AM Best has downgraded the financial strength rating of Zale Indemnity Company (ZIC) and its wholly owned subsidiary, Zale Life Insurance Company (Zale Life) from B++ (Good) to B+ (Good). The outlook of this credit rating remains stable.
ZIC is a captive insurer of Signet Jewelers, a large diamond jewelry retailer, and has been a provider of third-party credit insurance and warranty coverage to the customers of its affiliated retailers.
AM Best said that the ratings reflect ZIC’s and Zale Life’s balance sheet strength, which it categorises as very strong, as well as each company’s marginal operating performance, very limited business profile and appropriate enterprise risk management.
The rating agency said that the ratings were downgraded based on management’s recent decision 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 these two insurers. Despite these rating downgrades, ZIC’s ratings reflect its very strong balance sheet, solid cash flow and what is expected to be a very orderly runoff of its business. Most of this business has either been reinsured or will be discontinued, hence the change in the ratings.
Zale Life’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 very limited business profile and the immaterial net levels of net premiums due to high utilisation of an offshore reinsurance affiliate.
Zale Indemnity, ZIC, AM Best, rating, downgrade, outlook