What do the Weiss Ratings mean?

A = excellent
B = good
C = fair
D = weak
E = very weak  

Plus sign (+):  upper third of each grade
No sign: middle third of each grade
Minus sign (-): lower third of each grade  

In addition, in certain industries, we may also use F for failed and U for unrated due to insufficient data.


Weiss Ratings of Insurance Companies

 The Weiss Ratings of insurers are based upon the annual and quarterly financial statements obtained from state insurance commissioners. This data may be supplemented by information that we request from the insurance companies themselves. However, if a company chooses not to provide supplemental data, we reserve the right to rate the company based exclusively on publicly available data.

The Weiss Ratings are based on a complex analysis of hundreds of factors that are synthesized into a series of indexes: capitalization, investment safety (life, health and annuity companies only), reserve adequacy (property and casualty companies only), profitability, liquidity, and stability. These indexes are then used to arrive at a letter grade rating. A weak score on any one index can result in a low rating, as financial problems can be caused by any one of a number of factors, such as inadequate capital, unpredictable claims experience, poor liquidity, speculative investments, inadequate reserving, or consistent operating losses.

Our Capital Index gauges capital adequacy in terms of each insurer's ability to handle a variety of business and economic scenarios as they may impact investment performance, claims experience, persistency, and market position. The index combines two Risk-Adjusted Capital ratios as well as a leverage test that examines pricing risk.

Our Investment Safety Index measures the exposure of the company's investment portfolio to loss of principal and/or income due to default and market risks. Each investment area is rated by a factor that takes into consideration both quality and liquidity. (This factor is measured as a separate index only for life, health, and annuity insurers.)

Our Reserve Adequacy Index measures the adequacy of the company's reserves and its ability to accurately anticipate the level of claims it will receive. (This factor is measured as a separate index only for property and casualty insurers.)

Our Profitability Index measures the soundness of the company's operations and the contribution of profits to the company's financial strength. The profitability index is a composite of five sub-factors:
1) gain or loss on operations; 2) consistency of operating results; 3) impact of operating results on surplus; 4) adequacy of investment income as compared to the needs of policy reserves (life, health and annuity companies only); and 5) expenses in relation to industry norms for the types of policies that the company offers.

Our Liquidity Index evaluates a company's ability to raise the necessary cash to settle claims and honor cash withdrawal obligations. We model various cash flow scenarios, applying liquidity tests to determine how the company might fare in the event of an unexpected spike in claims and/or a run on policy surrenders.

Our Stability Index integrates a number of sub-factors that affect consistency (or lack thereof) in maintaining financial strength over time. These sub-factors will vary depending on the type of insurance company being evaluated but may include such things as 1) risk diversification in terms of company size, group size, number of policies in force, types of policies written, and use of reinsurance; 2) deterioration of operations as reported in critical asset, liability, income and expense items, such as surrender rates and premium volume; 3) years in operation; 4) former problem areas where, despite recent improvement, the company has yet to establish a record of stable performance over a suitable period of time; 5) a substantial shift in the company's operations; 6) potential instabilities such as reinsurance quality, asset/liability matching, and sources of capital; and 7) relationships with holding companies and affiliates.

In order to help guarantee our objectivity, we reserve the right to publish ratings expressing our opinion of a company's financial stability based exclusively on publicly available data and our own proprietary standards for safety.

Rating Definition

A Excellent. The company offers excellent financial security. It has maintained a conservative stance in its investment strategies, business operations and underwriting commitments. While the financial position of any company is subject to change, we believe that this company has the resources necessary to deal with severe economic conditions.
B Good. The company offers good financial security and has the resources to deal with a variety of adverse economic conditions. It comfortably exceeds the minimum levels for all of our rating criteria, and is likely to remain healthy for the near future. However, in the event of a severe recession or major financial crisis, we feel that this assessment should be reviewed to make sure that the firm is still maintaining adequate financial strength.
C Fair. The company offers fair financial security and is currently stable. But during an economic downturn or other financial pressures, we feel it may encounter difficulties in maintaining its financial stability.
D Weak. The company currently demonstrates what, in our opinion, we consider to be significant weaknesses which could negatively impact policyholders. In an unfavorable economic environment, these weaknesses could be magnified.
E Very Weak. The company currently demonstrates what we consider to be significant weaknesses and has also failed some of the basic tests that we use to identify fiscal stability. Therefore, even in a favorable economic environment, it is our opinion that policyholders could incur significant risks.
F Failed. The company is deemed failed if it is either 1) under supervision of an insurance regulatory authority; 2) in the process of rehabilitation; 3) in the process of liquidation; or 4) voluntarily dissolved after disciplinary or other regulatory action by an insurance regulatory authority.
+ The plus sign is an indication that the company is in the upper third of the letter grade.
- The minus sign is an indication that the company is in the lower third of the letter grade.
U Unrated. The company is unrated for one or more of the following reasons: (1) total assets are less than $1 million; (2) premium income for the current year was less than $100,000; or (3) the company functions almost exclusively as a holding company rather than as an underwriter; or, (4) in our opinion, we do not have enough information to reliably issue a rating.