A.M. Best has upgraded the financial strength rating (FSR) to A
(Excellent) from A- (Excellent) and the issuer credit ratings (ICR) to
“a” from “a-” of the five title insurance subsidiaries (collectively
referred to as First American Title Insurance Group) of First
American Financial Corporation (FAF) (Omaha, NE) (NYSE:FAF). These
five title insurance subsidiaries are: First American Title Insurance
Company, First American Title Insurance Company of Australia Pty
Limited (Australia), First American Title Insurance Company of
Louisiana (New Orleans, LA), First Title Insurance plc
(United Kingdom) and Ohio Bar Title Insurance Company (Columbus,
OH). Concurrently, A.M. Best has upgraded the ICR to “bbb” from “bbb-”
of FAF. The outlook for the above ratings has been revised to stable
from positive.
Additionally, A.M. Best has revised the ICR outlook to stable from
positive and affirmed the FSR of A (Excellent) and the ICRs of “a” of First
American Property & Casualty Insurance Company and First
American Specialty Insurance Company, collectively referred to as First
American PC Companies. The outlook for the FSR remains stable. All
companies are domiciled in Santa Ana, CA, unless otherwise specified.
The rating actions reflect First American Title Insurance Group’s
relatively strong risk-adjusted capitalization, driven by its improved
operating results and lower underwriting and affiliated investment
leverage, as well as its significant market presence in the title
insurance industry. The group maintains a strong franchise value and
benefits from the financial flexibility and operational support from
FAF, which maintains relatively modest financial leverage and solid
interest coverage. First American Title Insurance Group’s underwriting
leverage measures have significantly improved from the prior five-year
period due to its overall surplus growth, which outpaced premium growth
and improved operating results and cost reduction initiatives.
These positive rating factors are somewhat offset by First American
Title Insurance Group’s continuing challenges in managing the real
estate cycle and areas of significant reserve strengthening actions in
recent years. Although revenue and profitability were negatively
impacted in 2008 as a result of the prevailing economic environment,
which affected the real estate dependent title insurance market, the
group has reported a trend of improved operating results beginning in
2009, driven primarily by cost reduction initiatives, as well as general
improvement in the housing and real estate markets.
The rating actions of First American PC Companies reflect the reduction
of underwriting income achieved over the past two years as a result of
large loss activity and areas of modest adverse prior year loss reserve
development. While at a somewhat reduced level, the group continues to
report positive operating performance and maintains solid risk-adjusted
capitalization. These positive results are derived from its strict
underwriting discipline and loss control guidelines, which have resulted
in consistent underwriting and operating profitability. The ratings also
recognize First American PC Companies’ use of multiple distribution
channels to market its products. Besides brokers and independent agents,
First American PC Companies is able to leverage FAF’s advanced computer
systems and title distribution networks to facilitate direct escrow
sales of homeowners’ insurance.
Partially offsetting these positive rating factors are First American PC
Companies’ geographic concentration and exposure to catastrophic loss
events.
FAF’s ICR acknowledges the capital strength of its insurance
subsidiaries, its modest financial leverage and adequate interest
coverage measures.
This press release relates to rating(s) that have been published on
A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please visit A.M. Best’s Ratings
& Criteria Center.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS
RESERVED.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150925005545/en/
Copyright Business Wire 2015