Look Up Insurance Company Rating (Standard and Poors)

What the Insurance Company Ratings Mean (Standard & Poors)

AAA
An insurer rated 'AAA' has EXTREMELY STRONG financial security characteristics. 'AAA' is the highest Insurer Financial Strength Rating assigned by Standard & Poor's.
AA
An insurer rated 'AA' has VERY STRONG financial security characteristics, differing only slightly from those rated higher.
A
An insurer rated 'A' has STRONG financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings.
BBB
An insurer rated 'BBB' has GOOD financial security characteristics, but is more likely to be affected by adverse business conditions than are higher rated insurers.
An insurer rated 'BB' or lower is regarded as having vulnerable characteristics that may outweigh its strengths. 'BB' indicates the least degree of vulnerability within the range; 'CC' the highest. BB
An insurer rated 'BB' has MARGINAL financial security characteristics. Positive attributes exist, but adverse business conditions could lead to insufficient ability to meet financial commitments.
B
An insurer rated 'B' has WEAK financial security characteristics. Adverse business conditions will likely impair its ability to meet financial commitments.
CCC
An insurer rated 'CCC' has VERY WEAK financial security characteristics, and is dependent on favorable business conditions to meet financial commitments.
CC
An insurer rated 'CC' has EXTREMELY WEAK financial security characteristics and is likely not to meet some of its financial commitments.
R
An insurer rated 'R' is under REGULATORY SUPERVISION owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations.
NR
An insurer rated 'NR' is NOT RATED, which implies no opinion about the insurer's financial security.


Plus (+) or minus (-) signs following ratings from 'AA' to 'CCC' show relative standing within the major rating categories.

Insurance Company Ratings Slip (Wall Street Journal)

INSURANCE MARCH 17, 2009, 9:38 A.M. ET Worry Grows Over Insurers As Ratings Slip
More Companies Weakened By Bad Investment Choices; Shenandoah Sales Moratorium


By M.P. MCQUEEN
While consumers have been fretting about the safety of their policies at large, publicly traded insurers, some smaller, less-watched companies have been running into trouble too.

Insurers of all sizes are being slammed by investment losses. Some also are being dragged down by higher-than-expected claims in areas like long-term-care insurance. Regulators have taken over companies with policies owned by more than half a million people in more than 30 states, including life insurance and annuities. At one insurer, a receiver has imposed a moratorium on policyholders taking cash out of their policies or turning them in for cash.

A Question of Policies
Consumers are growing concerned as insurers' ratings are falling. Here's what they should keep in mind:

States regulate the amount of capital and reserves insurers need to keep.Some companies have run into trouble by falling short of these levels because of bad investments.Regulators try to work out problems with insurers so that policy owners are protected.Shenandoah Life Insurance Co., a small insurer based in Roanoke, Va., recently fell below state requirements for capital and cash reserves because of its investments in mortgage-backed securities, which were hammered in the housing meltdown. Shenandoah has stopped selling new policies and has instituted a moratorium on policyholders cashing out, selling, surrendering or borrowing from their contracts. The company is continuing to pay death and annuity benefits as well as health-insurance claims. The state receiver who has been running Shenandoah since last month declined to comment.

The life-insurance industry's troubles are causing angst for policyholders, even at institutions still regarded as solid, driving some consumers to delve deeper into the financial health of their insurers. Phyllis Myers of Washington, D.C., says she and her husband, who both work for nonprofit institutions, recently looked into the financial strength of Teachers Insurance & Annuity Association, part of retirement giant TIAA-CREF, which issues their annuities -- an insurance contract that promises a stream of income over a period of time.

Ms. Myers, an environmental consultant, says she was somewhat reassured by TIAA's triple-A ratings. But, she adds, "we are not sure right now how much confidence we have in the ratings based on what I am reading in the paper and hearing on the television."

Such behemoths as MetLife Inc., Hartford Financial Services Group Inc. and Prudential Financial Inc. have all been hit with slumping share prices and downgrades in their financial-strength ratings -- the main gauge used to assess an insurer's ability to pay claims -- though the ratings remain strong or very strong.

Worst Blowups
Some of the worst blowups so far have taken place at insurers that offer long-term-care policies to defray nursing-home expenses. The problem here was a higher-than-expected level of claims, partly because of owners' longevity, and partly because few customers are letting their policies lapse. Senior Health Insurance Co. in Pennsylvania, a unit of Conseco Inc., and Penn Treaty American Corp. and one of its subsidiaries recently were taken over by regulators in Pennsylvania. That prompted worries that policies won't pay off when they're needed, or that people will get a much-smaller benefit than they expected for their premiums.

"In good times the issues get swept under the rug, and in bad times rough spots show up," says Martin Weiss, president of Weiss Research Inc. in Jupiter, Fla., an investment-research firm that also rates insurers.

More trouble could be on the horizon. More than a dozen major insurers have seen ratings downgrades in recent weeks, and several have dropped into categories reflecting relatively weaker financial health. Analysts say their ability to pay claims could be affected by continuing investment losses.

They include Phoenix Cos., of Hartford, Conn., and its subsidiaries, which sell life insurance and annuities to the affluent, and Security Benefit Life Insurance Co. of Topeka, Kan. Phoenix has been weighed down by problematic investments in mortgage-backed securities. The company recently announced that its top two distributors had ceased to sell its policies. A Phoenix spokeswoman says the company's key financial "metrics remain solid."

Security Benefit, which sells 403(b) retirement plans and annuities, and which recently acquired mutual-fund company Rydex Investments, was recently downgraded for the fourth time since 2005. It is now at the top of the "vulnerable" range, according to the scale used by A.M. Best -- the range at which ratings agencies have determined that an insurer's financial condition could be subject to outside economic factors. Its problems stem from exposure to financial derivatives and subprime mortgages. Security Benefit executives and Kansas state regulators say they expect the company to be able to manage its way through.

In an unusual situation, Shenandoah was suddenly taken over by Virginia regulators last month after receiving a "good" financial-strength rating from a ratings firm just weeks earlier. The company has about 200,000 individual and group life-insurance policies and 21,000 annuity contracts in force in more than 30 states, mostly in the South. Regulators stepped in after a proposed merger with an Indianapolis financial-services company fell through. They said they hope to get the company back on its feet and avoid liquidation, but "it is too early to determine whether that can be achieved."

Virginia's state guaranty association, which compensates policy owners when an insurer is liquidated, protects life insurance and individual annuity cash values up to $100,000, and death benefits up to $300,000. Guaranty-fund limits vary by state; Virginia's are typical. For those in your state check the Web site of the National Organization of Life and Health Insurance Guaranty Associations, www.nolhga.com.

Financial Stability
"The industry continues to hold capital and surplus well in excess of the minimum requirements -- even after the detrimental effects from 2008," says Therese M. Vaughan, the CEO of the National Association of Insurance Commissioners.

Even if they're not panicking, financial advisers and their clients are doing some soul-searching after hearing about some big insurers' troubles. Henry Montag, a certified financial planner in Jericho, N.Y., said he hasn't switched or sold any of his own or clients' contracts lately, but he is discussing the solvency issue with clients.

"We are in uncharted waters," he says. "So many of the major companies like the Prudentials and Hartfords have been downgraded, that I am bringing it up rather than waiting for clients to bring it up." Mr. Montag is now pairing new clients with insurers "that are more financially stable and secure even if the premiums are higher."

Retirement Rescue - Annuities (from Bankrate.com)

Check annuities for retirement rescue

By Melissa M. Ezarik • Bankrate.com


In a crowd of average Joes and Janes, you'll be hard-pressed to find anyone who knows a lot about annuities, but you'll likely find plenty with a generally negative feeling about them.

That connotation may be well-deserved, yet in today's volatile investment climate annuities might represent a safe haven.

Tom Warschauer, professor of finance at San Diego State University, says, "The insurance industry has not done a very good job recommending products that specifically fit their clients' needs. They look at what they want to sell and find a place for them in everyone's portfolio."

One big issue has been the lack of transparency about charges embedded in annuity products, and since it's difficult to decipher those costs, "There's a lot of room for abuse," says Warschauer, who's also a professor of finance and director of the Center for the Study of Personal Financial Planning at the university.

Beth Almeida, executive director of the National Institute on Retirement Security agrees. "The costs associated with the purchase of individual annuities eat away at the overall retirement nest egg. So a retiree may get a regular check, but their overall retirement income is diminished."

But in today's uncertain and volatile market, "retirees and near-retirees are likely seeking safe haven," says Almeida. And Warschauer agrees, annuities "have some very valuable uses in retirement planning" in this economic climate.

During your working years, return on investment is generally the primary focus. But in retirement, "the new ROI is 'reliability of income,'" says Robert E. Sollmann Jr., senior vice president of MetLife's Retirement Strategies Group.

"The painful lesson we are learning from today's market is that the conventional wisdom -- 'diversify' -- isn't cutting it. International, commodities, U.S. stocks are all down. The guarantees provided by annuities that can deliver regardless of market performance" are needed to balance a retirement plan, Sollmann says.

Think annuities may be worth a look? With so many annuity types, it's easy to get overwhelmed by possibilities. Here are some directions that experts say pre-retirees and retirees should consider.

Let's start with some basic definitions: Annuities are life insurance contracts sold by insurance companies, brokers and other financial institutions that provide a regular periodic payment to a policyholder for a specified period of time. They are paid for before retirement in exchange for lifetime payments after retirement and are intended to provide a regular level of retirement income to meet day-to-day living expenses.


They come in two general categories:


• Fixed annuity. The insurance company guarantees the principal pays a minimum rate of interest. As long as the company is financially sound, money in a fixed annuity will grow -- and not drop -- in value. The growth in value or benefits paid may be fixed at a dollar amount, at an interest rate, or by a specified formula. The interest rate usually starts out as a fixed percentage and is adjusted annually.
• Variable annuity. Your money is invested in a fund similar to a mutual fund -- but one open only to that insurance company's investors. The amount paid out depends on the performance of that fund.

"I'm a real advocate of fixed annuities," says Warschauer, who compares it to a fixed vs. variable mortgage rate. "It's obvious with a fixed mortgage you're more secure. When you're in your retirement years, you really want to be able to count on the cash in-flow, and the fixed annuity does that." Of course, the fact that it's fixed means it doesn't go up with inflation. His recommendation: Package a growth element within your IRA or 401(k), and then shift money out into immediate fixed annuities for daily living expenses.

On the variable annuity route, consider products that come with bonuses or guarantees such as living benefit riders, says Bayne Northern, a national sales manager for Penn Mutual Life's Annuity Distribution System. Variable annuities that include bonuses "may actually 'replace' what you have just lost in the market."

But guarantees as part of a variable annuity come at an added expense, cautions Peter Miralles, president of Atlanta Wealth Consultants. In addition, he says, "Generally the guarantees are diminished when withdrawals are made while the market value is down."

Shaun Golden of Golden Wealth Management in Riverhead, N.Y., concurs about living benefit riders, which can be found in today's variable annuity contracts, offering a "lifetime of guaranteed income regardless of financial market conditions." Golden, who has positioned a portion of his clients' assets into these types of annuities, says he's getting expressions of appreciation for protecting "the income which we count on each month."

Sollmann says variable annuities with an income rider are worth considering for those who are still saving for retirement who want the potential to grow assets along with income protection, even in down markets.






More annuity choices
Among the many other annuities available:

Immediate (or income) annuity. Available as fixed, variable or a combination of both, the immediate annuity is designed to produce a stream of income soon after its purchase. This option would generally appeal to someone age 60 or older. Deferred annuities can be annuitized to become immediate annuities. Warschauer believes fixed immediate annuities are what near-retirees and retirees should consider first.

Deferred annuity. You give the company a large sum upfront or make monthly payments until you reach retirement age. The money grows tax-free until you retire. This works best for someone who has a big chunk of change to put down and at least 20 years for the money to grow tax-free before setting up a schedule of lifetime payments that would start after retirement.

Lifetime income annuity. This product provides income for the remaining life of a person (or people, if a two-life annuity is purchased), according to the Insurance Information Institute. The amount paid depends on age, the amount paid into the annuity, and (if it's a fixed annuity) an interest rate set by the company. David F. Babbel, professor of insurance and finance at The Wharton School at the University of Pennsylvania, says lifetime income annuities should play a substantial role -- 40 percent to 80 percent of retirement assets -- in the retirement arrangements of most people.

Inflation-adjusted annuity. This feature is one that is added to lifetime income annuities that protects one's purchasing power, regardless of whether inflation or deflation occurs, Babbel says, adding that only a handful of insurers offer this feature. He also suggests seeking an annuity with a preset annual rate of increase, such as 1 percent to 6 percent per year. As an alternative to the inflation-adjusted annuity, he suggests having a fixed immediate annuity with a deferred, flexible premium annuity as a supplement. The flexible premium annuity can be activated as needed, "and if inflation really takes off, you can use the flexible premium feature to increase the size of your annuity," he says.

Seek stability
A final word of wisdom that's especially important in today's market: Be careful whom you do business with. "An insurance company can go out of business," points out Warschauer. "There is no guarantee that if a company goes out of business, they won't take the variable annuity or fixed annuity holders with them."

That's why it's worth taking the time to do some research to find out how solid a company you're thinking of buying from. Check out:

A.M. Best WWW.AMBEST.COM
Moody's Investors Service WWW.MOODYS.COM
Standard & Poor's WWW.STANDARDANDPOORS.COM
TheStreet.com Ratings (formerly Weiss Ratings) WWW.WEISSRATINGS.COM


According to Warschauer, Weiss has had a reputation for doing the best job in predicting failure in insurance companies, although users have to pay to access information. With national firms, he adds, a company being licensed in the State of New York is a good sign of stability, since their insurance commissioner's department is "probably the best known with being careful with regulations."

Regarding worries over financial stability, Warschauer points out that ordinarily the industry purchases each other's customers when a company goes under. "They will buy that package of annuities and take them over. But there have been cases where the annuities have simply failed." Conclusion: Annuities can be a rescue vehicle for many retirees -- just proceed with caution.

Melissa Ezarik is a Connecticut-based freelance writer.