A.M. Best Co. has upgraded its outlook for Stewart Title Group and parent company Stewart Information Services Corp. to positive based on the company’s steadily improving risk-adjusted capitalization and operating results.
In 2012, Stewart had a second consecutive year of pretax profitability for the first time since 2006. Best noted the company has overcome the unfavorable operating results of 2008 and 2009 when Stewart significantly strengthened the level of claim reserves for prior policy years as it suffered large title claims (including those relating to agent defalcations) plus the real estate bust hurt new business.
Statutory surplus rose 15% in 2012 while premium leverage remained consistent with 2011’s numbers as premium volumes increased by a magnitude similar to surplus.
Best noted that
“Given the favorable operating results of the recent quarters and despite some macroeconomic uncertainties, reasonable prospects for further improvement in housing could eventually lead to improvement in general economic conditions, which could enable Stewart to continue to show profitable operating performance and improving risk-adjusted capitalization in the near to medium term.
“Furthermore, the organization’s expense and risk management efforts in recent years are expected to somewhat cushion the impact from any potential return to a broadly negative economic environment and declining housing market conditions in the coming year,” Best said.
