Rating service A.M. Best Co. on Thursday affirmed its credit and financial ratings on First American Title Insurance Group, as well as the credit rating of parent Santa Ana-based First American Corp.
A.M. Best said it kept an “A” rating on First American Title Insurance’s financial strength and an “A+” rating on its credit worthiness. Parent First American Corp.’s credit rating of “bbb+” was maintained.
The company cited First American’s favorable operating results and significant market presence in the title industry.
The rating follows a change in strategy by First American, which has begun revamping its title business strategy to emphasize profits,a strategy that has been well-received by analysts as of late.
The company’s push to expand beyond its mainstay title business also has paid off on Wall Street with the company’s stock at a nine-year high.
Now investors are waiting to see if First American will shift course by making a play for one of its top title competitors.
LandAmerica Financial Group Inc., the country’s No. 3 title insurer, might soon find itself an acquisition target. The Richmond, Va.-based company has been urged by its third-biggest shareholder to put itself up for sale.
“At this time the company should consider other options,” hedge fund investor Viking Global Investors LP said in a June 1 letter to LandAmerica’s board.
The hedge fund said it believes an acquisition of LandAmerica by one of its larger rivals would result in the company nearly doubling earnings.
LandAmerica, which counts a recent market value of about $1.8 billion, has about a 20% share of the national title insurance business.
First American and Jacksonville, Fla.-based Fidelity National Financial Inc. each have about 30%.
If First American’s interested in a deal, it’s playing coy.
The company has said in the past year that it isn’t particularly interested in buying a large title company, and that’s still the case, Chief Financial Officer Frank McMahon said at an investor presentation in New York last week.
For more on this story, see the June 11 edition of the Business Journal.
