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30 Sep 2009
$2.5 billion in debt affected
New York, September 30, 2009 -- Moody's Investors Service has affirmed the ratings of Ameriprise Financial,
Inc. (Ameriprise, NYS: AMP, A3 senior debt) and
its subsidiaries, led by RiverSource Life Insurance Company (Aa3
insurance financial strength rating) following Ameriprise's recent
announcement of a definitive agreement to acquire the long-term
asset management business of Columbia Management from Bank of America
Corporation for approximately $1 billion. The rating outlook
on Ameriprise and its subsidiaries remains negative. The acquisition
is subject to customary regulatory approvals and is expected to close
in the spring of 2010.
The rating agency noted that while the expansion of Ameriprise's
asset management operations materially improves its scale, it also
modestly increases the risk profile of the overall Ameriprise organization
since the asset management operations is viewed as less creditworthy than
the insurance operations. However, this slightly negative
impact is mitigated by: 1) the conservative, equity-based
financing used to fund the acquisition, 2) the additional unregulated
cash flows from the incremental revenues of the acquired business,
3) Ameriprise's existing extensive experience in the asset management
business, 4) the anticipated substantial cost savings available
by successfully integrating the two operations, and 5) Ameriprise's
good track record in integrating acquisitions into its existing businesses.
Moody's said that with the planned acquisition, Ameriprise
will be adding about $165 billion of long term assets under management
(AUM), split roughly 44% fixed income and 56% equity,
increasing the size of its total asset management operations to about
$400 billion in AUM. Notably, the acquisition does
not include Columbia's money market related investment operations
which would be a user of capital in supporting a $1 net asset value;
Moody's would independently evaluate the rating implications of
an acquisition of the Columbia money market business should it occur at
some later date.
Senior Credit Officer Arthur Fliegelman commented: "Ameriprise's
future holding company liquidity is anticipated to be strong despite the
use of $1 billion in cash to finance the acquisition. Issues
that Moody's will carefully focus on in monitoring the rating impact
of this acquisition include the timely and smooth integration of the two
investment operations, the ability of the combined entity to maintain
assets under management and distribution relationships, and the
occurrence of unexpected legal or other costs related to Columbia's
previous investment management and distribution arrangements."
According to Moody's, a downgrade of Ameriprise's ratings could
occur if the following occurs: 1) investment losses exceed $500
million pre-tax in 2009; 2) profitability remains depressed
with ROEs in the single digits or lower; or 3) NAIC RBC levels at
the operating life insurance companies consistently fall below 325%.
Conversely, the outlook could return to stable if the following
occurs: 1) investment losses diminish to an annual run rate of less
than $300 million pre-tax; 2) profitability improves
with ROEs consistently in the double digits; and 3) NAIC RBC remains
consistently above 350%.
The following ratings were affirmed with a negative outlook:
Ameriprise Financial, Inc. -- senior unsecured
debt at A3, junior subordinate debt at Baa2; senior unsecured
debt at (P)A3, senior subordinated debt at (P)Baa1, junior
subordinated debt at (P)Baa1, and preferred stock at (P)Baa2;
Ameriprise Financial Services, Inc. -- issuer
rating at A3;
RiverSource Life Insurance Company -- insurance financial
strength rating at Aa3;
RiverSource Life Insurance Company of New York -- insurance
financial strength rating at Aa3;
Ameriprise Capital Trust I, II, III and IV --
backed preferred stock at (P)Baa1.
The last rating action on Ameriprise occurred on June 3, 2009 when
Moody's assigned an A3 rating with a negative outlook to a $300
million Ameriprise senior debt issue.
Ameriprise Financial, Inc. has its operations headquartered
in Minneapolis, Minnesota. At June 30, 2009,
it had $397 billion in assets owned, managed, and administered;
shareholders' equity was $8.1 billion as of that date.
Ameriprise's net income was $225 million for the six month period
ending June 30, 2009.
The principal methodology used in rating Ameriprise was Moody's Global
Rating Methodology for Life Insurers, published in September 2006
and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually pay senior policyholder claims and
For more information please visit Moody's website at ww.moodys.com/insurance.
VP - Senior Credit Officer
Life Insurance Group
Moody's Investors Service
Moody's affirms Ameriprise's ratings following Columbia acquisition
Life Insurance Group
Moody's Investors Service
No Related Data.
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