How can I assess the financial strength of an insurance company?
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Five independent agencies—A.M. Best, Fitch, Moody’s, Standard & Poor’s, and Weiss—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale. Each agency uses numbers or plusses and minuses to indicate minor variations in rating from another rating class.
The agencies disagree often enough so that you should consider a company’s rating from two or more agencies before judging whether to buy or keep a policy from that company. Moreover, agencies will announce changes of ratings on any day. It’s probably prudent to check annually on the ratings of any company you’re interested in.
Some points for using the ratings:
- Don’t rely only on what the insurance companies say about their ratings from these agencies. Companies are likely to highlight a higher rating from one agency and ignore a lower one from another agency, or to select the most favorable comments from a rating agency’s report.
- To use the ratings from more than one independent agency, you need to understand that each agency’s rating code is different from the others. For example, an A+ from A.M. Best is the next-to-top rating of its 15 categories, but an A+ from Fitch or S&P is their 5th-highest rating (out of 24 categories for Fitch, and out of 19 categories for S&P). Moreover, Moody’s doesn’t have an A+ rating.
However, the ratings can be classified into “secure” and “vulnerable” mega-categories. Here, as of August 2005, are the rating scales for each of the “secure” rating classes, and all the “vulnerable” classes combined (source, except for Weiss: The Insurance Forum, September 2005 issue).
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Rating Agency |
Category |
Description |
# of companies in category |
% of rated companies
in category |
| A.M. Best | A++ | Superior | 52 | 5.4 |
| | A+ | Superior | 133 | 13.7 |
| | A | Excellent | 212 | 21.9 |
| | A- | Excellent | 266 | 27.5 |
| | B++ | Very good | 136 | 14.0 |
| | B+ | Very good | 103 | 10.6 |
| | B and lower | Vulnerable | 66 | 6.8 |
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| Fitch | AAA | Exceptionally strong | 9 | 3.0 |
| | AA+ | Very strong | 42 | 13.8 |
| | AA | Very strong | 50 | 16.4 |
| | AA- | Very strong | 50 | 16.4 |
| | A+ | Strong | 65 | 21.3 |
| | A | Strong | 47 | 15.4 |
| | A- | Strong | 14 | 4.6 |
| | BBB+ | Good | 17 | 3.8 |
| | BBB | Good | 21 | 4.7 |
| | BBB- | Good | 8 | 1.8 |
| | BB+ and lower | Vulnerable | 6 | 1.4 |
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| Moody's | Aaa | Exceptional | 12 | 3.8 |
| | Aa1 | Excellent | 18 | 5.6 |
| | Aa2 | Excellent | 59 | 18.4 |
| | Aa3 | Excellent | 91 | 28.4 |
| | A1 | Good | 24 | 7.5 |
| | A2 | Good | 33 | 10.3 |
| | A3 | Good | 48 | 15.0 |
| | Baa1 | Adequate | 16 | 5.0 |
| | Baa2 | Adequate | 3 | 0.9 |
| | Baa3 | Adequate | 1 | 0.3 |
| | Ba1 and lower | Vulnerable | 15 | 4.7 |
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| S & P | AAA | Extremely strong | 30 | 4.6 |
| | AA+ | Very strong | 43 | 6.5 |
| | AA | Very strong | 97 | 14.7 |
| | AA- | Very strong | 63 | 9.6 |
| | A+ | Strong | 83 | 12.6 |
| | A | Strong | 134 | 20.4 |
| | A- | Strong | 61 | 9.3 |
| | BBB+ | Good | 26 | 4.0 |
| | BBB | Good | 37 | 5.6 |
| | BBB- | Good | 4 | 0.6 |
| | BB+ and lower | Vulnerable | 80 | 12.2 |
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| Weiss* | A+ | Excellent | 29** | 3 |
| | A | Excellent | 29** | 3 |
| | A- | Excellent | 29** | 3 |
| | B+ | Good | 282** | 29 |
| | B | Good | 282** | 29 |
| | B- | Good | 282** | 29 |
| | C+ | Fair | 380** | 39 |
| | C | Fair | 380** | 39 |
| | C- | Fair | 380** | 39 |
| | D+ and lower | Vulnerable | 272** | 28 |
*2004 figures; updated information not available
**As of March 25, 2003 |
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Ratings Agency Contact Information
All of the ratings agencies can be found on the Web, or reached by phone.
Agency |
Web site |
Address |
Phone number |
| A.M. Best Company, Inc | www.ambest.com | Ambest Rd.
Oldwick, NJ 08858 | 908-439-2200 |
| Fitch Ratings | www.fitchibca.com | 1 State Street Plaza
New York, NY 10004 | 1-800-75-FITCH |
| Moody’s Investor Services* | www.moodys.com | 99 Church Street New York, NY 10007 | 212-553-0300 |
| Standard & Poor’s Insurance Ratings Services* | www2.standardandpoors.com | 55 Water Street
New York, NY 10004 | 212-438-2000 |
| Weiss Research** | www.weissratings.com | 15430 Endeavor Drive
Jupiter, FL 33478 | 800-289-9222 |
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*To use these Web sites, you have to register, but it’s free.
**Weiss charges $14.99 for each rating. However, its public Web site lists the ten highest and ten lowest ranked companies, and the companies themselves might reveal their Weiss rating. |
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