Ameriprise Financial, Inc.’s (AMP - Free Report) long-term issuer and senior unsecured debt ratings have been affirmed at A3 by Moody’s Investors Service, the rating division of Moody’s Corporation (MCO - Free Report) . 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.
Reasons for Affirmation
Per Moody’s, the reiteration of Ameriprise’s ratings and outlook indicates strong fundamentals and solid profitability. The company has been taking advantage of its brand name and market position to expand advisor base and at the same timesustainingstrong capital levels at its insurance subsidiaries.
Further, efforts to move toward less capital intensive operations by focusing on Asset Management, and Advice and Wealth Management segments have strengthened Ameriprise’s financial flexibility. The rating agency commented that hiring of experienced advisors has resulted in improved revenues and profits.
Nonetheless, the company’s potency is getting hurt by competitive operating backdrop and growth challenges in its Asset Management segment, which is witnessing significant net outflows. Also, the impact of weak/volatile equity markets on Ameriprise’s profitability and capital levels remains a concern.
Notably, while affirming the company’s ratings, Moody’s took into consideration its active share buyback plan and expects that it will continue managing capital deployments activities prudently.
What May Lead to Change in Ratings
Moody’s believes that any substantial reduction in Ameriprise’s dependence on equity markets for earnings growth and return on capital (ROC) persistently remaining above 10% will likely lead to ratings upgrade.
On the other hand, ratings could be downgraded in case Ameriprise’s share buyback continuously exceed earnings run-rate, if bottom-line growth is muted with ROC below 10% and if risk-based capital ratio levels at the operating life insurance companies fall below 350%.
Ameriprise remains well positioned for top-line growth through strategic acquisitions along with efforts to modify product and service-offering capacity. Further, the company’s efforts to improve revenues will further support profitability.
Shares of Ameriprise have rallied 4.4% over the past three months against 3.4% decline for the industry it belongs to.
Currently, Ameriprise carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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T. Rowe Price Group, Inc.’s (TROW - Free Report) earnings estimates for 2018 have been revised upward by 2.2% over the past 30 days. This Zacks Rank #2 stock hasgained 44.4% in the past year.
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