Guides
AM Best, S&P, Moody's and Fitch ratings explained
How the four insurer financial strength rating scales work, what each letter means, what a rating cannot tell you, and how to look up and read one.
Financial strength ratings are letter grades from independent agencies that opine on an insurer's ability to pay policyholder claims and meet its other obligations. Four agencies rate most large U.S. life insurers: AM Best (A++ down to F), S&P (AAA down to R), Moody's (Aaa down to C) and Fitch (AAA down to C). Each grade is an opinion about the company, not about any one policy, and none of them promises a claim will be paid or says anything about how an insurer treats claims.
What a financial strength rating measures
An insurer's financial strength rating looks at balance sheet strength, earnings, how the company invests its money, the quality of its reserves, its business mix and its management. AM Best describes its rating as an independent opinion of an insurer's financial strength and ability to meet ongoing policy and contract obligations, based on a quantitative and qualitative evaluation of balance sheet strength, operating performance and business profile, according to AM Best's guide to its ratings (a 2009 version of the scale; check ambest.com for the current text).
AM Best also says plainly what its rating does not do. It is not assigned to specific policies, does not address claims-payment practices or an insurer's ability to dispute claims for misrepresentation or fraud, and is not a recommendation to buy, hold or terminate any policy. Treat the other agencies' ratings the same way.
The four scales
All four split their scales into a "secure" zone and a "vulnerable" zone. For life insurance buyers, the secure zone is where nearly all large carriers sit.
AM Best (Financial Strength Rating)
| Rating | Descriptor |
|---|---|
| A++, A+ | Superior |
| A, A- | Excellent |
| B++, B+ | Good |
| B, B- | Fair |
| C++, C+ | Marginal |
| C, C- | Weak |
| D | Poor |
| E | Under regulatory supervision |
| F | In liquidation |
| S | Suspended |
AM Best also assigns an outlook (positive, negative or stable), usually covering the next 12 to 36 months, and an "under review" modifier when a change is likely within about six months.
S&P Global Ratings (insurer financial strength)
| Rating | Descriptor |
|---|---|
| AAA | Extremely strong |
| AA | Very strong |
| A | Strong |
| BBB | Good |
| BB | Marginal |
| B | Weak |
| CCC | Very weak |
| CC | Extremely weak |
| R | Regulatory action regarding solvency |
S&P treats BBB and above as the range where financial security characteristics outweigh vulnerabilities, and BB and below as vulnerable. Plus and minus signs refine the grades from AA through CCC.
Moody's (insurance financial strength)
| Rating | Descriptor |
|---|---|
| Aaa | Exceptional |
| Aa | Excellent |
| A | Good |
| Baa | Adequate |
| Ba | Questionable |
| B | Poor |
| Caa, Ca, C | Very poor to lowest |
Moody's adds numeric modifiers 1, 2 and 3 to categories from Aa down, where 1 is the high end of the category and 3 the low end. An insurer rated Aa3 is therefore at the bottom of Aa.
Fitch (insurer financial strength)
| Rating | Descriptor |
|---|---|
| AAA | Exceptionally strong |
| AA | Very strong |
| A | Strong |
| BBB | Good (lowest "secure" category) |
| BB | Moderately weak |
| B | Weak |
| CCC, CC, C | Very weak and below |
How to compare across agencies
The agencies use different letters, so the same company can read "A+" at AM Best, "AA-" at S&P and "Aa3" at Moody's. Agencies also disagree with each other, so the match is never exact. Do not subtract notches across scales; compare each agency's rating with its own scale, or use a composite like the The Comdex ranking: one number for insurer strength, which converts them to percentiles.
A hypothetical example: say two insurers both quote you the same 20-year term policy. One is rated A++ by AM Best and the other A. Both are in the "Superior" or "Excellent" range, both are secure, and the difference is small compared with differences in price, conversion rights and service. If one were rated B or lower, that would warrant much more caution for a policy you plan to keep for 30 years.
How ratings change
Ratings move. A downgrade, upgrade, outlook change or "under review" tag can follow an acquisition, a large reinsurance deal, investment losses or a change in the parent. As a dated example, AM Best downgraded Banner Life and William Penn to A (Excellent) from A+ on March 13, 2026, after Meiji Yasuda completed its purchase of Legal & General's U.S. protection business; see the Banner Life profile. Treat any rating as of its date.
Ratings are also published at the company's investor or ratings page, normally with the date. The agencies' own press releases are the primary source. Third-party sites sometimes show out-of-date grades.
Where ratings help and where they do not
They help you screen out weak insurers and compare a long-term promise across companies. A rating in a secure category is a reasonable minimum for a policy you will keep for decades.
They do not tell you claim-paying behavior, price, product quality or customer service, and in the usual model the agencies are paid by the companies they rate, which is one reason to use several of them. Ratings can also lag events: an insurer can fail soon after a high grade, as with Executive Life in 1991, when junk-bond losses led to California's seizure of the company (GAO T-GGD-92-13). See Life insurer failures in U.S. history.
If a life insurer does fail, state guaranty associations step in under what happens if your life insurance company fails. According to NOLHGA's coverage table (as of June 1, 2025), 45 of 51 jurisdictions cover death benefits up to $300,000 and six cover up to $500,000. Check your state with the state guaranty association coverage lookup.
A quick way to check a company
- Open the insurer's investor-relations or "ratings" page for the four ratings and dates.
- Confirm AM Best's current rating at ambest.com, and check the other agencies' announcements.
- Note the outlook and any "under review" tag.
- Compare with one or two similar insurers in the life insurer comparison tool.
- Pair this with complaint and satisfaction data (The NAIC complaint index and how to use it, What J.D. Power's life insurance study measures).
Key takeaways
- A financial strength rating is an independent opinion of an insurer's ability to pay obligations; it is not a guarantee, and it does not measure claims practices.
- AM Best, S&P, Moody's and Fitch each have their own scale; compare within a scale or use a composite, not by subtracting letters.
- Most large life insurers sit in the secure ranges, so price, product and service usually decide between them.
- Ratings change, so always check the date, outlook and "under review" tags.
- State guaranty associations are a backstop with limits, not a substitute for choosing a strong insurer.