Invesco Plc (IVZ)

IVZ 
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Invesco (IVZ)

Q2 2011 Earnings Call

July 26, 2011 9:00 am ET

Executives

Loren Starr - Chief Financial Officer and Senior Managing Director

Martin Flanagan - Chief Executive Officer, President and Executive Director

Analysts

Craig Siegenthaler - Crédit Suisse AG

William Katz - Citigroup Inc

J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc.

Michael Carrier - Deutsche Bank AG

Michael Kim - Sandler O'Neill + Partners, L.P.

Robert Lee - Keefe, Bruyette, & Woods, Inc.

Kenneth Worthington - JP Morgan Chase & Co

Marc Irizarry - Goldman Sachs Group Inc.

Daniel Fannon - Jefferies & Company, Inc.

Glenn Schorr - Nomura Securities Co. Ltd.

Jonathan Casteleyn - Susquehanna Financial Group, LLLP

Roger Freeman - Barclays Capital

Presentation

Loren Starr

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results for operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as believe, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs, such as will, may, could, should, and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate.

Operator

Good morning, and welcome to Invesco's Second Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I would like to turn the call over to the speakers for today, to Mr. Martin L. Flanagan, president and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may begin.

Martin Flanagan

Thank you very much. Thank you all for joining us today, and Loren and I will be speaking to the presentation that's available on the website if you're so inclined to follow through with that. This morning, we'll do what we traditionally do and review the results for the quarter. But also as we have traditionally done each quarter, we'll focus on a different part of the business and today, we want to give you our perspective on European business and how Invesco's positioned against what we do as a very tremendous opportunity for us in that region. Loren will go into the financials in greater detail, and as always, we'll open it up for Q&A.

So I'm on Slide 3 for those that are inclined to follow the presentation. If you take a look at the overview for the quarter, long-term investment performance remained very strong across Invesco for the second quarter with areas of exceptional performance. Our strong investment performance contributed to a continued trend of positive, long-term net inflows for the firm. And during the second quarter, we saw strong long-term net inflows across all distribution channels of industrial. And against the backdrop of what we all know are very volatile markets, we achieved margin expansion and earnings growth during the quarter.

Also during the quarter, we continue to repurchase -- our share repurchase program, purchasing 11.3 million shares for $280 million.

And if you take a look at the summary results, assets under management ended the quarter at $653 billion as compared to $641 billion at the end of the first quarter of this year, reflecting strong momentum across our global business. Adjusted operating income for the quarter was $285 million. That's up from $272 million in the first quarter, which represents a 4.7% increase quarter-over-quarter.

Net inflows for the quarter were $7.3 billion. This includes net long-term flows of $3.8 billion. This continues the positive trend we've demonstrated over the past several quarters of increased -- of positive inflows. And again, Loren will go into greater detail during the financial section of the presentation.

Moving on to investment performance. I think everybody realizes that the key strategic priority for us to deliver consistent, good long-term investment performance for our clients. Our commitment to investment excellence has helped us maintain strong long-term investment performance across the enterprise. If you take the firm -- take a look at the firm as a whole on a 3-year basis and a 5-year basis, the numbers are extraordinarily strong, with now 82% of our assets ahead of peers on both periods. And again, we have detailed charts in the appendix. But let me hit a few other highlights of those performance numbers for the quarter.

US Value Equity remained very strong with 88% or more of assets under management, the top half of the peer groups over 1, 3 and 5 years. 96% of our U.K. equity assets are beating benchmarks for, of over years 3 and 5. 99% of our Global ex US and Emerging Market capabilities are above benchmarks and peers over a 3-year period. And now, our Morningstar ratings in the United States U.S. Retail business are at all-time high, with 65% of our assets under management are rated 4 or 5 star.

Moving on to quarterly flows. If you take a look at total flows on Page 7, you can see strong investment performance across the enterprise contributed to positive flows during the quarter, and improving redemption picture contributed to the continued positive momentum of long-term flows. And as I mentioned earlier, total net flows for the quarter were $7.3 billion, of which $3.8 billion in long-term flows. If you take a look at flows by channel, again, strong gross sales and improving redemptions across the Retail and Institutional channels contributed to positive net flows for Invesco as a whole during the quarter.

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