A.M. Best Affirms Ratings of Old Republic Title Insurance Group and Its Members; Revises Outlook to Negative

June 25, 2008

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Old Republic Title Insurance Group and its members (Minneapolis, MN). The outlook has been revised to negative from stable. (See below for a detailed listing of the companies and ratings.)

The affirmation of the ratings reflects the group’s strong capitalization and the benefit it has received from the financial support of its publicly traded parent, Old Republic International Corporation (Old Republic) (NYSE: ORI) (Chicago, IL), which had $13.2 billion in total assets and $4.4 billion in shareholders’ equity as of March 31, 2008. Old Republic’s balance sheet maintains low financial leverage.

The revised outlook primarily is based on the uncertainties associated with the significant adverse impact on Old Republic's mortgage guaranty operations as a result of the ongoing downturn in the housing and related mortgage finance markets.

The positive rating factors are derived from the group’s moderate underwriting leverage, conservative reserving practices and commitment to technology advancement. These positive rating factors are partially offset by the ongoing down cycle in the real estate market. The group faces challenges in controlling expenses and managing earnings and revenue volatility due to the current weakness in the housing market as the demand for title insurance products is largely derived from transactions in residential real estate.

However, the group’s title premium is nationally diversified, which somewhat limits volatility to regional fluctuations in real estate markets. Moreover, approximately two-thirds of the group’s premium is generated through independent agents. This enables the group to potentially better manage down cycles as fixed costs are generally lower for that distribution channel.

The FSR of A+ (Superior) and ICRs of “aa-” have been affirmed for 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

For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Contact ALTA at 202-296-3671 or communications@alta.org.