A.M. Best has downgraded the financial strength rating from B++ (good) to B+ (good) and the long-term issuer credit ratings from “bbb+” to “bbb-” of Zale Indemnity Company (ZIC) and its wholly-owned subsidiary, Zale Life Insurance Company (Zale Life).
The outlook of these ratings remain stable.
As a captive insurer of Signet Jewelers, the largest diamond jewelry retailer in the world, ZIC has provided third-party credit insurance and warranty coverage to the customers of its affiliated retailers.
The majority of this business has either been reinsured or will be discontinued hence the change in ratings.
According to the ratings agency, the ratings are reflective of ZIC and Zale Life’s balance sheet strength, categorised as very strong, in addition to each company’s marginal operating performance, very limited business profile and appropriate enterprise risk management.
The ratings were downgraded based on the recent decision by management to discontinue writing all credit products, and most warranty and extended service products, which dramatically lessens the future business prospects and long-term profitability prospects for the two insurers.
Despite the rating downgrades, the ratings reflect ZIC’s very strong balance sheet, solid cash flow and what is predicted to be a very orderly business run-off.
Zale Life’s ratings reflect its solid level of risk-adjusted capitilisation, strong liquidity and the high credit quality of its investment portfolio.
Offsetting rating factors include a very limited business profile and the immaterial net levels of net premiums due to high utilisation of an offshore reinsurance affiliate.
