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Fitch Affirms Old Republic Title Group's 'AA-' IFS Ratings

May 16, 2005

Business Wire

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the 'AA-' insurer financial strength ratings of the Old Republic Title Group (ORT), which consists of the following title insurance companies: Old Republic National Title Insurance Co., Old Republic General Title Insurance Corp., Mississippi Valley Title Insurance Co. and American Guaranty Title Insurance Co. The Rating Outlook is Stable.

ORT's ratings benefit from the support of its parent, Old Republic International Corp. (NYSE: ORI - News). ORI is a publicly traded insurance organization, with interests in property/casualty, title, mortgage guaranty, and life insurance. ORI reported consolidated GAAP assets of $10.6 billion and stockholders' equity of $3.9 billion at Dec. 31, 2004. The title operations represented nearly one-third of total revenue for ORI, which has been higher over the past several years given the strong title insurance market.

ORT's ratings are also supported by its solid profitability, conservative balance sheet, and competitive position as one of the five U.S. title underwriters with a national presence.

ORT is the smallest among the five national title insurers with a 6% share of the market measured by premium volume. The market share has been stable over the recent past, pointing to ORT's ability to defend its competitive position in a consolidating market.

The company's distribution favors agents over owned distribution, which is different than most national peers. Consequently, ORT's cost structure is more variable and should help preserve profits when the title market slows down. Profitability on a statutory basis was strong, witnessed by a return surplus of 36.1% in 2004 versus an average of 25.1% for the national underwriters.

Fitch uses it own risk-adjusted capital (RAC) ratio to measure the capital adequacy of title insurance companies. ORT's RAC ratio was 206%, which was fairly flat between periods. Peer companies showed improved RAC ratios during 2004 possibly due to reserve credit from refinancing business, which typically shows lower loss ratios.

ORT reported a $22.2 million pretax charge on its GAAP books from the ruling by the California Court of Appeals affirming a prior trial verdict against Old Republic Title. This verdict dates back to a 1998 suit against an underwritten title agency subsidiary headquartered in California.

Entity/Issue/Type Action Rating/Outlook

  • Old Republic National Title Insurance Company
  • Old Republic General Title Insurance Corporation
  • Mississippi Valley Title Insurance Company
  • American Guaranty Title Insurance Company

-- Insurer financial strength Affirmed 'AA-'/Stable.

Source: Fitch Rating

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