Fitch Expects to Rate Ameriprise's Senior Unsecured Debt 'A-(EXP)'

Published: 2025-02-26 04:10:08 ET AMP

Fitch Ratings expects to assign Ameriprise Financial Inc.'s (AMP) proposed issuance of $750 million of senior unsecured notes a rating of 'A-(EXP)'.

The fixed rate of interest and maturity date will be determined at the time of issuance.

Key Rating Drivers

Equal Ranking: The debt issuance will represent a senior unsecured obligation of AMP, ranking pari passu with existing senior unsecured debt. The expected rating is equalized with AMP's 'A-' Long-Term Issuer Default Rating (IDR), reflecting the firm's largely unsecured corporate funding profile and Fitch's expectation for average recovery prospects in a stressed scenario.

Modest Impact on Leverage and Coverage: Fitch does not anticipate a material impact to the company's leverage and interest coverage metrics as the proceeds from the issuance will be used for general corporate purposes, which may include the repayment of $500 million of senior notes due in April 2025. AMP's leverage, as measured by gross debt to adjusted EBITDA, was 0.7x at YE24 which is within Fitch's 'a' category quantitative benchmark range for investment managers of 0.5x-1.5x. Interest coverage, as measured by EBITDA to interest expense, was a solid 28.8x at YE24.

Strong Franchise: AMP's ratings reflect its strong franchises in the U.S. advice and wealth management (AWM) segment, its asset management (AM) business through its Columbia Threadneedle subsidiaries, and life insurance, disability and annuity products offered through its RiverSource Life subsidiaries. The ratings also incorporate the benefits of AMP's vertically integrated business model, experienced management team and revenue diversification.

Inherent Market and Operational Risks: The ratings are constrained by inherent market risk driven by significant equity market and interest rate sensitivities, execution risk as AMP develops new bank products, the complex regulatory, legal and operational landscape, and sustained fee compression and net outflows in the AM segment.

Stable Rating Outlook: The Stable Outlook reflects Fitch's expectations that AMP will effectively manage and mitigate market risks particularly as it relates to the insurance business, maintain gross debt to adjusted EBITDA below 1.5x, and maintain available liquidity at its holdco in excess of its short-term obligations. The Stable Outlook also reflects Fitch's expectation that AMP will sustain strong operating performance and maintain a conservative credit risk profile.

For more information on the key rating drivers and sensitivities underpinning AMP's ratings, please see 'Fitch Affirms Ameriprise Financial at 'A-'; Outlook Stable,' dated Aug. 16, 2024.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Adverse regulatory actions or litigation, or reputational damage that leads to impairment of the firm's franchise or funding profile;

A significant and sustained decline in AUM and/or a meaningful erosion in operating margins;

An adverse alteration of the firm's risk appetite or inability of its risk management framework to identify and mitigate outsized risk exposures;

A sustained increase in gross debt to adjusted EBITDA of above 1.5x and/or a meaningful erosion in regulatory capital buffers, or a sharp and sustained decline in available holdco liquidity in relation to near-term obligations.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Meaningful market share gains, geographical expansion, and sustained growth in AUM in the AWM and AM business segments;

A reduction in gross debt to adjusted EBITDA to 0.5x or below on a sustained basis while maintaining strong liquidity and conservative regulatory capital ratios, or adjusted EBITDA margin expansion above 30% on a sustained basis.

DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS

The expected unsecured debt rating is equalized with the Long-Term IDR and reflects the firm's largely unsecured corporate funding profile and Fitch's expectation for average recovery prospects on the debt under a stressed scenario.

DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES

The expected unsecured debt rating is equalized with the Long-Term IDR and is expected to move in tandem.

ADJUSTMENTS

The Standalone Credit Profile (SCP) has been assigned in line with the implied SCP.

The Funding, Liquidity and Coverage score has been assigned below the implied score due to the following adjustment: Fungibility (negative).

Date of Relevant Committee

14-Aug-2024

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.