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Press release from Business Wire

A.M. Best Affirms Ratings of Zale Life Insurance Company

Wednesday, January 25, 2012

A.M. Best Affirms Ratings of Zale Life Insurance Company09:00 EST Wednesday, January 25, 2012 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-”of Zale Life Insurance Company (Zale Life) (Phoenix, AZ), a subsidiary of Zale Corporation (Zale) [NYSE: ZLC]. The outlook for both ratings is stable. Zale Life's ratings reflect its favorable risk-adjusted capital levels, conservative investment strategy, high liquidity levels to meet its short-term obligations and strategic role as a credit insurer of Zale, a leading specialty retailer of fine jewelry in North America. Offsetting factors include modest premium levels, lack of earnings diversification and relatively flat operating earnings. Historically, Zale Life has maintained favorable levels of risk-adjusted capital, despite annual stockholder dividends. The company also generates positive earnings supported by a high credit quality investment portfolio including a strong liquidity position. Tempering these strengths is Zale Life's dependence on the overall health of the economy, specifically the retail market as it relates to consumer spending and credit availability. Should retail market conditions remain difficult, in addition to challenges associated with the ability to extend credit to its customers, credit insurance sales could be pressured. Key rating drivers that may lead to positive rating movement for Zale Life include improved earnings trends and greater penetration of its customer base, which would lead to sustainable premium growth. Key rating drivers that may lead to negative rating actions include a sustained material deterioration in operating performance that may result in diminished capitalization levels. The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Understanding BCAR for Life/Health Insurers”; “Risk Management and the Rating Process for Insurance Companies”; and “A.M. Best's Liquidity Model for U.S. Life Insurers.” Methodologies can be found at Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVEDA.M. Best Co.Louis Savarese, (908) 439-2200, ext. 5168Senior Financial Analystlouis.savarese@ambest.comorWilliam Pargeans, (908) 439-2200, ext. 5359Assistant Vice Presidentwilliam.pargeans@ambest.comorRachelle Morrow, (908) 439-2200, ext. 5378Senior Manager, Public Relationsrachelle.morrow@ambest.comorJim Peavy, (908) 439-2200, ext. 5644Assistant Vice President, Public