Fitch Ratings Affirms American Pioneer Title's 'AA' IFS Rating

June 28, 2002

CHICAGO--(BUSINESS WIRE) -- Fitch Ratings has affirmed the insurer financial strength rating of American Pioneer Title Insurance Company (American Pioneer) at 'AA'. The Rating Outlook is Stable.

American Pioneer is a subsidiary of The PMI Group, Inc. a publicly traded holding company with subsidiaries engaged primarily in private mortgage insurance and title insurance. The PMI Group reported consolidated assets of $3 billion and shareholders' equity of $1.8 billion at Dec. 31, 2001. The PMI Group's private mortgage insurance subsidiary, The PMI Mortgage Insurance Co. (PMI), carries a 'AA+' Fitch rating and is the nation's third largest private mortgage insurer based on in-force premium. PMI provides a capital support agreement to American Pioneer, which is a factor in determining American Pioneer's rating.

The American Pioneer rating also considers the company's above average operating profitability, conservative investment policy, and strong agency monitoring and control systems. Balanced against these strengths are American Pioneer's dependence on the Florida market for a majority of its revenues, and operating leverage that is higher than peers.

Operating results have been favorable for American Pioneer for the last several years as evidenced by a five-year average statutory combined ratio of 94% and return on policyholders' surplus of 30.6% from 1997-2001. American Pioneer consistently reports better loss ratios than industry averages, which is indicative of the effectiveness of its underwriting and risk management policies. During 2001, the company reported statutory net income of $6.2 million on revenues of $154 million.

American Pioneer's investment policy stresses preservation of capital. As such, invested assets are concentrated in highly liquid, investment grade bonds and short-term investments, with a strong emphasis on high quality tax exempt securities.

American Pioneer's surplus is considered acceptable, although dividend requirements from PMI have limited surplus growth in recent years. Fitch's risk-adjusted capital (RAC) ratio estimated that American Pioneer's adjusted capital was 167% of required capital at year-end 2001. This RAC ratio was down considerably from 216% at year-end 2000 due primarily to expense leverage and agency risk charges. Fitch considers American Pioneer's reserving practices to be conservative as statutory reserves appear to be significantly redundant relative to actuarial requirements at year-end 2001.

Also factored into the rating are American Pioneer's more limited size and geographic scope relative to some title industry competitors, and the cyclical nature of the title insurance business due to the variability of operating revenues caused by macroeconomic factors that impact real estate market activity.

American Pioneer is a Florida domiciled title insurer that reported statutory admitted assets of $58 million and policyholders' surplus of $18.6 million at Dec. 31, 2001. Approximately 54% of the company's 2001 business originated in Florida. American Pioneer has embarked on a business expansion strategy in recent years to broaden its geographic scope. The company is currently licensed in 46 states and writes business in 41 states. This strategy has led to significant premium growth in recent years.

Source: Fitch Ratings

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