When investors are deciding where to place their funds, they turn to credit rating firms for advice. One of the top credit rating entities among the major four is Fitch.
They are responsible for tackling the overview of an entire company to evaluate its current solvency, its overall financial strength, and even how likely it is the company will remain in its current standing in the near future.
Investors aren’t the only ones who depend on these ratings for their well-being.
When it comes to purchasing life insurance, you need a company you can count on, something Fitch Ratings can help you find.
In this company guide, we’ll tell you how Fitch Ratings’ grading scale works so you can use it as you evaluate insurance providers.
About Fitch Ratings Inc.
At some point in his or her life, a person is responsible for buying insurance to protect their home, possessions, car, or family from health care expenses.
Even more critical is protecting their families from an untimely death with life insurance.
A quick search or even a few hours watching tv will present you with a whole host of insurance providers promising the best premium rates, expansive coverage, and easy approval.
And they do so in impressive fashion with thoughtful and engaging marketing. But picking the right company in today’s modern world entails more than just the lowest possible price, a funny television commercial, or a fancy sky rise building in a major city.
Because insurance can often be a bit of an intangible purchase, one which may not need to produce any return for several years or decades to come, having an agency like Fitch sort through the financial aspects of an insurer can help you weed out the companies who are least likely to keep providing their necessary value in the years to come.
Fitch does this by compiling data, as they have since 1913, in a meaningful way to showcase how strong and solvent an insurance company truly is.
Fitch: A History of Reliability
Fitch Ratings has been providing consumers and investors with reliable company ratings for over 100 years. In 1913, John Knowles Fitch founded the Fitch Publishing Company, which is now owned by Fimalac, SA and the Hearst Corporation.
As we mentioned above, Fitch Ratings is recognized across the professional world as one of the most dependable rating companies internationally.
In fact, Fitch Ratings is one of only three NRSROs, or nationally recognized statistical rating organizations, approved by the U.S. Securities and Exchange Commission.
The other two credit rating agencies are Moody’s and Standard & Poor’s, who tend to cover a larger variety of companies in their ratings.
How Fitch Ratings System Works
Fitch displays their investment review in an alphabetical and symbol-related graph, to make it simple for all consumers to get a snapshot picture of what a company really represents behind its brand. It looks like this:
|AAA (Exceptionally Strong)||BB+, BB, BB- (Moderately Weak)|
|AA+, AA, AA- (Very Strong)||B+, B, B- (Weak)|
|A+, A, A- (Strong)||CCC+, CCC, CCC- (Very Weak)|
|BBB+, BBB, BBB- (Good)||CC, C (Poor)|
Below a poor rating of C, Fitch Ratings also gives non-investment grades of D and NR. A grade of D signifies that a company has defaulted on its commitments, meaning Fitch Ratings expects it to do so on its future obligations. A grade of NR simply means that a company has not been publicly rated.
Fitch Ratings also distributes short-term ratings, which indicate a company’s viability over a one year period.
The scores provided indicate a company’s likelihood of defaulting during that time frame.
These ratings range from an F1+ at the highest to an F1, F2, F3, B, C, and D, with a D indicating default.
If you’re familiar with the other three private credit agencies, A.M. Best, Moody’s and Standard & Poor’s, you can see that Fitch’s rating guideline is slightly different and unique in its own way.
Where a “B+” with one rating group might be “Good,” it is one of the lower rankings according to the proprietary scale Fitch uses.
Benefits of Fitch Ratings
Fitch Ratings monitor a large scale of factors, both quantitative and qualitative in nature.
It aims to give consumers and industry-wide participants a more easily legible benchmark to use in order to compare one company to the next.
Although it is not to be used purely on its own, a Fitch Ratings grade does supply a thoroughly evaluated yet simple grade to understand where a company currently lies.
Reports are given based on the supplied information on such financial documents like cash flow statements, balance sheets, operating cost analyses, and more.
Aside from claims paying abilities reflected financially, current businesses models and the management team behind the company’s operations could also be taken into consideration before a final rating is awarded.
Fitch also publishes industry-wide reports, called sector coverages, where it attempts to also get a snapshot of what an entire industry looks like in connection with the current economic struggles, adherence to new regulation, and the overall competitive market within the industry.
Components of the Fitch Group
Fitch Ratings is only one piece of the Fitch Group’s work.
The Fitch Group is made up of four different arms: the Fitch Ratings, Fitch Solutions, Fitch Learning, and Fitch Solutions Macro Research, formerly known as the Business Monitor International (BMI).
Here is a quick review of the services provided by each of the four arms:
- Fitch Ratings: As discussed throughout this post, Fitch Ratings is primarily concerned with assessing the reliability and fiscal operations of companies, providing scores that are beneficial to investors and buyers who are considering the companies.
- Fitch Solutions: Fitch Solutions is closely linked to Fitch Ratings and helps clients determine their best investment options, sharing data from their market research with investors to provide them with risk solutions, debt market solutions, and macro intelligence solutions.
- Fitch Learning: With locations in New York, London, Chicago, Hong Kong, Dubai, and Singapore, Fitch Learning trains financial professionals with courses, apprenticeships, and corporate training.
- Fitch Solutions Macro Research: This newly integrated program does it all, merging Fitch Ratings Reports with the expertise of 150 BMI analysts’ perspectives to provide macro data to clients.
With these four tools, investors, professionals, and clients looking for insurance can be educated on crucial investment data and work toward solutions to their business needs.
Aside from its presence in the United States, Fitch Ratings also resides and operates in 30 other countries worldwide. Not limited to just insurance, Fitch also rates for corporate finance, global infrastructure, public and structured finance, and more.
Fitch Ratings also provides sovereign credit ratings, with which the company assesses countries’ abilities to meet their debt repayment obligations.
Because of Fitch’s well-established reputation, developing companies can boost their economies by obtaining a high score from Fitch Ratings as it increases investors’ likelihood to put money behind the country’s efforts.
Why You Should Consider Using Fitch Ratings
Fitch Ratings is a reputable credit rating company that uses quantitative and qualitative data to bring you company scores you can depend on.
While ratings are independent and data-driven in nature, one should also take into account ratings from the other major rating agencies, company histories, current events, and even current client reviews in order to make the best most informed decision in choosing a life insurance company to do business with.
Adding Fitch Ratings to your quest for the best insurance company is an excellent step in ensuring the company you choose is reliable and will fulfill its promise to cover you and your family, no matter what happens.