Ameriprise (AMP) Ratings and Outlook Reiterated by A.M. Best

A.M. Best Co. has reiterated the ratings for Ameriprise Financial, Inc. AMP and its insurance units. The rating agency has maintained the Long-Term Issuer Credit Rating of “a-” and reaffirmed the company’s existing debt ratings.

The agency has also reaffirmed the ratings for Ameriprise’s insurance divisions and their subsidiaries. While the ratings of RiverSource Life Insurance Company were reaffirmed with a financial strength rating (FSR) of A+ and Long-Term Issuer Credit Rating of “aa-”, the ratings of Ameriprise Captive Insurance Company (ACIC) were maintained at FSR of A and ICRs of “a+”. All the ratings reaffirmed a stable outlook.

RiverSource Life Insurance Company is based in Minneapolis and is the key life/health insurance subsidiary of Ameriprise, while ACIC is the property/casualty insurance subsidiary of Ameriprise.

Rationale behind the Affirmation

The affirmation of the ratings indicates Ameriprise’s steady capital strength to meet financial commitments, remarkable operating results, strong market position and effective hedging programs. Recently, the company benefited from its strong fee-based business, resulting in encouraging operating earnings, driven by favorable equity markets.

Ameriprise remains well poised for growth, given its discipline in financial planning and strengths in product development. The company has an effective and well-developed enterprise risk-management program in place, which helps in hedging risks. Additionally, Ameriprise offers various variable annuity as well as fixed annuity products to retail clients through its Annuities segment. These variable annuity products offer relatively modest guarantees, which help reduce variable annuity guarantee risks for the company. Notably, Ameriprise has effectively covered its interest payments and maintains moderate financial leverage of about 32% with solid interest coverage as of second-quarter 2018.

However, Ameriprise’s operations are highly correlated with the performance of the equity markets and interest rate movements. A.M. Best believes if interest rates remain low for annuity and long-term care insurance businesses, Ameriprise’s operating margins will be hurt.

Also, the Asset Management segment remains one of the key sources of Ameriprise’s revenues. This segment has been witnessing outflows over the past few years, though partly mitigated by strong fee-based businesses.

Nevertheless, it is on account of the various positives of the company, including strong ERM practices, that its ratings have been affirmed by A.M. Best at the current level.

The ratings affirmation of ACIC reflects its solid risk-adjusted capital position, effective hedging programs, favorable operating results and strong market position.

Ratings Affirmation by Other Firms

Ameriprise’s long-term issuer and senior unsecured debt ratings have lately been affirmed at A3 by Moody’s Investors Service, the rating division of Moody’s Corporation MCO. Further, the insurance financial strength rating of the company’s life insurance subsidiaries, led by RiverSource Life Insurance Company, has been reiterated at Aa3.

Notably, the rating agency has maintained stable outlook for Ameriprise.

Our View

Ameriprise remains well positioned for top-line growth through strategic acquisitions, along with its efforts to modify product and service-offering capacity. Further, the company’s efforts to improve revenues will boost profitability. Ameriprise currently carries a Zacks Rank #2 (Buy).

Ameriprise’s shares have gained 5.9% in six months’ time, outperforming the 3.3% decline recorded by the industry it belongs to.

 

Other Key Picks

E*TRADE Financial Corporation ETFC has been witnessing upward estimate revisions for the past 60 days. Also, the company’s shares have gained nearly 6.3%, year to date. It holds a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

First Financial Bankshares, Inc. FFIN has been witnessing upward estimate revisions for the past 90 days. Additionally, the stock has jumped around 32.3% year to date. It currently carries a Zacks Rank #2.

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