AllianceBernstein Holding's (AB) CEO Peter Kraus on Q1 2014 Earnings - Call Transcript

This transcript originally appeared on Seeking Alpha.

Title: AllianceBernstein Holding's CEO Discusses Q1 2014 Results - Earnings Call Transcript

Symbol: AB

Call Start: 8:04

Call End: 8:59

AllianceBernstein Holding L.P. (AB)

Q1 2014 Earnings Conference Call

April 30, 2014 8:00 AM ET

Executives

Andrea Prochniak - Director, IR

Peter Kraus - Chairman and CEO

John Weisenseel - CFO

Analysts

James Howley - Sandler O'Neill

Steve Fullerton - Citi Research

Cynthia Mayer - Bank of America Merrill Lynch

Craig Siegenthaler - Credit Suisse

Andrew San Antonio [ph]

Marc Irizarry - Goldman Sachs

Presentation

Operator

Thank you for standing by and welcome to AllianceBernstein First Quarter 2014 Earnings Review. At this time, all participants are in a listen-only mode. After the remarks, there will be a question-and-answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for one week.

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, Lisa [ph]. Hello and welcome to our first quarter 2014 earnings review. This conference call is being webcast and accompanied by a slide presentation that is posted in the Investor Relations section of our website.

Our Chairman and CEO, Peter Kraus; CFO, John Weisenseel; and COO, Jim Gingrich will present our financial results and take questions after our prepared remarks.

Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I'd like to point out the Safe Harbor language on Slide 1 of our presentation. You can also find our Safe Harbor language in the MD&A of our 2013 Form 10-K and in our first quarter 2014 Form 10-Q which we filed this morning. 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. We are also live tweeting today's earnings call. You can follow us on Twitter using our handle @alliancebernstn.

Now I'll turn the call over to Peter.

Peter Kraus

Thanks, Andrea, and thank you all for joining us for our first quarter earnings call. Let me start with the firm-wide overview on Slide 3. I'll get into more detail as I review our channel-specific results. But overall, I would say that our results for the quarter do not depict the strong underlying momentum we're seeing across our businesses.

Our institutional client activity levels were the highest and most diverse we've seen in years. Retail channel sales increased in most regions and private plant flows were at multi-year highs. Yet as you can see here, gross sales were flat with the prior quarter and down nearly $9 billion from last year's first quarter, a time when we were still enjoying new record sales in Asia ex Japan's retail fixed income.

Net flows were negative $4.4 billion, mostly the result of two large institutional redemptions during the quarter. These outflows carried half the average realization rate of our overall firm.

We finished the quarter with higher AUM as market appreciation of $8.1 billion more than offset outflows. The quarter also saw net new flows in areas like US taxable and taxes exempt fixed income alternatives and US active equities. Average AUM for the quarter was higher versus prior periods as well.

Turning to Slide 4, you can see our quarterly flow trends across channels. I mentioned earlier that we had a couple of large institutional redemptions during the quarter - one fixed income and one low key passive service. These drove the $3.8 billion in outflows from the channel.

In retail, our flows improved sequentially in the first quarter. Net outflows of $1.1 billion were less than one-third the prior quarter total, reflecting a very strong quarter in US retail as well as the success of our new product launches in Asia ex Japan and stabilizing redemptions in our flagship retail fixed income products in that region. The private client net flows turned positive in the quarter for the first time since early 2008.

Let's spend some time on our business beginning with institutions on Slide 5. The top half of this slide is where you can see the disconnect between our client activity levels and the actual fundings during the quarter.

Even as first quarter 2014 gross sales declined sharply versus the first quarter of 2013, our RFP activities increased by 38% with growth in every major asset class. In fact, it was the highest our RFP activity has been since the second quarter of 2008. Equity RFP activity more than doubled year-on-year with particular strength in small and SMID cap select equities and concentrated gross strategies, our new service that came over with W.P. Stewart.

The question I'm asked most often by investors is how are your relationships with consultants? I've always said that even in the toughest times, consultants have been willing to talk to us to hear about our investment discipline and market insights. Today, rather than just hearing us out, more consultants are seeking us out, asking us to update their databases, participate in searches and compete in finals.

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