OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” of RiverSource Life Insurance Company (Minneapolis, MN) and its wholly owned subsidiary, RiverSource Life Insurance Co. of New York (Albany, NY). A.M. Best also has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” of IDS Property Casualty Insurance Company (IDS) and its wholly owned, fully reinsured subsidiary, Ameriprise Insurance Company (both domiciled in De Pere, WI). Together, these companies represent the key life/health and property/casualty insurance subsidiaries of Ameriprise Financial, Inc. (Ameriprise) (headquartered in Minneapolis, MN) [NYSE:AMP]. Concurrently, A.M. Best has affirmed the Long-Term ICR of “a-” and the existing Long-Term Issue Credit Ratings (Long-Term IR) of Ameriprise. The outlook of these Credit Ratings (ratings) is stable.
The ratings of the life/health companies primarily reflect their strong risk-adjusted capital positions, favorable operating results, effective hedging programs, strong market positions and brand recognition. Ameriprise continues to benefit from its strong fee-based businesses, growth in client and advisory activity and increased sales and deposits in the protection and variable annuity space. The favorable operating earnings have been able to offset significant stockholder dividends, which has enabled the life/health companies to maintain their strong capital positions. Furthermore, Ameriprise continues to employ effective hedge programs that are primarily constructed to hedge GAAP income and economic risk, but also to limit statutory capital volatility. The group also has reduced the risk of some of its product offerings, which included the launch of its managed volatility funds that are now required for all new variable annuities with a living benefit rider. The managed volatility funds have helped Ameriprise lower hedge costs and performance volatility, while reducing required capital.
The ratings also consider Ameriprise’s broad multi-platform network of financial advisers, its leading market position and well-developed enterprise risk management (ERM) program. A.M. Best notes that the number of branded financial advisers remained relatively flat in recent periods, but overall retention rates on experienced advisers remain in the mid-90% range. At the holding company level, Ameriprise maintains a moderate level of financial leverage of approximately 30% with solid interest coverage. Both measures are within A.M. Best’s guidelines for Ameriprise’s current ratings.
A.M. Best notes that Ameriprise’s earnings remain highly correlated to movements in interest rates and equity markets. More than two-thirds of Ameriprise’s admitted assets are in separate accounts that are susceptible to sizable equity market declines. Earnings also are likely to be materially impacted should the current low interest rate environment persist, particularly in the fixed annuity and long-term care insurance lines of business. In addition, Ameriprise may continue to experience net outflows in its annuity and asset management businesses due to the ongoing volatility in the financial markets. Although A.M. Best remains concerned with the potential earnings volatility, this concern is somewhat mitigated by Ameriprise’s robust ERM practices that measure its key risks to ensure decisions are made that will enhance its overall business profile and performance.
The ratings of IDS and its reinsured subsidiary, Ameriprise Insurance Company, are based on the consolidated operating results and financial positions that reflect their contribution to Ameriprise through diversification of risks and earnings, expanded product offerings to affinity partners and tax benefits from their municipal bond portfolio. However, operating performance has declined over the most recent five-year period, necessitating strong capital infusions to maintain the companies’ risk-adjusted capitalization. The companies reported overall operating losses primarily due to deteriorating underwriting performance as a result of adverse prior-year loss reserve development and weather-related catastrophic losses that exceeded the company’s projections.
The following Long-Term IRs have been affirmed:
Ameriprise Financial, Inc.—
-- “a-” on $300 million 7.30% senior unsecured notes, due 2019
-- “a-” on $750 million 5.35% senior unsecured notes, due 2020
-- “a-” on $750 million 4.00% senior unsecured notes, due 2023
-- “a-” on $550 million 3.70% senior unsecured notes, due 2024
-- “a-” on $500 million 2.875% senior unsecured notes, due 2026
The following indicative Long-Term IRs have been affirmed under the current shelf registration:
Ameriprise Financial, Inc.—
-- “a-” on senior unsecured debt
-- “bbb+” on subordinated debt
-- “bbb” on preferred stock
Ameriprise Capital Trust I, II, III and IV—
-- “bbb” on trust preferred securities
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
