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Press release from Business Wire

A.M. Best Affirms Ratings of First American Title Insurance Group and First American Financial Corporation

Wednesday, June 08, 2011

A.M. Best Affirms Ratings of First American Title Insurance Group and First American Financial Corporation09:39 EDT Wednesday, June 08, 2011 OLDWICK, N.J. (Business Wire) -- 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 (Santa Ana, CA) [NYSE: FAF]. The outlook for all ratings is stable. (See below for a complete list of the companies and ratings.) The ratings reflect First American's significant market presence within the title industry as well as its significantly improved underwriting leverage measures. The group maintains a strong franchise value and benefits from the financial flexibility and operational support from First American Financial Corporation, 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. 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. 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: First American Title Insurance CompanyFirst American Title Insurance Company of Australia Pty LimitedTitle Insurance Company of OregonFirst American Title Insurance Company of LouisianaFirst Title Insurance plcOhio Bar Title Insurance Company The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “A.M. Best's Title Insurance Rating Methodology”; “BCAR for Title Insurance Companies”; “Catastrophe Risk Management Incorporated Within the Rating Process”; “A.M. Best's Ratings and the Treatment of Debt”; “Understanding BCAR for Property/Casualty Insurers”; “Natural Catastrophe Stress Test Methodology”; and “Catastrophe Analysis in A.M. Best Ratings.” Methodologies can be found at Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.A.M. Best Co.Michael Russo, 908-439-2200, ext. 5372Financial Analystmichael.russo@ambest.comorGary Davis, 908-439-2200, ext. 5665Assistant Vice Presidentgary.davis@ambest.comorRachelle Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relationsrachelle.morrow@ambest.comorJim Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public