Ameriprise Financial's CEO Hosts Annual Meeting of Shareholders (Transcript)

| About: Ameriprise Financial, (AMP)

Ameriprise Financial, Inc. (NYSE:AMP)

Annual Meeting of Shareholders Call

April 25, 2012 12:00 ET


Jim Cracchiolo – Chairman and Chief Executive Officer

Tom Moore – Corporate Secretary and Chief Governance Officer

Jim Cracchiolo – Chairman and Chief Executive Officer

Good morning. I am Jim Cracchiolo, Chairman and Chief Executive Officer of Ameriprise Financial. Welcome to our 2012 Annual Meeting of Shareholders. Thank you for joining us whether in person or listening on the web.

Tom Moore, our Corporate Secretary and Chief Governance Officer, is here with me today to help conduct the meeting. After I introduce our Board of Directors and executive leadership team, we'll conduct the formal part of our meeting. I will then give a business update on the state of the company, followed by voting results and the shareholder question-and-answer period. Tom, will now address some initial matters. Tom?

Tom Moore – Corporate Secretary and Chief Governance Officer

Thank you, Jim. The Board of Directors has appointed the Carideo Group Incorporated as the Inspector of Elections for this meeting. Ms. (Kristine Sundberg), the representative of the Carideo Group, has subscribed her oath of office and filed it with me.

The Board of Directors has fixed February 27, 2012 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 holders of common stock of the company as of February 27, 2012. This list has been prepared by Computershare Trust Company, National Association, the company's stock transfer agent and registrar.

Next, an affidavit of Ms. Sally Lent, an employee of Broadridge Financial Solutions, as to the distribution beginning on March 14, 2012 to our shareholders of record as of February 27 of a notice regarding the availability of proxy materials for the annual meeting to be held on April 25, 2012 or paper copies of those 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 2011 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 the internet and provided in paper form to those shareholders who requested them. I will file these materials with the minutes of the meeting. Jim?

Jim Cracchiolo – Chairman and Chief Executive Officer

The Inspector of Elections has reported the existence of a quorum, so we will proceed with the business of this meeting, which I now call to order. First, I'm pleased to introduce my colleagues on the Board who are with us today. Once I have introduced them all, I ask that you please join me in a warm round of applause in recognition of their efforts on behalf of Ameriprise Financial and its shareholders. Will the directors please stand as I call your name and please remain standing until I introduced you all? Siri S. Marshall; Lon R. Greenberg, our newest director who joined the Board last year; Warren D. Knowlton; W. Walker Lewis; Jeffrey Noddle; H. Jay Sarles; Robert F. Sharpe, Jr.; William H. Turner, please join me in giving our Board a warm round of applause.

Next, I would like to introduce as a group, the members of the executive leadership team of Ameriprise Financial who are here today. The Board and I rely heavily upon the skills and experiences to let these talented officers to help run the company. I ask the executive leadership team to all stand and please join me and the Board in giving them a round of applause.

I would also like to acknowledge Ameriprise Financial employees and advisors who are here with us today or listening on the web. Our company is in a terrific position today because of your hard work and dedication to our clients. On behalf of the Board of Directors, the executive leadership team, I sincerely thank each of you.

Now, I am going to turn it back to Tom for the statement of order of business and the opening of the polls.

Tom Moore – Corporate Secretary and Chief Governance Officer

Thank you, Jim. To ensure the orderly conduct of the business of this meeting, the Board of Directors has adopted the order of business set forth in the agenda provided to each person as he or she entered.

Accompanying the agenda are the meeting procedures approved by the Board of Directors. We ask in fairness to all of those present that you please honor these rules. The three items of business for today’s meeting are: first, the election of four directors to serve until the company’s 2013 Annual Meeting or until their successors are elected and qualified; second, a non-binding and advisory vote to approve the compensation of the named executive officers; finally, the ratification of PricewaterhouseCoopers by the Audit Committee to serve as the company’s independent auditors for the fiscal year ending December 31, 2012.

The company has not received notice from any shareholders, as required under its by-laws, of any other matter to be considered at today’s meeting. And therefore no other proposal or nomination may be properly introduced by shareholders. 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 deliver your ballot to the Inspector of Elections. Inspector, please stand in order to identify yourself. Thank you.

If you need a ballot, the Inspector can give you one. The polls will remain open until immediately after any discussion on today’s proposals. To promote the efficient conduct of the meeting, the Chairman has waived the formalities of requesting motions and seconds from the audience and has declared the order of business as stated in the agenda to be accepted by those present in the meeting room. Each of the following proposals is described in the company’s proxy statement dated March 9, 2012. Each proposal is presented at this meeting by the Board of Directors.

The first proposal as I said is the election of four directors. The following nominees, each of whom currently serves as a Class I director, will, if elected, serve on the Board until the company’s 2013 Annual Meeting or until their successors are elected and qualified: Lon R. Greenberg, Warren D. Knowlton, Jeffrey Noddle and Robert F. Sharpe, Jr. On behalf of the Chairman, I declare the nominations closed. Our shareholders will recall that at our 2010 Annual Meeting, they approved an amendment to our certificate of incorporation to declassify our Board of Directors on an incremental basis.

As a result, all directors standing for election or re-election will do so at each year’s Annual Meeting, beginning with our 2013 Annual Meeting. The second proposal is a non-binding advisory vote to approve the compensation of the named executive officers. The named executive officers are those identified in the compensation disclosure tables included in the proxy statement for this meeting. This vote commonly called a say on pay, is now required by federal law for large public companies.

At our 2011 Annual Meeting, our shareholders strongly supported the Board’s recommendation that this vote, to approve the compensation of the named executive officers be held annually. As a result, you’ll again have the chance to vote on this proposal at our 2013 Annual Meeting and at each Annual Meeting through our 2017 Annual Meeting. At the 2017 Annual Meeting, you will have another opportunity to vote on how frequently you would like this proposal to be presented to shareholders.

The final proposal seeks the ratification of the Audit Committee’s selection of PricewaterhouseCoopers, LLP as the company’s independent auditors for the fiscal year ending December 31, 2012. Now, we'll proceed with voting on each of the three proposals I have described. The votes required for each proposal to be approved are described in the chart provided on page three of our 2012 proxy statement.

We will close the polls immediately after any discussion on these proposals, so if you wish to vote and have not yet done so, please return your proxy card or ballot to the Inspector, 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, you wish to vote your shares in a manner different than that you have previously indicated, please raise your hand so that you can be given a ballot.

We will provide an opportunity following the Chairman's remarks for shareholders to raise questions not related to the proposals being voted on today. As we detail in our proxy statement, the Audit Committee of the Board of Directors approved the engagement of PricewaterhouseCoopers for the 2012 fiscal year, subject to ratification by our shareholders.

I would ask Mr. Bateman of PricewaterhouseCoopers to please stand and be recognized. Before I declare the polls closed, are there any questions for Mr. Bateman? There being no questions. Thank you, Mr. Bateman.

If there are any questions regarding the voting procedures, or if any shareholder wishes to comment on or raise any questions regarding the proposals being voted on, please raise your hand now. There being no further discussion of the proposals, we will now prepare to close the polls. Please return your ballots now if you have not already done so.

On behalf of the Chairman, I now declare the polls closed. While we're waiting for the inspector's voting report. I will turn it back to our Chairman for his report on the state of the business. Jim?

Jim Cracchiolo – Chairman and Chief Executive Officer

Thank you, Tom. When we met for last year's annual meeting, we had recently celebrated our five-year anniversary as a public company. And we reported record operating earnings for our firm. Since then, the market environment has been extremely challenging. Market volatility soared last summer and fall, reaching levels last seen during the recent financial crisis.

And while equity and markets have rebounded more recently on the initial signs of an economic recovery, they are still fragile and interest rates remained extremely low. Our business is impacted by the markets. Equity market movements impact asset levels, fees and client activity. And the continued low interest rate environment pressures our spread businesses.

Despite the challenging backdrop in 2011, Ameriprise stood stand strong. We posted new records of operating net revenue and operating earnings. And we returned $1.7 billion to shareholders through dividends and share repurchases, representing more than 130% of our 2011 operating earnings.

Today, Ameriprise is a leading diversified financial services firm with more than $675 billion in assets under management and administration. Our comprehensive approach to serving clients has helped us earn top 10 positions in each of our core businesses. And we've established one of the strongest financial foundations in the industry. 2011 was a year of significant progress for Ameriprise.

Our advisory and asset management businesses are important earnings drivers of the company. And they complement the stability and the asset gathering capabilities of our insurance and annuity businesses. We delivered double-digit operating net revenue growth last year and we continue to transform our earnings base.

Our higher returning, less capital intensive businesses delivered about half of our pretax income last year. That number was up substantially from 2006 when these businesses generated about a third. This frees up capital to invest for growth and return to shareholders. Over time, we intend to increase the contribution of these higher returning businesses to more than 60% while maintaining our diverse earnings profile and a rock solid balance sheet. I'd like to spend a few moments updating you on the progress we've made in our two growth platforms, wealth management and retirement, and asset management.

First, wealth management and retirement, part of what differentiates Ameriprise is the way we go to market. Our business is built on relationships with our 10,000 advisors and their relationships with more than 2 million clients.

In 2011, we made excellent progress growing these relationships, both in terms of establishing new client relationships and deepening existing ones. Preparing for retirement remains our clients' primary financial goal. Ameriprise ranks in the top five in the industry for retirement planning and advice. And we are the seventh largest provider of individual retirement accounts. We've also built the fifth largest branded advisor force in the United States and we have consistently invested to help advisors grow their businesses.

The Ameriprise brand is central to our growth strategy. Last fall, we launched the next phase of our advertising strategy. It included new advertising for the TV as well as ads online, an expanded presence on the online channel, so that we can reach more consumers and enhanced local marketing programs working with our advisers.

You may have seen the work that we did recently with Tommy Lee Jones to help tell our story. We've been pleased with the results and the campaign is also recognized for excellence in financial services. We've also made substantial investments in our advisory technology infrastructure, most notably the installation of the new brokerage platform that we began more than a year ago. This alone was a substantial undertaking and the improved technology is helping advisors to serve more clients more fully. And later this year, all of our advisors will be on the new platform. Our strong brand, powerful tools, and the financial strength that we have, have been key in transforming our advisor force. Advisor retention and satisfaction rates are excellent.

And over the past three years, more than 1100 experienced advisors chose to move to Ameriprise for the value we offer as well as the values for which we stand. Importantly, we brought new client relationships and billions of dollars in new assets to our firm. Client acquisition increased 10% last year and our retail client asset base now stands at $334 billion.

Our comprehensive approach to serving clients is also evident in our asset flows. Even with difficult markets last year, we generate solid net inflows in wrap accounts and variable annuities. In fact, these trends continue in 2012 with wrap net inflows in the first quarter reaching pre-financial crisis levels. And our RiverSource RAVA 5 variable annuity has proven to be one of our best product launches. At year end, net revenue per advisor reached a record, a record of $384,000 per advisor.

And our advice and wealth management segment pre-tax operating earnings increased 26% from a year ago to $406 million. Importantly, we have grown our segment profitability even with the impact of low interest rates on our earnings. Very important to serving our clients fully are our annuity and protection businesses. They provide very important retirement capabilities and opportunities to gather assets. Annuities deliver guaranteed income, which is essential for those in or nearing retirement.

And our insurance capabilities provide protection to help clients achieve their goals and also leave a legacy. We manage this business prudently and since we focus our sales through advisors, we know clients better. Our annuity assets have grown to $81 billion reflecting growth in our variable annuity business and a slowly declining block of fixed annuities given the lack of client demand from the low interest rate environment.

Overall, the business is performing in line with our expectations, both in terms of financial results and risk controls. Our underwriting is strong. Our risk management is effective and our pricing and product features are competitive. As we grow the business, we'll continue to ensure that we balanced client benefits and shareholder value.

With regard to protection, we have good books of business that generates solid earnings and steady contributions. Our life and health products are instrumental in fulfilling comprehensive needs of our clients. We've built a stable business with $191 billion in life insurance in force. The industry has faced a very difficult operating environment over the past several years. However, initial results in 2012 are showing a pickup in new business driven by our new universal life insurance product we launched last year. In addition, our auto and home business managed through a very difficult weather season last year.

And we were pleased to see the business return to more normal results this last fourth quarter and first. Our team in green bay has built an excellent consumer value proposition as a low cost provider to the mass affluent. We've been highly rated in both client satisfaction and service in a very competitive industry. And we are generating steady increases in policy counts. Our annuity and protection businesses have long been important earnings contributors for Ameriprise. They provide diversified and recurring revenue streams, deliver strong returns and, strengthen our client persistency.

Now, let me turn to asset management. We operate two complementary asset management platforms, Columbia Management in the U.S. and Threadneedle internationally. While each has a distinct investment process and perspective, together they create a powerful capability for Ameriprise. We offer broad retail and institutional capabilities and an extensive product portfolio of more than 110 four and five star funds.

Next week marks two years since we acquired Columbia and we began a large scale integration. The integration is essentially complete. We've established an excellent business foundation with talented investment teams. Broad product lines strong distribution capabilities and a global growth platform. We're building very good investment performance track records and have strong product lines expanding growth, core value, large, small, and mid-cap, as well as taxable and tax-exempt income.

In retail, we've established our wholesaling strength and we're gaining traction. As we started the year we're in net inflows in fixed income funds as well as focus funds. In addition, we're picking up momentum on many of our key intermediary platforms. While former parent outflows are pressuring our flows, we've earned improved market share and key distributors during a very difficult market environment, characterized by equity outflows across the industry.

In the institutional space, we're building a good book of business with broad capabilities and compelling track records. While we experienced net outflows, we're winning important and attractive mandates and our pipeline of unfunded mandates continues to build. When we announced the acquisition, we knew we've experienced outflows during integration as part of ex. parent activity. We're putting that behind us, and I feel very good about our growth opportunity as we move forward.

At Threadneedle, the team is making good progress, executing consistent strategy to diversify its revenue and earnings profile beyond the UK. We continue to deliver strong investment performance and are expanding our reach in Continental Europe, the Middle East and Australia. And last year, we set up regional offices in Asia. In fact, Threadneedle's highlights last year included two significant wins, first, when the contract with its former parent expired, Threadneedle retained management of existing assets as part of a competitive re-tender process.

Second, Threadneedle won a $14 billion mandate to manage Liverpool Victoria's insurance and pension portfolio, a significant mandate for the firm and one of the largest in the UK last year. Overall, I feel good about the progress we are making across our asset management businesses. Total segment operating earnings last year were $528 million, up 29% from 2010 reflecting the benefits of the Columbia acquisition. And as I said yesterday during our earnings call, the integration is almost behind us and we're getting over the hump. While we have more work to do, I feel very good about the business that we built and the opportunities before us.

Now, let me turn to the foundation strength that underpins our firm. The strength of our balance sheet and the effectiveness of our risk management program continue to differentiate Ameriprise and deliver for our shareholders. We managed the company to ensure financial strength and flexibility. We maintain substantial liquidity to meet client and company needs during periods of market stress. And we have low debt levels. In addition, we have a strong asset-liability matching program, and our investment portfolio is diversified and of high quality. For example, we remain in a net unrealized gain position and have no exposure to European sovereign debt issues that have dominated the news cycle.

We've been able to handle significant market impacts to our financial results. And at the same time, we've been focused on prudent expense management. Re-engineering has long been a core discipline of our firm and we will continue to maintain our expense rigor going forward. Our strong financial foundation and ability to generate excess capital allows us to return to shareholders through dividends and share repurchases, while continuing to seek additional opportunities to drive shareholder value.

Given our stock price in 2011, we took the opportunity to accelerate our buyback. We repurchased $1.5 billion worth of stock last year, which was more than twice what we repurchased in 2010. We are also continuing to evolve our dividend policy as we gradually increase the mix of dividends and share repurchases.

In 2011, we announced two quarterly dividend increases. And earlier this week, we announced another 25% increase, which brings our quarterly dividend to $0.35 per share. The total impact of these increases raised our quarterly dividend 94% in a short period of time. In just over six years as a public company, we've increased our dividend six times, boosting our dividend every year except during the heart of the financial crisis when we held it steady.

Our dividend growth now brings our implied dividend yield to about 2.6%, which puts us in very good company. In fact, in terms of total capital returned to shareholders, we are a leader among S&P 500 financials. In 2011, we were in the top quintile of S&P financial companies in terms of return of capital, where we returned almost three times the capital of the average company.

Few financial services companies provide the combination of return potential and financial strength as Ameriprise. We believe that over time we can consistently generate operating return on equity in the 15% to 18% range. We ended the first quarter of 2012 at 16%, and we have room to grow. I am energized about our growth potential and the large opportunity we have to help people reach their financial goals.

U.S. consumers today are struggling to set a course for the future. While the equity markets have improved, market volatility remains fresh in consumers' minds. And low interest rates make saving exceedingly difficult, for them to earn a return for retirement. Investors remained cautious as they search for higher yields, guarantees and ways to protect their assets. They want advice and real solutions tailored to their particular goals.

This is an ideal time for Ameriprise. Our financial strength and stability instill confidence. Our brand is trusted. And the breadth of our capabilities ensures we can offer personalized and comprehensive approach. We have a track record of standing behind our clients and delivering for all our stakeholders. We've demonstrated our ability to deliver good revenue and earnings growth through market cycles. And with the strength of our financial foundation and strong market positions, we're in a terrific position to increase our returns over time.

In closing, I'd like to thank our employees and advisors for their steadfast commitment to our clients. You bring our company to life everyday and we appreciate all that you do for Ameriprise. I'd also like to thank my fellow members of the Board of Directors for their support and counsel. And finally, thank you to our shareholders. Your investment in Ameriprise reflects your trust, and we will do all that we can to reward it. Thank you. And I'll now turn it back to Tom.

Tom Moore – Corporate Secretary and Chief Governance Officer

Thank you, Jim. Mr. Chairman, the Inspector of Elections has handed me a final report showing that proposals 1, 2, and 3 presented at today's meeting, including the elections under the majority voting standard of Messrs, Greenberg, Knowlton, Noddle and Sharpe as directors to serve until the 2013 Annual Meeting of Shareholders, have each received the required number of votes to pass.

In particular, I should note that the say on pay proposal has received approximately 92.2%, four votes of the votes cast. The Chairman will now welcome any questions or comments from our shareholders. We ask that you observe the meeting procedures in the agenda, including the time limit for questions. Please raise your hand and we will bring a microphone to you. Please state your name and city of residence and indicate whether you are a shareholder or a proxy for a shareholder. You may ask a question or offer a comment only if you are a shareholder or a proxy for a shareholder. If you have a question or concern that is not relevant to shareholders generally. Please see one of the attendants at the table in the back of the room. He or she will be happy to help you.

With that, I'll turn it over to our Chairman, who will open up the meeting for questions and comments. Jim?

Jim Cracchiolo – Chairman and Chief Executive Officer

Thank you, Tom. I'll open the meeting. Any questions or comments? Please raise your hand and we'll bring a mic to you.

Question-and-Answer Session

Steve Peterson

Thank you. My name is (Steve Peterson). I'm a shareholder and I'm happy to be a shareholder. Thank you for this very comprehensive report and I particularly appreciate your statement of the company's position going forward. We all buy shares looking to the future and not to the past. My question, though, I hope you'll find this in order, there have been several twin cities executives who have expressed a view with respect to the public financing of a Vikings stadium. Are you among that number?

Jim Cracchiolo

No, listen, we have not come out publicly in support or not support of a Vikings stadium. On one end, we think it's very helpful for the local economy, but we also think it's appropriate for the citizens of the state and the city to really decide and from a perspective of the revenues and expenses and how that fits within the budget of the state and the city and in order to do that, but the company has not taken a position formally on it. Other questions?

Jim Cracchiolo – Chairman and Chief Executive Officer

Seeing no further questions and comments, and thank you for yours and as well for your comments, we appreciate you taking the time. On behalf of Ameriprise, we'll continue to look forward and conduct ourselves in a correct way, so that we can continue to be successful in the marketplace and grow our returns to shareholders and look on behalf of our employees, advisors, on behalf of our clients. So, thank you very much and have a great day. Meeting is now adjourned.

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