Fitch Affirms Attorneys' Title Insurance Fund
July 24, 2006
CHICAGO--(BUSINESS WIRE) -Fitch Ratings has affirmed the Insurer Financial Strength rating of Attorneys' Title Insurance Fund, Inc. (The Fund) at 'A-'. The Rating Outlook is Stable.
The rating of The Fund is supported by its 19% share in the FL title insurance market, good profitability and improving risk-adjusted capital ratio. Balanced against these strengths are deteriorating market share, concentration of business in Florida, significant investment in equity securities, and pricing pressure from the Florida Department of Insurance.
The Fund is the third-largest title insurer in Florida based on premium volume and the sixth-largest title insurance organization in the U.S. Both Fidelity National Financial and First American Corporation have recently moved ahead of The Fund in terms of market share in FL. Although it is considered risky that the company derives nearly all of its revenue from a single state, FL's real estate market has historically performed better than other regions of the country. The potential repricing of title insurance by the Florida Department of Insurance does make The Fund's concentration in that state a greater concern.
Profitability, which had historically been below average, has improved over the past several years and compared favorably to averages for Fitch's title insurance rating universe. The Fund has taken advantage of a strong title insurance market to grow surplus by nearly 3 times to $139 million between 2001 and 2005.
Fitch's risk-adjusted capital (RAC) formula quantitatively tests capital adequacy for several risks, including investment risks, reserve adequacy, exposure to large losses, expense leverage, and agency risks. The Fund's capital adequacy, as measured by Fitch's RAC ratio, continued to improve in 2005 but remains below the average for Fitch's rating universe.
The company has an above-average exposure to unaffiliated common and preferred stocks, representing approximately one-half of total invested assets, or 86% of policyholders' surplus. The concerns over the large allocation to equity securities are additional volatility in earnings and surplus from stock market fluctuations.
The Fund is owned by a business trust that, in turn, is owned by attorneys who serve as agents for the company. All licensed attorneys in FL are eligible to become agent/owners of The Fund following the completion of The Fund's application process and payment of a modest annual fee. The company has approximately 6,000 attorney member agents in Florida. The Fund's ownership structure limits its access to outside capital.
Attorneys' Title Insurance Fund, Inc.
-- IFS affirmed at 'A-', with a Stable Outlook.
Source: Fitch Ratings
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