Fitch: U.S. Title Insurance Industry Capital Position Improves

CHICAGO--(BUSINESS WIRE)-- The U.S. title insurance industry's risk adjusted capital position improved in 2014 due largely to surplus growth and continued reduction in balance sheet risk exposures.

A new special report 'Title Insurers' 2014 Risk-Adjusted Capital Adequacy examines results from Fitch's title insurer risk-adjusted capital (RAC) model for 2014. The aggregate RAC score for Fitch's universe improved to 183% in 2014 compared with 168% in 2013.

This result marks the sixth straight year of RAC ratio improvement and is indicative of strong overall statutory capital levels for the 4 largest U.S. title insurers. Significant declines in traditional title insurer operating leverage measures over time are consistent with this improvement in RAC scores.

Leading the improved RAC scores was a 6% increase in stated policyholders' surplus in 2014 which was offset by a reduction in Fitch's estimate of statutory reserve adequacy causing adjusted policyholder surplus (APS) to increase by 3% over prior year.

Fitch's reserve adjustment is driven by a view that the industry's statutory balance sheet loss reserves, which are formula-based, are overstated. However, Fitch also believes that actuarially estimated reserves as shown in Schedule P of statutory financial statements are understated and will continue to show slight deficiencies in the near term.

Further aiding the improvement was a 7% reduction in targeted policyholder surplus (TPS) with reductions in most risk charges notably affiliated investment risk (R6), large loss and ceded reinsurance charge (R10), and expense leverage and agency risk charge (R11).

Fitch anticipates that title insurance industry capitalization, as measured by the RAC ratio, will remain near current levels in 2015. Surplus will likely remain flat. While shareholder dividends could vary by company, Fitch anticipates that distributions will be supported by earnings and not capital.

The full report 'Title Insurers' 2014 Risk-Adjusted Capital Adequacy' is available at 'www.fitchratings.com.' Analysis of company-specific variances in capital adequacy is included in the report.

Additional information is available at 'www.fitchratings.com'.

North American Title Insurers' 2014 Risk-Adjusted Capital Adequacy

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866527

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View source version on businesswire.com: http://www.businesswire.com/news/home/20150604006151/en/

Fitch Ratings
Gerald B. Glombicki, CPA
Director
+1-312-606-2354
Fitch, Inc.
70 West Madison St.
Chicago, IL 60602
or
Jeremy R. Graczyk
Analyst
+1-312-368-3208
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
[email protected]
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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