Ameriprise Financial, Inc. (AMP) Q4 2013 Earnings Report, Transcript and Summary

Welcome to the Fourth Quarter 2013 and Year End Earnings Call. My name is Ellen, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Alicia Charity. Ms. Charity, you may begin.

Thank you, and good morning. Welcome to Ameriprise Financial's fourth 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 references to various non-GAAP financial measures, which we believe provide insight into the company's operations. Reconciliation of the non-GAAP numbers to their 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 10-K report. We take no obligation to update publicly or revise these forward-looking statements. And with that, I'll turn it over to Jim.

Good morning, and thanks for joining us for our fourth quarter earnings call. Ameriprise achieved significant growth across many dimensions with a strong fourth quarter capping off an excellent year. As you saw, yesterday we reported revenue growth of 8% for the quarter and 7% for the year on an operating basis. Operating earnings per diluted share were up 9% for the quarter and 26% for the year. Our 2 growth businesses performed strongly. Fourth quarter pretax operating earnings in Advice & Wealth Management and Asset Management were $356 million, up 37% from a year ago. And for the year, we generated $1.3 billion in pretax operating earnings from these 2 businesses, up a very strong 31%. Because of the significant growth we've experienced in these businesses, they now represent 56% of our full year total business segment pretax operating earnings, and we're looking to take that number higher. This morning, I'd like to cover how I'm feeling about the business, as well as my perspective on the quarter and the year overall. Walter will discuss the numbers in more detail and then we'll take your questions. There are 4 highlights that I want you to take away. We're seeing good growth and profitability. Our results and progress demonstrate that we're executing our strategy, growing strongly and building off a solid foundation. Activity and assets continued to increase. Assets under management administration hit a record $771 billion. We feel good about our ability to capitalize on our opportunities in the financial services marketplace, and we've demonstrated that we can continue to invest while maintaining excellent expense levels. Our financial foundation remains one of the best in the industry. It provides important strategic flexibility and enables us to generate strong returns. In terms of our level of shareholder and capital return, we're at the higher end of the scale for a large cap financial firm. We have the capital strength, free cash flow and ability to return the majority of our operating earnings to shareholders annually. During the quarter, we returned $475 million to shareholders through share repurchases and dividends. And for the year, we've returned $1.9 billion or 130% of our full year operating earnings. With strong business results in capital return, we delivered another record high operating return on equity, excluding AOCI of 19.7%, setting ourselves apart from many of our competitors. Let's talk about our segments beginning with Advice & Wealth Management. Advice & Wealth had another terrific quarter. We continue to build on our reputation as the company with the right expertise to help clients feel confident about their retirement and financial future, as well as a place where productive experienced advisors can grow even stronger practices. At the same time, we're delivering excellent financial results. Revenues, earnings, client assets and advisor productivity all grew by double digits. Operating net revenue was up 12% to $1.1 billion reflecting good fundamentals and positive markets. Clients continue to return to the markets and we're bringing in good client flows. Total client assets grew 16% to $409 billion, aided by a record year for our wrap business. Wrap net inflows were up 38% with clients investing another $2.8 billion during the quarter. For the year, we were north of $13 billion of net inflows, which helped grow the platform to more than $153 billion. Our advisors are very engaged and productivity continues to grow nicely. Adjusting for the loss of bank earnings per advisor productivity increased 14% from good asset growth and strong transactional activity, generating a yearly rate of $440,000 per advisor. We continue to effectively manage our overall expense base well. Walter will give you the details, but margin grew, again, even after adjusting for the bank and with lower spread revenues on our large cash business. Our success in AWM comes in part from the deep relationships we have with clients and the fact that they stay with us a long time. That's the ideal situation. We're focused on delivering a superior client experience and helping our advisors use the capabilities we've invested in to serve more clients and grow their practices. We're focused on deepening relationships as well as bringing in new clients and assets. Our new confident retirement approach, which builds of our financial planning proposition, is proving to be successful in serving existing clients, as well as gaining new ones. Clients and prospects are responding very well and is resulting in higher flows and activity. In fact, we're quite excited to launch, on February 8, our first formal advertising campaign to promote Confident Retirement. Working with Tommy Lee Jones, the campaign conveys how our advisors are uniquely positioned to help people answer their toughest retirement questions. In fact, you'll see a lot of Ameriprise on major TV programming, including during the Olympics, as well as online through the first half of the year. In conjunction with this campaign, we're also launching an interactive online experience on our website that allows consumers to explore and evaluate how prepared they feel for retirement, see where they stand versus their peers and be directed to an Ameriprise advisor. In addition to advertising and marketing support, we continue to invest in our online and web experience to ensure that doing business with Ameriprise is simple and easy. Technology clearly plays an essential role in delivering a better experience in driving productivity. With tools like e-Signature, check scanning and e-Paper, advisors can now submit new business online, as we move to a more paperless office over time, one that is both efficient and secure. Our advisors are finding that our technology platform helps them serve clients better, increase efficiency and drive productivity. In terms of recruiting, we continue to bring in good advisors who value our culture, our leadership and what we do to support advisor growth. 80 experienced advisors came on board in the fourth quarter and the pipeline looks good for the year ahead. Clients and advisors want to work with a reputable trusted firm. I told you last quarter that external research ranked Ameriprise as one of the most trusted financial firms in the industry. Our advisor engagement is strong and growing. Our client retention and satisfaction also remains in excellent stead. We have a great value proposition and in fact, in the 2014 Forrester Customer Experience Index, Ameriprise was rated #1 in customer experience across investment firms. In summary, It was another terrific quarter and year for AWM. Our brand is strong, our momentum is good. We're focused on ensuring our advisors have the right resources to serve clients well and grow productivity. We're delivering good growth and profitability. We continue to have excellent client and advisor satisfaction and the business is consistently generating the results we expected and we told you we could achieve. In Asset Management, we're generating strong financial results, executing our strategy and we're focused on becoming a tough tier global asset manager. For the segment, our assets under management reached $501 billion, up 10% from a year ago, from positive equity markets in the U.S. and Europe, as well as good progress we're making in the U.K. and European retail as well as in institutional. We grew our revenues nicely and continue to manage expenses tightly. And for the year, Asset Management earned $715 million, up 28% from the prior year. I'm pleased with the earnings growth and I recognize we have more to do to overcome outflows from our ex-parent relationships. The story in Asset Management remains consistent with what I've been sharing. We continue to channel resources in areas where we see traction. Overall, we're delivering competitive, long-term investment performance across many areas of equity and fixed income. There are few areas where our short-term performance weakened slightly, but we're addressing it. We're growing our higher fee business, especially in institutional and at Threadneedle, which is showing up in the P&L. And we're making steady progress establishing our global investment teams as Columbia and Threadneedle align resources and strengths to drive profitable flows. In terms of flows, we experienced $5.5 billion of net inflows in the quarter, which included a high level of reinvested dividends at Columbia given the market appreciation last year, and the related gains in many portfolios. At Columbia, our sales were up in the quarter with strong traction in October and November. However, December was challenging for the finance [ph] industry, which we experienced too. Overall, we're focused on gaining traction in the third party intermediary channel. Our wholesaler productivity is improving and we have an excellent product line to sell. Advisors are learning more about our research strength and core capabilities, including in the income space where we have particular strength. The pieces are in place to gain share on some key distribution platforms and models, and we'll be stepping up our advertising, marketing and due diligence meetings this year. In terms of net inflows at Threadneedle, we continue to maintain good traction in U.K. and European retail funds. In January, however, we lost part of our U.S. equities team at Threadneedle. A veteran member of the team who has directly managed about 1/3 of the fund's assets, and who has had strong investment performance has taken over the management of these funds. In institutional, we're pleased with the steady growth we've seen in third-party institutional where we continue to see mandates funding, maintaining a strong win rate and have a good pipeline of new activity. This is helping to offset the legacy outflow pressures I've discussed. Overall in asset management, we're delivering competitive financial results and we're investing in the business. We know there's more work in front of us, but we're moving in a positive direction. Now let's discuss Annuities and Protection. These businesses are essential components of our value proposition and to bringing in more assets and deeper client relationships. Our Annuities business continues to deliver the results we're targeting. Revenues were up modestly and earnings were up nicely, up 9%. In variable annuities, cash sales increased 3% year-over-year. With continued strength in the equity markets and focused wholesaling efforts, ending account balances are up and sales of managed volatility funds are growing. As we told you last quarter, we've taken steps to further de-risk the portfolio, including providing policyholders with volatility controlled funds. We've seen a good response from advisors and significant asset movement from clients. From a capital perspective, we have set aside capital in excess of our requirements in the events of market movements, particularly for variable annuities. And in fixed annuities, we feel good about our existing book, but aren't adding to it given the interest rate environment. We're in the process of repricing a good portion of the book that should help release some of the spread compression caused by low rates. This began last quarter with the majority of the block repricing in the first half of 2014. In Protection, the Life and Health business is performing well with good sales, asset growth and good claims experience. Our advisors offer our products to their clients as part of their confident retirement approach, and we're seeing good growth in life insurance sales, up 16% for the year in 2013. Indexed universal life sales continue to be strong, and we're also experience improvement in variable universal life sales and steady growth in variable universal life and universal life assets, given the markets we've had. We recently introduced the insurance e-application, which streamlines the new business process for advisors and our back office. It's getting good results. We've also simplified our underwriting for a better client experience. In Auto and Home, premiums were up 10%. We're continuing to see good policy growth across Home, Auto and umbrella lines. We're working to deepen penetration with our affinity partners and with our own advisors. Our client satisfaction and retention remains very high. Walter will provide color on the financials for the Annuities and Protection businesses. To summarize, we had a strong fourth quarter to wrap up a very good year. Ameriprise is performing well, especially Advice & Wealth Management, which continues to show excellent results. In Asset Management, we're generating solid returns, but we have more work to do to gain flows at Columbia to overcome ex-parent activities. Our Insurance and Annuity businesses are good books of business and complement our total offering. From a company perspective, we continue to be recognized in the industry for the client and advisor experience we provide and for how we run the company. During the quarter, Ameriprise was, once again, named as one of the leading community-minded companies in the nation in the second edition of the Civic 50. We have the same strategic focus for 2014 and I believe we're positioned well for the year ahead. As I mentioned at the start, we delivered record return on equity, and we think we can take it even higher. With that, I'd like to hand things over to Walt for a detailed review of the numbers.

Thank you, Jim. Ameriprise delivered excellent financial results this quarter and for the full year. Business fundamentals remained strong, top line growth was solid, expenses were well-managed, and we had strong profitability. Starting with operating net revenue growth on page 3. In total, operating net revenues grew 8%, led by strong growth in Advice & Wealth Management and Asset Management. If you exclude the impact of low rates, revenues grew by 10%. We had double-digit revenue growth in Advice & Wealth Management and Asset Management, driven by increases in client assets, good transaction levels and market appreciation, which was partially offset by the impact of net outflows and asset management. Annuities and Insurance posted stable revenue growth, which was in line with our expectations. This growth in revenues has translated into strong earnings and margin expansion. AWM margins increased to 14.4%, up more than 250 basis points from last year. Asset Management margins were 40.2%. Combined, Advice and Wealth Management, and Asset Management's earnings grew 37% from last year and now account for 57% of earnings, representing a substantial progress in shifting our business mix. Let's turn to earnings on Slide 4. We continue to grow operating return on equity, reaching an all-time high of 19.7%. Operating earnings per share were $1.87, up 9%. The underlying growth rate was over 20%, when we adjust for 2013 and 2012 disclosed unusual items. Performance has been quite strong, especially in light of low interest rate environment, which impacted earnings by $38 million compared to the prior year. Finally, our ability to redeploy capital has contributed to EPS and ROE growth and is a strong point of differentiation for Ameriprise. Moving to Slide 5. Results for the full year are also strong and are similar to the trends, we saw in the quarter. In 2013, Advice & Wealth Management, and Asset Management, coupled with effective capital management were the prime factors behind our 26% year-over-year EPS growth rate. Earnings in these 2 segments increased over 30%. Excellent growth, considering the headwind from low interest rates and the exit of the bank. Throughout the year, we had solid business fundamentals, including growth in client assets, record wrap net inflows of $13.1 billion, good transaction levels, as well as market appreciation. For the full year, these 2 segments represent 56% of operating earnings. Annuities and Protection continue to produce solid results with 9% growth rate. These businesses continue to have a strong and differentiated risk profile. Moving to the segments, let's start with Advice & Wealth Management on Slide 6. We continue to deliver very strong results in Advice & Wealth Management. Pretax operating earnings grew 36% and was supported by revenue growth and effective expense management. We have also seen significant margin expansion, which reached 14.4% in the quarter despite a 100-basis-point headwind driven by the 20-basis-point interest spread impact on our brokerage sweep balances. There is substantial upside when short-term rates move higher. As a point of reference, 100-basis-point increase in short-term rates would increase annual earnings by about $150 million, and add approximately 300 basis points to margins, assuming that cash balance remain at the same level. Turning to Asset Management on Slide 7. Revenues increased 11%, primarily from market appreciation, offset by the cumulative impact of outflows. Our total expenses were up with the markets. We managed G&A expenses effectively and it was up only 3% from last year. In the quarter, earnings increased 38% to $194 million and adjusted operating margin improved to 40.2% from 33.6%, a year ago, reflecting favorable leverage to rising markets and tight expense management. Let's turn to flows in more detail on Slide 8. In the quarter, we had a total of $5.5 billion of net inflows, including $6.6 billion of reinvested dividends. This quarter was about $3 billion higher than the same quarter last year because of an increase in the level of realized gains in the equity funds. We had a total of $3.2 billion of outflows in the former parent related and other areas, we've previously discussed. This is in line with our expectation and consists of the following: we had outflows approximately $1.3 billion across retail and institutional, associated with 1 large former parent affiliated distribution partner. As we said, outflows will continue as our share net distribution channel normalizes. At Columbia retail, we had $300 million of outflows at a sub-advisor and $600 million of outflows in the RIA channel. In the Institutional business, we had $1 billion of outflows related to former parent influenced mandates at Columbia. We have areas of real improvement in strength. We had net inflows from the Institutional channel, where we are seeing strong growth in third-party mandates. And finally at Threadneedle, we had another strong quarter with $1.3 billion of retail net inflows. Turning to Annuities on Slide 9. Pretax operating earnings were $187 million. Variable annuity pretax earnings grew 21% from a year ago, primarily from equity market appreciation and business growth. Our variable annuity business continues to have a high-quality inflows block with good growth and attractive new business. In fact, the risk profile at the block has benefited from the addition of new fund offerings to our in-force policyholders we announced last quarter. These changes have been very well received by advisors and clients. In fact, clients transferred $900 million of assets that were not impacted by fee changes. This resulted in about $26 million benefits to earnings in the quarter related to lower reserves. The managed volatility products require low reserve than the legacy products as the hedging is embedded in the volatility control funds. In fixed annuities, pretax operating earnings were $31 million. Results in the quarter include about $12 million of lower earnings from spread compression. As interest rates increase, we will likely see account value shrink from increased lapses, but the net result will still be positive. Moving to Protection on Slide 10. Pretax operating earnings were $82 million. Underlying Life and Health business remains solid. We had good sales of variable universal life and index universal life. Claims experience was good and within our expectations, but at a higher level than last year. Auto and Home has continued new policy sales growth across market segments from affinity partnerships. Earnings in the quarter reflected $20 million increase in reserves, primarily from auto liability claims development. Let's turn to capital on Slide 11. We returned $475 million to shareholders through dividends and share repurchase in the quarter, and for the full year, we returned $1.9 billion. As you can see, 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. We ended the quarter with continued strong balance sheet fundamentals, nearly $2 billion of excess capital and an RBC ratio of approximately 450%. This does not include the $500 million of additional capital above required levels for variable annuity products. In 2014, our baseline plan is to return 90% to 100% of operating earnings to shareholders, and we expect that our approach to returning capital to shareholders will continue to make Ameriprise unique. With that, we'll take your questions.

[Operator Instructions] Our first question comes from Suneet Kamath with UBS.

Question on Asset Management to start. There's a comment in the presentation that indicates that you're increasing your penetration in intermediary platform. I am just wondering if you could provide some more color in terms of what exactly is going on, maybe some metrics that we could you use to track this because it's just hard to see progress when we just look at the assets going forward.

Yes. It's -- as we mentioned to you last year, what we've been doing is stepping up our efforts of getting our product suite into some of the larger platforms out in the industry for the intermediary distribution. Some of the larger wire houses and third-party channels. And so we're seeing -- winning some of the mandates now to get onto their platforms and their model portfolios. That would help us start to actually increase our wholesaling activities in support of that. It does take time, but we're beginning to get considered now for some of the fund groups that we have, particularly in the large-cap areas that are starting to complement our wholesaling activities. So once you get onto the model portfolios given in some of the larger houses, that can help you step up your third party sales activities. And so, we're seeing more of that activity occurring. We are being considered in getting in there and we've stepped up our efforts in that regard. So it's sort of a sort of preview for the idea that we think that we can get increased sales going there. And we saw a rise in sales last year across these channels, I think in the fourth quarter, it was actually pretty good until December and December weakened a bit, and I think the industry saw some of that as well.

So would you say the improvement in sales from these initiative should be more of a 2015 story as opposed to 2014 story?

Yes, I think it will take time to continue to develop, but we would hope to see some improvements through '14 and stronger activities into '15. But again, we're working hard at that. We're stepping up some of our marketing due diligence activities this year in these channels becoming some preferred providers in the channel. So we hope that, that will ramp up over the course of the year, because we believe, we have some good products that would make sense against some of the competitors out there.

Understood. And then just shifting to AWM, I guess, Jim, in your prepared comments, you talked about some increases in advertising spending, I guess, in the couple -- in the coming months. You clearly -- 1 of the stories of success there has been that the G&A has been held kind of flattish, so I guess, I'm just wondering, given these initiatives, should we start to think about G&A picking up as we move through 2014 on these higher expenses related to advertising and the like.

No. I think, we're considering -- we're continuing to manage the expense base quite well. I think, what we've alluded to more is that similar to what we did last year, we're launching a new campaign this year, really talking about our confident retirement approach. We probably are putting a little more of that activity that would be web-based in complement to our top line advertising. But the amounts will be relatively consistent with last year. We just heavy up a little bit more in the first 4 months of the year because that's the prime time for us to advertise. And then it starts to go low again and then it picks up again in the fourth quarter. But it should be similar trend lines to what you saw in 2013. We're probably just making a more of a statement around how we're going to be focusing our efforts that we think will help our approach out in the marketplace.

Got it. And then just the last 1 on the advisor count. Again, you added some experienced advisors, I think, in the quarter. The retention seems to be pretty good in both franchisee and employee channel. But if I look at the overall advisor count, it's down a little bit, maybe call it flattish. So I guess, I'm wondering, at what point, especially with retention improving, should we start to see the advisor count actually start to increase?

Yes. So part of the reduction you see in the total particularly in the employee area was mainly due to -- we have a -- we call it our remote center, our AAC, which handles some of our client activities in centralized sites, and we made a restructuring of those areas. So that we can move to a bit more -- a different type of model that we think will even be more effective and in so doing it, we reduced about 100 people in that channel. And so the activity per employee there was very low. They're not season producers, and that's really the reason for the reduction. But if you look at the productivity that we brought in and the people that we're maintaining with the retention, the productivity of the channel has increased nicely and as I mentioned to you, we brought that channel now into profitability. We're still in the low single digits in margin and that should rise now beginning this year and continue to ramp up over time as the producers we brought on board become more productive. So the headcount that you're looking at was mainly driven by that adjustment, which is really in sort of a remote channel that handled some of our client activities that have moved from our advisor base out in the field to centralized.

The next question comes from Alex Blostein with Goldman Sachs.

First, I was hoping you could comment on the retail activity in January and just kind of the near-term hiccup we had with U.S. Macro Data and all the turmoil in EM. Are you guys seeing any difference in terms of the re-engagement levels which, it sounded like it was picking up throughout the course of 2013 and started off pretty well in -- early in '14, but just to want to make sure, if that sort has continued so far.

Yes. I -- we don't see any material change. I mean, again it depends on what occurs over the next number of months and what the effect is -- how material. But we see a continuation of a good level of activity. It's hard to judge week to week right now just based on the nature of it. But we haven't seen any material shift.

Got it. And then a couple specifics, I guess, on the AWM segment. In the press release, and in your comments as well you suggested that the pipeline of FAs continues to be pretty robust. Can you help us kind of with the sources of pipeline and the wire houses, other independent shops, et cetera, and then more importantly, if you look at the productivity, are we looking at 500 per FA, 600 per FA on an annual basis, kind of help us kind of size, I guess, how that compares relative to you guys currently have on the books?

Okay, so I would say, our pipeline, as we enter the new year, looks really good for us, as a continuation, as we sort of ended the third and fourth quarter. So we see that continuing. We're really recruiting from a number of different sources, so it does include the combination of the wire houses, but also some independents. And we're seeing good people come on board. The productivity we're averaging is now pretty consistent with our total of what you've seen that we've reported, which is in the mid-400 to 500 ranges. And so it's a consistent type of per person that we see into the level of productivity that we have here.

Okay, got it. Shifting gears a bit, I want to touch on the Asset Management business and then, specifically, the U.S. team at Threadneedle. Can you guys help us size, I guess, the overall assets that the team collectively has managed, I know you said the new PM there or the PM that is staying managed 1/3 of it, but can you give us a sense of the total and then maybe split between retail and institutional?

Yes. We roughly have, for that total, about $15 billion and about 5 to 6s in the institutional line is in retail. The person that we have was actually a long-time PM that used to be at Columbia and actually had excellent performance in the mid and large cap value area. She actually had relocated over to London, a number of years ago, for relocation family reasons and she now -- she was part of that team for the last 4 years. She has excellent performance records. In fact, better than the team that left, part of the team that left. And she will be assuming full responsibility for the area. She will also be able to, even more formally, writeoff of a research we have in the U.S. since she is very familiar with it and we have great research capabilities that can really enhance the U.S. stock picking at Threadneedle. And so that the -- our investment offices there are quite excited about that opportunity. So listen, we're going through a change there, but we believe that we'll put in good resources and can continue to manage good money there. There may be some dislocation in the short term, as always occurs, but it's fortunate that we have a strong person there that can lead that team and shown from her past success.

I understood, makes sense, and then just the last one for me. Walter, you highlight a number of buckets in Asset Management that there's still legacy parent-related stuff. And so can you just give us an update again on -- as we think about 2014, kind of look on a quarterly run-rate basis, how much in total assets you guys still expect to see as kind of like gross outflow from these buckets just to kind of help us size the gap that you need to overcome to turn into positive flow mode?

Sure, listen, we certainly still, as we talked about it, have remaining assets at Balboa, which is about $0.5 billion and then certainly in BAC pensions, which is still lower of $2 billion. So again, I can't give it to you on a quarter basis, but we are certainly managing through that within the ranges. Zurich will continue at its levels that we've seen. But certainly, we do see that several billion will be coming in, as Jim has mentioned, and that is -- but, again, we feel, we're making progress, but it’s in that sort of level. I can't give you the quarterly on it.

[Operator Instructions] The next question is from Erik Bass with Citigroup.

Within Asset Management, can you just talk a little bit about where you see margins going from here and do you think 40% plus is sustainable? And I guess as further improvement contingent on either AUM leverage from the market or improved flows. Are there other steps you can continue to take to improve margins?

Yes, clearly, from our standpoint on managing the expenses and certainly, with the market and with looking at the asset levels, we just mentioned with -- I would do believe in that range is sustainable, and certainly looking as Jim said before, to even try and improve it. So I think it's a reasonable level to be at certainly in this high 30s, 40% range.

Okay. And then, I guess, just for Columbia Institutional, obviously is a good quarter for flows here and it looks like, you've seen a nice pickup in terms of sales over the past year. Do you believe that this business is now at a point that it should be able to generate consistent positive inflows and maybe if you could talk just a little bit more about what is driving the pickup in sales?

Well, I would say, we're seeing good traction in a number of areas. Like we've said in the institutional, we've got good traction in Europe. I think, we're going to start to actually garner some greater flows from some global activities that we have started to work on and some of the products that we're putting into the market over time. And the U.S. activity, we see sales increasing and what we have to do is manage over some of the combination of the ex-parent books of business that we had, as well as just some of the spottiness from some of the things that we're continuing to be in redemption mode. So I don't want to sit and predict that we're going to be in net inflows as we go forward, but I would say that we're gaining traction. I do believe that it's going to be a bit lumpy. But I feel that we have some good product, that we are stepping up levels of activity in certain areas. But I think, as you just asked regarding the margins, et cetera, we feel like we have a good profitable business that we're able to make good investments. But it's -- this is a very competitive field and it's blocking and tackling everyday and that's what we need to do this year.

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.