Fitch Downgrades & Places Attorneys' Title on Rating Watch Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded the insurer financial strength (IFS) rating of Attorneys' Title Insurance Fund, Inc. (The Fund) to 'BBB' from 'A-', and placed the ratings on Rating Watch Negative. The rating action reflects Fitch's estimate that statutory surplus declined by more than 50% in 2008 to an estimated $70 million. Final statutory surplus figures to be filed with regulators by the company at the end of the month are dependent on completion of an actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin review of reserves, which Fitch understands to be ongoing. An above average allocation to common stocks in The Fund's investment portfolio was the largest contributor to the estimated decline in surplus which represent more than one-third of total investments or greater than three-quarters of estimated policyholders' surplus at year-end 2008. The Negative Rating Watch reflects Fitch's concerns as to a possible further decline in surplus when reserve numbers are finalized See finalization. within the next several weeks. Consequently, significant adverse development in loss reserves could result in a further downgrade in The Fund's financial strength ratings, potentially by more than one notch. Fitch understands from management that proposals under the pending federal government stimulus plan could positively impact income taxes. As a result of the decrease in surplus, Fitch's Risk-Adjusted Capital (RAC See remote access concentrator. ) ratio will deteriorate to an estimated range of 100% to 125% at year-end 2008 from 218% at year-end 2007 and no longer fit the profile for the previous rating category. The Fund's capital adequacy was a key component of its financial strength ratings in light of its more limited geographic scope. Further, a robust capital position takes on greater importance during times of stress like the current down cycle. The Fund is owned by a business trust that in turn is owned by attorneys who serve as agents for the company. This ownership structure limits The Fund's access to outside capital. Other factors contributing to the rating action included poor operating performance and adverse reserve development. Net written premium at The Fund fell an estimated 40% for the full year 2008 to $200 million, while the company reported a net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $34 million through the first nine months of 2008. The operating loss for the full year is expected to be severe as The Fund was slow cutting operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. during the current downturn. In addition, higher than expected losses for policy years 2004 through 2007 as well as significant defalcation The misappropriation or Embezzlement of money. Defalcation implies that funds have in some way been mishandled, particularly where an officer or agent has breached his or her fiduciary duty. activity pressured results during 2008. Attorneys' Title Insurance Fund, Inc. --Insurer financial strength downgraded to 'BBB' from 'A-' and placed on Rating Watch Negative. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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