A.M. Best Assigns Rating to Ameriprise Financial's Junior Subordinated Notes Offering.

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bbb" to Ameriprise Financial, Inc.'s (Ameriprise) (NYSE:AMP) (Minneapolis, MN) announced issuance of $500 million in junior subordinated notes to be drawn down from the shelf registration recently filed with the Securities and Exchange Commission. Ameriprise and its life/health subsidiaries' existing financial strength, issuer credit and debt ratings are unchanged. The outlook for all ratings is negative.

The net proceeds from this offering will be used for general corporate purposes and to diversify Ameriprise's capital structure.

Ameriprise's debt-to-capital ratio will increase to roughly 17%; however, A.M. Best believes that future earnings will provide strong debt service coverage and enable capitalization to remain fairly constant. The securities have several features that garner equity credit such as a 60-year maturity, the ability of the issuer to defer interest up to 10 years with cumulative and compounding coupons and trigger events. In addition, the notes are subordinated to all other debt within the company.

Payments due after a deferral period will be financed through sale of Ameriprise stock. Ameriprise will retain the right to increase the number of shares sold to cover such payments, if necessary, which provides further flexibility. As such, A.M. Best has granted the notes 75% equity credit for purposes of determining financial leverage. This treatment primarily reflects the notes' liquidation preference as being subordinated to trust preferred securities.

The negative outlook recognizes A.M. Best's view that there are still inherent execution risks associated with re-branding the enterprise. Although variable annuity net flows were positive, earnings in 2005 declined from historical levels primarily due to non recourse separation costs incurred from the spin off from American Express. A.M. Best notes that interest coverage, although solid, will be pressured due to lower earnings and higher debt servicing costs.

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