Q1 2021 Ameriprise Financial Inc Earnings Call

[music].

Welcome to our first quarter 2021 earnings call. My name is Shelby and that'd be your operator for today's call. At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session.

And a question and answer session you'd be happy a question. Please press Star then one on your Touchtone phone.

Please note that this capital will be recorded.

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

Thank you Sylvia and good morning, welcome to Ameriprise Financial's first quarter earnings call on the call with me today are Jim Cracchiolo, Chairman and CEO and Walter Berman, Our 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 specifically 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 <unk>.

While a number of risks and uncertainties and sample list of factors and risks that could cause actual results to be materially different from forward looking statements can be found and our first quarter 2021 earnings release.

Our 2020 annual report to shareholders.

Our 2020 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 first 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, Thanks for joining our first quarter earnings call as you sure and yesterday's release Ameriprise is off to a strong start in 2021, well continuing the positive momentum from the past several quarters as you can see and our first quarter metrics and financial results regarding the environment.

Equity markets continue to rally in the first quarter as vaccinations increase and activity accelerated with the U S. Beginning to open back up the economy is gaining strength with the for the fiscal stimulus as well as better employment data.

With this backdrop key for US is that we remain focused on serving our clients engagement is high activity is strong and we're bringing and record client flows across the business.

We ended the quarter with assets under management and administration of 36% to 114 trillion dollars a new high. In addition, we recently announced the strategic acquisition of the BMO EMEA asset management message.

Taking a step back and looking at Ameriprise overall, I feel really good we're executing well and delivering on our strategy for growth that we discussed with you. We continue to transform ameriprise with wealth management and asset management now representing over 75% of operating earnings.

You've seen the financials.

Revenues are up 10% to over $3 billion earnings per share also increased nicely in the quarter of 27% ex the NOL benefit a year ago, even with low short term interest rates this year versus last year's quarter.

And our ROE remains very strong at 30%.

While we continue to invest strongly and the business we are managing expenses thoughtfully.

And our strong financial foundation, and free cash flow generation, we returned more than $490 million to shareholders and the quarter through dividends and our ongoing repurchase program, which is comparable to the last few quarters.

Yesterday, we announced another 9% increase and our quarterly dividend, our 17th increase since becoming public 16 years ago.

Let's discuss advice and wealth management, where we've been executing well and driving growth.

We are benefiting from the strategic investments, we've been making to deliver a differentiated client and advisor experience built on advice.

We've been on a multiyear journey to take our client experience to the next level.

A big part of that is the training and support we provide advisors and ensuring that the new digital tools and capabilities of fully integrated within their technology ecosystem.

One of our more significant investments our CRM platform is increasingly serving as the hub for advisors and allowing them to collaborate with clients, while driving efficiencies and we've seen good uptake as advisors integrate these capabilities into their practices.

This strong engagement is helping to drive good client activity excellent flows and new client acquisition as we continue to build on our momentum from last year. Our total client net flows were strong at nine 3 billion and the quarter with total client assets up 36.

<unk> to $762 billion.

Our investment advisory business continues to grow nicely in the quarter wrap net inflows for more than $10 billion up 55% over last year.

And this is another record for us and reinforces our excellent client and advisor engagement and focus on organic growth.

Transactional activity continued gaining strength and the first quarter picking up 12% over last year with good volume across a range of product solutions.

Even with clients, putting more of that cash back to work client cash balances remain elevated at more than $40 billion and advisor productivity was strong up 8% adjusting for interest rates.

And we're bringing on new advisors.

Virtual recruiting program is driving good results with 93 advisers, joining us and the quarter.

And the advisors recognize what we have to offer in terms of our culture technology and high level of support.

And as more states reopen their businesses and economies, we're looking forward to connecting with more advisors and person as we move through the balance of the year.

We also continue to build out the Ameriprise bank with total assets grew to $8 8 billion and the quarter.

As we discussed we plan to move additional deposits for the bank over the course of this year.

Pledge and margin loan volumes increased nicely in the quarter as our advisors engage with their clients with our lending solutions from a liquidity perspective.

Wrapping up AWS and even with interest rates at all time lows AWS margin increased 90 basis points sequentially ending the quarter at a strong 27%.

Turning to our retirement and protection solutions business.

Off to a good start and continue to adapt to the low interest rate environment.

We have been very proactive and this climate as we serve client needs and prudently manage the business.

Variable annuity sales increased nicely up 33% driven by our success of structured product.

As well as our annuities without living benefits.

As a result, the percentage of VA sales without living benefits grew to 64% of total sales in the quarter.

With regard to insurance, our focus has been on our flagship <unk> product rather than <unk> and in fact, the U S sales were up 76%, we're focused on making sure we have the right product for this rate environment, while maintaining strong underwriting.

Overall I feel good about how the retirement and protection solutions business is performing and this challenging environment.

As part of the strategy, we are actively pursuing a reinsurance transaction for the remaining closed block of fixed annuities and we feel we can execute in the near term turning to asset management, we're generating strong results. Our team is engaged serving clients evolving needs well.

And driving profitable growth I'll speak to the strength of the quarter and then comment on Bmo's EMEA acquisition.

With the continuation of positive flows and markets assets under management were up significantly increasing 32% to $564 billion.

We're investing and the business, including and transforming how we use data. This is both with investments in terms of our use of data and our research as well as and distribution.

In addition.

And also key is the thought leadership, we provide and how we are targeting the right advisors to drive meaningful engagement.

And regarding investment performance, our teams consistently generate strong performance for our clients, it's across all categories equities fixed income and asset allocation strategies.

As an active manager our research expertise is a key differentiator.

And highlight the Columbia Threadneedle ranked in the top 10 over the one five and 10 year time frames and the recent Barron's Best Fund family rankings.

One of only two firms that ranked in the top 10 across all time periods and we also won seven.

Lipper Awards and the U S. This year and over 22 awards and EMEA over the last year.

This level of performance bodes very well in terms of earning future flows.

Our quarter and Columbia, Threadneedle had 103, four and five star Morningstar rated funds globally.

Which represents close to 70% of our assets.

This shows the breadth and strength of our product lineup.

So with this type of investment performance and strong execution.

Our plan you saw the flows continue to be quite strong in the quarter, we had net inflows of $4 9 billion.

And improvement of seven 3 billion from a year ago, excluding legacy insurance partner outflows.

Net inflows for $6 2 billion.

Global retail net inflows were $4 6 billion.

Largely driven by the traction we're seeing in North America, we're driving high engagement with clients and intermediaries, including with the larger broker dealers and independents.

Sales and flows traction is broad and we're working hard to maintain that in the quarter. We had nine funds that generated over $250 million and net inflows, including five equity and for fixed income funds.

In EMEA, we are seeing good flows and continental Europe, and a number of key markets.

And the U K, we remained in outflows. However, we saw improvement in the quarter as the economy started to reopen there more fully and we're hopeful that investor sentiment will strengthen.

In terms of global institutional we had net inflows of $1 6 billion ex legacy partner outflows driven by our results and EMEA, we've made considerable progress and strengthening our consultant relations and client service globally.

Consultants have increased their ratings on a number of key strategies in recent quarters.

This is important in terms of our ability to gain additional mandates from existing clients and grow our sales pipeline.

As you saw earlier this month, we announced our strategic acquisition of Bmo's.

Asset management business. The acquisition is right in line with our strategy that we consistently discussed with you.

It will add complementary capabilities and solutions with their established strengths and responsible investing liability driven investing fiduciary outsource management and European real estate.

It will also expand our scale and other traditional asset classes, especially and European fixed income.

And recent flow trends and their EMEA business have been favorable.

In addition post close.

And the most North America and wealth management clients will have the opportunity to access a broad range of Columbia Threadneedle investment management solutions for.

From an asset management perspective, we gain important geographic diversity.

Upon close Emea's AUM will increase significantly to 40% of total AUM at Columbia, Threadneedle, which provides a good balance to the U S business.

We've always been a disciplined acquirer and we expect this transaction will add to our strategic growth and generate a good return over time and.

Accordingly, as we executed the team will remain focused on maintaining our strong business momentum.

So for Ameriprise overall, we're in an excellent position the business is performing really well and delivering strong results.

Based on the current environment, we feel comfortable that we will continue to generate strong returns with a strong balance sheet and substantial free cash flow.

With that Walter will cover the quarter and more detail and then we'll take your questions.

Thank you Jim.

Ameriprise delivered a strong quarter of financial results and excellent business metrics, which are a direct result of our continued execution of our strategic priorities.

We continued to demonstrate strong performance and our core growth businesses.

For wealth management, and asset management, driven by ongoing organic growth and expense discipline.

At the core we remain focused on accelerating our mix shift through specific actions for example.

Our recently announced strategic acquisition of Bmo's, EMEA asset management business will expand key capabilities and attractive and growing market segments.

And also adding to traditional asset classes.

This provides a larger combined capability.

Client needs.

We have high confidence and the financial benefits from the acquisition as well.

It will be accretive on a cash and operating basis by 2023.

Generating a 20% plus IRR.

And have a payback period consistent with the Columbia acquisition of eight years and.

In addition, we have established a strong partnership with BMO and North America, which we expect to generate strong profit.

We are actively engaged and a fixed annuity reinsurance process and anticipate finalizing the transaction shortly.

Lastly, we continue to effectively manage our risk profile and continued profit mix shift to lower risk and higher margin retirement and protection solutions offerings.

Our diversified model continues to generate robust free cash flow and strong balance sheet fundamentals.

We remain on track to return approximately 90% of adjusted operating earnings to shareholders and 2021.

Let's turn to slide six.

Ameriprise and strong underlying business performance and activity levels and our core growth businesses.

To neutralize headwinds from short term interest rates.

Reminder.

This will be the last quarter, where we had the reduction and short rates distorting the year over year comparison, excluding the impact from interest and.

Price adjusted net operating revenue grew 13%.

Ice and wealth management and asset management businesses profitability continues to increase with.

And with adjusted pre tax operating earnings up 35%.

General and administrative expenses continued to be well managed.

Excluding the impact of share price appreciation on compensation G&A expenses were up 2%.

As we remain disciplined executing reengineering initiatives.

And total we delivered excellent underlying EPS growth.

Of 27%, excluding the net operating loss tax benefit and very strong margins and the quarter.

Turning to slide seven and as Jim mentioned about wealth management continued to deliver excellent organic growth during the quarter with total client assets up 36% to 762 billion.

And responds to the request for many of you.

We are now disclosing total client flows.

And which increased 21% to $9 3 billion.

From a product perspective, we had a terrific growth and our wrap flows up 55% to $10 4 billion.

Cash balances remain elevated at $40 4 billion with a substantial opportunity for clients to put cash back to work and the future.

Okay, Jay financial results and advisory wealth management were strong with underlying adjusted operating earnings up 30% to 389 million for the $78 million interest rate headwinds.

Adjusted operating net revenues were up 16% to $1 9 billion driven by client flows.

Improved transaction activity and <unk>.

And our market levels.

And on sequential basis revenues increased 6% from strong performance, despite fewer fee days and the current quarter.

Expenses remained well managed and we continue to exhibit strong expense discipline.

G&A expenses increased only 2% included higher volume related expenses bank expansion and death.

And for future growth and elevated share based compensation.

Pretax adjusted operating margin was 27%.

Adjusting for interest rates the margin would have been 215 basis points higher.

On a sequential basis pre tax operating earnings increased 11%.

And pre tax adjusted operating margin expanded 90 basis points.

Turning to page nine.

The significant growth and asset management was due to our investment engine that is driving revenue growth through consistent investment performance and.

Compelling thought leadership, leading to increased client engagement.

Net inflows and the quarter was $6 2 billion, excluding legacy insurance partners and $8 billion improvement from a year ago.

Adjusted operating revenues increased 21% to $828 million, reflecting cumulative benefit of inflows for.

Herbal mixed shift towards equity strategies and market appreciation.

The prior year quarter included an unfavorable impact from a performance fee adjustment general and administrative expenses grew 12% from higher compensation expense related to strong performance.

Ameriprise share appreciation as well as the costs associated with increased activity levels.

Adjusted for compensation related expense G&A increase a more moderate and 5%.

Putting this together pre tax adjusted operating earnings grew 45% with a 43, 9% margin.

We continue to be very encouraged by the continuation of positive flow trends and strong profitability.

Let's turn to page 10.

Retirement and protection solutions continued to perform in line with expectation and this market and rate environment.

While we have a strong book of business from a risk for the sector. We continue to execute our strategy to improve it for them.

In the quarter, 64% of retirement product sales did not have living benefit guarantees.

The sales shift is already having an impact on our in force block.

With the account value of living benefit riders down from 65% to 63%.

And protection sales were flat as.

As we continue to see a meaningful increase and higher margin <unk>.

And a significant decline and index Universal life.

And these mix shifts are expected to continue going forward.

Financial results continue to be in line with expectations pre tax adjusted operating earnings increased 10% to $183 million.

We had a steep drop off and claims following january's high level and we were approaching pre COVID-19 levels of claims by the end of March.

This business is very well managed net amount at risk remains among the lowest and the industry and our hedging remains very effective.

Let's turn to page 11.

And total the corporate and other segment and a $21 million loss and the quarter.

Which was a $29 million improvement from the prior year.

Excluding closed blocks the loss and the corporate segment was $63 million, which included a $15 million investment gain and loss.

So you offset by $11 million of higher share based compensation expense.

The year ago quarter had $11 million benefit from Ameriprise share price depreciation.

Long term care had $46 million of earnings and the quarter.

The high COVID-19 related mortality and terminations, we saw in January and declines in February and March and we are approaching pre COVID-19 levels by the end of March.

This benefit was partially offset by the COVID-19 claims level and life insurance.

Fixed annuities had a $4 million loss related to the low interest rate environment as.

As I mentioned, we are making good progress on our fixed annuity reinsurance transaction.

Now, let's move to the balance sheet on the last slide our balance sheet fundamentals remain extremely strong.

Including our liquidity position of $2 3 billion at the parent company.

Substantial excess capital 2 billion, 96% hedge effectiveness and the quarter.

And a defensively positioned and investment portfolio.

Adjusted operating return on equity and the quarter remained strong at 30%.

We returned $491 million to shareholders and the quarter through dividends and buybacks.

We just announced and 9% increase and our quarterly dividend.

And we are on track for our commitment to return 90% of adjusted operating earnings to shareholders. This year.

With that we will take your questions.

Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone.

And with to be removed from the queue. Please press the pound sign are the husky.

Everybody Speakerphone, you may need to pick up the handset before pressing the numbers.

Once again, if you have a question. Please press Star then one on your Touchtone phone.

And our first question comes from Alex <unk> from Goldman Sachs.

Okay.

Great and good morning, Thanks for taking the question.

So Jim Walter I was hoping to start maybe with some trends you guys seeing in advice and wealth management, obviously, another really strong quarter, particularly and the wrap account flows as you pointed out over $10 billion and thanks for the new disclosure and the 9 billion for total.

I guess the first question is there and just kind of round sustainability, particularly and wrap flows and maybe we can tackle it from a perspective of kind of giving us a breakdown of how much of this is coming from existing clients sort of re engaging given the fact that market backdrop is better for.

<unk>, new assets coming from either recruiting or same store sales.

No Alex this is Jim.

Let's see.

I think we're seeing good growth coming from all of the.

Areas, you've mentioned, we see a good additional flow coming from current clients is with deepening through the advice.

Relationship that we've been really having our advisers really engage with clients on and the deepening but we also see good new organic growth from client acquisition coming in as well.

Rises and as a complement from recruits that we've added over the last year as they transfer their book they are bringing over some of the clients, but I would say, it's a lot coming from the organic growth from our core base, both for new clients that our advisors are bringing and as well as current clients.

Were there and deepening the relationship and bringing in more of those flows as well.

Got it that's good to hear.

Shifting gears, maybe we can touch on the BMO acquisitions, hoping together and more details on that property.

So it sounds like the flows there are positive maybe you can talk to sort of the sources of growth and kind of what products are driving flows and that asset and I guess more importantly are you thinking about any risks from.

From attrition.

As we took and typically <unk> and and.

And asset management acquisition, and then from a financial perspective, I guess Walter dominance for you.

I think I heard you say accretion to your operating earnings by 2023.

I think you guys are paying for this with cash so I guess why is the deal not immediately accretive.

And I guess within the same lines and maybe kind of help us with the jumping off point for revenues and pre tax income pre and post synergies for that asset and a bunch of things and there, but the strategic and financial highlights would be helpful.

Okay. So.

What I can say really is that we.

No right now that the EMEA BMO area is in inflows for the last number of months through the first quarter.

And we're seeing it and some of their core programs and initiatives the ones that we sort of laid out to you or the strategic capabilities.

And that we think that will really enhance and strengthen our areas to really get.

A more formal presence on the continent, there, but also that we could leverage globally.

We feel like as we go through this transaction since we're not really what I would call meshing together, both investment process or distribution capabilities and some of those areas. The more of an add on to us that we shouldn't suffer as.

You've mentioned a bit more of a.

Attrition going through that process, we feel very comfortable that we're adding there people, we're adding the capabilities and what we're spending more time integrating will be more of the back and middle offices.

And in our capabilities, which are much more state of the art much more current and.

And what can we can provide them technology wise and support was and.

So we feel like it could be a win win we always factor and when we do a transaction. There is always some breakage you can't really determined and how much. It is but we always factor in that and thinking about a deal.

But we're hoping that that would be one.

One that will not be significant based on what we're looking to do here, which is very different than murdy and emerging and integrating from offices and people from that standpoint, we like their capabilities, we think that those capabilities with <unk>.

And it distribution globally can actually enhanced net flow picture as well, but we didn't count on the revenue flows when we did the deal to make it like a make or break we really look at this from.

Having the cost synergies from the back and Middle office plus what.

They think they can grow plus what we can add and and then we complement that with our distribution as a plus.

And so we feel like this is really good strategic is exactly what we were looking for.

As a complement it is one that we can easily handle true the excess cash and balance sheet that we have and it doesn't take away from the organic growth that we want our people to continue to focus on and the asset management business.

Great Alex it's Walter so.

Obviously the.

BMO is generating.

EBITDA, but again, it's a division of a large corporation. So commenting on that number it would be all low problematic. We certainly have done our analysis of it but the big reason, obviously for the day.

Accretive.

Accretion and 23 is the central amount of onetime expense that we will be absorbing between now and in that timeframe.

Feel very comfortable and Thats why we gave you the bookends as it relates to the IRR on it and the.

Certainly the.

And the elements of payback. So we're working through right now and certainly we'll keep you abreast as we go through this and get additional information as we as we go.

Got you good.

Good about the fundamentals of it.

And as we find with the typical kind of M&A transaction are these integration charges is going to be backed out of your operating reported results for you guys going to leave those in as you think about 'twenty two as we normally do Alex we were back from outlook.

Yes, it makes sense alright, thanks, very much guys.

Youre welcome.

Our next question comes from Sami <unk> from Citi.

Thanks, Good morning, I wanted to just start with asset management and the very strong margin that you guys reported in the quarter.

$43 nine well above your 34% to 39% target.

Was there anything unusual in there that we should think about perhaps normalizing in the balance of the year and Relatedly and.

And what kind of gets you back down into the range is there and expectation that maybe investment spending will increase and the back half just wanted to get a sense of the trajectory of the margin. Thanks.

So.

And the first part and I'll handle the second and Theres nothing unusual and this quarter.

For me, what we do and getting the benefit of the leveraging and the fact that we do not have all wind and our pace as relates to the outflows. So it's really from that standpoint, and solid performance on the inflows and.

And we.

We feel the expenses will remain well managed.

And we go forward, but it is really the benefit of the inflows and the market.

And unusual.

And when we look at going forward longer term and the current period if markets hold we don't see that reverting back to.

And the <unk> at this point and time I think longer term, it's hard for us because there's there's a business mix as we said, even adding the BMO transaction, which is largely institutional there'll be some differences there just on fee not that they don't have they have good fees, but on a relative compared to our retail side.

So there are those various things and as you know there's always a mix change that occurs over the longer term.

And based on markets and a number of other factors, but from a cost perspective, we do not see.

Any thing that would cause a problem and then from a revenue you can see that our fee basis has been holding pretty well based on new assets that we're adding versus anything that are trading. So it's nothing in the near term. It's just longer term, it's hard to predict we will have to do some further work.

And depending on what happens over the cost for the year.

Got it and then on the retail flows can you give us a sense of how much of that activity is coming from ASW AUM versus the third party channels.

No I would say.

I would say overall, we're getting very strong flows from our third party channel Ameriprise has picked up a bit but.

And totality, it's really coming from the third party channels.

And so I would say, we feel really good we've actually grown our share and seven of the eight top distributors and the U S.

We're getting it from a number of different disciplines.

Disciplines.

And the broker dealers the independence, RIS et cetera. So.

So we feel very good and we have brought a lineup that is actually selling pretty well.

This is actually a time when even fixed income kicked in for US, where we were more equity and our combination and I'm getting good equity and fixed income has picked up as well. So we really feel good about the broadening there.

Got it and then just a last one for me if I could.

Just on M&A more broadly obviously, the BMO transaction is what you're focused on but.

Anything that you guys are still needing to or desiring to have from an M&A perspective, or do you pretty much have what you need post BMO in house.

Yes.

We actually feel like.

<unk> was one of the primary areas.

That we wanted to really complement which is growing a bit more and balancing out for more of the solutions oriented business, a little more institutional business a little more weight.

For our distribution, particularly in that area for <unk>.

EMEA.

So we feel like that was a primary focus and what we're looking to do if we did and incremental acquisition right now and we want to concentrate on getting that integrated well.

And feel like we've got good momentum in the core of the businesses both in the U S as well as what we think we could.

Expand internationally with some of our capabilities now institutionalized well with the products that we have we've got some very good.

Consultant approvals and ratings, which we think will expand our platform capabilities to what.

Distribution. So we're feeling pretty good about that that was one other things that we wanted to focus on and the near term and we think that this deal gives us some of that ability here.

Got it thanks, Jim.

Our next question comes from Brennan Hawken from UBS.

Good morning, Thank you for taking my questions.

And thanks actually for the total client flow disclosure, the net new assets across the wealth management business.

And certainly that helps to show the strength of the business.

Was curious if it's possible to get a longer historical time series for that data.

And.

And maybe for right now.

How indicative is the roughly 5% total organic growth rate.

That is reflected and the three quarters, if you disclose like how does that compare overtime.

Two.

Two the sort of organic growth rate implied by the total client flows and we're a period of a few years.

Yes so.

I think I'll have Walter respond a little what I can say is that and we've always sort of mentioned.

We feel like the numbers and I think Walt and his team is trying to reconcile going back based on the definitions and being utilized which is I think the ones the and utilized in the industry and a little more today.

Our client flows we think are pretty close to sort of wrap flows there may have been a period Jim staff.

And sort of the discussion on the Dole et cetera, whether it was more of a shift from some brokerage activity to the ramp that we saw some blips and some of those initial quarters, but I think if you go back over the last number of quarters.

Probably see more of a client flow close to again the wrap flows.

And there may be some.

Timing issues quarter to quarter et cetera, but I think that's along the lines Walter but.

Sure.

So right now we're working on that and so we will follow up and get you to 2020, but what Jim and saying I believe is a good representation of it. So it gives us a chance we'll get that out as we look at the new definitions and other things.

The data okay.

Yeah, great. Thank you for that much appreciate it.

And then and.

And helpful to have the high level indication. Thank you.

So for my follow up and.

Another question on AWS.

It was really good to see advisor head count pick up here this quarter.

So why not get a little bit more aggressive on the recruiting front or bolt on M&A.

Try to grow.

That head count more rapidly.

No.

Effectively when we look across a lot of the wealth management peers to.

And to get the best valuation and the stock tend to tend to have.

Solid growth and net new assets and and advisors and.

And obviously churn is an impact and so.

What steps do you think you can take to continue to kind of grind down churn and then and is.

Maybe picking up on the.

Aggression for recruiting something that you think is compelling at this point given the given where the market is for for advisors.

Yeah. So.

Good question.

And then the way I'd, probably answer that would be that.

We will continue to look at bringing and good advisors for the firm and we could probably.

And a bit more there and we're reviewing it.

Very important for us we want to bring and the right advisors that fit the brand the culture the compliance understand what their focus on growth on and just pay advisers to join us and will be part of our network and process for them.

We want to have advisers, joining us that we can help grow their productivity and grow their client relationships have great client satisfaction and be with us a long time.

That really builds on the culture and the brand.

And we think we have a great value proposition for advisers once they join us.

Both from how we onboard them, how we give them support the leadership the technology the capabilities.

And we just don't want to roll up a bunch of firms are independents, and just associate and process for them per se.

So that's very important to us I think we could probably.

Maybe we could be more aggressive out there.

And and but we also think it's very important for the long time. The other thing we really spend a lot of time different than other component is about just rolling up advisors is that we focus on our 10000 advisors growing their productivity, having strong client satisfaction.

Traction and I think when you compare us.

Last time, we did that and.

Analysis, which we update.

We're more than two five times any and dependent on annual productivity growth.

On a compounded basis for a long period of time and the same thing for against the warehouses. So that's where we put a lot more of our energy, but to your point, we complement that with having good recurrent and having good retention.

And we'll continue to look at whether we could step that up or there may be some other firms small firms suited to our cultural Mips.

But that's what we've been focused on and we've been successful with.

Great Thanks for that color.

Our next question comes from Andrew <unk> from Credit Suisse.

Hey, good morning.

Wanted to go back to the.

Advice and wealth and net 10 4 billion and.

Net wrap flows.

And just to just a phenomenal number and.

And I'm kind of thinking back to pre COVID-19 and it seemed like a normalized range and a very good range would have been $4 billion to $5 billion and it's kind of gradually jumped up and now and looking at the deposit base of $44 billion and.

And so my question is.

What's the right strike zone for wrap net flows at 10 billion and that's it.

Six to 8 billion.

Where do you think the normalized number is and given and 44 billion and deposits.

What can we look look toward in the near term.

So Andrew I think it was a very good question.

And someone else come from people had asked from the fourth quarter and and similar basis. When we had a good pickup and flows and client activity as well.

And what we've been seeing is and it's probably a combination of factors I mean, we have a reopening of the economy. I think people are starting to feel a bit more comfortable I think the markets have done well, so there's a little bit of that where people feel a little more comfortable and what they are doing right now.

<unk> and <unk>.

And so I think thats part of it because of the <unk>.

Positive nature of the reopening and the vaccine rolling out and et cetera, but I also feel part of that is the level of engagement that our advisors and we're also having with their clients, we really rolled out our whole foundational advice and complement to our comprehensive advice we have.

Over a half a million dollars of our clients already have gold's online that are and very active with.

We have been rolling out our integrated technology and the way our advisors and can continue to connect with clients and understand the nature of what conversations they should be have and will be rolling out more tools along those lines.

So we feel like we've stepped up our level of.

Having the advisors engage with the clients and giving them a lot more of the tools and capabilities to do that more seamlessly and integrated fashion.

And I think thats, having some effect I mean, its hard for me not knowing the market cycle and some other things popping up around but I feel good that we're going to continue to at least.

And we continue to gain those type of flows I cant predict whether its 910, eight six or whatever but I feel like we're in a good spot right now and we're very focused on helping that to continue.

Got it so.

Good very good momentum and and then thinking about the long term care block, which earned $46 million versus what one would normally.

Expect to be breakeven and I suspect.

There were some COVID-19 effects.

Close that uptick in earnings.

Where do you see earnings going over the near and intermediate term and that.

And that line item and then secondly, given that rates have come up a bit.

A lot and in the last.

12 months do you think that there is a.

A stronger possibility that you could divest of that block is there interest.

Walter I'll have you okay. So Andrew on the $46 million that is the realization of unfortunately, the mortality and lower and lower basically new entrants into the other.

And homes. So the frequency so as we indicated that is starting to slow down.

Down in March and basically dropped to around $5 million. So we're seeing we're gauging it and certainly we've gotten the benefit.

The situation with COVID-19.

And we are.

But we have our programs that are working as we indicated our benefit.

And as our price increases and other things on the claims.

Are all being well managed and staying with expectations. So.

I cant say, but certainly by the trend it's slowing down now as it relates to the situation with the cohort.

And just interest and the block itself from acquired.

We again, certainly the interest will interest rates, certainly affect that and and we.

Sure.

We'll evaluate.

And certainly that's coming in and and we are open to evaluate the elements within that but again.

We feel we have this.

OTC under control, but certainly we will look at opportunities.

And to reinsure that.

And maybe if I could just sneak one quick one and at the end just G&A overall was up 2% ex the effect of the stock and so forth.

So.

As we look forward and hopefully the market opens up.

Could you give any insight into what we could expect would be the overall growth and.

G&A.

Given the travel and entertainment might pick up do you think we could see a real sharp pickup and G&A or do you have ways to just kind of keep it under control as we move forward.

It's more of the latter I think we.

And as you noted we are managing our expenses well and even with the return to <unk> and other things of that nature. We believe we will stay and a more controlled situation with that.

Normally we get questions on AWS and the range on that is used for 2% and we think it's going to be and the three 4% range and so well managed.

As we go forward.

Awesome. Thank you.

Our next question comes from Tom Gallagher from Evercore.

Good morning.

Few follow ups on AWS.

Yeah appreciate that new disclosure on.

And total enterprise flows as well.

I guess, if we if we split those two businesses Walter.

How did the revenue yields and margins compare between wrap and non wrap businesses for you because clearly your your flows are being driven by wrap our our presumption has been wrap has much higher margins and and for yield but just just curious if you can quantify that.

Well listen we have very strong transactional activity and this quarter and so obviously that drove a good profitability for us and and we look at the margins and the profitability of these programs.

They are both very good this timing as you know and wrap you've got your P. As it relates to it on the transactional you'll take it upfront and award spread Robert back loaded. So the profitability of these honors are certainly from a data standpoint are extremely good and distinguishing between them and there is different and they fit in.

Through the confident retirement approach that we take the necessary for our client, but they all generate good acceptable returns for us.

Okay and.

Walter just a follow up on that so from your perspective.

And there is not meaningfully better margins, if you're I guess normalize and spread them out and spread them out over the life for the business between rap and non wrap would that would that be a fair characterization or are they just different.

They are different and the Gulf generate good returns for us they are really doing.

And they are different and unique.

And different characterization meet different needs.

And and timing and profitability, but they both would really do generate.

Scepter and good returns.

Okay, and then just a question on the weighted average gross field.

For the cash type deposits.

Breakout.

And last quarter was 69 basis points. This quarter. It was 65% the rate of change is clearly slowing.

And given what interest rates have done recently do you think we're near a bottom.

Assuming their clients continuing to maintain these high balances and these accounts do you do you think where we're closer to a bottom or or <unk> or do you think we might still see a little downward pressure on the margins.

I don't see downward pressure on the margins I do see obviously, we are evaluating.

From our standpoint.

<unk> and opportunities that we have for that product and certainly looking now at duration versus credit.

I would say.

And it certainly has slowed as you noted, but I can't say, we're for its bottom, but it certainly slowed and we're evaluating that looking at both the asset side of it and and then we'll see what happens from Jordan.

Okay. Thanks, and then one final one just the fixed annuity transaction I think the expectation was it would garner approximately $700 million I believe.

Interest rates have changed meaningfully, though I don't know whether that would meaningfully impact your execution price on that or not and that and then also just to confirm are you guys really at this point just focused on and isolated fixed annuity deal or have you consider broadening out whether thats to Andrew's <unk>.

<unk> long term care or variable annuities or life insurance.

Or at this point, it's really just fixed annuities.

Right now we're focused on fixed annuities as Jim and I have indicated we are.

Working on that to bring that to closure.

And yes interest rates do affect it but.

And that you are talking about it should be.

We achieved.

And from that standpoint, and as I indicated Andrew we do get constant.

Request for evaluation of different offers and we evaluate them.

And right now we're focusing on the fixed annuity.

Okay. Thanks.

Our next question comes from Ryan Krueger from K B W.

Hi, Thanks, good morning on the transactional activity and AWS can you give us any sense of if it's remained.

Elevated that.

Gone through April.

Yes, I believe it and.

And it is continuing again this is preliminary information coming in but yes, we are seeing.

Still continuing trends.

Thanks, and then.

And on the fixed annuity reinsurance do you view that as providing additional.

And capacity for for buybacks and above and beyond and 90% that you target or should we think about that more as replenishing capital that you'll use for the BMO transaction.

Well again, we are sitting and strong capital position now as we indicated our excess capital from 2 billion and certainly we're going to generate strong capital and free cash flow and going forward.

This transaction will replenish.

And look at it that way.

BMO transaction and then we make our decisions and looking opportunistically, what's the best way to deploy that.

Stage, we're sitting and very good position and certainly the fixed annuity transaction.

Certainly.

Offset the BMO and substantially.

And then just to confirm that the 90%.

Capital return targeted just for buybacks and dividends and exclude the M&A is that right.

That's right we're going to.

90% is buyback and dividends.

Great. Thank you.

Our next question comes from Kenneth Lee from RBC.

Hi, good morning, and thanks for taking my question.

Wondering if you could just remind us how sensitive ameriprise is earnings and.

Specific weighted with advice and wealth management, how sensitive the earnings could be any potential fed funds rate increase and more specifically just wondering whether you could potentially see a.

Benefit immediately.

And the answer is you will see a benefit on if you're talking about AWS and upon the fed funds and so if you look at say $25 billion looking and just concentrating on and sweep accounts.

$50 million for them.

Year period on a 1% encroachment.

Dimensions of it.

And then and then it's a matter of gauging, how we return that to the client, but normally you have a differential between when the platform changes and and then we evaluate the competitive situation.

And that's trying to dimension and from a simple and makes them.

Okay.

Great Great that's very helpful and.

And just one follow up.

Okay.

I'm wondering within the asset management.

Wondering if you could just talk about some of the contribution that youre seeing from any solution space mandates and.

Wonder if you could also just share with us how this could potentially change once the BMO EMEA and asset management acquisition is integrated and thanks.

So instant.

Institutionally and even from a REIT. So we have been getting sort of mandates a little more that are solutions oriented.

And we also as you also know how.

However, UK real estate those property business and we have a smaller U S business as well.

So this would complement that nicely and.

And bring some of that.

Vance capability in Europe to bear.

We know ESG is very big and they are a leader and ESG as well and we've been ramping up our activities and ESG and the UK for European activity and UK activity. So overall.

And we feel like it'll help us hit the ground running further in Europe, but we're also looking to for the use that solution capability complementing what we're already doing and glass for the U S. And we think that that will give us a greater ability to.

To bring in more solutions oriented business, so for the longer term.

So I don't know if that answers your question, but.

We had invested and solutions, we do have some other.

And the different strategies already coming to bear for some of what we're doing internationally and domestically, but this would advance those further.

Great. That's very helpful. Thank you very much.

Okay.

Yeah.

Our final question comes from Erik bass of Autonomous research.

Hi, Thank you just hoping you could provide some more color on the potential opportunity from the BMO wealth management relationship and the U S and how meaningful could this be in terms of incremental flows AUM.

DSO and the U S.

We're looking to.

Provide.

Our platform capabilities to BMO wealth management, but in addition.

We'll be looking to convert some of their activities over to us on the retail side.

For us to actually manage those activities for them.

And working with BMO and now we've crafted a relationship and.

Our arrangement on that.

Not purchasing.

U S business, but we're working on sort of.

An agreement.

Revenue type agreement as well as the distribution agreement.

And to pick up a level of their activities there.

I don't have.

More detailed information right now Walter I don't know if you have it.

No not at this moment and I think.

We are just working off from that standpoint too.

For our trend for clients over and we're discussing with them.

Jim syndicated.

And anything we've talked about before.

Is it related to the financials and that does not include that that aspect of it.

Got it and so those would all be potential upside in terms of kind of revenue synergies as well as obviously you don't have the assets. So theres no attrition it would all be wins that would kind of be incremental flow and the U S to the extent they emerge.

Yes, yes.

Perfect and do you have a sense of what their total AUR.

And the U S and kind of asset management and business that could be up for grabs.

We know the amount, but we just don't know what kind of transfer over and sorry, Robyn I'll tell you it's assignment.

They are working on that right now.

Got it okay. Thank you.

No further questions at this time, thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

Okay.

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Okay.

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