Fitch Ratings has affirmed Stewart Information Services Corporation's (Stewart) title insurance subsidiaries' Insurer Financial Strength (IFS) ratings at 'A-' (Strong) and Long-Term Issuer Default Rating (IDR) at 'BBB'.

The Rating Outlook is Stable for all ratings.

KEY RATING DRIVERS

The affirmation of Stewart's ratings is based on the company's strong capitalization, moderate business profile and adequate operating results.

As of 1H20, Stewart was the fourth largest title underwriter with a market share of approximately 10%. The company reported 1H20 GAAP operating margin of 7%, an improvement over the past several years. Operating results for full-year 2019 were modestly impacted by a potential merger with Fidelity National Financial, Inc. (FNF) that was terminated in September 2019.

There have been no unexpected adverse developments from the termination of the FNF deal, and the company is embarking on several strategies to strengthen their existing business profile. Recently the company purchased 57 title offices in Arizona, Colorado, and Nevada for $105 million which was primarily financed by the recent $109 million equity raise in August 2020.

STC's Risk Adjusted Capital score for YE 2019 is 217% up from prior year 195% and trails the industry leader by only 2pp. Stewart reported financial leverage of 11% at 1H20. Shareholder's equity increased 4% in 1H20 to $787 million.

Stewart took steps in Q2 to reduce fixed costs, and favorably the majority of operating costs, agent commissions, are directly related to origination volumes. Fitch notes that Q120 was a very strong quarter for the industry, and the pipeline of open orders for the industry indicates that Q320 will also be strong. In particular, refinance orders are up, but Fitch has concerns over longer term trends given macroeconomic uncertainty.

RATING SENSITIVITIES

The ratings remain sensitive to any material change in Fitch's Rating Case assumptions with respect the coronavirus pandemic. Periodic updates to Fitch's assumptions are possible given the rapid pace of changes in government actions in response to the pandemic, and the pace with which new information is available on the medical aspects of the outbreak.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

A material adverse change in Fitch's Ratings Assumptions with respect to the coronavirus' impact;

Sustained operating profit margin below 3%;

Capital deterioration whereby Stewart's RAC ratio drops below 125%;

Financial leverage ratio above 20%.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

A positive rating action is prefaced by Fitch's ability to reliably forecast the impact of the coronavirus pandemic on the financial profile of both the title insurance industry and STC.

Consolidated operating profit margin above 8%;

A sustained RAC score above 175% and operating leverage ratio below 4.0x.

BEST/WORST CASE RATING SCENARIO

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG CONSIDERATIONS

The highest level of ESG credit relevance, if present, is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

RATING ACTIONS

ENTITY/DEBT	RATING		PRIOR
Stewart Information Services Corporation	LT IDR	BBB 	Affirmed		BBB
Stewart Title Insurance Company	Ins Fin Str	A- 	Affirmed		A-
Stewart Title Guaranty Company	Ins Fin Str	A- 	Affirmed		A-

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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