Ameriprise Financial Inc AMP
Q4 2010 Earnings Call Transcript
Transcript Call Date 02/03/2011

Operator: Welcome to the Ameriprise Financial Fourth Quarter and Year End Earnings Conference Call. My name is Christine and I will be your operator for today's conference. 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 Ms. Laura Gagnon. Ms. Gagnon, you may begin.

Laura C. Gagnon - IR: Thank you and welcome to the Ameriprise Financial's fourth 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 2009 Annual Report to shareholders; and our 2009 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.

James M. Cracchiolo - Chairman and CEO: Good morning. I know a lot of companies are holding their earnings calls today, so we appreciate you taking the time to join us. This morning Walter and I will update you on our performance for the quarter and for the full year of 2010. Let's begin.

We reported good fourth quarter earnings and we finished the year with our best full year results ever as a public company. For the quarter, we generated $2.6 billion in operating net revenues, a 19% increase over last year. Our operating net income was $312 million, which was up 30% over a year ago. I should point out that the earnings includes two notable items, a $28 million expense related to FAS 157 impacts in variable annuities and $7 million in auto and home claims from a single hail storm in Arizona.

For the year on an operating basis, we reported earnings of $1.2 billion or $4.47 per share and we achieved record net revenues of $9.6 billion, an increase of 24% compared with 2009. Our return on equity reached 12.6%, an increase of 340 basis points over last year. While that's also an all-time high, we are focused on driving further improvement in our returns. We're making continued progress towards generating a higher percentage of our earnings from our less capital demanding, higher returning businesses.

For the quarter, we generated 54% of operating earnings from Advice & Wealth Management and Asset Management compared with 30% a year ago.

Given the environment, we're pleased that we've already surpassed our previous high watermarks, which we reached back in 2007. Remember the S&P 500 was 20% higher then and interest rates today remain extremely low. So we feel good about the path we're following. We came through the crisis untarnished and in an excellent condition and we've used our relative strength to grow the Company, both organically and through the Columbia Management acquisition. Owned, managed and administered assets reached a new record at $673 billion, which was 47% higher than a year ago.

Our prudent operating principles continued to serve us well. Our balance sheet and capital are stronger than at any time in the past, which gives us a competitive advantage and allows us to return capital to shareholders. In fact, we are still one of the very few firms in the industry that's buying back stock. For the quarter, we bought back 3.8 million shares for $200 million, and since restarting our buyback program in May, we've repurchased a total of $573 million. Including dividends for the year, we returned two-thirds of our earnings to shareholders. We intend to continue the buyback program in 2011.

At the same time, we are maintaining our expense discipline. We achieved over $240 million in reengineering savings across the Company in 2010, and we used the portion of this savings to fund investments for growth while delivering much of the savings to the bottom-line. While expenses have increased as a result of the stronger business activity, we remain very comfortable with our expense management.

In total, we feel quite good about the position we are in. The business is performing well and we have good earnings leverage for improving conditions.

Now, I would like to discuss our segment performance. First Advice & Wealth Management delivered another strong quarter. The segment generated a record $1 billion in operating net revenues and $90 million in pretax operating income, nearly triple the churnings of a year ago.

Margin improvement has been an area focus for us in the segment and we made good progress in 2010. In the fourth quarter, the segment's pretax operating margin was 8.9%, nearly 5 percentage points higher than a year ago. Advisor productivity is an important measure of our progress in this segment and it is improving nicely.

Operating net revenue per advisor reached new highs at $88,000 for the quarter and $326,000 for the year. Several factors led to the stronger productivity. First, client activity continued to tick upwards. While clients still haven't returned to pre-crisis activity levels, clearly confidence in the markets and the economy is improving. You can see the stronger activity in our client asset metrics. We continue to generate good net inflows into wrap accounts, and our total retail client assets reached a new high of $329 billion.

Second, over the past several years, we've significantly strengthened the advisor force and its economics. We had good success at recruiting, with approximately 800 experienced advisors joining us over the past two years. It takes a while for new recruits to bring over assets and clients and now, we're starting to realize the benefits of their established books of business.

The transformation of the employee advisor continues. Advisor retention has increased dramatically and we reduced cost substantially, even as we continue to invest in the business. So, while our total number of advisors has continued to decline, we're more than making up for it with stronger advisor productivity, both on a per advisor and total basis. In fact, on average, the advisors we've added, at five times the trailing productivity of the advisors who have left.

Finally, we're continuing to make major investments in the business. We're building our brand through advertising, and we're continuing to add to the tools and technology available to advisors. In fact, we're in the process of our multi-year rollout of a new industry-standard brokerage platform, which is one of the largest investments we've made in the advisor technology.

I should note that our financial performance in this segment still faces the headwinds of extremely low interest rates, which obviously depresses the spread we earn on client deposits. We don't expect rates to rise sharply anytime soon but an increase in rates would give us nice additional earnings leverage.

The Asset Management segment also delivered another strong quarter. We generated pretax operating earnings of $163 million for the quarter more than double a year ago and 35% higher than the sequential quarter. The segments pretax operating margin was 21.1%. These results which include $22 million of net income from hedge fund performance during the year demonstrated the improved profitability and scale of our combined Asset Management business.

Global retail flows improved sequentially and was essentially flat for the quarter. Strong retail net inflows at Threadneedle were offset by retail and Institutional outflows in the domestic business. Domestic retail flows improved with the sequential quarter, but we remained in net outflows. While we are starting to see a pickup in equity fund sales, we saw outflows in municipal and taxable funds.

In our Institutional business flows was skewed by the loss of two relatively large, but low margin mandates. In fact of the $5.7 billion in global net institutional outflows approximately $4.7 billion came from low margin pools of insurance assets including Zurich outflows, but we expect some of the outflows of low margin institutional assets to continue the pipeline of more profitable mandates is solid.

In fact at Columbia mandates sold in the fourth quarter that we expect to be funded earlier this year will more than offset revenues loss from the fourth quarter's net institutional outflows. Threadneedle reported another strong quarter with revenues assets and profitability all increasing significantly compared with a year ago. European investors began to return to equity funds during the quarter and as a result Threadneedle's retail flows improved substantially.

Investment performance remains strong with particular strength in equity funds. Threadneedle continues to manage his expenses flow even as revenues have increased significantly, so the international business is generating increasingly solid margins.

Columbia Management integration remains on schedules. Fund mergers will mostly be complete by the end of the second quarter and the new line-up will include strong performing funds in every style box. In fact on a pro forma basis, our funds are performing above the (68 percentile) in Lipper performance rankings in every category. We believe the combination of strong performance and clearly defined fund line-up will help us to start the turnaround of asset flows as we move through 2011.

In annuities, we reported pretax operating earnings of $128 million, which represents a 9% decrease compared with the year ago. The decline was driven by the impact of FAS 157 which has no impact on the underlying economics of the business and which we recognized in operating earnings. Walter will explain this item in more detail.

The underlying business continued to perform well as our new variable annuity product helps us generate variable annuity net inflows of approximately $400 million. We continue to feel good about the variable annuity business, especially now that we have focused our efforts and resources on our advisory force; we have a very good understanding of client behavior and can generate strong returns.

During the quarter, we made a strategic decision to stop selling variable annuities to clients above the firms. The decision was based in part on the fact that outside distribution generate 12.5% of our variable annuity sales that accounted for over 25% of the equity reinvested in the variable annuity business. Just as important, we knew that achieving scale and outside distribution of annuities will require substantial additional capital, so we chose to focus our resources on our system, where we can add real value to client's long-term financial plans.

The fixed annuity business remained stable, with net outflows resulting from our decision not to write new business because of the rate environment. Lapse rates remain low and asset persistency high in the fixed book, which continues to generate stable spread earnings and good returns. We'll continue to pursue opportunities in fixed annuities when market conditions become favorable.

The Protection segment produced pretax operating earnings of $86 million, down 26% compared with a year ago. We had weaker performance during the quarter due to claims from the hail storm I mentioned earlier and because we increased reserves related to bodily injury coverage claims. The results also include $10 million in higher variable universal life reserves related to SOP 03, which Walter will explain.

Aside from these impacts to the quarter, we continue to feel good about the health of our insurance business. Our underwriting performance has been strong and our large book of insurance business generates solid recurring earnings.

In auto and home, policy counts grew by 9% over a year ago driven in part by a promising partnership we have established to provide homeowners insurance to customers of Progressive Insurance. In the life and health business clients across the industry continue to be somewhat reluctant to commit cash required for new insurance contracts. That said, our advisors are finding that clients are beginning to be more receptive to a conversation about insurance. As a result, our full year cash sales were up 14% compared with 2009.

To summarize, I feel very good about the progress we have made and the results we delivered, both for the fourth quarter and for the full year. We are succeeding at driving higher margins and a greater percentage of earnings from our less capital demanding business and we are deriving real benefits from the scale and strength of all four of our operating segments.

Our Asset Management and Distribution acquisitions are paying off. At the same time, we continue to manage our finances prudently, our balance sheet and capital positions are as strong as ever, and our expense and risk disciplines will not waver. These actions are contributing to higher returns, which is a long-term focus for us.

We're pleased with the upward trend in our ROE, and we're confident that we have the right strategy as well as the business and financial strengths to drive increasing returns. Overall, we produced an excellent year with record results, and we feel good about our ability to continue making progress.

Now, I'll turn it over to Walter, and later, we'll take your questions.

Walter S. Berman - EVP and CFO: Thank you, Jim. We continue to report strong performance, with operating EPS of $1.21, up 33% from the prior year. The operating earnings include some notable negative impacts, which I will describe shortly. These negatives were offset by strong growth in our low capital businesses and continued solid performance of our annuity, and life, and health businesses.

Our low capital businesses, Advice & Wealth Management and Asset Management, generated 54% of operating segment pretax income compared with 30% a year ago. That shift, combined with prudent capital management, resulted in our operating ROE of 12.6%, up 340 basis points from last year. In addition, our balance sheet fundamentals remain strong in all areas.

On the next slide, I'll provide some detail on the quarter. Operating results exclude the impact of consolidated investment entity's realized gains and losses, as well as integration and restructuring charges. These items and the segment impacts are detailed and our statistical supplement.

Operating net revenues grew 19% to $2.6 billion in the quarter. While net operating earnings were $312 million, up 30%. Operating earnings per share increased 33% to a $1.21, reflecting growth and improved margins in Advice & Wealth Management and Asset Management.

Our results included $0.12 per share in mean reversion benefits and hedge fund performance fees, driven primarily by the markets. We believe this $0.12 is embedded in your estimates. Whereas, there were three unanticipated negative items included in the $1.21 that we believe are not reflected in the sell side analyst's expectations.

First, we recorded $0.11 for the negative impact of credit spreads narrowing on our variable annuity liability. This impact is not economic and consequently we do not hedge it. In fact, many of our insurance companies do not include it in their operating earnings, excluding this, earnings were $1.32.

Second, we recorded a $0.03 loss for auto and insurance claims related to an unusual hail storm in Phoenix. Finally we recorded $0.04 loss for increased auto and home liability reserves in the quarter. Our results were also impacted by increased general and administrative expenses, which are booked in each segment.

We had to catch up in our comp accruals due to strong business performance during the year and we incurred some increased legal expenses. On a full year basis we reported record operating earnings. Operating net revenue grew 24% to $9.6 billion and operating earnings were up 56% to a record $1.2 billion, which includes eight months of Columbia acquisition results.

Operating EPS grew 45% to $4.47 for the full year, which includes the impact of the higher weighted average share count for the equity we issued in June of 2009, partially offset by the share repurchases in 2010.

In the fourth quarter of 2010, low capital businesses generated 61% of our operating segment net revenues, up from 54% compared with the fourth quarter of 2009. This strong revenue growth combined with margin expansion in AWM and Asset Management resulted in 54% of operating segment earnings from our low capital businesses, up from 30% last year. Now I'll move on to our segment performance.

In Advice & Wealth Management, you can see that we generated nearly three-fold increase in segment PTI year-over-year. This segment reported record revenues surpassing $1 billion. These strong results were driven by recovering client activity, growth in assets under management from markets and inflow and retail client assets, as well as continued good expense management. Interest rates continued to impact our earnings where our brokerage cash spreads marginally down sequentially.

Expenses also continue to well-managed. On a sequential basis G&A expenses increased mostly due to higher business volumes and an increase in compensation expenses reflecting strong overall Company performance. We also incurred higher than normal legal expenses as a result of our ongoing litigation at Securities America.

On the next slide, I'll discuss Asset Management. This segment had another very strong quarter. With operating net revenues up 66% year-over-year and with the pretax operating margin of 21.1%, net of pass-through revenues margins increased to 34.1%. Hedge fund performance fees primarily from settlement generated $22 million of pretax earnings in the quarter compared to $30 million last year.

As Jim described, we saw an increased net outflows driven by low margin insurance portfolios in the Institutional business. Retail net flows improved sequentially. The Columbia Management integration is proceeding according to plan. We remain on track to deliver our financial projections we provided when we announced the transaction, and we feel very good about the business synergies we are realizing.

Let's move to next slide, for Annuity's operating pretax income declined 9% year-over-year, however the underlying performance was strong. In the quarter results included $43 million expense related to variable annuity living benefits. This expense resulted in a FAS 157 impact, which we do not hedge, namely non-performance risk and which many companies do not include in operating earnings. The business continued to generate strong sales for our new annuity product RAVA 5.

The overall book of business continued to generate strong stable earnings and returns, despite absorbing the volume-driven increased cost of distribution. We believe these returns will be further enhanced by our decision to exit outside distribution of variable annuities, which Jim described.

On next slide, I will discuss the Protection segment. The Life and Health segment business continued to generate consistent results. DI and LTC claims returned to expected levels after a higher than expected third quarter, and we continue 1to reserve at higher levels for our Universal Life products with secondary guarantees. As a reminder, I mentioned on the third quarter call that we expected an increased run rate in these reserves.

That said our results for the quarter were impacted by several notable items, including the hail storm in Phoenix. We've already reached our retention limits and are 100% reinsured for any future development from the storm. We've also increased our auto liability reserves by $16 million in the quarter.

Aside from those items, the Insurance business continued to generate good results with increase VULs sales during the year and good continued growth in the Auto and Home business.

On the next slide, we continue to manage our financial foundation well, which has enabled us to return capital to our shareholders. During the quarter, we repurchased 3.8 million shares for $200 million. This brings our total repurchases in 2010 to 13.1 million shares for $573 million. Including dividends, we returned $756 million to shareholders this year or over two-thirds of our net income.

We continue to hold more than $1.5 billion in excess capital, while our cash flow also remained strong at $2.9 billion, with $1.8 billion of free cash. The quality of our balance sheet also remains strong. Our preliminary estimate of the RiverSource risk-based capital ratio is approximately 600% and our unrealized gain position is $1.5 billion.

Our balance sheet ratios continue to remain conservative, both in terms of leverage and coverage ratios. Finally, our variable annuity hedge program continues to be effective. So to summarize, we generated strong earnings in the quarter as a result of very good underlying business performance in a challenging economic environment. Our actions have resulted in an increased operating leverage, and we are making good progress.

We are driving our mix towards the lower capital businesses effectively managing our excess capital and driving our operating returns through the higher end of our on average over time targets. Our balance sheet remains strong including our capital and liquidity positions. We are continuing to manage our risk exposures prudently, positioning the Company for continued growth.

Now, we'll take your questions.

Transcript Call Date 02/03/2011

Operator: Alexander Blostein, Goldman Sachs

Alexander Blostein - Goldman Sachs: Walter, a couple of questions on the expense and I guess just to start. If you look at your G&A in Asset Management and even if you strip out like a normalized margin on performance fees, these don't pick up a good amount quarter-on-quarter. So I guess number one, can you tell us how much the catch up was due to I guess fourth quarter comp accrual? Then where do you stand with respect to savings and how much is already in the run rate today?

Walter S. Berman - EVP and CFO: On the G&A expenses for AWM – I'm sorry you have to repeat the question because...

Alexander Blostein - Goldman Sachs: So, if you look at the Asset Management G&A expense, it jumped up quite a lot quarter-on-quarter. Then even if you strip out I guess an assumption for comp associated with performance fees, it's still off a good amount. So can you try to quantify maybe either there was a catch up I think you mentioned in your prepared remarks or – and then on top of that of how much of the savings is already in the run rate as of today?

Walter S. Berman - EVP and CFO: It's actually both because it was within the catch up on the comp in that segment of about $5 million to $6 million, and then we did have pass-through coming through as related to, which really drove the main expense. As run rate it's obviously geared towards the growth that we have on performance. So at this stage I would say that it's a representative.

Alexander Blostein - Goldman Sachs: How much of the estimated cost savings you guys already have in your run rate? Last quarter you said there is about maybe 50 of the 150 to 190 range in the run rate. So where do…?

Walter S. Berman - EVP and CFO: Right now in the quarter we hit a run rate that's like 112 and 75 if you take a look through the year-to-date growth synergies. We're on target to achieve the 130 to 150 run rate that we talked about. We said that will be total and some of that will carry into 2012, but certainly we're on target.

Alexander Blostein - Goldman Sachs: Jim, question for you on just a little bit of a bigger picture. The SEC put out a study a couple of weeks ago on the role of investment advisors versus broker/dealers and the fiduciary role within that. How would that impact your business if it all and if you can just update us where you stand on that issue?

James M. Cracchiolo - Chairman and CEO: It does impact our business because we follow the fiduciary rule across our franchise today and we already have in place all of the compliance controls, procedures, supervision necessary and appropriate for that. It actually makes it on an even playing field for us with others. So I think it will impact others more than us. It will do it in two ways, one will be the warehouses will have the move that standard. That will change the way they operate a bit. Then independence, because there has been a (call-in) now if people didn't move to that to have greater reviews by either the SEC of FINRA, as well as the states. In many cases we have consistent level of those reviews because we're big house, but others are able to duck a little bit below the radar and that may change as there is a call-in for more of a actual reviews by the regulatory authorities as we move to the standard. So, I think for us it will be favorable.

Alexander Blostein - Goldman Sachs: Lastly just on flows, could you quantify how much of your retail outflow in Columbia was due to the anticipated fund merger versus core outflows due to either performance or just client reallocating? You mentioned pretty strong pipeline in institutional. I was wondering if you could quantify that.

Walter S. Berman - EVP and CFO: What we have seen a bit of a pick-up in some sales in equities and that's actually continuing in January. I think as the industry felt a bit in the fourth quarter one of the new outflows had occurred more in the tax exempt area, particularly in the number of our portfolios with the U.S. trust business and so that had affected some of our flows. Overall, we see an improvement, but it's not necessarily where we wanted to be yet. We still experience some outflows in some key funds, some (sub-advice) one or two of ours that were Columbia funds that lowered their star ratings last year or the year before. Now, that performance in those funds have improved dramatically over the last year. So, hopefully, we will see a slowdown in some of the outflows there, but we had really good performance. Over 51 funds are now four and five star. As we merge the fund families, the overall performance will even improve. I think if you look at some of our statistical supplement on asset-weighted basis, we are well above 60% in a number of areas already. The mergers will actually cleanup that fund lineup a bit more for us, but we are not through the fund merger yet. Having said that, we did declare the new funds, that things are moving to the proxies they are already starting to be nailed, et cetera. So, I think it has some impact. It's hard for me to tell you. After that's over, and we're through that process, what the full effect is, but we just announced the fund line-up in the fourth quarter and we have put the wholesalers on the territories, as we adjust to the activity. They're very focused now. We had our kick-off meetings. So, we're going to try to work hard to improve the flows, but I think it will take some time. We're optimistic that we can get a turnaround. The Institutional side, that's a bit lumpy, because as we said, we lost these two large accounts domestically. There are only a few bps in account. One was the Banc of America, a bank client, and another was insurance from the Columbia. So, I think the revenue side of that is not going to be material, but on a volume basis, it looks significant. On mandates, are starting to come in institutional, now that the consultants are getting more comfortable that we're making our way through the process. We're picking up some nice wins. There's a lot more to do, but the pipeline is building. So, we hopefully will start to see some traction there, as well as we go into the – while we are in the New Year.

Operator: Andrew Kligerman, UBS Securities.

Andrew Kligerman - UBS Securities: Just two quick ones just to make sure I understood it. Walter, when you were talking about the run rate getting to 130 to 150 in phase, are you at 50 or 112? I just wasn't clear on that?

Walter S. Berman - EVP and CFO: Right now, if you just take a look at where we are at the quarter in the fourth it's about 112 run rate. As we talked about when we did the transaction we would be on a net basis 130 to 150 and I'm saying we are on track, but that is as I related for the full run of the program by and that will carry, some of that will carry into 2012. Bulk of it will be realized in 2011 but you will get the normalization factor coming into 2012. So, we are on track and now I just gave you the run rate right now.

Andrew Kligerman - UBS Securities: Then just could you quantify the total amount of comp accrual adjustments that you experienced throughout the Company. I think you answered before it was just for the Asset Management position, I was curious throughout the…?

Walter S. Berman - EVP and CFO: Andrew, quarter-over- quarter if you look at the third quarter versus the fourth quarter it is about $20 million of incremental as we've looked at the performance and we accrued up. That's what the impact was in the fourth quarter versus the first to third quarter about 20.

Andrew Kligerman - UBS Securities: Then just in terms of excess capital, the RBC I think it was like 590 in the quarter. You get every quarter Walter you say that your excess capital remains at $1.5 billion plus. So, my question is what's the real excess capital number is there a certain capital margin of that you have to absolutely keep, what is that? Then what are planning to do with the excess capital is it to keep pushing this buyback or I continue to read about your interest in asset managers, I think I read about pioneer recently. So what's your interest in buying an asset manager and at what size, I know I threw a lot of questions. So what's the excess capital, what's the capital margin you absolutely need to keep and thirdly what are you going to do with it, is it buy asset managers to buy back stock and if you buy asset managers (fourthly) what's the size?

Walter S. Berman - EVP and CFO: Let me take those questions. The plus has gotten bigger and yes, as you look at the RBC and you do your calculations, from that standpoint, you can see that using – obviously you don't want to use the 350 because there is a rating agency default logic on it. If you would it is approximately $1 billion in excess sitting at the insurance company level and throughout the Company, we have as we indicated excess and certainly a corporate. We're certainly on target as we've talked about to you, do our repurchase within the levels of authorization and we're evaluating the circumstances as we look at the environment and certainly the opportunities to best return that to shareholders. As Jim has said, we certainly explore potential acquisitions as they come along and we're opportunistic about it and certainly in the category of Asset Management that would be one of the categories in distribution, but as we're now just progressing to have a share buyback program, look at other ways to return that to effectively to our shareholders.

Andrew Kligerman - UBS Securities: So, Walter just in terms of that 1.5 so you're not going to give me how much the plus is, but how much do you need to need to keep. Do you need to keep 500 sitting there, do you need to keep the 1 billion of sitting there and never use it, how much do you keep?

Walter S. Berman - EVP and CFO: It is about situation-driven and you evaluated. As a definitional issue, you would say that you technically use the excess, but you will assess it as you evaluate situational review at that particular time and on this particular, the way we look at it today, the excess is getting as we moved out of the OD. Certainly, that will put less pressure on having any sort of contingent element within it. So, we evaluate it. At this stage I would say, technically it's all usable and depending on when we go to use it, we will assess the environment and assess the best use for the shareholders and how quickly we can replenish. I think you know where the earnings are coming from, it's less capital intense, so that gives us capability and that all goes into the evaluation of it. That's why we talk about the plus, because you really do have -- it changes the circumstances, but certainly within our definitions, we have access that is usable.

Andrew Kligerman - UBS Securities: So the last clarification on it would be then, so you could indeed or you would be comfortable this year using up your authorization, which I think is around $1 billion or if the right asset management operation came along, you could use $1 billion toward that, that would not be something out of the realm of possibilities. Is that a fair observation on my part?

James M. Cracchiolo - Chairman and CEO: I think that's the reason observation.

Operator: Suneet Kamath, Sanford Bernstein

Suneet Kamath - Sanford Bernstein: First for Jim on the property and casualty business, auto and home business. I don't want to make too much out of one quarter, but clearly your higher margin, lower capital intensive businesses are increasing. I think that's a big positive from a shareholders perspective. I am just wondering at some point, does it make sense to retain this auto and home business? I know that in the past the returns on it were accretive to your consolidated return, but I think that was in part because some of your Asset Management, Advice & Wealth Management businesses weren't quite at their full earning potential, but as those businesses get there, is it time to maybe reconsider whether or not, you need to keep this auto and home in-house?

James M. Cracchiolo - Chairman and CEO: Again, you have a freak hail storm. I should note that we have coverage. So, above $10 million, that's reinsured and handled and so, there is a cap to what that is, but again, it was a loss in the quarter. I would also say that over the last few years, not that we didn't suffer this as a little bit of a setback, but over the last number of years, we've had very good loss rates. In fact, we were releasing reserves over time based on what the accounts needed for us to do. So, we did have a pick up here. We think we have a very good reasonable and appropriate book. We have good underwriting standards. We have a low-cost model. I think as you look across the industry, it's one of the very good strong direct players out in the industry that I think is a very good asset. I think it's complementary in a number of areas. We're deepening our penetration within our own client base a bit more. The client profiling we're picking up from are (indiscernible) partners. I think it's quite good. So, I think from a perspective of the Company, we don't think it will be a drag. We think the returns have been pretty good and reasonable and appropriate against where we want to take the total returns for the business. Having said that, we always have flexibility long-term if that doesn't work the way we think it should.

Walter S. Berman - EVP and CFO: We did increase our reserves for the bodily injury. We noticed the trend of severity that took place and the actuaries decided to take the reserves up. I can't say that in the fourth quarter the trend lines improved, but again we felt that it was prudent to take the year reserves up. The business does return a good return for us and is a good diversifier.

Suneet Kamath - Sanford Bernstein: I guess I just look at where your stock is today and I think one of the big reasons it's down despite pretty good trends in your Asset Management, Advice & Wealth is because of this noise at PNC and we've seen this with other life insurance hybrid models before. When something goes wrong in the insurance side, the stock tends to take a hit. So I would just maybe put in my vote that you could reconsider that at some point. My second question is related to this nonperformance risk FAS 157 thing. Walter, I think you referenced in your prepared remarks twice that other life insurance companies put this below the line. Clearly, it's very difficult to model. Is there anything that you can do to help us think through how to model this on a quarterly basis such that it doesn't become a surprise to us, because obviously it's non-cash, non-economic as you say and I think it's pretty big distraction?

Walter S. Berman - EVP and CFO: We are really thinking about that and evaluating, because it is a non-economic impact and certainly as you look at the implications. It swings with the interest rates going up and the change in the liabilities. So, were be discussing this quarter to come out with either – and you look at all options for potentially excluding it or giving some sort of indication as we get later into the quarter. There is no way of estimating until you get towards the end of the quarter, but you are spot on. It really is problematic and it does drive differentials. The way people are estimating, there is no – and so, we will work at that and certainly have poll and talk to people about what the best way of doing that. We do believe that as we said this is non-economic aspect. There are obviously transaction cost and other factors that we will reflect, but this is the one that we're focusing on and we're going to work pretty hard to try and see if we can get the noise out of it and be able to get better transparency, so people can have idea about what the impact is in the quarters. So, we'll get back to you.

Suneet Kamath - Sanford Bernstein: Just one quick follow-up to your prepared remarks, you had mentioned when you were talking about annuity business that I think a larger percentage of the equity allocated to VAs, is in the third-party sales those products, why would that be the case?

Walter S. Berman - EVP and CFO: That is the case because on the percentage living benefits that are actually acquired or sold in the outside channel and that is the main driver of it. It was much higher percentage and that's what drove it up and obviously that is the prime reason and behavioral patterns to a degree.

Operator: John Nadel, Sterne Agee.

John Nadel - Sterne Agee: I have two questions for you. The effective tax rate Walter in 2010 was just under 24% I think you've guided us in the past to think about the marginal tax rate there being 35, clearly some of your tax planning strategies are working a bit better than maybe you guys anticipated. My question is where should we expecting that effective tax rate to move in 2011 and beyond?

Walter S. Berman - EVP and CFO: As I indicated, actually it was in the second quarter maybe in the first quarter also. As we looked out and certainly that in 2011, that the range we're getting is 25 to 27 and certainly it will probably be towards the lower end of that as we look at it now. It is difficult to forecast it on a quarterly basis. We have better idea on an annual and we did get into adjustment coming through, we fee; it was a little accelerated, but certainly we feel the rate for next year will be at the 25 to 27 and at a lower end of that.

John Nadel - Sterne Agee: Question on Asset Management. I know you guys don't want to give us necessarily the spit of the revenue and the expense offset around the performance fees. Any help you can give us as to--thinking about the pretax operating margin excluding the performance fees. I know those performance fees are real, I get it, but there are also one quarter events so I am sort of thinking about how do you look out to the next few quarters?

Walter S. Berman - EVP and CFO: Yes, if you back that out it should be about 19.7.

Operator: Thomas Gallagher, Credit Suisse.

Thomas Gallagher - Credit Suisse: Walter, if I understood you correctly, if $112 million of Columbia synergy benefits are already in the number, that means only $38 million remains in terms of getting us to the 150. So, said in other way, we only have $38 million of benefit still left on Asset Management margins related to expense synergies. Is that the right way to think about it?

Walter S. Berman - EVP and CFO: That's gross and the other thing is, as we said the year-to-date growth synergies were 75, if you do a run rate on that, that's 112 as you look at the change between the quarters. So, that's what we are just trying to do is give you what we said that we would do on the gross between 150 and 190.

Thomas Gallagher - Credit Suisse: So, you are talking about gross when you're using that 112, not net?

Walter S. Berman - EVP and CFO: Yeah.

Thomas Gallagher - Credit Suisse: So, I could take 190, subtract 112 and that would be the better way to think about what's left to come?

Walter S. Berman - EVP and CFO: Again, it's the range, 150 to 190, remember that.

Thomas Gallagher - Credit Suisse: If I assume you hit the top end of your range, I could have another – and the timing on when you expect to get those, will those be front half loaded, back half loaded in 2011?

Walter S. Berman - EVP and CFO: As we didn't give guidance, it's certainly, as we go through it, you could expect there'll be a calendarization factor that will carry over, as we basically bring on the transitional changes and elements of that. So, there's a back-loaded element to it, which will have a carry over into '12.

Thomas Gallagher - Credit Suisse: Just a question on Advice and Wealth Management margins, I know you had mentioned, there was an increase in legal expenses there, but if you look at just how strong revenue growth has been there, assuming there is a corporate objective to improve those margins into the double-digits. How should we think about timing? Assuming your revenue growth remains the way it was this year, do you think we'll get to double-digit pretax margins in 2011 or is that further out?

Walter S. Berman - EVP and CFO: Again, but not to forecast, but certainly as you look at the items that came in the quarter, as we talked about the (lead), the marketing, the bonusing, one could expect that you would get into double-digits.

Thomas Gallagher - Credit Suisse: Just purely on, because it was definitely a higher expense load this quarter, which suppressed margins despite the fact that you had strong revenue growth. So, part of that is just seasonal with comp accrual I assume or something like that?

Walter S. Berman - EVP and CFO: Yes you had that as related to the bonusing and certainly we started up the marketing program and then we had the legal that I mentioned. Again, legal we would evaluate as we go through, but certainly those were the elements that came through in the quarter, but we did have to catch up on the bonusing.

Thomas Gallagher - Credit Suisse: Last question is I think if we try and at least identify the synergy related net outflows in Asset Management, which I think from a revenue standpoint, if I remember correctly, is expected to be $30 million loss approximately, where are we on that? Should that all be behind us soon or how should I think about timing? I understand you haven't wanted to give any outflow guidance from an asset standpoint, but I know you have given it on revenues. So I just want to know where we are riding on revenue side?

James M. Cracchiolo - Chairman and CEO: We are still working through. It's still going through as it relates to the merger fees and the yield decline. So that's still working through and right now we see it within its ranges, so it's on target.

Thomas Gallagher - Credit Suisse: Walter, from a revenue standpoint are we half done, are we more than that? I don't you if you could give some guidance on that.

Walter S. Berman - EVP and CFO: I just don't have on that side that you are talking, because the differential the 20 to 40, I don't have the exact numbers. I think we are – I don't want to speculate. I will get back to you on that, but the issue is I think we are just – it is on target, but there is certainly more to come and that is not really – that was more on combining of funds and things of that nature and not all dealing with the flows. We'll give you some feedback.

Laura C. Gagnon - IR: Let me clarify we did say that $20 million to $40 million in revenue decline is going to include the lower fees we expect to receive on the fund as they merge and that's going to happen through the first half of this year, so that impact, that portion of the $20 million to $40 million is still to come.

James M. Cracchiolo - Chairman and CEO: But there is portion that has come, because it relates to – it's still coming.

Thomas Gallagher - Credit Suisse: Maybe I misunderstood, did that $20 million to $40 million not include any anticipation of net outflows as a result or did that also include that?

James M. Cracchiolo - Chairman and CEO: There were some outflows that were definitely assumed that we knew as we combined at the very beginning and had overlap in portfolio managers and some institutional accounts that would leave once we did the combinations. Some of that did take place in the third and fourth quarter. I think what Walt is referencing as the other piece of it is mainly merger of the funds that takes place that will move to lower breakpoints based on level of assets or that the funds that the assets are going into may have lower fees in the accounts because they are larger funds. So, with that, that's the other piece of the tranche within the $20 million to $40 million. Regarding, whether we suffer full outflows that we experience or not, we didn't dictate every account, but we feel comfortable that with where we are today and the assets, et cetera, that we're within those reasonable mess, as far as what we expected. Now, having said that, we would like to move into inflows to grow the business rather than continue to be in outflow area and that's where we're going to work hard to try to turn that around, but from what we estimated for what we knew at the time. I think we would end those balance with the last piece coming as we merge the funds.

Thomas Gallagher - Credit Suisse: One last detailed question for you Walter just to put this to bed. If I assume you hit the top end of the range in terms of synergy-related benefits that would be 190, you are at 112, this is all gross, the 30 that you expect to lose on this synergy has not yet come. So, I really should be taking that off the 190 to get to a net number. So, on a net basis, we have gotten 112, we have not yet...

Walter S. Berman - EVP and CFO: We don't have 112. We have the 112 run rate leaving the year, 112 was not booked as synergies within the year for actual realization.

Thomas Gallagher - Credit Suisse: So, that 112 is not a run rate in the 4Q either, Jim?

Walter S. Berman - EVP and CFO: It's a run rate out of 4Q, but if you are asking is it already in the P&L for 2010, the answer is no, only 75 is actually booked in the P&L in 2010, but as we leave the year that 75 turns into 112 for 2011.

Operator: That was the last question for today. Please go ahead with any final remarks.

James M. Cracchiolo - Chairman and CEO: First of all, I want to thank you for participating in the call and asking various questions that helped clarify things. I think one of the issues we do have, which is very hard and we'll try to figure out is, how to deal with things like the 157, because it's a non economic charge, but I know because people can predict it and so the estimates that you come out with doesn't include it and it does sort of get a little noise in the system. I would also leave you with this thought. I think for the things that we wanted to do in 2010, and what we told you back in 2009 and 2008, I think is actually coming about quite well. I think we have had a strong business and a strong year. I think we're seeing improvements. We think we continue to drive margin improvements. I feel very good about where AWM is and where it can go, as well as with the Colombia deal and Threadneedle that we can actually continue to improve there as well. Of course, we got work to do that change the flows around, et cetera, but I think, we've got good product line and good performance, which is something that we never really had completely in the past. I think we have a more substantial and fuller line-up. Yes, we're still working through further levels of integration, but the savings are being realized. I think we have a good business now, a sizable business. I think if you compare it to other large independent managers out there, we're quite sizable including our earnings and our ability to earn. The same thing with our Advice & Wealth Management, we're starting to come into the stream where this is really having a substantial impact. We think we can continue to grow those margins, even with low interest rates. Yes, we had some pickup in some expenses in the fourth quarter, but I think outside of the Securities America activity, our margins would have shown nice improvements as well in the fourth quarter for our core franchise business, which is really the focus that we have. So, I just want to leave you with the thoughts. I think we'll manage our other businesses very prudently to drive returns and manage the risk, that's why we chose to get out of the outside distribution of annuities. I think we can generate good returns, with good consumer behavior in the other annuities with strong hedging. I do believe our Protection business will start to approve. I take the note regarding the auto and home. It has not been a problem for us, but we don't want it to be a problem for us. So, if we see anything substantially changing we will evaluate, but we really think it can continue to drive margins, but it gives us some flexibility in case we don't need to. Overall as Walter said, we do have a strong capital position, we will be looking to utilize that appropriately. I will not use the money for acquisitions unless they really made sense and we can really get good synergies as we have been showing you for the last few that we did. We will return to shareholders as appropriately, but we don't need to do that all in one moment, but we can do that over time, so that you can feel comfortable, we can feel comfortable and still have degrees of opportunity for growth and investment. So, I appreciate you, while taking the time. I do feel we had a good year and we try to deliver everything that we told about year ago and we look forward to continuing to work with you in the New Year. Thank you.

Operator: Thank you for participating in the Ameriprise Financial fourth quarter and year-end earnings conference call. This concludes the conference for today. You may all disconnect at this time.