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A.M. Best

What is 'A.M. Best'

A.M. Best is a ratings agency focused on the worldwide insurance industry. Founded in New York City in 1899 by Alfred M. Best, the privately held company is headquartered in Oldwick, New Jersey. Both the U.S. Securities and Exchange Commission and the National Association of Insurance Commissioners have designated the company a nationally recognized statistical rating organization.

Explaining 'A.M. Best'

A.M. Best is the only ratings agency that specializes solely in the insurance industry. Moody's, Fitch and Standard & Poor's rate a wide range of debt instruments from both the public and private sectors in addition to insurance. The company's rating system focuses on an insurer's claims paying ability and the credit quality of its obligations.

Background

The company began rating insurance companies in 1899 and expanded to reporting on related news following the 1906 San Francisco earthquake. Damage from that quake, which devastated much of the city, resulted in insurance claims that bankrupted 12 American companies and two more in Europe. The need for reliable information and ratings on insurers led to the company's strong growth.

Collapse of AIG

In September 2008, the financial market crisis hit insurance holding company AIG hard, as enormous losses at its derivative trading subsidiary, AIG Financial Products, threatened to bring down the entire company, including the dozens of insurance companies that it owned. The holding company's stock fell more than 60%, and the ratings agencies were forced to quickly and aggressively cut the company's ratings. The federal government took over and bailed out the company with $185 billion of financial support, which was repaid in full by the end of February 2013.

Ratings System

Best issues both financial strength and issuer credit ratings. The former indicate the company's assessment of an insurer's ability to meet its obligations to policyholders. It takes into account both qualitative and quantitative assessments of the balance sheet, operating performance and business profile. There are six secure ratings from A++ to B+ and 10 vulnerable ratings from B to S, with the lowest indicating rating suspended.


Further Reading


On economics and finance
www.jstor.org [PDF]
… The differences I am discussing may be clarified by considering a field of economics which could but does not exist: ketchup economics … Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics …

Comparing the publication process in accounting, economics, finance, management, marketing, psychology, and the natural sciencesComparing the publication process in accounting, economics, finance, management, marketing, psychology, and the natural sciences
meridian.allenpress.com [PDF]
… The differences I am discussing may be clarified by considering a field of economics which could but does not exist: ketchup economics … Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics …

Private finance and “value for money” in NHS hospitals: a policy in search of a rationale?Private finance and “value for money” in NHS hospitals: a policy in search of a rationale?
www.bmj.com [PDF]
… The differences I am discussing may be clarified by considering a field of economics which could but does not exist: ketchup economics … Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics …

International monetary relations: Taking finance seriouslyInternational monetary relations: Taking finance seriously
www.aeaweb.org [PDF]
… The differences I am discussing may be clarified by considering a field of economics which could but does not exist: ketchup economics … Indeed, most ketchup economists regard the efficiency of the ketchup market as the best established fact in empirical economics …



Q&A About A.M. Best


How did the San Francisco earthquake affect A.M.'s growth?

It led to damage claims that bankrupted 12 American companies and two more in Europe resulting in increased demand for reliable information about insurers leading to strong growth for A M Best Company Incorporated (A M Best Co).

What does A.M. Best specialize in?

A.M. Best specializes solely in the insurance industry.

Who else rates debt instruments besides A.M. Best?

Moody's, Fitch and Standard & Poor's rate a wide range of debt instruments from both public and private sectors in addition to insurance companies' bonds or other fixed income instruments such as mortgages or bank loans which are also considered fixed income securities by some investors but not all investors who consider them part of their equity investments instead of their fixed income investments because they are not issued by governments nor corporations that have already paid off their debts with interest through taxes collected from citizens like government bonds do so therefore they are considered equity investments by those investors who consider them part of their equity investment portfolio instead of their fixed income investment portfolio because they don't pay any interest payments on those types of loans or mortgages so therefore they're considered equity investments for those investors who think that way about them instead of being classified as fixed income securities which is how most people classify them when considering what type(s) of investment(s) make up one's overall investment portfolio.)

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