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Financial Strength Ratings: What Do They Mean for You?
May 19, 2016
A quick look at independent financial ratings agencies & why they're important to consider as you make financial decisions
What do you do when you have a big decision to make?
When you're looking at buying a house, you schedule an inspection first. When it's a car, you check out reviews. Dealers and automakers all say their cars are best, but you want an objective assessment that offers apples-to-apples comparisons of such factors as frequency of repairs, engine power and safety.
And when it comes to choosing a financial representative, you probably ask your friends and family for recommendations. But how do you know the company the representative works for is credible? The evaluations provided by financial ratings agencies such as A.M. Best and Fitch Ratings are an excellent place to start.
What financial ratings agencies evaluate
You can think of the ratings as a report card, one that's issued by an independent agency. The ratings serve as an external verification of a financial organization's strength and its ability to keep the promises it has made to clients and members. Because all companies are measured against the same requirements, it's a useful way to compare their financial health and strength.
So what are the main agencies? And how can they help you decide which financial services company you should consider trusting with your hard-earned money?
Financial ratings agencies – who they are & how they work
There are a number of ratings agencies, including A.M. Best and Fitch Ratings, among others. Thrivent Financial is rated by A.M. Best and Fitch Ratings, both of which are designated by the U.S. Securities and Exchange Commission as Nationally Recognized Statistical Rating Organizations. Each agency reviews Thrivent at least once a year, and sometimes twice.
"The ratings agencies look at our financial health, the competency of our management team, the variety of products we offer, our member base and the training of our financial representatives," says Paul Zastrow, who leads Thrivent's corporate accounting team.
Once they've closely and scrupulously examined and analyzed these and other factors, the agencies then give a company a letter "grade," or credit rating. By and large, these ratings are pretty close to the A-F range found in schools. For example, A.M. Best has six grades for entities it deems "secure," from a top rating of A++ (Superior) to B+ (Good). Ratings below those are considered in the "vulnerable" range – with "F" designating "in liquidation."
For more than 20 years, Thrivent Financial has earned the highest possible rating from A.M. Best: A++ (Superior), highest of its 16 ratings (last rated June 2015). Fitch Ratings has consistently given Thrivent very strong ratings for more than a decade – recently rated AA+ (Very Strong), second of its 19 categories (last rated May 2016). Keep in mind that ratings reflect Thrivent's overall strength and claims-paying ability but do not apply to the performance of investment products.
"It's one thing for us to say we're strong and stable and that we'll be here when you need us most," says Zastrow. "But having outside agencies take a detailed look at our organization and affirm that we're well managed and financially strong – and that we have historically consistently received high ratings – is something we're very proud of."
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