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Rating Action:

Moody's assigns (P)Baa3 Issuer Rating to First American Financial Corporation

17 May 2010

$400 million senior secured credit facility rated (P)Baa2

New York, May 17, 2010 -- Moody's Investors Service has assigned a (P)Baa3 issuer rating to First American Financial Corporation, which is the new holding company for the First American Title Insurance Group. In the same action, Moody's assigned a (P)Baa2 rating to the company's senior secured revolving credit facility. First American Financial Corporation, along with its title insurances subsidiaries, is expected to be spun out of The First American Corporation (NYSE: FAF) by June 1, 2010, pending regulatory approval. Moody's continues to maintain A3 insurance financial strength ("IFS") ratings on First American's title insurance subsidiaries. The outlook for the ratings is stable.

The provisional (P) ratings are prospective in nature and are based on the assumption that FAF will complete the planned spin-off of its financial services businesses into a separate public company. Upon completion of the spin-off, the new company, First American Financial Corporation, will be a holding company for the group's title insurance and specialty insurance operating subsidiaries. First American Financial Corporation will have a capital structure that includes a three-year $400 million senior secured credit facility, that closed on April 12. Assignment of definitive ratings will be subject to completion of the spin-off, and a review of the final capital structure and operating profile.

According to Moody's, the (P)Baa3 issuer rating on First American Financial is based on the support provided by the company's title insurance group. The existing A3 insurance financial strength ratings of First American's lead title insurance subsidiaries are based on the title group's strong market position as the second largest title insurer in the US, its good financial flexibility, and its improved subsidiary capitalization levels. These strengths are offset by volatility in the group's revenue base and profit margins, reflecting the fundamental cyclicality of the title insurance business, and by an expectation of modest earnings results over the medium term. The ratings also reflect Moody's belief that the insurance subsidiaries' credit profile will remain largely unaffected by upcoming spin-off transaction.

According to Moody's Senior Credit Officer Paul Bauer: "The ratings on First American Financial reflect our belief that the company is committed to aggressively managing expenses in order to align costs with revenue volatility in what continues to be a difficult title insurance market. We also believe that the new stand-alone financial services company will maintain a conservative capital structure following the consummation of the expected spin off."

First American's senior secured credit facility is rated one notch higher than the issuer rating largely as a result of a secured interest in assets that are held outside of the company's insurance operating subsidiaries.

The following ratings were assigned, with a stable outlook:

First American Financial Corporation -- issuer rating of (P)Baa3, and senior secured credit facility ratings of (P)Baa2.

The following ratings remain in place, with a stable outlook:

First American Title Insurance Company -- insurance financial strength A3;

First American Title Insurance Co of New York -- insurance financial strength A3;

Title Insurance Company of Oregon -- insurance financial strength A3.

The last rating action for First American occurred on March 4, 2010, when Moody's assigned provisional corporate family and term loan ratings (both (P)Ba2) to The First American Corporation's Information Solutions Company (renamed Corelogic), which will house the information services segments of First American following the completion of the spin off. The last rating action involving First American's title insurance segment occurred on January 11, 2010, when Moody's affirmed the A3 insurance financial strength ratings for the lead title insurance subsidiaries, and placed the debt ratings of the company's current parent, First American Corporation, renamed Corelogic (which will no longer be the title group parent once the spin-off is completed), on review for possible downgrade.

First American Financial Corporation (the expected new parent company), will be headquartered in Santa Ana, California, and will be one of the nation's largest providers of title insurance and other real-estate related services. On a pro-forma basis, the company's revenue was $4.0 billion, and its net income was $118 million for 2009. Total equity at December 31, 2009 for was $1.8 billion.

The principal methodology used in rating First American is "Moody's Rating Methodology for U.S. Title Insurance Companies," which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating First American can also be found in the Rating Methodologies sub-directory on Moody's website.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

New York
Paul Bauer
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns (P)Baa3 Issuer Rating to First American Financial Corporation
No Related Data.
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