What Is A+/A1?
A+ /A1 refers to two ratings issued to long-term bonds and bond issuers by the competing credit rating agencies Standard & Poor's (S&P) and Moody's respectively. S&P uses A+, and Moody's uses A1, but both indicate pretty much the same thing.
Both A+ and A1 sit squarely in the middle of the investment-grade category of their credit ranking systems. They signify that bonds are of high-quality and have many positive qualities, but do carry a slightly higher degree of long-term investment risk.
key takeaways
- A+/A1 are credit ratings produced by ratings agencies S&P and Moody's.
- Both A+ and A1 fall in the middle of the investment-grade category, indicating some but low credit risk.
- Credit ratings are used by investors to gauge the creditworthiness of issuers, with better credit ratings corresponding to lower interest rates.
Understanding A+/A1
Both A+ and A1 represent the fifth-highest rating a debt issuer or a debt instrument can receive.
At Moody's, the A1 rating comes after the Aaa, Aa1, Aa2, and Aa3 ratings. The A rating itself denotes that the bond (or whatever security is being rated) is "upper-medium grade and subject to low credit risk." The modifier 1 indicates that "the obligation ranks in the higher end of its generic rating category."
At Standard & Poor's, the A rating comes after the AAA, AA+, AA, and AA- ratings. The A rating itself denotes a "strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circ*mstances." S&P further fine-tunes the evaluation by adding a + or – to the letter.
Both A+ and A1 are six rankings above the cutoff that separates investment-grade debt from high-yield, or non-investment-grade, debt, which carries ratings of Baa1/BBB+, Baa2/BBB, Baa3/BBB-, or even lower. The A+/A1 rating signifies that the issuer or carrier has stable financial backing and ample cash reserves. The risk of default for investors or policyholders is very low.
The credit ratings assigned by the various rating agencies are based primarily upon the insurer's or issuer's creditworthiness; in a sense, they are a quantified assessment of the creditworthiness of a borrower. A+ and A1, like all ratings, can be interpreted as a direct measure of the probability of default. However, credit stability and priority of payment are also factored into the rating.
Example of A+/A1
For example, XYZ Corp. is a company that is looking to raise capital by issuing long-term debt. It is a company that produces a popular consumer product and has a strong balance sheet with lots of free cash flow. It issues a responsible amount of debt and is easily able to make interest payments on its bonds until they mature—for now.
However, there are some changes on the horizon that might affect the company's financial standing. There are signs that sales of its flagship product are slowing, and new environmental regulations might necessitate it making some costly upgrades to its factories and production methods.
As a result, Moody's and S&P rank XYZ's debt an A+/A1. In so doing, they are saying the company has adequate capacity to meet financial commitments, along with many positive investment attributes; but it also has elements susceptible to adverse effects of changes in economic conditions.
FAQs
Example of A+/A1
What is the A1 a+ credit rating? ›
The A+/A1 credit ratings indicate that the bonds are high-quality with a minimal risk of default, placing them in the middle of the investment-grade category.
Are A1 and A+ the same? ›
Basically, there is no difference. A1 positive is a subgroup of A positive blood, and it is most definitely the most common.
What is the AA+ rating? ›
AA+ and Aa1 are bond ratings associated with a relatively low-risk, low-yield investment as defined by the rating agency. An Aa1 rating is used by Moody's, and an AA+ rating is used by Fitch Ratings and Standard and Poor's. Both ratings indicate the second-highest level of creditworthiness.
What is the difference between AAA and AA+? ›
What Does AA+ Mean? The AA+ rating is issued by S&P and Fitch and is similar to the Aa1 rating issued by Moody's. This rating is still of high quality but it falls below the AAA ranking. It comes with very low credit risk even though long-term risks may affect these investments.
How much credit is a A+? ›
How do I calculate my Grade Point Average?
| Letter Grade | Grade Point Value Per Credit | Percentage |
|---|
| A+ | 4.33 | 95 - 100 |
| A | 4.00 | 90 - 94 |
| A- | 3.67 | 85 - 89 |
| B+ | 3.33 | 80 - 84 |
9 more rowsA+ Rated Bonds are considered a moderately safe investment with a low risk of default. Companies typically issue them with a good financial history and track record of paying their debts.
What is an A+ A and A? ›
Letter grade Percentage Grade definition A+ 90-100 Excellent A 85-89 Very good A– 80-84 Very good B+ 75-79 Good B. Page 1. MAJOR RESEARCH PAPER – GRADING SCHEME. Letter grade.
Is an A+ 100%? ›
Common examples of grade conversion are: A+ (97–100), A (93–96), A- (90–92), B+ (87–89), B (83–86), B- (80–82), C+ (77–79), C (73–76), C- (70–72), D+ (67–69), D (65–66), D- (below 65).
Is A or A+ better? ›
Traditionally, the grades are A+, A, A−, B+, B, B−, C+, C, C−, D+, D, D− and F, with A+ being the highest and F being lowest. In some cases, grades can also be numerical.
The A credit grade generally reflects having a “good” credit score or higher (typically 700 or above) according to the FICO rating systems and others. 1 Sometimes, lenders will designate an additional “A+” for borrowers with the highest scores.
Is AA better than a+? ›
For example, with S&P and Fitch, a rating of AA+ is better than AA, and a rating of AA- is worse than AA but better than A+. Moody's uses numbers to indicate relative quality, with Aa1 being the best Aa rating, followed by Aa2 and Aa3.
What is the highest credit quality rating? ›
Highest credit quality
'AAA' ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments.
Can my wife use my AAA card? ›
Yes, but additional family members must each be enrolled as an Associate on your AAA Membership account. Primary Membership - The Primary Member is the first person in the household to join AAA. Membership includes roadside assistance and all other AAA services and benefits.
What is AAA to AA+ rating? ›
Fitch, one of three major independent agencies that assess creditworthiness, cut the rating from the top level of AAA to a notch lower at AA+. Fitch said it had noted a "steady deterioration" in governance over the last 20 years. US Treasury Secretary Janet Yellen called the downgrade "arbitrary".
What is the highest level of AAA membership? ›
AAA Premier Membership brings you the highest level of AAA perks. You'll receive everything you get as an AAA Plus member and much more, including: Up to 200 miles of free towing (once per year - the other 3 tows are limited to 100 miles).
Is A1 rating better than A2? ›
Moody's uses a numerical indicator. For example, A1 is better than A2 (but still not as good as Aa3).
What is the A and AA credit rating? ›
'AAA' rated entities and instruments demonstrate exceptional credit quality and lowest expectation of default risk. 'AA' rated entities and instruments demonstrate very high credit quality with a very low default risk. 'A' rated entities and instruments demonstrate high credit quality with a low default risk.
What is an A2 credit score? ›
Financial Terms By: a. A2. The sixth highest rating in Moody's Long-term Corporate Obligation Rating. Obligations rated A2 are considered upper-medium grade and are subject to low credit risk. Rating one notch higher is A1.
