AM Best has upgraded the long-term issuer credit rating to ‘bbb+’ (Good) and affirmed the financial strength rating of ‘B++’ (Good) of Signet Jewelers captive, Zale Indemnity Company (ZIC). The outlook assigned to these credit ratings is stable. These ratings reflect ZIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The upgrade in ZIC’s operating performance to adequate from marginal is supported by management’s decision to retain its operations as a contractual liability insurance policy (CLIP) provider for its parent and affiliates. ZIC’s revenue comes from fee income associated with its CLIP business, which reduces underwriting risk for the captive. The upgrade is further supported by ZIC’s operating performance metrics as both the combined and operating ratios improved significantly over the most recent five-year period. As a captive insurer of Signet Jewelers, ZIC is a provider of third-party credit insurance and warranty coverage to the customers of its affiliated retailers. The operations of ZIC as a CLIP provider limit its underwriting risk, along with its limited surplus growth. ZIC’s ratings reflect its solid level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, strong liquidity and the high credit quality of its investment portfolio.
