A.M. Best Affirms Ratings of Investors Title Company, Inc. and Its Subsidiaries
01 July 2016 - 4:26AM
Business Wire
A.M. Best has affirmed the financial strength rating of A
(Excellent) and the issuer credit ratings (ICR) of “a” of the two
subsidiaries of Investors Title Company, Inc. (ITIC)
[NASDAQ: ITIC], collectively referred to as the Investors Title
Company Group (ITC Group). The two subsidiaries are
Investors Title Insurance Company and National Investors
Title Insurance Company (Austin, TX). A.M. Best also has
affirmed the ICR of “bbb” of ITIC. The outlook for each rating is
stable. All companies are domiciled in Chapel Hill, NC, unless
otherwise specified.
The rating affirmations reflect ITC Group’s excellent
risk-adjusted capitalization as evidenced by its conservative
underwriting leverage ratios, which are relatively modest compared
with the title industry as a whole. In 2015, the group’s statutory
surplus level increased for the fifth straight year. The group’s
operating results have been consistently favorable in recent years,
posting an underwriting profit in each of the past five years, and
pre-tax operating results have been solid throughout this period.
ITC Group’s favorable results are partly due to its efforts to
carefully manage its expense structure while limiting losses,
including those from agency defalcations, through comprehensive
reinsurance protection and instituting extensive safeguards in the
selecting, monitoring and auditing of its title agency force and
other providers. Partly as a result of these initiatives, the group
has incurred no material defalcation losses in the past five years.
Additionally, the group has taken initiatives to diversify its book
of business by reducing its concentration in North Carolina, its
largest state, which previously represented nearly half of its
book, to approximately 32.5% as of year-end 2015. ITC Group also
has expanded its geographic footprint in recent years into more
than 20 states, including Texas, which is currently its
second-largest state. Furthermore, while its North Carolina
business continues to be conducted primarily through directly owned
branches, the group distributes its business in Texas and other
states primarily through independent agents, which has resulted in
greater diversification of its distribution channels.
The current economic environment and housing market conditions —
both of which determine the future revenue and earnings potential
of title insurers — have somewhat improved in recent years.
However, uncertainties remain as to the future direction of U.S.
monetary policy and its effect on long-term interest rates, which
drive title insurance activity and the effect on the macroeconomic
environment of potential geo-political events. Nevertheless,
combined with ITC Group’s expense and risk management efforts,
these generally improving conditions have produced steadily
increasing operating earnings in the past five years, with
particularly robust results in 2012, 2013, 2014 and continued
favorable operating results as of year-end 2015.
The current ratings and outlooks are not expected to change in
the near term. However, further upward movement in the ratings
and/or outlooks will depend on the ITC Group sustaining the
positive operating performance trend along with maintenance of
favorable risk-adjusted capitalization. Conversely, significant
deterioration in operating performance and/or significant erosion
in risk-adjusted capitalization levels in the operating companies
may result in downward movement in the ratings and/or outlooks.
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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A.M. BestGary DavisAssistant Vice
President+1 908 439 2200, ext.
5665gary.davis@ambest.comorDaniel RyanVice
President+1 908 439 2200, ext.
5325daniel.ryan@ambest.comorChristopher
SharkeyManager, Public Relations+1 908 439 2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyAssistant Vice President, Public Relations+1 908
439 2200, ext. 5644james.peavy@ambest.com
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