A.M. Best Rating
A.M. Best is the oldest and most widely cited financial strength rating agency for U.S. insurance carriers. A.M. Best rates carriers on a scale from A++ (Superior) down to F (in liquidation), with most major carriers falling in the A+ to A- range. The rating reflects A.M. Best's opinion of the carrier's ability to meet ongoing insurance policy obligations — claims, annuity payments, and contractual guarantees. Ratings are reviewed at least annually and can be upgraded, downgraded, or placed under review based on financial performance and capital adequacy.
A consumer is comparing two MYGA quotes. Carrier X offers 5.85% for 7 years; Carrier Y offers 6.10% for 7 years. Carrier X is rated A+ by A.M. Best. Carrier Y is rated B+. The 25 basis-point higher rate on Carrier Y is partial compensation for the carrier's lower rating, which reflects a less-conservative balance sheet, smaller capital cushion, or operational concerns identified by A.M. Best. A consumer purchasing a 7-year contract is exposed to Carrier Y's rating for the entire term plus any time after annuitization.
Why it matters
The A.M. Best rating is the single most accessible proxy for carrier credit quality. A carrier rated A or higher has been independently assessed as having a strong balance sheet, adequate reserves, and a sound business profile. A carrier rated B+ or lower has been flagged for specific concerns. Ratings are publicly available and free to consumers — there is no excuse for purchasing a multi-year contract without checking the rating.
How to evaluate
Look up the rating at ambest.com (free, no login required). For long-duration annuity contracts (anything longer than 5 years), aim for an A rating or higher. For shorter contracts or smaller premiums, B+ or B may be acceptable if the rate is materially higher. Cross-check with S&P, Moody's, and Fitch — if one rating agency materially disagrees with the others, dig further.
In the contract
The rating is not in the contract itself but is published by A.M. Best. Many carrier rate brochures display the rating prominently; if a carrier does not display its rating, that itself is a warning sign.
Related terms
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