Title Insurers See Small Decline in Capital Strength: Fitch expects expense leverage to decline in 2006.

CHICAGO -- The risk-adjusted capital position of the nation's title insurers, while still showing the industry as well capitalized, declined slightly between year-end 2004 and year-end 2005, a study conducted by Fitch Ratings here shows. But, the report adds, the effect of growth in surplus combined with a reduction in revenue should result in an increased RAC for the industry in 2006.

"Fitch views its quantitative RAC ratio as an important step in allowing interested parties to evaluate capital adequacy of title insurers in a meaningful, systematic fashion. The RAC is just one of many elements Fitch considers in assigning a title insurer's financial strength rating," it said.

The industry aggregate RAC for 2005 was 182%, compared with 184% in 2004. Fitch said, "An unexpectedly prosperous 2005 resulted in a higher expense leverage charge."

Fitch pointed to American Land Title Association statistics that show a record operating revenue for title companies in 2005 of $17.8 billion. But this increased revenue brought increased expenses as well." Statutory surplus creation was not strong enough to offset the expense leverage charge."

The rating agency looked at eight companies, five national title insurance underwriters and three regional ones.

Of those five, the national company with the highest RAC is Stewart Title Group, Houston, at 236%, up from 234% one year earlier, followed by Old Republic Title Group, Chicago, at 206%, down from 207%.

They were followed by First American Title Group, Santa Ana, Calif., at 174%, down from 185%; Fidelity National Title Group, Jacksonville, Fla., at 173%, down from 185%; and LandAmerica Title Group, Richmond, Va., at 154%, up 141%.