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Arizona Approves License for Agent-owned Underwriter

December 14, 2007

The chief financial officer of Alliant National Title says the company will target agents in the Phoenix and Tucson areas as it enters the Arizona market. Read on to see how this regional underwriter can help agents through this down market. Alliant National Title Insurance Co., a title insurance underwriter that partners with independent agents to improve their competitive position in the marketplace, announced the Arizona Department of Insurance approved the company's application to be a licensed title insurance underwriter.

"Although there are challenges in the residential market in Arizona today, we are confident about the long-term outlook for the state and its real estate industry," said Alliant National Title CEO Bob Grubb. "Arizona continues to enjoy solid employment growth, and baby boomers will continue to retire to the state and purchase real estate. Arizona is an ideal fit and an exciting opportunity for all of Alliant National's independent agents."

Scott Hendrickson, chief financial officer of Alliant National Title, said the company applied with the department of insurance in August and had to meet stringent guidelines before being approved, including a surplus of more than $750,000 in capital. Alliant National Title had about $2.4 million in capital, according to the company' s annual statement in 2006. Arizona also has a statute that gives the department of insurance up to nine months to conduct a review of the application.

"They did an extensive review and unlike some other states you have to go provide a lot of information upfront on bylaws and quarterly and annual filings," Hendrickson said. "Most states accept whatever you notarize and send, but in Arizona you have to send the information to be verified by a third party." Alliant National Title said it offers independent agents the ability to expand their business and improve their position in the marketplace, reduce their costs and risks, and increase profits within a network of like agents in a non-competitive partnership. In true partnership form, Alliant National Title provides an environment with its agents that improve the accuracy, efficiency and timeliness of its products, while expanding the knowledge base of its agents, and offering the best title insurance products and services possible, according to the company.

"Our unique approach has proven very successful in Colorado and Texas," said Alliant National Title President Dave Ginger. "We are excited to bring a unique level of service to independent title agencies that help them serve property owners better and be stronger contributors to their communities."

Arizona is the fifth largest state in terms of title premiums generated, totaling nearly $650 million in 2006. The state is expected to produce about the same volume in 2008.

"Our model is somewhat built around being in larger metropolitan areas and the majority of people in Arizona live in two counties, Maricopa and Pima," Hendrickson said. "We will pursue high integrity agents in the Phoenix area followed by Tucson."

Ginger wants to have Alliant National Title licensed in 35 states within five years. Other states being considered by the company to expand into include South Carolina, Georgia, Indiana, Ohio and Pennsylvania. He said the growth plan remains a bit behind schedule because regulatory offices are more judicious in their approval of an underwriter than before.

The company, which began operations in 2005, now has more than 50 agents in its fold, with 75 percent of its business coming from Texas agents. Alliant National Title recently filed its rates with the state and must wait for a 30-day review process to be completed before signing any agents. Hendrickson said once Alliance National Title develops its agent network in Arizona, it will again pursue expansion.

"We expect to be ready to start conducting business in Arizona in the beginning of 2008," Hendrickson said. "We hope to diversify some of that geographic risk with this expansion."

Despite the challenges of starting up a new underwriter during a time of significant change for the industry most independent agents are asking for a broader choice when it comes to underwriters.

First American Title Insurance Co. is the top underwriter in Arizona with 32 percent of the market and generating more than $132 million in premiums. Fidelity National Title Insurance Co. is second with 13.9 percent and $57 million in premiums, followed by Lawyers Title Insurance Co. with 9.9 percent and $40 million in premiums.

"The Arizona market is definitely dominated by direct operations and joint ventures the direct agencies are in business with," Hendrickson said. "They have about 65 percent of the market, but that makes our model more compelling. If you go into a state that is 90 percent independents they probably aren' t feeling the value proposition we bring forward."

Because of the mortgage malaise, Hendrickson expects the national underwriters to continue scaling back operations in states such as Arizona.

"Despite the slowdown we are maintaining our size and that has to do with adding new agents," he said. " We look to grow in 2008 and project about a 30 40 percent growth in written title premiums by expanding our existing marketshare in Texas and Colorado and building our presence in Arizona."

Arizona market

Existing-home sales declined 30.9 percent during the third quarter in Arizona, according to the National Association of Realtors. The University of Arizona Forecasting Project expects home building activity in the state to bottom next year, but adds that if credit tightens further the bottom may be pushed into 2009. However, the housing market slowdown has spurred interest in land sales. In the far outskirts of Phoenix, D.R. Horton Inc. recently sold 7,000 acres of residential land, or about 23,000 housing lots, to local real estate investment firms Wolff Co. and Langley Properties for $70 million. In one of the biggest deals since the housing collapse, Lennar Corp. in November sold 11,000 house sites to a venture mostly owned by the real-estate arm of Morgan Stanley for $525 million. Lennar had valued the land on its books at $1.3 billion, as of Sept. 30.

Education forums
Alliant National Title Insurance's management team is frequently called upon to speak at industry conferences and symposiums. Alliant National also hosts independent agent-specific educational forums, as well as selected professional-centric mortgage and title insurance industry education events. "Lunchtime Updates: Alliant National Educational Series" events are held quarterly, with the next forum scheduled for January 2008.

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