Fitch: Near-Term Credit Stabilization Unlikely for U.S. Title Insurance Sector

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Fitch Ratings' outlook for the U.S. title insurance industry remains negative, reflecting previous deterioration in market fundamentals and material reductions in capital.

The sharp downturn in real estate and mortgage market activity has created tremendous challenges for title insurers. For the remainder of 2009 and moving into 2010, Fitch believes that revenue and earnings recovery will hinge on stabilization in these markets. Fitch believes that a return to a stable outlook for the sector is unlikely until there are signs of a sustainable return to profitability in line with historical norms and improvement in risk-adjusted capital levels.

"The title insurance industry has been under a great deal of stress as companies try to align cost structures given the precipitous and dramatic decline in title revenues," said Doug Pawlowski, Senior Director and Head of U.S. Title Insurance Sector, Fitch Ratings. "That said, the title issuers enter are entering the final quarter of 2009 'right-sized' as declines in underwriters' expenses match the lower level of revenue."

Many of Fitch's recent negative rating actions for title insurance issuers reflect both weakened capital positions and in some cases a willingness to maintain lower capitalization at the underwriter level. The title insurance industry lost $1.4 billion or greater than 40% of its surplus during 2007 and 2008. Risk-adjusted capital (RAC) ratios for Fitch's title insurance rating universe decreased substantially from 186% at yearend 2006 to 140% at year-end 2007 to 104% at year-end 2008.

For a copy of the report 'Review and Outlook 2009-2010: Title Insurance Industry' dated Oct. 9, 2009, please see the Fitch Ratings web site www.fitchratings.com under the following headers:

Financial Institutions>>Insurance>>Special Reports

Additional information is available at www.fitchratings.com.

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