Important: This article provides general educational information, not individualized insurance, investment, tax, or legal advice. Annuity guarantees depend on contract terms and the issuing insurer's financial strength and claims-paying ability. Product availability varies by state.
Last Updated: October 25, 2026
Quick Summary
Financial strength ratings measure an insurance company's ability to pay its contractual obligations to policyholders by assessing capital, reserves, and financial stability. For annuity owners, these ratings help evaluate whether the insurer backing your contract has the resources to honor its promises.
Five independent agencies rate insurer financial strength in the United States: A.M. Best, Fitch Ratings, KBRA, Moody's, and Standard & Poor's.
Check the legal entity name on your contract, not just the brand name, because ratings are assigned to the specific company that issued your annuity.
Record the rating itself, its scale, the outlook, and the date reviewed; a rating without context is incomplete.
Financial strength ratings are opinions, not guarantees; they cannot predict future events or promise claims will always be paid without delay.
State guaranty associations provide a backstop if an insurer fails, but coverage limits and rules vary by state and contract type.
Table of Contents
- What Financial Strength Ratings Tell You About an Insurer
- How to Check an Insurance Company Rating
- Understanding AM Best Insurance Ratings and Other Agencies
- Financial Strength Rating vs Credit Rating: What's the Difference
- Insurer Claims-Paying Ability and What Ratings Cannot Guarantee
- State Guaranty Funds: Your Safety Net Beyond Ratings
- Using Ratings to Evaluate Your Annuity Choice
What Financial Strength Ratings Tell You About an Insurer
Financial strength ratings measure an insurance company's ability to pay its contractual obligations to policyholders. These ratings assess whether an insurer has enough capital, reserves, and financial stability to meet claims and benefits as promised.
An insurer's financial strength matters directly to annuity owners. If an insurance company fails, policyholders may face delays in receiving income payments or accessing their funds.
AnnuityTown provides educational content to help people understand how these ratings work and what they mean when comparing annuities.
How to Check an Insurance Company Rating
Finding an insurer's financial strength rating is straightforward, but reading the result correctly takes a few extra steps.
A practical lookup process:
- Identify the legal entity, not just the brand. Annuity contracts are issued by a specific insurance company, and that legal name may differ from the marketing name on the brochure. The issuing entity is printed on the contract's declaration page and on the annual statement. Ratings are assigned to that legal entity, and a parent company's rating is not automatically the same as the rating of the subsidiary that issued your contract.
- Search the rating agency's site by the legal entity name. Rating agency websites typically offer a free company search. Enter the exact legal name from the contract rather than a shortened brand name.
- Record four things, not one. Note the rating itself, the rating scale it belongs to, the outlook (often described as stable, positive, or negative), and the date the rating was last reviewed. A rating without its date and outlook is only part of the picture.
- Check whether the rating is interactive or non-interactive. Some agencies publish ratings that are assigned with the company's participation and access to management, and others publish unsolicited ratings based on public information. The agency's site usually states which type applies.
- Repeat the search at a second agency. Cross-checking is the simplest way to see whether one agency's view is an outlier.
- Look for rating actions, not just the current grade. Agency sites and press releases list upgrades, downgrades, and outlook changes. A recent downgrade or negative outlook may be more informative than the letter grade alone.
Where else to look:
- The insurer's own website, often under an "About Us," "Investor Relations," or "Ratings" page
- The insurer's statutory annual statement, which is filed with state insurance regulators and is often available through the state insurance department
- The National Association of Insurance Commissioners (NAIC) consumer resources, which explain how states oversee insurer solvency
- State insurance department consumer pages, which may publish complaint information and financial examination reports
A note on scales. Each agency uses its own scale and terminology, so a rating from one agency may look different from another agency's rating for the same company.
Checking multiple agencies gives a fuller picture of an insurer's financial health. If the ratings cluster in the upper ranges across agencies and the outlooks are stable, that is a consistent signal.
Understanding AM Best Insurance Ratings and Other Agencies
Five independent agencies rate insurance company financial strength in the United States. Each agency evaluates insurers using its own criteria and assigns ratings based on its assessment.
The Five Independent Rating Agencies
The five agencies that rate insurer financial strength are identified by the Insurance Information Institute:
- A.M. Best - The oldest and most widely used for insurance ratings
- Fitch Ratings - Provides ratings across financial sectors, including insurance
- Kroll Bond Rating Agency (KBRA) - Focuses on credit and financial strength
- Moody's - Offers ratings for insurance company bonds and financial strength
- Standard & Poor's (S&P) - Rates insurer financial strength and creditworthiness
A.M. Best is the most commonly cited in the insurance industry. Many annuity contracts reference A.M. Best ratings specifically. However, all five agencies provide legitimate assessments of insurer financial stability.
Why Different Agencies May Differ
Ratings from different agencies may not match exactly. The National Association of Insurance Commissioners notes that not all insurer financial strength ratings are created equal.
This variation is normal. It doesn't mean one rating is correct and another is wrong.
A company might receive an "A+" from one agency and an "A" from another. Both ratings may indicate financial strength.
When evaluating an insurer, looking at ratings from multiple agencies can provide a more complete picture.
Five independent agencies rate insurance company financial strength in the United States, each using its own criteria and rating scales.
| Rating Agency | Primary Focus | Scope |
|---|---|---|
| A.M. Best | Insurance financial strength | Most widely used for insurance ratings |
| Fitch Ratings | Financial sectors including insurance | Cross-sector financial strength |
| Kroll Bond Rating Agency (KBRA) | Credit and financial strength | Insurance and credit assessment |
| Moody's | Insurance bonds and financial strength | Insurance company creditworthiness |
| Standard & Poor's (S&P) | Insurer financial strength and creditworthiness | Insurance and credit ratings |
Financial Strength Rating vs Credit Rating: What's the Difference
Financial strength ratings and credit ratings are related but distinct measures.
Financial strength ratings assess an insurance company's ability to pay policyholder claims and benefits.
Credit ratings measure a company's ability to repay debt. They evaluate whether a company can meet its financial obligations to bondholders and creditors.
An insurer might have a strong financial strength rating but a lower credit rating, or vice versa.
For annuity owners, financial strength ratings are the more relevant measure. They directly address whether the insurer can pay your annuity benefits.
Insurer Claims-Paying Ability and What Ratings Cannot Guarantee
A financial strength rating is an opinion about an insurer's ability to pay claims. S&P describes its ratings as forward-looking opinions about an insurance organization's ability to pay its policies and contracts.
Ratings are not guarantees. A high rating means the rating agency believes the company has strong financial capacity.
Ratings reflect historical data and current conditions. They cannot predict future events.
Rating agencies have faced criticism for missing warning signs before insurance company failures. Ratings depend on the accuracy of company-provided financial data and the agency's analytical methods. Neither is infallible.
This is why ratings are one tool among several for evaluating an insurer. They provide useful information but should not be the only factor in your decision.
State Guaranty Funds: Your Safety Net Beyond Ratings
Even if an insurance company fails, state guaranty associations provide a layer of protection for policyholders.
How the safety net works:
- Trigger. Guaranty association protection generally applies when a state court declares an insurer insolvent and a state insurance regulator places the company into liquidation or rehabilitation. A rating downgrade alone does not trigger coverage.
- Coverage limits. Each state sets its own coverage limits, and those limits typically apply per policyholder, per insurer, and sometimes per annuity type. The limits are set in state law, not by the rating agencies, and they change from time to time.
- Covered benefits. Guaranty associations generally cover benefits under covered policies issued by the insolvent insurer, subject to the state's limits. Some benefits, such as certain non-guaranteed or separate-account values, may be treated differently depending on state law and the contract type.
- The claims process. When an insurer is liquidated, the guaranty association typically works with the receiver to transfer policies to a solvent insurer or to pay covered claims directly. This process can take time, and payments may not arrive on the original schedule during the transition.
- Not insurance. Guaranty associations are not insurance companies, and their protection is a statutory backstop rather than a contract benefit. Coverage is not a substitute for an insurer's own financial strength.
Why this matters when reading ratings. A financial strength rating and guaranty association coverage answer different questions. The rating addresses the likelihood that the insurer pays its own claims.
Practical points to verify:
- The coverage limits that apply in your state of residence at the time of an insolvency, which may differ from the limits in the state where the contract was purchased
- Whether the specific annuity type and benefit (for example, a guaranteed lifetime withdrawal benefit or an annuitized income stream) is covered under state law
- Whether the contract value exceeds the state's coverage limit, since amounts above the limit may not be fully protected
- Whether the insurer has affiliates that issue separate contracts, since coverage limits may apply separately to each insurer in a group
Guaranty association coverage varies by state and by contract, and the details are set in state law. A licensed professional and the state insurance department can help clarify how the rules apply to a specific contract.
Using Ratings to Evaluate Your Annuity Choice
When comparing annuities, financial strength ratings should be part of your evaluation process alongside other factors. Learn how AnnuityTown reviews carriers to understand how financial strength, contract terms, and insurer claims are evaluated beyond ratings alone.
Consider these elements:
- The issuing insurer's financial strength rating from multiple agencies
- The rating's date and any recent changes or outlook adjustments
- The annuity contract's terms, guarantees, and fees
- Surrender periods and withdrawal restrictions
- How the contract's benefits align with your retirement goals
- The cost of any riders or optional features
Financial strength ratings help answer one specific question: Can this company reliably pay my benefits? Other contract details answer different questions about what benefits you receive and under what conditions.
Learn how to read insurer financial strength ratings to understand the rating scales and what different ratings mean.
If you already own an annuity, you can review your annuity statement to verify the issuing carrier and understand your contract details. Frequently Asked Questions
What is an insurance carrier financial strength rating?
A financial strength rating is an independent agency's assessment of an insurer's ability to pay its contractual obligations, including annuity payments and claims. Rating agencies analyze the insurer's balance sheet, operating performance, capital adequacy, liquidity, and risk management practices. Ratings are expressed as letter grades and updated periodically. These ratings reflect the agency's forward-looking opinion, not a guarantee of future performance.
How do I check an insurance company's financial strength rating?
You can check an insurer's financial strength rating by visiting the websites of independent rating agencies: A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody's, and Standard & Poor's. Most agencies allow free searches by company name. You can also ask a licensed professional to provide the insurer's ratings from multiple agencies. When reviewing ratings, note that different agencies may assign different ratings to the same insurer, so comparing ratings across agencies is helpful.
Why does an insurer's claims-paying ability matter for my annuity?
Your annuity's value depends on the insurer's ability to pay the income or benefits promised in your contract. An insurer with strong financial strength is better positioned to meet its contractual commitments over the years or decades you may hold the annuity. Financial strength ratings help you assess this risk. However, ratings are opinions based on current data, not guarantees. A licensed professional can help you evaluate whether an insurer's financial strength aligns with your retirement income needs.
Are financial strength ratings the only thing I should consider when choosing an annuity?
Financial strength ratings are one important factor, but not the only one. You should also review the contract's terms, fees, surrender charges, withdrawal limits, crediting methods, guarantees, and how the product fits your retirement goals. A licensed professional can help you compare contracts side by side, including the insurer's financial strength, to identify which features and protections align with your situation.
Understanding financial strength ratings empowers you to evaluate insurers with more confidence. Ratings provide insight into an insurer's financial capacity, but they work best alongside other information about contract terms, guarantees, and your own retirement goals. A licensed professional can help you interpret ratings in context and evaluate how an insurer's financial strength relates to the specific annuity contract you're considering.