When purchasing a Medicaid Compliant Annuity, we often reference the insurance company’s A.M. Best Rating. A.M. Best is an American credit rating agency headquartered in Oldwick, New Jersey, that focuses on the insurance industry. A.M. Best issues financial-strength ratings measuring insurance companies' ability to pay claims. To quote A.M. Best, their rating system “. . . a forward-looking, independent, and objective opinion regarding an insurer's, issuer's, or financial obligation's relative creditworthiness. The opinion represents a comprehensive analysis consisting of a quantitative and qualitative evaluation of balance sheet strength, operating performance, and business profile or, where appropriate, the specific nature and details of a security.
It is important to note that A.M. Best is not the only company on the market that rates insurance. A few other popular options are Moodys, Fitch, and Standard & Poors.
The following scale outlines the ratings and descriptions assigned to insurance companies rated by AM Best.
Financial Strength Rating
Definition
A++, A+ (Superior)
Assigned to companies that have, in our opinion, a superior ability to meet their ongoing insurance obligations
A, A- (Excellent)
Assigned to companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations
B++, B+ (Good)
Assigned to companies that have, in our opinion, a good ability to meet their ongoing insurance obligations.
B, B- (Fair)
Assigned to companies that have, in our opinion, a fair ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions
C++, C+ (Marginal)
Assigned to companies that have, in our opinion, a marginal ability to meet their ongoing insurance obligations. Financial strength is vulnerable to adverse changes in underwriting and economic conditions.
C, C- (Weak)
Assigned to companies that have, in our opinion, a weak ability to meet their ongoing insurance obligations. Financial strength is very vulnerable to adverse changes in underwriting and economic conditions.
D (Poor)
Assigned to companies that have, in our opinion, a poor ability to meet their ongoing insurance obligations. Financial strength is extremely vulnerable to adverse changes in underwriting and economic conditions.
E (Under Regulatory Supervision)
not applicable
F (In Liquidation)
not applicable
S (Rating Suspended)
not applicable