AM Best Rating Explained for Annuity Buyers
AM Best is the dominant rating agency for U.S. insurance carriers. The scale runs from A++ (Superior) to F (In Liquidation). For annuity buyers: A- is the practical minimum, A or better is standard for serious money, and A+ or A++ is preferred for amounts at or above $500,000. Carriers below A- have a measurably higher historical default rate and merit elevated scrutiny.
The short answer
AM Best rates insurance carriers financial strength on a 16-step scale. The ratings tell you the likelihood that a carrier can meet its obligations to policyholders over the long term.
The practical buyer rule:
- A++ / A+ = Superior. Top-tier carriers (e.g., New York Life, MassMutual, Northwestern Mutual).
- A / A- = Excellent. Strong carriers (e.g., most major annuity issuers).
- B++ / B+ = Good. Acceptable for small amounts but carry elevated risk.
- B / B- = Fair. Substantial caution required.
- C++ and below = Marginal to weak. Generally avoid.
Why this matters
The state guaranty fund covers contracts up to a cap, but the carrier rating tells you how likely it is that the carrier will ever need the guaranty fund at all. Higher rating = lower failure probability = less time spent in administrative purgatory waiting for guaranty fund resolution.
Carriers rated A- or better have a historical 10-year default rate below 1%. Carriers rated B++ or below have a default rate several times higher.
Full AM Best rating scale
| Rating | Category | Description |
|---|---|---|
| A++ | Superior | Highest rating; very few carriers |
| A+ | Superior | Top-tier financial strength |
| A | Excellent | Strong financial strength |
| A- | Excellent | Solid; practical floor for most annuity buyers |
| B++ | Good | Acceptable but elevated risk; many PE-owned carriers sit here briefly |
| B+ | Good | Elevated risk; merits caution |
| B | Fair | Substantial caution required |
| B- | Fair | Substantial caution required |
| C++ | Marginal | Generally avoid |
| C+ | Marginal | Generally avoid |
| C | Weak | Avoid |
| C- | Weak | Avoid |
| D | Poor | Avoid |
| E | Under Regulatory Supervision | In rehabilitation |
| F | In Liquidation | Carrier has failed; state guaranty fund involved |
| S | Suspended | Rating temporarily suspended |
What the rating actually measures
AM Best Financial Strength Rating evaluates three dimensions:
- Balance sheet strength — capital adequacy, reserve quality, asset/liability matching, reinsurance dependence.
- Operating performance — profitability, premium growth, expense ratios, underwriting discipline.
- Business profile — diversification, distribution, market position, management depth.
The rating is forward-looking: it estimates the carrier ability to meet policyholder obligations over the next 12-36 months under stress scenarios. It does not predict yields, renewal behavior, or service quality.
How to read a rating change
Ratings come with outlooks (Positive, Stable, Negative) and watch designations (Under Review). Direction matters as much as the letter:
- A with Negative outlook = warning sign. The agency sees deterioration. Worth a deeper look before buying.
- A- with Positive outlook = improving credit. Often a PE-acquired carrier rebuilding capital.
- Under Review with Negative Implications = active concern; rating may drop. Defer purchase if possible.
- Withdrawn rating = the carrier asked Best to stop rating. Treat as a red flag. Use other rating agencies.
How to actually verify a rating
- Go to
ambest.com. Free registration. - Search by carrier name. Pull the most recent rating action and the rating rationale PDF.
- Cross-check with Comdex (composite of AM Best + S&P + Moody + Fitch).
- Read the most recent rating rationale — it explains the why behind the letter.
- If the carrier has had a rating action in the past 24 months, read that as well.
Common misconceptions
“A+ is better than A++.” False. The order top-down is A++, A+, A, A-. A++ is the highest.
“Same letter from a different agency means the same thing.” No. AM Best A is roughly equivalent to S&P AA- or A+, not S&P A. The composite Comdex score normalizes across agencies.
“An A-rated carrier cannot fail.” Historically rare but not impossible. Most failed carriers were downgraded 12-24 months in advance — but not all.
“AM Best rates the specific product.” No. The rating is on the issuing legal entity, not the product. A great MYGA from a B- carrier is still a B- contract from a safety perspective.
When the answer changes
- For amounts at or below your state guaranty cap: A- is acceptable; the guaranty fund backstops the rest.
- For amounts above the state cap: Require A or better, ideally A+.
- For long-tail products (income riders, LTC, lifetime SPIAs): Require A or better. The carrier needs to be there in 20 years, not just three.
- For PE-acquired carriers with new ratings: Look at the rationale, not just the letter. Capital structure post-acquisition matters.
Frequently Asked Questions
Related reading
- Comdex Score Explained
- How to vet an annuity carrier
- Should I trust a B++ rated carrier
- Is my MYGA protected if the carrier goes bankrupt
- AM Best official site
Get an independent safety review on your specific carrier or bank
Talk to a licensed independent expert. Hans.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product. Rates, ratings, state guaranty caps, FDIC rules, and tax treatment change frequently. Always confirm current values against the most recent carrier or bank disclosure documents and the actual contract before purchasing. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers. The producer specific appointment status with any carrier discussed may vary, and this article is not an endorsement or representation of carrier appointment. No compensation has been received from any carrier or bank in connection with the publication of this article. Always read the actual contract and consult a licensed advisor before purchasing any annuity, CD, or other financial product. Past performance does not predict future returns. AM Best ratings, Comdex scores, and tax treatment are subject to change. Historical bank and insurance failure outcomes described herein are based on publicly available regulatory and news sources and may include minor inaccuracies; do not rely on this article as a primary source.