CHICAGO, May 26 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR)
reaffirmed the claims paying ability rating of Connecticut Attorneys Title
Insurance Company (CATIC) at 'A-' (Single-A-Minus). The rating reflects
CATIC's strong franchise in the Connecticut title insurance market,
conservative investment policy, strong capital position, adequate agency
monitoring systems and favorable five-year operating performance. The rating
also reflects CATIC's limited geographic diversification, limited access to
outside capital funds due to its ownership structure, and the inherently
cyclical nature of the title insurance business. The Rating Outlook is
Stable.
CATIC recently entered into a strategic alliance with two other regional
insurers, Attorneys' Title Insurance Fund, Inc. (The Fund) and United General
Title Insurance Co. This alliance is expected to allow the firms to expand
service and support capabilities through the alliances' cooperative efforts
and to make the companies more attractive sources of title business for
national lenders due to greater combined geographic scale. As part of the
alliance, CATIC and The Fund made a significant minority investment in United
General's parent.
In addition to the business objectives of growing surplus, generating
profits and improving its operation capabilities, CATIC has the bar-related
title insurer objectives of preserving and promoting the use of independent
legal counsel in real estate transactions. CATIC has a long history of
success in the Connecticut title insurance market with the largest market
share of any other title insurer in Connecticut (34 percent based on 1999
written premiums) and a competitive advantage derived from its relationships
with attorney-agents.
DCR expects that future revenue growth will follow industry trends, which
are tied to the real estate cycle, and that operating profits will be impacted
by costs incurred from recent growth initiatives as well as cyclical factors.
It is unlikely that CATIC will be able to maintain in 2000 the record-high
levels of profitability experienced in 1998 and 1999. CATIC's statutory
surplus was more than adequate at yearend 1999 based on DCR's risk adjusted
capital (RAC) formula, which quantitatively tests capital adequacy for several
risks, including investment risks, reserve adequacy, exposure to large losses,
expense leverage and agency risks. CATIC's RAC for 1999 was 281 percent,
which is better than the title industry average.
CATIC continues to maintain a high-quality, liquid investment portfolio
and recently amended its investment policy to increase fixed-income securities
while decreasing unaffiliated equities. The company's capital position
remains strong. Although CATIC's unique ownership structure has spawned a
strong service orientation, which is a primary factor behind the company's
long-term operating success, it creates less flexibility for the company to
raise capital from current owners or the capital markets in the event that a
need for additional funds materializes.
CATIC reported statutory admitted assets of $35.6 million and
policyholders' surplus of $26.5 million at March 31, 2000.
For additional information, visit DCR's Web site at http://www.dcrco.com
(Quick Search: Connecticut Attorney's). DCR's research is also available on
Bloomberg at DCR, FirstCall's BondCall Direct/Research Direct at
http://www.firstcall.com and Multex at http://www.multex.com, as well as
through other third-party providers.
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Colleen M. Garrity, J.D., 312-368-2098,
garrity@dcrco.com, or James B. Auden, CFA, 312-386-3146,
auden@dcrco.com, both of Duff & Phelps Credit Rating Co.
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