by John Darer CLU ChFC CSSC RSP
You've just been told that the insurance company you are considering for your structured settlement or retirement annuity is rated A+. What exactly does that mean?
Generally when one hears "it's an A+ rated company" the speaker is referring to the financial strength rating of A.M Best & Company.
According to the A.M. Best Ratings Guide "a Best's Financial Strength Rating is an independent opinion of an insurer's financial strength and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a company's balance sheet strength, operating performance and business profile".
Other companies such as Standard & Poors, Fitch , Moodys and Weiss, also assess and publish ratings of an insurance company for financial strength and/or claims paying ability. It should be noted that with the exception of Weiss, an insurance company must pay a fee to the rating agency in order to be rated. Further it should be noted that, with the exception of Weiss, for the other rating agencies, with the exception of Weiss, an A+ rating is not one of its superior ratings.
While traditionally the A.M. Best ratings are stated first, be aware that some companies are creative in "window dress" their ratings so that for exmaple an A+for Fitch appears on the top, while a lower A (Excellent) rating from Best appears last
Link to A.M. Best Ratings Guide