DEFINITION of 'A/A2'

Usually the second- or third-highest rating that a rating agency assigns to a security or carrier. This rating signifies that there is a relatively low risk of default because the issuer or carrier is fairly stable. Investors and policyholders are therefore taking very little risk with these companies.

BREAKING DOWN 'A/A2'

The ratings assigned by the various ratings agencies are based primarily upon the insurer's or issuer's creditworthiness. This rating can therefore be interpreted as a direct measure of the probability of default. However, credit stability and priority of payment are also factored into the rating.

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RELATED FAQS
  1. How long are credit ratings valid?

    Learn how credit ratings are issued and how long they are valid. Investors look to credit ratings to determine risk associated ... Read Answer >>
  2. Does a good credit rating guarantee repayment?

    Learn how credit ratings help investors determine the creditworthiness of an issuer and the risk associated with making an ... Read Answer >>
  3. How important is credit rating on a fixed income security?

    Learn how credit ratings for fixed-income securities impact the yield and provide guidance for the amount of risk for the ... Read Answer >>
  4. In the beginning of this year, the total par value of all CCC-rated bonds were $12 ...

    The correct answer is: d) (i) Default Loss Rate = [($1.3 billion - $625 million)/$1.3 billion] = 51.9% (ii) Dollar Default ... Read Answer >>
  5. In what types of financial situations would credit spread risk be applied instead ...

    Find out when credit risk is realized as spread risk and when it is realized as default risk, and learn why market participants ... Read Answer >>
  6. What level of default rate is typical for the credit services industry?

    Learn how default rates affect businesses in the credit services industry, and what rates are considered normal for a company ... Read Answer >>
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