A.M. Best Co. has 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 also has affirmed the FSR of A (Excellent) and 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 insurance and property/casualty subsidiaries of Ameriprise Financial, Inc. (Ameriprise) (headquartered in Minneapolis, MN) [NYSE: AMP].
Concurrently, A.M. Best has affirmed the ICR of “a-” and the existing debt ratings of Ameriprise. The outlook for all ratings is stable. (Please see below for a detailed listing of the debt ratings.)
The ratings of the life insurance companies primarily reflect their strong risk-adjusted capital positions despite $1.6 billion of stockholder dividends in 2011 and their favorable statutory operating performance after adjusting for the capital impact of their hedging programs. A.M. Best notes that statutory operating results were significantly impacted by an increase in reserves for variable annuity guaranteed benefits. However, these impacts are substantially offset by unrealized gains (losses) on derivatives, which are not included in income, but rather below-the-line adjustments to statutory capital. Ameriprise historically has employed effective hedge programs that are primarily constructed to hedge GAAP income and economic risk, but also had the effect of limiting statutory capital volatility. The company also has reduced the risk of some of its product offerings in recent periods. In addition, the company maintains a moderate financial leverage of approximately 19% and strong interest coverage in the 19X–20X range. A.M. Best also views favorably the recent announcement that Ameriprise intends to change its banking subsidiary from a federal savings bank to a non-depository federal trust by year-end 2012.
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