Press Release - MAY 30, 2014
A.M. Best Upgrades Ratings of the Member Companies of Stewart Title Group
Neil Das Gupta
Senior Financial Analyst
(908) 439-2200, ext. 5206
Gary A. Davis
Assistant Vice President
(908) 439-2200, ext. 5665
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
FOR IMMEDIATE RELEASE
OLDWICK - MAY 30, 2014
A.M. Best has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and the issuer credit ratings (ICR) to "a-" from "bbb+" for the member companies of Stewart Title Group (Stewart). A.M. Best also has upgraded the ICR to "bbb-" from "bb+" for the parent holding company, Stewart Information Services Corporation (Houston, TX) [NYSE: STC]. The outlook for all ratings has been revised to stable from positive. (See below for a detailed listing of the companies and ratings.)
The upgrading of the organization's ratings is based on its significant improvement in risk-adjusted capitalization and continued positive operating results, as evidenced by a solid growth in surplus and significantly higher pre-tax earnings in 2013, following favorable results in 2012, as well as its significant business profile as the fourth-largest writer of title insurance in the United States.
Stewart's favorable risk-adjusted capitalization is evidenced by fairly moderate underwriting and premium leverage ratios. Statutory surplus on a reported basis rose by approximately 10% in 2013 compared with 2012, following a 15% increase from 2011 to 2012, while the group's premium leverage as of year-end 2013, as represented by net premium to surplus ratio, was slightly lower than that of 2012. This was due to premium growth being relatively restrained in 2013, growing at a magnitude somewhat below that of growth in surplus. Additionally, operating performance has been on a steadily improving trend over the past four years.
Stewart's modest positive operating performance in 2011, and more significantly, its solid underwriting and operating results of 2012 and 2013, were partly helped by a rise in premium volume in the latter two years as compared to back-to-back declines in 2010 and 2011. This was due to the housing market, and consequently, the demand for title insurance continuing to recover over the past three years. Further driving the positive operating performance trends in 2013, as in 2012, was a continuing improvement in Stewart's loss experience from active agents, as losses incurred from agents cancelled in past years were sizeable. This favorable loss trend can be seen in a declining loss and loss adjustment expense incurred ratio since 2010. It also has shown continued steady improvement in its expense ratio as a result of numerous expense initiatives undertaken in recent years.
While Stewart's current ratings and outlook are not expected to change in the near term, future upward movement on the ratings will necessitate sustaining an improved operating trend while maintaining favorable risk-adjusted capitalization. Conversely, any sudden setback in operating performance and/or risk-adjusted capitalization may result in negative pressure on the outlook and/or the current ratings.
The FSR has been upgraded to A- (Excellent) from B++ (Good) and the ICRs to "a-" from "bbb+" for the following members of Stewart Title Group:
o Stewart Title Guaranty Company
o Stewart Title Insurance Company
o Stewart Title Limited
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.