APPENDIX B CREDIT RATINGS
Credit ratings assist in evaluating the level of credit risk involved when investing in equity-linked notes, annuities, and insurance. Each rating organization uses a slightly different system. The highest four ratings encompass what is referred to as “investment grade bonds.” All ratings below the four highest are in the “junk” category. Moody’s and Standard & Poor’s publicize ratings on corporations and each has its own unique grading system.
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As of the date of this writing, the more frequent issuers of equity-linked notes had investment grade ratings as follows:
Additional modifiers indicate whether the rating is at the top, middle, or bottom for each category. S&P uses plusses and minuses, and Moody’s uses 1, 2, 3, with 1 being the highest. Source: Moodys.com and Bloomberg Financial.
Ratings are fluid and can be changed at any time by the rating companies. Insurance companies have their own unique ratings. A. M. Best ratings are as follows:
Anything below a B+ should not even be considered. A. M. Best rates the leading companies that offer equity-index annuities as Superior. Weiss Ratings uses a different methodology for measuring the financial strength of insurance companies. The ratings are as follows:
If a company has a Weiss rating of C or below, it should be eliminated from consideration.