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Egan-Jones faces a whistleblower lawsuit, SEC scrutiny, and a regulator ban as questions mount over the private “grades” propping up insurers’ investment portfolios. USA Herald is also investigating a new tip that ratings giant AM Best may have been compromised by an insurance company.

The credit rating is supposed to be one of the quiet guardrails of American finance — an independent, dispassionate judgment of whether a borrower can pay its debts. For insurance companies, those letter grades carry extra weight: they determine how much capital an insurer must hold in reserve to protect the policyholders who trust it with their premiums, their annuities, and their life savings.

Now one of the busiest players in that system stands accused of selling the guardrail itself.

U.S. insurers are holding roughly $40 billion of debt investments that were privately graded by Egan-Jones Ratings, a King of Prussia, Pennsylvania firm whose ratings have come under intense scrutiny from regulators on two continents, according to an exclusive investigation published this month by the Wall Street Journal, based on its analysis of public data.

The allegations against the firm are serious. Two former Egan-Jones executives are suing the company, alleging in a 2024 lawsuit that they were fired after telling securities regulators they were concerned about conflicts of interest — and that the firm pressured staff to inflate ratings in order to win business. The Securities and Exchange Commission has questioned the company’s reliability. And in January, regulators in Bermuda — a jurisdiction where insurers park enormous amounts of capital — removed Egan-Jones from their list of recognized ratings providers altogether.

Egan-Jones forcefully denies wrongdoing. “Egan-Jones stands behind the integrity, independence, and rigor of its ratings,” the company said in a statement to the Journal. The firm denied the former employees’ allegations, saying the two were establishing a competing ratings business, and it disputed the Journal’s reporting outright: “We dispute the Journal’s facts, methodology, and conclusions.”

Why This Matters to Policyholders

To understand the stakes, follow the capital. State insurance regulators generally use the credit rating on each investment to set the dollar amount an insurer must hold aside against the risk of loss. A better rating means a smaller cushion. A ratings firm willing to hand out generous grades therefore doesn’t just flatter a borrower — it can quietly thin the financial padding standing between an insurer’s risky bets and the policyholders counting on that insurer to pay claims decades from now.

“There can be impacts to policyholders if any of the rating agencies do a poor job,” Piper Sandler insurance analyst Paul Newsome told the Journal, warning that insurers who pick a lenient ratings agency might be setting themselves up for long-term pain if those deals run into trouble.

The risk has grown alongside a historic shift in how life insurers invest. Chasing higher returns, life and annuity insurers have splurged on private credit over the past decade — an estimated $980 billion of it, or about a quarter of total life-insurer holdings as of 2025, according to an estimate by insurance-ratings firm AM Best. Because these deals aren’t publicly traded, insurers and debt issuers increasingly pay for confidential “private letter” ratings rather than public grades from the likes of Moody’s or S&P Global. Insurers held about $480 billion of privately rated debt instruments in 2025 — more than ten times the $47 billion reported in 2018, when disclosure began, per the Journal’s analysis.

Private-letter ratings are, by design, hard to check. Few are ever disclosed, and unlike major public bond issues, these investments are frequently graded by only one firm. Whoever holds that pen holds enormous, nearly unauditable power.

One Notch Higher — or Three

Egan-Jones is one of the main players in that private-letter business. And when the Journal assembled a data set of nearly 18,200 private-letter rated instruments, Egan-Jones had issued ratings on more than a quarter of them.

The paper then did something the opacity of this market rarely allows: it found 52 investments, across 79 rating actions, where Egan-Jones and at least one other ratings firm maintained active grades on the same instrument over the same period. On average, Egan-Jones’s ratings came in one notch higher than the competing firms’. In two dozen cases, the Egan-Jones grade was at least three notches higher. The firm was lower in only 18 instances.

Egan-Jones counters that the accuracy of its ratings “has been proven by performance over time,” and argues the Journal relied on a limited sample that compared ratings issued at materially different times on dissimilar instruments. It also noted that many of the compared ratings were unsolicited grades on public bonds, produced for subscribers from public information — though the firm says it applies the same methodology to every rating, private or public, solicited or not.

Regulators appear less sanguine. In a September 2023 letter, the SEC warned Egan-Jones that its incentive structure for analysts could lead to compromised ratings — incentives the company says were simply part of a routine work-tracking system. In March, the SEC went further, questioning the firm’s capacity to “consistently produce credit ratings with integrity” on asset-backed securities it was seeking permission to rate. A study by the National Association of Insurance Commissioners, meanwhile, found that private-letter ratings from small firms — a group that includes Egan-Jones — were often inflated; the NAIC has since pulled the report to “clarify” its findings.

The Mark Walter Connection

Among the biggest holders of Egan-Jones-rated debt, the Journal found, are insurance companies controlled by Mark Walter — the financial titan best known as owner of the Los Angeles Dodgers. Egan-Jones rated about $2.6 billion of loans held by Walter’s insurers, including debt issued by American Media Productions, a firm controlled by a Walter affiliate that owns the Dodgers’ local TV broadcaster.

Loans tied to Walter’s empire now sit at the center of a federal fraud investigation. Authorities are examining how at least $16 billion in loans to entities tied to Walter or his conglomerate, TWG Global, were routed through a third entity before landing on the books of two life insurers Walter also controls — Delaware Life and Clear Spring Life and Annuity. The insurers acknowledged in a regulatory filing last month that those deals weren’t correctly flagged as affiliated transactions, a lapse that can mask potential conflicts of interest. A spokesperson for Walter’s insurers declined to comment to the Journal, and Egan-Jones said its understanding is that the investigation concerns disclosures, not ratings.

The concentration is striking: Egan-Jones supplied the credit scores for 37% of Delaware Life’s private-letter rated debt and fully 70% of Clear Spring’s, per the Journal’s analysis. Between them, the two insurers hold nearly $300 million in American Media debt — debt that carried a BBB grade from Egan-Jones, sitting on the second-lowest rung of investment grade, from 2019 until at least November 2024.

Household names hold Egan-Jones-graded paper too: TIAA with $5.5 billion, MassMutual with $3.4 billion, Principal with roughly $2 billion (Principal tallies it at $1.7 billion), Security Benefit Life with $1.7 billion, and Allianz Life with $1.6 billion. TIAA, MassMutual, Principal and Allianz all told the Journal they conduct their own independent risk assessments. Notably, Allianz said that late last year it instructed its asset managers to stop working with Egan-Jones and to obtain a second rating on any Egan-Jones-rated debt. Security Benefit didn’t respond to the Journal’s request for comment.

The market itself may be rendering a verdict: insurer debt rated confidentially by Egan-Jones fell more than 30% in 2025 from $58 billion in 2024 — even as the total pool of private-letter rated debt kept growing.

A Follow-Up Is Coming: The AM Best Tip

The Egan-Jones affair raises an uncomfortable question that reaches well beyond one firm: if ratings can be shopped, pressured, or purchased in the shadows of the private-credit boom, which other gatekeepers have been bent?

USA Herald can report that it has received a news tip alleging that AM Best — the century-old firm whose financial-strength ratings are the industry standard for judging insurers themselves — may have been compromised by an insurance company as well. USA Herald has not yet independently verified the claims in the tip, and no regulator has publicly accused AM Best of wrongdoing. But given what the Egan-Jones revelations show about how much rides on the independence of a single rating, the allegation warrants serious examination. USA Herald will publish a follow-up story on the AM Best tip as its investigation develops.

Because if the graders themselves are being graded on a curve, it is policyholders — the retirees, the annuitants, the families holding life-insurance contracts — who will ultimately pay for the inflation.