Welcome to the first quarter 2011 earnings call. My name is [Sandra] 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 Mr. Chad Sanner. Mr. Sanner, you may begin.

Thank you and welcome to the Ameriprise Financial first quarter earnings call. With me on the call today are Jim Cracchiolo, Chairman and CEO; and Walter Berman, Chief Financial Officer. After their remarks, we will take your questions. During the call, you will hear references to various non-GAAP financial measures which we believe provide insight into the underlying performance of the company’s operations. Reconciliations of non-GAAP numbers to the respective GAAP numbers can be found in today’s materials available on our website. Some of the statements that we make on this call may be forward-looking statements reflecting management’s expectations about future events and operating plans and performance. These forward-looking statements speak only as of today’s date and involve a number of risks and uncertainties. A sample list of factors and risks that could cause actual results to be materially different from forward-looking statements can be found in today’s earnings release and related presentation slides, our 2010 annual report to shareholders and our 2010 10-K report. We undertake no obligation to update publicly or revise these forward-looking statements. With that, I'd like to turn the call over to Jim.

Good morning. Thanks for joining us for our first quarter earnings discussion. This morning, Walter and I will update you on our performance and then we'll take your questions. This was another strong quarter for Ameriprise financial. We continue to make good progress in growing our high-return Advice & Wealth Management and Asset Management businesses highlighted by record advisor productivity and client assets and by strong investment performance in fund sales. At the same time, our insurance and annuity businesses continue to generate solid returns. For the quarter, on an operating basis and excluding the Securities America legal expenses, we reported earnings of $347 million, an increase of 54% over a year ago. Revenues increased by 22% to $2.6 billion and our return on equity increased to an all-time high of 13.6% for the trailing 12 months. Our strong financial foundation continues to contribute to our growth. Our balance sheet and capital are among the strongest in the industry and we have the ability to return significant capital to shareholders. In fact, during the quarter, we repurchased 6.5 million shares for $395 million. Since starting our buyback program last May we have repurchased nearly $1 billion of our stock. Today we also announced the largest dividend increase we have ever made. The quarterly dividend will increase 28% to $0.23 per share. While we're focused on growing the business, we are maintaining our long-time commitment to expense control and reengineering. We're on a run rate to achieve our reengineering targets for the year and we will continue to use the proceeds to fund our growth and to improve the bottom line. Overall, we feel very good about the trajectory of our results and the position we're in. Before I discuss our performance by business, I'd like to give you some detail…

Thank you, Jim. We generated strong earnings across all measures with reported EPS up 16% from last year, operating up 24% and operating excluding Securities America legal expense up 59%. The SAI legal charge was $77 million after tax or $0.30 per share. In addition to the legal charge we took during the quarter, as Jim said, we have made the decision to pursue a sale of SAI. As a result, we have moved SAI results from the Advice & Wealth Management segment to the Corporate and Other segment. Beginning in the second quarter, we intend to present SAI as discontinued operations for all prior periods. Our loan capital businesses, Advice & Wealth Management and Asset Management continue to drive our growth and earnings mix shift. That shift, combined with prudent capital management, resulted in an operating ROE of 12.8% or 13.6% when excluding the SAI charge. In addition, our balance sheet fundamental remain strong in all areas. We have substantial liquidity, a strong excess capital position and our debt to capital ratio remains conservative. I'll go into more detail shortly. On the next slide, I will provide some detail on the quarter. As you likely saw, we enhanced our operating earnings definition to now exclude the market impact on variable annuity guaranteed living benefits. Operating net revenues grew 22% to $2.6 billion in the quarter while net operating earnings, excluding the SAI expense, were $347 million, up 54%. Operating earnings per share, excluding the SAI legal charge, increased 59% to $1.35 reflecting growth and improved margins in Advice & Wealth Management and Asset Management. Our results were impacted by both positive and negative items but we believe the EPS of $1.35 is a good measure that reflects the strong underlying fundamentals of our business. We did have a tax…

(Operator Instructions). Your first question comes from the line of Nigel Dally - Morgan Stanley.

First question, just with buybacks -- substantial step up in the level of buybacks this quarter. Is it possible to provide some color as to whether we should expect this level of buyback this quarter to be a good run rate as we look out over the course of the year?

We actually stepped up, as you said, the buy backs in the quarter. We thought that was appropriate based upon the cash generation we had, the excess position and what we wanted to achieve overall, including with the dividend increase. So I think we're going to continue to be proactive in this area. I can't say exactly that we will trend line it exactly as you saw in the first quarter based on current economic or business circumstances on the market but I would say that we will be at a bit higher level. We achieved roughly about a $1 billion since we announced the buyback and we will be going to our board to talk about an increase to a buyback program at the end of the second quarter and that would be earlier than we would have normally when we asked for the original buyback approval, which was extended over two years.

Second question is with [by] the productivity, clearly very solid improvements this quarter. I think you talked in the past about when you hire veteran agents it takes time for their productivity to improve and certainly being evident in their results. But is most of that now being realized and so are we reaching a level where productivity gains [are actively] somewhat leveling off?

I would say for two reasons we wouldn't expect that we would be looking for increased productivity gains as we continue in the future for probably two or three reasons. One is the one you just mentioned. As people come into the network it does take them time to transfer the book to become fully productive again. We're still going through that maturation process. So people who were added last year need to ramp up. The people who were two years ago are ramping up but they've still got a little ways to go. So probably when you look at hitting sort of a two, 2.5 year cycle, they probably get closer to what their full -- the total prior production was. So we will see ramp up for people that we previously brought on, including those that we're bringing on or brought on in the first quarter. I would also say that we, ourselves, have always driven productivity improvements based upon our channel helping our advisors grow their practices. So we're continuing to do that this quarter. We will be conducting comprehensive training programs again throughout our network and helping our advisors to concentrate on areas to improve their practice management, to how to grow their book, how to acquire higher level clients, etc cetera. So we will continue to focus on productivity improvements. We don't just look at, as others do particularly in the independent channel, just bringing people onboard. We have probably the highest productivity increases against our core network of advisors on an annual basis and that's where we'll continue to focus. Then Walter mentioned, again, retail activity has come back a bit more as people are continuing to get more settled and to reinvest. So some cash has moved back from the sidelines, back into the products such as wrap and now annuity products, etc cetera.

Your next question comes from the line of Jay Gelb - Barclays Capital.

I wanted to touch base on the net flow activity. First, on Columbia -- well, I have two questions. First, on Columbia, do you anticipate the net flows could turn positive this year overall for Columbia? Then for Threadneedle, I think, Jim, you talked about in the opening remarks how institutional flows in the second quarter for Threadneedle could be better than the first. Could you give us a sense of magnitude there?

First, on the Columbia, I can't predict moving into a net inflow, particularly on an annual basis, but maybe on a quarterly basis. I think it has more to it some of the lumpiness that we may experience, again, on some of these parent relationships, or ex-parent relationships, that we and Columbia had that may drive some lumpy outflows. But what I could say to you is this. Our timeline, particularly in retail, that are higher margin products is trending very nicely with a significant increase in the first quarter in sales activity. Again, we're still in a new outflow and that's mainly due to the redemption particularly in some of the fixed income product but that seems to be improving, particularly as people have moved more back to equities, which is one of our strong suites here. So that could be a positive that can turn. I can't predict the exact quarter for it. The next thing I would say is on the institutional side, even if the outflow doesn't turn -- and, again, I would say there will be some lumpiness on that and there may be some other larger contracts that do not renew. I would say that on a revenue basis, as we said for the first quarter, that could be positive because we are winning mandates and higher fee products in areas that we're really concentrating on. So on a dollar volume, maybe not, but on a revenue, yes. I think that could be a possibility as we continue to move forward. But, again, we're building the pipeline, we're executing, we're very focused and this will come, we think, in time. Threadneedle, yes, Threadneedle was a bit lumpy in the quarter. If you go back to second quarter of last year when there was the volatility in Europe, we experienced a similar thing. Retail flows changed very quickly and institutional mandates didn't come in immediately. The costs of it were put on hold. But then it ramped up later on with that pent up demand and we got positive in the third and fourth quarter. So I would just say that I think we experienced some of that in the first quarter. We are seeing more mandates come in on the institutional side as we started April. I can't dictate what will be outflows. [Zurich], for instance, was $1.4 billion roughly of the $2 billion we mentioned. There was also another low-margin mandate that we lost during the quarter for -- it was on a pension scheme. So it wasn't a lot of revenue but the dollar amounts are higher. But we are seeing more mandates as things have settled in Japan and the people are seeing how the Middle East works out. So we'll see how that goes.

Then a quick one for Walter on the tax rate, 23% operating in 1Q. Your guidance of the full year is 26% to 28%. Could that guidance end up being conservative?

Well, I think it's appropriate because we are seeing it -- we're anticipating a lift in PTI as it relates to the way we started the quarter. So that's why I raised it from the 25% to 27%. Again, we had the discrete items that took place. We told you that we have them. They took place in this quarter, so I think when you do the math of it and you do on the run rate whatever way you want that you should probably anticipate that that's a pretty reasonable estimate. Again, I can't narrow it any better than the 26% to 28%.

Your next question comes from the line of Andrew Kligerman - UBS Securities.

Just quickly following up on Jay's questions -- and so if the tax rate was 23% and the guidance is 26% to 28% -- you're staying with that, Walter -- that implies that I should be modeling for at least 27% for each of the next three quarters, correct?

That's, yes, probably the low end. Again, if you go to the upper end of the guidance you'll get into a higher -- again, it's all driven by the marginal tax rate as the profitability increases and then we could get some other anticipated discrete items coming through. But, again, I can't tell you which quarters they're coming in.

Now the Securities America; I was a little surprised that you announced publically that it's for sale. So just a little background data, can you remind me of what you originally paid for it, number one? Number two, what is the reaction of the advisors at Securities America? Are you having any issues with departures or anything in light of the announcement? Thirdly, what is the interest level in acquiring that business?

I will handle a little more on the announcement side. Walter can talk to your first question regarding what we paid or exactly what the book value. From our perspective, we think overall this would be appropriate for Securities America so they can continue to build their model. They actually have a quite strong network of 1800 advisors. Their actual advisor account went up in the first quarter from recruitment. But they've been under attack because of this legal issue and with the settlement, which we think will be appropriate to resolve this issue, it should settle things down there. This does present an opportunity for Securities America and their advisors because I think the independent space, as you know, has attracted interest. Some people -- one company recently went public with it. Others are trying to put together various networks appropriate. So this could end up being appropriate for them to continue to build what they stand for in the independent space. So I think they just made the announcement. The reason we went public with this is because we are putting together a sales process for it and over the next week or two it will be out public or in one sense or another to the public channel. So we think it was appropriate of us to announce it, for Securities America to actually talk to their people and their advisors. We're looking to do this in appropriate fashion that would be both positive for Ameriprise as well as potentially in the way this is orchestrated for them to come out in a strong way. So we think it could be a positive on both counts. Walter?

Yes, on the latter one, rather than the price to pay, on the books right now it's approximately -- good will, intangible -- approximately $60 million.

Then just following up on the inflow, outflow question, you mentioned the lower margin products are going out the door and higher margin products are going in the door at both Columbia and Threadneedle. Could you provide a little detail around what those margins are? I think you had talked about potentially providing that down the road, some detail on the margins and what products are you selling later that are higher margin, what specifically around the products, getting those margins up?

Well, I think what I would say is, first of all, listen, we always try to keep as much business as we can and we also try to win as much business as we can. So even when we have redemptions, it's not that we don't lose some contracts that have some higher fees but when you look at the size of the assets that we're talking about on a net flow negative basis. They are being driven by higher asset levels for some of the lower margin products. Now, those margins range anywhere from roughly four or five bips to 11 bips roughly on the low end and then on the high end you're talking in the high 20s to the 40s. The ones that we've been concentrating on, as you would imagine, would be more of areas such as some of the equity areas, particularly small, mid caps, some of the large cap areas, such as certain debt vehicles, like high yield, etc cetera, floating rate. So there's a number of places that you have higher margins in the particular mandates that you get based on the type of assets that you're managing. That both goes for Columbia as well as Threadneedle. So that's where we have put a stronger focus and that are some of the focused areas that we are marketing out there.

What were the sales at Threadneedle in retail? I know you said that they were constant q-over-q, so I was just curious on a breakout number, retail sales.

We don't break it out, Andrew. So I don't know. Chad, is there anything he could look at?

I don't think we have anything available right now. We'll follow up, Andrew.

Your next question comes from the line of John Nadel - Stern Agee.

I have a couple quick ones of the Asset Management division. First, Walter, you gave us an update on where you guys are to date on run rates, savings as well as expenses. Can you just give us a sense for how much incremental savings was there in 1Q versus 4Q? I guess I'm just a little bit lost on where exactly you are.

If you look at the gross savings, all right, on the gross savings we had a run rate as we exited the fourth Q of $112 million. In the first quarter -- .

Exactly, fourth Q and then -- .

First quarter went to $124 million. That's on the run rate.

The target there was $170 million to $180 million, if I recall.

The target for the gross is $150 million to $190 million.

Then a question on the -- when distribution expenses in Asset Management this quarter, they seemed higher this quarter, if I look at it both on a percentage of average assets or even just relative to distribution fees. Was there something that changed there that we should be aware of or was there something one-time in nature in the distribution expenses in the Asset Management division? That was really a big delta relative to what I've been expecting.

No, it did go up and that related to when we were evaluating how Columbia handled their transferred agent and they were netting and we had a different approach on [Riversource]. So we researched it and we went to a grossing up. So what you saw now, we increased revenue, increased the expense associated with that and that was around $27 million, I think, which basically raised it. Again, it doesn't affect the, obviously, the profitability. It did affect the margin and that will be ongoing as we go forward.

That $27 million, that's $27 million in the distribution expense line? How much in the revenue line?

It's basically -- it pretty much neutralizes [inaudible] expense line that's impacted a small amount. But P&L impact is zero. We have a little [loss set in number of line] but the majority is on the amount I told you.

So no real bottom line impact but we had sort of a mechanism to put on the same basis.

Right [inaudible] we just evaluate it and we made that change.

Then just a quick one on Advice & Wealth Management; with Securities America now moved out of that division, it was clearly a drag on the margin. It looks to me like it was about 100 basis points. I guess for Jim or for Walter, should we expect that your targeted margin for that segment, that 12% target by 2012, should we expect that that's now 100 basis points higher?

Well, what I would say is that the margin on Securities America, you're 100% correct, is at a lower run rate margin. So if you take out legal fees, etc cetera, it would be at a lower margin than what we were looking for and striving for on our branded channel. So that would have reduced the weighted average by an amount but Securities America is much smaller than Ameriprise's brand. Having said that, I think the question is the 12% yes. We would be looking for it to go up but not necessarily -- I can't say for 2012 only because the interest rate environment, as you know, hasn't recovered yet and people are projecting that's going to take a bit longer before rates go up. But off the margin, I would say yes as a targeted number.

The only thing I would say -- .

I understand the short end of the cure pressure, yes.

The only thing I'll add to that is when we did the calculations on the 12% obviously Securities America margin is lower as a general rule but it certainly has generated a higher margins than you've seen. It's been absorbing a lot of legal expense. So its profitability is [seasonally] good and so it was impactful but it will not be that large. As Jim said, it's proportionate is not that great relative to the overall AWM segment.

Just a real quick one to sneak in, the 5 million shares that have been issued for compensation, in the last two quarters, is it fair to assume that that's a seasonal thing and we shouldn't be expecting that kind of issuance again until at least the fourth quarter?

The issuance, yes. Obviously, when people are exchanging shares you would get an impact on that, which that happens and that's what you saw in the fourth quarter on the options. Part of it was also the issuance we also do on the franchisee channel for the deferred comp that also occurs at the beginning of the year. But the majority roughly is a first quarter event.

Your next question comes from the line of Suneet Kamath - Sanford Bernstein.

A couple questions on the Advice & Wealth business if I could; first, I acknowledge the improvements in the productivity per advisor. But if I look at the branded financial plan cash sales, which you provide in your supplement, it looks like that statistic has been relatively flat, I guess, for the past couple quarters, which suggests to me that a lot of the productivity improvement you're getting is market-based fees as well as reducing the advisor count. So in your prepared remarks you talked about wrap accounts. You talked a shift to more equity products. I guess I'm trying to understand what the disconnect is between that activity and what we're seeing in terms of branded financial plan net cash sales and then what's your outlook for that statist and when do you think that might start to show some progress?

So I think there's probably a few other dynamics that are occurring that drives a little detachment in those trend lines from the past. One is we did shift, as we spoke about, from bringing in our own novices and training them on planning and requiring them to do planning as every part of their new client acquisition. That drives up a level of plan count and fees. As we transformed the employee network now and brought in over 1000 recruits, it takes us a bit longer to get them to really understand the aspects of the planning to actually start to do financial planning as part of their business curriculum, so to speak, and their practice management. So that's what we've been focused on but that will be more of a gradual build. They are interested in it. That's part of the reason they came over but it's also not natural for them to all of a sudden start the relationship or take a relationship they already have and make it a financial planning-based relationship versus adding a financial plan to it. Then on the fee structure that they feel comfortable with based on how they actually sell today and how they charge today. So part of the disconnect that you're seeing is in the past we required a lot more -- and got a lot more -- financial planning from our novice channel in the employee side and that has changed. In the franchisee channel actually financial planning has picked up and continues to grow a bit and penetration. Now, from a fee basis, I think our advisors are also a little bit sensitive on the fee basis so far based on the market cycle, so they haven't been raising their fees. In some cases they are, but not necessarily across the entire channel. So it's a combination of those factors. But to the point you referenced, retail activity was actually slowed down even though we actually charged financial fees during the crisis. The activity under those financial plans actually slowed and now that activity is picking up again. So that's part of probably what you're seeing if you just look at a straight trend line.

I guess I didn't appreciate the new advisors coming on and not doing as much financial planning. So I would imagine that that's a considerable point of leverage given your comments in the past about the revenue per advisor -- sorry, revenue per client being significantly higher for those that do financial planning versus those that don't.

Yes, and we are showing that to our new recruits and also trying to help them to actually change a bit of what they do. Now, I think, again, it's slow, as you know, to change behavior and it takes a long time but we're getting some good results from those people who did it, so that will show others what that would look like.

Then my second question on Advice & Wealth has to do with the products that you offer. Clearly in the past couple quarters you started to roll out third-party variable annuity product. Given this new fiduciary standard that we're learning more about more and more every day, do you think that you're going to have to open up the channel a little bit more to a third-party product in terms of, say, the protection side of the business where you don't currently offer third-party products, a whole life insurance as well as fixed annuities? How should we think about that going forward?

So what I would say is, first of all, we will continue to look and explore other areas and products to put onto the network. But in the insurance protection area we actually have a full range of competitive products on our network. They're not wholesaled into the channel but they are there, our advisors use them, they have ability to actually pick and choose what they want from a whole bunch of different carriers. We will look into continue even in the annuity area to possibly down the road expand that. Right now it's actually having an impact in a sense that people have the additional choice. We still have very good product there with very good pricing. So for the client and it still makes sense for them to evaluate our product against that. But we will continue to expand that choice as we go down the line but we're doing this in a gradual way because we think that's appropriate.

Then my last question is on the Columbia retail side. I think, Jim, in your comments -- and correct me if I’m wrong -- I think you said 52 out of 120 funds are four and five star funds by Morningstar. So my first question is that accurate. Then, second, if it is accurate, does that reflect the fund mergers that you're currently pursuing or what would that 52 number, if that's the right number, look like once you are done consolidating the funds that you are in the process of merging.

The 52 is the correct number today of the 120 that we -- Morningstar rated. I don't have an exact of what -- in front of me right now but we can get it to you of what it would be after the mergers. So I don't have it right in front of me so I don't want to give you something inaccurate. But I don't think it will materially change but we'll try to get a better number for you.

Your next question comes from the line of Thomas Gallagher - Credit Suisse.

Just one follow-up on the fund mergers; can you give us the approximate AUM on the funds that you're going to be closing and talk about timing on those again? Are those largely going to be done by June of this year? Then, also, Walter, are there -- you've talked about the overall synergy benefits. Can you talk about are there any dyssynergy costs that you're modeling in and the timing?

I'll start with the dyssynergies. Yes, as we do the mergers and which will go through the beginning, I think, of the third quarter, you will then realize the dyssynergies that we said would occur. From that stem the $20 million to $40 million because those will be when we start realizing majority of that but we are still tracking to be in the number actually improving on the number a little. So that will start occurring and so from our standpoint we'll see that through the third quarter. But as we go to the amount that we said, between the 130 and the 150, our net synergies will be at the upper end of the benefit on that.

Just in the AUM on the funds that are closing?

I don't have that. Maybe we'll get back to you on that.

The fund merges will be completed by the end of June. Yes, most of them. I think there may be a few [stragglers] but mostly by the end of June.

So I just want to understand what this practically means, $20 million to $40 million of dyssynergy costs. I understand the gross savings side that you gave before, $150 million to $190 million. So are there just loss revenues of $20 million to $40 million when you shut down certain funds -- or, sorry, when you merge the funds? What exactly is coming out the $20 million to $40 million? Is that a recurring loss revenue stream? Is that the way to think about it?

Yes, because you get the compression on the revenue.

You get the lower -- consolidating some of the funds, some of the funds we're consolidating to have lower fees and then also based on the scale of the funds there are some break points. So what it is -- now the $20 million to $40 million was all of the revenue, which includes some institutional that we would lose [in the thing]. So the $20 million to $40 million is not solely due to fund mergers. So we'll try to identify that a little clearer for you.

So if I roll forward today, Walter, you said there's $124 million of cost saves that are now run rated into 1Q. So as we think about going forward, the net impact is probably going to be modest if I consider the upper end of the dyssynergy expense of $40 million and then I true up to the mid point of the $150 million to $190 million, which is $170 million, which would get me to another $40 million to $50 million. So it looks -- is it fair to say that we're not -- when you net all this out we're not going to see -- we have the full benefit in this quarter that we're likely to see going forward or am I not doing that math correctly?

No, I think we -- you're being a little conservative on that. We anticipate that as we look -- let me start with the net. On a net basis today, the equivalent on the net of the gross $124 million is $120 million. Therefore, as we run rate out of 2011, that number will appreciate and head towards the upper end of the $130 million to $150 million. So there is room for additional benefits as we exit 2011 on a run rate basis.

So you have some pickup left but I guess the numbers I'm looking at would suggest maybe it's $10 million to $20 million but the vast bulk of it is behind us.

I'll leave that -- .

Is that directionally correct?

Yes, that's a good number. I would concentrate probably at the upper end.

If I can sneak one more in on capital, I just want to understand the $1.5 billion plus of excess capital. Can you talk about where that resides? Is most of that in the insurance company or can you just explain where the pieces are?

Tom, just one thing; when you say $10 million to $20 million and Walter said the high end, Walter was giving you that the $124 million today is run rate, not that it was realized in the P&L fully yet. I just wanted to clarify.

So, Jim, that's by the end of the quarter but we shouldn’t assume we saw that all in the quarter.

Yes, that's correct. That's why it's run rate. Actually realized exception to date is $102 million on that number.

Then just on capital?

Oh, on the capital, the capital is distributed throughout. Obviously, as we reported, we have an excess of 585% RBC, so obviously there's an amount sitting in the insurance and annuities. There's an amount sitting throughout all the subsidiaries and certainly in corporate. So we have it and certainly readily available as we talk about it from that standpoint. So it's spread throughout but the insurance company is sitting in a good position and so is the parent and several of the Asset Management and the Advice & Wealth Management. So well represented across but certainly insurance annuity has its share of excess.

Walter, do you have a variable annuity captive set up that's backing your life insurance business? If so, how much of a benefit is that?

No, we do not.

Your next question comes from the line of John Hall -- Wells Fargo.

For quite some time now we've seen assets go out of Threadneedle. A lot of them have been a function of [Zurich]. You mentioned $1.4 billion this quarter. How many assets are actually left with [Zurich]? I guess just give us what the runway is.

We have roughly $49 billion or thereabouts. I don't know exact but that's probably in the vicinity of total assets. Now the components of [Zurich] are broken down by what are retail contracts and things like property that are [loan] tenured or based on it's part of their individual account holdings. Then there is the owned asset part of [Zurich], which is really similar to ours, our insurance book and those are the ones that have the lower fees and that you see the larger volume of outflows as they have closed books and drawn down contracts, etc cetera. So that's the two components. We know that with working with [Zurich] to continue to keep a strong focus on their business but we also know that when we purchased this there will be a continued outflow and that what we've been using is then reusing that capacity to win these other mandates. One of the whole reasons was to diversify Threadneedle and win a lot more intermediary retial and institutional mandates rather than just manage the [Zurich] book. So therefore, [Zurich] has become less than 20%, I think thereabouts, 19% of the revenue today versus 49% of the assets. Part of that revenue will continue, which is the larger part, which has to do with the retail contracts of the [Zurich] book.

Of that $49 billion that you referenced, what is the amount that's vulnerable low-margin asset that keeps moving off the books?

I don't have that in front of me but I think on the dollars it's still probably more of the majority in dollars but not on the revenue side. On the revenue side it becomes much smaller. Again, now remember when we purchased Threadneedle, the book was almost 80% in assets and more than 50% in revenues. Now the revenue is down to 19% and the assets are down to 49%. So as we've actually grown the overall asset base of Threadneedle, it's really been now in the diversified retail assets and the other higher margin institutional mandates. But if you look at the total of the assets you say, well, it hasn't grown that much but the diversification and the fee basis has grown nicely.

On the VAs, how many variable annuities in dollars did you sell through third parties that I guess are now subject to withdraw over time?

I think last year -- do you have that number of what we sold? I think it was a little over $1 billion or so. Does that sound -- or a little less than $1 billion. I think we'll pull that out for you. So what you see is right now you have about $230 million of outflows, so roughly we're in slight inflows with that business on a net basis, so slight marginal based on the market had slowed down over the last two years, etc cetera. So as we actually move to outflows, we put more concentration on our channel again and so that's in nice inflows. The margins on our business are much higher than on the outside distribution business because that the retention of those assets are longer. The selling cost is lower because we can sell more per wholesaler, etc cetera. Then the return is actually much higher, so on a net income basis, we're not losing a lot on a PTI basis but we will be picking it up nicely on return as well as less capital deployed.

Finally, the two days that we lost this quarter, do we get them back?

Sales was $760 million just as a basis for you.

Yes, what happens is in the second quarter there will be 91 days and then in the third and fourth quarter there will be 92 days. So on a year-to-year it's the same but it's the sequential we gave you number because in the fourth quarter it was 92 days last year.

Your next question comes from the line of Eric Berg - RBC Capital Markets.

First, Jim or Walter, is it your sense from talking to the advisors that the public's anxiety about municipal bonds continues? Is this anxiety getting worse and we're seeing this in increasing outflows and tax exempt funds or stable or getting better? Just what is your anecdotal sense of the level of the public's anxiety about municipal bonds?

So I would say that I don't think it is getting worse. I think it's starting to temper a bit and improve. I know we feel strongly that there isn't this larger issue in the muni bond. Again, it depends on what part of the market you're playing in. There's always risk in subsets of the market. But we are feeling pretty good about the overall muni market and its positioning. The flows have not increased but when you look at the first quarter, remember, this mainly occurred starting as a ramp up. They underperformed in the fourth quarter. Then you've got some of the scary messages coming out namely in the December timeframe that really impacts January and February because retail, unlike institutional don't react immediately that moment. So that's what we saw low through the first quarter. I don't think it's increasing. I think it's starting to slow. There hasn't been as strong a focus now as equities again. So that's really I think where the mindset has shifted a bit. But hopefully the muni thing will settle and maybe turn around a little bit because there are some improved spreads in that business versus, apparently, in some of the other fixed income areas.

Second, could you offer a view -- just conjecture I guess it would be, informed conjecture -- as to why these geopolitical factors that you referenced, the crisis in Japan and the crisis in the Middle East, had a more profound affect in Europe and didn't seem to affect flows nearly to the same extent, at least based on your prepared comments, in the US?

Again, this will be my opinion. Just like last year, with the European issue on the [debt side], it's closer to home there. The Middle East is closer to home in Europe and the impacts that it could have and disruption to those markets. You also have mandates coming out of the Middle East itself that was slowed in the first quarter because of some stuff. To be very honest, Japan is maybe -- it is a more important mix to the international weighting than it is here where the US has been negative on Japan for a while. So I think there's a combination of factors. It seems that particularly in institutionals they move a bit quicker based on some adjustments in the international market than we see necessarily in the US because, again, the US international and the US is not as significant in the weighting of assets as it is internationally.

Finally, my question on recruiting is as follows. I think in the past you have taken a spigot approach. Turn it on and then occasionally turn it off, with respect to recruiting of high-priced teams and very, very senior experienced, highly productive but expensive to acquire producers. Where do you stand now in terms of your willingness to make such acquisitions of these higher-priced teams?

Eric, I would say that prior to 2008 we brought over a few experienced people, never high-priced teams at all. It was more that people want to associate because they heard about us. We never proactively went out and marketed ourselves. We never had a recruitment area in place that would actually be proactive in that regard because we really concentrated on novices. So beginning in 2008 we said with shifting that, with slowing down because of how we want to drive productivity and make the employee channel more of a permanent channel, and so we did that first with the Block acquisition and then we went and did it to add recruits into these offices that would become more productive offices rather than training offices. We still today are playing more in what I would call the average production of around $300,000, not necessarily in the million dollar plat. But we're finding that a number of people in the $1 million teams above that are interested in who we are and so, yes, we welcome them. We would like them onboard and we bring them onboard. But I would also say that we haven't really started and stopped it. We started to ramp this up. We got a bigger influx in 2009 because of the disruption that occurred. Before that we were actually ramped up in our own recruiting. We slowed that down only because we had to actually transfer the employee system onto a new system and so we couldn't do both at the same time. But now we're building the pipeline last year again. We're concentrated on bringing people in in a consistent fashion and we're getting good traction and good results for the levels that we're focused on. The market has heated up a bit compared to when you're talking about 2009 but I would also say that we're concentrated more in the probably $300,000 to $500,000 range. Then we still attract people at the $1 million but that's not our focus as a primary.

Your next question comes from the line of Alex Blostein - Goldman Sachs.

On Columbia's redial, so it looks like [rose] inflows were probably the best ever at about $11 billion. Jim, can you talk a little bit about the source of those inflows, how much of that was coming in through Ameriprise channel versus third party? Then as a follow-up to that, it seemed like you guys talked in the past about the fact that some of the financial advisors are not actively promoting the funds partially because the mergers haven't been completed yet. Is that still the case and do you think we should still see a little bit of a pickup in demand on the gross sale side once the mergers are done?

So today Ameriprise, when you look at $11 billion in sales for a quarter, Ameriprise is not any longer -- when we just had [Riversource] and primary, that was our main channel of 85%. So Ameriprise is a very important client of Columbia, one of its largest but it's not a majority or a substantial part of that makeup today. It is an important part as one of the key clients and one of the largest ones but the majority of activity does come from a combination of third party and Bank [America]'s channels like US Trust. But now third party is becoming larger and larger as they're more important. The recovery in sales is occurring in Ameriprise as you've seen a pickup in sales. So that's recurring nicely. It's starting to pick up to get back to the levels that we previously really would want from Ameriprise but there's still more work to do because I think even our advisors going through this change are re-acclimating to what are the funds, what are the performance, what's the mergers coming through. So we're seeing an activity pickup there and as it has refocused more to equity again, we're seeing the interest increase based on the performance of a number of those funds and factors there. So I am hoping that our focused efforts in a number of these key businesses will continue. We saw a nice improvement in the first quarter. We want that to continue. So overall, I would like the sales to continue to grow and at least be at least strongly consistent to what I saw in the first quarter and I'm hoping that some of the redemptions will continue to slow as things like the munis, etc cetera, hopefully get to play out a little more.

If we go back a year, you guys talked about -- and this is going to be on the old metric -- but the 25% pretax margin in Asset Management. In your assumptions, I believe you assumed 8% equity markets. It seems like you're at the higher end of your net savings from the merger. Equity markets are up 20% from that. So can you tell me why, I guess, we wouldn't see an upside to that 25% margin target?

Well, as we said, there were -- we are tracking. If you look at the number, which I normalized on the GAAP basis, it's almost 21%. It's 20.8%. So I think we are making progress. From that [stemoids] the combination then would be the four factors were the market, which is certainly ahead; the synergies, which are certainly tracking; the Columbia base; and now it's the net flow. That will be the change. So I would say that we're on trajectory to get there. At this stage, to forecast would be over it. I think it's premature to sit there and say. But certainly if we continue it should give us the capability.

Again, when we said that, we put out for a -- the timeframe. So as we extend the timeframe then the answer is, yes, it could be higher. So we'll go back and relook at those various components but one was also based on hitting within a certain timeframe.

The timeframe was first quarter 2012.

Actually, full year -- .

Yes, it's full year 2012.

If you look at the rate pressure, up across all your business. I think we have a decent understanding on the broker dealer cash spreads. But is there anything else being compressed due to the low rate environment? I don't know, maybe either money market fee waivers or some of the costs that you're sharing with money market funds that are being distributed through your channel. Or is it really just the cash price and the broker dealer channel?

It's the cash but also I think we're holding a lot more assets in the very shorter term rather than investing them out further because of where the market is right today, Walter, that is probably having some compression on earnings.

Yes, we're having compression now that we're having because obviously our investment rates are lower. So that's the other area that we are being impacted. I’m going to say obviously it impacts the hedging to some degree because of the lower interest rate but it's -- the prime one is on the sweep accounts.

The last question comes from the line of Colin Devine - Citigroup.

So is the tax benefit this quarter a dividends received deduction, is the first one? Secondly, given I guess the changing focus of the securities industry and regulators on this, can you just let us know what percentage of the advisors' fund sales and VA were proprietary? Then lastly, because, as you mentioned, the BofA channel, it's such an important part of Columbia. How has sales been tracking through BofA post the merger or since '04?

Colin, can you repeat the question on the taxes? I'm sorry.

Was the tax benefit just a dividends received deduction that came through this quarter?

What happened was it was a discrete item with a settlement with the IRS. That was the main thing of a prior audit situation. It had to do with [DRD] but it was referring to an older item that came through.

On the VA, I would say that I think there's a bit over 90% that is still [Riversource] versus external. Again, that has -- in a sense we have launched that in the end of the summer that has creeped up but it's still over 90% that is [Riversource]-based. Then I think that your last was around the Bank America. As we mentioned to you over the last quarter, we've seen some lumpier outflows from the Bank America where their institutional client, the bank clients that we've gotten mandates as part of the relationship with Bank America, we saw some of those things. We saw as Merrill Lynch was selling [Balboa], that contract went in December, so that was on the institutional side, so we'll see those. On the retail side we're actually seeing a pickup again in sales in the Merrill Lynch channel but we're seeing continued weakness in the US Trust, particularly in the muni area because that's where there was a heavy focus for those type of clients. I think overall -- I think the US Trust channel, some of the sales have not come back but I think sales are a bit lower in US Trust to begin with I think based on some changes going on there. So it's a combination of those things. So that's really maybe to give you a little color. Did we answer -- was that it, Colin? We're going to close then the call. What I'd like to end just with is I appreciate your continued attention to Ameriprise. What you see and we're trying to do is give you more detail and color underlying some of the flows and some of the activity and the business of what we're seeing today. Again, we're dealing with our business mix. We're…

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.