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Fitch Affirms Attorneys' Title Insurance Fund

October 14, 2004

Fitch affirmed the 'BBB+' insurer financial strength rating of Attorneys' Title Insurance Fund, Inc. (the fund) with a Stable Rating Outlook.

The fund's rating is supported by its 22% market share in the Florida title insurance market and the strength of its longstanding ties to attorney/agents. The fund is the second largest title insurer in Florida based on premium volume, and the sixth largest title insurance organization in the U.S. Balanced against these positives is the company's large holdings of equity securities, below-average risk-adjusted capital, and limited access to outside capital.

Profitability at the fund has improved relative to peers over the past year and one-half as the company is taking advantage of a very strong real estate market in Florida. Although the company derives nearly all of its revenue from Florida, the state's real estate market has historically performed well relative to the whole country.

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. The fund's ownership structure limits its access to outside capital.

The company has an above-average exposure to unaffiliated common and preferred stocks, representing 47% of total invested assets or 83% of policyholders' surplus at June 30, 2004. This allocation to common stocks was significantly higher than the 7% of total invested assets posted by Fitch's title insurance universe. The concern over the large allocation to equity securities is additional volatility in earnings and surplus from stock market fluctuations.

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 RAC ratio was 155% of required capital at year-end 2003, up significantly from 107% in 2002. The fund's capital adequacy, as measured by Fitch's RAC ratio, remains below the 186% average for Fitch's rating universe.

Attorneys' Title Insurance Fund, Inc.

-- Insurer financial strength affirmed at 'BBB+'

Source: Fitch Ratings

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