Title Insurer, Agency Enter Unusual Partnership : Insurance: The deal between First American and North American heralds a new kind of industry relationship in which underwriters work more closely with agents who sell the policies.

In a partnership that both parties say is unusual, First American Title Insurance Co. sold a 50% stake in one of its subsidiaries to a California agency company for cash and a note totaling $1.5 million.

The deal with North American Title Co. is expected to benefit both firms, but it also may show the industry a different way for title insurers like First American to work more closely with the agents who sell the policies.

“This is great news, definitely, for us, and it’s pretty good for the industry that an underwriter of any size is active in the California market,” said Gary B. Beeny, North American’s president. “This is a very unusual deal. I can’t recall anything quite like this before.”

First American’s president, Parker S. Kennedy, said his firm is pleased with the transaction as well. “We will now share in North American’s success, to some degree,” he said.

Title insurers are the carriers who underwrite policies--research deeds, prepare documents, administer any claims--and insure against problems homeowners might have with title to their property. Title companies are agents that sell policies issued by one or more insurers. Big carriers like First American--the nation’s second-largest--typically employ their own agents and also sell policies through independent agents.

With $72.6 million in revenue last year, privately held North American is the biggest agency in the nation, Beeny said. A former subsidiary of Glendale Federal Savings & Loan, it recently moved its headquarters to Walnut Creek. It has 1,200 employees who serve the California real estate market and expects to expand under the new deal.

“It’s great for us because it helps us control our destiny,” Beeny said. “For a company our size, that’s essential today.”

Kennedy said that North American’s success probably made it an unlikely candidate to handle any title insurer’s policies exclusively. So, he said, he approached North American’s founder and chairman, Dan R. Wentzel, with a different idea.

Under the deal they struck, First American sold a half-interest in one of its more than 15 title insurance subsidiaries to North American for a promissory note of $750,000, payable in 10 years.

Each company then put $750,000 in new capital into the former subsidiary, raising its total capital to $3 million. The reconstituted company was renamed North American Title Insurance Co., and it will issue the policies that North American Title Co. sells.

The agency, however, will operate the insurance company. And First American will back any policies in excess of $750,000.

The new arrangement also cuts out some of First American’s competition.

As an independent agency, North American sold policies issued by other title insurers. Now, as its contracts with those insurers expire, it will start acting as the exclusive agent for North American Title Insurance.

The new insurer is expected to earn about $1 million in its first year, or nearly one-third of the $3.3 million in net income that First American’s parent company earned in 1990, Kennedy said. The parent company has not yet issued 1991 results, but after a disastrous first quarter, it eked out a $654,000 profit for the first nine months. Kennedy said the firm’s revenue should exceed 1990’s total of $707 million.

The new insurer also is expected to generate $40 million in revenue in its first year, which should grow as the contracts with other insurers expire, Beeny said.

First American Title Insurance Co., which is owned by First American Financial Corp., offers title services in all 50 states and in the Bahamas, Bermuda, Canada, Guam, Mexico, Puerto Rico, the Virgin Islands and the United Kingdom.

The parent company’s stock gained slightly on over-the-counter trading Monday. Its Class A common stock closed at $17.25 a share, up 50 cents, or 3%, from Friday’s close, while its Class B common stock closed at $16.75 a share, up 75 cents, or 4.7%, from Friday’s close.