A.M. Best, Fitch, Moody’s and Standard & Poor’s are the major credit rating agencies, with A.M. Best one of the go to for the life insurance industry. While these ratings aren’t a perfect measure, they tend to be close. Look for a company with nothing lower than an “A-” from A.M. Best, and we recommend not going any further down. This isn’t to say it means another company isn’t a great fit, but we’re looking long term. You need your company to be solvent to pay a claim as quickly as possible.
Other financial signs to think about are company surplus, company assets and in-force policies, and total liabilities. Most life insurance companies will publish this kind of information on their website to promote transparency and to be compliant where necessary, but someone like A.M. Best can furnish these as well.
For quick reference, here is a list of the best life insurance companies and their current financial ratings:
|Midland National / Sammons||A+||A||A2||A+|
|Mutual of Omaha||A+||A1||AA-|
|National Life Group||A||A2||A|
|New York Life||A++||AAA||Aaa||AA+|
|United Home Life||A-|
Four major rating agencies exist today who are responsible for giving their opinion, and ultimately rating, based on a long list of factors about a financial institution’s possibility of success or failure. One of those is A.M. Best, who is probably one of the most respected and trusted.
A.M. Best is a company founded more than a century ago, who monitors the credit ratings of financial institutions worldwide, and they have a special focus on the industries of insurance.
From the consumer standpoint, it would be nearly impossible to evaluate all the different life insurance companies within the U.S. who are bidding for your business, so a company like A.M. Best helps to take the burden by giving ratings which have a correlation to financial strength, solvency, capital reserves, and the risk of investment portfolios. It gives each company who participates a letter grade which corresponds to a chart outlining what type of risk the insurance company is overall.
One of the top credit rating entities among the major four is Fitch. They are responsible for tackling the overview of an entire company to evaluate its current solvency, its overall financial strength, and even how likely it is the company will remain in its current standing in the near future.
ABOUT FITCH RATINGS INC.
At some point in their life, a person is responsible for buying insurance to protect their home, car or even their families from an untimely death. But picking the right company in today’s modern world is more than just the lowest possible price, a funny television commercial, or a fancy sky rise building in a major city.
Because insurance can often be a bit of an intangible purchase and one which may not need to produce any return for several years or decades to come, having an agency like Fitch sort through the financial aspects of an insurer can help you weed out the companies who are least likely to keep providing their necessary value in the years to come.
Fitch does this by compiling data, as they have since 1913, in a meaningful way to showcase how strong and solvent an insurance company truly is. They display their review in an alphabetical and symbol related graph, to make is simple for all consumers to get a snapshot picture of what a company really represents behind its brand. It looks like this:
Who do you trust when you need to make a decision on where to place your business when buying insurance? While every insurance company will be quick to tell you everything positive thing about their company and products, using a third part, independent credit rating agency, like Moody’s, will be much more beneficial to you in the long run.
UNDERSTANDING MOODY’S CORPORATION
Even if you selected the top companies by brand popularity, are you sure you’re getting the best deal with a reputable company? Moody’s can answer that question because they compile data on most major insurance companies in the U.S. and rate them based on financial strength, their ability to stay current on their bills, and provide both stable and sound products now and in the future. They take this data and attempt to simplify the company profile into a single grade, or rating, which is easy to compare from one insurance company or financial institution to the next.
Moody’s is technically a credit rating agency, comprised of the Moody’s Investors Service and the Moody’s Analytics divisions. They evaluate both national and global markets, the companies who make up the industries, and a long list of benchmarks which help to give a more clear indication of a companies current and future success, and they break it down into something a consumer can understand at a basic level.
All the data they take into consideration creates a nice output each consumer can use to make a more informed decision. Here’s what their rating table looks like:
It can be overly confusing choosing the right life insurance company to apply to, especially when they all claim to the best at what they do. Fortunately, third parties like Standard & Poor’s make it much simpler by investigating the inner workings of an insurer to make certain they are likely to hold up to their reputation and make good on their promises.
ABOUT STANDARD & POOR’S COMPANY
S&P is an independent credit rating agency who monitors financial institutions, banks, insurance companies and more to research how well a company is operating under the hood, and they report back with a simplified rating, based on a propriety table, to make it easy for advisors and consumers to better understand their financial strength.
Standard & Poor’s has been around in excess of one and a half centuries, making them the longest standing credit analyst of the major four. They determine the ratings they award by sifting through trillions of dollars in new debt instruments, researching and evaluating thousands of companies’ financial plans, business models, corporate responsibilities and performances.
What this all translates to from a consumer side of comparing companies for their own personal and business needs, is a simple, easy to understand output of scores, or ratings, which align a company into a category which most represents its current and possible future state. Here is an example of what their ratings table looks like: