Q4 2020 Ameriprise Financial Inc Earnings Call

[music].

Welcome to the fourth quarter 2020 earnings call.

My name is Sylvia and I'll be your operator for today's call at this time all participants in a listen only mode. Later, we'll conduct a question and answer session. During the question and answer session I'd be happy a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded I went on.

I'll turn the call over to Alicia charity Alicia you may begin.

Thank you Sylvia and good morning, welcome to Ameriprise Financial's fourth quarter earnings call.

On the call with me today are Jim Cracchiolo, Chairman, and CEO, and Walter Berman Chief Financial Officer.

Following their remarks, we'd be happy to take your questions.

Turning to our earnings presentation materials that are available on our website.

On slide two you will see a discussion of forward looking statements.

Typically during the call you will hear references to various non-GAAP financial measures, which we believe provide insight into the company's operations.

Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website at www Dot IR dot Ameriprise dot com.

Some statements that we make on this call may be forward, looking reflecting management's expectations about future events and overall operating plans and performance.

These forward looking statements speak only as of today's date.

And involve a number of risks and uncertainties.

A simple list of factors and risks that could cause actual results to be materially different from forward looking statements can be found on our fourth quarter 2020 earnings release, our 2019 annual report to shareholders and our 2019 10-K report.

We make no obligation to publicly update or revise these forward looking statements.

On slide three you see our GAAP financial results at the top of the page for the fourth quarter.

Below that you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of our core operations and facilitates a more meaningful trend analysis.

Many of the comments that management makes on the call today will focus on adjusted operating results.

And with that I'll turn it over to Jim.

Good morning, and thanks for joining our fourth quarter earnings call. As you saw on our release Ameriprise delivered an excellent quarter and a very strong year, considering the challenging operating environment in the quarter equity markets rallied on positive vaccine news the outcome of the U S election, and the likelihood for the fiscal stimulus.

The strength of our advice value proposition investment expertise and solutions are translating to our business results client activity and flows in the quarter continued to be very strong and we set new records, including ending the quarter with assets under management and administration of one one trillion dollars.

An important milestone.

Revenues in the quarter were quite good up 3% over $3 billion, driven by strong business fundamentals and positive equity markets offsetting the interest rate headwinds earnings per share also increased nicely in the quarter up 8% and our ROE remains very strong at 36%.

During the quarter, we continue to make good investments in the business as well as continuing to execute against our reengineering goals, resulting in a 1% decline in G&A expenses.

We're always looking to drive efficiency and invest strategically to extend our position it's core to how we operate.

We also returned more than $500 million to shareholders, which was 90% of our adjusted operating earnings and among the best in financial services for the full year, we returned close to $2 billion.

Very clearly our ability to consistently generate substantial free cash flow as well as to reinvest and return to shareholders are key differentiators for us.

Let's turn to advice and wealth management, where we delivered a very strong quarter and good organic growth.

Beginning with our clients with delivering a differentiated level of advice keeping clients focused on their goals, which was key in a volatile disruptive year.

Total client assets were up 14% to $732 billion driven by excellent client flows and positive markets as.

As you know, we built a leading investment advisory business and it continues to grow nicely in the quarter wrap net inflows were close to $8 billion up 82% over last year.

This was another record for us and a great indication of our excellent client advisor engagement and focus on growth.

Another highlight was transactional activity bouncing back on up 5% over last year and client cash balances continued to grow and ended the quarter at 41 $5 billion up to $1 billion from last quarter.

And while we're continuing to invest to make our offering even more compelling for clients and advisors. We continue to see very good engagement and on digital capabilities, allowing advisors and clients to interact and transact seamlessly and the majority of clients now have their goals online and follow their progress.

Our advisors are utilizing our tools and capabilities on our integrated technology platform.

They are reporting that they're processing business more efficiently and spending more time with their clients and growing their practices.

Evident in increased financial planning in advisor productivity, which was up 8% adjusting for interest rates.

You've heard me share that one of the greatest benefits of being on Ameriprise advisor is our caring culture, including truly best in class support and strong field leadership.

I recently spoke with all of our field leaders to kick off the year, they're energized about ameriprise and are focused on continuing to drive productivity and growth.

This high level of support is also reflected in our recruiting success.

Virtual recruiting program is extremely effective and continues to drive strong results with 82 experienced advisors joining us in the fourth quarter, we're recruiting top advisers from across the industry, who recognize that ameriprise off as the value proposition technology and level of support that can help them deliver at an.

<unk> advisor based client experience and take their practices to the next level of success and we have a track record of helping advisors grow two five times faster than peers, which is very compelling from a competitive perspective.

So far in 2021, this momentum continues and our recruiting pipeline remains strong.

It was also great to see that our client service teams were once again recognized by J D power for the excellent experience they deliver on.

This certification recognizes best practices from the highest performing contact centers across all industries, not just financial services.

Guarding the bank total assets grew to $8 billion with 7 billion of sweep deposits. We plan to move additional deposits to the bank. This year. We also added pledge loans to the product portfolio in the quarter and we're seeing a good response to date, it's an appealing product for high network clients seeking liquidity.

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Wrapping up AWS margin was strong at 19, 8% and was up 60 basis points sequentially.

As I mentioned earlier expenses continue to be well managed with G&A up only 2% and that includes investments in the bank.

Next retirement and protection solutions. This business is performing well and in line with our expectations. We're executing on our plan to drive a mix shift in the business focusing on higher returning products given the rate environment, which is further reducing our risk.

Variable annuity sales increased nicely up 20% driven by the success of the structured product we introduced earlier in the year more than offsetting reduced sales of the living benefit products. Very importantly, this increase the percentage of VA sales without living benefits, which grew to 58% of total sales.

In the quarter.

In protection, while sales were down 4% year over year, we've seen improvement quarter to quarter.

So the our flagship <unk> product doubled in the quarter offsetting the reduced sales from our UL products.

This product both better meet client needs in this rate environment, while generating good returns for the firm.

Clearly as Ameriprise continues to grow overall, the retirement and protection solutions segment will represent a smaller part of our business mix over time.

In regard to fixed annuities I know some of you are interested in our progress regarding the reinsurance transaction. We are actively looking to execute a transaction. This year and are encouraged by the recent uptick in the 10 year rate.

Turning to asset management, we continue to build on our progress and have a great story to share as an active manager.

The team is serving clients well on driving profitable growth. We continue to have excellent client engagement and investment performance the investments, we're making including in data and digital are helping to drive organic growth at Columbia Threadneedle with strong results in North America, with targeting advisors, better and delivering a compelling experience and importantly.

To strengthen our relationship with our distribution partners across regions, including with the large broker dealer firms and independents in the U S.

We're also investing in our operating platform, including important work to reduce duplicate legacy systems in the quarter. We completed the final phase of the installation of our global trading and portfolio management system, which will help our investment teams and drive additional efficiency and scale globally with a continuation of positive flows and positive.

Mark its assets under management grew 11% to $547 billion.

Our asset management business is making strong contributions.