What Is a Good AM Best Rating for an Annuity Company?

What an AM Best rating actually measures

AM Best is the oldest ratings agency built specifically around insurance, and it is the one cited most often in the annuity industry. Its Financial Strength Rating answers a single, important question: can this insurer keep meeting its obligations, including the guarantees sitting inside your contract, for years to come. An annuity is only as good as the company that stands behind it, which is exactly why the AM Best grade deserves a look before the rate does.

Ratings are not permanent. AM Best reviews each carrier at least once a year, sometimes more often after a major event like an acquisition, and it can raise, lower, or simply affirm a grade at any point. Every rating comes with an "as of" date and an outlook, usually Stable, Positive, or Negative, that hints at which direction the next review might go. A carrier's rating today is not a promise about where it will sit five or ten years into your contract, which is one more reason to check it again periodically rather than only at the point of sale.

A rating measures the company, not the product. It tells you how likely the insurer is to pay what it owes, not whether a specific annuity contract is the right fit for your goals.

How the AM Best scale is laid out

AM Best sorts carriers into two broad camps, "Secure" and "Vulnerable," and any annuity you consider should sit comfortably inside the Secure side:

A simple way to remember it: A- or better is good, A or better is excellent, and A+ or A++ counts as superior. Plenty of the largest annuity carriers hold ratings at A+ or A++. Some of these grades also carry a plus or minus modifier within the letter itself, and AM Best occasionally adds a notation flagging that a rating is under review, which is worth a second look before you sign anything.

What actually counts as good enough for an annuity

If you plan to hold a fixed annuity or MYGA for a number of years, treat A- as the line you will not cross and lean toward A or better whenever you can. Chasing an A++ carrier over a solid A- name rarely moves the needle much, but going below A- to squeeze out a slightly higher rate is precisely the shortcut that gets buyers into trouble later. The longer you plan to hold the contract, the more that rating matters, since a shorter three-year MYGA carries less exposure to a carrier's future than a ten-year fixed index annuity or an income rider you expect to lean on for decades. Pair a strong rating with your state's guaranty association backstop and you have built one of the safer corners of a retirement portfolio. Our guide on whether annuities are safe covers that second layer of protection in more depth.

How AM Best stacks up against S&P, Moody's, and Fitch

Four major agencies grade insurer strength, and each uses its own scale:

• AM Best: A++ down to D; insurance-focused and the one used most in annuity shopping
• S&P Global: AAA down to D
• Moody's: Aaa down to C
• Fitch: AAA down to D

The letters do not line up one to one across agencies. An AM Best A- and an S&P A- are not measuring the exact same thing, since each agency weighs a carrier's investments, reserves, and capital cushion with its own methodology. That is normal, and it is the reason a carrier review usually leads with AM Best and then notes whatever other agencies also cover that company.

AM Best has been rating insurers since 1899 and covers far more life and annuity carriers than the other three agencies combined, which is why its letter grade tends to show up first in any carrier review. No single agency captures the whole picture on its own, though, and two carriers can share the same AM Best letter while landing in very different places once S&P, Moody's, or Fitch weigh in. That is exactly why pulling more than one agency, or a blended COMDEX score, is worth the extra few minutes.

What a COMDEX score adds to the picture

A COMDEX score is not a rating agency; it is a composite number, from 1 to 100, that blends the grades from AM Best, S&P, Moody's, and Fitch into a single percentile. A carrier with a COMDEX of 90 ranks above 90% of the companies AM Best tracks, and only companies rated by more than one agency get a COMDEX number at all. It is a fast way to compare two insurers that share the same AM Best letter but diverge on the other three agencies: picture two carriers both sitting at A- with AM Best, where one also earns strong marks from S&P and Moody's and the other is rated only by AM Best. The COMDEX gap between them tells you something the single letter grade cannot. See exactly how the number gets built in the COMDEX score guide.

How to actually use ratings while you shop

• Set A- as your floor with AM Best, and prefer A or better. Screening out weaker carriers first keeps you from comparing rates you should never have looked at, since a slightly higher yield is never worth accepting from a company that might struggle to pay it out.
• Look at more than one agency, or the COMDEX blend, instead of leaning on a single opinion. A carrier that only publishes an AM Best grade is not automatically weaker, but a second data point rarely hurts.
• Confirm the rating yourself, directly on the agency's site rather than taking anyone's word for it secondhand, since a rating can shift between the day you were quoted and the day you actually sign.
• Stay under your state's guaranty association limit per carrier, or spread a larger sum across more than one company for extra coverage. A strong rating and a guaranty association backstop work together, not as substitutes for each other.

A licensed strategist can screen carriers on financial strength first, then compare the rates available across other top-rated companies, so you never have to trade a strong carrier for a strong number, or the other way around.