A.M. Best Assigns Initial Ratings to Fidelity.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--March 4, 2002 A.M. Best Co. has assigned an initial financial strength rating of A (Excellent) to Fidelity National Financial, Inc.'s (Fidelity), title insurance subsidiaries and an initial financial strength rating of B++ (Very Good) to Fidelity National Insurance Company, the group's property and casualty underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite) UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. , both of Santa Barbara, California Santa Barbara is a city in California, United States. It is the county seat of Santa Barbara County, California. As of the 2000 census, the city had a total population of 92,325. . The ratings reflect management's successful growth initiatives, operating performance, strong capital, excellent liquidity and franchise value of Fidelity and Chicago Title Corporation. The merged operations resulted in the creation of Fidelity, one of the largest providers of title insurance and real estate related services in the marketplace. Furthermore, management's strategic initiatives to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. core expertise, market brands and product and service diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. while containing revenue and earnings volatility through cost cutting initiatives, has allowed Fidelity to realize excellent pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern operating results. A.M. Best also recognized the unique attributes associated with the title industry and evaluated the group from both an insurance and general industry perspective. Title underwriters have limited underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. risk profiles due to standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. filing requirements and increased automation of the title review process. The limited risk profile is exemplified through high expense and low loss ratios that are typical for the title industry. The Fidelity Title Group has maintained operating leverages Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. consistent with the title industry with a well managed investment portfolio supporting a superior reserve to paid loss ratio. While the reserves and capital position of the company are strong, the rating analysis encompasses cash flow stress testing Determining the durability of a system by pushing it to its limits. Stress testing a network is performed by transmitting excessive numbers of packets or attempting to break in illegally. of Fidelity's operating performance through a variety of economic and real estate industry downturn scenarios. Future challenges for the Fidelity family of companies will be the integration of acquired and merged operations, management of economic cycles, growth and management of the group's financial leverage. Fidelity's management has an excellent record of managing and integrating acquisitions, as reflected in the Chicago Title merger. Management's announced strategies have been employed with initiatives integrated within predicted time frames. Analysis of the title group's revenue reflects a high correlation to economic cycles. The merger with Chicago Title blended the core proficiencies of each group, while mitigating cost exposures in difficult markets by strengthening the group's national presence. Initiatives have also allowed for the further mitigation of its exposure in difficult markets through economies of scale, low cost distribution systems and moderate growth in non-title business. Fidelity's management has an extensive history in successfully managing moderate to high financial leverage. A.M. Best notes that Fidelity's capital, strong operating profile and financial flexibility enable the company to effectively service moderate levels of debt--25%-35% debt to capital--and withstand competition and earnings in difficult markets. As a result, A.M. Best views the group's rating outlook as stable. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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