A.M. Best Affirms Ratings of Old Republic Title Insurance Group

June 26, 2006

OLDWICK, N.J.--(BUSINESS WIRE) -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of the Old Republic Title Insurance Group and its subsidiaries (Minneapolis, MN). The outlook on all ratings is stable.

The ratings reflect the group's strong capitalization, continuing favorable operating results, its strong market profile as one of the five leading title insurance groups in the United States and the support it receives from its parent, Old Republic International Corporation (NYSE: ORI - News). These positive rating factors are partially offset by the inherent risks associated with managing significant premium advances in recent years and the challenge of managing future economic cycles. The outlook is based on the group's strong capitalization and favorable operating earnings.

The positive rating factors are derived from the group's strong earnings performance, along with a conservative investment portfolio, commitment to technology advancement and strong demand for title products in recent years, which is reflective of a generally low interest rate environment and favorable real estate markets. Furthermore, the group benefits from the financial flexibility of its publicly-traded parent, Old Republic International Corporation, which had $11.6 billion in total assets and $4.1 billion in shareholder's equity as of March 31, 2006. The parent company also maintains a conservative balance sheet with low financial leverage.

The positive rating factors are partially offset by the risk associated with absorbing significant premium advances in recent years and the challenges in handling earnings and revenue volatility stemming from the fluctuating dynamics of the real estate market. This includes the potential for a weakening of real estate prices in selected areas of the country that have witnessed significant appreciation in recent years. Additionally, potential increases in long-term interest rates may also have a negative impact on the residential housing market, which typically drives the demand for title insurance products. However, the group's title premium is nationally diversified, which limits volatility to regional changes in real estate markets.

In addition, the majority of the group's title premium is generated from the agency distribution channel, which enables the group to ratchet down costs more quickly and efficiently during periods of slowdown in economic activity, as fixed costs are generally lower compared to competitors with a larger share of direct business.

Finally, the group is exposed to some degree of volatility in the legal and regulatory climate as it relates to the title industry.

The FSR of A+ (Superior) and the ICRs of "aa-" have been affirmed for the Old Republic Title Insurance Group and its following members:

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

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.

Source: A.M. Best Co.

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