AM Best affirms RiverSource ratings

AM Best has affirmed the financial strength rating (FSR) of A+ and the long-term issuer credit ratings (Long-Term ICR) of “aa-” of RiverSource Life Insurance Company and its wholly owned subsidiary, RiverSource Life Insurance of New York. These companies represent the key life/health (L/H) insurance subsidiaries of Ameriprise Financial are collectively known as Ameriprise Financial Group.

Concurrently, AM Best has affirmed the FSR of A and the Long-Term ICR of “a+” of Ameriprise Captive Insurance Company (ACIC), a property/casualty (P/C) subsidiary of Ameriprise. The outlook of these ratings is stable. In addition, AM Best has affirmed the Long-Term ICR of “a-” and the existing Long-Term Issue Credit Ratings (Long-Term IRs) of Ameriprise. The outlook of these ratings is stable.

The ratings of Ameriprise Financial Group reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favourable business profile and appropriate enterprise risk management (ERM).

AM Best said that the balance sheet metrics for the RiverSource-grouped companies remain supportive of the very strong balance sheet strength assessment. On an enterprise level, the group has taken various steps to de-risk the balance sheet from interest rate volatility, and this has been accomplished primarily in the medium term through reinsurance.

“AM Best views the capabilities of Ameriprise’s mature risk management program supportive of this strategy,” the rating agency said. “The group’s operating metrics include a return on equity well above industry averages at nearly 50% (excluding unlocking) and margins on a statutory reporting basis that reflect the strength of the group’s operating performance. Distribution capabilities are robust throughout the group’s adviser channel, leaning on an innovative delivery process and achieving operating efficiencies through its investments in technology. Ameriprise’s life and annuity business is complemented by the enterprise’s larger asset management businesses in the United States and internationally. As a group, the RiverSource companies not only are diversified geographically across the United States, but also offer investment services in addition to life and annuity products.”

The ratings of ACIC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM). ACIC benefits from rating enhancement due to its strategic importance as a single-parent captive insurance provider.

AM Best assesses 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). 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 AM Best’s commercial casualty composite. Additionally, ACIC benefits from a very low expense ratio.