阿默普萊斯金融 (AMP) 2013 Q1 法說會逐字稿

Welcome to the first quarter 2013 earnings call.

My name is Loraine, and I will be your operator for today's 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. Alicia Charity.

Ms. Charity, you may begin.

Thank you and good morning.

Welcome to Ameriprise Financial's first-quarter earnings call.

On the call with me today are Jim Cracchiolo, Chairman and CEO, and Walter Berman, Chief Financial Officer.

Following their remarks, we will be happy to take your questions.

During the call, you will hear various references to non-GAAP financial measures, which we believe provide insight into the Company's operations.

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

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

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

A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in today's earnings release, our 2012 annual report to shareholders, and our 2012 10K report.

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

And with that, I will turn it over to Jim.

Good morning and thanks for joining us today.

I'm going to provide my perspective on the business.

Walter will follow my remarks with a review of our results, and then we will take your questions.

Yesterday afternoon, we reported good first-quarter earnings; overall, Ameriprise is performing well.

Assets are up across the firm, and we're generating very strong results in our wealth management business.

We are executing our strategy, investing in our growth areas, and strengthening our position in our core businesses.

In terms of the economic environment, I feel better than I did a year ago.

Equity markets are stronger in the United States, and the economy is on a more stable ground and growing slowly.

Across Europe, the markets are a bit weaker, consistent with the economic environment there.

However, we are managing the headwinds caused by very low interest rates, although this pressure has been offset by gains in the equity markets.

Walter will take you through the numbers in detail, but our financial results reflect a good start to the year.

On an operating basis, net revenues grew to $2.6 billion due to strong growth in our fee-based businesses, offsetting the negative impact from rates and the loss of the bank related revenues.

Our earnings were $338 million, with earnings per share of $1.59.

And return on equity increased to 16.4%, which is an all-time high for us.

We expect to see ROE continue to improve over the next few quarters.

In addition, our assets under management and administration grew to a record high of $708 billion.

We are maintaining our strong capital position, generating good free cash flow and increasing our capital return to shareholders.

During the quarter we returned $454 million to shareholders, including repurchasing $360 million of our common stock.

As we've said, we intend to return the majority of our earnings to our shareholders annually, including the capital freed up from the bank.

And we plan to do so in a balanced way, based on the environment and the share price.

As you saw in the earnings release, we announced that we are increasing our dividend another 15%.

With regard to capital, we are focused on our core businesses and returning capital to shareholders in a prudent manner.

We often look at acquisition opportunities and how they can complement our business.

But at this point, we don't see any large properties in the marketplace that meet our acquisition criteria.

With that, let me turn to the business.

Our highlights for the first quarter reflect our progress, opportunities for further growth, and our continued focus on areas of improvement.

Advice and wealth management is producing excellent results as we continue our growth from 2012 into the first quarter.

Operating net revenues increased 7% to $1 billion, driven by record retail client net inflows and market appreciation.

Operating net revenues increased 10% excluding former banking operations, and operating PTI increased 39%, and adjusted for the bank it would have been 66%.

Operating margin increased to 12.9% due to the increase in productivity, our effective expense management and savings we targeted from our reduced technology spend.

In fact the 12.9% number included both the impact of lower interest rates on cash balances from a year ago, as well as the loss of the bank.

Ameriprise advisor client assets grew by 11% to $372 billion, driven by strong net inflows and equity market appreciation.

Client activity continued to pick up with exceptionally strong wrap net inflows growing to $4.1 billion, which is 41% higher than a year ago.

Productivity is also up nicely, with operating net revenue per advisor, excluding former bank operations, growing 9%.

Importantly, our advisor force remains strong; retention and satisfaction rates are high.

We continue to recruit good, productive and experienced advisors.

Because of better markets and the year-end tax season, recruiting has slowed in the first quarter, which is consistent with others in the industry.

We do, however, see a good opportunity to continue to bring in more quality advisors this year.

We are investing on our growth areas, building our brand through advertising and increasing efficiency through the tools and technologies we provide advisors.

The Ameriprise name was highly visible in the first quarter.

We launched the next phase of our national advertising campaign with spots airing during high-profile sports and entertainment programming and online video ads.

In fact our ad awareness has doubled with our campaign, so we are seeing terrific results there.

We also released our latest retirement survey, a continuation of our retirement check-in series to provide research and support to our advisors and demonstrate our position as a retirement thought leader in the industry.

With regard to our technology platform, which includes our new brokerage platform as well as all of our online capabilities, we are now focused on helping advisors leverage the benefits of the full suite.

This is a priority for us over the next 18 to 24 months.

We invested in this system because we believe it can help our advisors grow productivity, and when utilized fully, it will lower costs and enhance our overall client/advisor experience.

One of our largest opportunities for growth is in the retirement space, where we are already a leader.

We are focused on serving the consumers' overall retirement goals.

In fact, we brought out a more consumer friendly approach to enhance our go to market positioning; we call it our confident retirement approach.

It has tested very well with our advisors and consumers, and we've just begun to roll it out across our system.

The advisors who are using it are finding it to be a very effective way of deepening current relationships and developing new ones.

We are putting a concerted effort towards implementing this more broadly over the next two years.

Overall, it was a very good quarter for advice and wealth management, and we are pleased with the progress we're making in the business.

With good flows in productivity, as well as our continued expense management efforts, and even with the headwinds from low interest rates, margin is expanding nicely.

In asset management, we are building on our two strong footholds in the United States and Europe and establishing a strong global asset management business.

We are delivering good financial performance while managing a period of outflows, which I will discuss further in a moment.

Our assets under management are up 2% sequentially to $466 billion, driven by market appreciation.

However, that included the negative impact of foreign exchange, which was sizable in the quarter.

Operating PTI increased 10%, reflecting market appreciation and the benefits we are realizing from our revenue and expense reengineering efforts.

And the adjusted net pretax operating margin grew to 34.6% from 33.3% a year ago.

We have a good product platform in asset management, which we are continuing to invest in and grow, in particular within global equities and asset allocation products.

Meanwhile, we are maintaining consistent competitive investment performance, which remains a priority for us.

Regarding flows, Walter will cover the numbers for the quarter, but I wanted to take a moment to explain how we think about asset management, the overall strategy we are executing, and what you can expect from a business perspective.

Both of our major acquisitions, Threadneedle and Columbia, gave us asset managers with meaningful portions of assets under management, which included mandates from their former parents.

That created unique flow characteristics that we continue to manage today.

Threadneedle was part of Zurich, and it managed a significant level of insurance affiliated assets.

Our objective was to leverage Threadneedle's investment platform and asset base to build strong, third party related distribution in both retail and institutional capabilities to grow higher fee business while managing legacy assets.

We've been successful in doing this.

Today legacy insurance mandates represent a much smaller percentage of Threadneedle's assets under management.

This relationship is important, but we do expect to experience approximately $3 billion to $4 billion in outflows of these assets annually given the nature of the book.

That said, as we look at the business overall and invest to grow, Threadneedle inflows are higher fee, and we're seeing that dynamic come through in the P&L.

Like Threadneedle, Columbia had a level of assets directly associated with its former parent as well as assets that were influenced by relationships with the bank or its affiliates.

We approached the transaction in a similar manner to Threadneedle -- to build on the existing asset and client base, leverage strong investment performance and product offerings, and expand third-party and institutional distribution relationships.

While outflows of assets directly associated with the bank's pension and institutional area are largely behind us, we continue to experience several billion of ongoing outflows annually from our relationship with the bank and bank affiliated distribution.

In addition, we expect some level of outflows from a key sub advisor.

The core of the Columbia business is strong.

We are beginning to make good progress in growing in third-party and institutional.

We have good traction in our focused funds, and we are working to expand this more broadly across our intermediary platforms, as well as we are building a broader institutional pipeline and beginning to win more institutional mandates.

Looking ahead we expect flows to improve gradually this year.

Here is what you can expect from an overall business perspective.

Both Threadneedle and Columbia will experience outflows from assets that were directly or indirectly affiliated with the former parent companies, the majority being lower fee business.

We will leverage our platforms to build flows through third-party distribution in both the retail and the institutional channels.

We are organizing the efforts of Columbia and Threadneedle to use the strengths of the investment teams to better compete in the global marketplace with high demand products such as emerging markets, asset allocation, and global.

We are always focused on generating consistently strong investment performance, building on the product portfolio of 118 four and five star funds.

In fact, Columbia won five new Lipper awards in the quarter.

Reengineering remains a priority to maintain good profitability and margins as our flows evolve.

And finally, we will make decisions to drive profitable net inflows.

For example, we are executing our plan to align share classes with certain distribution channels.

In the case of our RIA changes it may impact flows in the near-term in exchange for improved earnings.

Overall, I'm optimistic about this business and what we can do with this business.

We have talented people, good investment processes, solid performance, and expanding distribution.

We're focused on gaining flows and building from the strong foundation we have in place over the medium term.

Let's move to annuities and insurance.

In annuities our business is strong and performing well.

We are generating good returns on a business that has a good risk profile with strong hedging.

Our flows are improving in our new volatility control product.

In addition we are building out the product line by launching three new managed volatility funds to help serve an even broader range of client and advisor needs.

As we move forward, we will also emphasize variable annuities without a living benefit rider to add to our already strong book.

We are launching 21 new investment options, including more advice embedded solutions, new asset classes like alternatives and commodities, and more funds and asset classes where tax deferral is valuable.

This is a good business for us, and we're looking to grow this book again.

With regard to fixed annuities, they continue to be a net outflows due to the effects of the interest rate climate and the reduced client appetite for these products.

As we look to 2014, we will be able to reprice a portion of the book that will take some of the pressure from this product line off our margins.

In protection, our insurance business is also performing well with good profitability in the quarter.

We have a diversified portfolio that is mostly comprised of variable universal life, cash value focused universal life, disability insurance and term products that are not significantly impacted by the interest rate environment.

We are beginning to see a nice pickup in sales of life products, with cash sales growing 12% year-over-year.

We are also pleased to see sales grow in our variable universal life product as well as continued steady growth in our index universal life.

In Ameriprise auto and home we had solid policy growth up 9% from our affinity partners and within the Ameriprise channel, resulting in premiums growing nicely, up 7%.

Expenses were well-managed; however, momentum was affected by increased reserves for an auto liability loss development.

Client satisfaction and retention for auto and home remain strong.

To summarize, we had a good quarter.

We continue to execute the strategy we laid out for you in November, and we are making good progress.

We are investing to maintain good capabilities while maintaining tight control of expenses.

Now I'd like to hand things over to Walter for a detailed review of the numbers.

Thank you, Jim.

Ameriprise delivered strong financial results, particularly in our key areas of growth, advice wealth management and asset management.

These two segments represent 60% of our total revenues and grew 8% on a combined basis when you normalize for exiting the bank.

In protection and annuities revenues grew in line with our expectations, particularly in light of continued low interest rates.

Let's turn to earnings on slide 4. Pretax earnings from advice and wealth management and asset management together increased over 30% excluding bank earnings in the 2012 quarter.

Similar to the revenue picture, we are seeing the same trend for operating pretax earnings in these segments.

Let's turn to EPS on slide 5. Excluding the bank, we had a solid 13% growth in operating EPS to $1.59 per share.

As we said, we plan to return 100% plus of earnings to shareholders this year.

Plus the $375 million freed up from exiting the bank.

The return of capital associated with the bank will effectively offset the lost bank earnings from an EPS perspective by year-end.

However, because of timing, earnings-per-share was impacted $0.04 on a year-over-year basis.

Return on equity hit an all-time high in the quarter at 16.4%, and we see an opportunity for further ROE expansion in 2013 and over the longer term.

Moving to the segment discussions, in advice and wealth management the strong year-over-year PTI growth trends were driven by underlying fundamentals of the business.

Client assets grew 11% to $372 billion, and we had record wrap net inflows of $4.1 billion.

Advisor metrics were strong; we continue to recruit high-quality experienced advisors with continued high retention rates.

Advisor productivity reached a record high of $104,000.

In the quarter, low interest rate had a negative impact of $10 million on earnings year-over-year.

The impact of low rates will be approximately $10 million per quarter for the balance of the year.

As Jim said, we remain focused on managing expenses.

Excluding the bank, G&A expenses were down 3%, primarily from the wind down of the brokerage platform conversion expense.

Year-over-year new brokerage platform related expenses declined $8 million, though a nominal amount of training expense will remain for the next quarter or two.

We will continue to invest in business growth initiatives, but we do not see any projects of this magnitude in the near-term.

One of the most compelling results in the quarter is the AWM margin, which on a reported basis was 12.9%, up 300 basis points.

Good results in their own right.

If we exclude the bank from the prior quarter, margins would have expanded 430 basis points over the prior year.

Turning to asset management, we had solid earnings of $144 million, up 10% over last year.

We were able to deliver earnings growth despite being in outflows by reengineering our revenue and expense basis.

In the quarter, we had one less fee day, which impacted revenue growth and profitability.

Overall operating expenses were up 4%, primarily from the impact of market appreciation on distribution fees, and G&A expenses remain well controlled.

As always, we will continue to focus on both revenue and expense reengineering opportunities to maintain solid profitability and margins; make the necessary choices, particularly around fee levels, to ensure our flows are profitable; and execute the strategies necessary to achieve positive flows.

Let's turn to flows in more detail on the next slide.

In the quarter, we had a total of $5.7 billion of outflows.

This was higher than anticipated, but consistent with prior patterns of outflows in a few specific areas.

For retail, overall flows were flat, with strong $1.7 billion of inflows at Threadneedle.

This was driven by strong consumer confidence and good sales in a few key products, particularly in Europe.

We recognize that US retail flows remain a challenge.

First, a large distribution partner continued to rebalance asset concentrations.

Second, we had continued outflows from a third-party sub advisor.

As we mentioned last quarter, we were also taking actions to improve the profitability of flows by changing the share class that we are offering in the RIA channel.

This resulted in outflows this quarter, and we expect to see more over the next few quarters.

For institutional, outflows were high at $5.5 billion, though primarily from low fee assets.

At Threadneedle, $2.2 billion of the outflows were largely from normal outflows from legacy insurance assets and also included $1 billion from a mandate in Japan that we previously disclosed.

For institutional at Columbia, there were approximately $1 billion of outflows from low basis points assets including Balboa.

In addition, several clients took money off the table in both investment grade and high-yield credit mandates, given strong performance in these asset classes.

Turning to annuities, operating pretax earnings was $156 million, which was in line with our expectation.

Variable annuity operating pretax earnings were $109 million, down 18% from the prior year period.

First-quarter results were impacted by a $7 million higher DAC amortization and benefits expense related to our third-quarter 2012 unlocking, which we had discussed last quarter.

Additionally, there was $10 million less favorable mean reversion compared to a year ago, and the prior year period included a $20 million favorable actuarial model adjustment.

In fixed annuities, operating pretax earning declined $9 million.

The pressure from low interest rates continued to impact the fixed annuity block.

In the first quarter, the impact from low interest rates was $17 million on a gross basis.

Partially offsetting this was a benefit to investment income from the accretion associated with assets transferred from the bank in the fourth quarter.

We expect the pretax earnings impact of low interest rates to be $15 million to $20 million per quarter for fixed annuities.

By year-end, we will begin lowering our interest rate exposure by resetting rates on a large five-year guaranteed block of fixed annuities.

As previously mentioned, we adopted a new methodology for allocating equity to our product lines in the quarter.

The new methodology reflects the higher requirements of rating agencies or regulators and also allocates contingent capital for stress scenarios, mainly to support our variable annuity book.

This quarter, the annuity segment's return on equity was a strong 16.2%.

Moving to protection on slide 10.

Operating pretax earnings were in line with our expectations at $110 million.

The continued strong results in our life and health businesses were offset by lower earnings for auto and home.

Life and health earnings were strong in the quarter from favorable disability and long-term care claims experience.

It was a good quarter for sales.

Both variable universal life and index universal life sales were up after refreshing our product last year.

Auto and home has continued strong new policy sales growth across market segments, primarily from our affinity relationships with Costco and Progressive.

However, earnings were a bit lower as we built reserves related to prior-year loss development.

The protection segment generated a strong 16.7% operating return on allocated equity in the period.

Let's turn to capital on the next slide.

We returned $454 million to shareholders through dividends and share repurchase in the first quarter.

We have been able to consistently return more than 100% of earnings to shareholders due to our business mix shift, risk management capabilities, and strong balance sheet fundamentals.

For the rest of 2013, we anticipate that our capital actions will drive continued ROE expansion and will neutralize the EPS impact of exiting the bank by the year-end.

As Jim said, we announced that our Board of Directors has approved an increase to our quarterly dividend to $0.52 per share, after our regular annual dividend review.

This dividend brings us to a 2.9% dividend yield, and is in line for our strategy to move towards a greater portion of our capital returned in the form of shareholder dividends.

With that, we will take your questions.

(Operator Instructions)

Eric Bass, Citigroup.

Hi, good morning.

I was hoping you could talk a little bit more about the environment for recruiting new advisors and whether you view the slowdown in hiring this quarter as a blip, or is it becoming more difficult to attract the advisors you are targeting?

And I guess related to that, do you expect any impact if new disclosure rules for compensation packages offered to advisors or advisor recruits go into effect?

Okay.

Well, what we have seen is, we started to experience a little slow down at the end of the year and the first part of this year, and we think that is consistent -- and you probably heard this from some others, because the market did pick up.

There were a lot of changes at the end of the year because of fiscal policy and tax policy, and there's a number of things that I think because of dividends and reinvestments that people were much more focused on how they were going to manage their portfolios.

So, we saw that a bit more this year than we did in previous years.

I think that is across the industry.

Having said that, we still have a good pipeline that is starting to rebuild as people come out of this period.

And we think that we will be able to ramp it up a bit as we go through the following quarters.

We have also been focused a bit more on higher productive people, and so that area is always a bit more competitive, but we have been really attracting some quality people into our franchise.

Regarding the new disclosure rules, depending on what they ultimately decide, it will initially have some effects, I would think, as people start to think about how they would disclose information in regard to their clients and what that would mean to them.

Having said that, I think it could actually work as a benefit over time, in a sense that there is -- a lot of people move between wire houses, and there is a question of why do they do that?

Are they doing it just for compensation or for a change in environment?

In our case, as we attract people over, we are attracting people who are actually coming over to work in a little different model with a bit more advice proposition, and we think we can probably help them explain to their clients what we would provide them that would actually help them work with their clients even more fully.

So, it would be a change.

I think any change always has an effect.

Having said that, I think there are some good things that we could highlight that would explain why those people are making the change to move.

So, we will see where it goes as far as what the regulator ultimately decides.

But we are preparing ourselves to deal with that effectively.

Okay.

Thanks, that is helpful.

And then if I could just ask one quick one on the asset management side.

You talk about a lot of the outflows being in low margin assets; I was just hoping you could give us a sense of the margin difference between what you are seeing on the institutional outflows and then on the retail assets where you are seeing inflows?

Kind of a rough margin differential between the two.

Well, I think we would break it down to just one or two components in institutional that Walter mentioned.

So, and I will separate the Threadneedle from Columbia just for a moment.

Clearly, we suffered $2.2 billion of outflows from Zurich related assets; one was a mandate that we recognize all incremental from our normal flow picture.

But on an ongoing basis, these are closed books, et cetera, and there is always a draw down of assets.

We have explained in the past that the fee basis, even though it's a good level for us to generate profitability, is much lower than new institutional mandates that we do win in the international marketplace.

And therefore the flow picture always looks, whether even if it's a break-even at that point, it's a real positive for us if we are bringing that in through new mandates through the third-party institutions.

Columbia is a little similar in that regard.

There were bank related, like Balboa, that they sold off that insurance book.

There were bank related affiliate distribution related to their intuitional activities that also have very low basis points.

And those compared to new institutional mandates are significantly different.

Now, the one thing we did get affected in the first quarter that was of higher fee to us were some mandates that we had in the credit area, not because we didn't have good performance, we had excellent performance, but because there was a rotation out of some of that area at the very beginning of the year, when everyone thought rates would start to back up, et cetera.

And so we experienced that rebalancing.

Now, the good news is, from what was freed up, including some capacity in these areas, we do have wins that will be funded in the second quarter; it just didn't time correctly, and you can never count on the timing of those things.

So, we do see some improvement in that regard from what I would call the third-party institutional.

It doesn't mean that we won't continue to get affected by what I would call the ex parent stuff, including here with Columbia.

And that is an effect.

And the retail distribution -- as you know, retail always has different fee structures than the institutional.

However, some of those fee structures for outflows are again through bank relationships as well as through sub advisor, and so their fee adjustments will be a slightly different than it would be if we are winning a new third-party that doesn't have some of those fee structures attached to it.

And the last point was Walter made on the RIA.

RIA, we were selling the wrong share class when we actually took this over, and even though we will experience outflows as we did in the first quarter, over time, this will actually be a better business for us, but we felt appropriate to make those changes.

So there was a confluence of events that really hit in the first quarter.

Having said that, we are continuing to be very focused on building flows in what we would call more profitable businesses, as well as expanding the distribution through the third-party retail and institutional.

But we will still experience outflows from the ex parent.

Now, having said that, we've got a good base; we continue to re-engineer to offset some of those losses.

And at the end of the day I think we can get back into a growing business, but, yes, right now it's going to take a little time, particularly if you look at the overall flow picture.

Got you, thank you very much.

Nigel Dally, Morgan Stanley.

Great, thanks.

First question, with the improvement in advisor productivity, can you discuss whether that -- would you expect that to be sustained, or was some of the client activity perhaps a little abnormal given the fiscal cliff and then the rush to put cash back to work in the past couple of quarters?

What we saw, again, is -- let me start with a little longer term and then what we saw in the quarter.

We saw longer-term is that we have been getting very good, strong inflows into the Company from a client perspective over the last year.

And we've also seen some strong inflows consistently into our wrap business.

I think the first quarter this year was exceptionally strong.

Now, two things a little to even out sort of that trend a little bit.

We did see a pickup in cash, holding cash at the end of the year as dividends were more significant, as well as people maintaining some of their cash to see what happens at the end of the year.

But if you looked at our balances, our cash balances are very high still, and they only went down about $1 billion that rotated back in through the wrap business.

So, I would say overall, we still see a good trend of new business coming in that is going into the wrap fee-based area.

And our cash balances are still at an abnormally high, even though they've come down a little from the end of the year.

So, as long as markets don't ratchet tremendously, we don't see a fundamental change in that at this point in time.

In regard to some of the current period activity, it's picked up a little on a transaction, but there it's not at a high level yet.

And so, again, I think as people feel more confident and start thinking about longer-term, we may see a further pickup there; but again, that all depends on environment as well as market conditions.

But I would say what we are experiencing in productivity from the fourth quarter to the first quarter, I don't see a fundamental change.

I can't predict; summer months always slow down a little bit, but that's as we look further out.

Okay, thanks.

Second, just going back to the issue with regards to flows.

As you mentioned in your comments, most of outflows continue to relate to BofA, Balboa, [Mavco] and Zurich, so out of your $430 billion or so of assets under management, is it possible to get details as to how much of the AUM relates to those buckets, if not in isolation, at least in aggregate?

Okay.

I think we could probably -- we will actually see what we can put together.

I think we disclosed now we are separating out and giving you a line item to talk about Zurich.

I think we don't like to break out sensitivity on client per se, but I think what we could do is probably give you at least a perspective on some of these affiliated type areas, but let me check with the group and see what we can do to provide some information.

What we did try to say to you clearly in this quarter is what Zurich will continue to mean to us.

So don't get me wrong; there's replenishment in a sense of what that basis of assets and does it appreciate, et cetera.

But there will be an ongoing consistent from that day we bought Zurich -- Threadneedle from Zurich.

So I don't see that fundamentally changing as long as we have that mandate, which is a good relationship.

In Columbia, I think it is going to be similar.

You have some of these low fee type of institutional businesses that were part of bank relationships.

And I think that has come down a lot, but there are still billions left there.

But they are at very low fee-basis points like Balboa.

And then there are the ongoing relationships, including things like US Trust that will be a good relationship that we want to continue to focus on and invest in, but just based on the starting point of that being the primary asset manager for the business, we will have experienced normal outflows as that business continues to diversify a bit.

So, we will see what we can provide you moving forward, but I wanted to be clear up front, here, that on an ongoing basis, for both of those it will be a few billion each, but we believe that we could manage that, and we believe that as we continue to redeploy our focus and resources for building, that we will offset that, particularly on a fee basis moving forward.

Great, thanks a lot.

Alex Blostein, Goldman Sachs.

Great, thanks.

Good morning, everybody.

Jim, thanks for the update on your appetite for deals.

I think it is helpful, but I guess broadly, it may be helpful to revisit how you guys think about excess capital with respect to deals as you continue to look for maybe other opportunities.

So, Walter, I think you highlighted $2 billion of excess capital.

I think you guys are move deployable; I don't know if it's intentionally or not.

But can we think about the $2 billion again?

If it's available for deals, you guys will look at everything, but over time if there are no deals, you will continue to return 100% of earnings, plus over time will be dipping into the $2 billion cushion?

I think you said that very well.

So, yes, that is exactly how we are thinking about it.

It doesn't mean that we won't look, but as I said, unless there is something that we feel is really appropriate for us that will further strategically add value and that we can get a good return for shareholders, our primary will be continuing to return to shareholders through buy-back and dividend, as we have been doing.

So, no change in that direction.

Walter?

The only thing I would add, Alex, excuse me, it's Walter, is that even as we go to add -- return more to it, we have the ability to accumulate a lot.

So if something does come up, we have the ability also to engage there.

Got it, helpful.

And then I just want to go back for a second to AWM on margins.

I remember a couple of years ago you guys were hoping to get to 12%, and now you've clearly -- at 13%, with still a decent amount of headwinds in the business.

Can you give us a sense where the employee margins are versus the franchisee margins?

And can we think about the target margin in that whole segment closer to mid-teens versus, I guess, what you guys used to target?

Yes, I would say, listen, we've been able to overcome significant headwinds.

As Walter outlined, just year-over-year, we are already at low rates as various, Bernanke made the latest adjustment back in August; that is another $10 million in the quarter lower than it was just last year, and we know how low that was.

And we've been able to offset that from improvement through productivity and expense management.

And then we took the bank out, which also really compressed margins by, as Walter said, 130 basis points on top of that.

So, if you put those two back in, you're close to 15% today based on what we said to you previously that we wanted to get to 12%.

And the 12% included interest rates coming back at the time.

So, we've more than offset the interest rate headwinds, and it actually has gone far beyond that.

In regard to your next question regarding the two channels, the employee channel is not at the margins we want them to be yet, as we continue to build the capacity and get the productivity where we want that to be as we've invested in that area.

So, we are probably around the break-even point right now.

And so as we continue to add productivity there, advisors, et cetera, we can definitely get that into the type of margins that we're talking across the business, which gets you, again, that boost that you have mentioned.

Got it.

Thanks for the color, guys.

Very helpful.

Suneet Kamath, UBS.

Thanks, and good morning.

Just a couple questions on the flows.

First, Jim, you had mentioned the RIA share class change and that had an impact on the flows, that you would expect that impact to continue going forward.

Can you just give us a sense of order of magnitude how much of an impact on the flows that had in the quarter?

In the first quarter, that was roughly about $600 million, and that was what normally would have been an inflow that we would have experienced to turn that into about a $600 million outflow, so the change was probably a bit more significant than $600 million.

Now, again, that was a repricing which closed out an old shale class, so there are some effects to that that people make a decision on.

We think we still have a good business there.

We think that a good number of people are staying in as the share class shifts.

Having said that, it was in effect in the retail flows in the first quarter, probably closer to the $600 million plus that would have been slightly positive, let's say, or a little -- a positive to a negative.

Okay, got it.

And is that about the rate that we should expect going forward?

I think in the second quarter, it might be a bit higher, only because it was fully enacted by the end of March, February and March.

So, again, we don't know exactly, but I would just say, second quarter would be sort of the bigger quarter possibly for it.

And again, I think even after that is over, economically, we will be better off.

Right, understood.

Turning to institutional at Columbia, in the past you guys have talked about a building pipeline and probably the biggest pipeline it's been, I think, as we characterized it at some point in recent quarters.

And my understanding is that pipeline in terms of mandates filling or funding has been delayed a little bit.

I was wondering if, A, you could talk about that?

And then, B, can you give us a sense of order of magnitude of what that pipeline is?

In other words if everything just magically funded today, is that a $1 billion, is it $5 billion, I mean just some sense of what we could expect if those mandates eventually fund.

Okay, so if we just look back over the number of periods, remember, we had to rebuild this.

We were on hold with consultants, et cetera.

We got off hold the beginning part of last year.

And so, since those points, our pipeline is the highest it's ever been, and it continues to grow.

We have, I don't want to give actual numbers here, but it is significantly up from where was two years ago and even nice strongly up from where it was a year ago.

And we are in a lot of pending finals, and we usually have very good win rates ultimately.

So, once we can get in the door -- now having said that, it's taken a little time to get a broader, what I would call a broader set of funds to be considered.

And I think we are finally getting there.

As an example I will give you this; we have wins to be funded of $1.4 billion.

Now again, you can't exactly time that.

We thought some of that would come in in the first quarter; it didn't, but we know based on a year ago, that a lot of what does win does get funded, but it does sometimes take a bit more than a quarter to do that.

So, I would just say that the pipeline is building.

I will ask the team what we feel comfortable with as we go forward, but there are billions in the pipeline and billions in the finals.

And so, what we already won is another $1 billion plus.

So I think unfortunately what we got hit in the first quarter is winnings didn't fund as quickly, and people rotated out of some very good mandates because of what they thought were going to happen in the fixed income market, and it was unfortunate that it compounded what that looked like.

Having said that, our team feels good about what they got in the pipeline.

It doesn't mean we won't lose some low basis point stuff from the bank affiliated type things that are very low margin that goes into those numbers, but we will try to clearly identify that for you moving forward.

Listen, we're not declaring success here.

We are declaring that we are hard at work.

We've got to build, and we've got to keep on getting out to the market and expanding.

But we do believe we are gaining traction.

It is just for you, and I can fully understand, it's hard to see when you see these substantial outflows from these categories.

That's very helpful.

My last question is on Columbia.

So, I think we're about three years after the close, and I think pretty much every year we have been in outflows.

And I understand that there has been some cyclical headwinds and the former parent stuff, and I get all that stuff.

But I guess my question is, as we think back to over the past couple of years, what if anything have you learned from the experience with Columbia that you would take to, say, another acquisition that you might decide to pursue down the road?

Were there any lessons learned that you could share with us?

Thanks.

There is always a lot of lessons to be learned.

So I would say things always take a bit longer than you always think.

For instance, you think some of the stuff -- let's say we're talking about flows; some of that stuff would either wash out quickly, or adjustments would be made, or you can be clear on what that is.

And it's not always easy to do that.

I would say, even when you integrate and merge, you may have a very clear plan and road map.

Having said that, the execution of it takes a lot of parties, whether they be internal, external, providers, boards, et cetera, that always take a bit longer.

You also, even in a deal, you've learned some things as you dig under the covers more, and whether you peel the onion in regard to what is really, from a parent perspective, or an economic, or a distribution.

Now, having said all of that, and if I had to retrace steps, I think we did an excellent deal.

I think we are providing a tremendous transformation for what we had.

I think we bought a good business.

I think we worked with a good partner in Bank of America and -- to orchestrate this and do this.

And I think if you go back to where we were and where we are today, and you look at our total asset management business combined, where we are generating over $0.5 billion of PTI, even with these outflows, could they -- would you have liked that to be done so the optics are different?

Absolutely, but for just like I did Threadneedle, I got optics of outflows, but I've created a wonderful business in Threadneedle with a diversified strong asset management company, number four in the UK market and expanding.

So, I would just say, you know what, the flows are an optic thing right now; but look at the profitability, look at the makeup, look at the positioning we have as one of the larger providers that we can build upon, and we've learned a lot.

So, if I had to do another deal, I will know a lot more about what I would do and say and how do I orchestrate it, but I also would say, if you look beyond the quarter or you look beyond the one indicator, and look at the total, and you can go back quarter to quarter and go back to the past, we've created a very large, successful -- we think will be very successful over time, but it's going to take more work -- asset manager that is generating very strong profitability.

I would compare it against anything in the industry.

Has a good product lineup, has good investment performance and expanding distribution.

So, I know it's hard, Suneet, as you look at the period and say, well, aren't the flows turning around?

But even if I suffer continued outflows from ex parent perspective, but I'm building a stronger business with stronger profitability, I think that is fine.

If I did another deal, let's say, and you buy it from somebody else, you're going to experience outflows in a consistent -- particularly if it was a parent owned entity.

But if you can derive good value from it, then I think we have to explain that a bit better than we've been able to.

Got it.

Very helpful.

Thank you for the responses.

John Nadel, Sterne, Agee & Leach.

Good morning, thanks for taking my question.

I have one on asset management.

Jim or Walter, if I look at the management fees as a percentage of average AUM -- in other words, the fee rate, it jumped up this quarter very nicely.

And I assume that is reflective of some of the things you've been talking about, a higher proportion of assets coming from retail, some of the lower fee business outflowing.

I guess my question is can we expect that that fee rate can continue to move higher from here?

And if so, is there any help you can provide us in terms of thinking about at what pace?

Yes, I think the observations you have are correct; and I think, again, there is a market factor in there and other elements.

So I think we can't be that predictive, but it's certainly in the two fee days less.

But with the shift, I think we should see that -- again, can't control the market, but certainly the trend line is reasonable.

And I would also say that we have more work to do regarding various pricing and things that we have with fee waivers, and caps, and various things to get that orchestrated even more appropriately over time.

Okay.

We did a lot of mergers; we did a lot of movement of funds, and I think that that has caused some issues for us, that we've started to make some changes with a year ago that is being factored in there that we need to continue to focus time and attention on.

Okay, so even the revenue enhancement side of that is not yet fully baked in yet?

No, I think we've got to do more work, including with our fund boards, to really go over that to understand what has changed in the dynamics and why.

We do have a good philosophy of giving and having good, reasonable fees.

Having said that, I think when we did a lot of these mergers and caps between two fund families, that actually put a bit more of a pressure and burden that I don't think is necessarily appropriate at this point.

All right, that is helpful.

And then, Jim, sort of right up front in your prepared remarks, you mentioned that you are not seeing, at least currently, acquisition opportunities that meet your internal criteria.

I was just hoping you could put maybe a finer point on that and help us understand maybe more specifically what those hurdles are?

Well, I think what I would say, and Walter can complement this -- we have a few hurdles.

So, one would be, we start off with the idea that, does this add value overall to our franchise longer term?

Because any deal that you do, you have -- just like Suneet asked, what are the learnings -- you have a lot to do with integration; you have a lot to do with change in flows, and people, and talent, et cetera.

And so you always have to look at that to say, does two and two equal something more than four?

Hopefully it doesn't give you three.

And so, the first thing is, does it add a complement to the product line?

Does it give you enough additional capacity?

Can you consolidate in the right way to free up resources?

And so, we go through that; that gives us a financial analysis as well, and economically does it give us as good a return as if we return it to shareholders in a different way?

And so, there are always opportunities; the question is can you get them to work for you, and do they detract you from the things that you think will build even a stronger business and present an opportunity cost or not?

So, it's not that we don't look at things; we look at things, and each of those properties have some benefits, and some of them that could be detractors or have some issues with them.

And I think as you also asked, we have continued to get smarter based on the learnings of doing Threadneedle, Seligman, and Columbia, now, so I think we are not naive anymore as we go in, but I think we've done a good job in each of these, and I think we factor in those learnings and our experience as we look at any other opportunity that approaches.

So, is the world continuing to consolidate at one level?

The answer is yes; you will continue to see transactions out in the marketplace.

Will we be able to play in them?

I think we do, based on our experience and our capacity and free cash that we can utilize.

But will we just do it because there is a deal out there?

The answer is no.

And so those are the things we take into account.

Beyond that, I mean, we have a very detailed thing that we go through to analyze whether something adds value or not.

So, I don't want to disclose that strategically here on a phone call.

All right, that is very helpful.

I appreciate the commentary.

Thanks, Jim.

Eric Berg, RBC Capital Markets.

Thanks very much, and good morning to everyone.

Jim, my question, I just have one, really bridges the asset management and the wealth management area, the advising wealth management area, and it is this.

It is striking to me that you've achieved continuing, significant success with your Wrap program, and yet the success -- and I think this would be probably to put it generously -- has been on-again, off-again in retail mutual funds.

Contrast the two businesses.

Why do you think you have been able to be as successful continuously bringing in net flows in the wrap area but not in retail funds?

So, I think, Eric, I think we are successful, because in our wrap area are the funds underneath it that, I think as an example, we continue to do well as Columbia, including in our channel.

Having said that, we have an open architecture channel, and therefore we are never going to win all the old business.

If you think about what we are experiencing for Bank of America and Zurich, again, these were proprietary businesses at one point that they captured a substantial amount of sales within each of those channels, just like we did at Ameriprise many years ago.

And it took us years to sort of go through that leveling out as an impact.

So part of that is what you may see in the overall fund types.

The second part is, to be very clear, now we are going to grow.

How?

Through third party.

And so even though we are maintaining good sales show, let's say at Ameriprise, and even let's say at some of the Bank of America activities as they further diversify, we now have to gain further traction.

And when we were RiverSource, remember, we started a third-party business; we were just starting to develop it.

At Columbia, they developed a third-party business, and part of what they did at Columbia in establishing that is some of their hotter products that they sold were unfortunately in just a few areas.

And so as those areas have changed now, some sub advisor and some type of funds where people have moved on and retired, they have been impacted a bit more by outflows.

But if we look at our gross sales, our gross sales are still good and strong, and we do a significant amount of tonnage.

However, we have been even having part of our redemption, and what we have to do is grow beyond those proprietary channels even more strongly now into third-party.

And so, that is really the changeover.

And so I would say that we need to work at this a bit longer.

We need to -- we took a major organization and merged it together over the last three years, and it's only at the end of let's say midyear 2012 that we are over the merger activities.

And unfortunately, I think we would've all liked to come out of this a bit stronger; it's requiring a bit more time and effort, but I think we got a lot of the good pieces in place to do that.

And we do see signs of success.

Having said that, we got a very big fund family today and a very big asset base -- we have $450 billion of assets under management.

We've got to get more cylinders firing to offset some of the ex parent stuff to get into a growth mode when we look at overall flows.

I think we may find it a bit easier to do that on a fee basis rather than in an absolute flow basis, and that is exactly what we experienced when we did Threadneedle with Zurich.

Our flows weren't oversized in a positive, but our fees were over time.

I guess if I could just ask one more question and you've touched on this, but I'm hoping you can build on your answer.

It is clear that you think, at least to me it seems apparent, that you believe this acquisition has been a success despite the negative optics of negative flows which I think have been almost every quarter.

If we could get a sharper point on what measures, not the measures that you see, but the measures that we in the public can see, what are the measures that we in the public can see that you would point to that you would think best speak to the success of this acquisition?

I will talk a few and I'll let Walter talk to the economics.

First of all, I would say we have a fund family that we are number eight in the US.

We, today, have 50 plus four and five star funds in most categories.

We have a more diversified and larger distribution platform than we've ever had before.

We have good talented people that have good performance in a larger areas than we ever had in capability.

We are a fund complex to be reckoned with out there.

I think you can compare the economics over, and the size and scope and the performance and the number of funds against any fund family out there.

And you can see that we are one of the larger more significant players.

That is a few, Walter, why don't you give him more on the economics?

Sure, and, Eric, clearly, it has been transformational from our PE, from our IRR objectives and we talked, it was 30%.It's been north of that.

And candidly from every aspect of financial AR, the program of both the capabilities that we now have and really the potential has really been a major shareholder value to the firm.

So on any measure we have looked at, this has been excellent.

So, I think you are asking an excellent question, Eric.

I think as I said, I think I would look at the more absolute dimensions and where we are situated.

The other thing I would just say is this, and we are only at the first or second inning of now taking Columbia, because we had to focus on integrating Columbia and putting Threadneedle with Columbia, and now we are really working on some global product, emerging market, asset allocation.

We've just brought in some senior talent there.

And we see some good opportunity.

We are expanding in Asia.

We set up offices out there and we are winning mandates already.

So, listen, I think we've got more work to do.

It is a competitive world.

There is a lot of good players in the industry, but we are a player today where in the past we were -- we weren't able to compete on a full-scale basis.

Now, it doesn't mean it's going to be easy, particularly to establish ourselves even more globally, but I think we have a lot of the capabilities and foundation to do so.

But we are going to work hard.

We've got to get those flows turned, we've got to win more business.

We've got to develop some of the more global capabilities that I think we already got some good things that are coming to -- will come to fruition towards the later part of this year.

So listen, we're not satisfied.

This is an area that we've got to get a bit stronger in and better.

But, on the other side, we are generating good strong profitability.

I think if you put us against a lot of, outside of the very largest players out there, I think you'll find that we are right in the mix, there.

And you can look at all the dimensions I've mentioned to you and I think we compare quite favorably.

More to do, some areas we can get better, but I think we are in good shape.

I appreciate your frankness and the comprehensive answer, and I look for to talking more with you.

Thank you so much.

Thank you.

Jeff Schuman, KBW.

Thank you, good morning.

I was hoping we could talk a little bit about the fixed annuity block.

Can you give us some sense of what the crediting rate or spread opportunity is when that book matures?

Are you talking about, it's Walter, you talking about the five-year book?

Yes.

Yes, what is going to happen here, if you take a look, it has two major components.

Primarily, there is an outside distribution channel which has a guaranteed minimum interest-rate that is going to be in the 3.5% range, which obviously on that basis we will honor that and adjust to it, but that will give you a comparison.

The balance of it however, both on the ID channel and some of the OD channel, is in the 1.5% range, and obviously that would then bring down, improve as we go into 2014 and start repricing the spread compression that we've had as we rebalance that.

Obviously we have to look at being certainly what is available out there from that standpoint and any alternatives to our clients and, but it clearly will be as we indicated this year we are -- the bulk of the $115 million that we're taking in interest-rate that would start to basically be mitigated in the area of the annuity as we go into '14 and certainly in '15.

Again it depends on environments, because I can't say what we are going to price at yet, it depends on what the rate is going to be out there.

But it certainly gives us that leg in to really readjust that and then be balanced with our shareholders and clients.

Okay, is that okay?

Yes, sorry I didn't quite, so the outside distributed stuff, the 3.5%, that is still some kind of a floor that would remain in effect, is that what you're saying?

Yes, absolutely.

Okay, so not so much opportunity there.

For that -- and that is about if you talk about the $4 billion, that is about 30% of that, $1.3 billion, $1.4 billion of it.

Okay.

And are there other similar blocks of this types of annuity that will come out of the guarantee period in subsequent years or is this pretty much the one kind of big block of this nature?

Yes, this is the big block, the other is the one-year that has been, a lot of it has been out of surrender, and obviously they have high guaranteed minimum interest rates.

Okay that is very helpful.

And then one other thing, we talked a lot about the share class and the flows on the RIA business but what is the base of a AUM for RIA business?

Right now I don't have that.

The RIA business space is, I don't want to guess.

You can --

Why don't we get back to you on the RIA base, and because I don't want to give something that is not 100%, it is not at the tip of my hands right now.

Okay and just one last question, we've talked in great detail about the different flow dynamics, but I went to make sure I understood what I thought I heard Jim say in his opening comments.

I thought I heard Jim say that all in, the expectation was that flows might improve over the course of the year?

Is that, did I understand the bottom line correctly that when we factor in all these bottom-up inputs that you still would hope to improve from this level?

Yes.

I think, again, we can't dictate when some of the lumpiness, some of the mandates change, but what I am saying to you and again, let me try to be clear, as clear as I can be right now.

We will, even after this year, okay, so let's say we will experience Balboa and some other things happening this year.

Even after this year, for some of these lumpy institutional low fee type of things, we will still, always, and so in Threadneedle the way I would look at it if I was you is this.

Are we gaining good flows in Threadneedle from retail and institutional through third party ex Zurich?

Because Zurich will be in an outflow on an ongoing basis from $3 billion to $4 billion a year.

And if the answer is yes, even if flows are break-even or negative, but they'll offset the negative inflows because of higher fee business, that is going to be a positive.

And so, I'm not saying we won't be in inflows in Threadneedle you can see in periods like including last year, we were in strong inflows in certain periods, but it is always, every quarter there is $1 billion or $1.5 billion of outflows from Zurich and you say well it's not that strong, that's a very strong good business of the net of those two.

Even if they come to break-even or positive after offsetting those outflows, or even negative to some extent.

We are still going to have some of that for Columbia as well.

We believe we can get into positive net inflows in Columbia.

Again, similar to what we're doing with Threadneedle, but we are always going to experience some level of outflow from the bank, bank affiliated distribution that are good agreements, good relationships, good base of assets.

But, I will tell you that when you look at the gross you're going to say well, why isn't it impossibly stronger?

I would say on the gross side it will be strong and growing, on the net side we will have some of those consistent outflows, but that doesn't mean it's a bad thing for us.

It means that it was part of the arrangement we made when we purchased this moving from a proprietary type of relationship to a third-party relationship.

But, our flows this year, we are targeting them to improve from what we've seen in the 1st quarter.

And we are targeting that we would gain more third-party activities, both in the institutional and improving in the retail.

And so, that is what we would say but we don't have a perfect crystal ball.

That is what we and the team are working on.

Okay, that is helpful and I think we all do understand some of these basic dynamics you're talking about, but I would just simply echo Nigel's point which is to the extent that you give us greater transparency, if you did a little bit this quarter with the Zurich outflows, I mean if you could give us even more transparency it's much easier for us to wrap our hands around and understand it.

I agree with you, I actually agree full -- so we will see what we can do appropriate, and that is why we try to have this conversation.

Your questions are right on target and I can understand sitting where you are, it is sometimes even sitting where I am, it's always easier as you break them down into different buckets.

So, we will see if we can even get better as we go forward.

Great, thanks a lot.

Thomas Gallagher, Credit Suisse.

Good morning.

Just to completely beat the dead horse here, just one other question on the flows.

The news or the guidance you are giving us on Threadneedle and Zurich assets, pretty consistent with what you said in the past, so that doesn't sound new.

The guidance on Columbia is new though just in terms of the expectation that you are going to continue to see outflows.

And I heard everything you've gone through, but I just want to know from your standpoint, because I think leading up to this quarter, the expectation that you had, had was that we would have more of a near-term end to the legacy flows.

So I just want to get a sense for what is it that you have seen behind the scenes?

Is it simply just the continued leakage?

Is it some new development on the US Trust side?

I just want get a little bit more color for what the change in tone from you is, your Management team just in terms of what you are seeing now.

Has there been a change or is it just more -- you've just gotten to the point where you're not willing to draw the line in the sand that this is going to abate?

So anyway, that is my one question on the flows.

Yes, I think, again, good question.

I think what it is, I think what we concentrated initially on was some of the larger buckets that we knew would adjust in the periods right after the acquisition.

We knew things like Balboa.

We knew that there were low fees prepaid type accounts and institutional accounts.

And a lot of that has occurred as we thought, maybe a little longer it took that we thought when someone says, we sold the insurance block, we figured that would go sooner than later and it's been a drip drip.

So, there are some of those institutional relationships that are still there.

Again, we are not going to try and move on them.

I mean they are there and they are good to the extent that they are there, but we know at one point they will move out.

We probably just assume that some of that would move quicker than it had.

The thing that I think is different is as we sort through all the lumpiness of it, what we also recognize now is, there is a also a continued large installed base of assets that we have a good relationship with Bank of America or their affiliates.

We want to maintain that relationship even beyond whatever the initial contractual period on an ongoing, we think it is good for them, they think it's good for them, we think it's good for us.

And so we are working hard to keep that their relationship.

Having said that, there was a level of concentration in there.

There was a level of asset base as they look to make some changes or they are dealing with how they want to look at their business that we know that we will be affected.

Similar too in a certain sense, not that these are closed book assets or anything, but similar to the sense of what we dealt with, with Zurich or even in Ameriprise's proprietary system at one point.

And so, now that we have greater optics to that, we understand a little more of what are the dynamics there, we are probably saying, this is what we are beginning to see more as we go further after the first level of the consolidation is over and the lumpiness is out.

And so, I don't know if we would have known all this initially.

We didn't.

Having said that, we don't think that it will in some way cause us not to be in a good strong business that we can grow, but it will be an ongoing affect and we are trying to make it clear to you so that we as your colleagues -- as your peers just asked, we are trying to give you some color for what we are trying to do.

And in that regard, we believe that we can do that well.

Having said that, we do know the optics of flows is where everyone concentrates on.

We are probably saying you've got to look beyond what just the one flow number is to look at the dynamics of the flow number, and then what are we doing as a total picture to make the changes necessary so that we can be a good competitor.

And that is probably what we are trying to bring to light.

I don't think we knew all of this previously.

So, as we knew it and understand it and we continue to lay out our strategy moving forward, I am trying to be clearer to you.

When we first did Zurich, we never came out initially, again, not knowing to say, Zurich will be in outflows $3 billion to $4 billion, it was more of, can you maintain that relationship and that agreement and all of that stuff.

And over time we learned a bit more as we peeled the onion and we reestablished that relationship in an appropriate way.

And so, we want that relationship, it's a good relationship, but what we learned, and what we continue to tell you every, now more formally every year is what that will look like.

So that you can do your math and you can understand the dynamics.

And that is all we are trying to do here.

I don't think we know everything going into any arrangement, particularly of the size and scope that we are talking about, here.

No, that is helpful, Jim.

So, if I can paraphrase at least the way I'm understanding this is, there is a larger pool of assets now under which you thought, when you initially did the deal, there was a distribution opportunity.

Now, as you assess those pool of assets and the distribution opportunity, the distribution opportunity probably isn't there for a larger pool of assets which means it's more, there is a larger amount of assets in a closed block that we should be thinking about in more of a closed block context.

Yes, I wouldn't call it a closed, but what I would -- we are getting to a more normalized overall rate from a sale and a redemption perspective.

So, over time, I think that will start to mediate et cetera, but I think what we we're saying to you is good strong relationship in a certain area that we are going to maintain and do our best to continue to replenish and build.

But just based upon the level that was there already, there is a natural outflow from that, because we're pretty significant in let's say fixed and municipal's, and so as there is a diversification including with more diversified equity and passives and stuff going on to various platforms.

We are not going to always garner what that total flow was when it was part of Bank of America entity.

Or even if it was, let's say Bank of America would be making changes today even if that was, Columbia was still part of them.

So that is all I'm saying is that there is that natural evolution that is occurring there that we are going to be affected by because we were a very large provider in that channel.

And that is what we are saying.

Now, having said that the world changes, just like with Ameriprise, we changed and we had to grow other areas of distribution to offset that, that is exactly what is occurring here for Columbia.

Okay, that's clear.

That helpful?

That is, thanks very much.

John Hall, Wells Fargo Securities, LLC.

Yes, I'll try to be real tight here.

Thanks very much here for the extra time.

Jim, on the global initiatives, I was just wondering if you could give us a quick progress report and maybe a time frame as to when we might see those take hold?

Okay, so, what we are actually seeing right now and doing is we've actually had some pretty good product in emerging market equity and debt et cetera.

And what we are doing is, we had some good people in Threadneedle as well as Columbia.

We are putting those resources together even more formally.

We've already established some reasonably good track records in these areas and we're going to be able to go to market even more substantially by having a stronger, larger depth of team resources and more track records.

And I think we are going to be in market for our first few activities in the second half of this year that we are going to try to actually put in our toolbox to even be more focused on in selling in the institutional channels.

We also have made some good headway in sharing things and building the depth of our research for our global fixed income as well as global equities, putting together some of the sub portfolios that Threadneedle has some excellent results in in let's say European, and we have here in the US that we manage in certain areas.

And so, those things are coming together.

We also now have put together a more formalized global team in asset allocation, we brought in Jeff Knight, and Jeff is leading our efforts there.

We have some good portfolios today in asset allocation, he is building that into a more comprehensive, global platform.

And taking resources that we have that are managing those type of things both in the US as well as that Threadneedle.

So, again, we're not standing still there, but these things take a little time, but we will start to put some of those things in the market more formally in the second half and build upon that over the next 18 to 24 months.

Great, appreciate it.

Thank you.

Thank you.

And thank you ladies and gentlemen, this concludes today's conference call.

Thank you for participating.

You may now disconnect.