AM Best has downgraded Connecticut Attorneys Title Insurance Co. (CATIC) of Essex Junction, Vermont. The company’s Financial Strength Rating has been downgraded to to B (Fair) from B++ (Good) and the Long-Term Issuer Credit Rating to “bb” (Fair) from “bbb” (Good).
The outlook assigned to these credit ratings is stable.
AM Best said the ratings reflect CATIC’s balance sheet strength, which AM Best assesses as weak, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
AM Best said it revised its assessment of CATIC’s overall balance sheet strength to weak from adequate due to the “significant drop-off” in its risk-adjusted capitalization that was prompted by a contraction in surplus and available capital despite the capital infusion received from its parent in the fourth quarter of 2024.
The sudden decline was also the result of higher-than-expected net premium leverage and the consequential deterioration in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), according to the ratings agency.
AM Best also expects an additional level of capital will be required for CATIC due to a “potentially large loss” that is currently in the process of being resolved.
The stable outlooks reflect AM Best’s expectation that CATIC will return to profitability in 2025 and maintain a level of risk-adjusted capitalization that is commensurate with its current balance sheet strength assessment.
CATIC’s weaker than expected combined and operating ratios of late are due to its higher-than-average expense ratio in support of its expansion efforts. As CATIC continues to maximize investment growth, it is concurrently deploying expense reduction initiatives, according to AM Best analysts.
The limited business profile reflects the concentration that CATIC has as a monoline title insurer. AM Best said it views CATIC’s enterprise risk management and reinsurance programs as appropriate.
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