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Fitch Ratings Downgrades Attorneys' Title Insurance Fund To 'BBB+'

July 8, 2002

CHICAGO--(BUSINESS WIRE) -- Fitch Ratings has downgraded the insurer financial strength rating of Attorneys' Title Insurance Fund, Inc. (The Fund) to 'BBB+' from 'A-'. The downgrade was driven by poor operating performance and a deteriorating trend in the company's risk adjusted capital position. The Rating Outlook has been changed to Stable from Negative.

The Fund's strong franchise in the Florida title insurance market remains a positive influence on the rating, while both the capital position and reserving practices are considered appropriate for the rating category. The Fund's larger than average investment position in equity securities, limited geographic diversification, and limited access to outside capital funds due to its ownership structure continue to be challenges for the company.

The Fund is the nation's sixth largest title insurance organization, and is the largest title insurer in Florida based on premium volume. The Fund has the largest title plant in Florida, and generates significant revenue from the sale of computerized title information to other underwriters. Approximately 94% of The Fund's premium volume originated in Florida in 2001.

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 Florida 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.

While the title industry enjoyed a record year in 2001 driven by heavy refinancing volume, The Fund reported a $5.3 million net loss for the year. The Fund's operating results have trailed peers over the past several years due to both higher expense levels and higher claim expenses. In fact, The Fund's average statutory combined ratio was 102% for the period 1997-2001, versus an average of 97.3% for the industry over the same period.

The Fund's net loss of $5.3 million in 2001 compared with essentially break-even results in 2000. The period-to-period decline is unusual as industry statutory net income more than doubled from 2000 to 2001. The largest single component of The Fund's net loss was a $4.4 million expense supporting its consumer advertising campaign. In 2001, The Fund undertook a consumer advertising campaign promoting use of its attorney/agents in the closing process, and educating the public regarding title insurance. The ad campaign is unique in the industry and results will be difficult to quantify.

The Fund reported statutory admitted assets of $161 million and policyholders' surplus of $50 million at March 31, 2002. At year-end 2001, capital adequacy as measured by Fitch's risk adjusted capital ratio was below industry averages and declined to 119% of required capital versus 127% and 158% at year-end 2000 and 1999, respectively.

Fitch is the nation's leading full service agency for financial strength ratings in the title insurance industry, with ratings on all five national title insurance groups and several of the leading regional title insurer.

Entity/Issue/Type  Action Rating/Outlook Attorneys' Title Insurance Fund, Inc --Insurer financial strength  Downgraded  'BBB+'/Stable

Source: Fitch



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