Annuity Company Credit Ratings

An annuity company’s credit rating can help you determine whether the company is safe to work with and in a financially stable situation.

When you buy an annuity, you are often committing a significant financial sum to the company you opt to work with. Customers can use the ratings of a company as a gauge of whether they feel comfortable making that investment.

The vast majority of major annuity providers hold ratings that range in A and B territory.
Companies with slightly lower ratings — such as carriers that hold a B++ rating from AM Best — tend to offer higher rates on their products.

Different customers have different levels of risk tolerance and will have to determine whether a company with a lower credit rating is worth working with for the higher rate they offer.

For reference, one annuity agent that RetireGuide spoke with said that they will not work with an annuity company unless it holds an A rating.

Some of the main annuity company rating agencies include AM Best, Fitch, Moody’s and S&P Global. Each agency rates companies in slightly different ways.

AM Best is often considered the gold standard of the industry, particularly when it comes to evaluating financial strength. It rates companies on a scale that ranges from A++ to D-.

It is highly unlikely you will come across a major annuity company with an AM Best financial strength rating below B++.

Moody’s, another popular rating agency, measures companies on their financial strength as well. Its scale ranges from Aaa to C.

Fitch measures the risk of a company defaulting, with its scale AAA to D.

S&P takes an insurance company’s claims-paying ability into account and rates companies from AAA to D.

An annuity company’s credit rating is publicly available and can typically be found by checking the website of the rating agency.

Many annuity companies are upfront about their ratings as well and will display them prominently on their websites or in product brochures.

With this being said, one important thing to keep in mind is that companies may not always be forthcoming about all of their scores. For example, a company may only display its most favorable rating and not offer information from other agencies that have given it a lower score.

The AM Best Financial Strength Rating is one of the best in the industry and is weighted as a key factor in RetireGuide’s best annuity companies.

When choosing an annuity company, remember that its credit rating is far from the only factor to consider.

Product offerings, rates, riders and your personal needs will all play a key role in identifying the company that makes the most sense for you. Credit ratings can confirm you are dealing with a reputable company and assuage any concerns you may have about trusting a carrier with a significant portion of your nest egg.

Editor Norah Layne contributed to this article.