阿默普萊斯金融 (AMP) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the fourth quarter earnings call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

Please note that this conference is being recorded.

I will now turn the call over to Ms. Laura Gagnon.

Ms. Gagnon, you may begin.

Thank you, and welcome to the Ameriprise Financial fourth quarter earnings call.

Presenting on the call today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer; Ted Truscott, Chief Investment Officer is also here for your questions.

After our remarks, we'd be happy to take your questions.

During the call you may hear references to various non-GAAP financial measures.

Which we believe provide insight into the underlying performance of the Company's operations.

Reconciliations of non-GAAP numbers to their respective GAAP numbers can be found in today's materials available on our website.

Some of the statements that we make on this call may be forward-looking statements reflecting management's expectations about future events and operating plans and performance.

These forward-looking statements speak only as of today's date and involve a number of risks and uncertainties.

A sample list of factors and risks that could cause results to be materially different from forward-looking statements, (audio difficulties), our 2007 annual report to shareholders and our 2007 10-K report.

We undertake no obligation to update publicly or revise these forward-looking statements.

With that I'd like to turn the call over to Jim.

Thank you, good afternoon and thanks for joining us for our fourth quarter earnings discussion.

I want you to take away three key messages from this call.

First, this was a disappointing and extremely difficult quarter because of the financial crisis we're experiencing.

Second, we have taken action to prepare the Company for what we expect to be another challenging year in 2009 and finally, I want you to understand the continuing strength of our balance sheet, business model and advisor/client relationships.

Let's begin with the numbers.

For the quarter, we recorded a net loss of $369 million or $1.69 per share which was primarily driven by the market impacts and our outlook for 2009.

Excluding these impacts, our core operating earnings for the quarter was $176 million or $0.80 per share.

I'm aware that our results are complicated, but we wanted to provide as much detail as we possibly could so that you can get a better understanding of our business, as well as the conditions of the Company.

The accelerated deterioration in the environment has affected our business and our balance sheet.

The S&P 500 was down 23% for the quarter and 38% for the year.

The largest full year decline since 1937.

And it wasn't just the equity markets that impacted us.

The slow down in client activity, the widening of credit spreads and the near zero interest rates short-term environment also affected our asset levels and revenues.

The noncore impacts reflect not only the severe deterioration during the fourth quarter, but also our outlook for 2009.

For example, the impairments and debt charge we recorded included significant adjustments to our valuation models.

We increased our discount rate on certain securities to reflect the possibility of continued dislocation in the credit markets and adjusted the DAC for the equity market declines.

So we've absorbed significant impacts from the market conditions we've experienced at the end of last year.

While preparing for an economic scenario in which there could be more possible corporate bankruptcies and other credit market dislocation.

Further weakness in real estate markets as well as no meaningful near term recovery in equities.

While these changes are significant, we believe it is more appropriate to be prudent and proactive now.

On the other hand, if the economic and market trends stabilize, we expect to recoup a significant amount of the other than temporary impairments over time.

Walter will provide extensive detail on these impacts shortly.

Clearly the fourth quarter was exceptionally difficult but our financial foundation remains sound and continues to provide stability for our clients, advisors and he Company.

We are maintaining our strong capital ratios, our balance sheet is solid and we continue to hold excess capital, approximately $700 million.

Keep in mind that earlier in the year, before the severe market downturn, we repurchased over $600 million of common stock, made all three cash acquisitions and increased our dividend by 13% on a per share basis.

While we are maintaining our financial foundation, we're also significantly increasing our re-engineering efforts in response to the environment.

Last week, we announced a restructuring that will result in run rate savings of over $130 million and savings of over $80 million in 2009.

These expense reductions are in addition to our regular re-engineering agenda and we expect overall re-engineering saves in 2009 of approximately $280 million.

Now let me give you some insight into how our core business is performing.

Many of our metrics including asset flows and client activity have been impacted by the market environment and we expect this to continue until conditions improve.

Still our business remains in solid condition.

Like everyone else, our clients are worried about the economy and many have sought safety, but they're still working closely with their advisors and maintaining a long-term focus.

As a result our advisor and client retention remains strong.

Our business is based on comprehensive financial planning, our client relationships endure over time, even in such challenging conditions.

In fact, our branded advisor financial plan net sales were up 6% over a year-ago and 17% over last quarter.

We think this is part of a reaction by consumers to a very volatile conditions.

Market dislocation is causing people to see the value of advise and long-term planning.

And we think this demand for our basic value proposition will continue.

In our advisor force the acquisition of HR Block Financial Advisors has given us the opportunity to build a new model for employee advisor group.

Approximately 950 advisors came to us as part of that transaction and they are productive and tenured.

We are capitalizing on their strengths to create a platform that is more efficient and more profitable.

At the same time our franchise advisors remain very stable with little attrition and remarkably high satisfaction given the external environment.

We're also beginning to experience success in our experienced advisor recruitment efforts in part because of the dislocation in the industry, but also because advisors are recognizing the value of our culture, corporate stability and our financial planning focus model.

Another factor in our high value and advisor satisfaction is the work we did around the reserve funds.

While that matter has impacted us financially, we supported our clients by providing short-term liquidity, and mitigating their losses in the primary fund and our clients and advisors have been appreciative of the that work.

Now I'll move onto the product areas.

Owned, managed and administered assets declined by 25% compared to fourth quarter 2007, driven by market depreciation.

We've also experienced outflows at RiverSource and Threadneedle.

In general, despite the extremely low interest environment clients continue to move from variable products like wrap and mutual funds and variable annuities to fixed products like certificates, FDIC insured, bank products, and fixed annuities.

This migration has impacted certain areas of our flows as well as our overall profitability.

Overall, RiverSource fund flows were negative $2.1 billion primarily due to low sales as clients resisted putting money to work in equity funds.

Redemptions remain stable.

We continue to believe that Seligman acquisition will provide meaningful benefits.

The transaction brought us $13 billion th assets, including about $3 billion in hedge funds, and very strong technology growth and value teams.

While assets in those funds have suffered with the rest of the market, we believe their strong performance track records will prove valuable as markets recover.

We also now have a much stronger third party distribution organization as a result of this acquisition.

Threadneedle continues to deliver competitive investment performance.

In fact, Threadneedle won multiple awards in 2008 including the UK LIPPER Fund award for best overall fund group.

Outflows have resulted from the continued outflow of Zurich funds as well as the overall lower level of equity investment in Europe and the U.K. Just as we have in the US, Threadneedle has taken steps to adjust its expenses while pursuing targeted pockets of opportunity for growth.

In the domestic market, we continue to see the mix of annuity sales shift from variable to fixed despite interest rates.

Variable annuity net inflows slowed to $509 million during the quarter while fixed annuities reached inflows for the first time in several years.

Certificate sales also increased significantly which is another indication of clients seeking safety.

In the insurance business, cash sales have been impacted by client's decision to hold onto cash and other liquid products.

We expect this sales trend to reverse as markets improve.

Still, life insurance in force was up 3% over a year ago to $192 billion.

The auto and home business continues to perform well with policies up 6% over a year-ago.

To summarize, the fourth quarter clearly presented a new set of challenges for all of us in this industry at the end of a very difficult year.

Our results were disappointing as the declining markets affected our balance sheet and income statement.

We expect the tough conditions to persist through this year, so we're making the necessary steps to reduce our expense base to be more inline with revenue opportunity and to limit our exposure to continued market dislocation.

At the same time, I want you to know that we're executing our strategy and investing for future growth opportunities.

We're confident that we have the ability to rebound on markets in the economy improve and we're just as confident that we have the ability to withstand the tough current operating environment.

Our balance sheet continues to be well positioned.

We hold strong capital and liquidity positions and our debt levels are very manageable.

Just as important, our model is intact.

Our advisor client relationships, the heart of our business model remains strong and the comprehensive nature of those relationships continue to provide revenue diversity.

So overall, it was a difficult year and even more difficult quarter, and we expect more to come.

But we continue to feel good about the decisions we're making and our long-term prospects.

Now I'll turn it to Walter for more detail on the quarter.

After that we'll take your questions.

Thanks, Jim.

We understand that our results this quarter are complicated so we posted slides on our website for you to follow.

These slides will be posted with talking points later tonight.

If you turn to slide two, we do recognize that the fourth quarter results were quite disappointing.

The change in financial fundamentals significantly impacted our performance in the quarter.

In the fourth quarter, the losses was $1.69 per share.

The market downturn generated $2.49 EPS impact in the quarter.

And I'll provide more details as we proceed through the presentation.

In the quarter, activity metrics GDC, and cash sales were dramatically lower as a result of the market dislocation, however, client and advisor retention remain stable.

An finally, our core balance sheet fundamentals remain strong despite the impact of the financial markets.

Slide three, provides more detail on the market dislocation in the quarter.

The S&P 500 dropped 23% in the quarter and 38% for the year.

While EFA was down 20% for the quarter and 45% for the year.

Credit spreads reached record highs with the market US high grade aggregate ending the quarter at 555 basis points, up 114 basis points in the quarter and high yield spreads ended the quarter up 642 basis points.

The fed funds rate dropped to a target of 0 to 25 basis points reflecting the severity of the liquidity environment.

We also received ample evidence that the recession is deepening, including a 7.2% unemployment rate.

In total, these noncore elements resulted in losses of $2.49 a share in the quarter and $4.11 per share for the full year.

Which were predominantly focused in the third and fourth quarters.

The environment also impacted our core operating EPS through lower fee revenues, lower net investment income, on high cash positions and its impact on our client behavior.

The impact to core earnings will continue to challenge us in 2009.

Let's turn to slide four.

The $2.49 EPS negative impact is comprised of four key elements.

We recorded a pretax investment loss of $420 million or $1.24 on an EPS basis.

$286 million of this loss related to nonagency RMBSs and $120 million relates to predominantly high yield corporate investments.

The other elements are DAC at $0.75 EPS impact and various, variable annuity charges of $0.26 per share and finally, restructuring and integration charges of $0.24 per share.

I will discuss each of these elements on the following page.

On page five we get a perspective of how we evaluating the changes during the quarter.

We continue to observe deterioration of our key drivers, specifically credit spreads as I indicated widened, driving the discount rate on RMBSs up almost 600 basis points to 20%.

Margin forwards continue to remain high and severity trends accelerated as home values continue to decline throughout the country.

Finally, pressures associated with the deepening and extending recession on cash flows and liquidity positions within our investor base, compounded our concerns.

Based upon these observations and our outlook for the 12 to 18 month period we have reassessed the evaluations in our portfolio and that resulted in our actions to write off $420 million in investment losses.

Slide six is quite busy.

Let me move through it.

From left to right, the amortized course of invested assets is $35.585 billion.

The fair value as of December 33, is $33.770 billion.

Within the portfolio our US government credits aggregate $5.9 billion.

Our unrealized losses as of December 31, ex these government assets are $1.9 billion or 6% of our portfolio.

We believe the level of unrealized losses is one of the lowest percentages of equity in the industry.

Keep in mind that these unrealized losses also reflect our new discount rate assumptions on valuations and the wide spreads in the corporate sector.

Over half of the unrealized losses are in corporate credits, based upon continuing overall spread widening.

On our website you'll find the underlying details relating to each one of these categories.

Our goal is to create transparency and allow you to form your own opinion as to the quality of the remaining portfolio.

On slide seven, you'll see a few facts about the investment portfolio.

I would encourage you to look at the complete disclosures on the web.

The portfolio remains high quality, in fact only 5% of the portfolio is rated below investment grade.

In our corporate portfolio, given our expectations that the recession could persist or worsen, we stress tested the integrity of the cash flows underlying each of the credits, specifically balance sheet strength, cash flow generating capabilities, current and near term liquidity, or funding needs and other underlying metrics we'll review to reaffirm our outlook.

While we're not immune to program pacts, we're comfortable with these exposures.

Next, in our prime MBS portfolio, we impaired three originally AA rated prime securities with poor collateral performance.

The remaining $92 million AA prime bonds have performed very well from a delinquency standpoint.

In the Alt-A portfolio it is clear that a portion of the investment portfolio has suffered the most during this quarter as a result of the decline in the housing market.

We booked a $261 million impairment, including $75 million of impairments booked on subordinate Alt-A ARMs, the remaining option ARMs investments are super senior and have credit enhancements.

Finally, we are quite comfortable with our CMBS portfolio due to its vintage, it's AAA profile, its 20 to 30% credit enhancement and amount of 41% of the portfolio that is agency backed.

Direct commercial mortgage underwrite was slowed in 2004 and stopped in 2007 completely as risk premiums began to look unattractive from a risk and maturing standpoint.

These holdings continue to maintain solid average LTVs, coverage and performs characteristic.

The portfolio has held up well in 2008.

Turning to slide eight.

Utilizing our normal new reversion methodology would have resulted in a DAC charge of 0.24 per share.

An additional $0.51 per share was realized due to the unlocking of future return assumptions.

The market declines of 23% also caused a substantial portion of debt and income hedge to go into the money, resulting in a negative impact of $0.19 per share.

In addition, hedge ineffectiveness resulted in $0.07 per share loss.

The $0.07 equates to a $25 million pretax loss comprised of three-prime items.

First, spread widening led to a FAS 157 benefit offset by basis risk, primarily related to fixed subaccounts for a net benefit after DAC of $117 million.

Underlying hedge effectiveness after DAC was a pretax loss of $76 million.

And finally, we wrote off $66 million in DAC based on the assumption that credit default spreads would narrow and not contribute to future profitability levels.

I should note that our hedge program was 95% effective, which we believe is strong performance given the severity of the market declines.

The issues is that, our liabilities in the quarter increased $1.6 billion and that's 5% effectiveness as it relates -- 95% effectiveness as it relates to that performance.

On slide nine, you can see some detail on the two charges we announced previously.

Our restructuring charge of $39 million after tax or $60 million pretax was predominantly severance and benefits.

This charge will result in savings of over $130 million annually on a run rate basis and we expect to achieve approximately $80 million of savings in 2009.

In addition, our total re-engineering savings in (inaudible) are expected to be in the range of 280 million to $300 million.

As a result, and netted against our continuing investment agenda, we expect pretax acquisition G&A expenses to decline by approximately 10% this year.

Note that our acquisition related charges is $12 million lower than originally estimated, that's primarily because we were able to renegotiate a favorable lease termination as relates to Seligman acquisition.

Let's move to our capital.

Slide 10.

We continue to maintain strong liquidity with $6.2 billion in cash and cash equivalents.

Free cash of about $4 billion or $700 million of cash at the holding Company level.

A portion of the cash balances, about $1.5 billion relates to collateral on our VA living benefits hedge program.

This portion of the balance will vary with market conditions.

As we previously indicated, we have no debt coming due until 2010 and as I said, our asset portfolio remains well diversified and high quality.

I encourage you to compare our investment assets to our peers.

We believe we are positioned well to weather this environment.

As we exit 2008 we are facing substantial challenges that will impact our earnings.

These are reduced fees based upon lower asset valuations, a client shift away from traditional products which will impact activity levels and margins, and a continued uncertainty as it relates to the economic outlook.

To offset these challenges, we are prudently managing expenses and will be maintaining a strong balance sheet that allows us to continue to focus on business fundamentals and our strategy.

In addition, in 2009, we have continued to focus on our re-engineering to align our expenses with revenue opportunities, revisit our variable annuities product design and pricing, develop new products to address client needs, and invest in the medium long-term infrastructure, growth and franchise.

And finally, maintain strong enterprise risk management and decision support to manage these challenging times and position our Company for the long term.

With that, let me turn it over to questions.

Thank you, we will now begin the question-and-answer session.

(Operator Instructions).

Our first question comes from Suneet Kamath from Sanford Bernstein please go ahead.

Sanford Bernstein, yes.

Just a couple questions, if I could.

First, with respect to the impairment charges that you've taken in your press release, have you taken those on a statutory basis, as well?

In other words, are they fully baked into that 450 RBC ratio as of year-end?

Question number two, on the, 280 million to $300 million of expense savings you talked about, I think in the past you have given us an indication of how much of that could fall to the bottom line.

Just wondering if you could give us that, a range on that and then lastly for Walter, if we go back to the investor day presentation, sort of have this chart that was almost a schematic where you showed 2008 forecasted core operating earnings, and then a bunch of other earnings considerations leaving you with sort of flat 2009 core earnings, is that still sort of valid and then can we put the sort of 390, 400 number as the core estimate for 2008 or something close to that?

Thanks.

Okay.

This is Laura.

I'd like to take the impairment versus stat.

We do treat our statutory impairments the same as GAAP, but what you have to realize is that the impairments that we show, the aggregate amount are across the Company.

So it's in a Bank, a certificate company and other legal entities aside from the RiverSource Life Company.

On the second one, I'm trying to remember the question.

Yes.

On the re-engineering, you should anticipate, we have expense growth and other things, but approximately two-thirds of that will flow right to the bottom line.

And as we, we said, we will manage each situation and that's what we're planning for as of this particular time.

I'm not going to be in the forecasting mode right now as it relates to 2009.

Clearly as we carry into 2009 we're going to be carrying a substantial head wind as it relates to the equity marks we are anticipating, at least in our planning that we'll be down 20% some odd on an average basis in 2009 versus 2008.

Again, from the standpoint of looking at core, we do not anticipate from a standpoint looking forward that there'll continued deterioration in the changes, but we certainly think we'll be starting off at a lower base both from our revenue and standpoint.

So, on that basis, we feel that we're sitting in pretty consistent, what I outlined in the chart without putting in the numbers.

Okay.

Thanks.

Our next question comes from John Nadel with Sterne Agee.

Please go ahead.

Wow.

That's close enough.

Good evening everybody.

Just two, I guess, maybe two or three quick ones.

One, could you give us a sense or an estimate on the statutory capital or the total adjusted capital that goes with that comment on the 450% or in excess of 450% RBC ratio?

We're still working through the statute.

We haven't filed, I'm not sure specifically what you're referring to?

Just the numerator of RBC ratio.

When you're talking about being at around 450% or thereabouts, can you give us a range, even not necessarily a nailed down number, but a range on what the numerator of that ratio will be?

Okay, we'll look it up, all right?

Okay, second, just to go back to Suneet's question on the chart, If I think about your investor day on November 12 S&P was around 850 at the time.

We rallied actually to close the year at 900.

Things were actually better at the end of the year, than they were on November 12, when you spoke to us.

We're sitting here today, obviously we have got a lot of volatility, but we're sitting here today, slightly better than the 850.

Just wanted to get a sense for, not necessarily forecasting '09, but I just, I really wanted to have a better sense for what you characterize since there's so many ins and outs in the 2008 numbers, you guys used a term on that slide called core operating earnings.

I'd just like to know what the 2008 core operating earnings were?

Okay, if you take a look, from the standpoint, we were looking at core operating, we were basically excluding the impact is it relates to DAC and looking at the impact of the impairments and looking at the reserve fund and looking at the Lehman as we made up on the 287 paper.

On that basis, that's what we're excluding from that standpoint.

So--.

So okay, so we're looking at, sorry, so we're looking at net income less realized investment losses, less your DAC hits, year-to-date, less the charge to pick up the reserve fund and less the Lehman derivative set?

Was there any other items?

Yes, if you take a look on page three of the -- of our earnings, you'll see that we've listed the items that we're saying, again, are making up the change factors that are driving and impacting our earnings in the fourth quarter.

And in the year.

Okay, okay, so--?

Let me clarify.

The one thing we do not factor into that is the deleveraging as it relates to the impact of our revenue from management fees and distribution fees.

That we have to, is not a factor in that as a variance discussion or as a component that we're trying to explain this.

The change that took place relating to the momentous movements in this year.

Okay.

Okay.

So, so core then for 4Q is the $0.80 number and add that to the year-to-date through nine months core number; right?

When we got into -- from that -- yes, basically -- the thing we're saying is the drop in management fees and impact on our activity levels is something that is part of the way we manage the business.

What we are trying--.

Yes, yes, yes, yes.

It's the huge impacts that we've gotten from the investment gains, the restructuring and other elements and the DAC.

Absolutely.

Okay, I understand where you're going with that.

And the last data point is just what's your goodwill balance on the GAAP balances sheet at year-end?

Plus the new acquisitions $1.1 billion.

$1.1 billion okay.

Sorry?

The estimated tax, statutory capital of about $2.5 billion at year-end.

Great, thank you.

The only other one I have for you is just in the flows, in the domestic retail, domestic institutional, in the international side.

Where does Seligman show up?

Because, it looks like, I guess it looks like it's in the market appreciation and other line, but could you tell us, sort of by each one of those items where it is?

Hold on, we're pulling it up right now.

What we've done, instead of including the acquisition of those assets as flows, net flows, we brought in the original acquisition as other, and then the flows after they were brought in is showing up in the flow line.

So it's, so, I'm sorry.

So it's in, so which line item is it in?

If you rolled forward beginning assets to ending assets?

It's in three different roll forwards.

It would be in the institutional, in the retail fund and in the alternative asset classes in the domestic page.

And it's in the market appreciation and other?

Or it's in the net flows?

When we acquired it, when we brought it in as an acquisition, we put it in other.

Flows that have transpired since we owned it are in the net flows.

Got it.

Okay.

And what was the dollar amount in each one of those?

The contribution then?

Institutional retail and alternative?

Just to get the level set on getting to the $13 billion.

Yes, I don't have the break down right in front of me, but I can get back to you with that, John.

That would be terrific.

Thank you.

Our next question comes from Andrew Kligerman from UBS.

Please go ahead.

Hey, good evening.

A few, I think, quick questions.

First on the asset management, you generated approximately $2 million of earnings versus $108 million in the year-ago quarter and obviously with revenues down almost 50% and assets down by a third there's a reduction in earnings, but, but was there anything unusual in that $2 million or should I be thinking that that's your earnings base going forward?

Well, in the fourth quarter, you have, if you look at -- we have obviously the market impact is a big driver.

And then we had, the gain on the sale is in that number and we also then lost the hedge fund earnings, much lower Threadneedle than they were last year.

Those were the big changes.

And the final thing, Andrew, as we told you, we are investing substantially this year in higher OD costs as it relates to wholesaling to build that base and obviously we're not getting the flow point at revenue.

So with regard, with the hedge fund earnings, was it a negative impact this year or just--?

Yes, it was lower this year than last year.

At Threadneedle.

So if we look forward to your investing and so forth, I don't know that there would necessarily be any change in the near term quarters.

Is that a fair view on asset management?

I think as it relates to the deleveraging it's certainly going to have an impact -- and we -- as we indicated a portion of the re-engineering saves relates to that activity, but it's certainly tough to deal with the deleveraging as -- in those marks, but we -- those are, those are, that's the prime driver.

So if you factor in--.

I got it.

I got you on that one.

Then just shifting back over to the excess capital, of $700 million and the RBC base of greater than 450%, is that $700 million in excess capital housed in RiverSource Life?

If it's not, what's the mix between that and the parent Company?

Actually it's housed through -- there's a substantial portion being housed at the at the parent Company.

Some are in the broker/dealer and a smaller portion there's some in Threadneedle and a smaller portion in the advice and wealth management.

So you have a 450% RBC ratio despite the fact that given you said substantial, I'll assume more than half is outside of the life Company.

Is that a fair -- so that's a pretty strong RBC, and if you needed to, you could actually downstream more money to strengthen it?

Am I thinking about this the right way?

This is Laura, I just want to remind you, we've said that the capital requirements we set aside for each legal entity is the greater, the regulatory, the rating agency or the economic capital, so RBC is used as a proxy in this environment.

Because of the differences in all the rating agency models.

I'm not sure I wrote would go there.

Okay.

Given this capital position has declined a fair amount, what's your thinking on M&A going forward?

Listen, we're always looking for opportunities.

Again, the most important thing for us is to preserve our rating with the agencies and the environment here needs to be gauged.

It's a situation that's challenging.

Even though we prudently managed the balance sheet, and managed our capital, we'll evaluate, but the determination will always be made on preserving the safety and soundness and our ratings.

Got it and one last one.

53% average loan to value, is that as of the end of the fourth quarter as it would be appraised, the real estate values in the fourth quarter?

Yes it is.

Operator, before we take the next question, the Seligman assets of approximately $12 million that are on a domestic roll forward are at $6.3 billion retail.

$3.2 billion institutional, and $2.5 billion in the alternative roll forward.

Next question?

Our next question comes from the Thomas Gallagher with Credit Suisse, please go ahead.

First, just a point of clarification.

Laura I think you said the -- to response to John Nadel's question, that the Seligman assets were included in net flows when--?

No.

-- they don't appear to be -- it appears that they're in market appreciation.

I just wanted to clarify that.

When we acquired the assets, so when we did bring them on as a block, the block comes into the roll forward as market appreciation and other.

It's the other.

Flows that they experienced after we've acquired them do flow through the net flow line.

So subsequent activity is in the net flows.

Okay.

Just wanted to confirm that.

Walter, to go back to the earnings run rate question, let me just attack it a different way.

If you're, understandably when you define your core run rate for '08, things have changed dramatically, in terms of the levels that we're at now.

Is it, are we better off thinking about it from the standpoint of if your core run rate was $0.80 in 4Q when the S&P was in average just above 900 and we're a bit below that now, that we'd be starting off somewhere in the $0.80 to below level before we start considering other offsets?

Or are there any other major adjustments that you'd make to that $0.80 number as we begin 2009?

Again, I don't, we don't really forecast, I, the issue is, the run rate we weren't trying to get to a run rate, we were trying to demonstrate some of the elements that impacted us, that converged in the fourth quarter.

And certainly from that standpoint, but what I laid out at the the conference and our investor day was clearly on the basis that these elements we believe again, if the market stabilized where they are, will not reoccur at the levels that they did in 2008 and certainly will give us the ability to move forward, but at a much lower base, as I indicated because of the deleveraging, and our fees and other things of that nature.

There are other factors that will impact the $0.80 and so, and so from that standpoint, to get into a reconciliation is going to be problematic, but, the key thing, I would say, we have taken actions.

We've looked at this, we certainly understood the impacters of the fees and we have not anticipated a significant turn around and we've therefore, moved into do our re-engineering on margin management accordingly to manage within that.

The other element which is an unknown is the continuation of basically the defensive posture of our customers in this environment and the nicks therefore that we'll pursue in the activity, which of course drives revenue for us.

There's a lot of factors to go into it and that we're managing through right now and evaluating.

And certainly as we looked in this quarter, as I told you, as we got deeper and deeper in seeing the environment and assessing its impact on our portfolio and the impact on our model, it's changing.

It's difficult to just come out with what a run rate is, but those are the key drivers.

Yes, I think one of the things that we're trying to explain and we're not saying it's one way or the other.

What we're trying to, I think what Walter's trying to explain is that the fourth quarter was a pretty significant meltdown including for retail client activity.

I mean with the volatility with seeing what's occurred, people really pulled back tremendously.

We didn't get various flows, clients really stayed very short, they didn't want to invest.

There's a combination of factors.

I think one is we know the market is down on an average basis year-over-year from where it was that's in the full year 2008 results.

We know that we've adjusted a number of our lines, including DAC.

We picked various levels of impairment based upon the credit dislocation as of the fourth quarter which was pretty bad.

We had a lot of volatility cost built into the numbers based on the things that we've just disclosed for the hedging and other factors.

From a core business, we're still sitting quite liquid, not earning anything based on the liquidity positions with interest rates very, very low on the short-term basis.

So if things stabilize and improve, we can put more money back to work and that would help on the spread revenue.

From a market perspective if the equity markets stabilize a bit and people feel comfortable where they are, and they feel comfortable that they understand a little more of the environment going out, I think our retail clients will get back to deploying some of their activity, because they're sitting not earning anything.

We think that could recover a bit as well.

We're not making any predictions.

What we're trying to do is sort of say we're making adjustments in the expense base.

We'll continue to do that.

If environments continue to weaken, we'll take more costs out if we have to do that.

We're still making investments, but we're doing it at a lower level than last year.

Again, if things really get more significant, we'll curtail that if necessary, but if things are stabilized and improved, we think the core value proposition is still holding, there's advise being had, where we're starting to integrate our advisors with H&R Block.

We're starting to recruit.

We think we can get some activity back, we're putting some of the fixed products back in the market that we were out of at one point and the variable.

There are things that we're making along the way.

So I think in trying to answer your question, I think we're trying to give you all the sort of inputs, so to speak, but because the environment is still one where we can't see the line of sight to what will be, we're trying to leave that sort of open and saying we're going to try to control and manage our destiny along the way.

There could be opportunities for improvement if things improve.

Got it.

Jim, that's helpful to hear.

Kind of the pluses and minuses.

And I guess, just to ask, I guess in very simple terms.

And the reason I asked was because I believe most of your variable revenue items are asset-based not transaction based.

The majority of them, therefore, if we're in a stable market where transactions, let's say, also are stable with sort of the depressed levels from 4Q.

Is there something else we're not thinking about that could put substantial downward pressure on the $0.80?

Like would you potentially have to really accelerate back amortization to meet the new lower level of profitability in the business or should we not be--?

No, I think, I think what we did, again, no one can tell what the markets will do, but I think we adjusted to where we felt comfortable with the markets in the fourth quarter, and where they were.

That was a reasonable sized DAC adjustment that moved down sort of even the base level and so the same thing, we feel on the credit impairments.

We took larger discounting factors based upon a negative outlook in a sense of markets not getting better.

So again, we can't dictate what happens in each of these various credit markets for corporates or in the idea of what's happening in mortgage backs for everything that will go on, but from, as of the fourth quarter, based on everything we saw, with not necessarily having a positive outlook for 2009, these are the adjustments we thought were necessary and appropriate.

And just, if you look at the RMBS, as we indicated driven by certainly credit, but mostly driven by the discount factor once you break through the principal.

On a cash basis, it only represents around a third of the actual write up you experience.

Two-thirds of it are coming from the discount rate being that high.

Obviously the discount rate changed.

You would deal with that and even on the ones that you already impaired.

Technically if it went higher you would have to even go into impair it at a higher level.

There's a lot of variables on it.

We've typed, as Jim said, take the most prudent approach, understanding the fact pattern, looking at the outlook that we felt that we would be facing over the next 12 to 18 months and deal with that within the bounds of being appropriate and so that's where we ended up.

Okay, thanks.

You're welcome.

Our next question comes from the Jeff Schuman with KBW.

Please go ahead.

Good evening.

I was wondering if we could talk a little more about cash and liquidity.

Obviously at this point we're used to companies building cash, but you added quite substantially $4 billion to your cash position this quarter.

Those cash earnings have been a drag all year.

As we look at your liquidity profile, there's not a lot of demands on the holding company in the foreseeable future.

At the operating level, your net flows and certificates and fixed annuities are actually positive.

What are kind of the contingencies that you're thinking about as you continue to build cash and how much is enough, I guess?

Well, I think your observations are correct.

We have been building cash.

I don't know what it's exactly for but we built cash and yes, we have positive flows on certificates and fixed annuities.

We have fairly elaborate testing that goes on for cash contingencies, we just noticed that any company that does get in trouble, it gets in trouble first for its liquidity.

And we have looked at a varying test of making sure that we can achieve pretty much all situations to bolster and fortress our basic cash needs.

Looking at across the Company, and looking at both from the cash we have and liquidity pools, the cash that's available that we can sell if we had to at a profit, and the cash that we have as back-up, even backed-up lines or other things of that nature, and we run through stress tests each month to look at different scenarios that could impact us.

Right now we feel very very comfortable with our ability to meet our cash needs and to meet our cash crises and it's expensive to do that, but we feel it's necessary.

But we are building cash and we are building liquidity and obviously that gives us a chance to evaluate the situation and determine the best alternative for applying that cash.

This is Laura, Jeff.

Go ahead.

Unrestricted cash and cash equivalents on the balance sheet went from 4.0 billion to $6.2 billion.

It's up $2.2 billion.

And ultimately--.

The release says it's up $4 billion.

There's approximately $4 billion of free cash.

What we were trying to get at, is that there's $1.5 billion of cash, that's actually collateral related to the living benefits hedging program and that will vary with markets.

So what we do thee -- so it is cash, it is free cash, but again, we understand the fluidity of that cash and therefore we have different back-ups on it.

What we're giving you were the components of it.

Let's move onto another issue.

Walter on page eight of your slides, for put hedged living benefit item of $0.07 I think you decomposed that into some pieces for us, but I really wasn't able to write that down quickly.

Would you please hit those items again for us?

Sure.

The first element of that, if you look at it, is taking the two they really correspond, it's the FAS 157 benefit and then net of the basis risks which we've gone through, which gives you your $117 million after DAC.

The second one is the -- our hedge loss relating, hedge effectiveness, loss associated with doings of the large movement in the liabilities, $1.6 billion.

That's $76 million and then we basically wrote off $66 million in DAC based upon the assumption that the credit default spreads would narrow in the future and not contribute to future profitability.

We wrote that off in fourth quarter in 2008.

Those are the three major components that were driving it.

Okay, thank you very much.

You're quite welcome.

Our next question comes from Eric Berg with Barclays Capital.

Please go ahead.

Thanks very much.

Good evening to everyone.

Walter, why don't I pick right up where Jeff was, you mentioned credit default spreads and a write-off of $66 million.

What do you mean by credit default spreads?

Is that shorthand for spreads on credit default swaps or spreads on credit on bonds in general?

No, with the, it's on a 157--.

No, I'm referencing the last -- go ahead.

Okay, what happens, it's technically, we have our 157 benefit as we look at our, our basically, our credit default standpoint of valuing our insurance company.

Which is standard, from that standpoint.

Okay.

Okay, basically what happens, we were in those assumptions, the spreads have been so large as we move through, it's impacted the DAC as you, estimate that those spreads would stay wide in the future.

We said, we took a more conservative posture and said, no, those spreads will not stay that wide in the future, therefore you had to reclaim the DAC on it.

That's all we did.

It was relating to our own position, nothing that as we revalue, based upon mark to market on 157.

Next, there was a problem on the line earlier, a little bit of cutting out of your voice when you were talking about the drop in earnings and asset management, I wasn't clear whether you were reconciling reported earnings or core earnings.

What were you reconciling and what were the reconciling items?

Explaining the drops in earnings and the asset management.

Could you go over that, please?

Sure, if you look at asset management for the fourth quarter, you have I believe it's, report said 2, just verify that?

Last year was 108.

I was giving you the components that were driving that as relates to -- obviously the biggest component is the drop in the equity markets and then you have a situation where we have the gain on the sale, but we have that offset by the lower Threadneedle hedge fund.

Then in addition to that, we have the expense as we told you we were investing in building the outside distribution wholesaling force which we explained would be a substantial investment in the 2008 timeframe.

Next, just a couple more quick ones.

Next, with respect to the largest component of your OTTI in the quarter, which looks like , $261 million, I guess it would be after tax, related to Alt-A RMBS, you did go over, I just didn't get it, I'm sorry, it's pretax, you didn't, you went over, I just couldn't write it all done sufficiently quickly, what is the specific character of these Alt-A RMBS securities that you wrote

We went through and analyzed based upon, these are the ones that are most affected by the housing situation and when we evaluated both the continuing roll rates and the severity implications of these, and then when we then, went through and evaluated that we did break, under various stress testing situations that we put them through, they broke through principle, that's when the discount rate came in.

It was pretty much the AA that were impacted and we're primarily letting out the AAA with went to AA that we felt the collateral was quite strong on.

This is Laura, I just want to repeat -- Eric, I just want to repeat that in addition to the invested asset schedule that is posted on our website these talking points will be posted later this evening.

Okay.

That's helpful.

Last question, either Jim or Walter, getting back to the larger discussion that we've been having about core earnings, and run rate and all that, it sounds like, and my ultimate question is, am I hearing your message correctly, that while earnings may have been in the neighborhood of $0.80 in the quarter, excluding, let's call these items one timers, it sounds like what you're, what I'm taking away, is that it sounds like business conditions deteriorated as we went through the quarter, and that if we were to look at, for example, results for the month of December, and multiply them by 3, we wouldn't get to $0.80 or to put it differently, that the run rate is not $0.80.

That's what I'm taking away.

Am I taking away the right or the wrong message?

I think, you're taking away, you're basically factoring in what we're trying to tell you.

There was, a huge impact based upon change.

Change that took place in the quarter.

The thing that, that that then drove, and like I said, we are not factoring in the impact on our basic management fees and other things as relate to that, as it will affect the full year look.

The other thing is there are also expense elements within there that, as we looked at our performance, we had lower G&A expenses that related to lower (inaudible).

So there are elements plus and minus that go into it.

That's why we're very cautious about giving you a firm number on run rate.

We certainly are reflecting and our strategies understand the implications of where the market deleveraging are taking and we're trying to explain to you these convergence of these other changes that are taking place.

As somebody indicated, if markets remain stable, a substantial portion will not impact us.

There are a lot going through it, Eric, and we're just trying to give you the road map to help you with that element of it.

But there's a lot of moving parts in this one.

I respect that.

Thank you.

This set of slides was very helpful.

Thanks to Laura for putting it together.

Awe, thanks, Eric, no credit?

I know you helped out Walter.

Thank you, Eric.

Thanks to everybody.

Our next question comes from Colin Devine with Citigroup.

Please go ahead.

Hello there.

I have a couple questions.

First, with respect to the, I guess VA dock adjustments, what I want to get a sense of, is how confident are you in the DAC now?

What sort of market return assumptions do we have?

And also, with respect to the charge related to volatility, and taking that out, am I mistaken or did that go into earnings in the third quarter and sort of why is the change?

And then just a couple other things.

I thought I heard you give the goodwill balance and I missed it.

If you could repeat that it'd be very helpful.

$1.1 billion Colin.

I'm sorry, how much was that?

$1.1 billion, I'm sorry, I thought you finished that Colin.

Do you feel you've built enough liquidity now or is this going to continue to drop?

And finally, there was a big jump, $2 billion jump in other liabilities on the balance sheet for the quarter.

I just wonder what that related to?

What we factored in, is we analyzed and we looked at this working with third parties and looking, and certainly working with, had to be reviewed by our audits.

The turn around in markets over the last six or seven drops, and how quickly once you determine the bottom, those turn arounds took place and what's the size of them.

Based upon that, we're looking over our mean reversion period for the five years we came up with a factor that we felt provided us the compounded annual growth that would occur.

Am I confident?

Yes, I am confident.

or I wouldn't have gone with the number.

As you know, we constantly evaluate it.

If it's, as markets change, we will impact that.

So that's that.

Walter, just to interrupt, are you back then, sort of in the middle of your mean reversion or assumption quarter?

Or are you still sitting at the top of it.

And if you have another weak quarter first and second are we going to be back with this?

Or do you now have some mean reversion room if you like?

Well, first of all, it's not linear and it's based upon what we've seen in the pattern.

Certainly in the -- in this current year it is not expected that, to use your term, it's probably in the middle of the pack, using your element within it, but I think you do know, it does ratchet up if you follow the history patterns.

Certainly we didn't build in that we were going to get a huge rationing in the initial period.

Okay, what was the second question?

2 billion and other liabilities.

I'll get the answer.

Colin you asked--?

Liquidity, is it going to continue.

Do you feel sufficient for what you need?

The answer is yes.

And let me just say on two bases.

One, we have more than ample liquidity today.

We're preserving it.

It's been dear price to do that and I think you know that.

The other thing is we build substantial amount of liquidity during the year.

So what we now have is -- and we saw it's all the back-up liquidity that we have.

So we feel we have adequate liquidity and we'll evaluate the situation as we evolve through the year.

But Colin, this is also something that we can deploy as soon as we feel things have calmed down a bit.

And listen we know you can't go to the debt markets and the cost is too high.

We're just keeping a very good comfort level, but at the same time, if we think things will settle and there wouldn't be greater marks against things that you buy, we can start deploying that back into the marketplace which we will over time.

This is the first time in a long time that we actually feel we're being compensated for taking risk and that certainly is a factor.

One just final one to go back to the investor day.

I think Jim and Walter, you made some pretty strong statements there, that you didn't foresee a scenario where Ameriprise would go out and need to raise capital.

Yet certainly the numbers I'm looking at would seem to tell me that continues to the be the case.

But I think there are many of us listening to the call that would appreciate a reconfirmation of that.

I can give you reconfirmation of that and I can say that on, the basis that the capital I believe we have, the liquidity we have, and the asset strength on which it rests on.

And the basic business model.

Thanks very much.

You're welcome.

Our next question comes from the John Nadel with Sterne Agee.

Please go ahead.

Even the second time around.

Sorry.

Just two quick follow-ups for you.

One, is it fair for me to assume that the sequential jump in the allocated equity to the annuities division, I think it was up about $500 million sequentially.

Had huge fixed annuity sales, is it entirely related to that or is there some of that related to the end of moneyness of the VAs.

I think it is related to, certainly it was increased -- and I think that is primary and then we also have -- we're reallocating based on co-bearing and just an adjustment on that.

Right now those are two prime drivers.

Yes, I mean, we're getting good flows in on our fixed annuities and we're actually, even though we're sitting with a lot of liquidity, we're able to invest at nice spreads now to give us good returns.

That's something that's -- the end of this year.

I'm sorry, this is Laura, you can look in the supplement and you can see exactly how much both variable and fixed increased.

That's right.

You're right.

So then two more quick questions, maybe bigger picture.

TARP, is there any update you can provide?

Obviously we had a change in the administration, change in Secretary of Treasury.

I think talking to most life companies, they're still in the dark and haven't heard much, but I guess, can you update us on what you've heard, if anything?

Second, around that, there's been some new proposals, to make it more stringent or more restrictive, upon, especially the senior officers of companies that participate.

Limiting compensation, travel, various other things, and so, especially in conjunction with your comments about, not needing to raise capital, are you thinking about, are you thinking about TARP any differently if you were approved to participate?

That's a great question.

Let me tell you what we do know.

First thing is we did apply, second we passed through OTS and it's that treasury.

The purpose of us applying, we did feel we're in good capital position, but in a situation where environments are quite volatile or other competing companies are applying for it.

We felt it was essential that we did apply.

It was meant to give us the contingent capabilities and evaluate other opportunities.

If those were changed dramatically obviously that would go into our decisioning.

Since we haven't heard back everything's been filed, and it's been moved across and we're operating on the basis that we have ample capital to move forward.

If we hear from them, then we'll consider it.

Yes, I think it's important to note, in last quarter there, was, only strong companies and so you know, there's that whole thing that you don't want to look weak if you're strong.

On the other hand you never know what the situation arise so we look at it as, again, something to explore.

We think that we were past treasury, but things, subsequently as you're hearing and I'm hearing, things are changing.

It's based on both a defensive posture, as well as a posture to continue to invest and grow.

If those things change, or treasury changes the correct purpose of the program or what they were looking to achieve, we would have to evaluate just as they're still evaluating what they're going to do with any additional funding.

Okay and then maybe somewhat relatedly, but more recently there's talk about the good bank, bad bank, I'm just wondering, based on your understanding of at least what's been floated thus far, in your status, at least as a thrift, do you expect or do you, as you look at the proposals or what's being floated, do you expect that you'd be able to participate, by selling certain assets if you so desired to the government?

At some, at some price?

And then, I guess also related to that, also, just confirm whether you can based on your current bank situation.

Are you eligible to issue, if you needed to, FDIC-backed debt?

Let me, let me just start with, the good bank, bad bank.

First, I think that's evolving.

I think the question is, what is it, what type of securities at what price?

I think on our way of looking at it, we do hold securities, we have marked those securities, and we do think that many of those securities we mark will recover.

We do have the ability to hold, for maturity.

That's why we also have a good liquidity position.

Just because that's set up wouldn't necessarily mean we think it would make sense, depending on what the price is.

I appreciate that.

And what we'd do as an alternative.

So that's really the first thing.

I'll let Walter--.

On the FDIC the prime verses for debt, that is, if you have debt that's maturing by June of '09, you became eligible up to 125% of that.

We do not have--.

Got it, so you don't have any of that.

Understood.

Maturity is November of 2010 and then you default to a different logic which is a percent of the -- of your position in the -- at the bank.

So we don't feel that that is applicable.

We certainly, if it's open to the holding company aspect, if they would evaluate on the liability of that, we would certainly entertain it, but I don't think that's been determined yet.

Got it.

All right thanks very much.

Appreciate it.

You're welcome.

Our next question comes from Eric Berg with Barclays Capital.

Thanks just one follow-up.

It seems like you have a different view of mortgage securities than you do with corporate debt.

There was a very significant loss in the high yield area of corporate debt, much less in percentage terms but quite large in dollar terms in your investment grade portfolio.

Yet you seem inclined to classify what's going on in the corporate debt area as temporary.

What's the difference in your judgment between what is happening to corporate bonds and in particular, why do you view those reductions in value as largely temporary whereas you've begun writing, declaring as permanent your Alt-A and to a lesser extent prime RMBS?

Thank you.

Ted's here.

Let him take it.

Why don't we both jump in.

On the corporate side, look, it's obviously credit by credit you've got to look at these things but I'll just give you the types of movements we're seeing.

I'll just take a couple of corporate bonds that are obviously in the higher grade sector, but if you take a look at the AT&Ts of the world and the -- and the Verizons of the world, you go back to November, these bonds are trading in the $80 range.

They were trading in the $107 range a week or so ago.

So, I think part of the message on the corporate bonds side is there are specific corporates that we may have an issue with that we may have to write down.

You're going to take some hits in this environment, some bankruptcies et cetera.

But overall, if we look at, particularly the high grade corporate debt sector we think there's a lot of missed pricing going on and quite frankly that's the opportunity that relates to the fixed annuity sales that we've been having.

When you're talking about the Alt-A RMBSs, you're talking about some specific securities that I think Walter can give you some specifics on and that's more, that's very specific in terms of the quarter.

So what happens, Eric, we get the specifics as it relates to the roll rates, delinquency roll rates, we also get the analysis, the severity and things going through delinquency and then what they're ultimately liquidated at.

That's what gives us our initial fact pattern.

We then look at different classes within that and looking at our collateral position.

So we then model, and this is where you get to the modeling, which will go out, for quite a long time, saying that we believe these severities will continue or ratchet and then you hit different reset points.

It's a lot more modeling that gets in.

Once you get into that model and you break your principle, you then go on order pile on your discount rate.

So it is more the modeling and the variability that's in those RMBSs that really give you the different impacts and you look at the pricing services and you look out there, they're all over the place.

So you can't even use those.

Course you get to corporate the pricing service is all there, still being impacted by discount rates or liquidity, there are still more analytics that you're doing because you're not there just dealing with a model, you're dealing with cash flow, you're dealing fundamentals in the corporation.

You kind of know a Company that's going to have a problem and one that's not, right, Eric?

The mortgage is much more modeling sensitivity.

You can see the disparity between the two views you might have here, although, quite frankly, when you get to the slide and the things that we've taken, there are specifics that we've taken these hits on.

Some of the modeling on the RMBS, we've projected we're breaking through in 2015, 2017, 2018.

Like I said, we looked at it, we modeled it, and looked like it was going to be breaking in, but that's when we took the impairment.

That's explains it, thank you.

Operator, this is Laura Gagnon.

We're now about 15 minutes over our allotted time.

We'll take one more question.

Prior to doing that, I just want to follow-up that the other asset question about the other liabilities increase actually meets (audio difficulties) that increase related to collateral for the variable annuity hedging program.

On the counter point.

Operator, can we have one more question please?

Sure, our next question comes from Thomas Gallagher with Credit Suisse.

Please go ahead.

A follow-up for Ted, if I could.

On the, kind of what you're seeing on the structured side, Alt-A deterioration is p pretty widely publicized.

That doesn't come as a big surprise.

Just curious on your prime nonagency RMBS.

Some small losses but I think for ordered trends in the market have been big increase in delinquencies in prime.

Have you all, and it sounds like you've taken some assumptions of further deterioration on Alt-A, but what is sort of baked into your assumptions on prime in terms of how things play out?

Well, I'll let Walter jump in on some of this too, but I think the main message we'd give is that we tend to have older vintages here, we're feeling much more comfortable about those vintages and the types of deterioration that we're seeing or not seeing as the case may be here.

And so again, when we sit back and we talk about the high quality end of the portfolio, believe me my fabulous fixed income team has spent hours and hours and hours going over this and we're feeling very comfortable with the nonagency prime RMBS principally from the older vintages aspect.

Where the Alt-A's that we've gone over a couple times on this call, there's a lot of work hat's going into looking at, quite frankly the deterioration and the sensitivity of the models to that deterioration, et cetera.

So we're feeling pretty good about it.

Walter, do you want to add anything?

No, I'm looking on to the master and you're spot on.

If I could just ask one more question.

The $1.1 billion of goodwill, is that largely Threadneedle and Seligman from those acquisitions?

And then, should, just broadly speaking, can you just talk a little bit about the process that goes into testing?

I think the FASB is actually implementing new goodwill impairment standards for 2009.

I don't know if this is part of that or if this is just due to the fact that AUMs are down so much that there could be impairments?

Thanks.

It is actually due to, the three largest, obviously there was goodwill, when (inaudible) acquired by (inaudible), but that's not the bulk.

The bulk is really Threadneedle, Seligman and H&R Block.

Those are the fee generators.

We are going through basically a two phase testing right now.

It does relate to obviously the complements of changes that have taken place as relates to the acquisitions in the fourth quarter and then drop in the market, in our market value.

We are now evaluating the fair value of the firms.

We have an outside accounting firm in doing that.

Looking at the allocated equity that we have associated and seeing if there is any basic potential impairment there.

If it fails that test, then we have to go through a valuation by third party evaluating a deep drill to look at the value of the firm and -- but we're not there yet.

We run through and then the other thing, with the market drop, you have to look at your control premium when you aggregate all your fair values to see that you're within a certain factor that the SEC has prescribed as acceptable.

So we are in the process of doing that and we're working through it and obviously as you've indicated we'll have that done before February.

Thank you.

Excuse me, in February, not before.

Listen, I want to thank you all for listening in tonight.

I know it's been probably a long few days for you, and a long year already, but again, let me wrap up by saying even though it was a tough quarter, we wanted to recognize that in our financial results where we saw it would be prudent and appropriate so that we would position ourselves to deal with 2009 if it's difficult but our core business is quite strong and stable still.

We'd love for activity to come back with markets being more stable.

But we're, we know that if that doesn't occur, we have to take the actions that we need to do and we've been doing that both from an expense side, as well as looking at even opportunities as they come along here in the core businesses.

Against our advice model and we will continue to manage prudently.

We think the decisions we made since we become public put us in a good position to do the things we have done and maintain a strong balance sheet through one of the most difficult environments that we all have experienced.

We still feel good about our business and our Company.

We feel good about the position we're in on a relative sense.

We all would like the markets to improve or at least stabilize so that we can get back to a more core business, but having said that, we think that we can continue to navigate these markets and continue to make the right investments as we're doing today for the meeting in the long-term for when things recover.

We appreciate your time.

If you have any other questions, please call Laura.

Laura, you're going to stay?

I'm actually not in my office in Minneapolis, I'm residing in New York.

If you'd please leave me a voice message on my number, 612-671-2080 or send me an e-mail, I'll be replying to your follow-up questions approximately from 9:00 Eastern until midnight or whenever we get through what you need.

Thank you.

Goodnight.

Thank you, ladies and gentlemen this concludes today's conference.

Thank you for participating.

You may all disconnect.