OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating 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-" and debt ratings of "bbb-" and "bb" on the existing senior debt and preferred securities of the parent holding company, The First American Corporation, Inc. [NYSE: FAF] (Santa Ana, CA). The outlook for all ratings is negative. (See below for a complete list of the companies and ratings.)

The affirmation of First American's ratings reflects its improved capitalization as of year-end 2008, which has significantly lowered the group's previously high underwriting leverage. The improvement in surplus was due partly to a significant decrease in non-admitted assets due to the settlement of previously non-admitted intercompany receivables by cash and other admitted marketable securities. The growth in surplus of nearly 40% in 2008, combined with the decline in premium volume of nearly 33% from decreased real estate activity, resulted in a significant decline in the group's net premium leverage ratio. Although the group's operating results were decidedly negative in 2008"”due to both higher incurred claims and expense ratios, which rose as expense levels did not decline as quickly as falling premium volume"”the results somewhat benefited from the lack of major reserve strengthening actions, compared to those undertaken in 2006 and 2007. At that time the group posted over $500 million in additional reserves over an 18-month period primarily due to higher than expected claim development from policy years 2004 to 2006.


The higher than expected claims arising from 2004 through 2006 derived from the significant increase in defaults, foreclosures and mortgage fraud, which developed in 2007 and was related to mortgages originating in those years, particularly those in the subprime category. First American remains challenged, owing to a significant softening in key real estate markets, which have negatively impacted title premium revenues in recent years and resulted in unfavorable operating margins in 2008. The outlook is based on First American's ongoing challenge to manage the real estate cycle and improve operating earnings.

The FSR of A- (Excellent) and ICRs of "a-" have been affirmed for First American Title Insurance Group and its following members:

• First American Title Insurance Company
• First American Title & Trust Company
• First American Title Insurance Company of Australia Pty Limited
• First American Title Insurance Company of Kansas Inc
• First American Title Insurance Company of New York
• Title Insurance Company of Oregon
• First American Transportation Title Insurance Company
• First Title Insurance plc
• Land Title Insurance Company of St. Louis
• Ohio Bar Title Insurance Company
• The Port Lawrence Title & Trust Company
• Western National Title Insurance Company
• Censtar Title Insurance Company
• Bridge Title Insurance Company
• Pacific Northwest Title Insurance Company Inc
• Columbian National Title Insurance Company
• United General Title Insurance Company
• T.A. Title Insurance Company

The FSR of A- (Excellent) and ICRs of "a-" have been affirmed for First American Corporation Property Casualty Companies and its following property/casualty members:

• First American Property & Casualty Insurance Company
• First American Specialty Insurance Company

The ICR of "bbb-" has been affirmed for The First American Corporation, Inc.

The following debt ratings have been affirmed:


The First American Corporation, Inc."”

-- "bbb-" on $100 million 7.55% senior unsecured debentures, due 2028

-- "bbb-" on $150 million 5.7% senior unsecured debentures, due 2014

First American Capital Trust I"”

-- "bb" on $100 million 8.5% capital securities, due 2012

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.





A.M. Best Co.

Analysts

Neil DasGupta, 908-439-2200, ext. 5206

neil.dasgupta@ambest.com

or

Gary Davis, 908-439-2200, ext. 5665

gary.davis@ambest.com

or

Public Relations

Jim Peavy, 908-439-2200, ext. 5644

james.peavy@ambest.com

or

Rachelle Morrow, 908-439-2200, ext. 5378

rachelle.morrow@ambest.com

Source: A.M. Best Co.