A.M. Best Affirms Credit Ratings of Ameriprise Financial, Inc. and Its Subsidiaries
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 business, which has led to favorable operating earnings in recent periods due to favorable equity markets. The ratings also consider Ameriprise’s broad multi-platform network of financial advisers and well-developed enterprise risk management (ERM) program. Along with its hedging program, Ameriprise’s current variable annuity (VA) products offer relatively modest guarantees which help to reduce the company’s VA guarantee risks. In addition, the use of permitted practices available in Minnesota on VA statutory hedge accounting will better align reported hedge gains (losses) to changes in VA reserves. At the holding company level, Ameriprise maintains moderate financial leverage of approximately 32% with solid interest coverage as of second quarter 2017. 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 due to reduced fee income. Operating margins also are likely to be negatively affected should the current low interest rate environment persist, particularly in the 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 uncertainty in the financial markets and competition in the annuity and mutual fund business lines. Although A.M. Best remains concerned for potential earnings erosion, 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 are primarily due to deteriorating underwriting performance that resulted from adverse prior-year loss reserve development and weather-related catastrophe losses that exceeded the company’s projections. The companies have taken a number of steps to improve reserving processes and for the first time in the most recent five-year period, reported favorable prior year loss reserve development in 2016. Other recent measures reduce the impact from weather-related catastrophe losses including revising and enhancing its reinsurance program, actively reducing its exposure in severe convective storm states, increasing wind/hail deductibles and increasing the number of dedicated field catastrophe adjusters.
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. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.