While the ratings are currently stable, positive rating factors include sustained material improvement in operating results at the parent level in conjunction with continued surplus appreciation and strong risk-based capitalization for the insurance companies. Negative rating actions could be caused by adverse economic conditions, as the insurance businesses are driven by the health of the overall U.S. economy. Other negative factors would include deterioration in operating results, a material change in the business profile of the insurance companies, increased leverage at Zale Corp. or a decline in risk-adjusted capitalization.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. Key criteria utilized include: “Rating Members of Insurance Groups”; “Understanding BCAR for Property/Casualty Insurers”; and “Understanding BCAR for Life/Health Insurers.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co. has upgraded the financial strength rating (FSR) to B++ (Good) from B+ (Good) and issuer credit rating (ICR) to “bbb+” from “bbb-” of Zale Life Insurance Company (Zale Life) (Phoenix, AZ). Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and ICR of “bbb+” of Zale Life’s affiliate, Zale Indemnity Company (ZIC) (Irving, TX). The outlook for Zale Life has been revised to stable from positive, while the outlook for ZIC is stable. The rating upgrades reflect Zale Life’s role as the credit life and disability insurance provider for the Zale Insurance Companies, its strong distribution relationship within the Zales retail stores in the United States, Canada and Puerto Rico and the synergies gained through common management, marketing platforms and shared services with ZIC. The ratings also consider Zale Life’s continued solid risk-adjusted capitalization and positive earnings stream. A.M. Best also notes that Zale Life’s investment portfolio is very short term in nature and has high levels of liquidity. ZIC’s affirmations reflect its continued strong underwriting results, profitable earnings and more than adequate risk-based capitalization. In the past three years, ZIC has significantly increased its premium volume while maintaining its strong underwriting metrics. The increase in written and earned premium can be primarily attributed to ZIC's state licensing initiatives, increasing its certificates of authority, as well as increased sales at the parent company, Zale Corporation (Zale Corp) [NYSE: ZLC]. While recognizing the group’s solid capital position and good profitability, A.M. Best notes that growth within the enterprise depends upon the health and strength of the economy, specifically as it relates to jewelry sales at Zale Corp. A.M. Best notes that while discretionary sales recently have improved, a potential decrease in consumer activity can still adversely impact the associated opportunities to market the group’s core credit products. Additionally, the ratings consider the challenges the organization faces in balancing new premium growth while maintaining favorable earnings trends and capitalization.