Your Annuity Is Only as Solid as the Carrier Behind It
A MYGA, FIA, or income annuity is a contractual promise from an insurance company. The rate and terms are guaranteed — but guaranteed by whom?
That's where AM Best comes in. It's the oldest and most widely recognized rating agency specifically focused on the insurance industry. When you see a letter grade next to a carrier's name, that's AM Best's assessment of their ability to meet ongoing obligations to policyholders.
The Rating Scale
AM Best's Financial Strength Ratings (FSR) run from A++ down through D, with ratings below B++ considered vulnerable:
| Rating | Description |
|---|---|
| A++ | Superior |
| A+ | Superior |
| A | Excellent |
| A- | Excellent |
| B++ | Good |
| B+ | Good |
| B | Fair |
| B- | Fair |
| C++ | Marginal |
| C+ | Marginal |
| C | Weak |
| C- | Weak |
| D | Poor |
Carriers rated A- and above are generally considered financially strong. Below that, the margin for error shrinks.
What the Rating Actually Measures
AM Best analyzes several dimensions of carrier strength:
Balance sheet strength — The ratio of assets to liabilities. A carrier needs surplus capital to absorb unexpected claims or investment losses.
Operating performance — Profitability trends, investment yield, and expense efficiency over time.
Business profile — Market position, product mix, geographic diversification, and competitive strengths.
Enterprise risk management — How well the carrier identifies, measures, and manages risk across its operations.
Ratings are updated periodically and can change — up or down. A carrier rated A- today may be downgraded if its balance sheet deteriorates. This is another reason to work with a carrier that's been consistently rated, not one that recently achieved a borderline grade.
Why the Guaranty Association Isn't a Full Substitute
Every state has a Life and Health Guaranty Association (or equivalent). If a licensed insurance carrier fails, the guaranty association steps in to pay covered claims.
This sounds reassuring — and it is a genuine backstop. But there are limits:
Coverage caps vary by state. Many states cover up to $250,000 per person per carrier for annuity values. Some states cover more; some less. If you have $400,000 with a single carrier and it fails, the excess may not be covered.
The process takes time. Guaranty association proceedings can take years. You may have limited access to your funds during that period.
Not all products qualify. Coverage rules vary, and certain product types or ownership structures may complicate a claim.
The rating matters regardless. A carrier failure is disruptive and costly even when the guaranty association eventually makes policyholders whole. Starting with a strong carrier avoids that disruption entirely.
Practical Takeaway
When evaluating any annuity:
1. Look up the carrier's current AM Best rating on ambest.com 2. Check for any recent rating actions (upgrades, downgrades, or "under review" designations) 3. For large allocations, consider spreading across multiple carriers to stay within guaranty association limits 4. Don't let a slightly higher rate from a lower-rated carrier override financial strength considerations — especially for money you're counting on in retirement
Rating agencies aren't perfect, and strong ratings don't guarantee zero risk. But they're the most systematic tool available for assessing carrier quality, and they're free to check.
Take the five minutes.
Questions about your specific situation? Contact Devin for a free, no-pressure rate comparison. Licensed in multiple states. No commitment required.