Best Affirms Ameriprise Financial and Subs Ratings

August 31, 2011

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Minneapolis-based RiverSource Life Insurance Company and its wholly owned subsidiary, RiverSource Life Insurance Co. of New York.

Best also 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, Wisc.) Together, these companies represent the key life insurance and property/casualty subsidiaries of Ameriprise Financial, Inc., which is headquartered in Minneapolis.

Best has also affirmed the ICR of “a-” and the existing debt ratings of Ameriprise. The outlook for all of the ratings is stable.

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,” Best explained.

“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.”

In an historical context Best noted that “statutory operating results have historically fluctuated during times of equity market volatility;” however, Best also pointed out 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.”

In addition Best said the ratings 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, 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 percent of statutory capital and surplus).”

Best also acknowledged 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.

Best summarized the debt ratings affirmed, as follows:
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

Source: A.M. Best

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