Rating Insurance Companies

By Steven H. Kobrin, LUTCF
November 9, 2004
Copyright © Steven H. Kobrin, LUTCF.
All rights reserved.

How do insurance company ratings help us? Rating insurance companies provides a standardized scale, allowing the consumer to match his personal level of financial conservatism with a rating. Insurance companies with that rating should fall within the consumer's comfort zone.

Rating Insurance Companies: Rule of Thumb

Professor Joseph M. Belth (editor of The Insurance Forum) provides an extremely useful rule-of-thumb for differentiating among the rating categories of insurance companies. In the September 2004 issue of The Insurance Forum, he explains the following:

If you are extremely conservative, we think "high ratings for insurance companies" should be defined as follows:

• Best: A++
• Fitch: AAA, AA+
• Moody's: Aaa, Aa1
• S&P: AAA, AA+

If you are very conservative, we think "high ratings for insurance companies" should be defined as follows:

• Best: A++, A+
• Fitch: AAA, AA+, AA
• Moody's: AAA, Aa1, Aa2
• S&P: AAA, AA+, AA

If you are conservative, we think "high ratings for insurance companies" should be defined as follows:

• Best: A++, A+, A
• Fitch: AAA, AA+, AA, AA-
• Moody's: AAA, Aa1, Aa2, Aa3
• S&P: AAA, AA+, AA, AA-

I like this approach because it recognizes that people have different comfort zones and—depending on your degree of conservatism—there is an approach that is right for you.

In my experience, the vast majority of my clients have been satisfied with the conservative definition of high ratings.

Rating Insurance Companies: A Sample

Finally, here are the A.M. Best ratings of popular insurance companies, as of September 2004:

• Banner Life: A++
• Empire General: A+
• First Colony Life: A+
• ING (Reassure America): A+
• MetLife: A+
• MONY: A+
• New York Life: A++
• Northwestern Mutual: A++
• Protective Life: A+
• Prudential: A+
• Savings Bank Life Insurance: A+
• West Coast Life: A+