Ameriprise Financial, inc (AMP) Q2 2021 Earnings Call Transcript

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Ameriprise Financial, inc (AMP 1.27%)
Q2 2021 Earnings Call
Jul 27, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the Second Quarter 2021 Earnings Call. My name is Sylvia and I'll be your operator for today's call. [Operator Instructions]. I will now turn the call over to Alicia Charity. Alicia, you may begin.

Alicia A. Charity -- Investor Relations

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'll 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 references 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 will turn it over to Jim.

James M. Cracchiolo -- Chairman and Chief Executive Officer

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 US 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 is a lot to be hopeful for, as we look ahead. As I consider this landscape, we are 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 of 28% to $1.2 trillion, another new high. With regard to recent strategic moves, we completed the RiverSource Life's 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 or 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 and Wealth Management, where we are 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 advisors are embracing our training, coaching, and powerful suite of tools that are fully integrated with our CRM platform, and we continue to add capabilities, including testing a new e-meeting tool that helps advisors prepare for client meetings in minutes. Our ongoing investments in the technology ecosystem are helping advisors 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 continue the positive trends we are seeing over the past several quarters. Consistent with strong client flows, wrap 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 advisor productivity up 14% adjusting for interest rates to a record of 731,000 per advisor. On the recruiting front, we had 42 experienced advisors join us in the quarter, a bit below where we've been. We're hearing that advisors have been focused on all that comes with reopening and some held off on transitioning firms of delayed the start dates. That said, people are getting back to a more normal rhythm. We are 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 are also seeing a good pickup in demand for our lending solutions. Loan volumes are steadily increasing led by our pledge product, which represents a nice opportunity for future growth. Wrapping up, AWM on metrics and financials remain very strong. Margin increased 380 basis points year-over-year and in the quarter at 21.4% showing consistent expansion since the Fed cut short-term rates a year ago.

Moving to retirement and 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 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 and 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 funds above median over the longer-term time frames on 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 remain 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 ex 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. The 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 are performing well and generating strong results. Our team is serving more clients and deepening relationships. We are delivering an excellent organic growth in both Wealth and Asset Management, and 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 reacclimating. It's been great to be together again in person. We're looking forward to be in more fully back to school 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.

Walter S. Berman -- Executive Vice President and Chief Financial Officer

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 and Wealth Management and Asset Management. Sales of our retirement and protection products were up significantly from last year, and we're focused in low risk and higher margin offerings. We are already seeing a shift in our enforced 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 we 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 and protects solution offerings. Our diversified model generates robust free cash flow and strong balance sheet fundamentals. We returned 92% of adjusted op 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's 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 and 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 pre-tax 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 and Wealth Management were very strong with pre-tax 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 an outstanding financial results. Net inflows were 8.1 billion, excluding legacy insurance partners, which is a continuation of an improved solid flow trends. 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 remained strong at 52 basis points reflecting the strong momentum we are seeing across the board with strength in both equity and fixed income strategies. Expenses remain well managed and in line with expectation 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 expense tightly. Pre-tax 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 and protection solutions continue to perform in line with expectation in this environment. Pre-tax 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 and products without living benefits. This has shifted in the overall book and now only 62% of our 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 and higher margin in VUL and a significant decline in IUL. This mix shift in both Retirement and Protection products are 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 buyback, 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.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Brennan Hawken from UBS.

Brennan Hawken -- UBS -- Analyst

Good morning, thanks for taking my 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 is a decent amount of demand, particularly from certain alternative asset managers to run an 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?

James M. Cracchiolo -- Chairman and Chief Executive Officer

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. It was just completed in July, the beginning of July, and 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 companywide 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, and we'll see what opportunities may arise in the future.

Brennan Hawken -- UBS -- Analyst

Okay, thanks for that. 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, 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 something you'd consider?

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yeah. So, I think to the first comment that you made, you know 80% of our total business right now is really in the Asset Light Asset Management Wealth Management segments with the wealth management really even 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 disclosing more of that type of segment that results for our wealth and asset management. I know Alicia and team are working with our finance people, are 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 all the data and everything is consistent quarter to quarter, how we look at it to track it, et cetera. 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 are able to report it appropriately.

Brennan Hawken -- UBS -- Analyst

Great, thanks for that color.

Operator

Our next question comes from Alex Blostein from Goldman Sachs.

Alex Blostein -- Goldman Sachs -- Analyst

Great. Good morning, guys, thanks for taking the question. So first I wanted to start with maybe a little bit of a deeper update on BMO EMEA asset management acquisitions to Jim. I heard you guys saying that the flows are 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 of more time kind of working through the transaction, maybe an update on sort of run rate revenues and pre-tax margins in that business and how you think these margins eventually are going to look like once you fully integrated with Columbia Threadneedle?

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yeah, so, Alex, as you would imagine a little different than a US acquisition being in the international marketplace in Europe, we do not have as much access to underlying information as you would have normally thought in sort of way you've already in a deal and contract because of privacy and all the limitations there. So, it sort of gives us a little bit of a delay in what we're able to really look at in a much more detailed equation to look at the expenses, the details of that, the various aspects underlying the absolutes to really then come up with what we would consider a combination of run rate and synergies and other things. So, we're just going to have to wait a bit. And it's not our usual, but it's one that where we know that that's what what is required at this point in time. So, we will definitely provide that to you as we continue to gain information for that. So, we're not holding it. It's just more that we don't really have it at the level that we would feel comfortable disclosing something that could change.

Alex Blostein -- Goldman Sachs -- Analyst

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

James M. Cracchiolo -- Chairman and Chief Executive Officer

We do not feel good about it, it's just more that -- it's not something that we can be accurately reporting on.

Alex Blostein -- Goldman Sachs -- Analyst

I go you. I hear you. Second question, Walter, maybe just your view on G&A outlook at a firm wide level. I know they're moving pieces between AWM and asset management. But as you think about G&A holistically for Ameriprise off of kind of $820-ish million run rate in the second quarter, how should we think of that for the rest of the year and maybe even into 2022, given there is some evidence of inflationary pressures building in asset management compensation and things like that?

Walter S. Berman -- Executive Vice President and Chief Financial Officer

Okay. First, let me start off, I think you know as we look at the results for the second quarter, we're managing expenses in a pretty disciplined way and certainly correlated to our revenue growth, we do expect going forward that we are going to continue to have good strong revenue growth. So therefore the expenses will correlate to that and, but we will manage this in a disciplined way. The thing that I would say at this stage, Alex, is that, we are seeing, we are going to start spending in development and other things. So, but it's going to be measured and certainly a month we do not see inflationary pressures yet. Certainly, our compensation is up, as we talked about because of the performance characteristics this year versus last year. But from our standpoint, the underlying expenses are being well managed, and we will continue to spend money as it's prudent, but you should expect that they're going to be disciplined approach to it, but we don't, don't see the inflation right now, just the normal increase that you see with the top performance that we're having.

Alex Blostein -- Goldman Sachs -- Analyst

Great, thanks. If I could just sneak one more in, and a little bit in the weeds. But I was curious about the point Jim you made around pledge 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.

James M. Cracchiolo -- Chairman and Chief Executive Officer

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

Walter S. Berman -- Executive Vice President and Chief Financial Officer

I don't have the number, it is growing and right now the way we operate with with our third-party partner is we basically do the share, then you underwriting and pay a certain sense of the growth potential there is very good. I just don't have the number at hand at this stage.

James M. Cracchiolo -- Chairman and Chief Executive Officer

And Alex since we just more fully launch 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 be to some larger balances over time.

Alex Blostein -- Goldman Sachs -- Analyst

Got it. Okay, thanks guys.

Operator

Our next question comes from Erik Bass from Autonomous Research.

Erik Bass -- Autonomous Research -- Analyst

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

James M. Cracchiolo -- Chairman and Chief Executive Officer

So I think the, what we saw is a consistent pickup after the last year's sort of low period, particularly on longer-term contracts. So as you saw, I mean, our sales of retirement and protection solutions activity really picked up strongly whether it's may be our VUL product or it's structured, or even our RAVA product which has no living benefits and so I think now as you look at the market environment and you look at the ability for our advisors to feel more comfortable actually executing those type of transactions in the environment and with the clients even combination of remote and in person that has picked up nicely. Now for other transaction activity, we see good activity there as well, and we had a pick-up generally both in there and wrap all through these period. So, the wrap business is really coming from both new client inflows as well as new clients that we're adding and we had good client acquisition during the period and the flows also was strong. So I think it's a combination of those factors. I don't think there is one in particular. I think the environment, particularly with low interest rates now that people are looking for how do they get a more return more holistically. In a wrap program, we do do balanced portfolios and diversify pretty well, so that there is a level of what we would call not just over-reliance on the equity markets, but not and the same time, just looking for yield from our fixed income and so I think it's a combination of those factors. I don't know if that answers your question, but as you saw, it continued from the latter part of last year all through the first half of this year.

Erik Bass -- Autonomous Research -- Analyst

Got it. Yeah, 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?

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yeah, I would say it's not just the transition. I mean, as we said, if you look at even though we have strong sales of our annuities, it's still down a few hundred million in net flows, because we're not really putting out there, the Verio with the guarantees, et cetera, but we had a nice pickup on those that didn't have it. But having said that, I feel there is a continuation in the wrap and that continuation will come not just from a mix shift per se. I don't think that's where the large part is. We are maintaining very large cash balances still and we, our flows in are also very good.

Erik Bass -- Autonomous Research -- Analyst

Thank you. You mentioned the impact of low interest rates. Just a quick one there. What are you doing to mitigate the impact of low rates on the bank and certificate products. And then on the other hand, if we do start to see higher interest rates, has anything changed versus the last tightening cycle in terms of your sensitivity to upside?

James M. Cracchiolo -- Chairman and Chief Executive Officer

No, in fact I think we sort of hit, we feel like we hit a low point. I mean if we are looking at what is the discussed of whether inflations there or not there with the Fed may do or not do it looks like there is more of the potential for it to go back with rates going up. I'll let Walter speak to a little bit of the actual rates or what we're doing with the bank to complement that.

Walter S. Berman -- Executive Vice President and Chief Financial Officer

So, obviously, the bank is very opportunistic now, because obviously if you look at a sweep account rates to 27 basis points and we are now new money has been placed at one point we were putting an emphasis on more duration than credit. So we see things upon the opportunity to be prudent about it not extending on credit, but certainly investing out and picking up that spread and you should anticipate that will be more sweep money to play on balance sheet.

Erik Bass -- Autonomous Research -- Analyst

Got it. Thank you.

Operator

Our next question comes from John Barnidge from Piper Sandler.

John Barnidge -- Piper Sandler -- Analyst

Thank you very much. With long-term care experience in the second quarter, would you say that 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.

Walter S. Berman -- Executive Vice President and Chief Financial Officer

It is Walter, so listen, one month, two months, they'll make trend, but yes, the numbers that we're seeing are certainly returning to the pre-COVID situation.

John Barnidge -- Piper Sandler -- Analyst

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

Walter S. Berman -- Executive Vice President and Chief Financial Officer

Well, OK. As part of our program, we are certainly always evaluating, reengineering and we, the stranded cost again is manageable from the fixed annuities based upon the expense base that 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.

John Barnidge -- Piper Sandler -- Analyst

Thank you.

Walter S. Berman -- Executive Vice President and Chief Financial Officer

You are welcome.

Operator

Our next question comes from Humphrey Lee from Dowling and Partners.

Humphrey Lee -- Dowling & Partners -- Analyst

Good morning and thank you for taking my questions. Just to follow up on AWM activities, given the strong Wrap flows and transactional activities, as you think about it, how much of that would you actually build out to pent-up demand since last year versus the productivity gains that from the actions you've taken and how do you think about there going forward.

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yes. So I think it's combination. So again, we know the market conditions are favorable. We know the equity markets are strong and that always lens itself to a consumer appetite for some speak about being comfortable investing. I think part of it is not just the market, but sort of the economy reopening and the feeling that there is not going to be a big shoe to drop so to speak in the near term. I would also say that part of it is definitely the capabilities we put in place and the engagement we have with our advisors. We've done a lot over the last few years, just the idea is like we, one of the few firms that we're were able to like fully operate virtually with all of our capabilities with not losing a beat with our advisors or engagement with the clients. Our digital activities with the clients and the advisors are very strong and keep on adding capabilities there. We are integrating everything in an ecosystem that works together, not just putting tools on a platform and saying, hey, we got this service and look out the way it is and usually when we talk to you about it, it's not something like we just like thought of, just introduced or just added. It's something that we really have tested out, we've proven, we've actually rolled it out. And it really works well. And so I would just say that has, it has a lot to our advisors having this type of engagement with the clients and also the way they are able to transact with the firm and the information that we're providing. So, I think it's a combination of all of that. I mean, I can't sit here and tell you how much we got from each. What I can tell you is the feedback from our advisors are very positive about what we have enabled for them and how that's operating as they were working through things including some of the capabilities we've added on the whole advice modules and what that does in client flows. So that's why we feel good about our system, and we feel like when we do discuss these things with you, it's not vaporware, it's not something that we just like introduced and we're making a big marketing play on it. It's something that we feel really comfortable that has been executed.

Humphrey Lee -- Dowling & Partners -- Analyst

So it sounds like if market conditions continue to be favorable or at least stable, at least for the near-term, that the current activities level should be at least are sustainable in the near term, is that the right way to think about it?

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yes. I can't sit here and tell you there is anything that we see has changed that. And what was saying, 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 sellout or the economics situation changed or COVID jumps back up in some fashion that close 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, we feel good about the continuation of what we have.

Humphrey Lee -- Dowling & Partners -- Analyst

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 margin for the segments given the business mix, but if the market conditions remain stable, any reason why the margin at Columbia Threadneedle will not remain in the low to mid 40% range going forward?

James M. Cracchiolo -- Chairman and Chief Executive Officer

No, I would say this, we actually feel like if Europe improves a bit and our flows turn around their margins will be a bit higher, I mean we outside of foreign exchange and et cetera, we think that would be a possibly, even if you saw, even where there is a level of margin compression or institutional flows are a little low fee-based, we've been able to maintain at 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 UK would actually be favorable if that started the turnaround to add to that. BMO is not a negative at all. I mean, so you're doing in like a 100 and Sutton billion dollars 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 it's all you're doing as 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 -- add in 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 break out of it, but I would say there is nothing that I would sit here to tell you would change in that regard at this point.

Humphrey Lee -- Dowling & Partners -- Analyst

Okay. So that it sounds like for Columbia Threadneedle, there is still more operating leverage as you can get as if Europe turnaround. Okay, got it, thanks.

Operator

Our next question comes from Andrew Kligerman from Credit Suisse.

Andrew Kligerman -- Credit Suisse -- Analyst

Hey, good morning. Maybe just to quickly follow up on last question about advice and wealth, so $9 billion plus in wrap flows for three quarters in a row, you're sitting at $39 billion in cash or north of that actually. These are more than double, around double the numbers we would have seen two years ago before the pandemic. So I just want to make sure this is the new normal then.

James M. Cracchiolo -- Chairman and Chief Executive Officer

Well, I think, Andrew, it's an excellent question and I think you're right, I mean listen here, sometimes and we compare it to a little of the level of activity that we saw just the prior quarters or year, I think if you do go back to '19, our level of activity or productivity, 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 as 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 is that 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.

Andrew Kligerman -- Credit Suisse -- Analyst

Okay, and maybe just following a little bit up on plantings question, these M&A blocks are pretty active out there. Maybe you could, I can take it from a different angle, are you getting a lot of incoming calls and with those calls maybe even a consideration that going forward, you would manufacture and ultimately reinsure the product as you, you move forward on new business.

Walter S. Berman -- Executive Vice President and Chief Financial Officer

Andrew, it's Walter. As Jim indicated, certainly we are getting imbalanced we're evaluating both from a tactical and strategic standpoint and I would say there is clearly interest and certainly if we 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 we're certainly getting imbalanced.

Andrew Kligerman -- Credit Suisse -- Analyst

So maybe just lastly. So the round-trip of excess capital will be around 2 billion after BMO and and the fixed annuity block it's completed. Any sense when you're doing a great payout ratio of about 90%, any sense of the possibility that you might ramp that up a bit in the back half of the year and next year?

James M. Cracchiolo -- Chairman and Chief Executive Officer

I think, Andrew, at this point, we want to execute the BMO transaction. We just completed the fixed annuity. As we've 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.

Andrew Kligerman -- Credit Suisse -- Analyst

Okay, thank you.

Operator

Our next question comes from Tom Gallagher from Evercore.

Tom Gallagher -- Evercore -- Analyst

Good morning. First question just on, Walter, how we should think about corporate following the closing of the FA deal that the -- are we going to see an amortization of the negative seed flowing through corporate and can you give some indication for what the earnings impact is going to be going forward?

Walter S. Berman -- Executive Vice President and Chief Financial Officer

So, yes, again we haven't finalized exactly, but it's a reasonable positioning to put it in Corporate, and yes, there will be amortization of the negative Seed but let me put this in context, as we evaluated certainly the FA book and it's trajectory going forward, it was, this transaction is going to be a positive from a P&L standpoint. Certainly, you would see as you project, it will be higher than what you're seeing right now, but all the projections are, it will be certainly P&L positive to us as we go forward and that does not even take into consideration the use of proceeds as it relates to the freed up capital. So it's risk and P&L wise, as you look over the term of this and certainly the freed up capital aspects of it. It's certainly very positive yes. So the time it would be positive to what we would be experience if we maintain the fixed annuity book and the losses from that. On a relative, I mean, on an absolute sense, it will still be some negative in each quarter and, but what the size of the negative per quarter. You are going to see, OK, right now, you saw in this quarter we had $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 to pretty much probably 10 million a quarter, something in that range. Okay. Andrew -- Tom does that make sense to you?

Tom Gallagher -- Evercore -- Analyst

That does. Yeah, yeah.

James M. Cracchiolo -- Chairman and Chief Executive Officer

And that's, and Walter that's I presume that's non-cash?

Walter S. Berman -- Executive Vice President and Chief Financial Officer

Yeah. That's exactly right. Because it...

James M. Cracchiolo -- Chairman and Chief Executive Officer

Okay.

Tom Gallagher -- Evercore -- Analyst

Because it is the amortization right?

James M. Cracchiolo -- Chairman and Chief Executive Officer

And that's not the. And that does not include like the use of capital, if we were to use it for buyback or other things. So to offset that. But what I would say is that we held it, you would have had a 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.

Tom Gallagher -- Evercore -- Analyst

That makes sense and is and just to, to come back to the question of potential risk transfer. So, the fixed annuity deals done. I heard everything you guys have said about that you're getting inbound calls in you're evaluating things if we think about we'll call it the most likely path of outcomes here, would it be something similar to FA where you might, you might do a slice of your remaining risk, whether that's life insurance variable annuities seen long-term care or would you be open to doing something far, far more strategic like a full divestiture of RiverSource Life HMH when you and how, I don't know how closely you've really looked at it yet, but when you think about the drag on your valuation in your multiple today from those businesses compared to bid-ask spreads in the market, do you have any, any sort of sense for whether you think it could be a meaningful positive and something bigger would make sense or do you think it's more going to be more bite sized transactions?

James M. Cracchiolo -- Chairman and Chief Executive Officer

So, Tom, it's, it's an excellent question. And what I would say is that 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 barely makes sense from what we're doing for our system or our client, et cetera, it 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 holistic. 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 risk even the guarantee portion and well managed. And so if there are aspects that are favorable for us to evaluate something different, and we also take until capital, we will evaluate it. If there are subsets that like we did with the fixed annuity So to optimizes the book right now if 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, 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.

Tom Gallagher -- Evercore -- Analyst

That's, that's good color. Appreciate it, Jim.

James M. Cracchiolo -- Chairman and Chief Executive Officer

Thank you.

Operator

Our next question comes from Suneet Kamath from Citi.

Suneet Kamath -- Citi -- Analyst

Thanks, good morning. So I wanted to go back to AWM for a second. Jim you had mentioned that you brought in, I think 42 experienced advisors, which is about half of what you guys would normally do. I know you said there is some focus on reopening et cetera but can you talk about the competitive environment for advisors and do you think you could get back to that kind of 80-ish plus advisor recruiting per quarter kind of in the near term?

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yes. Suneet. So, I think, listen, as we went through the quarter, we didn't expect it to slow down as much, but for a combination, again, we can't put a fine point on it, but in speaking to our people, et cetera, it wasn't that there wasn't strong interest and that we're having good conversations, but it's sort of where like some people who there wanted to delay it, some people that want to sort of like, well the reopening and what I'm looking out of the markets are what they are, et cetera. So right now, our pipeline looks really good, and we feel like we'll get back to those numbers. And that's really and maybe even a little more favorable, but I would probably say who is just the way it came. Now, is there a competitive market. Absolutely. There is a competitive market and we are being disciplined as well because we don't want to just you know if it's not right for us, we don't jump at it, just like we want it right for the advisor we're recruiting in that we can help them be successful, but I would probably say the second quarter, I wouldn't attribute it to competitive frame I contributed to a confluence of factors. And that's really what I'm getting from my people. So as I said, I'm not coming up with that myself, it's really what I got as feedback as I went through the system.

Suneet Kamath -- Citi -- Analyst

Okay that makes sense. And then just two quick production questions. First in asset management on the North American retail business, can you give a sense of where the growth is coming from in terms of channels, how much of it is AWM versus the third-party intermediaries? And then I have a follow-up for AWM.

James M. Cracchiolo -- Chairman and Chief Executive Officer

Yes, so we have strong flows across our system in the US 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 there similar share just that our growth is strong and so they get in the piece of that action. So no different than the third parties as far as what we're seeing in the pick up, but it's across. And also I think we did mention that it's not and just wanted to 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 slow down like in the equity sales and 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 have positives in Europe, UK was weak previously and now Europe slowed down a little, just because of what happened in the environment, but we're hoping that will bounce back.

Suneet Kamath -- Citi -- Analyst

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. So I apologize if you said it and I missed it, but in terms of the wrap flows, can you give a sense of how much of that is coming from the newer advisors 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?

James M. Cracchiolo -- Chairman and Chief Executive Officer

We're seeing, so on the new advisors, we can see the consistency of the ramp up. The ramp-up is actually improved a bit and we're actually on a relative basis to the industry quite good. We are at the higher end of that, but I would probably see the flows are really coming from the combination of factors, but the legacy advisors are really generating good flows -- organic flows.

Suneet Kamath -- Citi -- Analyst

Okay, great, thanks so much.

Operator

We have no further questions at this time. [Operator Closing Comments].

Duration: 55 minutes

Call participants:

Alicia A. Charity -- Investor Relations

James M. Cracchiolo -- Chairman and Chief Executive Officer

Walter S. Berman -- Executive Vice President and Chief Financial Officer

Brennan Hawken -- UBS -- Analyst

Alex Blostein -- Goldman Sachs -- Analyst

Erik Bass -- Autonomous Research -- Analyst

John Barnidge -- Piper Sandler -- Analyst

Humphrey Lee -- Dowling & Partners -- Analyst

Andrew Kligerman -- Credit Suisse -- Analyst

Tom Gallagher -- Evercore -- Analyst

Suneet Kamath -- Citi -- Analyst

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