Article 4 - LTC Insurance Company Ratings

How are Insurance Companies Rated?

Your long-term care insurance is only as good as the company that issues it. So when you buy long-term care insurance, it's wise to make certain that the issuing company is financially sound. The A.M. Best Company, Standard & Poor's, Moody's Investors Services and Weiss Research are well-regarded rating companies that provide objective measures of insurance companies' creditworthiness. Here is a sample of their ratings and what they mean:

A.M. Best Company
Standard & Poor's
Moody's Investors Services

1, 2, 3 Modifiers for each generic rating category from Aa to B. 1 indicates that the insurance company ranks in the higher end of its generic rating category. The modifier 2 indicates a mid-range ranking. The modifier 3 indicates that the company ranks in the lower end of its generic category.

Martin Weiss

is the nation's leading consumer advocate for financial safety. He is president of The Weiss Group, Inc., a leader in the fields of money markets, interest rates, economic safety, and forecasting. The Group has helped millions of Americans judge the financial stability of insurance companies, HMOs, banks, savings & loans, and securities brokers

His Weiss Ratings, based largely on the Weiss proprietary computer model, has won acclaim by the US General Accounting Office (GAO) for having beaten the competition by three to one in accuracy.

The A.M. Best Company

A.M. Best is perhaps the best known of all the insurance rating companies. It publishes over 50 different information products about insurance companies and the insurance industry. Here is an overview of what the A.M. Best rating system means. The following ratings are considered "secure" ratings by A.M. Best:

A++ and A+ ( Superior):
The company has demonstrated superior overall performance and has a very strong ability to meet its obligations to policyholders over a long period of time.

A and A- (Excellent):
The company has demonstrated excellent overall performance and has a strong ability to meet its obligations to policyholders over a long period of time.

B++ and B+ (Very Good):
The company has demonstrated very good overall performance and has a good ability to meet its obligations to policyholders over a long period of time.

The following ratings indicate that a company is "vulnerable" to financial difficulties in the future by A. M. Best:

B and B- (Adequate):
The company has an adequate overall performance and can meet its obligations to policyholders, but may be vulnerable to unfavorable changes in underwriting or economic conditions.
C++ and C+ (Fair):
The company has demonstrated fair overall performance and can meet its current obligations to policyholders, but is vulnerable to unfavorable changes in underwriting or economic conditions.

C and C- ( Marginal):
The company has demonstrated marginal overall performance. It can meet its current obligations to policyholders, but it is very vulnerable to unfavorable changes in underwriting or economic conditions.

D (Very Vulnerable):
The company has demonstrated poor overall performance. The company can meet its obligations to policyholders, but is extremely vulnerable to unfavorable changes in underwriting or economic conditions.

E (Under State Supervision):
The company is under state insurance regulatory authority supervision, control or restraint, such as conservatorship or rehabilitation, but not including liquidation. This rating may be assigned if the company is under a cease and desist order issued by a state regulator other than from its state of domicile.

F (In Liquidation):
The company has been placed under an order of liquidation by a court of law, or its owners have voluntarily agreed to liquidate. Companies that voluntarily liquidate or dissolve their charters are generally not insolvent.

Standard & Poor's

Standard and Poor's rates the claims-paying ability of over 300 insurance organizations worldwide, and monitors public data on another 2,000 U.S. companies. The following ratings are considered "secure" ratings by Standard & Poor's:

AAA
Superior financial security on an absolute and relative basis. Capacity to meet policyholder obligations is overwhelming under a variety of economic and underwriting conditions.

AA
Excellent financial security. Capacity to meet policyholder obligations is strong under a variety of economic and underwriting conditions.

A
Good financial security, but capacity to meet policyholder obligations is somewhat susceptible to adverse economic and underwriting conditions.

The following ratings are considered "vulnerable" ratings by Standard & Poor's:

BBB
Adequate financial security, but capacity to meet policyholder obligations is susceptible to adverse economic and underwriting conditions.

BB
Financial security may be adequate, but capacity to meet policyholder obligations, particularly with respect to long-term or "long-tail" policies, is vulnerable to adverse economic and underwriting conditions.

B
Vulnerable financial security. Currently able to meet policyholder obligations, but capacity to meet policyholder obligations is particularly vulnerable to adverse economic and underwriting conditions.

CCC
Extremely vulnerable financial security. Continued capacity to meet policyholder obligations is highly questionable unless favorable economic and underwriting conditions prevail.

NR
Not Rated. The insurer is not rated by Standard & Poor's.

R
Regulatory action. As of the date indicated, the insurer is under supervision of insurance regulators following rehabilitation, receivership, liquidation, or any other action that reflects regulatory concern about the insurer's financial condition. Information on this status is provided by the National Association of Insurance Commissioners and other regulatory bodies. Although believed to be accurate, this information is not guaranteed. The "R" rating does not apply to insurers subject only to non financial actions such as market conduct violations.

Moody's:

Moody's Ratings, founded in 1909, rates the financial strength of a variety of investment vehicles and institutions, including corporate bonds, preferred stock, short-term debt, mutual funds and insurance companies. The following ratings are considered "strong" by Moody's:

Aaa
Exceptional financial security. While the financial strength of these companies is likely to change, such changes as can be visualized are most unlikely to impair their fundamentally strong position.
Aa
Excellent financial security, together with the Aaa group, they constitute what are generally known as high-grade companies. They are rated lower than Aaa companies because long-term risks appear somewhat larger.

A
Good financial security. However, elements may be present which suggest a susceptibility to impairment sometime in their future.

Baa
Adequate financial security. However, certain protective elements may be lacking or may be characteristically unreliable over any great length of time.

The following ratings are considered "weak" by Moody's:

Ba
Questionable financial security. Often the ability of these companies to meet policyholder obligations may be very moderate and thereby not well safeguarded in the future.

B
Poor financial security. Assurance of punctual payment of policyholder obligations over any long period of time is small.

Caa
Very poor financial security. They may be in default on their policyholder obligations or there may be present elements of danger with respect to punctual payment of policyholder obligations claims.

Ca
Extremely poor financial security. Such companies are often in default on their policyholder obligations or have other marked shortcomings.