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Text: 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.
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.
As you saw in yesterday's release, Ameriprise is off to a strong start in 2021.
We're continuing the positive momentum from the past several quarters, as you can see in our first quarter metrics and financial results.
Regarding the environment, equity markets continue to rally in the first quarter as vaccinations increased and activity accelerated with the U.S. beginning to open back up.
The economy is gaining strength with the further 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 in record client flows across the business.
We ended the quarter with assets under management and administration of 36% to $1.14 trillion, a new high.
In addition, we recently announced the strategic acquisition of the BMO EMEA Asset Management business.
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 ROE remains very strong at 30%.
While we continue to invest strongly in the business, we are managing expenses thoughtfully.
With our strong financial foundation and free cash flow generation, we returned more than $490 million to shareholders in the quarter through dividends and our ongoing repurchase program, which is comparable to the last few quarters.
Yesterday, we announced another 9% increase in our quarterly dividend, our 17th increase since becoming public 16 years ago.
Let's discuss Advice & Wealth Management, where we've been executing well and driving growth.
We're benefiting from the strategic investments we've been making to deliver a differentiated client/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 are fully integrated within their technology ecosystem.
One of our more significant investments, our CRM platform, is increasingly serving as the hub for advisors 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 was strong at $9.3 billion in the quarter, with total client assets of 36% to $762 billion.
Our investment advisory business continues to grow nicely.
In the quarter, wrap net inflows were more than $10 billion, up 55% over last year.
This is another record for us and reinforces our excellent client advisor engagement and focus on organic growth.
Transactional activity continued gaining strength in the first quarter, picking up 12% over last year, with good volume across a range of product solutions.
Even with clients putting more of the 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.
Our virtual recruiting program is driving good results with 93 advisors joining us in the quarter.
Advisers 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 in person as we move through the balance of the year.
We also continue to build out the Ameriprise Bank, where total assets grew to $8.8 billion in the quarter.
As we discussed, we plan to move additional deposits to 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 AWM, even with interest rates at all-time lows, AWM margin increased 90 basis points sequentially, ending the quarter at a strong 20.7%.
Turning to our Retirement and Protection Solutions business, we're off to a good start and continue to adapt to the low interest rate environment.
We have been very proactive in 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 VUL product rather than IUL.
In fact, VUL 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 Protection Solutions business is performing in this challenging environment.
As part of this strategy, we are actively pursuing a reinsurance transaction for the remaining closed block of fixed annuities, and we feel we can execute it 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 in markets, assets under management were up significantly, increasing 32% to $564 billion.
We're investing in the business, including in transforming how we use data.
This is both within investments in terms of our use of data and our research as well as in distribution.
In addition, and also key, is the thought leadership we provide and how we are targeting the right advisors to drive meaningful engagement.
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.
I'd highlight that Columbia Threadneedle ranked in the top 10 and over the one, five and 10-year time frames in the recent Barron's Best Fund Family ranking, one of only two firms that ranked in the top 10 across all-time periods.
We also won seven Lipper Awards in the U.S. this year and over 22 awards in EMEA over the last year.
This level of performance bodes very well in terms of earning future flows.
This shows the breadth and strength of our product lineup.
So with this type of investment performance and the strong execution of our plan, you saw that flows continue to be quite strong.
In the quarter, we had net inflows of $4.9 billion, an improvement of $7.3 billion from a year ago.
Excluding legacy insurance partner outflows, net inflows were $6.2 billion.
Global retail net inflows were $4.6 billion, largely driven by the traction we've seen 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 in net inflows, including five equity and four fixed income funds.
In EMEA, we've seen good flows in Continental Europe in a number of key markets.
In 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 in EMEA.
We've made considerable progress in 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 EMEA asset management business.
The acquisition is right in line with our strategy that we consistently discuss with you.
It will add complementary capabilities and solutions with their established strengths in responsible investing, liability-driven investing, fiduciary outsource management and European real estate.
It will also expand our scale in other traditional asset classes, especially in European fixed income, and recent flow trends in their EMEA business have been favorable.
In addition, post close, BMO's North American Wealth Management clients will have the opportunity to access a broad range of Columbia Threadneedle investment management solutions.
From an asset management perspective, we gained 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.
Importantly, 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'll continue to generate strong returns with a strong balance sheet and substantial free cash flow.
Ameriprise delivered a strong quarter of financial results and excellent business metrics, which are a direct result of our continued execution of the strategic priorities.
We continue to demonstrate strong performance in our core growth businesses of Advice & 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 in attractive and growing market segments, while also adding to traditional asset classes.
This provides a larger combined capability to meet client needs.
We have high confidence in 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.
In addition, we have established a strong partnership with BMO in North America, which we expect to generate strong profits.
We are actively engaged in 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 solution 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 in 2021.
Ameriprise's strong underlying business performance and activity levels in our core growth businesses continue to neutralize headwinds from short-term interest rates.
As a reminder, this will be the last quarter where we have a reduction in short rates, sorting the year-over-year comparison.
Excluding the impact from interest, Ameriprise adjusted net operating revenue grew 13%.
Advice & Wealth Management and Asset Management businesses' profitability continues to increase, with adjusted pre-tax operating earnings up 35%.
General and administrative expenses continue 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.
In total, we delivered excellent underlying earnings per share growth of 27%, excluding the net operating loss tax benefit and very strong margins in the quarter.
Turning to slide seven.
As Jim mentioned, Advice & Wealth Management continued to deliver excellent organic growth during the quarter, with total client assets up 36% to $762 billion.
In response to the request from many of you, we are now disclosing total client flows, which increased 21% to $9.3 billion.
From a product perspective, we had a terrific growth in 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 in the future.
On page eight, financial results in Advice & Wealth Management were strong, with underlying adjusted operating earnings up 30% to $389 million after the $78 million interest rate headwind.
Adjusted operating net revenues were up 16% to $1.9 billion, driven by client flows, improved transaction activity and higher market levels.
On a sequential basis, revenues increased 6% from strong performance despite fewer fee days in the current quarter.
Expenses remain well managed and we continue to exhibit strong expense discipline.
G&A expense increased only 2% including higher volume-related expenses, bank expansion, investments for future growth and elevated share-based compensation.
Pretax adjusted operating margin was 20.7%.
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 in 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 in the quarter was $6.2 billion, excluding legacy insurance partners, an $8 billion improvement from a year ago.
Adjusted operating revenues increased 21% to $828 million, reflecting cumulative benefit of inflows, favorable mix shift toward 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 increased a more moderate 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 continue to perform in line with expectation in this market and rate environment.
While we have a strong book of business from a risk perspective, we continue to execute our strategy to improve it further.
In the quarter, 64% of retirement product sales did not have living benefit guarantees.
This 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%.
In protection, sales were flat, as we continue to see a meaningful increase in higher-margin VUL and a significant decline in index universal life.
These mix shifts are expected to continue going forward.
Financial results continue to be in line with expectations.
Pretax adjusted operating earnings increased 10% to $183 million.
We had a steep drop-off in claims following January's high level, and we were approaching pre-COVID levels of claims by the end of March.
This business is very well managed.
Net amount at risk remains among the lowest in the industry, and our hedging remains very effective.
Let's turn to page 11.
In total, the corporate and other segment had a $21 million loss in the quarter, which was a $29 million improvement from the prior year.
Excluding closed blocks, the loss in the corporate segment was $63 million, which included a $15 million investment gain, largely 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 in the quarter.
The high COVID-related mortality and terminations that we saw in January declined in February and March and were approaching pre-COVID levels by the end of March.
This benefit was partially offset by the COVID claims level on life insurance.
Fixed annuities had a $4 million loss related to the low interest rate environment.
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 of $2 billion, 96% hedge effectiveness in the quarter and a defensively positioned investment portfolio.
Adjusted operating return on equity in the quarter remained strong at 30%.
We returned $491 million to shareholders in the quarter through dividends and buyback.
We just announced a 9% increase in our quarterly dividend, and we are on track with our commitment to return 90% of adjusted operating earnings to shareholders this year.

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increased its quarterly dividend 9 percent to $1.13 per share.

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