Fitch Downgrades Stewart Title Group's IFS to 'A'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has downgraded the insurer financial strength (IFS)
ratings of Stewart Title Guaranty Company (STG) and its wholly owned
subsidiary Stewart Title Insurance Company (STIC), collectively
referred to as Stewart to 'A' from 'A+'. The Rating Outlook for both
companies is Stable. The companies are ultimately owned by Stewart
Information Services Corporation (STC), a publicly traded holding
company.

Fitch's rating action was driven by deterioration in STC's
profitability both relative to peers and on an absolute basis. Fitch's
prior 'A+' IFS rating of STC, which was the highest stand-alone rating
Fitch had amongst title insurer, considered not only STC's ongoing
strong balance sheet and capital position, but also a belief that STC
would perform better than peers from a profitability perspective in a
down market.

Through the first six months of 2008, STC's GAAP pretax margins
were a negative 10.4% compared to the national peer average, excluding
STC, of negative 1.8%. Similarly, STC's year-to-date GAAP combined
ratio of 111.7% was above the national peer average, excluding STC, of
103%. Part of the difference is driven by STC's ongoing investments in
technology. The prior rating level, in part, was based on an
assumption that STC's historic technology-related investments may have
allowed STC's to show better margins than peers in a down market,
which has not been the case.

Fitch believes that the current downturn in the real estate cycle
will continue at least through the near-to-intermediate term, further
pressuring STC's margins.

STC is currently the only company in Fitch's universe of rated
title insurers to have a Stable Rating Outlook. All other companies
have a Negative Outlook or are on Rating Watch Negative, due to market
pressures.

Factor supporting the rating and Stable Outlook are the company's
strong balance sheet fundamentals including a solid risk-adjusted and
absolute capital position, conservative reserving practices, minimal
debt leverage, high quality and very liquid investment portfolio, and
moderate operating leverage. At year-end 2007, Stewart's 231%
risk-adjusted capital (RAC) as measured by Fitch's ratio was the
highest of the five national title groups. Fitch notes that STC
contributed $21.2 million into the title operating subsidiaries in
2007 to strengthen statutory surplus.

Stewart is one of the nation's largest title insurance groups with
a national market share of 11.7% as of March 31, 2008 according to the
American Land Title Association. Over half of Stewart's premiums come
from its four largest states: Texas; California; New York; and
Florida. Stewart distributes its products through more than 9,500
locations on properties located in all 50 states and foreign
countries.

Fitch has downgraded the following IFS ratings with a Stable
Outlook:

Stewart Title Guaranty

--IFS to 'A' from 'A+'.

Stewart Title Insurance Company

--IFS to 'A' from 'A+'.

Fitch's rating definitions and the terms of use of such ratings
are available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality,
conflicts of interest, affiliate firewall, compliance and other
relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings, Chicago
Gerald Glombicki, 312-606-2354
Douglas M. Pawlowski, CFA, 312-368-2054
or
Media Relations:
Sandro Scenga, 212-908-0278, New York

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