A.M. Best Revises Outlook to Stable for Ameriprise Financial, Inc. and Its Life Subsidiaries; Upgrades ICRs of P/C Subsidiaries

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to stable from negative and 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’s Ratings & the Treatment of Debt”

A.M. Best also has upgraded the ICRs to “a+” from “a” and affirmed the FSR of A (Excellent) of Ameriprise P&C Companies and its members. The outlook for these ratings is stable.

The Ameriprise P&C Companies’ ratings are based on the consolidated operating results and financial position 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 insurance and property/casualty subsidiaries of Ameriprise Financial, Inc. (Ameriprise) (headquartered in Minneapolis, MN) (NYSE: AMP).

Concurrently, A.M. Best has revised the outlook to stable from negative and affirmed the ICR of “a-” and the existing debt ratings of Ameriprise. (Please see below for a detailed listing of the ratings.)

The revised outlook for the life insurance companies primarily reflects their strong risk-adjusted capital position and the improved liquidity and overall balance sheet strength of Ameriprise. While statutory operating results have been impacted by fluctuating reserves supporting variable annuity guarantees, A.M. Best notes that the company employs an effective hedge program that is constructed to hedge GAAP income, economic risk and statutory capital. Ameriprise also has taken measures over the most recent period to improve its hedge effectiveness and decrease the risk profile of some of its product offerings. Furthermore, Ameriprise maintains a moderate level of financial leverage, adequate fixed charge coverage and appropriate 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. While the number of financial advisors has declined over the most recent period, A.M. Best notes that the company has made a strategic decision to focus on the productivity of experienced advisors, and the decline in the advisor count is primarily the result of less productive advisors leaving the company.

While narrowing credit spreads have moved Ameriprise’s investment portfolio to an unrealized gain position of approximately $1.6 billion as of June 30, 2010, A.M. Best believes there is still potential for further credit impairments, especially within residential and commercial mortgage-backed securities, as well as in its direct commercial mortgage loan portfolio. A.M. Best notes 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 170% of statutory capital and surplus. However, A.M. Best acknowledges that the company’s direct commercial loan portfolio has performed well during the most recent period with only a modest amount of delinquent loans, while its commercial mortgage-backed securities are concentrated primarily in the senior most tranches.

While many of Ameriprise’s business fundamentals and financial metrics have improved, the company’s earnings remain highly correlated to the performance of the equity markets. As a result, earnings trends may continue to be impacted by fluctuating equity valuations and will be susceptible to further volatility in the financial markets.

The ratings of Ameriprise P&C Companies reflect its 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 $800 million 5.35% senior unsecured notes, due 2010

-- “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: “Understanding BCAR for Life and Health Insurers”; “Rating Members of Insurance Groups”; “A.M. Best’s Ratings & the Treatment of Debt”; “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Natural Catastrophe Stress Test Methodology”; and “Catastrophe Analysis in A.M. Best Ratings.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.