A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of the life/health subsidiaries of Ameriprise Financial, Inc. (Ameriprise Financial) [NYSE:AMP]. These entities, which were formerly, IDS Life Insurance Company and IDS Life Insurance Company of New York, were recently renamed RiverSource Life Insurance Company (RiverSource) (Minneapolis, MN) and its wholly owned subsidiary, RiverSource Life Insurance Co. of New York, respectively. Concurrently, A.M. Best has affirmed the ICR of “a-” of Ameriprise Financial and all the group’s debt ratings. The outlook for all ratings has been revised to stable from negative.
The ratings reflect the group’s consistent operating performance, strong variable annuity net flows and reduced credit risk in its investment portfolio. The ratings also reflect the growing distribution relationships cultivated by Ameriprise Financial, which have bolstered its market position in the variable annuity sector. Strategic efforts by Ameriprise Financial to improve its distribution have somewhat mitigated concerns related to the marketing alliances put in place by Ameriprise Financial’s former parent, American Express, following the spin off, which will expire in third quarter 2007.
The revised outlook recognizes senior management’s ability to execute a strong brand awareness campaign and surpass its targeted projections. Going forward, A.M. Best believes Ameriprise Financial will be able to leverage its operations and business profile through its varied distribution sources, including the financial advisors networks, banks and independent broker/dealers.
Partially offsetting these positive factors are Ameriprise Financial’s significant exposure to equity market risk, as equity market performance has a considerable impact on revenue and earnings for Ameriprise Financial. Although risk-adjusted capitalization has improved at the insurance entities, capital deployment may be focused on corporate initiatives such as additional share buybacks and shareholder dividends. A.M. Best believes challenges remain with regard to expanding its brand awareness and maintaining a strong distribution base after the transitional marketing alliances with American Express expire.
Ameriprise Financial’s adjusted financial leverage ratio of approximately 16% is viewed as prudent, and A.M. Best believes that future earnings will provide strong debt service coverage. Furthermore, cash flows from non-insurance entities are also available to service holding company debt.
For a complete listing of Ameriprise Financial, Inc.’s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/022604ameriprise.pdf.
Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.