A.M. Best has affirmed the financial strength rating
(FSR) of A+ (Superior) and the 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 the 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 ICR of “a-” and the existing issue ratings of Ameriprise. The
outlook for these ratings is stable.
The ratings of the life/health companies primarily reflect their
strong risk-adjusted capital positions, favorable operating results
and effective hedging programs. Operating earnings have improved
over the most recent period due to higher management and financial
advisor fees from improved market conditions, leading to higher
assets under management. In addition, operating earnings have
benefited from higher distribution fees due to increased client
activity. The growth in operating earnings has 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 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 advisors, its leading market position and
well-developed enterprise risk management (ERM) program. A.M. Best
notes that the number of branded financial advisors remained
relatively flat in recent periods, but overall retention rates on
experienced advisors remain in the mid-90% range. At the holding
company level, Ameriprise maintains a moderate level of financial
leverage of approximately 25% with solid interest coverage. Both
measures are well within A.M. Best’s guidelines for its current
ratings.
A.M. Best notes that Ameriprise’s earnings remain highly
correlated to movements in interest rates and equity markets. Over
two-thirds of Ameriprise’s admitted assets are in separate accounts
that are susceptible to sizable equity market declines. Earnings
are also 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. Although
A.M. Best remains concerned with the potential earnings volatility,
this concern is somewhat mitigated by Ameriprise’s robust ERM
practices, which measures its key risks to ensure decisions are
made that will enhance its overall business profile and
performance.
While life insurance sales have rebounded over the past four
years, statutory premiums from Ameriprise’s annuity, life and
health lines of business have generally declined during that same
period. This is primarily due to a substantial decline in variable
annuity and variable universal life sales following the financial
crisis. Sales of variable annuities have been impacted since the
organization decided to cease marketing through third-party
distribution channels and the transition to new volatility managed
annuity products in the past two years.
However, the company’s product mix has become more balanced as
ordinary life insurance sales have increased in recent periods.
With the exception of 2014, Ameriprise has experienced significant
outflows in its annuity and asset management businesses over the
years including the first half of 2015. While earnings have
benefited from market appreciation and expense management
initiatives in these business segments, a substantial decline in
equity markets may result in a considerable decline in operating
results should these negative outflows return to historical
levels.
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 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 loss and loss-adjustment expense reserve development and
above plan, prior year, weather-related, catastrophic losses.
The following issue ratings have been
affirmed:
Ameriprise Financial, Inc.—
-- “a-” on $700 million 5.65% senior
unsecured notes, due 2015 (currently $350 million outstanding)
-- “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
-- “bbb” on $500 million 7.518% junior
subordinated notes, due 2066 (currently $294 million
outstanding)
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
This press release relates to rating(s) 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 visit A.M.
Best’s Ratings & Criteria Center.
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 © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20151001006795/en/
A.M. BestTom Zitelli, 908-439-2200, ext.
5412Senior Financial Analyst –
L/Htom.zitelli@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorKevin
Dorsey, 908-439-2200, ext. 5401Senior Financial Analyst –
P/Ckevin.dorsey@ambest.comorJim Peavy, 908-439-2200,
ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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