2008-08-27 23:40:01 -

- Fitch Ratings has affirmed the 'A-' insurer financial strength (IFS) rating of Attorneys' Title Insurance Fund, Inc. (The Fund) and revised the Rating Outlook to Negative from Stable.

The rating action reflects The Fund's poor operating performance and slower response to cutting operating expenses relative to peers during this current difficult environment of reduced mortgage originations and greater

title insurance claims. Additional concerns include The Fund's concentration of business in Florida, which along with California has suffered disproportionately in the real estate down cycle, and lost surplus given the company's limited financial flexibility.

Favorably, The Fund's risk-adjusted capital position, measured by Fitch's RAC ratio continues to compare favorably to industry peers and remains an important element in The Fund's financial strength rating.

Through first half-2008, The Fund reported a net loss of $8.5 million, which has already exceeded the nearly $6 million loss posted for the full year 2007. The Fund's combined ratio was a product of both higher losses and a slowness in expense cutting relative to peers.

The Fund is the third-largest title insurer in Florida based on premium volume behind both Fidelity National Financial and First American Corporation. The geographic concentration in the Florida market is currently hurting operating results, however, historically The Fund has benefitted from Florida's real estate market outperforming other regions of the country.

Although The Fund has lost in excess of $33 million in surplus since its peak of $159 million at yearend 2006, the $125 million of surplus as of June 30, 2008 is still two and one-half times the level recorded in 2002. The Fund's capital adequacy, as measured by Fitch's RAC ratio, remains better than the average for Fitch's rating universe. Capital adequacy is always a key component of financial strength ratings, but it takes on greater importance during times of stress like the current down cycle.

The Fund has an above-average exposure to unaffiliated common and preferred stocks, representing approximately one-half of total invested assets or 85% of policyholders' surplus. This compares to equity exposure within Fitch's rating universe of less than 5% of invested assets or 15% of policyholders' surplus. The concerns over the large allocation to equity securities are additional volatility in earnings and surplus from stock market fluctuations.

The Fund is owned by a business trust that in turn is owned by attorneys who serve as agents for the company. This ownership structure limits The Fund's access to outside capital, as well as the likelihood of the company being an acquisition target.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Fitch Ratings, Chicago
Douglas M. Pawlowski,CFA, 312-368-2054
Gerald B. Glombicki, 312-606-2354
Sandro Scenga, 212-908-0278
(Media Relations, New York)