How to check if an annuity company is financially strong

An annuity is only as reliable as the company behind it. Guarantees like income payments or interest credits depend on the issuing insurer's ability to meet those obligations for years or even decades. If you're exploring annuities in the Cary or Triangle area, learning how to evaluate the company is a smart first step. It takes less time than you might think.

Here's the short version. Independent rating agencies publish financial strength ratings. These show how likely an insurer is to pay its claims. You can look them up for free. You can also verify the company's license in North Carolina with state and national tools. Then bring your findings to a licensed professional. This guide walks you through each step.

What financial strength ratings actually measure

Financial strength ratings are opinions issued by independent agencies about an insurance company's ability to pay the claims and obligations it owes to policyholders and contract holders. For someone considering an annuity, the question these ratings try to answer is straightforward: can this company make the payments it promises in my contract, both now and decades from now?

Ratings look at the company's surplus, investment portfolio, operating performance, and management practices. A higher rating generally means the agency believes the company has a stronger capacity to meet its obligations under a range of economic conditions. A lower rating signals more concern about that ability.

These ratings are opinions, not guarantees. They are based on the best information available at the time the agency publishes them. They do not predict the future, and they can be raised, lowered, or withdrawn as conditions change.

This part catches people off guard sometimes. Ratings apply to the insurance company as a whole, not to a specific annuity product or the illustration an agent shows you. A company with a strong overall rating can still sell contracts with terms that may or may not fit your situation. The rating tells you about the company. The contract tells you about the product. You need to evaluate both.

It is also worth noting the difference between financial strength ratings and general credit ratings. Financial strength ratings specifically assess an insurer's ability to meet policyholder and contract obligations. Credit ratings, which you might see applied to corporate bonds or other debt, assess a company's ability to repay borrowed money. For annuity research, the financial strength rating is the relevant measure.

The major rating agencies and their scales

Four agencies are widely used for evaluating the financial strength of life insurance and annuity companies. Each uses its own scale and terminology, which can look confusing at first. Here is how they work.

AM Best

AM Best focuses exclusively on the insurance industry, which makes it the agency most people encounter first when researching annuity companies. Its Financial Strength Rating (FSR) scale runs from A++ (Superior) down to D (Poor). The Superior category indicates, in AM Best's words, a strong ability to meet ongoing insurance obligations. Lower categories reflect declining ability.

AM Best also assigns a Financial Size Category based on the company's adjusted policyholders' surplus. This gives a sense of the company's overall financial size, which is a separate consideration from the letter rating. A company can have a strong FSR but a smaller Financial Size Category, or the reverse.

You can search AM Best ratings for free at ratings.ambest.com. The search results typically display the current FSR, the Financial Size Category, and the date of the most recent review.

S&P Global Ratings

S&P issues Insurer Financial Strength (IFS) ratings that it describes as forward-looking opinions about an insurer's capacity to pay policies and contracts. The scale ranges from AAA (extremely strong financial security characteristics) down through AA, A, BBB, BB, and lower categories. Each category can carry a plus or minus modifier for more nuance within the group.

S&P's ratings are available on spglobal.com/ratings. Basic rating information is accessible, though some detailed analytical reports may require a free registration.

Moody's Investors Service

Moody's uses Insurance Financial Strength ratings on a scale from Aaa (Exceptional) down through Aa, A, Baa, Ba, B, and to C. Numerical modifiers (1, 2, 3) within each letter category provide additional precision, with 1 being the highest position within a category.

Moody's describes these ratings as opinions on the ability to repay senior policyholder claims and obligations. Some rating information is available on moodys.com, though access to full reports may require registration.

Fitch Ratings

Fitch assigns Insurer Financial Strength ratings on a scale from AAA to C, structured similarly to its broader credit rating framework. AAA represents the highest expectation of the insurer's ability to meet policyholder and contract obligations. Lower categories reflect increasing uncertainty about that capacity, with recovery considerations becoming more relevant as ratings decline.

Fitch ratings can be found at fitchratings.com, with some reports requiring registration to view.

Why check more than one agency

Each agency uses its own methodology, data sources, and judgment framework. Two agencies can look at the same company and reach slightly different conclusions. Checking ratings from two or more agencies gives you a broader view and can flag inconsistencies worth raising with a professional.

You may also find that a particular company is rated by one or two agencies but not all four. That is not unusual. It may mean the company did not seek or maintain a rating from every agency. It does not automatically signal a problem, but it is worth noting and asking about.

How to look up ratings for a specific company

The process for checking a company's ratings is more straightforward than most people expect. Here is a general walkthrough using AM Best as the primary example, since it specializes in insurance and offers free public access. The steps are similar on other agency sites.

1. Find the exact company name. The insurer named on the annuity contract or illustration is the one you want to search. This might be a parent company or a subsidiary. If you are not sure of the legal name, ask the agent or look at the contract paperwork.
2. Visit the agency's rating search page. For AM Best, go to ratings.ambest.com and use the company search feature. For S&P, Moody's, or Fitch, navigate to their ratings sections and look for a similar search tool.
3. Search by company name. Type the full legal name. If the exact match does not appear, try a shorter version of the name or check whether the company operates under a different legal entity than the brand name you recognize.
4. Review the current rating and outlook. The results will show the current Financial Strength Rating (or equivalent), the date it was assigned or last affirmed, and an outlook. The outlook is usually stable, positive, or negative. It gives a sense of whether the agency expects the rating to hold, improve, or face pressure in the near term.
5. Note the date. A rating confirmed last month carries more informational weight than one that has not been updated in two years. Agencies review ratings on regular cycles and can also initiate off-cycle reviews if something significant changes.
6. Check a second agency. Run the same search on a different agency's site. Compare what you find. If one agency shows a notably different assessment, that is worth discussing with a professional.

Most agencies provide basic rating and outlook information through free searches. More detailed analytical reports may require creating a free account or, in some cases, a paid subscription. For initial research, the free information is usually enough to start an informed conversation.

North Carolina resources for checking insurers

Beyond the national rating agencies, North Carolina offers consumer tools for verifying insurance companies. These do not replace financial strength ratings, but they add a useful layer of context for Triangle-area residents.

North Carolina Department of Insurance

The NC Department of Insurance (NC DOI) regulates insurance companies and agents licensed to operate in the state. The NC DOI website at ncdoi.gov provides consumer information, complaint filing options, and links to tools that let you verify whether a company is authorized to sell insurance in North Carolina.

The NC DOI does not publish its own financial strength ratings. Its role is regulatory: making sure companies meet state requirements for licensing and conduct. If you want to confirm that a specific annuity issuer is licensed in North Carolina, the NC DOI site can direct you to the right lookup tool.

NAIC Consumer Information Source

The National Association of Insurance Commissioners (NAIC) offers a free Consumer Information Source (CIS) at content.naic.org/cis_consumer_information.htm. Through this tool, you can search for an insurance company and find information about its licensing status by state, complaint data filed by consumers, and some basic financial context.

This is a practical way to confirm that the company offering the annuity is licensed to do business in North Carolina and to see whether other consumers have filed complaints against it. It does not replace an agency rating, but it answers a different question: is this company operating legally in my state, and have there been reported problems?

North Carolina Life and Health Insurance Guaranty Association

North Carolina has a guaranty association that provides a limited safety net for policyholders and contract holders if a member insurer becomes insolvent. The North Carolina Life and Health Insurance Guaranty Association, at nclifega.org, exists to cover certain claims up to statutory limits when an insurer can no longer pay.

For annuity holders, this means there may be some protection if the issuing company fails. But there are limits to understand:

• Coverage amounts are capped by state statute. The caps depend on the type of coverage (life insurance, annuities, or health insurance) and are subject to change through legislation.
• Not every insurance company or contract type qualifies for guaranty association protection. The company must be a member of the association.
• The guaranty association is a backstop for worst-case scenarios. It is not a substitute for choosing a financially strong company before you buy.
• Specific coverage limits and eligibility rules are set by North Carolina statute. Verify current details at nclifega.org or through a licensed professional rather than relying on general summaries.

Think of the guaranty association like a seatbelt. You hope you never need it, and it does not replace careful driving. Checking the financial strength of the company before you buy is still the primary due-diligence step.

What ratings do not tell you

Financial strength ratings are useful tools, but they have real limits. Understanding what they do not cover is just as important as understanding what they measure.

• Ratings are not product reviews. A high rating for the company does not mean the specific annuity contract you are looking at has competitive terms, appropriate features, or makes sense for your financial situation.
• Ratings can change after you buy. A company rated A+ today could be downgraded next year if its financial condition weakens. Agencies review ratings periodically, and unexpected events can prompt reviews outside the normal cycle. There is no way to lock in a rating.
• Ratings do not predict specific outcomes. They reflect an agency's assessment of overall ability to pay claims, not a promise that any particular contract will perform as illustrated.
• Not all companies are rated by every agency. Some insurers choose not to seek or maintain ratings from all four agencies. The absence of a rating from one agency is worth noting, but it is not automatically a warning sign. It is something to discuss with a professional.
• Ratings do not account for your personal situation. Your age, income, other assets, tax picture, health, and goals all affect whether any annuity makes sense. A strong company rating helps you evaluate the issuer. It does not answer whether the product fits your life.
• Ratings are not the same as FDIC insurance or government guarantees. Annuities are not bank deposits. They are insurance company contracts. The financial strength of the issuing company is the backing, not a federal guarantee fund.

Questions to bring to a licensed insurance professional

Once you have looked up ratings and verified a company's license, a licensed insurance professional can help you put the pieces together. Here are questions that can make that conversation more productive:

• What are this company's current financial strength ratings from AM Best, S&P, Moody's, and Fitch? Has any rating been changed or placed on review recently?
• What is the outlook on each rating? Is the agency expecting stability, improvement, or potential pressure?
• Is this company licensed to sell annuities in North Carolina? Can you show me confirmation?
• What guarantees are written into this specific contract? Which of those guarantees depend directly on the company's financial strength?
• If the company ran into financial difficulty, how would the North Carolina guaranty association apply to my contract? What are the current coverage limits?
• Are there features in this contract, like surrender charges or restrictions on withdrawals, that would make it harder for me to respond if the company's situation changed?
• How does this company's financial size compare to its total obligations to policyholders?
• Can you walk me through what happens to my contract guarantees in different scenarios, including if the company is downgraded or merged with another insurer?

A licensed professional who is authorized to sell annuities in North Carolina can review the contract details, explain how the guarantees actually work, and help you understand the trade-offs involved. If you want to learn more about evaluating annuity companies or have questions about this process, you can use the Ask a Question page or browse our other guides on annuities.

Why this step matters

Checking the financial strength of an annuity company is not complicated. Still, it is a step that gets skipped more often than it should. People spend time comparing interest rates, surrender schedules, and income rider features. They often skip looking at the company behind those promises. That gap is worth closing.

Independent rating agencies publish their opinions about insurers' ability to pay claims. Those opinions are available to anyone with an internet connection. North Carolina offers additional tools through the Department of Insurance and the NAIC to verify licensing and review complaint history. The state guaranty association provides a limited backstop. It works best as a safety net you never need, not a reason to skip your own research.

No rating eliminates all risk. No rating tells you whether a particular annuity contract is the right move for your situation. What ratings give you is a starting point: a set of independent assessments you can bring to a conversation with a licensed professional who can review your specific circumstances.

CaryFixedIncome.com is an educational resource, not a financial planning firm or insurance carrier. We help readers in Cary, Raleigh, Durham, Chapel Hill, and the surrounding Triangle understand how things work so they can ask better questions. For guidance tailored to your situation, speak with a licensed insurance professional who is authorized to do business in North Carolina.