Following through on a warning issued last month, analysts at Fitch Ratings today lowered First American Corp.’s insurer financial strength and debt ratings by a notch, and said they remain subject to further downgrade.

The ratings moves were a response to First American’s announcement of an expected $50 million fourth-quarter loss, a reorganization of the company, and expected weakness in title insurance, Fitch analysts said.

Downgraded from “A+” to “A” were the insurer financial strength ratings of a dozen title insurance companies under the First American umbrella, including First American Ttitle Insurance, Land Title Insurance Co. of St. Louis, Mortgage Guaranty & Title Co. and United General Title Insurance Co..

Fitch said it also initiated coverage of four other First American title insurance companies with an initial insurer financial strength rating of “A.” The IFS ratings, of Pacific Northwest Title Insurance Co., Censtar Title Insurance Co., T.A. Title Insurance Co., and First American Title Insurance Co. of Kansas, were placed on “Outlook Negative” for potential downgrades.

Fitch downgraded First American Corp.’s issuer default rating from “A-” to “BBB+” and its senior unsecured debt from “BBB+” to “BBB,” which will raise the company’s cost of borrowing.

Fitch said the downgrades were also related to last month’s announcement by First American that it would spin off its title insurance and related business into a separate company (see Inman News story).

The new company will be known as First American Financial Corp. and include First American’s residential and commercial title operations, its home warranty and homeowners insurance businesses, and its trust and banking services.

First American’s property and mortgage information segments will remain under the umbrella of the existing holding company, which will be renamed as part of the reorganization to be completed in the third quarter.

After the spin-off, First American Financial will no longer have access to unregulated cash flows to service its debt, Fitch analysts said.

“While Fitch believes that management is actively taking initiatives to address concerns about profitability, reserve quality and long-term strategic direction, Fitch remains cautious about the company’s performance over the next year given the current operating environment,” analysts said.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×