A.M. Best Affirms First American Ratings
|June 9, 2011|
A.M. Best Co.has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of First American Title Insurance Group (First American) and its member companies. A.M. Best also has affirmed the ICR of “bbb-” of the parent holding company, First American Financial Corporation. The outlook for all ratings is stable.
The ratings reflect First American’s significant market presence within the title industry as well as its significantly improved underwriting leverage measures, according to A.M. Best. The group maintains a strong franchise value and benefits from the financial flexibility and operational support from First American Financial, which maintains modest financial leverage. First American’s underwriting leverage measures improved significantly in recent years, due to surplus growth combined with declining premium volume, the rating company said.
These positive rating factors are somewhat offset by the First American’s challenging operating environment, which is reflective of ongoing profitability concerns due to a significant softening in real estate markets that has negatively impacted title premium revenues in recent years.
“While the group’s revenue and profitability were both negatively impacted in 2008 due to the prevailing economic environment, operating results rebounded in 2009 and 2010, mainly due to cost reduction initiatives as First American focused on managing the real estate down cycle,” A.M. Best said. “In addition, the group took significant reserve strengthening actions in recent years due to unfavorable loss development in prior policy years.”
The FSR of A- (Excellent) and ICR of “a-” have been affirmed for First American Title Insurance Group and its following members: