A.M. Best Co. has downgraded the financial strength rating of First American Title Insurance Group and its member companies from “A (Excellent)” to “A-minus (Excellent).”
The move was made because of concern over the Santa Ana, Calif.-based carriers' overall capitalization following an approximately $325 million drop in statutory surplus reported at the end of 2007.
Best said the surplus decline was due to a significant increase in nonadmitted intercompany receivable and goodwill resulting from the carrier's intended plan to spin off its financial services companies into a separate company to be called First American Financial Corporation.
The plan, announced in January, is expected to be completed in the third quarter of this year.
The drop in surplus also reflects claims reserve strengthening and charges taken in 2007 amounting to more than $520 million, the Oldwick, N.J.-based rating service said.
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