KBRA Downgrades Ratings for CATIC Financial, Inc. and Insurance Subsidiaries
3 Jun 2025 | New York
KBRA downgrades the insurance financial strength rating (IFSR) to BBB+ from A- for Connecticut Attorneys Title Insurance Company (CATIC), the lead operating subsidiary of CATIC Financial Inc. (CATIC Financial), downgrades the IFSR to BB+ from BBB- for CATIC Title Insurance Company (CATIC Title) and downgrades to BB+ from BBB- the issuer rating for CATIC Financial. The Outlook for all ratings is Stable.
The downgrade of CATIC reflects the continued deterioration in its operating performance, inclusive of the impact of an unusually outsized loss in its run-off book, which negatively impacted several financial metrics including profitability ratios, net premium leverage, reserve leverage, and an approximate 22% decline in policyholder surplus. The downgrade of CATIC Title reflects the deterioration in its operating performance, inclusive of the need to strengthen its statutory premium reserves per regulatory formulas, which caused policyholder surplus to decline by 20% in 2024. The company’s limited surplus base of $3 million at year-end 2024 is vulnerable to relatively small changes in income and other balance sheet movements. The downgrade of CATIC Financial reflects the downgrade of CATIC, as its issuer rating is notched off CATIC’s IFSR rating.
The rating for CATIC reflects its dominant market position in New England and leading presence in Connecticut and Vermont. On a combined basis, CATIC and CATIC Title increased direct written premiums by 14% in 2024, despite decreased activity in the real estate market. CATIC Financial is the 4th largest independent title insurance provider based on 2024 premiums. 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 A+. 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 real estate closing transactions.
Tempering these strengths are CATIC and CATIC Title’s elevated expense ratio and potential execution risk regarding the group’s geographic expansion strategy. KBRA expects adequate surplus growth at CATIC over the next few years driven by projected profitability, although growth is constrained by annual dividends paid to parent company CATIC Financial to support debt payments. Additionally, CATIC Title’s net premium leverage compares unfavorably to industry benchmarks, and it is geographically concentrated in three states with low market shares in those states.
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 without a suitable replacement, a material negative change in reserves or loss of available reinsurance, a change in capital support from parent, CATIC Financial, or an inability to raise equity and/or service holding company debt obligations.
CATIC Financial and its subsidiaries provide title insurance and related services on residential and commercial properties primarily in New England, with a growing presence in the Southeast, and operate exclusively through a network of independent and attorney-agents.
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