A.M. Best Ratings Explained

The A.M. Best Company is one of the leading insurance and financial company rating firms. A.M. Best uses a grading scale of S to A++ to judge a company’s financial status so consumers can make confident decisions regarding their banks, insurance providers, and more. Read our guide for more A.M. Best ratings explained.

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Natasha McLachlan is a writer who currently lives in Southern California. She is an alumna of California College of the Arts, where she obtained her B.A. in Writing and Literature. Her current work revolves around insurance guides and informational articles. She truly enjoys helping others learn more about everyday, practical matters through her work.

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Laura Walker graduated college with a BS in Criminal Justice with a minor in Political Science. She married her husband and began working in the family insurance business in 2005. She became a licensed agent and wrote P&C business focusing on personal lines insurance for 10 years. Laura serviced existing business and wrote new business. She now uses her insurance background to help educate...

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Reviewed by Laura Walker
Former Licensed Agent

UPDATED: Mar 9, 2021

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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 rating 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. Insurance companies have obligations to policyholders and the financial strength rating provides a look at the financial stability of a company so you can tell whether an insurer will be able to fulfill that financial obligation or not.

Here is the insurance ratings scale used by A.M. Best Company, and what each insurance company ratings mean to you.

What do A.M. Best’s Letter Gradations mean?

A++ and A+ Superior Companies with either of these ratings are among the top rated in the industry.
A and A- Excellent These companies show a high degree of stability and a positive long term outlook.
B++ and B+ Good These companies are stable, but have room for improvement. The long term outlook may be unsure.
B and B- Fair While 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+ Marginal Indicates 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- Weak Indicates a company that is going through financial problems of one sort or another. Not a good choice for purchasing an insurance policy.
D Poor This 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.
E Under regulatory supervision Indicates a company which is being investigated or administrated by outside agency.
F In liquidation Indicates 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.
S Suspended This company, for whatever reason, is no longer accepting new customers or investments.

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What does it mean if an insurance carrier doesn’t have a rating?

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

Other major rating agencies may have insight into the performance of a specific company; you can also turn to the BBB Business Profile of a particular insurance provider. This could be a good indicator of whether a provider will have the ability and financial strength to sustain its ongoing insurance operations, providing insurance coverage, and fulfilling its insurance obligations. You can look for signs of poor operating performance or financial performance.

Why do ratings change often?

Ratings have to be updated frequently in order to be kept up to date. Companies that 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.

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