A.M. Best Affirms Credit Ratings of Ameriprise Financial, Inc. and Its Subsidiaries
03 November 2016 - 7:24AM
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.
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version on businesswire.com: http://www.businesswire.com/news/home/20161102006739/en/
A.M. BestEdward Kohlberg, +1 908-439-2200, ext.
5664Associate Director –
L/Hedward.kohlberg@ambest.comorChristopher Sharkey, +1
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJonathan Harris,
CFA, FRM, +1 908-439-2200, ext. 5771Senior Financial Analyst
– P/Cjonathan.harris@ambest.comorJim Peavy, +1 908-439-2200,
ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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