OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (ICR) of “a” of the five title insurance subsidiaries (collectively referred to as First American Title Insurance Group) of First American Financial Corporation (FAF) (Delaware)(NYSE:FAF). These five title insurance subsidiaries are: First American Title Insurance Company (Omaha, NE), 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 affirmed the Long-Term ICR of “bbb” of FAF. The outlook of these Credit Ratings (ratings) is stable.
Additionally, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR 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 of these ratings is stable. All companies are domiciled in Santa Ana, CA, unless otherwise specified.
The ratings of First American Title Insurance Group reflect its 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.
Although real estate market conditions have shown some improvement recently, the group will be challenged to manage and sustain operating performance through the current macro-economic environment, which could hinder the rebound in real estate market activity, due to increased mortgage interest rates and changes in the legal and regulatory environment.
Negative rating actions could occur if a lack of underwriting discipline results in operating performance deteriorating to a level below peers. In addition, any erosion of surplus that causes a significant rise in the group’s underwriting leverage measures could result in rating action.
The ratings of First American PC Companies reflect the group’s relatively strong risk-adjusted capitalization. The group has also seen somewhat stable operating results over the most recent five-year period, derived from its strict underwriting discipline and loss control guidelines, which have resulted in measurable underwriting profitability over the long term. The Long-Term ICR also recognizes 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, as well as an increase in underlying claim frequency on their portfolio.
Negative rating actions could occur if a lack of underwriting discipline results in operating performance deteriorating to a level below peers. In addition, any erosion of surplus that causes a significant rise in the group’s underwriting leverage measures could also result in rating action.
This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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