First American Acquiring United General Title Insurance

Fitch Ratings, Chicago, has affirmed its ratings of First American Corp. here following the announcement of the title insurer acquiring another underwriter, United General Title Insurance Co., Denver.

Fitch said it believes the deal aligns well with First American's strategy to increase market share.

"Fitch is slightly concerned that the business being acquired has lower profit margins and retention risk. However, these concerns are assuaged by the size of the transaction, which is small when compared with First American's total results," the rating agency said.

The current ratings for First American, which include insurer financial strength ratings for its title subsidiaries of "A" and a positive ratings outlook, is based on the company's strong and improving positions in title insurance and real estate ancillary services; solid operating performance during the recent strong real estate market, which resulted in substantial growth in policyholders' surplus; strong capitalization, including the second largest policyholders' surplus of the top five national companies; and below-average operating leverage.

But, Fitch noted, the positives are offset by a higher-than-average intangible equity and above average affiliated investments that reduce liquidity. First American is the second largest title insurance provider, with a market share of 24% based on operating income and premium, Fitch said.

First American did not disclose the purchase price it paid for the privately held United General.

United General had been owned by its management, including president and chief executive John P. Dwyer since 1995.

Gross revenue has increased from $38 million in 1995 up to $208 million in 2004. It is licensed in 36 states and the District of Columbia. Based on 2003 market share date from the American Land Title Association, United General is the sixth-largest title insurer by geographic coverage with a 1.64% national market share.

FATIC president Gary L. Kermott said his company plans to grow United General into "a major national brand." Mr. Dwyer will continue as president of United General as well as take on the role of regional vice president with FATIC.

In 2001, United General, along with two other underwriters, formed the RealAlliance. The joint venture uses a proprietary transaction management system that enables local independent agents to work seamlessly with other independent agents to perform transactions in 48 states.

United General was created in Louisiana in 1983 and redomiciled in Colorado in 1999.

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