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.
What is an AA+ credit 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 AA and AA+? ›
Thus, the rating of [ICRA]AA+ is one notch higher than [ICRA]AA, while [ICRA]AA- is one notch lower than [ICRA]AA. The above rating scale also applies to bank loan ratings and other instruments.
What is the meaning of Aa1? ›
Aa1. The second highest rating in Moody's Long-term Corporate Obligation Rating. Obligations rated Aa1 are judged to be of high quality and are subject to very low credit risk. Rating one notch higher is Aaa.
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+ or A: An A+ credit score means you're always on time with your monthly payments, you only utilize a small fraction of your available credit, and you're well on your way to paying off any mortgage or auto loans in your name.
Which is better, AAA or AA+? ›
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.
What does crisil A1+ rating mean? ›
CRISIL A1. Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk. CRISIL A2. Securities with this rating are considered to have strong degree of safety regarding timely payment of financial obligations.
Which is better credit rating A or AA? ›
'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. 'BBB' rated entities and instruments demonstrate medium credit quality with a moderate default risk.
Some of the top examples include Australia, Canada, Denmark, Germany, Sweden, Switzerland, Norway, and Hong Kong. These are all countries that generally carry a credit rating of AAA.
What does AA mean from credit score? ›
'aa' ratings denote very strong prospects for ongoing viability. Fundamental characteristics are very strong and stable, such that it is considered highly unlikely that the financial institution would have to rely on extraordinary support to avoid default.
Why do junk bonds have low ratings? ›
Junk bonds are low-rated bonds due to the increased risk that there will be a default on the bond, meaning the bond issuer may not be able to make the interest payments or buy back the bond at maturity.
What does being A1 mean? ›
adjective. Britannica Dictionary definition of A1. informal + somewhat old-fashioned. : very good or excellent.
What is the definition of a 1%? ›
idiom (also the 1%) Add to word list Add to word list. the richest one percent of people, who are said to have most of the money, property, and power in society : He promised to govern in the interests of all, and not just the one percent.
How do you spell A1? ›
“A1.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/A1.
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).
Is AA rating 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 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.
What is an A in credit? ›
Very high credit quality
'AA' ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
