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Fitch Ratings Finds Title Insurance Industry Well Capitalized

July 26, 2002

CHICAGO--(BUSINESS WIRE) -- The title insurance industry remains well-capitalized overall, though there remain significant disparities in capital strength among individual companies, according to a new report published recently by Fitch Ratings. Fitch bases this conclusion on a study of risk-adjusted capital (RAC) that produced the somewhat surprising result that the RAC ratio for Fitch's aggregate title insurer universe was relatively unchanged in 2001 relative to year-end 2000.

'The steadiness of risk-adjusted capital for title insurers was somewhat unexpected as the industry experienced sharp revenue growth in 2001 due to continued strong real estate market activity and record mortgage refinancing activity,' said James B. Auden, Senior Director, Fitch Ratings. 'Based on developments to date in 2002, Fitch Ratings believes that its title insurance universe will remain at adequate capital levels over the near term.'

Fitch developed a quantitative model in 1995 to estimate title insurers' risk-adjusted capital position, and is the only known model developed specifically for title insurers. The quantitative RAC ratio is viewed as an important step in allowing interested parties to evaluate capital adequacy of title insurers in a meaningful, systematic fashion. The title industry's 2001 aggregate RAC is 181%, essentially unchanged from 182% in 2000 and up from 168% in 1999.

'Capitalization in the title insurance industry for 2002 relative to 2001 will depend greatly on earnings levels and how earnings growth translates into growth in policyholders' surplus,' said Auden. 'Fitch expects operating earnings to decline from the strong levels of 2001, but 2002 should still produce good earnings barring any sharp changes in the market environment.'

Fitch's title insurer universe includes all five national title insurers and five of the largest regional insurers. These companies comprise over 94% of the title insurance industry based on statutory operating revenue.

For a copy of the report titled 'Title Insurers' Risk-Adjusted Capital Adequacy at Year-end 2001' please visit Fitch's Web site at 'www.fitchratings.com'.

Source: Fitch Ratings:



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