AllianceBernstein Holding CEO Discusses Q1 2012 Results - Earnings Call Transcript

AllianceBernstein Holding (AB)

Q1 2012 Earnings Call

May 2, 2012 8:00 am ET

Executives

Andrea Prochniak - Director, IR

Peter Kraus - Chairman and CEO

Ed Farrell - Controller and Interim CFO

Jim Gingrich - Chief Operating Officer

Analyst

Michael Kim - Sandler O'Neill

Steve Fullerton - Citigroup

Chris Spahr - CLSA

Cynthia Mayer - Bank of America Merrill Lynch

Marc Irizarry - Goldman Sachs

Michael Kim - Sandler O'Neill

Presentation

Operator

Welcome to the AllianceBernstein first quarter 2012 earnings review. (Operator Instructions)

I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AllianceBernstein, Ms. Andrea Prochniak. Please go ahead.

Andrea Prochniak

Thank you. Good morning, everyone, and welcome to our first quarter 2012 earnings review. As a reminder, this conference call is being webcast and accompanied by a slide presentation that can be found in the Investor Relations section of our website.

Our Chairman and CEO, Peter Kraus; and our Controller and Interim CFO, Ed Farrell, will present our financial results today. Our new Chief Operating Officer, Jim Gingrich, is with us as well and will participate in the question-and-answer portion of this call.

Now I' like to point out the cautions regarding forward-looking statements on Slide 2 of our presentation. Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. You can also find our cautions regarding forward-looking statements in the MD&A of our 2011 Form 10-K in an our first quarter 2012 Form 10-Q which we filed this morning.

I'd also like to remind you that under Regulation FD, management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions during this call.

Now, I'll turn the call over to Peter.

Peter Kraus

Thanks, Andrea, and thanks everybody for joining for our first quarter earnings call. As Andrea noted, I will go business highlights, Ed will then go with the financials and our COO, Jim Gingrich who is here as well will join Ed and I for questions at the end.

Let's start the morning with Slide 3. In a more constructive operating environment, we were able to deliver better investment preference for our clients and much stronger financial results this quarter than last.

Gross sales were $18.1 billion and were up 21% from the fourth quarter of 2011 and 15% from the same period last year. That is our highest since the second quarter of 2010 when sales were $18.8 billion, very close to this quarter's number.

Net outflows were down versus prior periods and that includes the impact of last years AXA asset sales which I will discuss in a moment. AUM increased 3% from yearend 2011 due to both, market appreciation and net new flows to retail, a business that performed extremely well in the first quarter.

Our retail strength is clear from the distribution channel view on Slide 4, should we take a look. Retail gross sales of $12.9 billion were 81% higher than the fourth quarter and 66% higher than 2011s quarterly average.

This is our best retail sales quarter since the second quarter of '07 when sales were $13.6 billion, again pretty close to this years' level. While Asia remains our strongest market, we had growth across regions, asset classes and both new and long standing products. As a result, retail had net inflows of $2.3 billion, our first positive flow quarter since early 2010 when inflows were $2.5 billion.

Inflows would have been stronger were not for about $600 million in redemptions related to prior year AXA assets sales in Canada and Australia that hit during the quarter.

Private client gross sales of $1.4 billion were down from the prior quarter. The retention is moderated and net cap net outflows flat. In institutional, gross sales of $3.8 billion were down sequentially and year-over-year. CRS sales were much later this quarter compared with the large funding we saw in a two comparable prior quarters.

As expected we had about $5.2 billion institutional redemptions related to AXA assets sales last year. This pushed outflows higher for the second consecutive quarter.

Slide 5 breaks out the impact of this dynamics when institutional flows more clearly. As you can see from the chart, top right, absent the AXA impact, outflows have been stable since the third quarter of 2011 and were substantially better than the first and the second quarter of last year.

As you have surely noted, we also added to our pipeline during the quarter, 40% of our $6.6 billion pipeline at the quarter end represented new additions including in diverse services like emerging market debt, global credit and small cap growth.

In fact, we're seeing increased our fee activity in both Fixed Income and Equities. In Fixed Income, we had first quarter wins in U.S. High Yield and Global Plus put a fine contribution and pitch for new business in global credit, global investment grade, high income and muni's.

In Equities, we had wins in market neutral, U.S. small cap growth and we're getting into more searches for emerging market value against strategic value and select U.S. equity. Maintaining our recent improvement in investment performance will be a key factor in wining more business going forward.

As you can see on Slide 6, many of our services beat their benchmarks in the first quarter. Most of our Fixed Income strategies continue to outperform. Global high income, global fixed income and diversified yield have all beaten their benchmarks for the quarter, one, three and five year periods.

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