A.M. Best Affirms Ratings of Ameriprise Financial, Inc. and Its Subsidiaries
August 30 2011 - 1:45PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A+ (Superior) and issuer credit ratings (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 ICR of “a+” of Ameriprise P&C Companies
and its members, 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 insurance and
property/casualty subsidiaries of Ameriprise Financial, Inc.
(Ameriprise) (headquartered in Minneapolis, MN) (NYSE: AMP).
Concurrently, A.M. Best has affirmed the ICR of “a-” and the
existing debt ratings of Ameriprise. The outlook for all ratings is
stable. (Please see below for a detailed listing of the debt
ratings.)
The ratings of the life insurance companies primarily reflect
their strong risk-adjusted capital positions, adequate liquidity
and the financial flexibility and favorable balance sheet strength
of Ameriprise. While overall premium growth has been challenged in
recent periods, statutory operating results have benefitted from
higher fees associated with an increase in separate account asset
valuations and the release of reserves supporting variable annuity
guarantees. Whereas statutory operating results have historically
fluctuated during times of equity market volatility, A.M. Best
notes that Ameriprise employs an effective hedge program that is
constructed to hedge GAAP income, economic risk and statutory
capital. Ameriprise also has taken measures to improve its hedge
effectiveness and decrease the risk profile of some of its product
offerings in recent periods. Furthermore, Ameriprise maintains a
moderate level of financial leverage, adequate fixed charge
coverage and reasonable levels of intangibles and goodwill on its
balance sheet relative to its current ratings.
The ratings also consider Ameriprise’s broad multi-platform
network of financial advisors and strong brand recognition in the
industry. Although the number of financial advisors has declined in
recent periods, A.M. Best notes that productivity per advisor has
improved during this time as the company has focused on improving
the productivity of experienced advisors, while culling less
productive agents.
Ameriprise’s investment portfolio remains relatively
conservative, maintaining a net unrealized gain position of
approximately $1.7 billion as of June 30, 2011. Despite the fact
that the company’s exposure to the commercial real estate market
remains relatively high (with non-agency commercial mortgage-backed
securities and direct commercial loans representing roughly 150% of
statutory capital and surplus) A.M. Best acknowledges that
Ameriprise’s direct commercial loan portfolio has performed well in
recent periods with only one delinquent loan of more than 60 days
as of June 30, 2011. In addition, its commercial mortgage-backed
securities are concentrated primarily in the senior most
tranches.
While Ameriprise’s main business segments, including Asset
Management, Advice and Wealth Management, Annuities and Protection
have all performed well recently, the company’s earnings remain
highly correlated to the performance of the equity markets. As a
result, earning trends may be impacted by fluctuating equity
valuations and will be susceptible to further volatility in the
financial markets.
The Ameriprise P&C Companies’ ratings are based on the
consolidated operating results and financial positions of IDS and
its subsidiary and reflect their synergies with Ameriprise. In
addition, the ratings take into account the group’s solid
risk-adjusted capital position and favorable trend of operating
results.
The following debt ratings have been affirmed:
Ameriprise Financial, Inc.—-- “a-” on $700 million 5.65%
senior unsecured notes, due 2015-- “a-” on $300 million 7.30%
senior unsecured notes, due 2019-- “a-” on $750 million 5.35%
senior unsecured notes, due 2020-- “a-” on $200 million 7.75%
senior unsecured notes, due 2039-- “bbb” on $500 million 7.518%
junior subordinated notes, due 2066
The following indicative shelf ratings have been affirmed:
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
The principal methodology used in determining these ratings is
Best’s Credit Rating Methodology -- Global Life and Non-Life
Insurance Edition, which provides a comprehensive explanation of
A.M. Best’s rating process and highlights the different rating
criteria employed. Additional key criteria utilized include: “Risk
Management and the Rating Process for Insurance Companies”; “A.M.
Best Ratings & the Treatment of Debt”; “Understanding BCAR for
Life and Health Insurers”; “Understanding BCAR for
Property/Casualty Insurers”; “Natural Catastrophe Stress Test
Methodology”; “Catastrophe Analysis in A.M. Best Ratings”; and
“Rating Members of Insurance Groups.” Methodologies can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2011 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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