Ameriprise Financial's Analyst Day Call Transcript

| About: Ameriprise Financial, (AMP)
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Ameriprise Financial, Inc. (NYSE:AMP) Ameriprise Financial Analyst Day Call November 16, 2011 8:00 AM ET


Jim Cracchiolo - Chairman & CEO

Don Froude - President, The Personal Advisors Group

Ted Truscott - CEO, U.S. Asset Management & President, Annuities Ameriprise Financial

Mike Jones - President, Columbia Asset Management

Crispin Henderson - CEO, Threadneedle Asset Management Holdings

Walter Berman - EVP & CFO


Jay Gelb - Barclays Capital

Alicia Charity

Good morning everybody. Thank you for joining us for Ameriprise’s Financial community meeting. My name is Alicia Charity for those of you I have not met. We've got a great agenda today. We are going to start off hearing from Jim Cracchiolo and then from some of our business leaders and then wrap up with some comments from Walter Berman, our CFO and at that point we will open it up for your questions. I wanted to briefly bring your attention to our forward-looking statements and information around non-GAAP measures and with that I will turn it over to Jim.

Jim Cracchiolo

Thank you, Alicia. Good morning everyone. Thank you for joining us here at the New York Stock Exchange and for those of you who are tuning in on the web we hope that we will give you an informative session this morning. What we like to cover is to give you an update on our story. The Ameriprise story since we became public in 2006 and the major transformation that was gone over.

In that regard we think that we are set up for a significant opportunity of what's happening out there in the larger market price around retirement, around the growth of mass and affluent populations and their need for advice. With that in mind we think that we've created a tremendous value over the last six years and that we are positioned well to continue to create value. And we think today our company is a bit undervalued both on a peer basis but also in as we think about it as the sum of its thoughts beyond that of what we can grow for the future and the type of returns that we can achieve.

We think there is a significant opportunity. We think we are positioned well and we would like to walk you through that today. We wanted to now talk about the company a little differently than we've talked about it before. We've talked about it mainly in segments. We want to start to think about how we go to market, how we position the company, how we invest in the company and how we make decisions.

With that we wanted to give a little better understanding of our Advice & Wealth Management businesses today. Don Froude, the President of our Advisors Group as part of that leadership team. We’ll talk about the advisor part of the equation and then Ted Truscott, our CEO of the U.S. Asset Management and Mike Jones, the President will give you a better understanding of Columbia Asset Management and Crispin Henderson, the CEO of our International Asset Management Threadneedle will talk a bit more about Threadneedle’s opportunities as well as how they’re positioned because we think that combination gives us a good makeup to continue to grow in that space as well.

Let me start by saying, when we first came out, we had to undertake a major separation as you’re well aware and then we went into one of the most severe financial crisises and recessions that we faced in many, many decades. Today, we’ve come out in a strong way. We’re at diversified retail financial services firm. We really focus moving from the mass population to the mass-affluent and affluent and that’s where mainly all our growth is coming from. With today a recognized brand, Ameriprise today has grown in awareness around the country.

It’s grown in awareness both from a client and a prospect perspective and it’s grown in awareness even from a rep and advisor perspective and you’ll hear more about that from Don in a minute. We also have a strong Wealth Management business. We’ve invested heavily, we’re generating good strong returns and good strong growth and our asset management moved from more of a middle tight player to now one of the largest out there not just domestically but as you look at it having to have a good international makeup for us to be positioned well for global activities.

And our Insurance and Annuity business is now a true part of the equation, but it’s part of the way we think about our client relationships and solutions rather than a dominant pot of the business in a standalone basis. And we have proven through this financial crisis, through the market challenges as well as the investments that we’ve taken on that we can execute well and that we have established ourselves as one of the strongest players out there from a capital perspective, a liquidity perspective, from a financial investment perspective that Walter will talk about in a few minutes.

What does that look like financially? Well over the last six years, we’ve grown our revenue base even through the financial crisis significantly, up 42% in that period of time. Our earnings on a net basis has almost doubled 94% up. Our ROE improved by 38% and that’s what a very strong capital base and excess capital position that we are holding today. In our assets under management administration grew as well over 40%.

For you as investors, shareholders and for us in looking at the value we created from a total shareholder return over that period of time we are up 43% against the S&P Index of 16. The Assets Management Index, a negative 10; The Life Index, Life & Health negative 15 and the S&P Financials negative 47. So we’ve been able since we became public to execute against the strategy we put in place what we told you we’re looking to do. We were able to navigate one of the most severe financial crisis and keep the company strong. Gave us the ability to invest, gave us the ability to acquire and today we think we’re in the strongest position.

Now there are still significant headwinds out there. We understand where the interest rate environment, that’s still a major headwind, the market volatility that is still out there and is affecting us and the industry. But we also feel we are positioned well for growth, that our balance sheet and our ability to navigate this storm as we did previously is there as well and we are very much focused to continue to ensure that we can generate strong returns for the future. And the reason we feel so good is because of what’s happening beyond what you see today in the market place day-to-day and quarter-to-quarter. Three secular growth trends that are really helping us move forward. One is around retirement and we will talk about that because more people are moving to retirement and the people moving to retirement, the people in these age groups have most of the assets.

The mass affluent and affluent population is where those assets are growing most significantly and then what they are seeing today based upon the financial crisis, the volatility, the idea that they themselves have to be responsible for their retirement is they are starting to ask how do I achieve it, I need advice.

So let’s look at some of those steps. The US investable assets by age bracket you can see the 55 to 64 years old, that was roughly 25% of the investable assets today in 2010, that’s $29 million that will grow to 30% as that total pie doubles over the next ten years. The 65 plus biggest movement, baby boomers to retirement is growing nicely, 34% of the total makeup today that will grow to 40% by 2020.

And the total pie is estimated to double and we play right in the heart of that arena. You also look at where those financial assets are invested for retirement, whether they are a non-qualified investments held for retirement, IRAs or DC plans, deposits, annuities protection. We play across that range of all those product solutions and the way people need to be handled for the retirement qualified as well as non-qualified.

And if you think about it from the overall population of who we serve. Those populations are saying 79% of consumers do not feel very prepared for retirement. We know that today, all the conversations around that.

68% of consumers desire to receive advice and that continues to grow. And 54% of the target market prefer to work with a financial advisor. So Ameriprise is having one of the largest networks, a network built around financial planning and advice that is our go-to-market value proposition.

The ability to serve clients with the solution set we have, we think that we are situated quite well and our asset management business plays in a similar arena, whether through product that they manufacture for us at Ameriprise and solutions, whether for a true intermediaries to satisfy those same types of opportunities for intermediary clients or in institutions and pension plans et cetera to serve that market.

The other way, thank you. And so we think that we have a make up, the type of businesses we are in, how those solution sets work together, how can we target this market, the network that we have to target the market with, we can take greater opportunity, both for our wealth management as well as our asset management business.

So what I want to talk you today about is not our segments, but the way we go to market. See as we think about our strategy, as we position the company, as we invest, as we target, as we develop the type of solutions that we need, we focus on two real opportunities, the wealth management and retirement market and the asset management market.

And in the wealth management market, we look at the advice and solution driven businesses to focus on the mass affluent and affluent populations. The ones that we said are growing and have all the opportunity. And we look at a range of solutions both ones that we manufacture and ones that we network in to satisfy those opportunities. And through deep relationships, we are able to generate very good diversified revenue streams.

In the asset management business, we've transformed ourselves into now more of a global asset manager. We have size, we have scale, we serve both the retail and institutional markets and institutional will be one that we think there is a large growth opportunity for us. And again, the solutions that we continue to innovate again will help people achieve wealth as well as their retirement solutions to achieve goals beyond just achieving their benchmarks.

So if we think about the wealth in the retirement area, today we are situated quite well. We have one of the largest networks, the fifth largest in the country, the leader in financial planning and advice, more than 2 million retail clients, roughly $300 billion of assets that we manage or administer for those clients to a network of 9,700 advisors. And what's critical is that even from a solution set we are one of the largest. Number two, in the way we manage assets, the mutual fund wraps, number seven in managed accounts, number seven in IRA accounts and administration, top five in the retail retirement space.

But one of the things that we truly standout for is the satisfaction we get with the clients, the tenure of our clients, the persistency of their assets, the depth of their relationships, the amount that they refer us based on their satisfaction. And so there are other large companies, but many of them now are part of larger institutions. We have a makeup as an independent company truly focused here with a branded nation-wide brand serving this population.

So if you think about our Advice and Wealth Management business and retirement, where were we and where are we today. We established ourselves and we separated from American Express’ new brand. Now, we have a well-recognized brand; one that is taking space in all the areas that we want to do business. We’ve moved more from our mass markets and mass affluent and affluent now. We’re moving further up market. This is where our growth opportunity continues to come as well.

We’ve always built our network from the ground-up, novice advisors, people coming, college graduates, some career changes now they were bringing in career changes and more experienced people. People with books of business, people who actually want to grow in the financial advice and planning in a more fruitful way.

Our model is around developing deep relationships, growing productivity. We have some of the best productivity gains that anyone in the industry over the little last decade. And this is where we continue to gain share of wallet; where we continue to track more clients in, where we continue to get more referrals. And this business has moved from a core center or a distributor to now a strong profit center in its own right.

But beyond that it is the gateway for every other product that we manufacture. It is the gateway that brings in the clients, the assets, maintains the relationship that’s why we have a good risk profile. Good behavior, that’s why we can generate good strong returns with less volatility and risk in the products that we manufacture; that’s why its all linked and tied together.

And our brand is starting to standout, not just a brand that’s out there today in financial service, but more of a trusted brand. We did not break that trust during the financial crisis. We do not take government support that is really standing out in the consumers mind, its standing out in the advisors mind.

And so its very critical that we continue to be focused on who we are and what we are all about and that’s why even the new ad campaign with Tommy Lee Jones whether its on national TV, its on web, its through our seminars and what we bring to life in local communities and what are advisors do is starting to really have an impact for us.

So if you look at one of the stats that we talk to you about operating net revenue per advisor that continues to grow nicely. And why does it grow nicely; because we continue to gain more clients with more assets. We transformed our employee network as I said from a novice network to productive network. And that productivity continues to rise, you’ll hear more from Don that we continue to grow the productivity by keeping more people in that channel as well as adding to that channel and hire productive people.

With deepening relationships, the tools, the capabilities you’ll hear about helps our advisors go to market better, helps them deepen their relations to identify opportunities, helps trained them and develop them and give them marketing support to grow. And part of that is also the way we do business; we go out to look at your needs, look at their goals, look their goals of lifetime, look at how they can achieve retirement the best way and so that’s why 65% of our revenues are fee based. So even within this business, the largest part of the business is asset management and we have one of the largest fee based businesses regarding financial planning.

So the way that comes together and continues to add value is tremendous and as we grow the network moving from where we transform them and brought them number of advisors to stability we have to grow in and you’ll see that we think that we will be able to add to that.

Now even with the headwinds one of the biggest revenue streams you know we have and the industry has is net spread for free cash, very little in these economics today could be significant as the world we’ve had and interest rates start to get normalized, but even with that, our net operating revenue again year-over-year third quarter to third quarter has grown by 15%. And if I put 2009, you’ll see it nice again. Same thing in our operating pretax income run by 43%. We are achieving the margins; we told you about even though we’re not getting the benefit of the interest rates that we mentioned to you.

And we think we can continue to grow product – no, I cannot predict the global economy; I cannot predict markets, I cannot predict level of volatility that people will experience. I just know that based on our success through the crisis, our success today and the ability for us to continue to grow in this space that I think we’ll do reasonably well, again, adjusted for markets.

Now people all the time say, well Jim, how do I think about your business? How do I compare it? So what we’re trying to do here is give you some comparisons both on a segment basis but then absolute, because again, when that someone just coming into this space. We are established, we are large and we should be reckoned with. So I just used two proxies out there, whether they would be Raymond James or LP; ones a regional player, ones more of independent network; not a branded proposition.

And here again, if you look at our net revenue per advisor is quite strong. If you look at our operating PTI, quite strong, look at our margins, quite strong. Look at their Ps versus ours, quite different.

Now I would challenge and say this is a nationwide branded proposition. This is not a highly leveraged individual entity. This is one well established with strong tenure, with client relationships that are also tied to my brand as one or two others like Raymond James. So look at it in that light and I would also say look at our growth rates in the each segment as I talked about against whether it’s those players or other peers.

Now, our annuity and insurance business are solutions for our clients. We choose to manufacture them, why, because over many years we developed tremendous scale, a great book of business, good risk profile, strong persistent client relationships that these solutions satisfy as I mentioned to you in our advice and planning model. And if one of our products takes part of that space, we generate another revenue stream, another profit stream, another detail attachment in that client relationship. And one that we feel very comfortable to honor and I’ll explain a little about that and Walter will complement my conversation here.

So our products are focused on our channel. We do not sell these products now externally. We sold a bit of them in annuities. We curtailed that a year ago.

Let's look at the annuity business as an example. It represents the piece of our client assets, less than 24%. It’s a critical capability for us to help satisfy the retirement income part of the equation for the client. Walter will tell you about the make up of that. The type of benefits or guarantees and that's not against the entire book. Those relationships with our clients are strong, they last a long period of time. It also because of the type of clients that we associate with through financial planning and advice have a good, both good persistency but good behavior. And our products are manufactured to work with that behavior in the right way so that we can generate appropriate returns over the long haul.

We are a scale player. So we can operate efficiently, and we've put in place and continue to manage our risk well including the way we hedge so that we can eliminate some of that volatility. Now, having said that, one of the questions that you've always raised is what if. So Walter is going to give you a little more of the what if. We don't think the what if, in anyway, will affect the entire company as you would think. Yes, it will have some affect on our rating, our earnings here, etcetera, but we've been able to manage that well. We've been able to limit some of the down side and still generate good strong returns over 16%. So I believe that our risk profile against our client relationship, against the type of products we've put out there, against the way we manage our exposure is better than what is out there, if you sold this through a third party intermediary, that you can't control the behavior as well or understand the behavior as well.

From an insurance and protection perspective, if you look at our life business, it’s mainly focused on asset accumulation. Our largest book is of VUL product. Now VUL sales have slowed in this environment. Of course, market conditions, the volatility of equity market but that is the large part of our book. Again, it’s designed for our type of clients through these planning type relationships. 85% of our life growth annualized premiums are permanent products, the remainders are in term, but here again we reinsure 90% of mortality risk. We have strong client persistencies.

The reason is business works for us, our clients do it a little longer. They do have a good persistency. And our life book generates good ROEs. Now we have a piece of that book long-term care. It’s a close book, we continue to raise, we’re starting to improve some of the returns there but it’s not something we’ve grown. It’s that we manage etcetera and even there we freed up some reserves and capital recently.

Our PNC book is only part to our clients, the other piece is through third-party but through a familiar relationships and even there outside of the volatility we experienced with some of the catalogs of this year, etcetera, you’ll find that that book overtime generates a very doubly time. It’s a direct player. In that industry, it actually has some of the better returns, the better PEs, the better focus on what that is as a low-cost provider. So we feel that the businesses we’re in and the protection and the annuities. And the PNC really does give us a good risk profile as part and compliment to what we do. But it’s not the highest growth part of our businesses. Its low growth and I’ll show you that in the few moments. But it give us a good diversity, good solid base, diversity of revenues, some premiums etcetera that will compliment and give us an overall good return with less volatility over time to equity markets along.

So when you put this all together, our products are designed as solutions, not commodities. We have a lower risk profile because it’s a clients-centric approach. It’s not a commodity product sale. Our revenues streams are diversified and recurring. Because of our deep relationships, our strong and high client satisfaction, our high defies this satisfactions with the company, strong retention rates there, strong client retention persistency results that gives us strong returns versus our peers and ones that we feel we can continue to grow based on the need, as I mentioned to you upfront, the growth on retirement, [baby bloomers] move into retirement, the bulk of where the assets pulls are and the need for advice.

Now I am not saying that Ameriprise is the only player out there, but I am telling you that we are one of the few as an independent public company of the size and scale to take advantage of that opportunity and we don’t need to gain share from anybody else. We just need to grow a bit against the very large population out there that need our services.

And that’s what we are doing and we will continue to transform this business to take advantage of that opportunity. This year, last year, next year we are making some of the largest investments in our technology, already built into the results I’ve explain to you. So its not as though our cost base is going up but that there is well and that will come down over time, but we are making those investments and that’s already factored into those returns.

So we want to continue to build deeper relationships with mass and mass affluent. We want to continue to grow a high quality of outputs. I am not looking for number of counts. I am looking for productivity, I am looking for good people to serve the population that we want to serve for the long-term. We are going to focused on growing productivity year-in and year-out. That’s what we’ve done over the last decade, that’s what we are going continue to do. We’re going to ensure that we are balanced and the assurance in annuity product development, pricing flexibility and effective hedging. We don’t want products what enclose risk to entire company or to this value equation. And so we will manage that in an appropriate way and when we can’t based on competitive factors etcetera, then we will move away. But clearly, based on our credit ratings, our ability, our scale, our knowledge, our understanding of the client behaviors we feel we are situated quite well here. And we will continue to expand profitability. Now, we continue to open our network, we continue to bring in more people and we are going to do that and as we grow our employee part in compliment to our franchise part, remember both of them operate under the same value proposition as a national brand, will even gain better and stronger economies.

Now let me move to the asset management business. Now the first question is why asset management? Let me just give you a make up. Our company, the IDS Company, this is how the company was built. We were one of the largest and most successful players in this until the 1990’s and late 1990. Since I have become CEO of the business, I want to re-establish that. Based on the market place, consolidation has occurred and moving from proprietary to open architecture, the way we did that now is through a combination of internal but more acquisitions that complement what we do and that’s what others have done as well.

So in this case, I think, we have transformed this business into a leader today. There is still things that we have to continue to invest in and grow and gain share, but I would tell you in size and scale and scope and capabilities, I think this is a player to be reckoned with. And we can meet the retirement institutional needs and it does serve us well as part of our complement, the type of knowledge, the capability, asset management and asset allocation, all those things complement how we can serve people to come up with solutions for the long-term. It fits neatly into this equation but it is one of the areas that we really do want to go and market beyond the round channel. This is one of the areas that scale does matter and we think we can take that space but we can bring the intellectual capability to help others serve those markets.

And so we move from a mid-size asset manager to now increasingly global in scale and size, and Ted and Chris are going to walk you through that. We move from use -- our overall distribution was affiliated to our channel. Now, its mainly through third party channels. We move from a limited suite of products and that’s where we never were able to get the flows we want to consistently through cycles through a broad suite and one that we continue to complement and grow on a global basis. We move from a single sub-scale manager as we work to now having scale. We successfully did a number of acquisitions. Threadneedle is a successful acquisition. (inaudible) and Columbia are successful acquisitions. You will hear more about that. We think we are set up well. We think that gives us capability for the future.

We were below industry margins, right because we lost scale. Now we are back to competitive margins. Yes we can include anything to increase those margins. Everyone says well you need to get to X, now that’s not true. If you look at us against competitors, and all the things, and I will give you a few, we are already there. Now could we get better, absolutely. But we are competitive. So look at our make up. $417 billion of assets, Ted and Crispin will go over this in more detail, a nice mix between international and domestic, a nice mix between equities and fixed and some alternatives that's growing. Good strong performance over a 100 plus Morningstar 4 and 5 stock funds in both US and the UK.

A growing diversified distribution, two thirds of our assets now are from non-affiliated channels. Look at our operating PTI, over $400 million for the three quarters. We have a good strong leadership and talent team that you will hear more about from Ted and Crispin and Mike, diverse distribution channels as I have mentioned.

We are finalizing the integration and we are achieving margins but there's more that we can do and one of our focus is to get into inflows. Now the industries and outflows. This is a major change occurred across the industry based on market conditions. We have to reestablish ourselves, gain traction and ground in a tough market. I think we are seeing some signs of that, but you will hear more about it.

But what we set out to achieve with these acquisitions we've achieved. We have the foundation, we have the earnings power, we have the diverse array of products and performance and those things we didn't have before. Again how do we compare. We are not small anymore, we are not unprofitable. And if you look at it again PEs of these companies and not all of them are inflows. In fact many of them are outflows. So it’s not as though we have to gain to be competitive against what's occurring in the industry or across the industry.

Now having said that, we definitely want to improve, we definitely want to get into inflows, we definitely want to ensure that we continue to gain profitability in margins. But again, this is not something that we have to prove that we’re in the asset management business, that we have to gain skill, that we have to gain performance, that we have to gain distribution, that we have to gain profitability.

Having said that, we got a great foundation because we’re not stopping here. Let me be very clear with you, this is an opportunity for further growth, opportunity to continue to globalize, opportunity to continue to gain traction in the market to innovate. That’s where we’re going and that’s what we’re going to do. We want to continue consistent competitive investment performance. We want to generate strong inflows across our product base, across domestic and international. We want it to be a global player overtime, truly global. And we want to continue to expand on profitability.

So what has that created in value creation. I told you at the beginning of the presentation what we’ve been able to achieve. But we don’t want to stop there. Two years ago, 2009, I stood before you to say we wanted to set some goals, some of you thought they were lofty goals. Some of you thought that they couldn’t be achieved. Some of you thought that the transformation couldn’t be as aggressive as we had targeted.

We feel that we’ve achieved that in many cases and in [Chem] cases that we are short, we still are pushing, we got a year away. Now in that regard, net revenue growth that we said we wanted to be at the high end of the 68% range that we give to you on average overtime, 17% compounded through the third quarter.

EPS growth, we wanted to be at the high end of that 24% compounded. ROE, we wanted to be at the high end of that. We’re at 13.4. We think again we got a lot of headwinds from market interest rates, stack on lock et cetera. We continue that a year there, we are going continue to push, markets are good and we think that we are going to be close to that benchmark again.

Excess capital, so I am not using all my excess capital in that equation. If I did I get a different ROE. Over 2 billion, we set approximately a billion. So I think on those factors you will see and again we are only in the third quarter of 2011, not the end of 2012. We’ll give you more about the details. Walter will walk you through more details against what we said in the 2009 FCM, but again we feel like we are achieving what we set out to do in many instances with a tougher environment and Walter will explain that tougher environment versus the assumptions that we use, very different.

And so over that period, our revenue grew by 17% as I showed you and operating is 26%. There is only three quarters in 2011. So if you annualize that number using fourth quarter last year as an example and add it, you are talking 1.3 billion in that earnings, quite substantial with a good return. Now again, what does that look like in what we have achieved here.

When we started out, we came out as one segment and people didn’t understand those and I agree with you. Many people are trying to figure out who we were, where we generate our revenue our earnings et cetera. And we couldn’t give that to you into at least a year or later maybe a little longer. You had to set up our accounting systems, general ledger, we had to put everything on a basis going back and forward and so it wasn’t only to after that we came out to give you some of our segment’s activities.

And we were growing nicely until the crash occurred again and then everything got mixed up in the industry, what’s valuation, what was the risk that companies have.

Today, we’ve made a big shift, okay. Today over 50% of our earnings are coming from the businesses I’ve mentioned and closer to 60 on a revenue basis, significant. This is no longer we generate some asset management revenues from the assets that we manage for our insurance or annuity business. The clients we have aren’t Insurance and Annuity clients that we have asset management to. They are financial planning clients that have net worth over apps that are licensed across the industry for all the products and services, work with a client against their entire life, not to sell them an insurance product.

This is the make up of our company. And the risk profile of annuities and to actually cost their against the broad clients that with deep relationship against the retirement entire to solve their equation is a different mix than what you see is the broader industry. Now we started to move, our PE started to increase over the periods and then again going through another market cycle like we have, that sort of got in some way, it lagged.

But today if you look at insurance group, less than 9% of their profitability from makeup of some stats done here is from the businesses I just mentioned. But if you look at PE, we are close to what the insurance group is. I would actually say and I didn’t put on the slide if you compare revenue growth, earnings growth, return on equity. You pay all those index against whether it is the wealth management index, the asset management or the insurance both on an individual peer basis or even absolute against the numbers I just gave you for the total company, you will find they compare it quite well.

So again I believe we are way on the value if you assume that the industry should be priced the way it is. I would go one step further and say if we continue to do what we need to do then my return that I am going to focus on will be in the 15% to 18% range. I don’t think you will find the larger industry able to achieve that. I think even when you look at asset management peers on a GAAP basis, not just on a cash basis, you will find that their returns because of amortization and all the cost of acquisition et cetera will also have lower returns.

But I believe as the entire company, not looking at segments, segment will be higher Advice and Wealth and Asset Management, but looking at the entire company I think we can comfortably in normal markets achieve its hyper range of 15% to 18% with a good conservative, a good capital position, not higher leverage on our debt based on the model we’ve put in place. Now of course, over time you can get impacts, interest rate impacts that are severe that we already facing headwinds, markets that depreciate in which case anybody is going to find the hard time achieving their normalized returns.

But I do believe that returns across our financial services industries will go down based on capital requirements, will go down based on the things that all of us are experienced, I believe that Ameriprise will move to another range if things continue to get normalized based on what we put in place and that’s what we are going to shoot for. That’s what we are going to target, no guarantees in life but that’s what we are going to be focused on and I think that will be very good appropriate margins that still give us flexibility. Now with that capital management and deployment is very important.

Walter will talk to you, but we are generating good strong cash flow currently 90% of our earnings is free cash. We have already a large capital position. We are ready deploying significant amount of capital, again compare us against the industry at large, or against segments, we are one of the few at the very high end of returning capital to shareholders. We've raised our dividend 27% this year, but it’s again something we are going to focus on what is our dividend growth strategy here that's one of the conversations I will be having with my Board. And we have the flexibility; we have now the experience to continue to look at acquisitions on an opportunistic basis. The two businesses that we've been successful in investing in and growing. And that's what we are going to continue to do.

We are not going to use all capital one way and not have flexibility on the other side we want to have a good capital base, flexibility to deal within blinds; we want to have the ability to acquire if something comes along that we can generate good value from, but we want to return to shareholders to achieve the type of returns consistently along those lines.

We think again through a very difficult cycle including a difficult environment today, we are achieving what we set out to do, we think we are positioned quite well, we think that we have the strategy in place and most important I want to say to you, what drives a company like Ameriprise or any company I believe is the leadership and the people and the talent and the satisfaction of your employees and your advisors as in my case with Ameriprise and I believe I've got one of the strongest management teams, I've got one of the best employee populations and I have a fully engaged advisor and high satisfaction for them to continue to help me build this company.

So I want to thank you. With that in mind, I would like to tell you that that’s the story that we have for you today and I would like to now introduce Don Froude, who is the President of the Personal Advisors Group to give you a better understanding of how we deal or actually develop our advisor network and the types of things that we are achieving. Don?

Don Froude

Good morning. I am very excited to be here with all of you today and my purpose is to give you an overview of the Advice and Wealth Management business and focus specifically on the Personal Advisors Group which is our advisor force which I am very proud and privileged to lead. My team is in a very great position for us to show you what we’ve done and how we’re positioned for growth in the future. But I am privileged to work with a very powerful and strong leadership team in our Advice and Wealth Management business and this is the team that delivers our integrated business model. So I would like to just introduce Kim Sharan who heads up our marketing and the financial planning and wealth strategy, Joe Sweeney, Advice and Wealth Management Products and Services and Glen Salow, our partner who leads the Service Delivery and Technology team. So let’s take a closer look at the advisor force.

If you think about the advisor group, there are a few key points that I’d like for you to takeaway from our discussion today. First, we have a very strong advisor force in place that’s continuing to grow. Over the past several years, our advisor force had become a very powerful growth engine for Ameriprise Financial. And the platform is highly scalable. Not only is it strong, but we have continued to increase the overall productivity of advisors which you’re going to see in many of the slides that I’ll present today.

But this transformation of our advisor force has really built the foundation for how we’re going to continue to grow into the future. Although, the markets have been tough, I feel very, very good about our business. I am confident that we can continue to grow and that we can continue to grow our revenue and our margins. Today, I am going to walk you through some of our priorities for continuing, perhaps to continue to drive that growth and our executing against the strategies.

Across our Advice and Wealth Management business, we have three top priorities. First, we want to serve more clients’ comprehensibly, secondly, we want to grow our advisor force and the productivity and thirdly we want to deliver very strong financial results. So the goal of today’s presentation show you how we are driving this productivity and the profitability by executing together as a team and how we are executing against those priorities in the success that that’s giving us.

Let me start by discussing how we are working on serving more clients. As you heard from Jim a few minutes ago, we are ideally positioned to take advantage of an extremely compelling market opportunity right now. The retirement need is going to continue to grow; it’s going to continue to grow in this country and it’s going to grow for decades; but it’s going to grow against our target clientele, the mass affluent in affluent clients. They are huge part on the retirement marketplace.

Unfortunately, today their confidence level in their ability to retire comfortably has eroded significantly. They are looking to have a comfortable retirement and they are looking for some answers against that. So just as important, these clients have learned that they truly needed advice and guidance in order to help them achieve that confidence and to achieve their retirement. And we’ve found out that they are willing to pay for that advice.

We are a firm that is focused intently on comprehensive financial planning and providing advising guidance to the mass affluent and the affluent client based. And in my opinion there is no one that does better than we did.

Our biggest differentiator in the marketplace is just simply what we do and how we do it. Our approach to our business is centered around the concept and the beliefs that we are in the business of life. And we know that all advisor ministry look at certain milestones and try to achieve them. Getting married, buying a house, planning for college education, ageing parents in retirement.

But then Ameriprise advisor will look at this graph that you see here with all the pictures that depict many of the milestones and their belief about that and their behavior would be different. They would be looking at those things and working with the client saying, what could possibly go wrong with the goals and dreams that you’ve shared with me; what could be real thus from happening and why it has become so important because issues like long term care, disability insurance, life insurance has ways of fixing some of those possible things will go wrong in a persons life. We all know that whether you get a 6%, 7% or 8% return in your overall portfolio is insignificant; if a 41 year old spouse passes away unexpectedly and doesn’t have the insurance for their family.

The questions that we ask our clients are tough questions; sometimes they create a level of uncomfortableness; but they are critical for us to be able to understand how we can best position ourselves to help the client achieve their goal and show them how much we care. My advisors have a philosophy that we help our clients prepare for the certainty of uncertainty; don’t know what’s out there, but I know that something is there. There are many potholes in life, and our job as an advisor is to help you see what’s there and how we can help you avoid many of them.

So when I look at this and where we’re going here, our ability to use financial planning and understanding your emotional connection here enables us to create very deep relationships with our client. And this is one of the best ways I know to show the client that just how much you care about them, their family, their situation and their future and by doing this, we are creating a very long lasting and emotional relationship with our clients.

And what this leads to; is increased trust and to me that is something that’s very special right now and it’s needed in this industry and it’s needed for our clients and this is ultimately what we found that our customers are looking for. Last year’s study was done in this industry and the study was asking clients, what was the number one concern that they had with their advisors; number one concern?

And this is clear enough, their number one concern was, does my advisor truly understand my situation. In that study number six was investment performance. At Ameriprise, we get back to the similar study earlier this year and what we found out was that our clients were looking for an advisor who makes them feel valued and trustworthy and dependable. In our study number nine was investment performance.

So, as the leader of the Personal Advisor Group one of the things that I feel very compelled to do is to provide our advisors with a tool they need to make sure that they understand the client situation better than anyone else, and can deliver that in a trustworthy and dependable manner. And the best way for us to do that is through comprehensive financial planning and advice.

This is the cornerstone of how we help our clients and this is the best way that I know that we can deepen relationships and continue to prove to advice to clients just how much we care and how much we are aware of their particular situation. Through our financial planning process, we uncovered an incredible amount of needs, needs that we can solve. We have broad capabilities that span all four cornerstones of the client’s financial life, protection, investments, cash and liabilities as well as tax and the state planning. So these capabilities extend normally over our clients, present life also and over their retirement life.

Our comprehensive approach to the client centered around financial planning provide us a very unique benefits and they are powerful benefits. What we found out the difference between our planning clients and our non-planning clients, first and foremost they are more satisfied.

Now it’s nice and very good to deal with a satisfied client. That’s a big plus. Second, they have much more confident and optimistic outlook about their future and this also occurs during very volatile times in the market with particularly telling for our clients in 2008. They were very confident, felt very good about where their future was at that point in time, even though the markets were very volatile. And thirdly, they are more likely to refer another high value client to an Ameriprise advisor and referrals are one of the key ways in which we organically grow our client base.

Now there's also some economic benefits to this. So when you look at our financial planning line, they generally have at least three times more assets with us than our non-planning clients. Those assets generally generate almost five times the GDC revenue commission-based business that are non-planning clients. And they are six times more likely to have some form of a life insurance or insurance relationship with us. And we know that this is good. So the facts in these stats are very strongest, as to why financial planning and advice is good for the client. But I will also tell you that it’s absolutely very good for the advisor and it’s very, very good and very strong for Ameriprise Financial.

The model works because it solves both the client needs and it helps the advisor do a more complete job and build a more stable practice. And other benefit of our comprehensive approach is it provides us with a very strong diversity of product across all of our advisors. Advisors are leveraging the breadth and depth of all of our product solutions that you are going to hear about this morning in asset management. In order for them to solve their client needs as completely as we possibly can, we have a very nice product mix and you can see with wrap as being the primary driver. But as you know, we are one of the largest assets management in terms of wrap counts and our fee-based business is continuing to grow securely against the affluent and mass affluent marketplace.

Our retail client assets are currently about [$300 million] which is higher than it was before the economic crash. The next slide, I just wanted to show you very quickly, I show your assets mix and this is I would like to show you what leadership that we have in terms of our depth and penetration versus our peers. Compared to the industry, our clients hold more products with us from investments, retirements, IRAs and clearly financial planning. As you know that more products that you have, generally the more retention you have of that client base. Our deep relationships give us a much larger share of that client’s wallet then if we didn’t have that broad product base. And this is really do what drives this is our comprehensive approach to the client in terms of financial planning and advise, which leads to the multiple number of products that we have because we’re using that to solve client problems and not just move product. It’s very compelling when you solve the problem with the product versus just here’s the product and that’s what our approach does.

In addition to the debt of our relationships with our clients, we’re currently growing our client base, and in fact, year-to-date, we’re up 11% in client acquisition against our target market, the affluent and the mass affluent client. There were several factors that are contributing to this success and over the course of this year, we’ve really evolved our brand messaging against the current consumer sentiment. Our new advertising campaign that Jim mentioned, featuring Tommy Lee Jones, reinforces the fact that we’ve never taken a bailout. There were a 100-year old company that’s been very successful, that were strong and were stable, in a market that isn’t always that way.

That we’re focused on helping our clients meet their needs, and that we’ve a very strong balance sheet. This plays our very well for the client. It also reinforces this to the advisors that are looking at Ameriprise. We brought this message to a local level with each of our advisors and it makes it very easier for them to leverage that new campaign in order to continue to make client acquisitions in their local market. We’ve expanded our online presences to make it easier for clients to communicate with advisors, to make it easier for them to see their accounts and access information. So what these things really do for us? What they lead to for our clients is an increased level of satisfaction and it leads to long standing relationships.

Long standing satisfaction leads to referrals. It enables them and encourages them and they want to refer their friends and their family to us. Now, there can’t be a greater compliment to have a really hard value client, say, you know the work that you’ve done for me is so compelling that I want to refer my family and my friends to you. And that’s what we strive for and most -- many of our client acquisitions that you’ll see comes from referrals.

Secondly, lets transition to the second growth priority which is growing our advisor force. Our advisor proposition at Ameriprise is very unique in the industry. Its one of the primary reasons that I feel we had great success recruiting over the last three years. And perhaps the greatest differentiator of that fact is that we work for one branded network but we offer two ways for you to affiliate with us. And I will just tell you having limited advisors for 32 years, advisors love choice. So we give them choice, it makes them happy. But regardless of which way, you decide to affiliate with us, affiliate with us as an employee or as franchisee, the one thing that you can be sure of is that you’ll get a substantial amount of support; all kinds support, leadership support marketing support, product support.

Both of our channels are highly productive as you are going to see. So let me just give you a brief overview about this two channels what have they represent. So, the first of all, our franchised channel model is particularly unique because its an independent channel, they are independent business owners but they get an incredible amount of support from us, which is very different. So most independent channels don’t provide the level of support that we want, in terms of field leadership. So this is a key differentiator. In addition to that, this is a very robust, profitable and matured channel.

We currently have over 75,000 advisors in this particular group. They’re independent business owners. They hire their own staff, they pick up their own real estate, they decide where they want to be, they might come in as a solo practice or they might come in as a solo practice and involve into teams within their offices. The key here is that they have the access to formal leadership. It’s a big differentiator for us as a company and I need to continue to underscore that because there are not other independence out there that provide that leadership and that’s a compelling difference when you are sitting out there and you buy yourself. They have this access; they can do it through our field leadership. We also have peer coaching which we call franchise consultants and sometimes something works better than peer-to-peer. The other things that’s compelling here. It’s these 75 – these people, the franchises, they are earning equity in their practice each and every day. At some point in the future, all of the franchise advisors will sell their practice for some multiple of revenue. It’s a very big difference.

On the employee channel, we currently have 2,200 advisors in this channel. Their businesses expenses are paid for by the firm. They’re supported by a very formal infrastructure, very similar to what you would experience at Merrill Lynch or Morgan Stanley or Wachovia. And there is a much greater attention, the [hands-on-bridge] management training and the value proposition that you would experience as a client is the same whether you would be in the employee channel, whether you would be in the franchise channel. But I really believe that what makes the employee channel right now so exiting is the fact that this business model is so scalable.

I have a 130 branch offices and in almost everyone I have at least one empty seat. I could continue to add a meaningful number of advisors to this population without adding meaningful expenses to that. And so when I think about what that really means is, but if you continue to add productivity, continue to add advisors, right? The revenues continue to increase. So overall, right now, we have one of the best advisor systems and the best network and it’s powered by a branded financial services company.

This is the next slide as one that I am particularly proud of because I really believe that retention is the cornerstone for growth in my business, and what you see is that the value proposition that we led, the peer leadership we had has led to great retention on both channels. Historically, we’ve always had very strong retention on our franchise side; always in the 90% range. So, what you are seeing here is there has been a very strong retention that has occurred on the employee channel.

I went back to 2005 on this, and it will be in a 60%. We are up in the 70s. We are now over 90% retention in the employee channel. This is really, really important and it speaks to the fact that the value proposition, the leadership they are providing is giving people the encouragement to stay and to continue to do the things that are important. So, I look at this as a very, very telling slide as to where we are going to be capable of going, our advisor force is stable, they are motivated, and they are happy.

We have always had a very strong system but we’ve taken many steps to make it even stronger. We’ve dramatically transformed our employee advisor business. We no longer are hiring novice advisors, we are now exclusively hiring experienced advisors from the industry and this has really changed and transformed the look of the employee business.

We are no longer encouraging employee advisors to migrate to the franchise business if their GDC and their revenue was lowest we had done before. The other cornerstone here is we have done a very successful job of integrating the HNR block advisors into our system. Our retention of this group of people has been very high, there's been a very interesting transformation, they were very highly transaction centered business. They have now migrated in many ways to a more fee-based and advice model. There's obviously more room to grow there, but it’s proven to me and I think that my team that we have the ability to bring people in and we can dip them into our culture and they can start to assume some of the attributes that we know are good.

We've transformed the business into a scalable long-term career choice for some of the sites that they want to be an employee advisor and can still maintain our value proposition. Our employee channel is complemented by a very productive highly motivated franchise business. So I have the luxury of having these two businesses and they complement each other beautifully and both of them are continuing to gain in productivity. We are going to continue to grow our productivity, our profitability and our margins across the entire advisor force.

So if you can see on this slide both of my businesses right now are growing their operating net revenue per advisor in a very meaningful way. We are going to continue to invest in our advisor force, to either drive their productivity and their satisfaction and we are going to do this by deepening our relation with our advisors and our clients. Our advisor value proposition is centered around providing branded resources, tool support, field leadership, to help advisors grow their practice in a meaningful way.

And even if you are in the franchise channel with this much support you might be independent, but I can promise you, you are never alone, and that's one of the things that our franchise advisors really value about us. The combination support that we provide is unmatched in this industry. And it provides us with a very competitive edge and then as evidenced, as Jim mentioned but it is evidenced by our most recent advisor satisfaction survey, our advisors are very pleased with the support that they receive on almost every level within the company and one of the numbers that we look at the most is their level of engagement and their engagement is extremely high.

Their desire to stay with Ameriprise is extremely high. And over 90% of them has said that they want to continue to grow their practices. So we’ve got motivated people they’re engaged and they want to grow. That’s a great combination for someone like me. We also have a very strong history of the training culture and we want to continue to maintain that. Beyond our formal training, we have very meaningful informal training support that’s available to advisors that want to grow or to staff members. They need to continue to understand how will they help their advisors become more productive.

We’re very focused on the tool suite that we provide to advisors through financial planning or asset management, we want to have the best tools available to them. We’ve just converted to a new industry-leading brokers platform that’s powered by Thomson ONE. We’re also continuing to develop a unique set of tools that allow advisors to systematize their practice so that they can leverage their time. They can become more productive without adding more staff. We developed a tool called Opportunity Manager which is to drive awareness about product solutions and opportunities at the local advisor practice level and finally we’re constantly enhancing our financial planning, software and capabilities to make this process easier for advisors and to make it easier for clients.

We’re going to continue to grow our advisor force by sustaining our strong retention levels. That’s going to be cornerstone of our growth and we want to continue to bring in advisors into our company that believe in the vision and the value proposition that we have. It’s not for production, it’s for people that have the belief that this is the best place that they can serve their clients and grow their practice. There are four ways that we’re focused on bringing in new advisors.

First, is the experienced advisor recruiting that we’ve been talking about. I will go into a little more detail on that. Then in the second we’re going to continue to bring in leading advisors that are in the industry into our company. Two, we are going to help advisors acquire external practices. With the aging advisor force in the industry there were significant number of advisor and practices that are retiring. We make it easy for our advisors to acquire practices of retiring advisors.

Thirdly we want to build and continue to build out our targeted career change program. This enables us to partner with people that are outside of the financial service business and put them together with the leading advisor in the employee channel and build the team that is meaningful. Someone comes in from another industry has network partners with a very senior advisor. We put those things together and somehow magical things happen for both parties. Everyone gets his part and practices and revenues continue to grow. And lastly we are going to continue to expand our Ameriprise advisor center. These are virtual distribution channels that we have in Minnesota, in Minneapolis as well as newly announced in Las Vegas.

I’ll just like to take a little deeper look at the experienced advisor recruiting. We’ve had a quite a bit of success during the downturn in the markets here and as you can see over the past five quarters I am happy and proud to say that we have a strong momentum again. And we work every closely as a team in Advise & Wealth Management to bring these new advisors on and to help them transition their clients and their practices to Ameriprise.

We help them to ramp up their production and their productivity once they join us and so for this is been very successful. So we have recruited 100 of advisors and recruiting them is the beginning. What we have do is bring their clients and assets over and I just want to share with you that if we look at the recruiting that we brought in 2009. Currently they have brought over 94% of the assets that they had at their previous firm.

If you look at 2010 it is about 90%. So we have built a very strong onboarding process to help advisors bring their practices over quickly within sort of the first 24 months, they have got 90% of their assets there and now we continue to help them grow. So this is a very, very big deal for us and it is very important. The only thing that I want to underscore is that the recruits that we are bringing into this company, not only are they excited and passionate about what they are about to do, but also they are four times more productive than the advisors that are leaving us.

Right so the knob-assisted or that they are washing out in the business. We are bringing in people on top of them that are four times more productive. That’s a good ratio. Overall our recruiting pipeline today is very, very strong and we are structured it properly to continue to capitalize on the opportunity that is presented. I just want to underscore to you right now my advisor force is very experienced more than they are ever been before. They are more tenured than they have ever been before. They have more assets than there have been before and those things lead to a higher level of productivity than we had ever had before.

And so coming out of this downturn we’ve continued to drive increases and overall productivity and we have done this across both channels. It is not just the employee channel, both channels are firing on all cylinders and we are well beyond where we were before the economic crisis. So as you can see on the slide, the dark blue bars are year-to-date results and we are continuing to generate very, very good growth even with a very challenging market here in the third quarter.

Let me just go to our final priority which is to deliver strong financial results. I think what I’ll show you here is this is where the rubber meets the road. Our advisor business is very strong. It is very productive and it continues to generate very attractive financial results. I really believe that this is the very key revenue generator for Ameriprise Financial today and into the future.

Let’s address very quickly here, the profitability improvements that we are making. We ended the third quarter with a margin of 12.4% and year-to-date about 11.5%. We have essentially doubled our profitability compared to pre-crisis levels. I remember standing in front of this group two years ago and our team telling you that this was our goal. We have achieved this, and I want to underscore that we are not done.

As matter of fact, I really believe we are just getting started, the best is in front of us. Our priorities of more clients more advisors, and deeper relationships are the key ingredients to our growth. When you combine that with a very strong focus on expense management, this puts us in a very strong position for us to continue to post very competitive margins in this business.

As I told you at the beginning of my presentation today, I wanted to leave you with a few key thoughts. First, the Advise and Wealth Management is a growth engine for Ameriprise, there is no doubt about it. Our advisor force is strong and it’s growing. We are continuing to drive productivity increases across both of our channels. The platforms that I have are very, very scalable and I can increase the scale here without increasing the expenses and we have transformed this business and right now we are going to continue to focus on the growth that we have achieved.

I would like to close today just by saying that the personal advisors of Ameriprise Financial are the people that bring our client experience to life everyday. They are devoted to their clients and they are devoted to building and growing their practice and I can just tell you that I am very proud to lead the advisors of Ameriprise Financial. I would like to thank you all for your attention that you've extended to me today and with that we are going to take a 10 minute break, come back and you are going to hear from my asset management colleagues and from Walter before we take your questions. We are going to begin promptly in 10 minutes. Thanks again.

Ted Truscott

We’re going to have everybody take their seats. We are going to get started with the second half of the presentation. Thank you guys. Welcome back and let’s start with the asset management segment of the business. My name is Ted Truscott and its my pleasure along with Mike Jones and Crispin Henderson to tell you more about the asset management business at Ameriprise.

We basically are three teams and Mike talking about our transformation from a very mid-sized asset manager to a more global player, a leading global player. The very strong investment performance that we have across both Columbia and Threadneedle and the growth opportunities that we have as a result and then the margins that we’re producing are competitive; there’s obviously room for improvement but we’re pleased with the progression here.

Just by a way of highlighting something that Jim said to you earlier, I’ve been working with Jim for over 10 years now in transforming the asset management business and when I sat down and talk to Jim and Walter about what we needed to do, we talked about a number of different things; but one of the most to grow out of what was really a captive asset manager, one that largely distributed only within Ameriprise and managed largely Ameriprise money and this is something that’s much bigger and just to give you a little statistic, I decided to go back as I do I keep all these files on my computer to go back to plans back may be as far back as 2001.

We have the ambitious goal back before the Columbia acquisition of selling $4 billion in asset and funds and third party intermediary channel by 2011, this was back in 2008. We had that ambitious goal of selling $4 billion. We will sell 9X that number in the coming year as a result of the acquisition of Columbia.

So I would submit to you as one of the key teams here that we’ve transformed the asset management business completely and totally, we’ve done a little bit of organically; we’ve done a lot of it through acquisition that we are very good at doing it through acquisition that we’ve managed to extract value from those acquisitions in lots of different ways with Threadneedle. We basically told them to get on with running the place and Crispin’s going to show you what an amazing job they’ve done in transforming them, sells from largely captive manager of Zurich Insurance assets to a formidable distributor and player and performance and we’ve transformed the domestic side largely through the acquisition of selling them in Columbia.

So lets talk about being a global player, we’re number 27 overall in the world or number seven in the US in terms of long term mutual fund assets that obviously excludes money market or number four in the UK across this segment and more than $400 billion in assets and a very board product line up with really, really great investment performance.

This is our global map; you can see that we have multiple offices around the world both in terms of distribution and investment centers. We are very good in managing ourselves on a multi-geographic basis and that footprint is expanding out in Asia as we will talk a little bit more during the presentation.

This is what the platform looks like overall, $417 billion across what its today Columbia and of course Threadneedle and then the breakdown by asset type roughly spread evenly among fixed income and equities. We’ve got an alternative business that slide and that portion of the pie encompasses the Threadneedle property business which Crispin will tell you more about, unique business that we have in the UK as well as our CLO platform in Los Angeles and the Seligman hedge fund platform out in Menlo Park.

This is where we rank in terms of long term mutual fund assets; keep in mind that back in 2008 little over RiverSource investments had a whole $38 billion in mutual fund assets in the US. So this is a huge transformation, we’re roughly 4.5 times more than we were in 2009 if you look at the assets back and then.

So big transformation on the mutual fund side; lets switch to what Columbia look likes. Again, roughly split across fixed income and equity in the alternatives business; one of the things that Mike is going to talk to you about is not only the retail side of the business, but also the institutional business we would ideally like to have the business split across retail and institutional on more of a 50-50 basis as we go forward and Mike is going to talk to you a bit about that very bright spot in the Columbia picture overall.

What about performance and the growth opportunities; well, Crispin is going to cover the Threadneedle investment performance so I am going to concentrate on what Columbia is about and how we are going to take that performance and deliver multiple growth opportunities.

One of the biggest things we want to do is take the base of what we have and continue to expand the product offering. We are well established in the major categories out there and have great performance in the major categories out. But now we introduce newer things that are more in keeping with today’s environment that maybe absolute return funds and that maybe fun to look across the total balance sheet of a corporation these days; all-in-one fund or it may well be things like tax sensitive investing.

We have incubated four or five products this year, as well as a major absolute return launch and we think that that’s the sub for continued product development going forward product is one of the keys in this business and we’re going to keep innovating in that space in order to drive flows.

We clearly need to drive flows, that’s a big focus of what we have at Columbia and Threadneedle across the segment. If you look at it, we’ve got some challenges in Columbia in terms of getting then to better net inflows. But Threadneedle has had some tremendous success and has also got the acquisition of Liverpool Victoria’s assets and the take-on of those assets is going to drive good flows across this segment this year.

Obviously, building the brand, recruiting talents and also leveraging our opportunities of Threadneedle, as we begin to focus on the fact that the industry is really competing on a global basis is one of the big important growth opportunities that we have and we are all going to talk to you a bit about that as well.

We have very strong investment performance in the US. 54 of four and five star funds out of a 118 funds, you can read the rest of this slide in terms of the different med ways that we measured it. Importantly though, one of the key elements that this is not just confined to one particular category. It’s spread across 24 different equity funds and almost every style box out there except for the mid value space, across asset allocation categories and importantly across tax exempt and taxable fixed income.

This is one of the things that Mike will tell you about; we actually have some fabulous performance in the bond space. This is one of the things that we need to do better in terms of letting people know that we are not only a formidable equity manager, but we also do a very well in the fixed income space.

Building the brand is key; you know Columbia is an agglomeration of many, many asset manager’s overtime. This goes all the way back to names like Stein, Roe, the original Columbia management in Portland, Oregon and all kinds of other players. And so getting people to understand Columbia who we are, and importantly what the performance is, is a big piece of what we are doing and we have been doing a lot of advertising this year in the trade publication and we think that’s an important piece of what we have to offer as well.

Let’s get people to know Columbia, let’s get people to know how we invest money, let’s get people to know the strong performance that we have in multiple categories. We need to know about our invested resources, they are strong and deep. We have multiple ways of managing money at Columbia and as Colin Moore, our Chief Investment Officer is found of saying is, we don’t tell people what to do, we just measure to make sure that they are doing what they say they do and we unify these various processes under our methodology known as 5P and we believe that that 5P has brought a consistency to the investment performance and a competitive nature to that performance that we lacked earlier in our incarnation as Ameriprise. I mentioned the very strong distribution that we have across retail and institutional and Mike’s going to give you some more details about that as well.

What are the growth opportunities here? Well, Columbia and Threadneedle are starting to work together more because increasingly the competition has more of a global approach to investing as opposed to different investment centers or functions. So we are beginning to share research and intellectual capital across the platforms. We are aligning a more global approach to our institutional sales, making sure that no referral goes unheeded or untouched and we are leveraging the asset allocation expertise that takes place across both platforms.

Importantly I think the cross distribution opportunities are huge. We are launching and distributing Threadneedle products in the US, in some cases we've had people come in and ask for a customized product from Threadneedle that we have then launched through our US mutual fund space and delivered that quite frankly in record times.

At the same time Columbia products are being distributed through the Threadneedle fee cap and we think that this gives us a big broad opportunity in the retail space not to mention the aforementioned collaboration from an institutional perspective. Crispin is going to talk to you more about this, but we are also very pleased with the partnering that we are doing to increase Asian distributions. I don't have to tell anybody in this room that Asia is the big growth market going forward. It certainly is not going to equal what we have in the availability of assets to gather within our home markets, but its growth rates are huge and we want to be able to play in that space.

Now let’s talk about financials where we are. As you can see, we’re now a very significant part of Ameriprise’s net operating revenues as well as our pretax operating earnings. These are big changes from where we were just a few years ago as Jim showed you on his slides. Importantly, the revenues are strong. Obviously they’re impacted a bit by market, our pretax operating earnings on these slides I would just urge you to focus it in the fourth quarter. We tend to book hedge funds, performance fees in that fourth quarter although it looks a bit different than the other quarters, let’s not forget that market is in here as well and then in the most recent third quarter, we had some charges of Threadneedle that affected the numbers there as a few one-off items.

We showed you this slide last year which is what our adjusted net pretax operating margins look like, what does this do, it takes to operating margin that we report and remember what we tend to do is we run distribution through the revenue line and then we take it out in the expense line. If you adjust for the fact that we’re running distribution through revenue and expenses. If you adjust for sub-advisory fees, goodwill amortization and some other pass-through items that relates to Columbia acting as a advisor or various wrap and discretionary wrap programs within Ameriprise. You can see that our adjusted net pretax operating margins are very competitive relative to some of the other players that report a bit differently from the way we do.

So just in summary what I’d like to say is that the transformation of what was a very small segment of Ameriprise’s business namely the Asset Management business has been huge. That we are much larger than we were, we have scale to compete, we have a depth and breadth of product and performance that allows us to compete on a truly global scale across the segment going forward and that we have lots of growth opportunities as a result all powered by what are some very strong results from a financial perspective as well. So to give you more detail on Columbia, I would like to call up my partner Mike Jones and have him to take you through the Columbia in greater detail. Thank you.

Mike Jones

I am going to pick up where Ted felt off and really talk about two areas. First is product and product development, where we are today and we are going, but also I think very importantly what folks have on their minds today, anyone in the industry does which is our distribution channels. But the retail distribution are intermediary channel as well as the institutional channels. I think the key part here let’s get into flows and talk about what’s going on.

Let me start though by talking a little bit about the strength of our organization. As you can see from this slide, Columbia’s integration is essentially complete. We brought together and about two years ago the investment teams along with the distribution teams and support teams. We made those decisions upfront and we’ve been happy with the retention levels we’ve had there which have been better than the industry norm.

Secondly, as you look at the other aspects of it from real estate to merging over 40 product lines, we’ve had success there and are heading off to the races. And finally, as we move into2012, we’ll be completing our technology integration as well. So now let’s talk a little bit about the product line up and here I think the key part here is really as Ted has mentioned, we really have a breadth of strength at Columbia. We very well known for the strength over domestic equity products, but as Ted mentioned our focus funds in terms of our taxable and tax-exempt fixed income funds. You look at our asset allocation funds. We are getting to the absolutely returns space as well.

We have a broad breadth of products and one of the key parts here is the beginning of every year, we take a look at key investment themes we think are going to be prevalent in the market and apply our products against these themes and we call these our focus funds and we have this in both the retail as well as the institutional segment. And one of the things we have here is by way of example is we look back in beginning of 2011 and said, we believe that income-oriented equities are going to have significant importance for our clients and what we did was we brought to our clients our 5-star Dividend Income Fund and our 4-star Dividend Opportunity Fund. Similarly we looked at our short duration credit as an area of opportunity and we took our deep research ability on the fixed income side and brought to our clients the 4-star Limited Duration Credit fund.

So you see we are not just an equity shop, we have a broader array of products and Ted has referenced the strength of these products. The key here becomes adopting to market conditions and bringing solutions to your clients in whatever space they need.

The next step though becomes the challenge of net flows. Let me talk a little bit about that as it relates to product development. A part of the issue we’ve had with being a negative outflows for this year is the fact that some of our strongest performance has not been in a sweet spot of flows for the industry. So what do you do about that? While we address that by leveraging strength and doing some proactive product development. And on this page you see both on the retail and institutional side, some of the things we have done. First and foremost we look at our improving track records and I think a great example there has to do with our Intermediary Multi-Sector Bond Fund, and what we have here is a 4-star Morningstar fund which is about to drop off a couple of quarters of tough performance within the three year timeframe.

As always we are out there, we are talking about and clients are responding. Additionally, we have the Emerging Market Debt Fund you see on the right side of the page and here is a 5-star fund which has not been as fully embraced in the institutional arena as we had hoped and part of the reason is because we need to put more resources behind it, we are doing that and we are seeing a response in the marketplace already.

On the product development side, I won’t go through all of our product development initiatives, but what I will talk about are a couple. The absolute return side, we launched our Absolute Returns Funds in this past April and these are funds which essentially focus on longer-terms returns, reducing the volatility and having a much lower co-relation to the respective index.

We are also looking at our Asset Allocation Funds, something we talk about in terms of easy train which is really introducing risk parity into the equation, into the asset allocation funds, so you can drive returns better and finally a major theme we see on the institutional side, our clients who want to de-risk their portfolio are already a player in this space and we will continue to invest in this liability driving investing because it is something our clients want.

One of the things Jim mentioned this morning is both, you need to be innovative and you need to respond to the marketplace and our marketplace as you all know is about retirement right now. I think you see what these products were doing just that.

Our key part here which Crispin and I were talking about earlier is that you know in a low growth environment these are the products that sell and you need to be in front of the curve and you need to be quick on your feet as you do this type of development.

Here is a quick slide just looking at some of the advertisements we have done and I think the point here really is yes product development is important, but equally important is how you launch the product and I am pleased to tell you with the help of Kim Sharan and her team we launched this ad when we launched our Absolute Return Funds. This won the Industry Education Award last month and we are thrilled about the fact that we are recognized not just for the launch but for the quality of our educational materials. Just a footnote on all this, these two funds along with the Threadneedle emerging markets macro funds since April, we have raised north of $500 million.

Let's now get into the distribution side of the house and talk a little bit about intermediary distribution than the institutional distribution. On the intermediary side to say we’re a Tier 1 player is significant. Its not just that you have the scope, but it’s also about the fact that you are providing folks like Merrill Lynch and all the major broker dealers and IADs the coverage they want, whether its at the top of the house, whether its on their platforms or whether its in the field and this is something we are doing a great job of.

Just some numbers for you, just to understand some of the magnitude of this and of course I talked about the transformation that Ameriprise has undergone as an asset manager in terms of their distribution, but we have 85 wholesalers out in the field supported by an internal desk of 90 folks.

On the DCIO side alone, we have a team there which has been in the field since 2002 and we have a business which is north of $20 billion. Very importantly, is our efforts in national accounts and platform distribution where we have 26 folks out there in the field working to cover those platforms. This is becoming increasingly important as you have kind of this blending of the retail and the institutional approach, as well as the fact that we've been one of the first. We have this team in place since 2004 and one of the leaders in the industry in this area.

So we cover all the channels, broker dealer, IAD, private wealth management, as well as DCIO and another point here is the value proposition, not just the portfolio managers and research analyst working with our product and marketing teams, but also things like our Columbia Management learning center which is a key value proposition. And this is a team of people supported by helping us out in the field working with the financial advisors, helping them grow their practice, focusing on retirement both in terms of accumulation and distribution.

I think these next couple of slides really gets us some important issues and I want to take some time driving them. As you can see, Columbia in the third quarter was a net outflows and we’re a net outflows year-to-date on the retail side. And I want to talk about this, I framed it in my mind thinking it of two ways. Why are we in that outflows? What are we doing about it and to what extent do I have confidence in the future that we’re on the right track. So let me talk about that.

In life there’s challenges and these challenges you create on your own off time consciously and there’s also challenges which occur that you have little control over like the markets.

The first challenge, I am going to talk about is one that I am directly responsible for and that was the combination of our distribution forces. We had RiverSource as Ted described really a force that was focused on the affiliate distribution, we have Columbia, who had external wholesalers and we came together even before I believe they want, I made the decision, let’s pull these two teams together and let’s get the best and brightest people on the field as quickly as possible.

Now sounds like an intelligent decision, but you all have to consider the fact that in this marketplace, in this arena, if you read the market metrics and another surveys, it takes wholesalers really three years to get fully up to speed in a new territory. So when I made this decisions back in the first quarter, I made it consciously knowing that guess what I'm disrupting 100% of the field, but as we move forward today, we’re now entering that third year and I am seeing our wholesaler productivity go up.

So what are we doing about it; my second point. The passage a time, but also you got to retain the wholesalers, you got to pay them properly, you got to give them the proper support, you got a have advertising campaigns and with that excellent successes in that area.

Our second area of challenge in the market conditions and you can see on the left side of this slide what’s happened in the industry third quarter to third quarter. Massive outflows in mutual funds in general and it really in our sweet-spot as I said before, we are known as an excellent domestic equity manager and that area has been particular hit.

So what we are doing about it? Well, I’ve already talked about one of the things we are doing which is doing product development and leveraging existing and other products that we have in areas of more demand. And secondly, its great to have those products but you got to be up there talking about it. So all our wholesaler have been increasing trained over the last 18 months as well as we put incentives in place to make sure that they are talking about the full array of products not just equity products.

And finally, and this is something I am most pleased about is what I call to my sales team about you need to sell again for the flow sometime and we’ve done an excellent job of that, and there is no better example of that. Then as I look at what we’ve done in the large cap place where a large cap focused on we’ve raise just short of $2 billion net this year and in industry category that’s out north of $22 billion for the year. So don’t lay back and claim to feed, go out there, we have a wonderful product and sell it to make sure people are buying it.

In addition on this page, I want to talk little bit about pockets of redemption. Some of you have probably run the press; we’re loosing the near 529 plan in the first quarter of 2012. Addition, we’ve had some challenges in terms of redemptions in both the Ameriprise area as well as the US Trust area. What are we doing about it? Well, what we are doing about is we put a retention force in place on the sales desk which we are growing and have been growing since the quarter to make sure that we’re focusing on retention strategy on both the firm and the product level and taking it down another step to the advisor level.

So as we look at the right side of the page, a key point here though really becomes the fact that we have seeing strong year-to-date improvement in Ameriprise and third party as Ted referenced. And I am not declaring victory, but let me now reference why I am very confident about our net flows position and the ability to grow this business organically in the years ahead.

Ted has mentioned the Columbia acquisition being transformational and really how we’ve combined the two teams and we now have a solid affiliate base in terms of – a semi affiliate base, I talked about respectively, Ameriprise and US Trust; but very importantly our third party distribution is well suited for this.

And if you look at the histograms on the left side of the page what you see are gross sales by channel year-over-year. And now let me direct your attention to the light green bar; and what this speaks to really is our third party distribution in terms of our broker dealer and IAD areas and we’ve seen this going from 27% to 34% of gross sales. We also see the foundation as I referenced for Ameriprise and define contribution investment only theme.

And the US Trust which you see some deterioration in terms of the percentages and let me tell you that with respect to US Trust, very large, very important client to us. They also happen to be our largest tax exempt funding; we know what’s happening in that area this year. So as I look at this, I say to myself, we are going to continue the them grow that business and we are going to get our fair share of the business and maintain our assets and move around the corner and grow those assets.

Very importantly, on the right hand side of this page are what I look at with Ted looked at Jim and others in terms of leading indicators of this business; are we getting it right? And if you look at the first bullet point, gross sales up 6% in a very tough environment, we are very proud of that. We’ve had a great year from a gross sales standpoint in many of these channels. You can see external focus firms, gross are up 25%. We have net inflows of $2.5 billion in focus funds year-to-date and you can read the rest, so let me highlight one other point.

You see that’s 71% number. When we get called in to make a platform pitch, again the top managers in the industry we win 71% of the time, that’s a spectacular number for us and we take that, we combine it with our robust wholesaling force and you are on a broad array of platforms with a broad array of products, really driving your results. So again, I am not sitting here to claim victory, we are still, yes in net outflows, but a lot of things that I look at day in and day out are going in a very positive direction. We’ll continue to monitor that.

In the interest of time, just a quick comment on other expansion opportunities. I want to say here is that we have a strong distribution capabilities and relationships and retirement, high net worth, ultra high net worth and the key here now is adding the vehicles within these growth channels and making sure that we’re driving the flows increasingly as we move forward. So more to come here, but you can see the various vehicles on the left and the channels that we are focused on the right.

Our theme here that you are going to hear again and again from us as we go forward, is we need to be vehicle agnostic, we need to develop this excellent performance that we have built in numerous channels and numerous vehicles and we are in the process of making sure that we are on the forefront of that.

Let me now talk a little bit about the institutional business which we are very excited about. And you see on this page, just the size of our institutional business as well as where we are today. What I can tell you point blank is that the institutional sales team that we have on the field today is stronger than either legacy organization ever had. We have a seasoned relationship management team that supports the sales team and on the sales team, I am talking about the sales team, we’re covering not just the pension consultants and their territories, but we are covering fund-to-fund of [these odd] and the larger DCIO plans.

Finally our focus here really has to do with the largest of the firms, the $1 billion plus institutional targets. A lot of progress in this business, I am very excited about where we are going and at Ted’s point we are driving this to become 50% of our business as we are growing the other side as well.

And a couple of comments here, and my experience in this business, if you have an institutional firm and you are winning and you are a larger firm, if you can win anywhere from 35% to 50% of the finals you are in, on an ongoing basis you are doing very, very well in my view of first [quarter]. We are winning 53% of our finals which tells you a number of things, just as we were a bit in the penalty box on the retail side because I disrupted the sales force there. What this tells you is both the consultants as well as the clients themselves have taken this out of the penalty box, and in fact its been the shortest period of time I’ve seen an acquisition of size come out of the penalty box, and to that point if I look at the consultant coverage, which is crucial to our growth. I look at -- we covered approximately 65 pension consultant firms and as many of you know, these pension consultants drive, in any given year, 70% to 80% of the business and as we drive that business we tier it up. The first tier is in to the top nine consultants, and then the remainder of the second and third tier.

Of the top nine consultants, nine out of nine have had us in searches this year and seven out of nine have made it to the final presentations and won. So that’s an important stat. I think another point here is just the number of searches we’re in, over 160 searches with the overall consultant community, a very important channel for us, and you the results in the middle of the page with a pipeline and how that’s grown as well. So, again, very excited about the ability to grow this business organically.

A point on the challenges now on the institutional side and we can talk about our market volatility and you know suppressed activity, which is how that translates in the institutional arena. When the markets get volatile, people decide let’s hold off on the asset locations, which lets see what’s going to happen. So that’s hardest impact on anyone in the institutional arena recently. Additionally, we delineated this in the chart on the bottom of the page. We’re going to see institutional outflows really driven by lower margin legacy parent business. On the left hand side of the page, you see approximately $6.6 billion, that’s going to be coming out in the fourth quarter and another $2.7. Please also note the basis points there because that’s significant because from a revenue standpoint, if I take all of the businesses that we’ve won but has not yet funded and we’ll fund it in the fourth and the first quarter, we pretty much offset the revenue this business is going to take. So optically it looks like a large asset but from the standpoint of revenues and profitability, it has a much more minor impact.

Let me close by couple of comments on our institutional business moving forward. We’re really focusing on driving the higher profit macro in terms of the third-party assets. We’re going to continue the product development I described earlier, and again in areas like LDI and absolutely returns, things that the institutional are in are really our looking for. And again, I echo something Ted said and (inaudible) something that Crispin will talk about, we are going to see growth on the international front as well and that we are very excited about working with our partners over in London.

So, to close, what I’ll tell you is that we’re -- the integration is largely complete. We have a strong investment performance. We see the indicators that we like that indicate that we are going to be able to grow this business organically, and we’re excited in for prospects in the quarters ahead. So with that let me ask Crispin Anderson, the CEO of Threadneedle to come to the podium.

Crispin Henderson

Good morning everybody. Its great to be back in the New York Stock Exchange. I feel little bit like the Army Field Captain returning from the field of war in Europe, so to say there are some survivors and the field is a very difficult field as you’ve heard. Domestically, the industry is not close and that’s true globally. So not only we got hugely volatile markets, where assets levels for asset managers are reducing, but we also have significant outflows where ever if you look in the world. So it’s good to be a survivor and a survivor in that environment. And here is why. We’re a stronger partner to Columbia internationally. As a leading UK manager, we are winning mandates. We are expanding rapidly into Asia, generating great performance on the long-term and growing the business for the future.

Let’s just recap. Last time I was here, I talked a bit about was all substance of the business. We have significant assets under management of $196 billion. It split 30% retail and 70 institutional. It’s quite the reverse when it comes to revenue. So 30% or 62% of revenues of retail, 38 institutional. You can see the assets split. There was a nice diverse split and that whole positioning gives us a strong market position as the international business of Ameriprise, you can see all statistics there. What’s important is the distribution power as we grow that. We are now working through 17 overseas globally distributing to clients in over 80 countries.

When I talk about the war, fund flows and then volatility, this is an extraordinary story and we have won this year’s largest institution mandate in the UK. It’s $14 billion. We also delivered record gross flows and net flows. We’ve also retained the honorary re-tender, the block of Zurich assets that is our Heritage. You heard a little about or more about our expansion into the Asian Pacific region, and we’re also building a tremendous global palette of product that was sort of best-off for distribution globally form both Threadneedle and Columbia.

Lets focus on that large win. It’s Britain’s largest friendly society that had it’s own asset manager, who wasn’t making headway with it and wanted to outsource and they selected Threadneedle based on its tremendous long-term performance for clients like Zurich and other major insurance clients. It brings in $14 billion on November the 1. So it’s in. I just want to point the fact that it was really two mandates. There is one for the society and one for the society’s pension fund. The society’s pension fund is $1.4 billion and $400 million of that, in due course, will flow out again as they decide to index some part or a part of it. It’s a long term mandate. It’s on the good terms, and it adds significant scales to our fixed income business and positions us as a go-to place for this kind of mandate, which is great.

The other very significant position, I know, we have also written about this in the past; Zurich position. You will remember that Zurich was our previous owner before we were bought by Ameriprise, it’s our heritage client. It runs big, closed, and, life, and pension books, those are closed. There was no more new clients coming into them. It was continuing premium income but no new clients and we’ve managed that since the acquisition on the long-term contract that was negotiated as part of the acquisition. Zurich, at the end of that, re-tendered the contract on institutional terms in 2011 and I’m delighted to tell you that Threadneedle has retained all of the assets involved there. It’s retained those assets at the revenue levels that we enjoy at the moment and it continues to position us as a strong provider to the Zurich Group overall.

Zurich remains our largest client, but represents less than 25% now of our revenues, and it’s dynamics running the business are interesting as a closed book. You see outflows every month along – industry level outflows and those in good markets are replaced by market uplift and they’re mitigated to some degree by the dividend and income reinvestment that takes place on a month-by-month basis. I just wanted to point to the expansion of Threadneedle globally and if you look back to 2003 we had $2.1 billion outside of the UK. That's a ten fold increase and one that we would expect to continue to increase this element of diversification is very important and it’s important for the group as a whole to take its business, both Threadneedle and Columbia globally.

Let's look at that from a Threadneedle perspective. This year we are enjoying a record gross sales of $17.1 billion but what is important here to note is what is the proportion sold in the UK versus the rest of the world and in the UK you can see we are selling only 32% now and two thirds of our gross sales are outside of the UK. As we now look to that outside of the UK obviously Continental Europe is critically important and that's a huge battleground for us, but we are opening up very substantially in new markets and Asia Pacific is particularly exciting because I see this as a very much joint effort with Ted and Mike and our Columbia partners and so we are collaborating very closely on this.

We have an Asian board that if you like sits across that and coordinates our thinking and our approach which is really, really great. Our tactics at the moment to be able to leverage institutional opportunity while building a strong retail structure so that as our licenses come through we will be able to sell strongly in the retail area. We've got a southern hub in Singapore covering South Asia and a northern hub in Hong Kong covering North Asia and we are distributing the best of Threadneedle and Columbia. As Ted says the framework for that is the Luxemburg fee cap which is the product of choice for imports to that area.

In terms of our investment performance and what drives our ability to sell and to gain mandates of our performance 78% of our rated funds are 4 or 5-star by Morningstar, that’s 56 out of 72. We still enjoy tremendous long-term performance, that long-term performance translates into a myriad of awards, a 126 so far this year right the way through from the left group type awards for a company as a whole through specific sectors like property, property group of the year award. So a broad sense of Morningstar type award in France, Portugal, Spain et cetera, et cetera. A very exciting bringing to life if you like of that performance.

And what is that performance, these are the three, five and ten year numbers on the left of our percentage of funds outperforming that benchmark. So their peer group as you can see very, very strong numbers. And what is particularly interesting and I’ll link this back to the Zurich point is that we manage a large amount of money on an asset allocation basis. We allocate using our underlying funds into equities or (inaudible) equities into fixed income and into property. We call that the asset allocation funds.

They amounts to $34 billion US of our assets under management, a big chunk of that is Zurich and now a little for Victoria and as you can see our track record in running that kind of money is unsurpassed.

Property business is an interesting one, it’s a bricks and mortar business, it is not REITs as we used to here, that investing directly in bricks and mortars, we’re hugely successful and as Mike was talking about when you look at low gross environments particularly in UK property and other products, particularly important. Then this is a very useful part of our business. We’ve taken in significant amount of inflow over the last two years and our open ended funds and our closed end funds which we launched right at the bottom of the market, the time of the crisis. I am talking also about 2 billion pounds, those are performing extremely well.

We also launched our first very socially responsible property investment which is the Low Carbon Workplace Fund, that’s already raised a $100 million and we have great hopes for that forward. So you can see what we’ve been doing. What makes me so confident about the future growth internationally. Well rather like Mike we’re very focused on the institutional business. We really must increase our revenues there. We know that we are a winner in non-UK area particularly Middle East Sovereign wealth funds, US and Asian expansion. We need to continue to push that. We are looking to particularly in Europe ensure what we get to retain stickier revenues, the turnover rates in Europe are quite high and therefore we need to make sure as we distribute, we do distribute to those who are not just asset allocators for private banks, the stickier end of the market.

We’re building our capabilities in absolutely key products for low growth and the future, both on a global distribution basis, but also work well in low recessionary times and we’re also building out those areas which are particularly important, fixed income commodities and properties because they too form part of that sort of multi-asset, our ability to offer product at any time in the market cycle almost particularly now in low growth environment.

And so I just wanted to finish by saying I am picking up the theme of both Mike and Ted to put on the table of working together. This is particularly exciting. It is important for you to understand that we are not integrating the fundamental factories involved here. It is very important that you understand that. We each have our own ways of running money and those are very important that we preserve the tremendous values associated with that, but Threadneedle is distributing Columbia product outside of the US.

Columbia is distributing Threadneedle products inside the US. We’ve got that best of all proposition. We are running some products which are sleeved products and so Columbia will access for example our global equities as part of an easy offering and we are also cooperating on global financial institutions, institutions such as many of you represent. We come to talk to you as a single hold if you like. So in that sense we presenting the best of the GFI community globally. So really that’s it. We have delivered record growth sales and net sales during the year in an environment which is in outflows and in the significant difficulty and you will see in Q4 those flows coming through and the assets getting larger. We won the UK’s largest mandate for the year of $14 billion. We retained that heritage business based on our strong performance. We’ve continued to grow and diversify the business particularly the kinds of the things we are doing in the Middle East and the Far East et cetera. And we were aligning strongly with Columbia to leverage our capabilities, our international product opportunities and most of all our net sales propositions.

I hope that gives you an update from Threadneedle, thank you very much indeed.

I would now like to welcome Walter Berman, who I know you are all wishing to hear from, the man with the money and I look forward to hearing what Walter has to say.

Walter Berman

Thank you Crispin. I can guarantee you on the last speaker. And what I am going to cover is really to provide the context and basically focus on the points that were made by Jim and the other speakers. First, to talk about the challenging environment we have been in and certainly I think you will see from the slides and the impact factors has been challenging. Track through the financial objects we told you into 2009 that we would go for by 2012 and then talk about what creates our financial strength and flexibility to meet our financial objectives in a multi situation and in a multi timeframe.

And then finally talk about generating and sustaining substantial shareholder value. This is not a pretty picture. Back in 2009 when we met, the GDP was negative. It has now gone to 2% which is really not very robust. Consumer confidence has actually deteriorated down to 59% and unemployment is staying at 9%.

When you take those factors with our risk policy and we go back to what I projected using within markets, both looking at the equity markets and the interest rate both on the short and long term and compare it to where it is today what we realize and what we are projecting at, the net impact from period of 2009 starting there and moving to 2012 is $350 million in PTI. The majority of that is in the interest arena with about $120 million coming on the sweep accounts, on the short rates which are about 40% of what we thought they would be when we use the forward curve.

The other portion is on the long end, both looking at the impact we recently had in our data marking totally related to interest related dislocation and then the impact that we’ve discussed about the low interest environment. That balances the equity markets and that is as you look in the chart, it is coming from the drop that you just saw took place, the 14% drop and then we are projecting that to go by 8% from this point. What we will do? I don't know; but certainly that is the calibration of the numbers. Certainly, it will have an impact, we certainly will work to try and overcome that, but those are fairly large numbers.

Let me move to the financial objectives, a lot of this has been discussed, so I won't spend a lot of time, I will just try and add some different points about it. First on the mix, as we indicated, we said by 2012 we would achieve the 52% mix of low capital intense activity, we’ve achieved that on a year-to-date basis in 2011. Our low capital intense have been growing at a very good pace and we slowed a little due to the environment on our high capital intense activities. So that is a big plus.

The other plus that I mentioned and Jim mentioned it also, we said that in the calibrations that we did in 2009, we would have $1 billion of excess capital that’s what you should assume is there; we actually have $2 billion plus. Also in that timeframe, since we met we have basic dividend and repurchase of the $2.1 billion back to our shareholders.

Moving on to the other objectives that we said, we said that we achieved 25% its 23% here as we looked at the way Columbia did their accounting, where we did our accounting, we re-calibrated that and we basically went to taking into revenue elements of the EPN, elements of translation of [subsidy] which will let down the original, it’s strictly a mass calculation, it was an adjustment that we doesn’t know. Right now in the third quarter, it was a big impact in the market, we’re at an 18%.

If you look at the four quarters starting with the fourth quarter of 2010 which had the hedge fund profitability obviously we don’t know what the hedge fund profitability will be yet as we would go, you’re almost approaching 20% when you adjust for some of the one-time items we talked about. It does have an impact on our margins when the markets get impacted at that level.

If you look at Advice and Wealth Management, we said that we’ll achieve 12% we hit 11.5% driven by the strong advisor productivity to grow from EARs, our revenue growth and our reengineering. And that’s with not achieving approximately 100 of that it won’t be 100 – the drag related to the sweep accounts was the rates being as such a differential versus what we predicated.

Our return on equity has been impacted, but we are moving as you saw 13.4% for the third quarter and I’ll spoke to you in a minute about what the progression has been and we believe that based upon our growth rates, we will get in the range of the 15%. Certainly, the markets are challenging and certainly the interest environment is challenging, but we have achieved most of what we said and we believe that we’re on a trajectory to continue that way.

If you take a look the progression that we had, we started at 9.7% we got to 14.5% we dropped to 13.4% what you have taking place in the third quarter of 2010 and in the third quarter of 2011 is a deck impact. In 2010, it was a positive and 2011 was a negative driven by the market dislocation, the impact it had an on interest rate, if you just normalize it, just to see, where we are, we are at 14%.

Now lets talk about creating the financial strength and flexibility to meet our financial target. This is the key area, its critical because its basically the foundational elements that allow us to ensure that we can achieve our operating and strategic objectives. It starts with the culture and how we think about managing all aspects of our business, all elements of these reviews are discussed and reviewed by Jim and his management team and we basically use an enterprise risk management framework to address and understand the risk profiles we are facing and the decision implications of them over multiple years and multiple timeframes. We look at effective liquidity management, prudent product design, a differentiated derivative mitigation strategies, a line of investment strategy, strong active liability management and finally the creation of our excess capital.

So let me go over each one of them. The most important in my mind is liquidity, it always has been and always will, because without it you don’t survive. And a tremendous amount of resource and analysis and capability is focused on it. We you look at two situations; we look at one we have capital market dislocation and one with the focuses on AMP. In all cases, in all analytics looking at the role of our liabilities, ability of our assets to then cover them, we are well within any of analysis that we look and this is constantly evaluated, because we understand the implications and force the liquidate and we are constantly measuring to make sure that we have adequacy to meet to all contingency situation.

Right now, we have on average about $2.6 billion; we’re at the top company level and about 800 at the holding company. The course of that is really high. It’s $30 million to $40 million a year. We can’t say look at it, evaluate and assess what the appropriate level would be as we look forward.

We also extend this philosophy as we look at our debt structuring. We basically ladder it to ensure that we have the appropriate capability to meet that in any situation. Right now, we have $700 million maturing in 2015 which certainly gives us more than ample time to strategize around achieving debt repayment.

So let’s move on to investment portfolio. Again, a very important element, it deals with multiple objectives of yield optimization, liquidity requirement and credit diversification to ensure you get the right, mix because this is the cornerstone of how we basically manage the business on our own portfolio and also provide the capability that I spoke to you about.

I think our track record is quite good. Right now, we have no holdings of European sovereign debt and distress countries. It’s not an accident, it is basically the way we evaluate it; the risk return elements and we are quite fortunate to having an excellent team with Columbia that has helped navigate these situations today and in prior situations.

We also looked at our commercial real estate. We basically only have two delinquent loans out of the $2.5 billion. If you now move over to the retail sector, we had almost $4 billion, we impaired $300 million since 2009; I think an excellent record. We are in a business of risk and I think we manage it quite well.

We also don’t chase yields. It is critical for us to understand the instruments and understand the implications of those instruments. Therefore, we have made a decision not to invest in hedge funds, private equity, credit default swaps, or do [secure line] examples within our own portfolio.

Let me turn to asset liability management. We presented these numbers back at the third quarter. You can see the impact of the low interest rate environment and we follow the same discipline that we talked about as it relates to managing the assets and looking at our liquidity. We look at duration across the board, both on the product, on a legal entity basis, and we are assessing its convexity implications, that's certainly in an environment of this nature as the duration and convexity will change fairly rapidly.

We believe we will then have conservative challenges and we are constantly making adjustments and looking at this. As you can see, we indicated that there will be, if these rates continue, using the full curve, there will be about a $35 million impact as we move forward, net after-tax impact.

So if you take a look at managing our product, which is another important element, we are comfortable with the risks associated with our variable annuity products and other products in our portfolio. First and primary as Jim has indicated. It sold through our stronger advice capability network. That builds on relationships that provide strong persistency and risk selection tolerance that we feel quite comfortable with. If you take a look at where we are, the product features are balanced and not aggressive, approximately 63% of debt benefits are simply a return to premium. On the living benefit side, no guarantees account for 50%. Now, obviously, our current sales mix is higher than that but that’s a fact. We have 50% of that book having no guarantees attached to them. And currently, we are not offering GMIB and it only represents 1% of the entire portfolio.

Third, we take a look at the way we manage the portfolio. As we see the dislocations taking place due to low interest, we’ve made decision to raise our prices. We have to do it because it’s very difficult to hedge in this environment. We’ve changed the way we hedge right now. We’re taking more on macro out of the market hedge because of the course they announce. We’re trying to navigate through that. We feel quite comfortable with the position that we’re taking and its constantly we evaluate. But at these levels, it is extremely challenging to offer these sorts of products.

And then finally, the key cornerstone, specially for the variable annuity product is the way we hedge when we approach it. From day one, we’ve taken a capital market approach to hedging our exposures. We take a static adjusted approach to ensure that we do not have the velocity of the impact coming forward when you have dislocations in the marketplace that took place in 2008. It was a critical element that separated us from most of our peers. As this graph indicates, in 2011, the volatility in [office] is actually quite close took place in 2009 and ‘08.

In the third quarter alone, the swing in assets and liabilities were over $6 billion in the quarter, and throughout 2011 we maintained a 95% effectiveness. We’ve done that through basically the investments we made in knowledge capability, (inaudible) the liabilities and the assets implications of it, the back testing capabilities that we constantly review to understand if we are not exactly getting the results we want, why? And then how we can best mitigate those results through our hedging capability.

It is an important and critical element and in all [manner] participates in, both the decision as it relates to the ranges of tolerance and then how effective it is. We have a monthly attribution meeting to review each aspects of this. Lastly, is the substantial nature of our excess capital on this and how that capital act under stress situations?

Under stress, So, right now we talk about we have $2.5 billion in excess. The way we analyze this and we go through a tremendous amount of statistic analysis but ultimately when we sit and talk to management, we frame it on the basis that what we think is going to happen and then we take two booking, a stress booking and a happy case. In this case, I can assure you that this is stress. What we’ve said, we would have a 22% drop for three years taking us down to 700 on the S&P, the 10 year Treasury Yields under 1.5% and the short rate would be at two basis points.

Under that stress situation, looking at over a 2.5 year horizon, the amount of capital pull that we see is in the 30% range. We will still have over $1.5 billion in excess, available to meet the needs of the business. This is constantly evaluated and looked at. Obviously, we want to significantly over stress this to 10,000, to test the reviews, give for [CTE] 98, but this is basis we said and go through our various governance committees to understand the implications to our business model, to ensure that we can meet the needs of our business and if we can meet, then talk about mitigation strategies. As we look at it now, we feel extremely comfortable and with this aspect and that’s why we fell comfortable in our buy back programs and we feel comfortable in the programs that we launched to grow the business.

So, let me get on to the final subject, which is creating substantial shareholder value and growth. We achieved the 52% mix. We believe over the next two to three years again, market conditions reasonable and certainly subject to, we can get to 60% and that’s with growing certainly our capital [intangible] business at slower level but really get in the growth trajectory that we believe on the management business and on the asset management business. Jim mentioned 90% of operating. If you look at our, this is our segment operating earnings with a current situation and looking at the amount of earnings being generated in our low capital business which requires very little capital, and looking at the capital generation and the high capital business, which again, a lot of mix shifting is taking place, we have and we feel comfortable with the generation of 90% of the capital goes to others sources than the requirement that are being created by.

We constantly evaluate it and shifts as you get different elements and even with those shifts we feel quite comfortable with the amount of excess capital that we generate.

Jim presented this, I would just re-emphasize for the revenue growth and for the EPS growth we are maintaining, but for the ROE with the capabilities we have and what we have achieved and with the EITF coming but while the EITF will add to this, is the fact that where we are and where we – we will believe that it allows us to go up to the 15 day change percent. And it’s not a walk in the park, but we certainly feel that this is achievable and we demonstrated where we have come from and our capabilities in doing this.

Again, we recognize that we generate a lot, we have a lot, and we have redeployed a lot, and this is the $2.1 billion that we spoke about and on the next slide I will talk about our positioning from our return on equity standpoint. We can grow the return on equity. As you heard, we are going to grow the business. We will deploy – redeploy the excess capital as we feel it’s effective for our shareholders, taking into consideration the market environment and other aspects we look at, the prudent risk management is a key element that is the way we make decisions and we make trade-offs.

We have borrowing capacity as you can see from this chart and still stay at a 25% debt to cap and then finally the EITF will certainly drive up the return, but again the base return is being driven up by the fundamentals of the business and the amount of capital we generate, the amount of earnings and then the redeployment of that.

So in summary I just think we have a great story and I think it is coming together and actually I feel very comfortable about it because we are growing the top line, our earnings are really quite good both in balanced markets and they are good in markets that are more challenging. We have the shift to low capital that has a great trajectory and we have the ability as we've demonstrated in the past to prudently manage the expenses. The company is committed to the safety and soundness and strong fundamentals and allowing us to have that capability over multiple situations to meet our operating needs and then finally we have multiple leverage to grow our return to equity. So thank you. With that we will take questions.

Jim Cracchiolo

Thank you. I want to just thank the presenters but what we try to do here was to give you a little bit of view of Ameriprise particularly around the areas that I know you ask a lot of questions on. So we think we are situated well. We are continuing to invest, we are continuing to see opportunities for us to be successful and as I also said one of our concerns you should have in today's marketplace is what happens on the negative side depending on the environment and I think we will also try to explain to you that even in those cases and that's a significant stress test. That's very significant versus what you will see out there in marketplace, we still have the wherewithal as well as the strong foundation to navigate well. So with that then I will open up for any questions here to my executive teams here as well. So they’re going take any questions. We have one here okay, starting in the back and we’ll walk our way up, yes.

Question-and-Answer Session

Unidentified Analyst

Thanks Jim, I just wanted a clarification from one of Walter’s slides. When you talked about margins in ROE target, I think you sort of re-endorsed the ROE target. And you talked about some of the challenges in asset management but I wasn’t sure of the 23% margin target for 2012. It’s still the target or you’re trying to caution us given the third quarter that’s a little ambitious.

Walter Berman

Again what I'm saying is it was said on thee market situation that’s by the time we get to 2012 we’ll be at least 5% on there on own average that we thought it was going to achieve. We’re certainly going to work as hard as we can to do that, but I am just you know, the basic drivers that we thought will get there as it relates to the market will be under what we use in the (inaudible).

Unidentified Analyst

Okay, so just because so do you think five points, is that what you said?

Jim Cracchiolo

No, what he said was the market itself. The overall market levels are lower than what we assume to achieve that margin and so if the market stays below what our estimates are, it will affect that margin and he said for instance adjusted for some of the one-offs we are roughly at a 20% now.

Walter Berman

If you look at the last four quarters.

Jim Cracchiolo

So again, we’re continuing to look for ways to improve that over the next year but it will be below the 23% unless the markets go back to the assumptions that we utilize for equity markets in the 2009 presentation.

Unidentified Analyst

I was hoping may be Walter you can flash out your comments in ROE a little bit better so the 18% I guess at the higher end of the I guess the new target, can you give us a sense I guess how much of that is really the accounting change versus the business in capital deployment and just kind of walk us through that high end of 15 to now that high end being 18 and then just the follow up to that, looks like you guys obviously still generating a ton of excess capital. So how much do you guys see deploying on an annual basis kind on a run rate going forward and then maybe the breakdown dividends and buybacks within that?

Walter Berman

I’ll do first part of your questions. If you look at the ETIF on 09. We are estimated somewhere between 1.82%. So the reality of that is that you take now we’ve gone to 15 to 18 that we really are saying that our old target 12 to 15 is now like at 16% that we are going to trying. So again we are approaching coming up onto 15%, the upper end of the old target and we felt that with the capabilities we have and hopefully the growth momentum we are seeing that we will be available to get without the ETIF have a range they will get to 16.

Jim Cracchiolo

I think very clearly what we are saying to you is the ETIF does adjust the equity return a bit but without that we felt, we feel very comfortable moving out of the 12% to 15% range. Now one big caveat is always the idea of equity markets and interest rates et cetera, but we feel even in the environment we’re roughly in with the ETIF we should be in the 15% to 18% range. And again we might correlate to get to the high end of if we are in good markets versus now, but we feel that’s our new range that we really focused on.

The second question is the redeployment of capital. So again there are a number of factors as I explained and Walter explained that go into that, but we didn’t give you or plot out exactly how we will use the capital, but this is our thinking, so that it consistent with where we have been is the number one the first and foremost is based on the success of the business we are generating good additional capital and so we have a strong excess to begin with and we need to redeploy that access to get into a 15% to 18% range because adding that much capital every year is going to dilute that return.

So that’s number one that we have to factor in from a return basis as we think about. Second thing, what is the best way to deploy that capital. Right now we have accelerated as you saw in the first part of the year buyback based on how low the stock price is. In addition we raised the dividend, but I think that is coming more important for certain investors. So we are going to evaluate our dividend strategy there and take that up with our board.

And then the third thing very clearly is this. We have had good success in acquisitions that strategically addition to situation that is value to us. We want to maintain a level of capital. So on a cash basis we could acquire that would make some sense depending on what the asset is and what would add for the two businesses we spoke to you about of where our value proposition is.

And so we always want to have some flexibility. So we don’t have to raise capital and we don’t want to over leverage ourselves from a debt perspective. So if we keep that strong capital position, it gives us the ability to navigate. So if we see markets really bad, we know that we have the capital and we don’t have to raise or do anything. On the other side if markets start to tense or we are in a good situation with value presents itself, we on a cash basis can do a complimentary acquisitions if it fits in with we have done.

And so those are the balances, there is no perfect science to it, but what we will do is continue to evaluate that on an ongoing basis to redeploy capital because based on our earnings strength and power if we just sit with it, we are not going to get to the 15% to 18%. We will be if you look at it. So when you go over this last slide you saw that amount of excess. That’s part of our, that’s a large part of our capital position.

So if we adjust to that right away, you are going to boost your returns. So what we want to say to you is this, we will return it to you, we will do it on a consistent based on our earnings power, but with that we want you to know that you are investing in a strong company that can navigate that has opportunities as well beyond what we are generating organically and that’s what the equation is for us.

Jay Gelb - Barclays Capital

Jay Gelb from Barclays Capital. I just wanted to make sure we are setting the baseline, the right way for 2012, you are talking about 12% to 15% earnings growth, is there anything we should expect in 4Q of 2011 in terms of one-timers or with the earnings, power be similar to what we saw in say 1Q and 2Q?

Walter Berman

I don’t give forward looks, obviously by nature they are one time so, they will come through. I do not contemplate but again that doesn’t mean it is not happen.

Jim Cracchiolo

So let me try to explain the 12% to 15% just to be clear because again, I can’t predict for you the markets. So if the markets, you know again, I think in the fourth quarter, you know they made some of their way back from the third, they will impact our short-term earnings. So on a 12% to 15% we are saying every quarter, we will do 12% to 15%, what we say to you always is that over the cycle, over a longer period. We will look to achieve 12% to 15%.

So there may be some quarters where because of market conditions or just the amount of what’s occurred just in a depreciation that occurred, we might not be able to hit the 12% to 15%, but I would tell you over time just like we said to you, you know since 2006 those are sort of the ranges that we are looking, the last two years even with headwinds we did much better than that. We did 24%. So on that, I am not sitting here to say next quarter will be 12% to 15%, but Walter?

Walter Berman

Let me add one other thing. We talk about the drivers they put in or the assumptions they put in back into 2009 or (inaudible), one of the other things which is not factored in here and I think we've been certainly very fortunate with the productivity and elements. These sort of markets actually could have a dampening effect, but we don't know if they continually get volatile with our clients. I mean right now we are talking about metrics, but our clients are performing very well. They are being managed and certainly guided through this situation, but you know when you get moved in it is like over 14% in one quarter. It’s a little disruptive so again there's a lot of things that go into it and you know that we are in equity markets and we are certainly impacted by interest markets.

Jim Cracchiolo

I guess Walter it was more specifically for 2012. We talk about 15% bogey for earnings growth. So probably just be helpful to set the baseline because I am not sure it’s square on your right way relative to ROE and your EPS growth.

Walter Berman

The earnings, you could go to the low end of the range. We have tremendous capacity again. We have $1.7 billion out on our shelf as it relates to buy back shares. There's a lot of things that drive it, so it isn't getting a 100% correlated. So on that basis I think it does make sense but if you’d imagine depending on where markets go and where you think we have our assumptions that are built in that the markets will be 8%. On that basis certainly we will get into those ranges that we are talking about.

Unidentified Analyst

Ted I think there's a lot of interest on when you feel the net outflows for Columbia could come to an end.

Ted Truscott

Well we've given you some view of what we would call a large outflow coming in the first quarter of next year is. Mike also discussed some of the variables in terms of having products where the flows tend to be and I think part of this is going to relate to market and then are we in the right spot for where the market goes and part of it’s going relates to what we develop.

But look, I think if we had pour down this, we’re obviously trying to improve the picture significantly in 2012 and reverse that taking into account that first flow that Mike talked about in terms of the outflow we’re expecting in the first quarter. So if we start to strip away that large one-timer in the fourth quarter we think there’s going to be significant improvement in ‘12 and obviously we’ll be on that in ’13; that’s what we’re looking for. Those variables obviously impacting things.

Unidentified Analyst

Thanks Jim. I just want to follow-up on the capital again. Since we think about that 15% to 18% ROE target over the next several years, what is the level of capital cushion that sort of built in there because it used to be $1 billion now it’s whatever $2 billion plus, but the business mix has changed dramatically, right? So may be a level of excess capital that you felt you needed to hold in the past is no longer the same. So maybe just some color around what you feel is appropriate?

Jim Cracchiolo

I think [Suneet], we, in thinking about what I would say is we always would think that we want flexibility to maintain a reasonable extra capital base and so I would probably put out there and well Don if you want to comment, but I would assume that we’re still within those ranges assuming $1 billion of excess. Doesn’t mean we couldn’t use it so if we’re in good markets we might want to use it for something.

But having said that, just on have average overtime, we like having that sort of cushion so to speak, so that we can not only navigate but take advantage of some opportunities if they come along. But I would say it’s still is a conservative capital base, because that’s above everything required in our numbers.

Unidentified Analyst

So the $1 billion would be on balance sheet and wouldn’t include that $500 million of debt capacity that you have?

Jim Cracchiolo


Unidentified Analyst

And then my separate second question I guess is on Threadneedle; on this $14 billion Liverpool Victoria mandate that’s coming in, should we think about that business is having a similar margin as the Zurich business meaning its insurance related, so could be margin dilutive or how should we think about that?

Ted Truscott

Yeah its Truscott, I think the other thing just I remind, it is a longest term contract, but pretty much like we had with the original Zurich proposition. So I would host to Mike or Crispin.

Crispin Henderson

I think its margin accretive not – I just forgot, its margin accretive.

Unidentified Analyst

Just that’s the way math works, as the size of the assets coming in or – and the leverage?

Ted Truscott

To the overall position if you look at the economics we bring in $14 billion. Our cost increase is a price we paid for servicing that with the outsourcing and what we paid down and we brought in roughly 15 people, no fund managers, just 15 people from Liverpool Victoria to help us to manage the account and to do various other actions associating with promoting Liverpool Victoria’s products because that will be a sales channel, although not a huge sales channel, but it is a sales channel for the future. So if you can imagine $14 billion coming in at large institutional rates and essentially a cost increase of 17 people, plus you’ll know the servicing cost and you can see that this is a significant margin improvement.

Unidentified Analyst

Hi, I have two questions, but to follow up on what Suneet was saying Jim, so you want to retain at least $1 billion of capital excess and then beyond that you are active in deploying and I just want to make sure…

Jim Cracchiolo

I would say, its not that I want to retain, I am saying, in those ranges that we would may you know have additional. It doesn’t mean that I won’t use it if there is a good opportunity use it that makes sense, but I would also say to get to those ranges wouldn’t be that we are just having no access.

Unidentified Analyst

Two questions; one – actually two, Ted and Crispin and then follow up with one for Don. I saw the numbers with the Morningstar, they look terrific; one of the things when I was looking at the third quarter results where your asset weighted above LIBOR average ratings. So the one year number in Columbia, it went from 62% above average to 56% above average; at Threadneedle and I think this was above average Morningstar average weighted and that’s for one year again, correct me, it went from 87%, 83% rather to 67% so I was kind of wondering what was going on with that one year experience and should we be concerned about that going forward is performance taking a long turn?

Ted Truscott

That will be correct, Crispin will comment on his numbers; if you look at the last quarter we had a weaker record year result, which I think influenced that asset weighted result. The fixed income numbers are actually really strong in both the taxable and tax exempt basis as are the asset allocation numbers. So yes, we had weaker results in equities [Andrew] we’ll stroke that piece down, am I concerned about it, no. These things wax and wane a little bit, as we know we manage over the three and five years cycle which we think is really the piece that you want to end up on. Obviously, the three and the five year election of one, but that’s not a huge move and we know exactly where it was. It was just really in the equity results and the rest of the places is doing quite well overall.

Crispin Henderson

Yeah, in Threadneedle the reduction in the numbers comes about from two points, first of all, the bond side, and the second the equity side. On the bond side, it’s the same between both. We took the view for markets particularly we’re particularly volatile and that we needed to be playing, a very prudent bond type approach to investing on that. We deliberately didn’t try and impress the envelope.

On the equity side, we have a quality bias whenever you see significant volatility, we are longer term asset managers, so we need to make sure that we deliver long term results. So often you’ll see within this volatility the shares that are moving up and down very quickly are not necessarily the shares that Threadneedle would buy. We are buying and holding strong balance sheet, strong management positions, strong ability to call price in the market, excellent management teams, those kinds of quality assets.

So during times of high volatility both in the bond area and the equity area, you will see us play in the high quality area that’s a deliberate policy and sometimes as you would find out, it effects you are operating. Well, a very good example would be 2002, when markets came back in another – just recently when markets came back, those were sort are sort of dash for trash, I mean people were buying things, but they thought we are going bankrupt, but all of a sudden we won’t, so the prices were going up. We participate only to a modest extent in that kind of dash for trash. We are quality investors and quality company.

Unidentified Analyst

And just, I don't know if you got numbers recently, but did you see any change after October; the market rallied back, do you think that might have corrected the underperformance in the one year number or maybe its too early?

Jim Cracchiolo

Its too early, I mean one month is going to obviously influence you somewhat positively and that moves it at a margin, but I think you've really got to take a multi month view of it overall and so yes you know October in general is a better month. We obviously in some ways look at this stuff too much, i.e. we get performance reports everyday whether you can really influence things on a daily basis and performances are really I think open question. But generally, Andrew I go back to the statements I think both Crispin and I are making is we are comfortable where we are, we are comfortable with the processes. We know where we have the difficulty and its not something that we’re particularly concerned about at the moment.

Unidentified Analyst

Don, I was looking at your slide 12 and the franchisee retention is just you know, its off the chart phenomenally 94.6%. But then when I think about those type of advisors, these big ticket guys, I wonder if they have long term contracts that you are giving them, if they get big upfront commissions. So could you give us a sense of what the upfront is to these folks and how long they are locked up, that's one? And the second part of it is, what happens at the end of that period, would you expect the retention ratio at fall to something like 70% or 80%?

Don Froude

You are asking specifically on the franchise side?

Unidentified Analyst

Franchisees, yeah, not the employees.

Don Froude

The franchise side of the business is very unique,; I mean when people go into the independent channel, they are making a decision that its very different than one going from wirehouse to wirehouse. So if someone’s been at Merrill Lynch for 15 years and they are coming over to our franchise side or independent side they’re doing that’s a good they want to monetize their practice one time and one time only.

So when you get on the sort of the typical treadmill of wirehouse to wirehouse you’re working, you get your upfront money you work for seven to nine years and then as soon as that’s over you have to do it again. Your franchise advisors are very different, as I said in my talk is that one of the key ingredients to an independent advisor is that they’re building real equity in their practice and when they go sell that practice it’s unencumbered and depending on the mix of business and the diversity of revenue.

So when we look at our practices they can sell typically they’ll sell anywhere from one, one and a quarter times in normal industry standards, because our mix is so diverse and the revenue streams are so mix in terms of insurance and financial planning, managed money etcetera many of those practices are going for somewhere 275 to 300, we heard one from at the transitions earlier this year the one’s at 335 basis points in terms of revenue.

So their future there is all about the value and the equity that they’re building, so I would not be expecting to see this fall off and within our own system when people retire, those practices gets sold very quickly. I mean, I have more demand then I have supply. So if they retire, there is generally succession plan in place, that includes the sale of that asset and if someone is not in your practice to succeed them, they will sell and practice very quickly. Jim, anything you want to?

Jim Cracchiolo

I think Don’s right. I mean you can always get a paycheck to go, but they’re already have a very high payout that will offset that to go into a wirehouse. Their pay will cut in half and they will loose the value that they built and passing that value on is more significant then an up front check that they’re going to get from a wirehouse. So its does happen when someone like really in need of maybe a cash on a short-term basis once I while, but in the reality our retention is high because of that long revenue within that retention rates. So you know as people retiring and selling their practices or we ask to leave because they defaulted on their franchise for some reason that we didn’t want them here. So we have very strong and that’s consistence. So we don’t see that changing as long as they get. We engage them, we support them, we are delivering for them what they need and they really do like the company. They like what we do, what we stand for, who we are. They felt we navigated this really well and that we’re continuing to invest for the future.

Unidentified Analyst

So their not moving over for much money or even any chat initially?

Jim Cracchiolo

They really moving over so that they can create that equity in practice for most of our advisors and most of the independent advisors, the value of their practice is probably the single largest asset they actually have and even maybe bigger than their home many times. So this is the very significant opportunity for them and their doing and we’re seeing more and more senior advisors in the industry that are making that move. So it’s a very positive it’s a positive event for us. And they are capital for themselves which is terrific.

Unidentified Analyst

Can you remind us, auto and home, we didn’t discuss this morning, probably for obvious reasons, but can you just remind us how much PTI and capital is tied up in that business and understanding it is a decent return business would we consider outsourcing that business in the future, free up even more capital to make investments or buy back the stock?

Jim Cracchiolo

The reason, first of all, there is no reason why we didn’t discuss it this time, I think it was more that we want to focus really on the two core growth engines of the company more than anything else. From our perspective, we are very pleased with the property and casualty business. It’s something that we built organically over last decade. It’s something that’s generating actually outside of a type of cycle in the market with cat losses etcetera from the environment generates a good consistent return. It’s been growing nicely, our expense ratios are good. We will probably bring that more to light on the next time out and I would say it generates a good return on capital over, again the cycles. With that in mind, I wouldn’t say outsource. I would say we could probably sell it if we want it to. I think it would be a good asset. We like its complement, we like that it’s the demands [are full]. We like that if it brings in clients along those lines through affinity-type relationships.

And so right now, with us having such strong capital base, with us generating good capital with us, having the ability to generate the returns from it, that’s consistent with the overall returns we want to achieve and giving us that additional earnings as well as what I recall, not having the need for capital. We don’t see a pressing priority to do anything other than continue to build that and create value from it and over time if we do, we will even have a stronger asset if you wanted to sell it.

The protection segment. So, we don’t disclose but I can say that with what we have seen, it certainly went through with the cat losses and the [battle] we talked about. We do anticipate and prior to that, I think they were trying above average industry returns and we anticipate that that’s what’s going to occur as we move into 2012.

Unidentified Analyst

Thanks, Jim. I actually had one question for Don and one for Michael Jones. Don, the real change in your retention has been on the employee side, and I am just wondering what specifically you have done for those guys that is different from what you have done in the past and then what you – in different from what you might be doing for the franchises. Am I right when I say that their line has really moved up sharply?

Don Froude

Right and that’s really the story. While we’ve changed our entire business model, we historically were bringing in novice advisors, recent college graduates, training them in our industry like this, having them hook up with a senior advisor and then moving them into the franchise side of the business. We changed the model. So we are now almost exclusively recruiting experienced advisors from the industry that know and understand our value proposition and want to become a part of that.

As I say to recruits all the time, we are one of the best kept secrets on Wall Street, and it’s because for 117 years, we had a methodology of the way we did things. We are now going after and telling people our story and we are attracting quality advisors that want to come from the many of the reasons that we said. The stability of our company, the vision, the integrity, the ethics, the value and the things that are really important and in many cases are missing out there.

So, as we bring in those people, they have stable books of business. They have maturity, they like what would they see, what we offer, in many respects, I believe philosophically and business-wise, it’s almost irreplaceable.

So if you really believe in what we are doing, we will give you the support that you need. We’ll give you the independence to really make that happen and you build a very strong and constructed business against a business process that’s different.

So that’s what helping people really stay and continue to grow in our board. So if you are happy and your business is growing and your payout is very fairer and reasonable, you are not looking and that's why this retention has gone through the roof. We also don't have that turnover at the bottom. So that's very important and that stability has led ourselves to where we are going right now. As I said, the thing is so important is that the scalability of that platform, we've got a 130 offices and then almost everyone have at least one empty desk. I can fill that, bring that in, and bring them people that are in the $300,000, $400,000 in GDC and that continues to improve our overall numbers without increasing our expense ratio.

Unidentified Analyst

And Mike, my question for you relates to these retention desks that you referenced. I think you said that for your own guys, meaning the Ameriprise advisors for U.S. Trust and for select third party distributors, select third party distributors. You've set up special teams of people to do a better job than you have of holding on to assets. So I am inferring from that that there's an issue with your own guys in holding on assets and with U.S. Trust. Is that the right inference?

Mike Jones

I would really describe it more as looking at the industry and saying that in any given year, if you are a manager in the intermediary state for retail, there's going to be outflows, there's going to redemptions, to the extent you can focus on areas we can bring that down marginally just a couple of percentage points. That's going to have a real kick into your getting you deposit net flows and keeping you there, and so we focus on Ameriprise and U.S. Trust as two very large platforms for us as well as some of the larger platforms on the third party. So its really more of a holistic approach as opposed to just strictly looking at problem areas. Its more thinking about okay, if we can bring that percentage down a couple of percentage points over the next 18 months, that's going to have a real kick for our positive book.

Unidentified Analyst

First on M&A opportunities. Would it be fair to say your priority or how is (inaudible) priority will be finding international and if so is the distress in Europe possibly, we see the same opportunities created with the European banks looking to divest that we saw with Bank of America, Columbia?

Jim Cracchiolo

I would say you’re right in a sense that we see the large global opportunity for us. Threadneedle is of the night size in scale but as you saw in the pie it’s more of a third, a little less than that of the total assets and so we would like that to being, sort of, where we have a nice balance between domestic and international. So yes there will be one of the opportunities. Now, what again, and I want to be very clear. It doesn’t mean because there were properties out there that we’re running to market to go do something. We’re saying that if something appropriate comes along that fits, that can really leverage up Threadneedle and complement it, and working with Columbia to really take more global space. We will look at it. And that would be like one of the opportunities that we would have in mind as we thought about the global marketplace.

We are starting to invest more and think about. That why we’re growing now in the Middle East and Asia, organically. In the advising wealth management, you should know we already have on the ground, we’re building the business in India and that we’re testing out using the financial planning model to the affluent market. We will be looking at that in a few other emerging markets overtime. So we’re going to start to find some seats both organically as well as seeing if there is something appropriate now. Having said that, it’s very important that we picked the right business that fits in correctly, that we can get the returns that we mentioned to you before. So we’re not going to just use our capital because we have it. And if that’s the case, we’ll just buyback our dividend. So it’s a combination of those factors but you’re right, that will be one on the opportunities we look at.

Unidentified Analysts

And is there is anything when you start look at your early pipeline of things of interest, are there more properties coming up in Europe from the stressed financials or two early for that yet?

Jim Cracchiolo

I think there are things that are going to come up. It depends on how people make various decisions that I think it’s a very fluid environment right now. So depending on how people need to raise capital, what businesses they can consider core and non-core, whether these are places that they will look at, there is always that potential just like there was in the US.

Unidentified Analyst

Alright. And then if I cancel on AWM margins, you obviously already had [DTL] targeted 12% in the third quarter even with the heavy drag from spreads versus where you thought there’d be three years ago. I guess part one is one of the main driver behind that is largely the experienced producers coming in and they are at higher margins then the average versus some thing beyond that?

Jim Cracchiolo

No, it really was a few things and they were all complimentary. One is yes we adjusted our cost-base. We took out a level of cost but within office recruitment where you had a heavy upfront expense to get people hired and trained and staffed and led. So that’s one of the act it is. Second thing was productivity improvement. So we continue. With that, I would also tell you within those margins of 12%, we probably have one of the strongest investments agendas factored in to that expense base, putting in a new Thomson brokerage platform converting our entire network is a huge expense over a period of time. So, within those numbers, we also had a strong investment agenda. So it’s a combination of productivity, its combination of the cost and transformation that we went through, and it’s also a combination of people that are focused on getting in more client assets and managing those assets to, as Don said, that deeper relationships. Now, I think we can continue to growth that and one of the example Don said is this. I have capacity within and under my employee channel and more people like an add to it I already have a fixed cost base, right.

And so that in itself can get those employee margins into a more competitive situation and they are not where they need to be in. So that’s one of the opportunities. Second is interest rates. So we are not counting on interest rates based on what Bernanke said. So I am not stopping with the 12% because of interest rates. I think based on the things we said was we have achieved more than we thought we would, what are targeted to do, but we want to continue that anyway and then if interest rates do come back one, two or three years down the line, I think that’s going to be an incremental margin for us that will really add to the profitability of course as Walter has said in the past, the first level of that will be fall to the bottomline.

Unidentified Analyst

Without putting a timetable on it, whenever interest rates do come back and given the productivity efforts and the investments starts to drop at some point, long term what do you think I mean is 15 achievable if everything falls into place long term.

Unidentified Company Representative

Before I jump at it, I will have Walter do some calculations and we will talk to you in an upcoming meeting.

Unidentified Analyst

Maybe just a couple of follow ups. One for Don and one for Mike. So there’s been a couple of articles recently pointing out that you guys picked up DFA recruiting and I guess in October there was like 50 or so and can you talk a little bit about that and then just broadly if you look at the productivity of people that are coming in over the last year including I guess so far in the fourth quarter, how does that compare to the overall productivity of the mix you know not just by franchise versus employee but a whole?

Don Froude

We have had a very strong couple of months and there is a lot of things that factor into that. I think one of the most significant is that our story is really starting to get out there. I cannot tell you how hard my team is working to make sure that they are in front of every advisor in every city, in every marketplace everyday and we have now been active now for a little over three years plus and we are making relationships with people.

In addition to that I have lots of my competitors out there that change the landscape every day. So if there is nothing that makes me smile when you said, I mean, when one of my competitors says we are going to take and change the payout of a $300,000 or $400,000 advisor from what the current grid is down to 20% or 25%. Those are great advisors for us and they have longstanding businesses.

They have got good compliance records. They have great practices and they are looking for somebody that wants to help them continue to grow their practices. So we use that as an opportunity. In addition to that, because our story is getting out there, we are getting in front of much larger drivers than we have ever been had the opportunity for it, just this in the last month, we have recruited several million dollar advisors and million dollar teams. We are recruiting more million dollar people then we used to talk to them in the course of six months.

So and there is a combination of lot of things that are really, really, really strong and but it is hard work, the doggedness and the fact our story is getting out that we have an impeccable balance sheet, that we have great efforts, we have great integrity and the thing that I am the most proud about is that people understand that we really care.

Every month we do two VIPs a month where we bring advisors from all over the country. They were considering us and come into Minneapolis. They get a chance to meet with all senior leadership. They meet with Jim, they meet with me, they meet with Bill Williams or Pat or Dave and the rest of the senior management team, people from marketing. That accessibility is not available on the front. I have said, really there are people who have said, I have been in other firms for 20 years and I have never met with the CEO.

Jim meets with almost every single recruiting team and people that we bring in to these VIP, and that’s what makes us different because people now want to say what’s real out there, and what can in believe in. So, I think we are on the right track, our opportunity is there. I really do think this is going to continue to get better. This is the cornerstone of our growth and the more people start to understand what we stand for which is becoming the case, the better quality advisors are going to come. These are good solid people with great businesses.

Unidentified Analyst

And then just quickly on asset management, I wanted to follow-up on the comments made about the institutional business. It sounds like you won a couple of mandates that you mentioned like in the fund they got in the fourth quarter, first quarter could you quantify those and maybe tell us a little bit more about the products that are winning those institutional mandates there, and then I guess looking out what's the overall RFP outline looking for you guys?

Mike Jones

Sure, I can't give – quantify, specifically, I can give you some color though and from a color standpoint its more than a few mandates, its multiple mandates; its across the nice product set, equities as well as some fixed income on the domestic side. As we look at the pipeline, we look at RFP generation, one of the things that we are happy about is our conversion rate, the fact that what I talked about before which is the ability to win north of 45% of the final that you’re in.

But from the bottom of the pipeline the RFP is on through; we are seeing increased activity. Our pipeline is up approximately 25% year-over-year both in terms of assets as well as number of opportunities so we are getting in front of a lot of folks and I think what's really contributing to that is the limited amount of time we spent in the penalty box with the pension consultants and have been able to build quickly from there.

Jim Cracchiolo

Let me take off more question, I just want to say one thing that we tried to do and I know a number of you asked particularly in the past, you said to me, Jim let us know if you see some of these larger mandates you know that you talk about and some of things like under the parent company, so what Mike did is outlined for you the fourth and first quarter what those are and after that there will be some, but we will get more to a normalized basis so its not anything exceptional that we are looking at.

In Threadneedle’s case, we also wanted to mention that, so in that regard, he got all back to mandates from zero, but ten different buckets of those mandates; but we still have the close book the outflows $2 billion roughly a year normal redemptions and normal in the type of the industry. Some of that is to offset based on just replenishment interest in equity markets. But we’ll always report that and you’ll say you’re in outflows there, so I just want you to know that. But again, based on what replenishes and the economics that doesn’t hurt us.

The last piece is, there will be a lot to mandate just like we mentioned the two out on Columbia there’ll be a lot one coming in the fourth quarter for Threadneedle which is the Liverpool Victoria, which is $14 billion. So we tried to highlight that so that when it comes you know, January, February when we report, you’ll understand that those things are in those total flow catchers, okay?

Let me take one other, I think we’ve run a bit over not for you, but where we work and hopefully and if there’s other things after that you can please you know, Alicia and chat others that you can give us a call.

Unidentified Analyst

Just a quick clarification question on the guidance. The 2012 guidance assumes the ETIF rolling through in terms of the ROE number or is that apples to apples with 2011?

Jim Cracchiolo

We will restate everything when the ETIF rolls up, but when we’re talking about the 15 to 18 it will include the adjustment for ETIF. And then, we will continue to look at what we generate on an ongoing basis within the 15 to 18; again, based on market conditions, it could be at the low end of range or we could even get up to the high end of the range you know in more normalized situations, okay?

Unidentified Analyst

What are the budgets for 2012?

Jim Cracchiolo

2012 well, I don’t know if we’ve given guidance on the 2012, it will be within the 15 to 18 after the ETIF adjustment. We didn’t say exactly where but; it depends on market conditions, next year.

Jim Cracchiolo

Thank you very much. We appreciate your time and we’ll continue to try to continue improve to give a better understanding of the businesses as we go forward. But we are feeling good outside of the environment that we all live in which doesn’t make us feel optimistic everyday; but from a business perspective we are. Thank you very much.

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