Insurance companies are sized up based upon their annuity ratings.
The financial strength of insurance companies are rated by companies such as: A.M. Best, McGraw-Hill, The Street and Moody's (McQueen, 2009).
These ratings determine the ability to pay on commitments and claims. As insurance companies have parent companies, these parent companies can have a stock loss without affecting the ability of its insurance company to pay (McQueen).
Insurance companies maintain certain levels of reserves and capital that is state regulated (McQueen).
Thus, if you see ratings drop of an insurance company that you have annuities with, it does not necessarily mean that your money is not safe or that you will not be paid when your annuities when due. A company can be in the secure range even though it had a ratings drop.
Ask our financial planning professional for more information on how this works.
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McQueen, M.P. (2009, March 5). Don't dump your annuity just yet. The Wall Street Journal, p. C3.
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