What Do Life Insurance Company Ratings Mean?
Moody’s has 21 ratings categories ranging from Aaa to C. This scale is referred to as the “Global Long-term Rating Scale” and is a representation of the relative credit risk of financial obligations. In other words, a rating of Aaa means financial obligations are the highest quality and the risk is minimal. A rating of C, on the other hand, indicates financial obligations are likely in default, with an extremely low chance of recovery of principal and interest. Ratings are forward-looking based on data collected by a team of analysts.
The rating process follows 6 steps: analytical team is assigned, issuer shares company information with analysts, analysts meet with management to discuss the information, analytical team brings their information to the rating committee who reviews, and votes, ratings and rationale are delivered, and surveillance is maintained on an on-going basis to keep ratings current. The committee process of assessing and determining the ratings of companies helps ensure the ratings are consistent and as free from bias as possible. Following the committee rating, the issuer is notified of the rating and the factors that determined it, prior to the rating being published.
To learn more about Moody’s rating process, you can view more details here.
