- AM Best is the oldest and most widely used credit rating agency for the U.S. insurance industry, rating 16,000+ carriers globally.
- Ratings range from A++ (Superior) at the top to D (Poor) at the bottom on a 13-point scale. Most major U.S. annuity carriers fall in the A++ to A- range.
- For long-term annuity contracts, the practical floor is an A rating. B++ rated carriers warrant more careful evaluation.
- Ratings measure balance sheet strength, operating performance, business profile, and enterprise risk management, but don't capture customer service or product quality.
When you shop for an annuity, AM Best ratings appear everywhere. Every carrier brochure lists them. Every independent review references them. Every agent pitch mentions them. This guide explains what AM Best ratings actually mean, how the scale works, and how to use them when evaluating an annuity carrier or insurance company.
What is AM Best?
AM Best is a credit rating agency that has been rating insurance companies since 1899. The company is headquartered in Oldwick, New Jersey, and is recognized as a Nationally Recognized Statistical Rating Organization by the Securities and Exchange Commission and the National Association of Insurance Commissioners. AM Best is one of the oldest insurance rating services, and it specializes in the insurance industry rather than rating across multiple sectors.
The agency rates over 16,000 insurance companies globally. Its primary product is the Financial Strength Rating, which measures an insurer's ability to pay claims on the policies and contracts it has issued. For annuity buyers, that ability to pay claims is the entire point. A guaranteed lifetime income stream is only as good as the carrier behind it.
The AM Best rating scale
AM Best uses a 13-point letter scale ranging from A++ at the top down to D at the bottom. Each grade also includes a tier within the category. Here is the scale, grouped by category:
Secure ratings (the carriers you want):
- A++ and A+ (Superior), the strongest financial strength tier
- A and A- (Excellent), very strong, the most common rating among major annuity carriers
- B++ and B+ (Good), financially adequate, but with more risk than the top tiers
Vulnerable ratings (proceed with caution):
- B and B- (Fair), meaningful financial weakness
- C++ and C+ (Marginal), significant financial concerns
- C and C- (Weak), substantial weakness
- D (Poor), serious financial issues
Most major U.S. annuity carriers fall in the A++ to A- range. A B++ rating, while still "secure," is on the lower end of what most independent reviewers consider acceptable for a long-term annuity contract.
What AM Best is actually measuring
AM Best evaluates four main areas to arrive at a rating:
Balance sheet strength measures the carrier's capital reserves relative to the obligations it has taken on. A carrier with strong reserves can absorb unexpected claims or investment losses without trouble.
Operating performance measures profitability and consistency of earnings. A carrier that consistently earns money is more likely to remain solvent over a long contract period.
Business profile measures the diversity and quality of the carrier's lines of business. A carrier concentrated in one risky line is more vulnerable than one with multiple stable lines.
Enterprise risk management measures how well the carrier identifies and manages risk across the organization. Better risk management means fewer surprises.
The rating committee considers all four areas and votes on a final rating. The process repeats annually, but ratings can change at any time if a carrier's situation changes.
How to use AM Best ratings when shopping for an annuity
Here is the practical version. For any annuity you are considering, look up the issuing carrier's current AM Best Financial Strength Rating directly on the AM Best website. Do not rely on the rating quoted in a brochure, since brochures can be out of date.
For a long-term annuity contract, most independent reviewers consider an A rating or better as the minimum acceptable threshold. An A+ or A++ rating is preferable, especially for products with guaranteed lifetime income features that may pay out over 30 or more years.
A B++ rated carrier is not necessarily a bad choice, but it warrants more careful evaluation. Lower-rated carriers may offer higher current rates to attract premium dollars, which is the trade-off. Higher rate, slightly higher counterparty risk. For buyers placing premium amounts within their state guaranty association limits, the additional risk may be acceptable. For larger premium amounts, the rating matters more.
Limits of AM Best ratings
Ratings are forward-looking opinions, not guarantees. AM Best explicitly states that ratings should not be the sole reason to purchase or switch insurance carriers. They do not capture customer service quality, product features, or fee structures.
For a complete picture, also review the carrier's ratings from Standard and Poor's, Moody's, and Fitch (each uses a slightly different scale), the National Association of Insurance Commissioners complaint index for the carrier, and customer satisfaction surveys like the J.D. Power index when available.
The bottom line
AM Best ratings are the most widely used measure of insurance company financial strength in the United States and a critical input when evaluating an annuity carrier. A rated A or better, ideally A+ or A++, is the practical floor for a long-term annuity contract. The rating is not the only factor that matters, but it is the first one to check.
How AM Best ratings affect annuity carrier selection
Looking at real carriers helps make the scale concrete. Allianz Life carries an A+ rating. Athene Annuity is rated A+. Nationwide is A+. American National holds an A rating. Atlantic Coast Life holds a B++ rating, which is why it gets more scrutiny in independent reviews even though the carrier remains technically secure.
When two annuity carriers offer similar products with similar rates, the higher-rated carrier is usually the better choice for a long-term contract. When the lower-rated carrier offers meaningfully better rates, the trade-off becomes a real decision about how much counterparty risk you are willing to accept for the additional return.
Frequently asked questions
Is an A rated annuity safe? An A rating from AM Best places the carrier in the "Excellent" tier, meaning the rating agency views the carrier as having strong ability to pay claims and meet its contractual obligations. It is generally considered safe for long-term annuity contracts, though no rating is a guarantee of future performance.
What is the highest AM Best rating? A++ is the highest rating, designated "Superior." Very few carriers hold an A++ rating. Most major U.S. annuity carriers fall in the A+ to A range.
How often does AM Best update ratings? Ratings are formally reviewed annually, but AM Best can update a rating at any time if the carrier's financial situation changes materially. Always check the current rating directly at ambest.com rather than relying on brochure values.
Are AM Best ratings free to look up? Yes. The AM Best website allows free public lookup of any rated insurance company's current Financial Strength Rating.
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