S&P's rating scheme uses a letter grade scale that ranges from AAA (highest) to R (lowest), (ie., AAA, AA, A, BBB, BB, B, CCC, R). The "AAA" rating represents a company's extremely strong capacity to honor its obligations and to remain so over a long period of time. "AAA" companys offer superior financial security on both an absolute and relative basis.
As a group, the claims-paying ability ratings are divided into two broad classifications. Rating categories from 'AAA' to 'BBB' are classifed as "secure" and indicate insurers whose financial capacity to meet policyholder obligations is viewed on balance as sound. Ratings categories from 'BB' to 'CCC' are classified as "vulnerable" and indicate insurers whose financial capacity to meet policyholders obligations is viewed as vulnerable to adverse economic and underwriting conditions.
Plus (+) and minus (-) signs show relative standing within a category; they do not suggest likely upgrades or downgrades. For certain companies, the S&P rating includes a 'q' subscript, which indicates that the rating is based solely on quantitative analysis of publicly available financial data. In the case of claims-paying ability ratings, this is the statutory financial data filed with the National Association of Insurance Commissioners. Annuity & Life Insurance Shopper does not include the 'q' subscript rating.
Long-Term Credit Ratings
S&P rates companies on a scale from AAA to D. Intermediate ratings are offered at each level between AA and B (i.e., BBB+, BBB and BBB-). For some companies, S&P may also offer guidance (termed a "credit watch") as to whether it is likely to be upgraded (positive), downgraded (negative) or uncertain (neutral).
Short-Term Issue Credit Ratings
S&P rates specific issues on a scale from A-1 to D. Within the A-1 category it can be designated with a plus sign (+). This indicates that the issuer's commitment to meet its obligation is extremely strong. Country risk and currency of repayment of the obligor to meet the issue obligation are factored into the credit analysis and reflected in the issue rating.
| Long-Term Credit Ratings | |
| AAA | the best quality companies, reliable and stable |
| AA | quality companies, a bit higher risk than AAA |
| A | economic situation can affect finance |
| BBB | medium class companies, which are satisfactory at the moment |
| BB | more prone to changes in the economy |
| B | financial situation varies noticeably |
| CCC | currently vulnerable and dependent on favorable economic conditions to meet its commitments |
| CC | highly vulnerable, very speculative bonds |
| C | highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations |
| CI | past due on interest |
| R | under regulatory supervision due to its financial situation |
| SD | has selectively defaulted on some obligations |
| D | has defaulted on obligations and S&P believes that it will generally default on most or all obligations |
| NR | not rated |
| Short-Term Issue Credit Ratings | |
| A-1 | obligor's capacity to meet its financial commitment on the obligation is strong |
| A-2 | is susceptible to adverse economic conditions however the obligor's capacity to meet its financial commitment on the obligation is satisfactory |
| A-3 | adverse economic conditions are likely to weaken the obligor's capacity to meet its financial commitment on the obligation |
| B | has a significant speculative characteristics. The obligor currently has the capacity to meet its financial obligation but faces major ongoing uncertainties that could impacts its financial commitment on the obligation |
| C | currently vulnerable to nonpayment and is dependent upon favourable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation |
| D | is in payment default. Obligation not made on due date and grace period may not have expired. The rating is also used upon the filing of a bankruptcy petition. |
S&P Fair Value Rank
Using S&P's exclusive proprietary quantitative model, stocks are ranked in one of five groups, ranging from Group 5, listing the most undervalued stocks, to Group 1, the most overvalued issues. Group 5 stocks are expected to generally outperform all others. A positive (+) or negative (-) Timing Index is placed next to the Fair Value ranking to further aid the selection process. A stock with a (+) added to the Fair Value Rank simply means that this stock has a somewhat better chance to outperform other stock with the same Fair Value Rank. A stock with a (-) has a somewhat lesser chance to outperform other stocks with the same Fair Value Rank.
Fair Value rankings imply the following:
5 - Stock is significantly undervalued
4 - Stock is moderately undervalued
3 - Stock is fairly valued
2 - Stock is modestly overvalued
1 - Stock is significantly overvalued
Standard & Poor's BankRatings Service offers detailed coverage of rated financial institutions, including banks, bank holding companies, and securities firms. In addition, BankRatings Service provides detailed analyses of more than 70 national banking systems, which provide context for assessments of individual institutions. Subscribers also receive fax notification of all new and revised ratings within minutes of their public release.
BankRatings Service is the definitive guide to financial institutions world-wide. For subscription information call Standard & Poor's:
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