Submitted by Anonymous on
Any comment on Riversource Life Insur CO? Their AMBest Rating is generally positive but no FDIC insurance makes me nervous
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tom replied on Permalink
Riversource Life Insurance Company
Are you asking from the perspective of a current or prospective policyholder?
If so, what type of policy--annuity, life or disability? They are also very active in asset management arena with Seligman acquisition. Please clarify which area is the base of your inquiry.
Their ratings, as you indicate, are OK: A+ AM Best, AA- Fitch, Aa3 Moody's, AA- S&P.
Not quite sure where the FDIC comment comes into play. They do not appear to be a depository institution. Maybe they have a proprietary money market fund? State guaranty funds would back life/annuity products to limited extent in the case of insolvency.
Please feel free to refine question if you are comfortable and we'll do our best to shed some light on it.
JN replied on Permalink
Riversource
Tom ~ apologies for the vague question.
Perspective: Policyholder
Product: Fixed annuity
Financial Guaranty: I realize that Riversource -- an Amerprise sp company, divested from Amex if I am not mistaken -- is NOT a depository institution. The concomitant lack of FDIC coverage makes me nervous in this age of OBAMA. I was unaware that state $$ would respond in the case of insolvency. What are the ltd's on state-specific coverage?
Alfred M Best doesnt have the credibility they used to after recent debacles so I dug up an SP report. It was generally good but also indicated that Riversource had an unusually hi stability-to-equity-market exposure. Given the political landscape (Pontiacs are bad for America, card companies cant price for risk), I wondered if this was reason enough to stay in lower-yielding CD's etc.
No rush on yr answer; no need for any special diligence; any top-of-mind info you have would be appreciated.
Cheers!
tom replied on Permalink
Riversource
Yes, good to look at rating agencies with a critical eye rather than blindly assuming all is well with a particular rating--we have seen the effects of the latter approach play-out over the past year or so...
You are correct that Riversource is essentially the product manufacturer behind Ameriprise and that they are divested from Amex. Also believe you are correct that they are not a depository institution, although they are an asset manager and do appear to have money market funds.
A few things for you to consider:
1) I believe California backs fixed annuities up to $80,000 (I guess 80% of the contract value to max $100K contract value). Call this number to confirm: 916-492-3500.
2) One approach to mitigate credit risk with a fixed annuity is to spread purchases/contracts around. In other words, if you have $500K then place 5 $100K contracts with 5 different insurance companies.
3) You could also think about laddering. In other words some time diversification through staggering fixed annuity purchases over time.
4) You need to think about inflation protection with variable annuities and whether this interest rate environment is one in which you want to lock-in fixed receipts--for more info on this take a look here:
http://www.annuitydigest.com/blog/tom/fixed_annuity_sales_continue_soar_...
5) Also keep in mind that Ameriprise is not the only source for fixed annuities. Comparison shop. Talk to an indepedendent advisor or give a New York Life rep a call.