Fitch Affirms Attorneys' Title Insurance Fund
August 1, 2007
CHICAGO -- Fitch has affirmed the Insurer Financial Strength rating of Attorneys' Title Insurance Fund, Inc. (the Fund) at 'A-' . The Rating Outlook is Stable.
The IFS rating of the Fund is supported by its nearly 19% share in the Florida title insurance market, good profitability, and an improved risk-adjusted capital ratio. Balanced against these strengths are the Fund's concentration of business in Florida, significant investment in equity securities, and limited financial flexibility.
The Fund is the third-largest title insurer in Florida based on premium volume and the sixth-largest title insurance organization in the United States. Both Fidelity National Financial and First American Corporation have used acquisitions to move ahead of the Fund in terms of market share in Florida. The fact that the company derives nearly all of its revenue from a single state potentially adds volatility to operating results; however, Florida's real estate market has historically performed better than other regions of the country.
The Fund has grown surplus by more than 3 times to $159 million between 2002 and 2006, which is reflected in operating leverage ratios as well as Fitch's risk-adjusted capital (RAC) ratio. The 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 capital adequacy, as measured by Fitch's RAC ratio, continued to improve in 2006 and for the first time is materially better than the average for Fitch's rating universe.
The company has an above-average exposure to unaffiliated common and preferred stocks, representing approximately one-half of total invested assets or 84% of policyholders' surplus. This compares to equity exposure within Fitch's rating universe of less than 12% of invested assets or 29% of policyholders' surplus. The concerns over the large allocation to equity securities are additional volatility in earnings and surplus from stock market fluctuations.
The Fund is owned by a business trust that in turn is owned by attorneys who serve as agents for the company. This ownership structure limits the Fund's access to outside capital, as well as the likelihood of the company being an acquisition target.
Attorneys' Title Insurance Fund, Inc.
--IFS affirmed at 'A-', with a Stable Outlook.
Source: Fitch Ratings