Best’s News & Research Service - September 26, 2014 01:14 PM (EDT)
A.M. Best Removes Ratings of Zale Indemnity Company and Zale Life Insurance Company from Under Review and Affirms the Ratings
Oldwick //BestWire// - A.M. Best has removed from under review with developing implications and affirmed the financial strength ratings of B++ (Good) and the issuer credit ratings of "bbb+" of Zale Indemnity Company (ZIC) (Irving, TX) and Zale Life Insurance Company (Zale Life) (Phoenix, AZ). The outlook assigned to all ratings is stable.
The ratings were placed under review with developing implications following the announcement that Zale Corporation (Zale), at the time the ultimate parent of ZIC and Zale Life, had entered into an agreement to sell all of its issued and outstanding stock to Signet Jewelers Limited (Signet). The transaction closed in the second quarter 2014.
Following discussions with management, A.M. Best anticipates no change in the operating profile or capitalization of either company. ZIC's ratings reflect the company's adequate risk-adjusted capitalization and consistently positive underwriting results. Partially offsetting these positive rating attributes is ZIC's dependence on the health and strength of the economy, specifically as it relates to jewelry sales for premium generation, as well as ZIC's limited business profile as single parent captive.
The affirmation of Zale Life reflects its favorable risk-adjusted capitalization, good liquidity and lower risk in its investment portfolio. Offsetting factors include the limited business profile and low growth in premium and earnings. Potential positive rating factors for ZIC and Zale Life would include medium to long-term stability at the captive and parent level, increased premium growth, improved risk-adjusted capitalization and continued strong underwriting results. Key factors that could lead to negative rating actions include a material change in business strategy for either entity or a material deterioration in risk-adjusted capitalization or operating results.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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