Fitch Affirms The First American Corp.'s Ratings

January 17, 2003

Rating Outlook - Stable

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed all the rating of First American Corp. (FAF), including FAF's 'BBB' senior debt rating, the 'BBB-' preferred security rating for FAF's subsidiary First American Capital Trust, and the 'A' insurer financial strength ratings (IFS) of FAF's primary title insurance subsidiary First American Title Insurance Company (FATIC) and its active title insurance subsidiaries (First American Group). All ratings are listed below. The Rating Outlook is Stable.

The IFS ratings are based on the company's strong franchise in the title insurance industry and other real estate related services, favorable historical operating results, a strengthened reserve position in recent years, and adequate capital position. Somewhat offsetting the strengths are lower than average liquidity, higher than average goodwill and financial leverage that is somewhat high for the rating category.

Lower interest rates and a strong housing market, over the past eighteen months have significantly improved the revenue and profitability of the title insurance industry. In line with industry trends, FAF's operating results have been strong. In the first nine months of 2002, operating revenue in the title operations, which is the primary driver of operating results, increased significantly (up 27.7% to $2.5 billion, compared to the prior year period). Current open order counts are high and Fitch believes industry results should remain favorable in the near term.

First American Group is currently the second largest provider of title insurance in the U.S. based on 2001 operating revenue (market share of approximately 23% based on operating income and premium). Going forward, First American Group is expected to maintain its strong market position in the title insurance industry.

FAF is a leader among its title industry competitors in providing real estate services such as tax monitoring, credit reporting, property appraisals and flood plain certification to its customers. Given that large mortgage lenders and other market participants are demanding more complete services to make the real estate settlement process more efficient and less costly, bundled services has become an important element in the organization's growth strategy. In addition, the organization has diversified revenue sources by expanding into non-real estate related products and services - resident screening, pre-employment and drug screening, and driving records. Fitch expects the organization to continue to build its other real estate related and non-real estate related businesses.

Fitch considers FAF's capital position to be adequate. As of Sept. 30, 2002, statutory capital grew to $620.7 million from $534.2 million in year-end 2001. At year-end 2001, FAF's capital adequacy on a risk-adjusted basis (based on Fitch's risk-adjusted capital model) was strong at 209%.

The organization's acquisition strategy has resulted in above average good will on the balance sheet and Fitch expects this to continue. At Sept. 30, 2002 goodwill represented 15.4% of total assets, which is down slightly from year-end 2001 where good represented 16.9% of total assets.

In recent years, FAF has been more active in accessing capital markets and Fitch believes financial leverage is somewhat high for the rating category albeit holding company financial leverage is expected to remain at or below current levels. FAF's debt-to-capital ratio is expected to be managed long term at approximately 20% to 25%, with fixed charge coverage at or above 8 times(x). At Sept. 30, 2002, FAF's debt-to-total capital ratio (including minority interest) was approximately 22.0%, debt plus preferred securities to total capital ratio was 27.0% and fixed charge coverage was above 11x.

FAF is a publicly traded holding company based in Santa Ana, CA with GAAP assets of $3.2 billion and shareholders' equity of $1.3 billion at Sept. 30, 2002. FAF is a leading provider of real estate related services to property buyers and mortgage lenders with operations in Financial Services (77% of GAAP operating revenues) and Information Technology (23% of GAAP operating revenue).

Entity/Issue/Type Action First American Corp.
--Senior debt Affirmed AffirmedFirst American Capital Trust
-- Trust preferred securities AffirmedFirst American Title Insurance Company
--Insurer financial strength AffirmedFirst American Title Insurance Co. of New York
--Insurer financial strength AffirmedFirst American Title Insurance Co. of Texas
--Insurer financial strength AffirmedFirst American Title Insurance Co. of Oregon
--Insurer financial strength AffirmedLand Title Insurance Co. of St. Louis
--Insurer financial strength AffirmedOhio Bar Title Insurance Co.
--Insurer financial strength AffirmedPort Lawrence Title & Trust Co.
--Insurer financial strength AffirmedFirst American Title Insurance Co. of North Carolina
--Insurer financial strength AffirmedMortgage Guaranty & Title Co.
--Insurer financial strength AffirmedMassachusetts Title Insurance Co.
--Insurer financial strength AffirmedFirst American Title Insurance Co. (UK) PLC.
--Insurer financial strength Affirmed

Source: Fitch Ratings

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