Ameriprise Financial, Inc. (AMP) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting of Ameriprise Financial. Our host for today's call is Jim Cracchiolo, Chairman and CEO. [Operator Instructions] I'll now turn the call over to your host. Mr. Cracchiolo, you may begin.

Good morning. Thank you for joining us today, and welcome to the Ameriprise Financial Annual Meeting of Shareholders. I'm Jim Cracchiolo, Chairman and Chief Executive Officer. I am joined by Tom Moore, our Corporate Secretary and Chief Governance Officer, who will oversee today's meeting, which is our first completely virtual annual meeting. As we informed our shareholders, we are holding this meeting virtually to adhere to government guidelines regarding the COVID-19 virus in restricting large gatherings and to support the health and safety of our shareholders, directors and employees. On behalf of everyone at Ameriprise, I'd like to extend our good wishes for the well-being of you and your families. Today's virtual meeting will proceed in a similar fashion to our in-person annual meetings, but I'd be giving my business presentation and answering shareholder questions after the formal business of the meeting rather than during the meeting. This will allow us to conclude the necessary business in the unlikely event of technical issues with the webcast. In the event of a technical malfunction or a disruption that interferes with our ability to continue the webcast, the meeting will be adjourned, recessed or expedited. If the webcast has a technology disruption, the polls will open immediately and will close 2 minutes thereafter. If the meeting is so adjourned or recessed, all votes received prior to the time the polls are closed will be counted. The meeting will not be reconvened, and the results will be announced publicly. With that, I will note that the inspector of elections has reported a quorum, so we will proceed with the meeting, which I now call to order. I'll begin by introducing my colleagues on the Board of Directors. The Board of Directors appointed Brian Shea as a director effective as of June 1, 2019, and Brian is standing for election for the first time. The other directors and I are seeking reelection. The directors participating with me in today's meeting are Dianne Neal Blixt, Amy DiGeso, Lon R. Greenberg, Jeffrey Noddle, Robert F. Sharpe Jr., Brian T. Shea, W. Edward Walter and Christopher J. Williams. On behalf of all our shareholders, I would like to recognize our Board's significant contribution to the company's strength and long-term success. I'm grateful for the continued support and counsel of my fellow directors during this difficult time. As always, they remain focused on serving the best interest of the company, its shareholders, employees, advisers and other stakeholders. As shareholders of Ameriprise, you can take comfort in the fact that our company benefits from having an experienced and long-tenured executive leadership team. The Board and I rely on their leadership, informed perspective and commitment. And I would like to take a moment to recognize our executive leaders and their contributions. Thank you all very much. Now I'll turn things over to Tom to outline the statement of order of business, the proposals being submitted to shareholders and the opening and closing of the polls. Tom?

Thank you, Jim. The Board of Directors has appointed The Carideo Group, Inc. as inspector of elections for this meeting. Mr. Jon Commers, the representative of The Carideo Group, has subscribed his oath of office and filed it with me. The Board of Directors has fixed March 2, 2020, as the record date for determining shareholders entitled to notice of and to vote at this annual meeting. Mr. Chairman, I present the following documents: a certified list of the holders of common stock of the company as of the close of business on March 2, 2020. This list has been prepared by Broadridge Financial Solutions, the company's stock transfer agent and registrar; an affidavit of Ms. Joanne Vogel, an employee of Broadridge Financial Solutions, as to the distribution beginning on March 20, 2020, to our shareholders of record as of March 2, 2020, of a notice regarding the availability of proxy materials for the shareholder meeting to be held on April 29, 2020, or paper copies of the proxy materials. The notice informed our registered shareholders of the availability online of the notice of meeting, the proxy statement for this meeting and the 2019 annual report to shareholders. Shareholders were also informed how to obtain these proxy materials in paper form or by e-mail at no charge. The notice disclosed the date, time and location of this meeting as well as the items to be voted on. Copies of the proxy materials have been posted on our annual meeting site and provided in paper form to those shareholders who requested them. On April 9, 2020, the company filed with the Securities and Exchange Commission supplemental proxy materials that provided our shareholders with notice of a change of location of the annual meeting from Minneapolis, Minnesota to a virtual-only meeting. On April 9, 2020, the company also distributed a news release announcing the decision of the Board of Directors to hold this meeting as a virtual-only meeting. Both the notice of a change of location and the news release were promptly posted on the company's public website. I will file these materials with the minutes of the meeting. To ensure the orderly conduct of the business of this meeting, the Board of Directors has adopted the order of business and meeting rules of conduct posted on our shareholder annual meeting site. I'll explain the 3 matters on the agenda for consideration during today's voting. The company has not received notice from any of its shareholders as required under its bylaws of any other matter to be considered at today's meeting, and therefore, no other proposal or nomination may be properly introduced by a shareholder at this meeting. On behalf of the Chairman, I now declare the polls open for voting at this annual meeting. If you wish to vote at the meeting and have not yet done so, you may now vote on the meeting site. The polls will remain open until immediately after discussion on today's proposals. To promote the efficient conduct of the meeting, the Chairman has declared the order of business as stated in the agenda to be accepted. Each of the following 3 proposals is described in the company's proxy statement dated March 20, 2020, and is presented at this meeting by the Board of Directors. The Board of Directors is recommending that shareholders vote for each Director nominee listed in the proxy statement and for the second and third proposals. The first proposal is the election of 9 directors. All of our director candidates are standing for election for a 1-year term. Therefore, Mr. Cracchiolo and each of the other 8 nominees named in the proxy statement and whom Mr. Cracchiolo introduced to you earlier in the meeting are standing for election each to serve until our 2021 annual meeting. The second proposal is a nonbinding advisory vote to approve the compensation of the named executive officers. The named executive officers are those officers identified in the compensation disclosure tables included in the proxy statement for this meeting. This vote, commonly called a say-on-pay, is required by federal law for large public companies. The third and final proposal seeks ratification of the Audit Committee's selection of PricewaterhouseCoopers LLP as the company's independent auditors for the fiscal year ending December 31, 2020. Now we will proceed with voting on each of the proposals I've described. The votes required for each proposal to be approved are described in the chart provided on Page 65 of our 2020 proxy statement. We will close the polls shortly, so if you wish to vote and have not done so, you may vote online now. If you previously returned a proxy card or voted by means of the Internet or telephone and do not wish to change your vote, you do not need to vote at this meeting. If you have not yet turned in a proxy card or if you are a shareholder of record and you wish to vote your shares in a manner different than you have indicated, you must vote online now. As we detail in our proxy statement, the Audit Committee of the Board of Directors approved the engagement of PricewaterhouseCoopers LLP for the 2020 fiscal year, subject to ratification by our shareholders. If you are a shareholder or a proxy for a shareholder, you may submit questions on the meeting site throughout the meeting. After the business presentation, our Chairman will respond to shareholder questions. Mr. [ Statler ] of PricewaterhouseCoopers will also be available to answer any questions after the Chairman's business presentation. On behalf of the Chairman, I now declare the polls closed. Mr. Chairman, the inspector of elections has provided a preliminary report showing that the management proposals presented at today's meeting, including the election of each of the 9 director candidates standing for election to serve until the 2021 annual meeting of shareholders, have received the required number of votes to pass. With that, I'll turn it over to our Chairman who will close the formal business of the meeting before beginning his presentation and responding to shareholder questions. Jim?

Thanks, Tom. This adjourns the formal business of the meeting. Now I'll begin with my presentation and take questions. While our shareholder meetings typically focus on prior year business and financial results, 2020 is clearly a very different year given the global pandemic we're all experiencing. So before I discuss 2019, I'll share my perspective on the significant environmental challenges over the past few months. I'll also discuss how Ameriprise entered this period executing very well on all of our priorities and how we are responding and navigating these challenges. And importantly, I'll highlight why I believe we will come out of this period in a strong position. Globally, governments have taken unprecedented steps to contain the spread of the virus, substantially impacting our daily lives, business activity and economies. And the fiscal and monetary responses to mitigate the economic impact have been significant. The fed has stepped in to provide substantial support to the financial system, including reducing interest rates to all-time lows and continuing to provide much-needed liquidity. Additionally, the government has provided extensive fiscal stimulus of $2.5 trillion. Even with these actions, there have been severe impacts to the economy and historic volatility with sharp declines in equity markets and liquidity issues in certain fixed income markets. And there is, of course, the immense personal impact to individuals, families and communities, especially for our health care workers, emergency responders and others. This is a unique event in that the virus is causing a health care and an economic crisis simultaneously. In the face of this extremely challenging and unprecedented environment, the Ameriprise team around the world rose to the occasion. Our senior leadership team acted decisively and proactively as this crisis emerged. We benefited from our business continuity capabilities and stayed focused on our top priority: serving clients' needs while ensuring the health and safety of our employees and advisers. I'm proud to say that we accomplished this through a successful large-scale shift to work from home. Throughout this process, our technology resiliency and capabilities have been superb, enabling our clients and advisers to continue to work together without disruption. We achieved this with approximately 95% of the firm working from home by mid-March. This is no small feat, and I'm grateful to my Ameriprise colleagues who've remained focused and resilient. It's been humbling to see the positive feedback we are receiving from clients, employees, advisers and field leaders about the support and resources we're providing during this difficult time. Our clients appreciate our timely and proactive communications, and they are consistently citing strong performance and value of our technology and capabilities. Now I'll turn to our financial strength, which continues to be a core pillar of Ameriprise and has helped us navigate the current environment with confidence and conviction. Our liquidity position is very strong. We have a sizable excess capital position, and we have a high-quality investment portfolio with an average rating of a AA minus and limited exposure to industries that are under pressure. We also benefit from our longstanding and effective risk management that prepares us for these types of volatile economic conditions and supports our ability to generate free cash flow. Maintaining an excellent financial foundation and strong expense management ensures we can continue to focus on our long-term strategic priorities and manage equity market and interest rate pressures. As importantly are our excellent value propositions in what we do for clients day in and day out. We're providing expert perspective through our research and market commentary, and we're delivering personal, highly tailored advice, helping our clients stay focused on both their near- and long-term goals. During these uncertain times, clients realize even more the power and value of our personal financial advice, a thoughtful long-term plan and the solutions to achieve it. And that's what we deliver. And as an active manager, our extensive research capabilities and relevant investment perspective and solutions are helping serve client needs to achieve targeted investment outcomes and manage risk. While there are many unknowns ahead, we're well prepared to serve our clients, grow our business in the right way and deliver for our advisers, employees and shareholders. I believe the actions we're taking and how well we're situated will contribute to extending our record of being one of the top-performing companies in financial services. As always, we're focused on delivering consistently strong performance over the long term. So clearly, Ameriprise is managing these headwinds while operating from a position of strength as a diversified financial services leader, which is a good transition to briefly recap 2019, a record year for Ameriprise that extended into the first couple of months of 2020. We ended 2019 with assets under management and administration of $973 billion, a new high, with strong growth in Advice & Wealth Management retail client assets, adviser productivity as well as Asset Management AUM. In terms of adjusted operating results in 2019, net revenues reached $12.7 billion; EPS grew 10% to $16.10; and return on equity, excluding AOCI, increased 120 basis points to 38.3%. Our return on equity is consistently one of the best in financial services. And we took important strategic actions, including the sale of Ameriprise Auto & Home insurance, reinsurance of a block of fixed annuities and the launch of Ameriprise Bank, FSB, a key strategy for future growth. In terms of the total shareholder return for Ameriprise Financial, in 2019, it was a strong 64%. Based on the strength of our company and the results we have demonstrated, we believe we can continue to outperform over the near and long term. I'm proud that Ameriprise has consistently been among the top-performing financial stocks since our spin-off, ending 2019 as the fourth best return in the S&P 500 Financials Index. I'd like to briefly reinforce the core themes we discussed at the Investor Day meeting we held with analysts and institutional investors in November. First, Ameriprise has a large, long-term opportunity to grow as a wealth manager and advice leader focused on deep client relationships. These personal relationships are at the core of our business and truly differentiate our firm, especially in volatile markets. Investors are increasingly seeking personalized advice, effective solutions, terrific service, and importantly, they want to work with a firm and adviser they can trust. That's Ameriprise. These attributes may be even more relevant today, given investors' understanding how quickly market conditions can change. We're at the heart of this opportunity. Our clients consistently rate us 4.9 out of 5 stars for satisfaction. Our advisers are regularly recognized in top publications to the quality and the productivity of their practices, and we have received numerous industry awards for trust and customer service. As a diversified firm, our wealth management business is complemented by our Asset Management, Insurance & Annuity capabilities. Wealth management is the core growth driver of Ameriprise, and our advisers generate approximately 85% of our firm-wide revenue. Our advisers work with clients over decades and deeply understand their goals and what they want to achieve over their lifetime. And behind every adviser is the strength of Ameriprise and the excellent support we provide them. We delivered an outstanding year in Advice & Wealth Management, including meaningful growth in client assets to $643 billion with good growth in fee-based accounts. This translated into substantial segment revenue, pretax adjusted operating earnings growth and profitability. Importantly, our commitment to invest for the long term and our decision to accelerate growth investments in 2019 is proving to be very beneficial. In 2019, we made significant growth investments. We further enhanced our digitally enabled advice and financial-planning capabilities to make it even easier for our clients and advisers to work together. This includes online goal and progress sharing and the ability to communicate simultaneously. Our advisers are using our newly integrated tools to serve more clients, deepen relationships with existing clients and grow their practices. As I mentioned earlier, these capabilities have made a meaningful difference as thousands of our advisers and employees are now working remotely, seamlessly delivering for clients. We also implemented a sophisticated CRM system last year that advisers are using to meet the significant demand for client connections. In addition, we completed the implementation of our customer advisory platform, further strengthening our investment advisory business, one of the largest in the industry. And we launched the Ameriprise Bank, FSB to better serve the banking needs of our clients and help our advisers grow their practices. The bank is an important long-term growth driver of our wealth management business, expanding our deposit and lending capabilities. The opportunity before us is large, and we're ready to capture an even larger share given our strength and the advice value proposition we provide. Our second key area of focus is continuing to transform our global Asset Management business, Columbia Threadneedle Investments, to meet the important and growing client needs for active management. 2019 was a year of important progress in Asset Management. Assets under management was up nicely to $494 billion. Our net flow picture improved by $14 billion year-over-year. We delivered solid results across each of our key regions with the U.S., our largest market, showing the greatest year-over-year improvement. And at the same time, we strengthened our institutional business and managed the uncertainty of Brexit well. From an investment perspective, our equity, fixed income and asset allocation teams had an excellent year. In fact, for 2019, Columbia Threadneedle ranked in the top 5 for Barron's Annual Ranking of top-performing firms. With this performance, we focused on investing in our global research capabilities, including expanding our use of data and technology, deploying our broad investment capabilities to serve core client needs, accelerating progress in U.S. intermediary, expanding in Europe to complement our strength in the U.S. and the U.K. and growing our institutional, multi-asset and solution businesses. The result was a good year for our Asset Management business, and we are focused on continuing our progress. Our third theme is managing our well-developed Insurance & Annuity books of business focused on retirement asset accumulation solutions for our clients that generate strong cash flow for Ameriprise. Our Insurance & Annuity capability is an important part of how we meet client needs through the Ameriprise Confident Retirement approach. The books of business have performed well through market cycles, which is reflected in our record for generating strong and competitive returns. We recognize that the recent decline in interest rates is a sizable challenge for the industry, and we are adapting. In fact, we took a number of strategic steps in 2019 to strengthen the business. As I mentioned, we sold Ameriprise Auto & Home insurance in the fourth quarter, allowing us to free up $700 million in capital. We also received over $1 billion for the transaction. And we reinsured 20% of our fixed annuity block, which freed up $200 million in capital. Our fourth strategic business theme is continuing to focus on profitable growth, maintain a sound balance sheet and generating strong returns for investors. Our diversified business generates strong free cash flow that we reinvest in the business and return to shareholders. Our strong performance and strategic actions increased our large excess capital position to over $2 billion, even as we returned $2.4 billion to shareholders through share repurchases and dividends. This included an 8% increase in our regular quarterly dividend in 2019, our 15th increase since we became public company 15 years ago. Our capital position remains a clear differentiator for Ameriprise, and the actions we took in 2019 and this year further reinforced the importance of maintaining a strong financial foundation. What has always defined our firm are my Ameriprise colleagues and our caring, client-focused culture. We care deeply about our clients and each other and the communities in which we live and work. I'm seeing the spirit demonstrated day in and day out during this crisis, from the company and advisers donating protective equipment to hospitals, to our support of nonprofits and need across the country. One of the important actions we took was accelerate and increase in our grants to nonprofits we support to help them cover cash flow and other expenses during this time of increased economic pressure. I want to reinforce again how proud I am of our executive leadership team, our leaders, employees and advisers for what they have individually and collectively accomplished. Our country and our industry are in uncharted territory, but Ameriprise is equipped to navigate and to move forward just as we've done many times in our history. In fact, 2019 marked the 125th year anniversary of Ameriprise. Through market downturns, recessions, economic booms, the Great Depression and the Great Recession, we have stood by our clients with the resolve and resources to honor our financial obligations. I'm confident we will continue to focus on the right priorities and execute in the right way. While many uncertainties remain, I am comforted by the fact that we have an exceptional and experienced team in place to manage through this well. I'm confident about the opportunity for Ameriprise, and I'm energized about helping our company take the next steps in our journey. Thank you.

Thank you, Jim. And with that, we'll take a moment or 2 to review the questions that we've received. And Jim will be back in just a moment. Thank you.

Okay. The first question we received from a shareholder is a question about our response to COVID-19 situation and more particularly about the fees during this time. As I mentioned in my prepared remarks, Ameriprise team around the world responded extremely well in the face of this challenging and unprecedented event. Our senior leadership team, aligned with our Board of Directors, acted decisively as this crisis emerged, quickly deploying our business continuity capabilities. Our priority to the situation was really the safety of our employees, at the same time of serving our advisers and our clients without disruptions. We met all of the client adviser needs. And while nearly all of our firm was working from home, the investments we made, the tools, the capabilities over the longer term really served us well and continue to serve us well in this environment. We understand this situation will continue to evolve, and we feel prepared that Ameriprise will emerge in a strong position, given the strength of our value propositions, the investments we've made and the financial strength and stability of the firm. As it relates to fees, we charge for service and products we offer. We work diligently to ensure these fees are competitive, meet all regulatory requirements and serving clients even through this crisis. So we thank you for that question. The next question was from a shareholder who asked about the response of the Board's Compensation and Benefits Committee to the voting results on say-on-pay proposal over the last 2 years. As you know, our executive compensation program is overseen by the Compensation and Benefits Committee was comprised solely of independent directors. In terms of the say-on-pay vote results, in 2018, '19, the Board and management engaged with our shares extensively, listened carefully and have to say, made changes to the program. And from what Tom described in our results, we're pleased that the shareholders supported the proposal, and we will file 8-K announcing the voting results after today's meeting. And you'll see that the support on the say-on-pay proposal is above 90%, around 90% again, which is in line with our historical support. Thank you for that question. The next question we have is a question around whether the Board has a mandatory retirement age for directors. The Board has adopted a policy that no one who is aged 75 or older can be appointed as a director or be nominated for election or reelection. I will say that the Board's Nominating and Governance Committee is focused on succession planning based on how long directors will be able to stay on the Board and is aware of the need on an ongoing basis. Over the past few years, a few Board Members rotated off the Board, and the Board has added several very talented directors. Just last June, the Board appointed Brian Shea to the Board, and Brian was elected by shareholders for the first time today. He has been a great addition to the Board. So we thank you for that question. We received another question. And this is regarding, Mr. Chairman, the [ compensator ] pension funds, so combined assets of $70 billion have a collective ownership position and common shares of 491,000 of long-term shares. We appreciate the efforts of the company has to address difficulties faced by employees, customers and other important stakeholders. The acceleration of company's donation schedule and hunger relief grants are particularly admirable. The recent growth in the size of passive mutual funds, corporate ownership interest in U.S. corporations have been dramatic, which raises important public policy and corporate governance issues. Currently, BlackRock holds 7.8%; Vanguard, 10.7% of company's shares. Do you and the Board see this growing corporate ownership concentration a positive, negative development in regard to the Board's task to focus on long-term corporate planning to ensure long-term performance and success? Thank you, Mr. Chairman. We very much have focused on the long-term success of the company since we became public. We really have, number one, focused around what we do for clients that place their trust in us. We've been rated #1 in trust a number of times over the last few years, #1 in forgiveness, number -- top of the charts in Net Promoter Score as well as in serving clients in their best interest. We have a very strong client focus and culture. We have very strong values in the company. Our employee engagements are some of the highest across financial services. We invest in our people. We invest in the company and the technology over the years since we've been public. And so we very much align with the interest of our long-term shareholders and what they're looking to do. We have strong efforts regarding ESG as well. So we feel very aligned to take a long-term focus as we've always done. We've been in business for 125 years, and we like it to remain that way. Those are the extent that we have time for questions at this point. So with that, I've now reached the end of the meeting. And so on behalf of Ameriprise Financial's Board of Directors and its officers and employees, I want to thank you again for listening to our annual meeting and for your support of the company. Thank you. And we will adjourn.

This now concludes the meeting. Thank you for joining, and have a pleasant day.