Welcome to the Second Quarter 2021 Earnings Call. My name is Sylvia, and I'll be your operator for today's call. Please note that this conference is being recorded. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Thank you, and good morning. Welcome to Ameriprise Financial's Second 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'd be happy to take your questions. Turning to our earnings presentation materials that are available on our website. On Slide 2, you will see a discussion of forward-looking statements. Specifically, during the call, you will hear reference to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of non-GAAP numbers to their respective GAAP numbers can be found in today's materials and on our website. Some statements that we make on this call may be forward-looking, reflecting management's expectations about future events and overall 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 our second quarter 2021 earnings release, our 2020 annual report to shareholders, and our 2020 10-K report. We make no obligation to publicly update or revise these forward-looking statements. On Slide 3, you see our GAAP financial results at the top of the page for the second quarter. Below that, you see our adjusted operating results, which management believes enhances the understanding of our business by reflecting the underlying performance of core operations and facilitates a more meaningful trend analysis. Many of the comments that management makes on the call today will focus on adjusted operating results. And with that, I'll turn it over to Jim.

Hello, everyone, and thanks for joining us this morning. As you saw in our release, Ameriprise had another strong quarter, and I feel good about how we're performing at this point in the year. The environment in the U.S. continues to improve as the economy reopens more fully and equity markets remain strong. Recent spikes in the virus are putting some pressure on Europe's recovery. But overall, there's a lot to be hopeful for as we look ahead. As I consider this landscape, we're executing well across our businesses, driving growth through our lower capital fee-based businesses and freeing up capital to generate shareholder value. We delivered another quarter of excellent organic growth in wealth and asset management and strong productivity across our system. This included strong client flows with more than $16 billion of inflows in wealth management and asset management in the quarter. And we ended with assets under management and administration up 28% to $1.2 trillion, another new high. With regard to recent strategic moves, we completed the RiverSource Life fixed annuity reinsurance transaction. This further advances our mix shift to capital-light businesses and frees up approximately $700 million of excess capital, and our acquisition of BMO's EMEA asset management business, which we announced in April, is on track to close in the fourth quarter. Let's turn to our adjusted operating results for the quarter. Momentum in the business continues, with revenues coming in strongly at $3.4 billion up 22%, fueled by organic growth in markets. Earnings increased 34%, excluding the reversal of the NOL a year ago, with earnings per share up 39%, reflecting strong business growth and capital return. And ROE remains exceptionally strong at 37.5%. As always, we continue to manage expenses well. Let's move to Advice & Wealth Management, where we're consistently generating good growth. Our strategic investments continue to be an important part of what we're doing. People are coming to Ameriprise for a high-quality advice experience backed by leading-edge technology. Client satisfaction remains high, and clients are engaging with us personally and through our extensive digital capabilities. Importantly, our advisers are embracing our training, coaching and powerful suite of tools that are fully integrated with our CRM platform. We continue to add capabilities, including testing a new e-meeting tool that helps advisers prepare for client meetings in minutes. Our ongoing investments in the technology ecosystem are helping advisers connect with more clients and prospects and run their practices more efficiently. This high level of engagement is leading to really good client activity, asset flows and client acquisition. Total client inflows were up 54% to $9.5 billion, and that continued the positive trend we're seeing over the past several quarters. Consistent with strong client flows, wrapped net inflows were $10 billion, continuing a very strong run rate. Transactional activity also grew nicely, up nearly 30% over last year, with good volume across a range of product solutions. All of this momentum, along with positive markets, drove nice growth in adviser productivity, up 14%, adjusting for interest rates to a record of $731,000 per adviser. On the recruiting front, we have 42 experienced advisers join us in the quarter, a bit below where we've been. We're hearing that advisers have been focused on all that comes with reopening, and some held off on transitioning firms or delayed their start dates. That said, people are getting back to a more normal rhythm. We're now hosting in-person meetings that complement our virtual recruiting, and we feel good about our pipeline for the third quarter. Turning to the bank. Total assets grew to $9.7 billion in the quarter. We continue to move additional deposits to the bank, and we have adjusted our investment strategy to extend duration a bit. We're also seeing a good pickup in demand for our lending solutions. Loan volumes are steadily increasing, led by a pledged product, which represents a nice opportunity for future growth. Wrapping up AWM and metrics and financials remain very strong. Margin increased 380 basis points year-over-year, ending the quarter at 21.4%, showing consistent expansion since the Fed cut short-term rates a year ago. Moving to Retirement & Protection Solutions. Results were good, and we continue to advance our strategic initiatives. With regard to Annuities, we had strong variable annuity sales with total sales up 88% from a year ago. This was driven by increased demand for both our structured variable annuity product and our RAVA product without living benefits. Together, this represented over two-thirds of sales in the quarter, a continuation of the shift that we're driving. On the insurance side, Life and Health insurance sales approximately doubled, driven by our VUL product, which is an appropriate product to this rate environment. Now let's discuss asset management, where we continue to grow the business consistent with our plans. Assets under management rose to $593 billion, up 25% over last year from strong business results in positive markets. Regarding investment performance, the team continues to generate excellent performance for clients across equity, fixed income and asset allocation strategies, with more than 80% of the funds above median over the longer-term time frames on an asset-weighted basis. At quarter end, we had 110 4- and 5-star Morningstar-rated funds representing more than 70% of our funds. This quarter, we had net inflows of $6.7 billion, an improvement of $4.1 billion from a year ago. Excluding legacy insurance partner outflows, net inflows were $8.1 billion. These results build upon the favorable net flows we saw over the past several quarters. Global retail net inflows were $4.2 billion, driven by another quarter of strong results in North America. Engagement with clients and intermediaries remains excellent. Sales and flows traction is broad-based with 15 of our investment capabilities generating over $100 million of net inflows in the quarter. And in EMEA, retail sales have been weaker given the risk-off environment. As I said, we're hopeful that EMEA flows will strengthen in the second half as the post-pandemic reopening and economic recovery continue. In terms of global institutional, we saw a nice improvement with net inflows of $3.9 billion excluding legacy partner outflows, with wins across equity and fixed income strategies in both North America and EMEA. I feel good about our sales pipeline. Turning to BMO. As we discussed with you, the acquisition will add important capabilities and build on our reach in EMEA. Their business remains in positive flows, and we continue to receive good feedback from clients and institutional consultants. As I mentioned, we're on track to close in the fourth quarter. In terms of the balance sheet, our capital management is excellent. The business continues to generate substantial free cash flow, and we're freeing up additional capital. In fact, the approximately $700 million of our reinsurance deal largely pays for the BMO acquisition, giving us additional flexibility to return capital to shareholders at an attractive rate. In summary, Ameriprise is in a terrific position. We're performing well and generating strong results. Our team is serving more clients and deepening relationships. We're delivering excellent organic growth in both wealth and asset management. The BMO transaction will add an additional growth opportunity, and we're accelerating our business mix shift with the reinsurance of the fixed annuity block. I'd like to close by talking about our team. Our people have been coming back to the office a few days a week this summer and re-acclimating. It's been great to be together again in person. We're looking forward to being more fully back this fall where conditions are safe to do so while maintaining a level of flexibility. Now I'll turn it over to Walter and then take your questions.

Thank you, Jim. Ameriprise delivered very strong financial results across the firm, with adjusted operating EPS up 39% to $5.27. We continue to demonstrate excellent metrics, earnings growth and margin expansion in our core growth businesses of Advice & Wealth Management and Asset Management. Sales of our Retirement & Protection products were up significantly from last year, and we're focused on low risk and higher-margin offerings. We're already seeing a shift in our import block and expect this to continue going forward. As Jim mentioned, in the quarter, we continue to advance our strategic priorities to expand our growth businesses and reduce our risk profile. We remain on track to close the acquisition of BMO's EMEA Asset Management business in the fourth quarter, which will expand our core geographic and product capabilities in attractive and growing market segments. Additionally, we entered into an agreement to reinsure approximately $8 billion of fixed annuities and closed on the RiverSource Life transaction in early July. As noted, we will free up approximately $700 million of capital and will have a marginal projected impact on fixed annuity profitability. In addition to the reinsurance transaction, we continue to effectively manage our risk profile through product mix shift to lower risk and higher-margin Retirement & Protection Solutions offerings. Our diversified model generates robust free cash flow and strong balance sheet fundamentals. We returned 92% of adjusted operating earnings to shareholders in the quarter, aligning us to our projected 90% target for the full year. Let's turn to Slide 6. In the quarter, Ameriprise adjusted operating net revenues grew 22% and PTI increased 35%, reflecting continued excellent business performance. Revenue and earnings in our capital-light businesses of AWM and Asset Management drove nearly 80% of the total, excluding corporate and other, a significant shift from a year ago, even normalizing for the unusually high earnings in RPS last year. We remain disciplined on expenses. G&A expenses were well managed, up 6%, given the strong business growth in the quarter. Overall, we delivered another excellent quarter that underscores the strength of the business model that continues to yield robust profitable growth. Turning to Slide 7, Advice & Wealth Management delivered another quarter of excellent organic growth, with total client assets up 28% to $807 billion. Total client flows were $9.5 billion, the third consecutive quarter of total client flows at or above $9 billion, demonstrating the sustainability of our organic growth. Our focus is not only on growth but profitable growth. In the quarter, our pretax-adjusted operating margin was 21.4%, an increase of 380 basis points from the prior year and an increase of 70 basis points sequentially despite continued low interest rates. On Page 8, financial results in Advice & Wealth Management were very strong, with pretax adjusted operating earnings of $423 million, up 56%. Adjusted operating net revenues grew 29% to $2 billion, fueled by robust client flows and a 29% increase in transactional activity in addition to strong market appreciation. On a sequential basis, revenue increased nicely to 5%. Ameriprise Bank continues to grow at a solid pace, reaching nearly $10 billion in the quarter after adding $700 million of sweep cash to the balance sheet. Expenses remain well managed, and we continue to exhibit strong expense discipline. G&A expense increased 3%, reflecting increased activity and the timing of performance-based compensation expense. Going forward, we remain committed to managing expense and margin in a disciplined manner. Turning to Page 9, Asset Management delivered another strong quarter, driven by excellent investment performance and sustained inflows, resulting in outstanding financial results. Net inflows were $8.1 billion, excluding legacy insurance partners, which is a continuation of an improved solid flow trend. Adjusted operating revenues increased 32% to $879 million, a result of the cumulative benefit of net inflows and market appreciation. On a sequential basis, revenues were up 6%. Our fee rate remains strong at 52 basis points, reflecting the robust momentum we are seeing across the board with strength in both equity and fixed income strategies. Expenses remain well managed and in line with expectations given the revenue environment. G&A expenses grew 12%, primarily from the timing of compensation expense related to strong business performance as well as foreign exchange translation and higher volume-related expenses. As with AWM, going forward, we will manage the expense tightly. Pretax adjusted operating earnings grew 79%, and we delivered a 45% margin. Moving forward, we expect strong financial performance to continue and anticipate that margins will remain in the mid-40% range over the near term, driven by current robust equity markets. Let's turn to Page 10. Retirement & Protection Solutions continue to perform in line with expectations in this environment. Pretax adjusted operating earnings were $182 million. Sales in the quarter were up significantly off a low base in the prior year driven by the pandemic. Sales were above pre-COVID levels, resulting in an increase in distribution expense in the quarter. Additionally, earnings in the prior year were positively impacted by the lower surrenders and withdrawals relating to the pandemic environment. Importantly, we continue to reduce our risk profile by growing sales of retirement products without living benefits. Retirement sales increased 88% during the quarter, with two-thirds of the sales on products without living benefits. This is shifting the overall book, and now only 62% of the AUR block has living benefit riders, down over 200 basis points from a year ago. In Protection, sales nearly doubled as we continue to see a meaningful increase in higher-margin VUL and a significant decline in IUL. This mix shift in both retirement and protection products is expected to continue going forward. Now let's move to the balance sheet on the last slide. Our balance sheet fundamentals remain extremely strong, including our liquidity position of $3 billion at the parent company and substantial excess capital of $2 billion, which does not include the capital release from the recently announced fixed annuity transaction. Adjusted operating return on equity in the quarter remained strong at 37.5%. We returned $585 million to shareholders in the quarter through dividends and buybacks, and we are on track with our commitment to return 90% of adjusted operating earnings to shareholders for the year. With that, we'll take your questions.

So just a quick one on insurance here. Now that you've got the fixed annuity sale announced, what are your plans for the rest of the insurance business? It seems as though there's a decent amount of demand, particularly from certain alternative asset managers to run the insurance business. How should we think about the potential for you to capitalize on that demand and offer up further opportunity to monetize some of these insurance assets?

So this is Jim. As we said, our first focus was really to execute the remaining part of our fixed annuity book, which we think we were successful in doing that, that was just completed in July. So we are continuing to look at other opportunities that may make sense for us both strategically as well as tactically for certain parts of our business. And we're doing that more holistically to evaluate what that does from a client perspective, what it does from a company-wide perspective regarding our capital situation, our risk profile and also what the appetite is in the marketplace. So to your point, we're constantly looking at that as we now completed the fixed annuity transaction. We'll see what opportunities may arise in the future.

Okay. And then shifting gears, another strong quarter in AWM. The organic growth there, really quite good, building on success in 1Q. So to me, this really underscores that Ameriprise really is a wealth management firm at its core. Have you considered adjusting some of the AWM reporting or maybe providing some enhanced reporting that would be a little bit more in line with the wealth management competitors in the marketplace? And allow for a little bit more clean comparison on some of these metrics. Distribution revenue, including some components that are yield-oriented, compensation being part of distribution expense. Just some of these metrics that are probably really more tied to the insurance legacy of the firm that don't make for the easiest comparisons to the wealth management firms. And so just curious whether or not that's something you've looked at or is something you'd consider?

Yes. So I think to the first comment that you made, 80% of our total business right now is really in the asset-light asset management and wealth management segments, with wealth management really driving the components of whatever is remaining in our retirement business, which is actually a high-returning subset of the company. But if you take that to your point, we have been moving more in that direction of disclosing more of that type of segmented results for our wealth and asset management. I know Alicia and the team are working with our finance people and looking at all those things. And just like we introduced some of those additional metrics, as you would imagine, we have to go back and make sure that, well, the data and everything is consistent quarter-to-quarter, how we look at it to track it, etc. So we're doing that now, and we'll come out with some other things as we move forward, but we want to make sure that we're just doing that in a way that is consistent with both the industry, but also that we're able to report it appropriately.

So first, I wanted to start with maybe a little bit of a deeper update on BMO EMEA asset management acquisitions. So Jim heard you guys saying that the flow is just still positive, which is great, and the transaction is expected to close in the fourth quarter. But now that you've had maybe a little bit more time kind of working through the transaction, maybe an update on sort of run rate revenues and pretax margins in that business? And how you think these margins are eventually going to look like once you're fully integrated with Columbia Threadneedle?

Yes, Alex, as you can imagine, the situation is a bit different with an international acquisition in Europe compared to one in the U.S. Our access to the underlying information isn’t as robust as we would usually expect when we're already in a deal because of privacy restrictions and other limitations. This results in a slight delay in our ability to conduct a detailed analysis of expenses and other essential factors needed to determine run rates, synergies, and more. We'll need to wait a bit longer for this information. It's not the usual process, but we understand it's necessary at this stage. We will certainly share updates as we gather more information, but right now we lack the level of detail we would feel comfortable disclosing due to the potential for changes.

Got you. All right. We'll stay tuned for that.

Okay. First, let me start off. As we review the results for the second quarter, we are managing expenses in a disciplined way, which aligns with our revenue growth. We expect to continue experiencing strong revenue growth in the future, so expenses will be in line with that, and we will manage them thoughtfully. At this stage, I want to mention that we will begin to invest in development and other areas, but this spending will be measured. Additionally, we do not currently see any inflationary pressures. Our compensation has increased, as we mentioned, due to this year's performance compared to last year. However, we are effectively controlling our underlying expenses and will continue to spend wisely. You can expect a disciplined approach moving forward. Right now, we only see the normal increases associated with our strong performance.

Great. If I could just sneak one more in and a little bit in those. But I was curious about the point Jim, you made about pledged loans in the bank. Can you guys give us a balance of those loans in the second quarter versus what it was in the first quarter? Sort of the yield that you guys are earning there and the outlook for future growth, definitely seems like one of the ways to grow the bank's NII in a bit of a unique way.

I don't have that in front of me. Walter, I...

No, I don't have the number at hand. It is growing. Currently, our operations with our third-party partner involve sharing in the underwriting and covering certain expenses. The growth potential in this area is very good.

And Alex, since we just more fully launched this across the system in the fourth quarter of last year, we rolled it out. It's starting to really percolate. So what I would probably say is that we're in very early innings, but I think based on the appetite as well as where that fits in, I think it will be a nice growth area for us. But I would probably say it's still in the early stages, but one that's growing nicely and hopefully will lead to some larger balances over time.

Starting with AWM. Can you talk a bit more about the client trends and the outlook for transactional activity? And where are you seeing most of the wrap flows coming from?

We observed a steady improvement following last year's low period, especially regarding longer-term contracts. Our sales in Retirement & Protection Solutions saw significant growth, whether it was our VUL product, structured offerings, or our RAVA product, which lacks living benefits. Currently, the market environment and our advisers' increased comfort in executing transactions with clients, whether remotely or in-person, have both contributed positively. Additionally, we noted strong activity in other transactions, with an overall increase throughout this period. The wrap business is benefitting from new client inflows and the addition of new clients, leading to good client acquisition during this time along with robust flows. This growth results from several factors rather than just one, notably the current low interest rates prompting people to seek more comprehensive returns. Our wrap program offers balanced and well-diversified portfolios, avoiding overreliance on equity markets while not solely chasing yields from fixed income. I believe these combined factors are crucial. While I'm not sure if that completely addresses your question, the positive trend has continued since late last year and into the first half of this year.

Got it. Yes. I guess I was thinking about just the sustainability of the organic growth rate. So do you think there's still some dry powder from existing clients to drive flows into wrap, or is it transitioning more where you need new assets coming into the platform?

Yes. I would say it's not only about the transition. Even though we have strong sales of our annuities, net flows are still down a few hundred million because we are focusing on the variable products with guarantees. However, we have seen a nice increase in those without guarantees. I believe there is a continued momentum in the wrap, which will not just come from a shift in mix. We are still maintaining very large cash balances, and our inflows are also quite strong.

Okay. You mentioned the effect of low interest rates; can you share what measures you're taking to address the impact of low rates on the bank and certificate products? Additionally, if interest rates begin to rise, has your sensitivity to potential gains changed compared to the previous tightening cycle?

No. In fact, we believe we have reached a low point. When discussing whether inflation is present and what actions the Fed may take, it seems there is a potential for rates to increase. I will let Walter address the specifics of the actual rates and what we are doing with the bank to support that.

The bank is currently taking advantage of opportunities, as indicated by our sweep account rates at 27 basis points. New investments are being allocated at 140. We are focusing more on duration rather than credit. We aim to approach this prudently, not extending credit too much, but rather investing to increase that spread. You can expect to see more sweep funds available on our balance sheet.

With long-term care experience in the second quarter, would you say that's back to completely normalized levels? Or do you think it comes down more? I know in March, it was about $5 million in earnings on the 1Q '21 call.

Yes. Thanks, it's Walter. So listen, 1 month, 2 months don't make a trend. But yes, the numbers that we're seeing are certainly returning to the pre-COVID situation. Yes.

Okay, great. And then my follow-up, how should we be thinking about timing and efforts to reduce an extended cost left with the fixed annuity transaction?

Well, okay, as part of our program. We are certainly always evaluating reengineering, and the stranded cost, again, is manageable from the fixed annuities based upon the expense base it had in the allocation elements that we feel comfortable that we'll be able to neutralize that as we do our reengineering and evaluate within the RPS product and also across the firm. So we will be able to neutralize the majority of it.

Just to follow up on AWM activities, given the strong rep flows and transactional activities, how much of that would you attribute to pent-up demand since last year versus the productivity gains from the actions you've taken? How do you think about that going forward?

Yes, I believe it's a mix of factors. The market conditions are favorable, and the equity markets are strong, which typically encourages consumer confidence in investing. Additionally, the economy is reopening, and there seems to be a sense that a significant downturn isn't imminent. Part of this success can be attributed to the capabilities we've developed and the engagement we maintain with our advisers. Over the past few years, we've worked hard to ensure that we can operate virtually with all our capabilities intact, without any disruptions to our advisers or client interactions. Our digital engagement with clients and advisers is robust, and we continue to enhance our offerings in that area. We're integrating everything into a cohesive ecosystem that functions together rather than merely adding features to a platform and marketing them as excellent services. When we share updates, these are not just ideas we've recently generated; they have been tested, successfully implemented, and proven to work effectively. This engagement has significantly benefited our advisers in their interactions with clients and in how they transact with the firm, as well as the information we provide. It's a combination of all these elements. While I can't quantify the impact of each factor, the feedback from our advisers has been very positive regarding the tools and support we've provided, especially concerning the advice modules and their influence on client flows. This is why we feel optimistic about our system. Our discussions are grounded in reality; we're not simply promoting new ideas that haven't been properly executed. We are confident that what we've implemented has been effectively carried out.

So it sounds like if market conditions continue to be favorable or at least stable, at least for the near term, that the current kind of activity level should be at least sustainable in the near term? Is that the right way to think about it?

Yes. I can't sit here and tell you there's anything that we see has changed that from what we're seeing. I mean, as I mentioned to you, at year-end and then the first quarter. I mean I don't have a perfect crystal ball and if the market fell out or if the economic situation changed or COVID jumped back up in some fashion that closed parts of the economy, we may see some effect. But I think as we're just chugging along right now, we don't see anything materially changing that outlook. And so again, as I said in the first quarter, no crystal ball, but we feel good about the continuation of what we have.

Got it. My second question is related to asset management. The margin clearly was very favorable this quarter. But at the same time, adding the BMO block will likely lower your overall margin for the segments, given the business mix. But if the market conditions remain stable, any reason why the margin at Columbia Threadneedle would not remain in the low to mid-40s percent range kind of going forward?

No. I would say this, we actually feel like if Europe improves a bit, and our flows turn around there, margins will be a bit higher. I mean we offset foreign exchange and etc. we think that would be a possibility. But even if you sort, even where there's a level of margin compression or institutional flows or a little low fee base, we've been able to maintain a 52 basis points over the course of the year, that spread because we are winning some mandates and getting good flows in certain of our products that have the fees. I think Europe, the U.K. would actually be favorable if that started to turn around to add to that. BMO is not a negative at all. I mean that's what you're doing is you're weighing in like $100-and-something billion of assets that have an institutional base mainly. And with that, they have a lower fee. But we think the revenue contribution will be positive, and the float situation, we can make positive as well. And so really, that's all you're doing is you're doing the math. But if you said you're at the 40s now and that will stay, and then you just add the institutional, adding that component, it will come to whatever the number comes to, and we'll provide that to you as soon as we get a more fine-tuned breakout of it. But I would say there's nothing that I would sit here to tell you would change in that regard at this point.

Maybe just to quickly follow up on Hung-Fai's last question about Advice & Wealth. So $9 billion plus in wrap flows for 3 quarters in a row, you're sitting at $39 billion in cash or north of that, actually. These are more than double or around double the numbers we would have seen 2 years ago before the pandemic. So I just want to make sure this is the new normal.

Well, I think, Andrew, it's an excellent question. And I think you're right. I mean listen here sometimes when we compare it to a little of the level of activity that we saw just prior quarters or year. I think if you do go back to '19, our level of activity, our productivity, our margins on that productivity and the amount of flow activity has definitely increased. We do feel we're more productive. We do feel that we're starting to hit on sort of the right channels for that growth. But I mean, if I can define the $9 billion or $10 billion, is there something from some pent-up, yes, is something probably in there. But to your point, our cash balances are up as well. So it's not as though we lowered the amount that's sitting in cash and just moved it into wrap. So I think you're right in what you're concluding. I was just trying to sort of talk about it more from a year-over-year basis.

Okay. Just to follow up on Brennan's question, the M&A market is quite active. Are you receiving many incoming calls? And with those inquiries, are you considering the possibility of manufacturing and reinsuring the product as you pursue new business in the future?

Andrew, it's Walter. As Jim indicated, certainly, we are getting inbounds. We're evaluating both from a tactical and strategic standpoint. And I would say there is clearly interest. And certainly, we're looking at the best shareholder implications to it, taking into consideration all aspects, including PE multiple and certainly recognizing the quality of the book. But we are certainly getting inbounds.

Awesome. Lastly, the round trip of excess capital will be around $2 billion after BMO and the fixed annuity block is completed. Any sense of the possibility that you might increase the payout ratio, which is currently about 90%, in the latter half of the year and next year?

I think, Andrew, at this point, we want to execute the BMO transaction. We just completed the fixed annuity. As we said to you, even before we did those things, we would target a nice return, which we're doing, and we're consistent with that. So you can keep that as sort of our base right now. But I think it will depend on market conditions and a sense of what opportunity arises in that regard. And it gives us also flexibility. So I don't want to commit to anything at this point. We want to complete the BMO transaction as we go through and see how the environment is. But I would just say it's a real positive to have the hand.

First question, Walter, how should we think about corporate following the closing of the FA deal? Are we going to see an amortization of the negative seed flowing through corporate? Can you give some indication of what the earnings impact will be going forward?

Sure. We haven't finalized everything yet, but placing it in corporate seems reasonable. There will be amortization of the negative seed, but to provide context, as we examine the FA book and its future trajectory, this transaction will positively impact our profit and loss. You can expect it to be higher than what we currently see, and all projections indicate it will definitely be positive for us moving forward. Additionally, this does not even consider the benefits of the freed-up capital. So, from both risk and profit and loss perspectives, looking at this over the long term, the aspects related to freed-up capital are quite positive.

Yes. So Tom, it would be beneficial if we keep the fixed annuity book and its associated losses. In absolute terms, there will still be some negative impact each quarter, but Walter, the magnitude of that negative impact per quarter will be reduced.

You're going to see, okay, right now, you saw it in this quarter, we had a $6 million loss. So as you look out to it, in '22, it's going to get pretty close to when the amortization and the other aspects of it will equal pretty much probably $10 million a quarter, something in that range.

Okay. Andrew, does that make sense to you?

That does, yes. And I presume that's noncash?

Yes, that's exactly right because it involves the amortization.

Right. And that does not include like the use of capital if we were to use it for buybacks or other things or so to offset that. But what I would say is if we held it, you would have had higher numbers but this was a very reasonable and appropriate way, and it also freed up that amount of capital upfront rather than just over time.

That makes sense. To revisit the question about potential risk transfer, the fixed annuity deal is complete. I understand you’re receiving inbound calls and evaluating options. Considering the most likely outcomes, could it resemble what you did with the fixed annuity, possibly taking a portion of your remaining risk, whether that's from life insurance, variable annuities, or long-term care? Alternatively, would you consider a more strategic move like a complete divestiture of RiverSource Life? Depending on how closely you've assessed it, do you perceive the impact on your valuation and multiple from those businesses relative to current market bid-ask spreads? Do you believe it could yield a significant positive outcome that would justify a larger transaction, or is it more likely to be smaller deals?

So Tom, it's an excellent question. And what I would say is we're evaluating a lot of different aspects. So as an example, if something optimizes us for slices, we will look at that. If something strategic that really makes sense from what we're doing for our system or a client, etc., makes sense, we'll evaluate it. So it's not as though we're just being myopic at this point. We're looking at it more holistically. We will look at what that generates for shareholders as well as what it is from a client value proposition. But when I say that, I look at it, so just think about it for that 20% that's remaining, again, outside of the LTC, which we manage, and it's not going to be an earnings for us. The rest of the business that we have right now generates a very good return. Now, there are subsets like low interest rates for like the IUL book is not as lucrative as the VUL and other things like that. But even our annuity book has a very good return. It's well risked, even the guarantee portion and well managed. So if there are assets that are favorable for us to evaluate something different, and we also take into account the PE, we'll evaluate it. If there are subsets that like we did with the fixed annuity that sort of optimizes the book right now as other things unfold, we'll look at that as well. So I can't sit here and give you a perfect again view of the crystal ball, but we're open and thinking about what makes sense, but we look at all aspects of that, not just the financial aspect in the short term.

I wanted to return to AWM for a moment. Jim, you mentioned that you brought in around 42 experienced advisers, which is about half of your usual number. I understand there’s some emphasis on reopening, but can you discuss the competitive landscape for advisers? Do you believe it’s possible to return to recruiting over 80 advisers per quarter in the near future?

Yes, Suneet. As we reviewed the quarter, we didn't anticipate such a significant slowdown. There was strong interest and positive conversations, but some individuals chose to delay their decisions while others were unsure due to current market conditions. Our pipeline appears strong, and we believe we can return to previous figures, or perhaps even achieve better results. The situation is competitive, and we're being careful not to pursue opportunities that don't align with our goals, especially in terms of helping new advisers succeed. While I wouldn't link the slower second quarter solely to competition, I can attribute it to a mix of factors based on feedback from our team.

Okay. That makes sense. And then just a few quick production questions. First in asset management on the North American retail business. Can you give us a sense of where the growth is coming from in terms of channels? How much of it is A&WM versus the third-party intermediaries? And then I'll have a follow-up for A&WM.

Yes. So we have strong flows across our system in the U.S. in retail as well as we had some nice flows in institutional. In the retail, it's actually across the combination of those channels. We've actually picked up share in most of the intermediary. In AWM, it's just they're getting their similar share just that our growth is strong. And so they're getting a piece of that action. So they're no different than the third parties as far as what we're seeing in the pickup, but it's across. And also, I think we did mention that it's not in just 1 or 2 disciplines. We have a range of products that are actually getting. And I think if you looked at the industry outside of passive, there was a bit more of a slowdown like in the equity sales, in the active. Our equity has held up pretty well. So even though there was a little bit of a slowing in certain aspects, it was still quite good. So we feel good about the retail and the consistency of it and the variety of products that we're putting in the market. I think where we had a little more softness was really in Europe. We had positives in Europe; the U.K. was weaker previously. And now Europe slowed down a little just because of what happened in the environment, but we're hoping that will bounce back.

Okay. That makes sense. And then the last one I had on production. I think this might have been asked before, and I didn't hear the answer. I apologize if you said it and I missed it. But in terms of the wrap flows, can you give us a sense of how much of that is coming from sort of the newer advisers maybe that you added over the past couple of years versus the sort of what I would call installed base folks that have been around for a while?

We're observing that the ramp-up for new advisers has shown consistency and has improved overall. Relative to the industry, we are performing quite well, sitting at the higher end. The flows are influenced by several factors; however, the legacy advisers are particularly generating strong organic flows.

We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.