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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 21, 2013 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Connecticut Attorneys Title Insurance Company (CATIC) (Rocky Hill, CT).
CATIC’s ratings reflect its favorable capitalization as evidenced by its moderate underwriting leverage ratios. Statutory surplus on a reported basis increased nearly 6% in 2012 compared to 2011, and while premium growth of approximately 20% from a rebounding housing market caused a moderate increase in its net premium to surplus ratio for 2012, this measure still remains relatively low compared to that of the title insurance industry as a whole.
The revised outlook is based partly on CATIC’s continued favorable operating performance, which has improved its capital position, as well as greater risk management efforts that are expected to improve future operating performance. The company’s increase in surplus represents the first annual increase in the past five-year period and is partly due to favorable underwriting and operating results in the past year, a trend that first began in 2011 and has continued through the first six months of 2013 (based on the latest available statutory financial data). While CATIC’s operating performance has been variable in the recent five-year period, due in part to agency defalcation losses suffered prior to 2011, no defalcation losses have been reported since late 2010. CATIC also has instituted greater safeguards through expanded monitoring systems and has availed greater reinsurance protection against such losses in the future through the formation of a captive insurer in Vermont in 2012.
As a bar-related title insurer utilizing independent attorney agents, CATIC retains a market niche as the sixth-largest regional title insurer in the United States with a long-standing presence in New England. The current economic environment and housing market conditions—both of which determine future revenue and earnings potential of title insurers—has somewhat improved in recent quarters. Combined with CATIC’s expense and risk management efforts, these conditions have produced favorable operating earnings in 2011-2012 and year-to-date in 2013, following a significant operating loss in 2010, which was caused by a single material agent defalcation.
Any future upward movement in CATIC’s ratings will require it to sustain its current favorable operating results, while maintaining favorable risk-adjusted capitalization. Conversely, further volatility in CATIC’s operating performance and/or risk-adjusted capitalization may result in greater pressure on its current ratings and/or outlook.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.