A.M. Best Co. Affirms Financial Strength Rating of A+ for the Title Operations and "bbb" Senior Debt Rating for The First American Corporation.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--July 12, 2001 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the A+ (Superior) financial strength ratings of The First American Corporation
Officially referred to as The First American Corporation (FAC) , title insurance subsidiaries and affirmed the A (Excellent) financial strength rating of First American First American may refer to:
A financial strength rating of A (Excellent) was assigned to First American Corporation's property and casualty insurance operations. In addition, A.M. Best affirmed the "a-" rating of the outstanding senior debt of the parent company, The First American Corporation and affirmed the "bbb" rating to the existing trust preferred securities issue by First American Capital Trust I. The ratings reflect long-term earnings growth resulting from a strong franchise value and an increasingly diversified diversified (di·verˑ·s revenue base, which includes unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. fee income. The company also maintains excellent operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. and a conservative well managed investment portfolio with strong interest coverage. Furthermore, management has an effective corporate strategy that allows First American to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. its core expertise in real estate oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. business. A.M. Best noted that title companies are not typical insurance entities because they have a limited underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. risk profile. The risks associated with this business are low because standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. title information filing requirements and increased automation of the title review process eliminate much of the underwriting risk. The moderate underwriting risk is exemplified through reported high expense and low loss ratios that are typical in the title industry. A.M. Best recognizes the unique attributes of title insurers and evaluates these entities from both an insurance and general industry perspective. While the reserves and capital position of the company are strong, the rating analysis emphasizes cash flow stress testing Determining the durability of a system by pushing it to its limits. Stress testing a network is performed by transmitting excessive numbers of packets or attempting to break in illegally. of the company's operating performance through a variety of economic and real estate downturn scenarios. First American's financial leverage (debt plus capital securities) is moderately high at 37%. However, First American's strong operating profile and financial management enable the company to effectively service its debt and to withstand the competitive and earnings pressures related to difficult real estate markets. In addition, the company maintains cash at the holding company level that could be used for alternative liquidity. Dramatic growth in the company's core title business and non-title operations combined with the company's advanced technological capabilities have provided it with significant economies of scale. First American's cost structure mitigates its exposure to difficult real estate markets and economic times through economies of scale, along with the company's increased use of its low-cost direct distribution system. In addition, the material and growing non-title businesses allow the company to absorb revenue declines from real estate downturns with less margin compression. First American's non-title businesses include real estate information and consumer services Consumer Services refers to the formulation, deformulation, technical consulting and testing of most consumer products, such as food, herbs, beverages, vitamins, pharmaceuticals, cosmetics, hair products, household cleaners, [paints, plastics, metals, waxes, coatings, minerals, , which comprised approximately 40% of the company's earnings in its 2000 fiscal year. Real estate information and services account for the majority of revenues and earnings of the non-title business. This segment provides credit information to the mortgage industry including real estate appraisals Real estate appraisal An estimate of the value of property using various methods. , tax services and flood zone reporting. Real estate information and services reported top line growth even during recessionary periods over the past ten years. The consumer information services See Information Systems. include consumer credit reports (non-mortgage), tenant screening, employment screening, trust and banking, home warranty A Home warranty is an insurance contract that covers the repair and replacement costs of home appliances. The warranty generally covers equipment and appliances such as dishwashers, plumbing systems, electrical systems etc. and property and casualty insurance. Both of these unregulated segments provide diversification that is less sensitive to economic cycles and offer effective interest coverage on a stand-alone basis. Through its subsidiaries, The First American Corporation provides title insurance along with real estate and consumer information services to its clients. Based in Santa Ana, California Santa Ana is the most populous city in Orange County, California and is the county seat. It lies approximately 10 miles inland from the Pacific Ocean, on the largely seasonal Santa Ana River. , First American reported consolidated revenues of $766.7 million and net income of $16.7 million for three months ending March 31, 2001. The following ratings have been affirmed:
Debt Ratings:
- The First American Financial Corporation -- "a-" rating on
senior debentures maturing 2028
- The First American Financial Corporation -- "a-" rating on
senior convertible debentures maturing 2008
- First American Capital Trust I -- "bbb" rating on trust
preferred securities due 2012
Financial Strength Ratings:
- First American Title Insurance Group A+
- First American Title Insurance Co. A+g
- First American Title Insurance Company of New York A+g
- First American Title Insurance Company of North Carolina A+g
- First American Title Insurance Company of Oregon A+g
- First American Title Insurance Company of Texas A+g
- First American Transportation Title Insurance Co. A+g
- First American Title Insurance Company of Kansas A+g
- First American Title & Trust of Oklahoma A+g
- Greater Louisiana Title Insurance Company A+g
- Land Title Insurance Company of St. Louis A+g
- Massachusetts Title Insurance Company A+g
- Mortgage Guarantee & Title Company A+g
- Ohio Bar Title Insurance Company A+g
- Port Lawrence Title & Trust Company A+g
- First American Title Insurance Australia A+r
- First American Title Insurance (UK) A+r
- First American Title Insurance Company (CAB) A+r
- First American Corporation Property & Casualty Companies A
- First American Property and Casualty Insurance Co. Ag
- First American Specialty Insurance Company Ag
- First American Home Buyer Protection Corporation A
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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