AM Best affirms ZIC ratings

AM Best has upgraded the financial strength rating (FSR) to B++ from B+ and the long-term issuer credit rating (long term ICR) to “bbb” from “bbb-” of Dallas-based Zale Indemnity Company (ZIC).

The outlook of the long-term ICR has been revised to positive from stable while the outlook of the FSR is stable.

The ratings reflect ZIC’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

AM Best upgraded the ratings based on management’s decision to retain ZIC’s operations as a contractual liability insurance policy (CLIP) provider for its ultimate parent, Signet Jewelers and its affiliates. As a captive insurer of Signet Jewelers, ZIC has been a provider of third-party credit insurance and warranty coverage to the customers of its affiliated retailers.

The parent had intentions to sell ZIC, but management has affirmed ZIC’s value to the organisation’s growth as ZIC provides value and strategic alignment in offering CLIPs on extended warranty agreements in states that require them by law. The limited operations for ZIC as a CLIP provider results in limited underwriting risk, along with limited organic surplus growth.

According to AM Best ZIC’s ratings reflect its solid level of risk-adjusted capitalisation, strong liquidity and the high credit quality of its investment portfolio. Offsetting rating factors include a limited business profile and limited organic capital growth due to the limited scope of its operations.