AllianceBernstein Holding L.P. (NYSE:AB) Q4 2018 Earnings Conference Call Transcript

Feb 13, 2019 • 08:00 am ET

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AllianceBernstein Holding L.P. (NYSE:AB) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Thank you for standing by and welcome to the AllianceBernstein Fourth Quarter 2018 Earnings Review. At this time, all participants are in a listen-only mode. After their remarks, there will be a question and answer session and I will give you instructions on how to ask questions at that time. As a reminder, this conference is being recorded and will be available for replay for one week.

I would now like to turn the conference over to the host for this call, the Director of Investor Relations for AB, Ms. Andrea Prochniak. Please go ahead.

Executive
Andrea Prochniak

Thank you Jessa. Good morning everyone and welcome to our fourth quarter 2018 earnings review. This conference call is being webcast and accompanied by a slide presentation that's posted in the Investor Relations section of our website, www.alliancebernstein.com. Seth Bernstein, our President and CEO; John Weisenseel, our CFO; and Jim Gingrich, our COO, will present our results and take questions after our prepared remarks.

Some of the information we present today is forward-looking and subject to certain SEC rules and regulations regarding disclosure. So I'd like to point out the Safe Harbor language on Slide one of our presentation. You can also find our Safe Harbor language in the MD&A of our 2018, 10-K, which we filed this morning. Under regulation FD management may only address questions of a material nature from the investment community in a public forum, so please ask all such questions during this call. We are also live tweeting today's earnings call. You can follow us on Twitter using our handle @AB_insights.

Now I'll turn it over to Seth.

Executive
Seth P. Bernstein

Good morning. Thank you for joining us today. Despite the impact of year-end market dislocation on both industry flows and assets, we maintained strong underlying momentum across our business in 2018 and further strengthened our competitive position. Our full year results reflects the differentiation of our revitalized active equity platform, which attracted $10.8 billion in net new flows and our ability to continue scaling and commercializing our business. Our sales mix across channels was our most diverse in years, and finally, our results reflect our ongoing commitment to disciplined expense management, as demonstrated by the 140 basis point expansion in our adjusted operating margin in 2018% to 29.1%.

Now, let's get into the specifics. Starting with a firmwide overview on Slide three. Annual gross sales of $93.8 billion in 2018 were up $15 billion or 19%. About $10 billion of the increase came from first quarter CRS fundings. The rest was from robust client activity, particularly in Active Equities. Total firmwide net flows were negative $8.1 billion for the year. We experienced two large CRS redemption totaling $14 billion in the first half and significant annual outflows from both institutional and retail fixed income products.

Because of these net outflows, and the steep fourth quarter market decline, we finished 2018 with lower assets under management. However, average AUM was up due to our first three quarters of strong market performance. We also reported