[January 22, 2013]

A.M. Best Revises Outlook of Zale Life Insurance Company

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of Zale Life Insurance Company (Zale Life) (Phoenix, AZ).

The revised outlook reflects Zale Life's solid and consistent level of risk-adjusted capitalization, positive earnings stream and the moderate increase in its premium levels. A.M. Best also notes that Zale Life's investment portfolio is very short term in nature with little credit risk and high levels of liquidity.

While recognizing Zale Life's solid capital position and its consistent profitability, A.M. Best notes that its growth is highly dependent upon the strength of the overall economy along with the continued stabilization of the retail operations at its parent, Zale Corporation (Zale Corp) (headquartered in Irving, TX). A.M. Best notes that a potential decrease in consumer actiity can still adversely impact the associated opportunities to market Zale Life's core credit products.

Factors that could lead to positive rating actions on Zale Life include continued strong earnings, maintenance of solid capitalization levels, increased strategic importance to the insurance group and continued improvement in the retail operations of Zale Corp, which could lead to expansion of Zale Life's business profile.

Key rating drivers that could lead to an additional revision in the outlook (back to stable) include a material deterioration in capitalization or operating performance as well as contraction in retail sales at Zale Corp, resulting in lower premium growth and a diminished business profile.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, 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.

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