OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlooks to positive from stable and affirmed the financial strength rating of B++ (Good) and the issuer credit ratings of “bbb+” for Zale Indemnity Company (Zale Indemnity) (Irving, Texas) and its wholly-owned subsidiary, Zale Life Insurance Company (Zale Life) (Phoenix, AZ).
The ratings for Zale Indemnity, which acts as a captive insurer for the customers of its intermediate parent, Zale Corporation (Zale Corp.), reflect the strong underwriting and operating results generated over the long term, as well as its solid risk-adjusted capitalization and the role of the company in providing complementary insurance services for the customers of its parent’s jewelry operations. Zale Corp. was acquired by Signet Jewelers, Ltd (Signet) in 2014 with Zale’s Jewelry stores continuing to be managed as a separate brand. Zale Indemnity provides a number of insurance products to Zale Jewelry customers, principally warranty and extended service contracts and, through its Zale Life subsidiary, credit life insurance.
The ratings for Zale Life reflect its role as a provider of credit insurance within Zale Corp., its favorable level of risk-adjusted capitalization, strong liquidity and the high credit quality of its investment portfolio. Offsetting rating factors include the company’s limited business profile and modest level of premium growth, which remains highly correlated to U.S. economic growth and Signet’s retail jewelry sales, given its acquisition of Zale Corporation and its subsidiaries.
The outlooks reflect the improving business prospects and profile of the Zale Indemnity and Zale Life as affiliates of Signet. Positive rating factors for Zale Indemnity include continued stability at both the captive and the parent while maintaining strong operating results and risk-adjusted capitalization. Positive rating factors for Zale Life would include expansion of its business profile resulting in organic earnings growth.
Other negative triggers for Zale Life and Zale Indemnity would include deterioration in operating results, risk-adjusted capitalization or an adverse decline in the overall strength of the U.S. economy given that both companies’ sales are correlated to U.S. retail jewelry sales.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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