A.M. Best Co., Oldwick, N.J., is a credit rating organization that assesses the financial strength of "risk-bearing entities," including insurance companies, and assigns each a Best's Rating. The rating is an independent third-party evaluation of insurance companies based on financial strength ratings, issuer credit ratings and debt ratings. The ratings are derived from an evaluation of a company's balance sheet strength, operating performance and business profile. Following is a description of the three rating types.

Best's Financial Strength Ratings

A Best's Financial Strength Rating is an evaluation of an insurance company's ability to meets its obligations to its customers. If a company is considered secure, it will receive ratings of A++ or A+ (superior), A or A- (excellent) or B++ or B+ (good). If a company is considered vulnerable, it can receive a range of ratings, including B or B- (fair), C++ or C+ (marginal), C or C- (weak), D (poor), E (under regulatory supervision), F (in liquidation) and S (rating suspended).

Companies that are reported on by A.M. Best but don't receive a Best's Rating are assigned Not Rated (NR) Categories, such as NR-1: Insufficient Data, NR-2: Insufficient Size and/or Operating Experience, NR-3: Rating Procedure Inapplicable, NR-4: Company Request and NR-5: Not Formally Followed.

Best's Issuer Credit Ratings

There are two types of Best's Issuer Credit Ratings: Best's Long-term Issuer Credit Rating and Best's Short-term Issuer Credit Rating.

A Best's Long-term Issuer Credit Rating describes a company's ability to meet its senior obligations. Ratings vary depending on credit quality. Regarding Insurance Company Issuer Credit Ratings, a company in the investment grade category could have a rating of aaa (exceptional), aa (superior), a (excellent) or bbb (good). A company in the noninvestment grade category could have a rating of bb (fair), b (marginal), ccc or cc (weak), c (poor) or d (in default).

Regarding Non-Insurance Company Issuer Credit Ratings, a company in the investment grade category could have a rating of aaa (exceptional), aa (very strong), a (strong) or bbb (adequate). A company in the noninvestment grade category could have a rating of bb (speculative), b (very speculative) ccc, cc or c (extremely speculative) or d (in default).

A Best's Short-term Issuer Credit Rating describes a company's ability to meet its senior financial commitments on obligations maturing in generally less than one year. A company in the investment grade category could have a rating of AMB-1+ (strongest), AMB-1 (outstanding), AMB-2 (satisfactory) or AMB-3 (adequate). A company in the noninvestment grade category could have a rating of AMB-4 (speculative) or d (in default).

Best's Debt Ratings

There are two types of Best's Debt Ratings: Best's Long-term Debt Rating and Best's Short-term Debt Rating.

Assigned to debt and preferred stock issues, a Best's Long-term Debt Rating indicates a company's ability to meet it financial obligations to security holders when due. Ratings vary depending on credit quality. A company in the investment grade category could have a rating of aaa (exceptional), aa (very strong), a (strong) or bbb (adequate). A company in the noninvestment grade category could have a rating of bb (speculative), b (very speculative) ccc, cc or c (extremely speculative) or d (in default).

A Best's Short-term Debt Rating indicates a company's ability to meet its obligations having maturities less than one year. A company in the investment grade category could have a rating of AMB-1+ (strongest), AMB-1 (outstanding), AMB-2 (satisfactory) or AMB-3 (adequate). A company in the noninvestment grade category could have a rating of AMB-4 (speculative) or d (in default).

For more information about A.M. Best's ratings, visit www.ambest.com/ratings/about.asp.

This Web exclusive information is a supplement to Safe Solutions.