A.M. Best Upgrades First American Title to A+; Assigns Debt Rating to First American Financial.

OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 15, 1999--

A.M. Best Co. today upgraded the group financial strength ratings of First American Title Insurance Co. and its title insurance subsidiaries to A+ (Superior). At the same time, A.M. Best assigned an "a-" rating to the outstanding senior debt of the group's ultimate parent, The First American Financial Corp., and a "bbb" rating to the existing trust preferred securities issued by First American Capital Trust I.

A.M. Best said First American's ratings reflect long-term earnings growth resulting from a strong franchise value and an increasingly diversified revenue base. In addition, the company maintains a favorable level of operating leverage, a conservative and well-managed investment portfolio and a modest amount of financial leverage with strong interest coverage. Furthermore, management has an effective corporate strategy that allows First American to capitalize on its core expertise in real estate-oriented business.

The rating agency noted that title companies are not typical insurance entities because they consistently generate low loss ratios and have a limited risk profile. The risks associated with this business are low because standardized title information filing requirements and increased automation of the title review process eliminate much of the underwriting risk.

A.M. Best recognizes the unique attributes of title insurers and evaluates these entities from both an insurance perspective and an economic perspective. Consequently, the rating analysis incorporates stress testing of the company's operating performance through a variety of economic and real estate downturn scenarios. A.M. Best noted that First American's strong operating profile positions the company better than many of its peers to withstand the competitive and earnings pressures related to downturns in the real estate market.

Dramatic growth in the company's core business and in its non-title operations--combined with the company's advanced technological capabilities--have provided it with significant economies of scale. In particular, the material and growing earnings from the non-title businesses allow the company to absorb revenue declines from real estate downturns with less margin compression. These businesses-- which include tax service information, real estate appraisals, credit reporting,and trust and banking services--provide valuable earnings diversification. Because these earnings are less sensitive to economic cycles, A.M. Best noted, they are not only sustainable but also provide effective interest expense coverage on a stand-alone basis.

The increased scale and the company's increased use of low-cost direct distribution over the past five years have created a cost structure that mitigates the company's exposure to real estate and economic downturns. This allows the company to maintain its strong debt service capability through a variety of economic stress scenarios.

The rating outlook for the First American Financial Corp. is stable.

The following ratings were assigned:

The First American Financial Corp. -- "a-" rating on senior debt. First American Capital Trust I -- "bbb" rating on trust preferred securities.

The following financial strength ratings were upgraded:

First American Title Insurance Group , at A+. First American Title & Trust Co., A+ g. First American Title Insurance Co., at A+ g. First American Title Insurance Company of New York, at A+ g. First American Title Insurance Company of North Carolina, at A+ g. First American Title Insurance Company of Oregon, at A+ g. First American Title Insurance Company of Texas, at A+ g. Land Title Insurance Company of St. Louis, at A+ g. Massachusetts Title Insurance Co. at A+ g. Mortgage Guarantee & Title Co., at A+ g. The Port Lawrence Title & Trust Co., at A+ g. First American Title Insurance Co. (Canada), at A+ r. First American Title Insurance Co. plc (UK), at A+ r. First American Title Insurance Company of Australia, at A+ r.

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.