KBRA Affirms Ratings for CATIC Financial, Inc. and Insurance Subsidiaries
19 Jul 2024 | New York
KBRA affirms the insurance financial strength rating (IFSR) of A- for Connecticut Attorneys Title Insurance Company (CATIC), the lead operating subsidiary of CATIC Financial, Inc. (CATIC Financial), the IFSR of BBB- for CATIC Title Insurance Company (CATIC Title) and the BBB- issuer rating for CATIC Financial. The Outlook for all ratings is Stable. CATIC Financial and its subsidiaries provide title insurance and related services on residential and commercial properties in New England, with a growing presence in the Southeast, and operate exclusively through a network of independent and attorney-agents.
The rating for CATIC reflects its dominant market position in New England and leading presence in Connecticut and Vermont. Over the past eight years, direct premiums for CATIC and CATIC Title have grown from $68 million in 2015 to $188 million in 2023. Direct premiums were down 15% compared to 2022, driven primarily by decreased activity in the real estate market. CATIC Financial is the 6th largest independent title insurance provider based on 2023 premiums. CATIC has reported positive net income each year since 2015, except for 2018 and 2023. The company reported record levels of net income in 2020 and 2021.
CATIC and CATIC Title’s investment portfolios are generally conservative, the majority of which are comprised of bonds and cash and cash equivalents with an average credit quality of AA-. CATIC’s experienced management team has an extensive legal background and is well aligned with the company’s business strategy to maintain the involvement of real estate attorneys and independent agents in every real estate closing transaction.
Tempering these strengths are the company’s elevated expense ratio and potential execution risk regarding its expansion strategy. Ongoing systems upgrades and expansion costs have driven CATIC’s expense ratio higher relative to the overall title industry. CATIC also has some high risk assets in its investment portfolio which could potentially lead to investment losses. KBRA expects adequate surplus growth at CATIC over the next few years driven by projected profitability.
The ratings could be upgraded if the companies sustain a long-term trend of growth in earnings leading to organic surplus growth or experience continued growth in fee-based business to improve earnings diversification.
The ratings could be downgraded due to a trend in earnings deterioration causing surplus declines, material investment losses, departure of key members of the management team, a material negative change in reserves or loss of available reinsurance, or a change in capital support from its parent, CATIC Financial.
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