Risk from A to D

The credit quality of bonds is based primarily on the likelihood of possible default, resulting in investors losing their principal. Rating agencies sift through data provided by the bond issuers, and other public and non-public data, to evaluate the likelihood of default for a bond assigned with a particular rating, while also applying other risk factors in assigning a specific rating. The chart below describes common bond ratings and includes a general description of each ¹. For precise ratings descriptions, visit the respective ratings agency Web sites.

Rating Description		Rating by Rating Organization
INVESTMENT GRADE
Highest credit quality with minimal risk of default. Extremely strong capacity to meet financial commitments.		AM Best: aaa DBRS, Fitch, Japan, R&I: AAA LACE: A+, A Moody's: Aaa S&P, Egan-Jones: AAA
Superior to very high credit quality and very low risk of default. Very strong capacity to meet financial commitments.		AM Best: aa DBRS, Fitch, Japan, R&I: AA LACE: B+ Moody's: Aa S&P, Egan-Jones: AA
High to upper-medium credit quality with some risk factors that could contribute to default. Bonds in this category are still considered to be in little danger of default risk.		AM Best: a DBRS, Fitch, Japan, R&I: A LACE: B Moody's: A S&P, Egan-Jones: A
Adequate to medium credit quality, with acceptable levels of risk. Could be susceptible to default risk in the long term, or there may be other adverse conditions present which reduce credit quality.		AM Best: bbb DBRS, Fitch, Japan, R&I: BBB LACE: B–, C+ Moody's: Baa S&P, Egan-Jones: BBB
NON-INVESTMENT GRADE
Questionable to speculative financial security, with additional factors that may contribute to default, such as ability to meet debt obligations, especially during periods of economic recession.		AM Best: bb DBRS, Fitch, Japan, R&I: BB LACE: C, C– Moody's: Ba S&P, Egan-Jones: BB
Speculative to highly speculative financial security, with low expectation that issuer will meet debt obligations.		AM Best: b DBRS, Fitch, Japan, R&I: B LACE: C, C– Moody's: B S&P, Egan-Jones: B
Very highly speculative with high risk of default.		AM Best: ccc DBRS, Fitch, Japan, R&I: CCC LACE: D, E Moody's: Caa S&P, Egan-Jones: CCC
Very highly speculative with danger of default, or default probable, or may have recently occurred.		AM Best: cc DBRS, Fitch, Japan, R&I: CC LACE: D, E Moody's: Ca S&P, Egan-Jones: CC
Very highly speculative, often accompanied by bankruptcy petitions; default imminent or has recently occurred.		AM Best: c DBRS, Japan, R&I: C Fitch: C+, C, C– LACE: D, E Moody's: C S&P, Egan-Jones: C+, C, C–
Default and/or in arrears, meaning a portion of a serial bond remains unpaid at maturity. Issuer has not met scheduled payment of interest or principal or made clear it will miss such payments.		AM Best: d DBRS, Fitch, Japan: D LACE: D, E Moody's, R&I: No Rating S&P, Egan-Jones: D

¹The specific ratings are copyrighted by the individual rating agencies and may not be used or reprinted without a license and/or written permission otherwise.