Where can you check the financial strength and credit ratings of various insurers and learn more about the rating process?

INTRO TO CREDIT RATINGS

A Credit Rating is an Informed Opinion

Credit ratings are forward looking opinions about an issuer’s relative creditworthiness. They provide a common and transparent global language for investors to form a view on and compare the relative likelihood of whether an issuer may repay its debts on time and in full. Credit Ratings are just one of many inputs that investors and other market participants can consider as part of their decision-making processes.

Why are credit ratings useful?

Credit ratings help facilitate an efficient capital marketplace. They provide transparent third-party information that’s not only forward-looking, but standardized for consistency.

Learn more about Credit Ratings

Credit ratings can enable

• People to start & grow businesses

• 

  Governments to improve infrastructure

• Manufacturers to build factories & create jobs

Who Uses Credit Ratings?

Issuers

— Expand the pool of investors and available capital— Lengthen the terms of financing— Diversify funding sources

Intermediaries

— Benchmark the relative credit risk of different debt issues— Set the initial pricing for individual debt issues they structure— Determine the interest rate issues will pay— Package assets into securities or structured finance instruments to market to investors

Investors

— A third-party opinion of credit quality— A basis for comparison across asset classes, geographies, and peers— Information and metrics to make informed decisions, such as supplementing their own credit analysis or establishing thresholds for credit risk and investment guideline

There are 8 Steps in our Ratings Process

• 1

  Contract : The issuer requests a rating and signs an engagement letter.

• 2

  Pre-Evaluation : We assemble a team of analysts to review pertinent information.

• 3

  Management Meeting : Analysts meet with management team to review and discuss information.

• 4

  Analysis : Analysts evaluate information and propose the rating to a rating committee.

• 5

  Rating Committee : The committee reviews the lead analyst’s rating recommendation then votes on the credit rating.

• 6

  Notification : We generally provide the issuer with a pre-publication rationale for its credit rating for fact-checking and accuracy purposes.

• 7

  Publication : We typically publish a press release announcing the public rating and post the rating on our website.

• 8

  Surveillance of Rated Issuers and Issues : The goal of this surveillance is to keep the rating current by identifying issues that may result in either an upgrade or a downgrade.

Our Ratings Scale

• AAA

  Investment Grade: Extremely strong capacity to meet financial commitments

• AA

  Investment Grade: Very strong capacity to meet financial commitments

• A

  Investment Grade: Strong capacity to meet financial commitments, but somewhat susceptible to economic conditions and changes in circumstances

• BBB

  Investment Grade: Adequate capacity to meet financial commitments, but more subject to adverse economic conditions

• BB

  Speculative Grade : Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions

• B

  Speculative Grade : More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments

• CCC

  Speculative Grade : Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments

• CC

  Speculative Grade : Highly vulnerable; default has not yet occurred, but is expected to be a virtual certainty

• C

  Speculative Grade : Currently highly vulnerable to non-payment, and ultimate recovery is expected to be lower than that of higher rated obligations

• D

  Speculative Grade : Payment default on a financial commitment or breach of an imputed promise; also used when a bankruptcy petition has been filed

• *We generally provide the issuer with a pre-publication rationale for its credit rating for fact-checking and accuracy purposes.

How We Track Our Ratings

We continuously work to refine our ratings to uphold the highest level of excellence. To measure performance, we conduct studies that assess how much a rating has moved up or down over a given period of time, also known as its transition rate.

Predicting Stability

Transition rates can also be helpful to investors and credit professionals because they demonstrate relative stability and volatility. For example, investors who are obligated to purchase only highly rated securities may review the history of transitions and defaults as part of their research.

In addition, we conduct studies that track defaults across various industries, providing a fuller credit picture for analysts.

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