First published 4/17/2009, updated 11232109

Since the economic meltdown of 2008 more people have asked if the life insurance companies I recommend are financially sound. Fair question! Here at Hinerman Group we use A.M. Best as the benchmark for what companies we will, or won’t, represent.  We only represent life insurance companies that are rated A (excellent) or A+ or A++(both superior).

Insurance companies are uniquely positioned to be able to pull through rough times because of the large profits they’ve had in years leading up to a downturn. Their income stream isn’t impacted the way, for instance, automakers or other manufacturing industries can be. Insurance companies also have huge reserves that they have to carry by law. While plenty of insurance companies took a beating in 2008 on Wall Street, their rough ride was, like so many companies, not a true reflection of their profitability.

Back to ratings for a minute. In the ratings and financial report provided there were ratings from the 5 major rating agencies and a “Comdex” score. Each uses slightly different criteria to come up with their rating. Here, from their own websites are how each assesses a company.

1. AM Best
2. Weiss (The
3. Fitch
4. Moody’s. Moody’s must think they are exceptionally fascinating. Look around page 13 or 14 for relevant rating explanations.
5. Standard and Poor’s. I found very little relevant information on S&P just as I have generally found very little emphasis put on S&P ratings.

Along with A.M. Best as our benchmark, the tool I have found the most helpful in rating’s analysis is the Comdex rating. Simply put this ranks a company on a percentage scale against all of the other rated life insurance companies (about 1100). If a company is rated in the 90th or higher percentile you know you are dealing with a company that over the spectrum of all the rating agencies ranks among the top 10%. Would I put more weight on a company that has a 99% over one that is 90%. Simply put, no! The only tangible difference I have found in the actual companies is that those rated at or within a few points of 100% tend to be companies that focus on cash value products. They are rated higher due to their huge cash reserves, or should I say your cash, not because they are a better managed or more stable company. I guess there is one other tangible difference that is fair to note. The companies at or near 100% are the most expensive insurance providers in the country.

Bottom line. Are ratings worth looking at? Absolutely. If there was a Swamp Life of Vermont, I suspect that ratings for that company might tell a very compelling story. Should you run from a company because they don’t have the highest rating available? Absolutely not. There are plenty of large, stable, 150 year old companies out there that only have an A (excellent) rating. If you have questions or need more information or want to compare quotes, call or email me directly. My name is Ed Hinerman. Let’s talk