7 November 2022Reinsurance

AM Best affirms RiverSource ratings

AM Best has affirmed the financial strength rating of A+ and the long-term issuer credit ratings of “aa-” of RiverSource Life Insurance Company and its wholly owned subsidiary, RiverSource Life Insurance Co. of New York.

These companies represent the key life/health (L/H) insurance subsidiaries of Ameriprise Financial,  and 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, a property/casualty 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 of Ameriprise. The outlook of these ratings is stable.

According to AM Best 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). The group’s operating performance has remained favourable through 2022 and continues to maintain a trend of high return-on-equity ratios on a statutory reporting basis. Earnings have been accretive to capital growth. While rate increases on the group’s long term care business and economic risks from interest rates rising may present challenges, robust ERM practices mitigate balance sheet risks. Ameriprise has executed on reinsurance transactions on specific lines of business to generate excess capital, improve interest rate risk, improve asset-liability management, while keeping earnings consistent. At the holding company level, Ameriprise maintains moderate financial leverage with good interest coverage. Both measures are within AM Best’s guidelines for Ameriprise’s current ratings. Ameriprise does have a history of returning capital back to shareholders.

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 geographically diversified across the United States, but also offer investment services in addition to life and annuity products. The distribution capabilities are robust through the company’s advisor channel, and the company has achieved innovative delivery and operating efficiencies through its investments in technology.

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 ERM. ACIC benefits from rating enhancement due to its strategic importance as a single-parent captive insurance provider.

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.

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).