A.M. Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit ratings of “aa-” of RiverSource Life Insurance Company, based in Minnesota and its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York.
These companies represent the key life/health insurance subsidiaries of Ameriprise Financial, Inc. (Ameriprise) and are collectively known as Ameriprise Financial Group.
A.M. Best has also affirmed the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a+” of Ameriprise Captive Insurance Company (ACIC), based in Vermont, a property/casualty subsidiary of Ameriprise. Additionally, A.M. Best has affirmed the long-term issuer credit ratings of “a-” and the existing long-term issue credit ratings of Ameriprise.
The outlook of these credit ratings is stable.
A.M. Best outlined that they categorised Ameriprise Financial Group balance sheet strength as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).
The ratings of the life/health companies primarily reflect their solid risk-adjusted capital position, favourable operating results, effective hedging programmes, strong market positions and premier brand recognition.
A.M. Best suggested that Ameriprise continues to “benefit from its strong fee-based business, which has led to favourable operating earnings in recent years due to mostly favourable equity markets; however, expects headwinds in the current year.”
The rating firm noted that Ameriprise’s earnings remain highly correlated to movements in interest rates and equity markets. Approximately two-thirds of RiverSource Life Insurance Company and RiverSource Life Insurance of New York’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 affected negatively should the current low-interest-rate environment persist, particularly in the annuity and long-term care insurance lines of business,” according to A.M. Best.
It was explained that Ameriprise will likely continue to experience net outflows in its annuity and asset management businesses; however, this is being offset by its continued strong fee-based businesses.
Although A.M. Best has short-term concern for potential earnings erosion, this is 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.
A.M. Best categorised ACIC balance sheet strength as very strong, as well as its strong operating performance, limited business profile and appropriate ERM.
“The captive has generated strong operating performance as demonstrated by its five-year average pre-tax return on revenue and equity ratios that compare favourably with the averages for the commercial casualty composite,” the rating firm noted.
A.M. Best assessed ACIC’s business profile as limited due to its narrow market focus as a single parent captive serving just one customer (its parent) for a limited amount of exposure.
ACIC provides various coverages to its parent in the form of errors and omissions policies, a workers’ compensation deductible reimbursement policy, fidelity bonds and property terrorism (conventional and nuclear, biological, chemical or radiological).
A.M. Best assessed ACIC’s ERM as appropriate, as the company has adopted the risk management strategies employed by Ameriprise. ACIC benefits from rating enhancement due to its strategic importance as a single parent captive insurance provider.
