AM Best Ratings Explained

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The A.M. Best Company is one of the leading insurance and financial company ratings firms. The company uses a standard grading scale to provide consumers with information about the stability and long term financial outlook of financial companies. At a glance, someone who is comparing prices of different insurance companies can know whether they are dealing with a company that is in dire straits, is making a comeback from a financial blow, or is riding on top of the heap. Here is the grading scale used by A.M. Best Company, and what the grades mean to you.

A.M. Best's Letter Gradations

A++ and A+SuperiorCompanies with either of these ratings are among the top rated in the industry.
A and A-ExcellentThese companies show a high degree of stability and a positive long term outlook.
B++ and B+GoodThese companies are stable, but have room for improvement. The long term outlook may be unsure.
B and B-FairWhile currently stable, these companies have a lot of room for financial improvement. Companies rated below a B+ may not be the best choices for long term insurance policies but may be suitable for short term policies such as car insurance.
C++ and C+MarginalIndicates that the company is going through some sort of financial turmoil. Consumer investment should only be made with extreme caution. Investors may be more interested in this rating because it shows the potential for future gains.
C and C-WeakIndicates a company that is going through financial problems of one sort or another. Not a good choice for purchasing an insurance policy.
DPoorThis company has suffered some sort of major financial stress and is currently on shaky financial ground. Companies with a rating of D may not be suitable for insurance purchases or long term investments.
EUnder regulatory supervisionIndicates a company which is being investigated or administrated by outside agency.
FIn liquidationIndicates a company that is being liquidated to pay debts. An F-rated company is probably not allowed to sell insurance products, and would not be a wise investment.
SSuspendedThis company, for whatever reason, is no longer accepting new customers or investments.

Lack of a Rating

Just because you cannot find a rating for any particular company, do not assume that the company is insolvent or even experiencing financial turmoil. There are many reasons why a rating may not be available, including the company being a subsidiary of a larger firm, lack of current information during the ratings update, or company changes in name or ownership.

Ratings Change Often

Ratings have to be updated frequently in order to be kept up to date. Companies which have less than perfect ratings but which are known to be going through restructuring, selling portions of the company, or other financial transactions may be slated for a rating upgrade soon. It is not unusual for a rating to drop during a tumultuous economic season, and such temporary downgrades seldom last more than one or two ratings periods.

About the Author: is an avid writer and content specialist for US Insurance Agents. John authors articles and other content for the company's insurance websites. Google+