Insurance Company Credit Rating

AAA

DEFINITION of 'Insurance Company Credit Rating '

The opinion of an independent agency regarding the financial strength of an insurance company. An insurance company’s credit rating indicates its ability to pay policyholders’ claims. It does not indicate how well the insurance company’s securities are likely to perform for investors. In addition, an insurance company’s credit rating is considered an opinion, not a fact, and ratings of the same insurance company can differ among rating agencies.

INVESTOPEDIA EXPLAINS 'Insurance Company Credit Rating '

There are four major insurance company rating agencies: Moody’s, A.M. Best, Fitch and Standard & Poor’s (the last two companies also provide corporate credit ratings for investors). Each agency has its own rating scale that doesn’t necessarily equate to another company’s rating scale, even when the ratings appear similar.

For example, A.M. Best’s highest insurance company credit rating is A++, meaning superior, while Fitch’s is AAA for exceptionally strong, Moody’s is Aaa for highest quality, and Standard & Poor’s is AAA for extremely strong. It is important not to confuse, for example, A.M. Best’s second-best rating of A+ (for superior) with Fitch’s fifth-best rating of A+ (for strong), or A.M. Best’s C rating (for weak) with Moody’s C (for lowest rated).  

An entity that appears to be a single, major insurance company may actually be composed of several smaller insurance companies, each with its own insurance company credit rating. For example, MetLife, Inc., has a number of subsidiaries, including American Life Insurance Company, General American Life Insurance Company, MetLife Insurance Company of Connecticut and New England Life Insurance Company. Moody’s has rated American Life Insurance Company as A1, while it has rated the other three Aa3. What's more, these ratings differ from the company’s corporate credit ratings, which have included, for example, Baa2 for MetLife, Inc. preferred stock and A3 for MetLife, Inc. senior unsecured debt, in April 2014.

RELATED TERMS
  1. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  2. Lloyd's Of London

    A British insurance market where members join hands as syndicates ...
  3. Reinsurer

    A company that provides financial protection to insurance companies. ...
  4. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all ...
  5. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  6. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
Related Articles
  1. How the Affordable Care Act Changed ...
    Insurance

    How the Affordable Care Act Changed ...

  2. Why You Don’t Need Mortgage Protection ...
    Insurance

    Why You Don’t Need Mortgage Protection ...

  3. The Beginner's Guide To Homeowners' ...
    Home & Auto

    The Beginner's Guide To Homeowners' ...

  4. Find Security In Covered Bonds
    Insurance

    Find Security In Covered Bonds

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center