What Is an AM Best Rating? Annuity Glossary

The scale, from Superior to Poor

AM Best grades run from A++ at the top down to F at the bottom.

• A++ and A+ (Superior): the largest, best-capitalized carriers in the market
• A and A- (Excellent): strong, well-run companies, one tier below Superior
• B++ and B+ (Good): adequate capital, but more exposed to a downturn than the tiers above
• B and below: weaker positions, generally treated as a warning sign
• E and F: reserved for insurers under regulatory supervision or in liquidation

Most carriers worth comparing sit at A- or higher. A single-notch difference, say A versus A-, is not usually a reason to rule a company out on its own. A multi-notch gap is worth asking about.

What actually goes into the grade

AM Best looks at a carrier's capital position, the quality of its investment holdings, profitability, liquidity, the mix of business it writes, and the strength of its management team. Ratings are not fixed. They get revisited on a regular schedule and can move at any time, though a company usually drifts a notch or two rather than falling off a cliff overnight. Looking at the last five years of a carrier's rating history tells you more than the current letter alone, since it shows whether the trend is stable, improving, or sliding.

Do not stop at the letter grade

The AM Best rating is one input, not the whole picture. Pair it with a COMDEX score, which blends the ratings from every major agency that covers the carrier into a single percentile, and check what your state guaranty association covers as a backstop. Our carrier ratings resource walks through how to read all three together.

In short: AM Best rates carriers from A++ down to F based on their ability to pay claims. A- or better is the common floor buyers use, but check the trend and the COMDEX score too, not just the letter.