AMERIPRISE FINANCIAL SERVICES, INC. (AMP)

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Ameriprise Financial, Inc (AMP)

Q1 2011 Earnings Call

April 26, 2011, 9:00 am ET

Executives

Chad Sanner - IR

Jim Cracchiolo - Chairman and CEO

Walter Berman - EVP and CFO

Analysts

Nigel Dally - Morgan Stanley

Jay Gelb - Barclays Capital

Andrew Kligerman - UBS Securities

Suneet Kamath - Sanford Bernstein

Thomas Gallagher - Credit Suisse

John Hall -- Wells Fargo

Eric Berg - RBC Capital Markets

Alex Blostein - Goldman Sachs

Colin Devine - Citigroup

Presentation

Operator

Welcome to the first quarter 2011 earnings call. My name is [Sandra] and I will 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. Please note that this conference is being recorded. I will now turn the call over to Mr. Chad Sanner. Mr. Sanner, you may begin.

Chad Sanner

Thank you and welcome to the Ameriprise Financial first quarter earnings call. With me on the call today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. After their remarks, we will take your questions.

During the call, you will hear references to various non-GAAP financial measures which we believe provide insight into the underlying performance of the company’s operations. Reconciliations of non-GAAP numbers to the respective GAAP numbers can be found in today’s materials available on our website.

Some of the statements that we make on this call may be forward-looking statements reflecting management’s expectations about future events and operating plans and performance. These forward-looking statements speak only as of today’s date and involve a number of risks and uncertainties.

A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in today’s earnings release and related presentation slides, our 2010 annual report to shareholders and our 2010 10-K report. We undertake no obligation to update publicly or revise these forward-looking statements.

With that, I'd like to turn the call over to Jim.

Jim Cracchiolo

Good morning. Thanks for joining us for our first quarter earnings discussion. This morning, Walter and I will update you on our performance and then we'll take your questions.

This was another strong quarter for Ameriprise financial. We continue to make good progress in growing our high-return Advice & Wealth Management and Asset Management businesses highlighted by record advisor productivity and client assets and by strong investment performance in fund sales.

At the same time, our insurance and annuity businesses continue to generate solid returns. For the quarter, on an operating basis and excluding the Securities America legal expenses, we reported earnings of $347 million, an increase of 54% over a year ago.

Revenues increased by 22% to $2.6 billion and our return on equity increased to an all-time high of 13.6% for the trailing 12 months. Our strong financial foundation continues to contribute to our growth.

Our balance sheet and capital are among the strongest in the industry and we have the ability to return significant capital to shareholders. In fact, during the quarter, we repurchased 6.5 million shares for $395 million.

Since starting our buyback program last May we have repurchased nearly $1 billion of our stock. Today we also announced the largest dividend increase we have ever made. The quarterly dividend will increase 28% to $0.23 per share.

While we're focused on growing the business, we are maintaining our long-time commitment to expense control and reengineering. We're on a run rate to achieve our reengineering targets for the year and we will continue to use the proceeds to fund our growth and to improve the bottom line.

Overall, we feel very good about the trajectory of our results and the position we're in. Before I discuss our performance by business, I'd like to give you some detail on our decisions regarding Securities America.

As you're probably aware, Securities America has been involved in a legal process related to sales or private placement securities issued by [Medical Capital] and [Providence Shale]. Both of those companies have been accused of fraud by the FCC and are in receivership.

After careful consideration we determined that a reasonable and expeditious solution to this unfortunate situation was in the best interest of all constituents. The $150 million comprehensive settlement includes the $40 million previously reserved.

The net after-tax charge, as we reported in the earnings release, was $77 million, which includes the settlement and related legal fees. Our value proposition is centered on our Ameriprise branded advisor force and that is where we will continue to focus our energy.

As a result, we intend to identify an appropriate buyer for Securities America. Just to be clear, the sale process will not affect our commitment to complete the settlement on its current terms. I should also note that this move will have a [deminimous] impact on our results.

Now, I'd like to talk about our segment performance. First, Advice & Wealth Management delivered another strong quarter wit operating pretax income increasing by 94% over a year ago to $99 million. We continue to make progress in improving margins.

For the quarter, the segment's pretax operating margin reached 10.8%, which is approximately four percentage points higher than last year. We remain focused on improving advisor productivity and we reached our highest advisor productivity ever.

Several factors are contributing to the improvements. First, client activity has continued its steady recovery. Given the depth of the financial crisis it is no surprise to us that retail clients have been reluctant to take on risk.

Now, risk appetites are gradually returning as clients recognize the need to generate returns. As a result, transactional activity increased and our branded retail client assets reached an all-time high of $315 billion, highlighted by strong growth in wrap products.

We recorded wrap net inflows of $2.8 billion for the quarter and total wrap assets reached $103 billion.

Second, the long-term work we've done to strengthen the economics of our advisor force is paying off. We surpassed 1000 experienced advisory recruits since we cranked up that effort the end of 2008 and those advisors are highly productive. Many of them have joined our employee channel, which has led to much stronger profitability in that part of the business.

Now that we've substantially reengineered the advisory force, our total advisor count has stabilized. While we will continue to experience attrition of lower-producing advisors, we will also continue to bring in better producers.

Advisor retention is very strong across the force with retention of our franchisees increasing to 94% and with employee advisor retention reaching 87%. The employee number represents a very large improvement. It's up 14 percentage points in just one year.

We're also acquiring valuable clients at a better rate, both from experienced advisor recruits bringing over their clients and from client acquisition work by our advisors.

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