UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-34580
(Exact name of registrant as specified in its charter)
Delaware
26-1911571
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1 First American Way, Santa Ana, California 92707-5913
(Address of principal executive offices) (Zip Code)
(714) 250-3000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, $0.00001 par value
FAF
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☒
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2024 was
$5,346,932,596.
On February 10, 2025, there were 102.8 million shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement with respect to the 2025 annual meeting of the stockholders are incorporated by reference
in Part III of this report. The definitive proxy statement or an amendment to this Form 10-K will be filed no later than 120 days after the close of
registrant’s fiscal year.
3
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
INFORMATION INCLUDED IN REPORT
PART I
Item 1.
Business ..........................................................................................................................................................
6
Item 1A. Risk Factors ....................................................................................................................................................
13
Item 1B. Unresolved Staff Comments...........................................................................................................................
23
Item 1C. Cybersecurity ..................................................................................................................................................
24
Item 2.
Properties ........................................................................................................................................................
25
Item 3.
Legal Proceedings...........................................................................................................................................
25
Item 4.
Mine Safety Disclosures .................................................................................................................................
25
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities....................................................................................................................................................
26
Item 6.
[Reserved].......................................................................................................................................................
28
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.........................
28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk........................................................................
45
Item 8.
Financial Statements and Supplementary Data...............................................................................................
47
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........................
109
Item 9A. Controls and Procedures .................................................................................................................................
109
Item 9B. Other Information ...........................................................................................................................................
109
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections............................................................
110
PART III
Item 10. Directors, Executive Officers and Corporate Governance .............................................................................
111
Item 11. Executive Compensation ................................................................................................................................
111
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ......
111
Item 13. Certain Relationships and Related Transactions, and Director Independence ...............................................
111
Item 14. Principal Accountant Fees and Services.........................................................................................................
111
PART IV
Item 15. Exhibits and Financial Statement Schedules ..................................................................................................
112
Item 16. Form 10-K Summary ......................................................................................................................................
115
4
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE
FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS AND MAY CONTAIN THE
WORDS “BELIEVE,” “ANTICIPATE,” “EXPECT,” “INTEND,” “PLAN,” “PREDICT,” “ESTIMATE,” “PROJECT,”
“WILL BE,” “WILL CONTINUE,” “WILL LIKELY RESULT,” OR OTHER SIMILAR WORDS AND PHRASES OR FUTURE
OR CONDITIONAL VERBS SUCH AS “WILL,” “MAY,” “MIGHT,” “SHOULD,” “WOULD,” OR “COULD.” THESE
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS REGARDING FUTURE
OPERATIONS, PERFORMANCE, FINANCIAL CONDITION, PROSPECTS, PLANS AND STRATEGIES. THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS THAT MAY
PROVE TO BE INCORRECT.
RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET
FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED
RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT
LIMITATION:
•
INTEREST RATE FLUCTUATIONS;
•
CHANGES IN CONDITIONS OF THE REAL ESTATE MARKETS;
•
VOLATILITY IN THE CAPITAL MARKETS;
•
UNFAVORABLE ECONOMIC CONDITIONS;
•
IMPAIRMENTS IN THE COMPANY’S GOODWILL OR OTHER INTANGIBLE ASSETS;
•
FAILURES AT FINANCIAL INSTITUTIONS WHERE THE COMPANY DEPOSITS FUNDS;
•
REGULATORY OVERSIGHT AND CHANGES IN APPLICABLE LAWS AND GOVERNMENT REGULATIONS,
INCLUDING PRIVACY AND DATA PROTECTION LAWS;
•
HEIGHTENED SCRUTINY BY LEGISLATORS AND REGULATORS OF THE COMPANY’S TITLE INSURANCE
AND SERVICES SEGMENT AND CERTAIN OTHER OF THE COMPANY’S BUSINESSES;
•
REGULATION OF TITLE INSURANCE RATES;
•
LIMITATIONS ON ACCESS TO PUBLIC RECORDS AND OTHER DATA;
•
SEVERE WEATHER CONDITIONS, HEALTH CRISES, TERRORIST ATTACKS AND OTHER CATASTROPHE
EVENTS;
•
CHANGES IN RELATIONSHIPS WITH LARGE MORTGAGE LENDERS AND GOVERNMENT-SPONSORED
ENTERPRISES;
•
CHANGES IN MEASURES OF THE STRENGTH OF THE COMPANY’S TITLE INSURANCE UNDERWRITERS,
INCLUDING RATINGS AND STATUTORY CAPITAL AND SURPLUS;
•
LOSSES IN THE COMPANY’S INVESTMENT PORTFOLIO OR VENTURE INVESTMENT PORTFOLIO;
•
MATERIAL VARIANCE BETWEEN ACTUAL AND EXPECTED CLAIMS EXPERIENCE;
•
PROVISION OF CAPITAL TO SUBSIDIARIES THAT COULD AFFECT THE COMPANY’S LIQUIDITY
POSITION;
•
DEFALCATIONS, INCREASED CLAIMS OR OTHER COSTS AND EXPENSES ATTRIBUTABLE TO THE
COMPANY’S USE OF TITLE AGENTS;
•
ANY INADEQUACY IN THE COMPANY’S RISK MANAGEMENT FRAMEWORK OR USE OF MODELS;
•
SYSTEMS
DAMAGE,
FAILURES,
INTERRUPTIONS,
CYBERATTACKS
AND
INTRUSIONS,
OR
UNAUTHORIZED DATA DISCLOSURES;
•
INNOVATION EFFORTS OF THE COMPANY AND OTHER INDUSTRY PARTICIPANTS AND ANY RELATED
MARKET DISRUPTION;
•
ERRORS AND FRAUD INVOLVING THE TRANSFER OF FUNDS;
5
•
FAILURES TO RECRUIT AND RETAIN QUALIFIED EMPLOYEES;
•
THE COMPANY’S USE OF A GLOBAL WORKFORCE;
•
INABILITY OF THE COMPANY TO FULFILL PARENT COMPANY OBLIGATIONS AND/OR PAY DIVIDENDS;
•
INABILITY TO REALIZE ANTICIPATED SYNERGIES OR PRODUCE RETURNS THAT JUSTIFY INVESTMENT
IN ACQUIRED BUSINESSES;
•
A REDUCTION IN THE DEPOSITS AT THE COMPANY’S FEDERAL SAVINGS BANK SUBSIDIARY;
•
CLAIMS OF INFRINGEMENT OR INABILITY TO ADEQUATELY PROTECT THE COMPANY’S
INTELLECTUAL PROPERTY; AND
•
OTHER FACTORS DESCRIBED IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING UNDER THE
CAPTION RISK FACTORS IN ITEM 1A OF PART I.
THE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE. THE COMPANY DOES
NOT UNDERTAKE TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT CIRCUMSTANCES OR EVENTS
THAT OCCUR AFTER THE DATE THE FORWARD-LOOKING STATEMENTS ARE MADE.
6
PART I
Item 1. Business
The Company
First American Financial Corporation traces its heritage back to 1889. On June 1, 2010, its common stock was listed on
the New York Stock Exchange under the ticker symbol “FAF.” First American’s executive offices are located at 1 First
American Way, Santa Ana, California 92707-5913 and its telephone number is (714) 250-3000.
Unless otherwise indicated or otherwise required by the context, the terms “we,” “our,” “it,” “its,” “Company” and “First
American” refer to First American Financial Corporation and its subsidiaries.
General
The Company, through its subsidiaries, is engaged in the business of providing title insurance, settlement services and
other financial services and risk solutions through its title insurance and services segment and its home warranty segment. The
title insurance and services segment provides title insurance, closing and/or escrow services and similar or related services
domestically and internationally in connection with residential and commercial real estate transactions. The segment also
provides products, services and solutions that are designed to mitigate risk in, or otherwise facilitate, real estate transactions.
Many of these products, services and solutions involve the use of real property-related data, including data derived from the
Company’s proprietary databases. In addition, the segment provides banking, trust, warehouse lending, mortgage subservicing
and wealth management services. The home warranty segment sells home warranty products. Our corporate segment consists
of certain financing facilities, our venture investment portfolio, operating results related to our property and casualty insurance
business, which no longer sells policies or has policies in force, and certain corporate services that support our business
operations. The substantial majority of our business is dependent upon activity in the real estate and mortgage markets.
Our strategy is to profitably grow our core title insurance and settlement services business, expand our data advantage to
strengthen our core business and pursue growth opportunities, and manage and actively invest in complementary businesses
where the Company has a strategic advantage. We are focused on continued improvement of our customers’ experience with
our products, services and solutions, including through the digital transformation of our offerings, and on enhancing the services
offered to our customers. In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the
customer experience and decrease risk, we are utilizing innovative technologies, processes and techniques in the production
and delivery of our products and services. These efforts include streamlining title and closing processes by converting certain
manual processes into automated ones. Part of our growth strategy involves acquiring companies that expand our market share,
enhance our data capabilities, provide us with technological capabilities or complement our businesses. We remain committed
to efficiently managing our business to market conditions throughout business cycles and to deploying our capital to maximize
stockholder returns.
Title Insurance and Services Segment
Our title insurance and services segment issues title insurance policies on residential and commercial property in the
United States and offers similar or related products and services internationally. This segment also provides closing and/or
escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to
mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and
records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and
default-related products and services; provides document generation services; provides warehouse lending services; subservices
mortgage loans; and provides banking, trust and wealth management services. In 2024, 2023 and 2022, the Company derived
93.6%, 95.4% and 99.2%, of its consolidated revenues, respectively, from this segment.
Overview of Title Insurance Industry
In most instances in the United States, and in certain instances internationally, mortgage lenders and purchasers of real
estate desire to be protected from loss or damage in the event of defects in the title of the subject property. Title insurance is a
means of providing such protection.
7
Title Policies. Title insurance policies insure the interests of owners or lenders against defects in the title to real property,
and the policies typically include the duty to defend against claimed title defects. These defects include adverse ownership
claims, liens, encumbrances or other matters affecting title. Title insurance policies generally insure against losses arising out
of circumstances that occur prior to policy issuance; however, our Company, in certain states, provides coverage for losses
arising out of certain events that occur subsequent to policy issuance, such as forgery of a deed to the owner’s real estate. Title
insurance policies are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search
of one or more of public records, maps, documents and prior title policies to ascertain the existence of easements, restrictions,
rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property. In certain limited
instances, a visual inspection of the property is also made. To facilitate the preparation of preliminary title reports and
commitments, copies and/or abstracts of public records, maps, documents and prior title policies may be compiled and indexed
to specific properties in an area. This compilation is known as a “title plant.”
The beneficiaries of title insurance policies generally are real estate owners and mortgage lenders. A title insurance
policy indemnifies the named insured and certain successors in interest against certain title defects, liens and encumbrances
existing as of the date of the policy and not specifically excepted from its provisions. The policy typically provides coverage
for the real property mortgage lender in the amount of its outstanding mortgage loan balance and for the owner in the amount
of the purchase price of the property. In some cases, the policy might provide insurance in a greater amount, or for automatic
increases in coverage over time. The potential for claims under a title insurance policy issued to a mortgage lender generally
ceases upon repayment of the mortgage loan. The potential for claims under a title insurance policy issued to an owner generally
ceases upon the sale or transfer of the insured property.
Before issuing title policies, title insurers typically seek to limit their risk of loss by accurately performing title searches
and examinations and, in many instances, curing identified title defects. Increasingly, title insurance policies are being
underwritten utilizing automated decisioning tools based, in whole or in part, on alternative information sources. These
searches, examinations and curative efforts distinguish title insurers from other insurers, such as property and casualty insurers.
Title insurers generally insure against losses arising out of circumstances existing as of the date of the policy, property and
casualty insurers generally insure against losses arising out of events that occur subsequent to policy issuance. As a result of
these differences, title insurers typically experience relatively low claims, as a percentage of premiums, when compared to
property and casualty insurers, but have relatively high expenses. The primary expenses incurred by a title insurer pertain to
sales, underwriting (including the costs associated with searching and examining title and with the curative process),
information technology and administrative costs. Where the policy is issued by an agent, the premium retained by the agent is
the primary expense for the insurer.
The Closing Process. In the United States, title insurance is essential to the real estate closing process in most transactions
involving real property mortgage lenders. In a typical residential real estate sale transaction where title insurance is issued, a
third party, such as a real estate broker or agent, lawyer or closer, orders the title insurance on behalf of an insured or in certain
instances, such as with respect to a lender, the insured orders on its own behalf. Once the order has been placed and a title
insurance company or an agent has determined the current status of the title to the property to its satisfaction, the title insurer
or agent prepares, issues and circulates a commitment or preliminary report. The commitment or preliminary report identifies
the conditions, exceptions and/or limitations that the title insurer intends to attach to the policy and identifies items appearing
on the title that, in certain circumstances, must be eliminated prior to closing.
In the United States, the closing or settlement function, sometimes called an escrow in the western states, is, depending
on the local custom in the region, performed by a lawyer, an escrow company or a title insurance company or agent, generally
referred to as a “closer.” Once documentation has been prepared and signed, and any required mortgage lender payoff demands
are obtained, the transaction closes. The closer typically records the appropriate title documents and arranges the transfer of
funds to pay off prior loans and extinguish the liens securing such loans. Title policies are then issued, typically insuring the
priority of the mortgage of the real property mortgage lender in the amount of its mortgage loan and the owner in the amount
of the purchase price. Before a closing takes place, however, the title insurer or agent typically provides an update to the
commitment to discover any adverse matters affecting title and, if any are found, works to eliminate them so that the title
insurer or agent issues the title policy subject only to those exceptions to coverage which are acceptable to the title insurer, the
owner and the owner’s lender.
8
Issuing the Policy: Direct vs. Agency. A title insurance policy can be issued directly by a title insurer or indirectly on
behalf of a title insurer through agents, which usually operate independently of the title insurer and typically issue policies for
more than one insurer. Where the policy is issued by a title insurer, the search is performed by or on behalf of the title insurer,
and the premium is collected and retained by the title insurer. Where the policy is issued by an agent, the search is typically
performed by or on behalf of the agent, and the agent collects, and retains a portion of, the premium. The agent remits the
remainder of the premium to the title insurer as compensation for the insurer bearing the risk of loss in the event a claim is
made under the policy and for other services the insurer may provide. The percentage of the premium retained by an agent
varies by geography and from agent to agent. Generally, a title insurer is obligated to pay title claims in accordance with the
terms of its policies, regardless of whether it issues its policy directly or indirectly through an agent. In addition, when a title
insurer has issued a commitment to insure a particular transaction, it may be requested to issue a closing protection letter that
protects a lender or borrower, or in some states also a seller, from a loss of funds, under certain conditions, caused by the actions
of the title insurer or its agent. When a loss to the title insurer occurs under a policy issued through an agent or a closing
protection letter, under certain circumstances the title insurer may seek recovery of all or a portion of the loss from the agent
or the agent’s errors and omissions insurance carrier.
Premiums. The premium for title insurance is typically due and earned in full when the real estate transaction is closed.
Premiums generally are calculated with reference to the policy amount. The premium charged by a title insurer or an agent is
subject to regulation in most areas. Such regulations vary from jurisdiction to jurisdiction.
Our Title Insurance Operations
Overview. We conduct our title insurance and closing business through a network of direct operations and agents.
Through this network, we issue policies in the 49 states that permit the issuance of title insurance policies, the District of
Columbia and certain United States territories. We also offer title insurance, closing services and similar or related products
and services, either directly or through third parties in other countries, including Canada, the United Kingdom, Australia, New
Zealand, South Korea and various other established and emerging markets as described in the “International Operations” section
below.
The substantial majority of our title insurance and closing business is dependent upon activity in the real estate and
mortgage markets, which are cyclical and seasonal. Residential purchase activity is typically slower in the winter months with
increased volumes in the spring and summer months and is sensitive to interest rates. Residential refinance activity is not
seasonal, but is generally correlated with changes in interest rates and, in particular, mortgage rates. Commercial real estate
volumes are less sensitive to changes in interest rates and fluctuate based on local supply and demand conditions and financing
availability. Commercial activity is typically elevated towards the end of the year. However, changes in general economic
conditions in the United States and abroad can cause fluctuations in these traditional patterns of real estate activity, and changes
in the general economic conditions in a particular geography can cause fluctuations in these traditional patterns of real estate
activity in that geography.
Distribution, Sales and Marketing. We distribute our title insurance policies and related products and services through
our direct and agent channels. In our direct channel, the distribution of our policies and related products and services occurs
through sales representatives located throughout the United States. Title insurance policies issued, and other products and
services delivered through, this channel are primarily delivered in connection with sales and refinances of residential and
commercial real property.
Within the direct channel, our sales and marketing efforts are focused on the primary sources of business referrals. For
residential business, we generally market to real estate agents and brokers, mortgage brokers, real estate attorneys, mortgage
originators, homebuilders and escrow service providers. We also market directly to firms that purchase and sell residential real
estate on a large-scale basis. For refinance and default-related business, we market directly to mortgage originators and
servicers with centrally managed platforms and government-sponsored enterprises. For the commercial business, we market
primarily to principals, developers, and investors; real estate investment trusts; law firms; commercial lenders; life insurance
companies; commercial brokers and mortgage brokers. Our marketing efforts highlight the value and significance of our
product and service offerings, underscoring the quality and timeliness of our services, our financial strength, our commitment
to process and product innovation and our national presence. We provide educational resources on our website and through
various channels to help consumers and other stakeholders gain a deeper understanding of our products, services, and the title
and settlement process.
9
In our agency channel, we issue policies in accordance with agreements with authorized agents. These agreements
typically state the conditions under which the agent is authorized to issue our title insurance policies. The agency agreement
also typically prescribes the circumstances under which the agent may be liable to us if a policy loss occurs, as well as the
services we provide to the agent and the price for those services. Those services vary by geography and from agent to agent.
We are continuing to seek to provide additional services to our agents, including banking services and closing-related services,
in an effort to reduce risk and enhance relationships with our agents. As is standard in our industry, our agents typically operate
with a substantial degree of independence from us and typically act as agents for other title insurers.
Within the agency channel, our sales and marketing efforts are directed at the agents themselves and emphasize the
quality and timeliness of our underwriting support, our financial strength and our agency-based product and service offerings,
including product innovations. Premium splits also are of importance in attracting and retaining agents.
International Operations. We provide products and services in a number of countries outside of the United States, and
our international operations accounted for approximately 7.3% of our title insurance and services segment revenues in 2024.
Today we have direct operations and a physical presence in several countries, including Canada, the United Kingdom, South
Korea, Australia and New Zealand. While reliable data are not available, we believe that we have the largest market share for
title insurance outside of the United States. Our range of international products and services is designed to lower our clients’
risk profiles and reduce their operating costs through enhanced operational efficiencies. In certain established markets,
primarily British Commonwealth countries, we have combined title insurance with customized processing offerings to enhance
the speed and efficiency of the mortgage and conveyancing processes. In these markets we also offer products designed to
mitigate risk and otherwise facilitate real estate transactions.
Our international operations present risks that may not exist to the same extent in our domestic operations, including
those associated with differences in the nature of the products provided, the scope of coverage provided by those products and
the manner in which risk is underwritten.
Data and Title Plants. The title insurance business is heavily dependent on data. Underwriting decisions require
comprehensive and accurate data. In an attempt to enhance efficiency and reduce risk, certain underwriting functions are
increasingly being automated. As discussed further in the Innovation and Intellectual Property section below, our ability to
automate underwriting decisions has accelerated as we have improved the breadth and quality of our data assets and our analytic
tools.
Our title plants constitute one of our principal assets. A title search is typically conducted by searching the abstracted
information from public records or utilizing a title plant holding information abstracted from public records. While public title
records generally are indexed by reference to the names of the parties to a given recorded document, our title plants primarily
arrange their records on a geographic basis. Because of this difference, title plant data and records generally may be searched
more efficiently. Many of our title plants also index prior title insurance policies, adding to searching efficiency. These title
plants support not only our title insurance operations, but we also license this data to third parties, including competing title
companies and agents.
Reserves for Claims and Losses. We provide for losses associated with title insurance policies, closing protection letters
and other risk-based products based upon our historical experience and other factors by a charge to expense when the related
premium revenue is recognized. The resulting reserve for incurred but not reported claims, together with the reserve for known
claims, reflects management’s best estimate of the total costs required to settle all claims reported to us and claims incurred but
not reported, and are considered to be adequate for such purpose. Each period the reasonableness of the estimated reserves is
assessed; if the estimate requires adjustment, such an adjustment is recorded.
Reinsurance and Coinsurance. In certain circumstances we assume and cede title insurance risks through reinsurance.
In reinsurance arrangements, the primary insurer retains a certain amount of risk under a policy and cedes the remainder of the
risk under the policy to the reinsurer. The primary insurer pays the reinsurer a premium in exchange for accepting this risk of
loss. The primary insurer generally remains liable to its insured for the total risk, but is reinsured for a portion of the total risk
under the terms of the reinsurance agreement. In addition to reinsurance arrangements involving other industry participants,
we maintain a global treaty reinsurance program provided by a syndicate of highly rated reinsurers. Subject to the treaty limits
and certain other limitations, the program generally covers claims that arose while the program is in effect.
We also serve as a coinsurer in connection with certain commercial transactions. In a coinsurance scenario, two or more
insurers are selected by the insured and each coinsurer is liable for its specified percentage share of the total liability.
10
Competition. The business of providing title insurance and related products and services is highly competitive. The
number of competing companies and the size of such companies vary in the different areas in which we conduct business.
Generally, in areas of major real estate activity, such as metropolitan and suburban localities, we compete with many other title
insurers and agents. Our major nationwide competitors in our principal markets include Fidelity National Financial, Inc., Old
Republic International Corporation, Stewart Title Guaranty Company, and their affiliates. In addition to these national
competitors, other nationwide, regional and local competitors aggressively compete. Numerous agency operations throughout
the country also provide aggressive competition. We are currently the second largest provider of title insurance in the United
States, based on the most recent American Land Title Association market share data.
We believe that competition for title insurance, closing services and related products and services is based primarily on
service, quality, price, relationships and the ease of access and use of products. Customer service is an important competitive
factor because parties to real estate transactions are usually concerned with time schedules and costs associated with delays in
closing transactions. In certain transactions, such as those involving commercial properties, financial strength and scope of
coverage are also important. We regularly evaluate our pricing and agent splits, and based on competitive, market and
regulatory conditions and claims history, among other factors, adjust our prices and agent splits as and where appropriate.
Data and Analytics. Our data and analytics business offers property information and analytic solutions for title
underwriting automation, fraud risk management, identity verification, compliance and valuation that are powered by our
extensive collection of real estate property data, ownership data and recorded documents. These solutions enable our title
insurance operations, lenders, other title companies and other real estate industry participants to make informed, and
increasingly automated, decisions to manage workflow and auditing and compliance operations.
Trust, Wealth Management and Banking Services. Our federal savings bank subsidiary offers trust, wealth management
and deposit products and related services, including fund transfer services. The bank does not originate loans. As of
December 31, 2024, the bank administered fiduciary and custody assets having a market value of $4.8 billion, which includes
managed assets of $2.4 billion. The bank’s balance sheet had assets of $6.1 billion, with deposits of $5.9 billion and
stockholder’s equity of $253 million. The bank’s deposits consist primarily of funds deposited by its affiliates and, in some
instances, by non-affiliated title agents. The majority of such deposits are from third parties to be held in trust pending the
closing of real estate transactions, but there is also a portion of which are custodial funds held on behalf of clients of our
residential mortgage subservicer subsidiary. The bank also maintains other deposits, including operating funds deposited by
its affiliates.
Home Warranty Segment
Our home warranty segment provides residential service contracts that cover residential systems, such as heating and air
conditioning systems, and certain appliances against failures that occur as the result of normal usage during the coverage period.
Coverage is typically for one year and is renewable annually at the option of the contract holder, subject to our approval.
Coverage and pricing typically vary by geographic region. Fees for the contracts generally are paid at the closing of the home
purchase or, for contracts sold directly to consumers, are generally paid in full up front or on a monthly basis by the consumer.
In addition, under the contract, the holder is responsible for a service fee for each trade call. First year warranties are marketed
through real estate brokers and agents and directly to consumers. We generally sell contract renewals directly to consumers.
Revenues associated with home warranties sold at the time of a home purchase are dependent upon activity in the residential
purchase market, which is cyclical and seasonal. Residential purchase activity is typically slower in the winter months with
increased volumes in the spring and summer months and is sensitive to interest rate fluctuations. However, changes in general
economic conditions in the United States, can cause fluctuations in this traditional pattern of activity, and changes in the general
economic conditions in a geography can cause fluctuations in the traditional patterns of activity in that geography. Our home
warranty business currently operates in 36 states in the United States and the District of Columbia.
Corporate Segment
Our corporate segment consists primarily of certain financing facilities, our venture investment portfolio, operating
results related to our property and casualty insurance business, which no longer sells policies or has policies in force, and
certain corporate services that support our business operations. Our venture investment portfolio consists primarily of
investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many
of which offer technology-enabled products and services), investments in funds that typically invest in these same types of
companies, and a similar investment that is trading publicly. While we hope to realize financial benefits from these venture
investments, we make and hold these investments primarily for strategic reasons.
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Innovation and Intellectual Property
In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the customer experience
and decrease risk, we are utilizing innovative technologies, processes and techniques, including artificial intelligence, in the
production and delivery of our products and services. These efforts include streamlining and enhancing the closing process,
which we believe improves the customer experience by simplifying and reducing the time it takes to close a transaction, reduces
risk and improves communication. We are also deploying innovation solutions that leverage our bank to make the closing
process more flexible. We increasingly are employing advanced technologies to automate various internal processes, including
processes related to the building and maintaining of title plants and other data assets, as well as the search and examination of
information in connection with the issuance of title insurance policies.
We strive to align our intellectual property strategy with our business strategy and our technology development efforts.
We rely on a combination of patents, trademarks, copyright and trade secret laws, non-disclosure agreements, contractual
provisions and a system of internal safeguards to protect our intellectual property rights and proprietary information. We have
a number of issued patents and additional patent applications pending in the United States and internationally, including patents
for title automation, loan risk assessment, online platforms, optical character recognition and data extraction. We also believe
that many of our brands have accumulated substantial goodwill in the marketplace. In addition, we have developed a number
of proprietary trade secrets that we believe provide us with a competitive advantage.
Human Capital Resources
As of December 31, 2024, the Company employed 19,038 employees, with 12,135 of them located in the United States
and 6,903 outside of the U.S. We strive to have a positive, collaborative culture that engages employees, as we believe engaged
employees serve our customers well. We believe this combination, along with the efficient operation of our business, ultimately
benefits our stockholders. As part of this effort, we participate in competitions that recognize the quality of our workplace,
which competitions we believe provide a framework for improving, and insights for evaluating, our employee engagement
efforts. Moreover, receipt of awards in connection with those competitions facilitates our efforts to attract and retain desired
talent. The success of our efforts is demonstrated through our inclusion on the Fortune 100 Best Companies to Work For® list
in the United States for the last nine years, the Best Workplaces™ in Canada list for the last ten years, as well as a number of
similar lists in local or specialized areas. In addition, we have been recognized on the Fortune® Best Workplaces for Women™
(United States) and Great Place to Work® list for Best Workplaces for Women (Canada) for the ninth year in a row and we
earned a top score of 100 on the Human Rights Campaign Foundation’s 2023-2024 Corporate Equality Index for the sixth
consecutive year. We have implemented many professional development programs to build and strengthen the skill sets of our
employees. We also believe that an inclusive workforce benefits our Company and, as a result we employ a number of programs
focused on the development of employee-centered actions to enhance the recruitment, engagement, development, and retention
of employees.
Regulation
Many of our subsidiaries are subject to extensive regulation by applicable domestic or foreign regulatory agencies. The
extent of such regulation varies based on the industry involved, the nature of the business conducted by the subsidiary (for
example, licensed title insurers are subject to a heightened level of regulation compared to underwritten title companies or
agencies), the subsidiary’s jurisdiction of organization and the jurisdictions in which it operates. In addition, the Company is
subject to regulation as an insurance holding company, a savings and loan holding company, a publicly-traded company, a
Delaware corporation and a corporation that has its principal executive offices in California.
Our domestic subsidiaries that operate in the title insurance industry or the property and casualty insurance industry are
subject to regulation by state insurance regulators. Each of our underwriters, or insurers, is regulated primarily by the insurance
department or equivalent governmental body within the jurisdiction of its organization, which oversees compliance with the
laws and regulations pertaining to such insurer. For example, our primary title insurance underwriter, First American Title
Insurance Company, is a Nebraska corporation and, accordingly, is primarily regulated by the Nebraska Department of
Insurance. Insurance regulations typically place limits on, among other matters, the ability of the insurer to pay dividends to
its parent company or to enter into transactions with affiliates. They also may require approval of the insurance commissioner
prior to a third party directly or indirectly acquiring control of the insurer, which may make it difficult or prohibitive for a third
party to acquire our Company.
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In addition, our insurers are subject to the laws of other jurisdictions in which they transact business, which laws typically
establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business;
regulating trade practices; licensing agents; approving policy forms, accounting practices and financial practices; establishing
requirements pertaining to reserves and capital and surplus as regards policyholders; requiring the deferral of a portion of all
premiums in a reserve for the protection of policyholders and the segregation of investments in a corresponding amount;
establishing parameters regarding suitable investments for reserves, capital and surplus; and approving rate schedules. The
manner in which rates are established or changed ranges from states that promulgate rates, to states in which individual
companies or associations of companies prepare rate filings that are submitted for approval, to a few states in which rate changes
do not need to be filed for approval. Each of our insurers is also subject to periodic examination by regulatory authorities both
within such insurer’s jurisdiction of organization as well as by the other jurisdictions where it is licensed to conduct business.
Our foreign insurance subsidiaries and branches of First American Title Insurance Company that operate in Canada,
Australia, New Zealand, the United Kingdom, Malta, South Korea and Hong Kong are regulated primarily by regulatory
authorities in the regions, provinces and/or countries in which they operate and may secondarily be regulated by the domestic
regulator of First American Title Insurance Company as a part of the First American insurance holding company group. Each
of these regions, provinces and countries has established a regulatory framework with respect to the oversight of compliance
with its laws and regulations. Therefore, our foreign insurance subsidiaries generally are subject to regulatory review,
examination, investigation and enforcement in a similar manner as our domestic insurance subsidiaries, subject to local
variations.
Our underwritten title companies and agencies are also subject to certain regulation by insurance regulatory or banking
authorities, including, but not limited to, minimum net worth requirements, licensing requirements, statistical reporting
requirements, rate filing requirements and marketing restrictions.
Certain laws and regulations require the Company to maintain certain information security standards and practices. Other
laws and regulations regulate the manner in which the Company collects, uses, retains, protects, discloses, transfers, and
processes personal data.
In addition to state-level regulation, our domestic subsidiaries that operate in the insurance business, as well as our home
warranty, mortgage servicing and subservicing, banking and certain other subsidiaries, are subject to regulation by federal
agencies, including the Consumer Financial Protection Bureau (“CFPB”). The CFPB has broad authority to regulate, among
other areas, the mortgage and real estate markets, including our domestic subsidiaries, in matters which impact consumers.
This authority includes the enforcement of federal consumer financial laws, including the Real Estate Settlement Procedures
Act and the Truth in Lending Act. Regulations issued by the CFPB, or the manner in which it interprets and enforces existing
consumer protection laws, have impacted and could continue to impact the way in which we conduct our businesses and the
profitability of those businesses.
Our home warranty and settlement services businesses are also subject to regulation in some states by insurance
authorities or other applicable regulatory entities.
Our federal savings bank is regulated and supervised by the Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corporation. The Board of Governors of the Federal Reserve System regulates and supervises the Company,
as a savings and loan holding company, including its non-banking subsidiaries that are part of the holding company system.
Federal banking laws and regulations require third parties to obtain prior approval to acquire control of our federal savings
bank or our Company, which may make such an acquisition of our Company by a third party more difficult or prohibitive.
Cybersecurity and Data Protection
The Company dedicates significant resources to securing its systems and to protecting non-public personal information
and other confidential information. These include resources dedicated to intrusion detection and prevention such as firewalls,
endpoint protection and behavior analysis tools, among others. They also include resources dedicated toward vulnerability
identification through the performance of vulnerability scans and penetration tests, among other methods. See Item 1C.
Cybersecurity for additional details regarding cybersecurity and data protection.
13
Investment Policies
The vast majority of our investments are held within a debt securities and marketable equity securities portfolio overseen
by our investment department and an investment committee made up of certain senior executives. Members of that investment
committee sometimes function in a dual capacity to also provide oversight for certain of our regulated subsidiaries that have
their own designated investment committees for their investments within this investment portfolio. The investment committee
oversees investment portfolio activities, such as policy setting, compliance reporting, portfolio reviews, and strategy. The
Company’s investment portfolio policies are designed to comply with regulatory requirements and to align the investment
portfolio asset allocation with strategic objectives. For example, our federal savings bank is required to maintain at least 65%
of its asset portfolio in loans or securities that are secured by real estate. Our federal savings bank currently does not make real
estate loans, and therefore fulfills this regulatory requirement through investments in mortgage-backed securities. In addition,
applicable law imposes certain restrictions upon the types and amounts of investments that may be made by our regulated
insurance subsidiaries. The Company’s investment portfolio policies further provide that these investments are to be managed
to maximize long-term returns consistent with liquidity, regulatory and risk objectives, and that these investments should not
expose the Company to excessive levels of credit, liquidity, and interest rate risks.
As of December 31, 2024, our debt and marketable equity securities portfolio consisted of approximately 95% of debt
securities. As of that date, over 71% of our debt securities were held in securities that are United States government-backed or
rated AAA/Aaa and approximately 97% of the debt securities portfolio was rated or classified as investment grade or better.
Percentages are based on the estimated fair values of the securities. Credit ratings reflect published ratings obtained from
globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating
was selected.
Independent of this investment portfolio and its management, we maintain our venture capital portfolio, certain money-
market and other short-term investments, and other strategic equity investments in companies engaged in our businesses or
similar or related businesses.
Available Information
The Company maintains a website, www.firstam.com, which includes financial information and other information for
investors, including open and closed title insurance orders (which typically are posted approximately 10 to 12 days after the
end of each calendar month). The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 are available free of charge through the “Investors” page of the website as soon as reasonably practicable
after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission. The
Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this
Annual Report on Form 10-K, or any other filing with the Securities and Exchange Commission unless the Company expressly
incorporates such materials.
Item 1A. Risk Factors
The following “risk factors” could materially and adversely affect the Company’s business, operations, reputation,
financial position or future financial performance. Some of the factors, events and contingencies discussed below may have
occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies
have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could
materially and adversely affect us in the future. You should carefully consider each of the following risk factors and the other
information contained in this Annual Report on Form 10-K. The Company faces risks other than those listed here, including
those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial.
Because of the following factors, as well as other variables affecting the Company’s operating results, past financial
performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results
or trends in future periods.
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STRATEGIC RISK FACTORS
1. The Company’s risk management framework could prove inadequate, which could adversely affect the Company
The Company’s risk management framework is designed to identify, monitor and mitigate risks that could have a negative
impact on the Company’s financial condition or reputation. This framework includes departments or groups dedicated to
enterprise risk management, treasury management, information security, model risk management, disaster recovery and other
information technology-related risks, business continuity, legal and compliance, compensation structures and other human
resources matters, vendor management and internal audit, among others. Many of the processes overseen by these departments
function at the enterprise level, but many also function through, or rely to a certain degree upon, risk mitigation efforts in local
operating groups. This is especially the case with respect to the Company’s operations outside of the United States and recently
acquired businesses, which may not be fully integrated into the Company’s risk management framework. Similarly, with
respect to the risks the Company assumes in the ordinary course of its business through the issuance of title insurance policies
and the provision of related products and services, the Company employs localized, as well as centralized risk mitigation efforts.
These efforts include the implementation of underwriting policies and procedures, automated underwriting and other risk-
decisioning tools and other mechanisms for assessing and managing risk. Underwriting title insurance policies and making
other risk-assumption decisions frequently involves a substantial degree of individual judgment and, accordingly, underwriters
are maintained at the state, regional, divisional, and corporate levels with varying degrees of underwriting authority. These
individuals may be encouraged by customers or others to assume risks or to expeditiously make risk determinations. If the
Company’s risk mitigation efforts prove inadequate, the Company could be adversely affected.
2. The Company is pursuing various innovative initiatives, which could result in increased title claims or otherwise
adversely affect the Company
In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience
and decrease risk, the Company is utilizing innovative technologies, processes and techniques, including artificial intelligence,
in the production and delivery of its products and services. These efforts include converting certain manual processes into
automated ones to streamline searches, examinations and other underwriting functions in connection with the issuance of title
insurance policies, building and maintaining title plants and other data assets, and digitizing and automating components of the
settlement process. The Company believes these innovations will improve the customer experience by simplifying and
reducing the time it takes to close a transaction, reduce risk and improve communication, and expects to continue expanding
its use of these technologies. Risks from these and other innovative initiatives include those associated with potential defects
in the design and development of the technologies used to automate processes; misapplication of technologies; the reliance on
data, rules or assumptions that may prove inadequate; increased costs from third parties on whose technologies we are
dependent; information security vulnerabilities; and failure to meet customer expectations, among others. As a result of these
risks, the Company could experience increased claims, reputational damage or other adverse effects, which could be material
to the Company.
3. Potentially disruptive innovation in the real estate industry and/or the Company’s participation in these efforts
could adversely affect the Company
In addition to the Company’s innovative activities, other participants in the real estate industry are seeking to innovate
in ways that could adversely impact the Company’s businesses. These participants include certain of the Company’s sources
of business, competitors, investments and ultimate customers. Innovations by these participants may change the demand for
the Company’s products and services, the manner in which the Company’s products and services are ordered or fulfilled and
the revenue or profitability derived from the Company’s products and services. The Company’s investments in some of these
participants could also facilitate efforts that ultimately disrupt the Company’s business or enable competitors. Accordingly,
the Company’s efforts to anticipate and participate in these transformations could require significant additional investment and
management attention and may not succeed. These innovative efforts by third parties, and the manner in which the Company,
its agents and other industry participants respond to them, could therefore have an adverse effect on the Company.
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OPERATIONAL RISK FACTORS
4. Conditions in the real estate market generally impact the demand for a substantial portion of the Company’s
products and services
Demand for a substantial portion of the Company’s products and services generally decreases as the number of real estate
transactions in which its products and services are purchased decreases. The number of real estate transactions in which the
Company’s products and services are purchased typically decreases in the following situations, among others:
•
when mortgage interest rates are high or rising;
•
when the availability of credit, including commercial and residential mortgage funding, is limited;
•
when real estate affordability is declining;
•
when real estate inventory levels are insufficient or declining; and
•
when economic conditions are unfavorable, including during periods of high unemployment.
Certain of these circumstances, particularly when combined with declining real estate values and the increase in
foreclosures that often results therefrom, also tend to adversely impact the Company’s title claims experience. National
inventory levels for residential homes for sale remain below historical average levels, and, combined with sustained high
mortgage interest rates and elevated home prices, which decreased demand, contributed to historically weak residential
purchase activity. Residential refinance activity is generally correlated with changes in mortgage interest rates and rising
mortgage rates, beginning in 2022, expectedly had an adverse impact on the Company’s refinance business that is expected to
continue for so long as mortgage rates remain high relative to the interest rates of outstanding mortgages. Higher interest rates
also negatively impacted commercial transactions beginning in the latter half of 2022 and will likely continue to impact our
volumes, although activity levels have started to improve in recent quarters.
5. Unfavorable economic conditions adversely affect the Company
Historically, uncertainty and negative trends in general economic conditions in the United States and abroad, including
significant tightening of credit markets and/or a general decline in the value of real property, have created a difficult operating
environment for the Company. These conditions also tend to negatively impact, and recently have impacted, the amount of
funds the Company receives from third parties held in trust pending the closing of commercial and residential real estate
transactions.
The Company deposits a substantial portion of these funds, as well as its own funds, with the federal savings bank it
owns. During periods of unfavorable economic conditions, the return on these funds deposited at the Company’s bank, as well
as funds the Company deposits with third party financial institutions, tends to decline. In addition, the Company holds
investments in entities, such as title agencies, settlement service providers and venture-stage companies, some of which have
been negatively impacted by these conditions, as well as other securities in its investment portfolio, which also may be, and
recently have been, negatively impacted by these conditions.
Certain funds deposited at the Company’s bank are invested into investment grade fixed income securities and any
realized and unrealized losses on those investments will be reflected in the Company’s consolidated financial statements. The
likelihood of such losses, which would generally not occur if the Company were to deposit these funds in an unaffiliated entity,
increases when interest rates increase and/or when economic conditions are unfavorable.
Depending upon the ultimate severity and duration of any economic downturn and other negative economic conditions,
the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and
cash flows, higher claims, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt
facilities and other contracts, difficulties in obtaining access to capital, challenges to the Company’s ability to pay dividends at
currently anticipated levels, deterioration in the value of or return on its investments and increased credit risk from customers
and others with obligations to the Company.
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6. The Company’s use of models involves risks and uncertainties that could adversely affect the Company
The Company utilizes models to support decisions related to risk management, capital and liquidity planning, financial
accounting, data extraction and other business purposes. Models are, by their nature, inherently limited due to their reliance
on statistical, economic, financial or mathematical theories, techniques, data and assumptions that may be erroneous or
inappropriate for the intended or actual use. Flawed models or uses of models, particularly those that rely on artificial
intelligence, may result in, among other consequences, erroneous, biased or misleading outputs, imprudent business decisions,
inadequate risk management or enhanced regulatory supervision. Heightened regulatory supervision and an evolving
regulatory landscape could hinder the pace of the Company’s innovation and may require burdensome changes to the
Company’s existing governance, processes and controls. These risks and uncertainties could have a material adverse effect on
the Company’s results of operations, financial condition and reputation.
7. Severe weather conditions, health crises, terrorist attacks and other catastrophe events could adversely affect the
Company
Severe weather conditions, global or extensive health crises, terrorist attacks and other catastrophe events and responses
to these events could adversely affect the Company. The extent to which these catastrophe events and responses to them impact
the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able
to accurately predict, including: the duration and scope of the catastrophe event and restrictions and responses to it; the impact
of the catastrophe event on economic activity and actions taken in response, including the efficacy of governmental and other
relief efforts or countermeasures; the effect on participants in real estate transactions and the demand for the Company’s
products and services.
The Company’s home warranty business has been and may be impacted by increases in the frequency and severity of
weather events. Home warranty claims, including those pertaining to HVAC systems, tend to rise as temperatures become
extreme, especially in geographies where extreme temperatures are infrequent.
In addition, the Company manages its financial exposure for losses in its title insurance business with third-party
reinsurance. Catastrophe events could adversely affect the cost and availability of that reinsurance. Moreover, to the extent
severe weather conditions, health crises, terrorist attacks and other catastrophe events impact companies or municipalities
whose securities the Company invests in, the value of its investments may also decrease due to these factors.
The frequency, severity, duration, and geographic location and scope of such health crises, catastrophe and severe
weather events are inherently unpredictable, and, therefore, the Company is unable to predict the ultimate impact these events
and responses to them will have on its businesses. The impacts of catastrophe events and responses to them may also exacerbate
the risks discussed elsewhere in Part I, Item 1A of this Annual Report.
8. The Company may find it difficult to acquire necessary data
Certain data used and supplied by the Company are subject to regulation by various federal, state and local regulatory
authorities. Compliance with existing federal, state and local laws and regulations with respect to such data has not had a
material adverse effect on the Company’s results of operations to date. Nonetheless, federal, state and local laws and
regulations in the United States designed to protect the public from the misuse of personal information in the marketplace and
adverse publicity or potential litigation concerning the commercial use of such information may affect the Company’s
operations and could result in substantial regulatory compliance expense, litigation expense and a loss of revenue. The suppliers
of data to the Company face similar burdens. As a result of these and other factors, the Company may find it financially
burdensome to acquire necessary data.
9. Changes in the Company’s relationships with large mortgage lenders or government–sponsored enterprises could
adversely affect the Company
Large mortgage lenders and government-sponsored enterprises, because of their significant role in the mortgage process,
have significant influence over the Company and other service providers. Changes in the Company’s relationship with any of
these lenders or government-sponsored enterprises, the loss of all or a portion of the business the Company derives from these
parties, any refusal of these parties to accept the Company’s products and services, the modification of the government-
sponsored enterprises’ requirements for title insurance or mortgage servicing in connection with mortgages they purchase or
the use of alternatives to the Company’s products and services, could have a material adverse effect on the Company.
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10.
A downgrade by ratings agencies, reductions in statutory capital and surplus maintained by the
Company’s title insurance underwriters or a deterioration in other measures of financial strength could adversely affect the
Company
Certain of the Company’s customers use measurements of the financial strength of the Company’s title insurance
underwriters, including, among others, ratings provided by ratings agencies and levels of statutory capital and surplus
maintained by those underwriters, in determining the amount of a policy they will accept and the amount of reinsurance
required. Each of the major ratings agencies currently rates the Company’s title insurance operations. These ratings provide
the agencies’ perspectives on the financial strength, operating performance and cash generating ability of those operations.
These agencies continually review these ratings and the ratings are subject to change. Statutory capital and surplus, or the
amount by which statutory assets exceed statutory liabilities, is also a measure of financial strength. Accordingly, if the ratings
or statutory capital and surplus of these title insurance underwriters are reduced from their current levels, or if there is a
deterioration in other measures of financial strength, the Company’s results of operations, competitive position and liquidity
could be adversely affected. In addition, a downgrade in the ratings or rankings for the Company’s federal savings bank
subsidiary or its mortgage servicing business could have an adverse effect on that particular business.
11.
The issuance of the Company’s title insurance policies and related activities by independent title agents
could adversely affect the Company
The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that usually
operate with substantial independence from the Company. There is no guarantee that these title agents will fulfill their fiduciary
duties or contractual obligations to the Company, which are designed to limit the Company’s risk with respect to their activities.
Certain activities that are not governed by fiduciary duties or contractual obligations to the Company can also create risks. If,
for example, funds held in trust by an independent title agent are not appropriately applied by the agent in a transaction, it may
result in one or more parties to a transaction having defective title to or lien on a property, which, in turn, has led to and may
continue to lead to title claims against the Company for which the Company may be liable.
In addition, regulators are increasingly seeking to hold the Company responsible for the actions of these title agents and,
under certain circumstances, the Company may be held liable directly to third parties for actions (including defalcations) or
omissions of these agents. Case law and statutes in certain states also suggest that the Company is liable for the actions or
omissions of its agents in those states, regardless of contractual limitations. As a result, the Company’s use of title agents could
result in increased claims and loss severity on the Company’s policies issued through agents and an increase in other costs and
expenses.
12.
Systems damage, failures, interruptions, cyberattacks and intrusions, and unauthorized data disclosures
by the Company or its service providers may disrupt the Company’s business, harm the Company’s reputation, result in
material claims for damages or otherwise adversely affect the Company
The Company uses computer software applications, systems and other technologies (collectively referred to as
“systems”), some of which it owns and manages and some of which are owned and/or managed by third parties, including
providers of Software as a Service (SaaS) and providers of distributed computing infrastructure platforms commonly known
as the “cloud.” The Company and its agents, suppliers, service providers, and customers use systems to receive, process, store
and transmit business information, including non-public personal information as well as data from suppliers and other
information upon which the Company’s business relies. The Company also uses these systems to manage substantial cash,
investment assets, bank deposits, trust assets, escrow account balances and custodial balances on behalf of itself and its
customers, among other activities. Many of the Company’s products, services and solutions involving the use of real property
related data are fully reliant on these systems and are only available electronically. Accordingly, for a variety of reasons, the
integrity of these systems and the protection of the information that resides thereon are critically important to the Company’s
successful operation.
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These systems have been subject to, and are likely to continue to be the target of, malware, cyberattacks and
cyberterrorism, ransomware attacks, phishing attacks, unauthorized access, online and offline fraud and other malicious
activity. These attacks are prevalent, continue to increase in frequency and sophistication, and are increasingly difficult to
prevent or detect. These systems also have known and unknown vulnerabilities. Once identified, the Company’s information
technology and information security personnel seek to remediate these vulnerabilities based, in part, on the level of risk
presented and the burden of remediation. For a number of reasons, including the introduction of new vulnerabilities, resource
constraints, competing business demands and dependence on third parties, a number of unremediated vulnerabilities will always
exist. Remediation of some vulnerabilities are outside of the control of the Company and third-party remediation efforts may
not be timely provided or implemented or otherwise adequate, even when the level of risk is critical or high. Further, certain
other potential causes of system damage or other negative system-related events are wholly or partially beyond the Company’s
control, such as natural disasters, vendor failures to satisfy service level requirements, third party negligence or intentional acts,
and power or telecommunications failures. These circumstances could expose the Company to system-related damages,
failures, interruptions, cyberattacks, as the Company experienced in December 2023 (as described further in Item 1C.
Cybersecurity), and other negative events or could otherwise disrupt the Company’s business and could also result in the loss
or unauthorized release, gathering, monitoring or destruction of confidential, proprietary and other information pertaining to
the Company, its customers, employees, agents or suppliers.
In conducting its business and delivering its products and services, the Company also utilizes service providers. These
service providers and the systems they utilize are typically subject to similar types of system- and information security-related
risks that the Company faces. The Company provides certain of these service providers with data, including nonpublic personal
information. There is no guarantee that the Company’s due diligence or ongoing vendor oversight will be sufficient to ensure
the integrity and security of the systems utilized by these service providers or the protection of the information that resides
thereon.
Certain laws and contracts the Company has entered into require it to comply with certain information security
requirements and to notify various parties, including consumers or customers, in the event of certain actual or potential data
breaches or systems failures, including those of the Company’s service providers. Further, the Company’s financial institution
customers have obligations to safeguard their systems and sensitive information and the Company may be bound contractually
and/or by regulation to comply with the same requirements. If the Company or its service providers fail to comply with
applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or
the imposition of fines, among other consequences.
Any inability of the Company or its service providers to prevent or adequately respond to the issues described above
could disrupt the Company’s business, delay the delivery of its products and services, inhibit its ability to retain existing
customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in
financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences that could be material to the
Company.
13.
Errors and fraud involving the transfer of funds may adversely affect the Company
The Company relies on its systems, employees and domestic and international banks to transfer its own funds and the
funds of third parties. In addition to relying on third-party banks to transfer these funds, the Company’s federal savings bank
subsidiary transfers funds on behalf of the Company as well as title agents that are not affiliates of the Company. These transfers
are susceptible to user input error, fraud, system interruptions, incorrect processing and similar errors that from time to time
result in lost funds or delayed transactions. The Company’s email and computer systems and systems used by its agents,
customers and other parties involved in a transaction have been subject to, and are likely to continue to be the target of,
fraudulent attacks, including attempts to cause the Company or its agents to improperly transfer funds. These attacks continue
to increase in frequency and sophistication. Funds transferred to a fraudulent recipient may not be recoverable. In certain
instances the Company may be liable for those unrecovered funds. The controls and procedures used by the Company to
prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or
other adverse consequences which could be material to the Company.
14. The Company’s failure to recruit and retain qualified employees may adversely affect the business
The Company’s continued success depends, in large part, on its ability to hire and retain qualified people. Competition
for highly qualified people is significant, and there is no assurance that the Company will be successful in attracting, training
or retaining people. If the Company is unable to attract and retain qualified people, its business and operations may be impaired
or disrupted.
19
15.
The Company’s use of a global workforce involves risks that could adversely affect the Company
The Company utilizes lower cost labor in countries such as India and the Philippines, among others. These countries are
subject to relatively high degrees of political and social instability and may lack the infrastructure to withstand natural disasters,
health crises and other catastrophe events. Such disruptions could decrease efficiency and increase the Company’s costs.
Weakness of the United States dollar in relation to the currencies used in these countries may also reduce the savings achievable
through this strategy. Laws, regulations, business requirements or social or political pressures may require the Company to
use labor based in the United States or may otherwise effectively increase the Company’s labor costs abroad. The Company
may not be able to pass on these increased costs to its customers.
16.
Acquisitions may have an adverse effect on our business
The Company has in the past acquired, and is expected to acquire in the future, other businesses. When businesses are
acquired, the Company may not be able to integrate or manage these businesses in such a manner as to realize the anticipated
synergies or otherwise produce returns that justify the investment. Acquired businesses may subject the Company to increased
regulatory or compliance requirements. The Company’s acquisitions have involved, and may continue to involve, the entry
into businesses in which the Company’s management has limited prior experience, making the Company reliant on the
management team of the acquired business. The Company may not be able to successfully retain employees of acquired
businesses or integrate them, and could lose customers, suppliers or other partners as a result of the acquisitions. The Company
may also assume or incur unanticipated liabilities from acquisitions. For these and other reasons, including changes in market
conditions, the projections used to value the acquired businesses may prove inaccurate. These and other factors related to
acquisitions could have a material adverse effect on the Company’s results of operations, financial condition and liquidity. The
Company’s management also will continue to be required to dedicate substantial time and effort to the integration of its
acquisitions. These efforts could divert management’s focus and resources from other strategic opportunities and operational
matters.
LEGAL AND COMPLIANCE RISK FACTORS
17.
Regulatory oversight and changes in government regulation could require the Company to raise capital,
make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares,
prohibit or limit the Company’s operations, make it more costly or burdensome to conduct such operations, result in
decreased demand for the Company’s products and services or otherwise adversely affect the Company
Most of the Company’s businesses are regulated by various federal, state, local and foreign governmental agencies.
These and other of the Company’s businesses also operate within statutory guidelines, which can include requirements to
maintain certain licenses at the federal, state and/or local levels. The industry in which the Company operates and the markets
into which it sells its products are also regulated and subject to statutory guidelines. In general, in recent years, the Company
experienced increasing regulatory oversight and became subject to increasingly complex statutory guidelines.
Regulatory oversight could require the Company to raise capital, and/or make it more difficult to deploy capital, including
dividends to stockholders and repurchases of the Company’s shares. It is possible that the group capital calculations,
particularly in an economic downturn, could have the effect of requiring the Company to raise capital and/or making it more
difficult to otherwise deploy capital, including dividends to stockholders and repurchases of the Company’s shares.
An increasing number of federal, state, and international laws and regulations apply to the collection, use, retention,
protection, disclosure, transfer, and other processing of personal data. The effects of these privacy and data protection laws,
including the cost of compliance and required changes in the manner in which the Company conducts its business, are not fully
known and are potentially significant, and the failure to comply could adversely affect the Company. The Company has incurred
costs to comply with these laws and to respond to inquiries about its compliance with them.
20
In addition, changes in the applicable regulatory environment, statutory guidelines or interpretations of existing
regulations or statutes; reform of government-sponsored enterprises such as the Federal National Mortgage Association
(“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”); enhanced governmental oversight or
efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit
or limit its future operations or make it more costly or burdensome to conduct such operations or result in decreased demand
for the Company’s products and services or a change in its competitive position. The impact of these changes would be more
significant if they involve jurisdictions in which the Company generates a greater portion of its title premiums, such as the
states of Arizona, California, Florida, New York, and Texas. These changes may compel the Company to reduce its prices,
may restrict its ability to implement price increases or acquire assets or businesses, may limit the manner in which the Company
conducts its business or otherwise may have a negative impact on its ability to generate revenues, earnings and cash flows.
18.
Scrutiny of the Company’s businesses and the industries in which it operates by governmental entities and
others could adversely affect the Company
The real estate settlement services industry, an industry in which the Company generates a substantial portion of its
revenue and earnings, and the mortgage servicing and subservicing industry are subject to continuous scrutiny by regulators,
legislators, the media and plaintiffs’ attorneys. Though often directed at these industries generally, these groups also focus
their attention directly on the Company’s businesses from time to time. In either case, this scrutiny may result in changes
which could adversely affect the Company’s operations and, therefore, its financial condition and liquidity.
Governmental entities have routinely inquired into certain practices in the real estate settlement services industry and the
mortgage servicing and subservicing industry to determine whether certain of the Company’s businesses or its competitors
have violated applicable laws, which include, among others, the insurance codes of the various jurisdictions, the Real Estate
Settlement Procedures Act, the Truth in Lending Act and similar state, federal and foreign laws. The CFPB, for example, has
actively utilized its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against
various participants in the mortgage and settlement industries. Departments of insurance in the various states, the CFPB and
other federal regulators and applicable regulators in international jurisdictions, either separately or together, also periodically
conduct targeted inquiries into the practices of title insurance companies, other settlement services providers and mortgage
servicers in their respective jurisdictions. Currently, the Company is the subject of regulatory inquiries.
Further, from time to time, plaintiffs’ lawyers have targeted, and are expected to continue to target, the Company and
other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct. These lawsuits
often involve large groups of plaintiffs and claims for substantial damages. These types of inquiries or proceedings have from
time to time resulted, and may in the future result, in findings of a violation of the law or other wrongful conduct and the
payment of fines or damages or the imposition of restrictions on the Company’s conduct. This could impact the Company’s
operations and financial condition. Moreover, these laws and standards of conduct often are ambiguous and, thus, it may be
difficult to ensure compliance. This ambiguity may force the Company to mitigate its risk by settling claims or by ending
practices that generate revenues, earnings and cash flows. Currently the Company is a party to class action lawsuits.
19.
Regulation of title insurance rates could adversely affect the Company
Title insurance rates are subject to extensive regulation, which varies from state to state. In many states the approval of
the applicable state insurance regulator is required prior to implementing a rate change. These regulations could hinder the
Company’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect its
results of operations, particularly in a rapidly declining market.
21
FINANCIAL RISK FACTORS
20.
Failures at financial institutions at which the Company deposits funds could adversely affect the Company
The Company deposits substantial funds in financial institutions. These funds include amounts owned by third parties,
such as escrow deposits, like-kind exchange deposits and investor, mortgagor and subservicer deposits. Should one or more
of the financial institutions at which deposits are maintained fail, there is no guarantee that the Company would recover the
funds deposited, whether through Federal Deposit Insurance Corporation coverage or otherwise. In the event of any such
failure, the Company also could be held liable for the funds owned by third parties. Unfavorable economic conditions may
lead to a heightened risk of failures of financial institutions at which the Company maintains deposits. Failures may be difficult
to predict and the Company may not be able to react in a sufficiently timely manner to avoid adverse effects on the Company.
21.
Unfavorable economic or other conditions could cause the Company to write off a portion of its goodwill
and other intangible assets
The Company performs an impairment test of the carrying value of goodwill and other indefinite-lived intangible assets
annually in the fourth quarter, or sooner if circumstances indicate a possible impairment. Finite-lived intangible assets are
subject to impairment tests on a periodic basis. Factors that may be considered in connection with this review include, without
limitation, underperformance relative to historical or projected future operating results, reductions in the Company’s stock price
and market capitalization, increased cost of capital and negative macroeconomic, industry and company-specific trends. These
and other factors could lead to a conclusion that goodwill or other intangible assets are impaired, in which case the Company
would be required to write off the portion believed to be impaired. Any substantial goodwill and other intangible asset
impairments that may be required could have a material adverse effect on the Company’s results of operations and financial
condition.
22.
The Company’s investment portfolio is subject to certain risks and could experience losses
The Company maintains a substantial investment portfolio, primarily consisting of fixed income debt securities. The
investment portfolio also includes adjustable-rate debt securities, common and preferred stock, as well as money-market and
other short-term investments. Securities in the Company’s investment portfolio are subject to certain economic and financial
market risks, such as credit risk, interest rate (including call, prepayment and extension) risk and/or liquidity risk. The risk of
loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions. Debt and
equity securities are carried at fair value on the Company’s balance sheet. Changes in the fair values of debt securities are
recorded as a component of accumulated other comprehensive income/loss on the balance sheet. For debt securities in an
unrealized loss position, where the loss is determined to be due to credit-related factors, the Company records the loss in
earnings. Changes in the fair values of marketable equity securities are recognized in earnings. Changes in the fair values of
securities in the Company’s investment portfolio have had an adverse impact on the Company and could have a material adverse
effect on the Company’s results of operations, statutory surplus, financial condition and cash flow.
23.
The Company’s venture investment portfolio is volatile and subject to certain risks and could experience
losses
The Company’s venture investment portfolio is primarily comprised of investments in the equity of private venture-stage
companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and
services), investments in funds that typically invest in these same types of companies, and a similar investment that is trading
publicly. The venture investment portfolio is managed independent of the Company’s portfolio of debt securities and
marketable equity securities, which is overseen by the Company’s investment department and an investment committee. The
Company may continue to make similar venture investments. These investments may cause material fluctuations in the
Company’s quarterly results of operations due to the recognition of gains or losses in connection with observable price changes,
such as from liquidity events, impairments, subsequent equity sales, or price changes in investments that begin trading publicly,
which changes can be volatile.
22
24.
Actual claims experience could materially vary from the expected claims experience reflected in the
Company’s reserve for incurred but not reported claims
The Company maintains a reserve for incurred but not reported (“IBNR”) claims pertaining to its title, escrow and other
insurance and guarantee products. The majority of this reserve pertains to title insurance policies, which are long-duration
contracts with the majority of the claims reported within the first few years following the issuance of the policy. Generally,
65% to 75% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate
to the six most recent policy years. Changes in expected ultimate losses and corresponding loss rates for recent policy years
are considered likely and could result in a material adjustment to the IBNR reserves. In uncertain economic times, an even
larger change is more likely. A material change in expected ultimate losses and corresponding loss rates for older policy years
is also possible, particularly for the ten most recent policy years. The estimates made by management in determining the
appropriate level of IBNR reserves could ultimately prove to be materially different from actual claims experience.
Changes in laws or regulations impacting real estate, particularly when applied retroactively, may cause a material change
in expected ultimate losses and corresponding loss rates for recent and/or older policy years. For example, the 2020 United
States Supreme Court decision in McGirt v. Oklahoma calls into question the governing authority for certain real estate-related
matters in Native American reservations once thought to have been disestablished. To the extent the Company, in those areas,
underwrote title insurance policies or closed real estate transactions in conformity with authority that ultimately proves
inapplicable, expected ultimate losses arising from those policies and transactions could change materially and could result in
a material change to loss rates.
25.
The Company may have to provide capital to one or more of its subsidiaries, which may necessitate
accessing funds from the Company’s revolving credit facility or otherwise
The Company is a holding company and its subsidiaries, from time to time, may need additional capital from the
Company to, for example, fund operations, meet regulatory requirements or pay liabilities. In order to provide such capital, the
Company may need to draw down on its revolving credit facility or access other sources of capital, which could negatively
affect its debt-to-capital ratio and liquidity position.
26.
The Company's ability to fulfill parent company obligations and/or pay dividends may be limited
The Company is a holding company whose primary assets are investments in its operating subsidiaries. The Company’s
ability to fulfill parent company obligations and/or declare and pay dividends is dependent on the ability of its subsidiaries to
pay dividends or repay funds. If the Company’s operating subsidiaries are not able to pay dividends or repay funds, the
Company may not be able to fulfill parent company obligations and/or declare and pay dividends. Moreover, pursuant to
insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and
advances available is limited. See Item 7 – MD&A – Liquidity and Capital Resources for details on dividend restrictions. The
Company may also be required to invest capital in its subsidiaries which could further limit its ability to fulfill parent company
obligations and/or declare and pay dividends.
27.
A reduction in the deposits at the Company’s federal savings bank subsidiary could require the Company
to borrow funds to maintain liquidity
The deposits of the Company’s federal savings bank subsidiary consist almost entirely of funds deposited by its affiliates,
the majority of which are from third parties to be held in trust pending the closing of real estate transactions. When real estate
transactions decline, aggregate deposits held in trust at the Company’s bank tend to decline. There is also a portion of the
bank’s deposits that are custodial funds held on behalf of clients of the Company’s residential mortgage subservicer subsidiary.
Such clients may cause their custodial funds to be moved out of the Company’s bank subsidiary in connection with the transfer
of ownership of mortgage servicing rights or loans, termination of subservicing contracts or otherwise. The likelihood of these
clients causing funds to be moved increases as interest rates rise, which could result in a marked decline in the bank’s deposits.
When there is a reduction in the bank’s deposits, the Company could be required to borrow funds to maintain the bank’s
liquidity.
23
GENERAL RISK FACTORS
28.
Certain provisions of the Company’s bylaws and certificate of incorporation, as well as regulatory hurdles,
may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that the Company’s
stockholders might consider favorable
The Company’s bylaws and certificate of incorporation contain provisions that could be considered “anti-takeover”
provisions because they make it harder for a third-party to acquire the Company without the consent of the Company’s
incumbent board of directors. Under these provisions:
•
election of the Company’s board of directors is staggered such that only three or four of the directors are elected by
the stockholders each year and the directors serve three year terms prior to reelection;
•
stockholders may not remove directors without cause, change the size of the board of directors or, except as may be
provided for in the terms of preferred stock the Company issues in the future, fill vacancies on the board of directors;
•
stockholders may act only at stockholder meetings and not by written consent;
•
stockholders must comply with advance notice provisions for nominating directors or presenting other proposals at
stockholder meetings; and
•
the Company’s board of directors may without stockholder approval issue preferred shares and determine their rights
and terms, including voting rights, or adopt a stockholder rights plan.
While the Company believes that they are appropriate, these provisions may only be amended by the affirmative vote of
the holders of approximately 67% of the Company’s issued voting shares. In addition, federal banking laws and regulations
and state insurance laws and regulations require third parties to obtain prior approval to acquire control of the Company due to
its status as a savings and loan holding company and an insurance holding company. These provisions and regulatory
requirements could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a
change of control transaction that might involve a premium price or otherwise be considered favorably by the Company’s
stockholders.
29.
The Company may be susceptible to claims of infringement and may not be able to adequately protect its
intellectual property
The Company relies on a combination of patents, trademarks, copyrights, trade secret laws, non-disclosure agreements,
contractual provisions and systems of internal safeguards to protect its intellectual property. As the Company expands its
utilization of innovative technologies, processes and techniques in the production and delivery of its products and services, the
Company may increasingly have to litigate to enforce and protect its intellectual property rights, which may divert Company
resources, cause reputational harm to the Company or result in other adverse consequences, including a loss of competitive
advantage, and there is no guarantee that such protection and enforcement efforts would be successful. In addition, third parties
may allege that the Company’s operations or activities infringe on their intellectual property rights, including through the
Company’s use of software containing open source code, which may expose the Company to third-party claims of ownership
of, or demands for the release of, the source code, the open source software and/or derivative works that were developed using
such software, or otherwise seeking to enforce the terms of the applicable open source license. Many of the risks associated
with usage of open source cannot be eliminated, and could, if not properly addressed, adversely affect the Company’s business.
Infringement claims may give rise to litigation, which could result in damages, injunctions prohibiting the Company from
providing certain products or services, entry into costly licensing arrangements or other adverse consequences.
Item 1B. Unresolved Staff Comments
Not applicable.
24
Item 1C. Cybersecurity
We recognize the critical importance of maintaining the safety and security of our systems and data and take a holistic
approach to overseeing and managing cybersecurity, which is supported by both management and our Board of Directors. The
Company’s Board, the Audit Committee of the Board and management devote significant resources to cybersecurity and risk
management processes to adapt to the changing cybersecurity landscape and respond to emerging threats in a timely and
effective manner. Our approach to cybersecurity risk management is multi-layered and includes governance and risk,
monitoring and incidence response, data security, application security, endpoint security, network security and perimeter
security.
The Company’s Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to the Audit
Committee of the Board. The Audit Committee receives quarterly reports from our Chief Information Security Officer
(“CISO”) regarding cybersecurity matters. The CISO also briefs the full Board of Directors on cybersecurity matters semi-
annually.
The Company maintains an extensive and structured enterprise risk management (“ERM”) program encompassing senior
executive leaders from all facets of its business, including operations, human resources, finance, accounting, treasury,
information security, information technology, legal/regulatory, internal audit, compliance, underwriting, and real estate. As
part of our ERM program, the Company maintains an Information Security Oversight Committee (“ISO Committee”) that
oversees the Company’s cybersecurity program from a management perspective.
The ISO Committee meets quarterly and is comprised of the Company’s Chief Executive Officer, Chief Financial Officer
and Chief Legal Officer, whose relevant expertise and experience can be found in the Company’s Proxy Statement on Schedule
14A filed on April 1, 2024.
The ISO Committee also includes the Co-Presidents of First American Title Insurance Company, the Vice-Chairman of
our data and analytics business and the President of our international division, who bring deep operational experience specific
to our businesses; the Chief Intellectual Property and Privacy Officer, who is responsible for protecting and advising on
innovation, data privacy and intellectual property; and is chaired by the Company’s Chief Risk Officer, who has over 25 years
of experience in risk management. The Company’s CISO and Chief Technology Officer (“CTO”) are participants on the ISO
Committee.
The Company’s CISO is primarily responsible for assessing and managing cybersecurity risks and threats and is
responsible for developing and implementing our information security program, working closely with the ISO Committee. The
CISO manages a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity
governance, cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response,
cyber forensics, insider threats and regulatory compliance. Our CISO has been with the Company for 14 years in various
information security leadership roles and has over 20 years of experience in the cybersecurity field. The CISO provides regular
reports to the ISO Committee that are shared with the Company’s Board of Directors.
The Company’s CTO is responsible for overseeing the Company’s overall technology strategy, including integrating
security considerations into all aspects of our technology development. Our CTO has over 20 years of experience in technology
management roles.
As part of our risk management process, the Company maintains an overall risk management program that encompasses
cybersecurity, conducts security audits, annual System and Organization Controls (“SOC 2”) testing, and ongoing risk
assessments using a company-wide risk framework. We also require employees with access to information systems to
undertake data protection and cybersecurity training. The Company has processes in place for assessing, identifying, and
managing material risks from potential cybersecurity incidents, including vulnerability identification, intrusion prevention,
encryption, endpoint protection, behavior analysis, mitigation and the processes and protocols set forth in the Company’s
incident response plans. Certain of our subsidiaries manage their own cybersecurity functions and coordinate with the
Company’s CISO. The Company also employs systems and processes designed to oversee and identify cybersecurity threats
associated with third-party vendors, including a risk assessment and rigorous evaluation of each vendor that may access, process
or store highly sensitive or proprietary data or that is systematically integrated with the Company’s systems or network. In
addition to our in-house cybersecurity capabilities, we engage assessors, consultants, auditors, and other third parties to assist
with assessing, identifying, mitigating and managing cybersecurity risks, including the maintenance of a Security Operations
Center that is co-managed between the Company and a managed security service provider (“MSSP”), which continuously
reviews the Company’s network using threat intelligence from a variety of sources and reports potential incidents from users.
25
While the Company has experienced cybersecurity threats to its data and systems, such threats have not materially
affected the Company, including our business strategy, results of operations or financial condition, with the exception of an
incident in the fourth quarter of 2023, as disclosed in a Current Report filed by the Company on Form 8-K on December 22,
2023, as amended on December 29, 2023 and January 12, 2024 and followed by a Current Report on Form 8-K on May 28,
2024. On June 21, 2024, the Company received a complaint, on a class action basis, relating to the incident in the fourth quarter
of 2023. For additional information on cybersecurity risks we face, see Item 1A. Risk Factors of this Annual Report, which
should be read in conjunction with the foregoing information.
Item 2. Properties
Each of our business segments uses our executive offices in Santa Ana, California. This office campus consists of five
office buildings, a technology center and a two-story parking structure, totaling approximately 490,000 square feet. The office
facilities we occupy are, in all material respects, in good condition and adequate for their intended use.
Item 3. Legal Proceedings
See Note 21 Litigation and Regulatory Contingencies to the consolidated financial statements included in Item 8.
Financial Statements and Supplementary Data of Part II of this report, which is incorporated by reference into this Item 3 of
Part I.
Item 4. Mine Safety Disclosures
Not applicable.
26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock Market Prices and Dividends
The Company’s common stock trades on the New York Stock Exchange (ticker symbol FAF). The approximate number
of record holders of common stock on February 10, 2025, was 1,762.
In January 2025, the Company’s board of directors declared a cash dividend of $0.54 per share. We expect that the
Company will continue to pay quarterly cash dividends at or above the current level. The timing, declaration and payment of
future dividends, however, falls within the discretion of the Company’s board of directors and will depend upon many factors,
including the Company’s financial condition and earnings, the capital requirements of our businesses, restrictions imposed by
applicable law and any other factors the board of directors deems relevant from time to time. In addition, the ability to pay
dividends also is potentially affected by the restrictions described in Note 2 Statutory Restrictions on Investments and
Stockholders’ Equity to the consolidated financial statements included in Item 8. Financial Statements and Supplementary
Data of Part II of this report.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Pursuant to the share repurchase program approved by the Company’s board of directors in June 2022, which program
has no expiration date, the Company may repurchase up to $400.0 million of the Company’s issued and outstanding common
stock. The following table describes purchases by the Company under the share repurchase program that settled during each
period set forth in the table. Prices in column (b) include commissions. Cumulatively, as of December 31, 2024, the Company
had repurchased $254.6 million (including commissions) of its shares authorized under the share repurchase program and had
the authority to repurchase an additional $145.4 million (including commissions) under that program.
Period
(a)
Total
Number of
Shares
Purchased
(b)
Average
Price Paid
per Share
(c)
Total Number of
Shares
Purchased as
Part
of Publicly
Announced Plans
or Programs
(d)
Maximum
Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs
October 1, 2024 to October 31, 2024
—
$
—
—
$
153,513,550
November 1, 2024 to November 30, 2024
50,230
66.16
50,230
150,190,463
December 1, 2024 to December 31, 2024
73,539
65.56
73,539
145,369,040
Total
123,769
$
65.80
123,769
$
145,369,040
Unregistered Sales of Equity Securities
During the year ended December 31, 2024, the Company did not issue any unregistered common stock.
27
Stock Performance Graph
The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the
SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, each as amended, except to the extent that it is specifically incorporated by reference into
such filing.
The following graph compares the cumulative total stockholder return on the Company’s common stock with the
corresponding cumulative total returns of the S&P 400 Mid Cap Index and an industry peer group for the period from
December 31, 2019 through December 31, 2024. The comparison assumes an investment of $100 on December 31, 2019 and
reinvestment of dividends. This historical performance is not indicative of future performance.
Comparison of Cumulative Total Return
First American
Financial Corporation
(FAF) (1)
Custom Peer
Group (1)(2)
S&P 400 Mid Cap
Index (1)
December 31, 2019
$
100
$
100
$
100
December 31, 2020
$
91
$
92
$
114
December 31, 2021
$
143
$
119
$
142
December 31, 2022
$
99
$
122
$
123
December 31, 2023
$
126
$
133
$
143
December 31, 2024
$
127
$
169
$
163
(1)
As calculated by Bloomberg Financial Services including reinvestment of dividends.
(2)
The custom peer group consists of the following companies: American Financial Group, Inc.; Assurant, Inc.; Axis
Capital Holdings Limited; Cincinnati Financial Corporation; Everest Group, Ltd.; Fidelity National Financial, Inc.;
Genworth Financial, Inc.; The Hanover Insurance Group, Inc.; Kemper Corporation; Mercury General Corporation; Old
Republic International Corp.; and W.R. Berkley Corporation, each of which are in the insurance industry. The
compensation committee of the Company utilizes the compensation practices of these companies as benchmarks in
setting the compensation of its executive officers.
28
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS MAY
CONTAIN THE WORDS “BELIEVE,” “ANTICIPATE,” “EXPECT,” “PLAN,” “PREDICT,” “ESTIMATE,” “PROJECT,”
“WILL BE,” “WILL CONTINUE,” “WILL LIKELY RESULT,” OR OTHER SIMILAR WORDS AND PHRASES.
RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET
FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED
RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE THE
FACTORS SET FORTH ON PAGES 4-5 OF THIS ANNUAL REPORT. THE FORWARD-LOOKING STATEMENTS SPEAK
ONLY AS OF THE DATE THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE TO UPDATE FORWARD-
LOOKING STATEMENTS TO REFLECT CIRCUMSTANCES OR EVENTS THAT OCCUR AFTER THE DATE THE
FORWARD-LOOKING STATEMENTS ARE MADE.
This Management’s Discussion and Analysis contains the financial measure adjusted debt to capitalization ratio that is
not presented in accordance with generally accepted accounting principles (“GAAP”) as it excludes the effects of secured
financings payable and accumulated other comprehensive loss. The Company is presenting this non-GAAP financial measure
because it provides the Company’s management and readers of this Annual Report on Form 10-K with additional insight into
the financial leverage of the Company. The Company does not intend for this non-GAAP financial measure to be a substitute
for any GAAP financial information. In this Annual Report on Form 10-K, this non-GAAP financial measure has been
presented with, and reconciled to, the most directly comparable GAAP financial measure. Readers of this Annual Report on
Form 10-K should use this non-GAAP financial measure only in conjunction with the comparable GAAP financial measure.
Because not all companies use identical calculations, the presentation of adjusted debt to capitalization ratio may not be
comparable to other similarly titled measures of other companies.
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with GAAP and reflect the consolidated
operations of the Company. The consolidated financial statements include the accounts of First American Financial
Corporation, all controlled subsidiaries and any variable interest entities where the Company is deemed the primary beneficiary.
All significant intercompany transactions and balances have been eliminated. Equity investments in which the Company
exercises significant influence but does not control and is not the primary beneficiary, are accounted for using the equity method
of accounting. Equity investments in which the Company does not exercise significant influence over the investee and without
readily determinable fair values, or non-marketable equity securities, are accounted for at cost, less impairment, and are adjusted
up or down for any observable price changes.
29
Reportable Segments
The Company consists of the following reportable segments:
•
The title insurance and services segment issues title insurance policies on residential and commercial property in
the United States and offers similar or related products and services internationally. This segment also provides
closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services
and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and
provides access to title plant data and records; provides appraisals and other valuation-related products and
services; provides lien release, document custodial and default-related products and services; provides document
generation services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust
and wealth management services. The Company, through its principal title insurance subsidiary and such
subsidiary’s affiliates, transacts its title insurance business through a network of direct operations and
agents. Through this network, the Company issues policies in the 49 states that permit the issuance of title insurance
policies, the District of Columbia and certain United States territories. The Company also offers title insurance,
closing services and similar or related products and services, either directly or through third parties in other
countries, including Canada, the United Kingdom, South Korea, Australia, New Zealand and various other
established and emerging markets.
•
The home warranty segment sells products including residential service contracts that cover residential systems,
such as heating and air conditioning systems, and certain appliances against failures that occur as the result of
normal usage during the coverage period. This business currently operates in 36 states and the District of
Columbia.
•
The corporate segment includes investments in venture-stage companies, certain financing facilities and corporate
services that support the Company’s business operations.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that
often involve a significant degree of judgment. The Company’s management considers the accounting policies described below
to be the most dependent on the application of estimates and assumptions in preparing the Company’s consolidated financial
statements. See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements for
a more detailed description of the Company’s significant accounting policies.
Provision for policy losses
The Company provides for title insurance losses through a charge to expense when the related premium revenue is
recognized. The amount charged to expense is generally determined by applying a rate (the loss provision rate) to total title
insurance premiums and escrow fees. The Company’s management estimates the loss provision rate at the beginning of each
year and reassesses the rate quarterly to ensure that the resulting incurred but not reported (“IBNR”) loss reserve and known
claims reserve included in the Company’s consolidated balance sheets together reflect management’s best estimate of the total
costs required to settle all IBNR and known claims. If the ending IBNR reserve is not considered adequate, an adjustment is
recorded.
The process of assessing the loss provision rate and the resulting IBNR reserve involves an evaluation of the results of
an in-house actuarial review. The Company’s in-house actuary performs a reserve analysis utilizing generally accepted
actuarial methods that incorporate cumulative historical claims experience and information provided by in-house claims and
operations personnel. Current economic and business trends are also contemplated as part of the reserve analysis. These
include conditions in the real estate and mortgage markets, changes in residential and commercial real estate values, and
changes in the levels of defaults and foreclosures that may affect claims levels and patterns of emergence, as well as any
company-specific factors that may be relevant to past and future claims experience. Results from the analysis include, but are
not limited to, a range of IBNR reserve estimates and a single point estimate for IBNR as of the balance sheet date.
30
For recent policy years at early stages of development (generally the last three years), IBNR is generally estimated using
a combination of expected loss rate and multiplicative loss development factor calculations. For more mature policy years,
IBNR generally is estimated using multiplicative loss development factor calculations. The expected loss rate method estimates
IBNR by applying an expected loss rate to total title insurance premiums and escrow fees and by adjusting for policy year
maturity using estimated loss development patterns. Multiplicative loss development factor calculations estimate IBNR by
applying factors derived from loss development patterns to losses realized to date. The expected loss rate and loss development
patterns are based on historical experience and the relationship of the history to the applicable policy years.
The Company’s management uses the IBNR point estimate from the in-house actuary’s analysis and other relevant
information concerning claims to determine what it considers to be the best estimate of the total amount required for the IBNR
reserve.
The volume and timing of title insurance claims are subject to cyclical influences from both the real estate and mortgage
markets. Title policies issued to lenders constitute a large portion of the Company’s title insurance volume. These policies
insure lenders against losses on mortgage loans due to title defects in the collateral property. Even if an underlying title defect
exists that could result in a claim, often the lender must realize an actual loss, or at least be likely to realize an actual loss, for
a title insurance liability to exist. As a result, title insurance claims exposure is sensitive to lenders’ losses on mortgage loans
and is affected in turn by external factors that affect mortgage loan losses, particularly macroeconomic factors.
A general decline in real estate prices can expose lenders to greater risk of losses on mortgage loans, as loan-to-value
ratios increase and defaults and foreclosures increase. Title insurance claims exposure for a given policy year is also affected
by the quality of mortgage loan underwriting during the corresponding origination year. The Company believes that the
sensitivity of claims to external conditions in the real estate and mortgage markets is an inherent feature of title insurance’s
business economics that applies broadly to the title insurance industry.
Title insurance policies are long-duration contracts with the majority of the claims reported to the Company within the
first few years following the issuance of the policy. Generally, 65% to 75% of claim amounts become known in the first six
years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected
ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material
adjustment to the IBNR reserves. Based on historical experience, management believes a 50 basis point change to the loss
rates for recent policy years, positive or negative, is reasonably likely given the long duration nature of a title insurance policy.
In uncertain economic times an even larger change is more likely. As examples, if the expected ultimate losses for each of the
last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be
an increase or decrease, as the case may be, of $159.0 million, and if expected ultimate losses for those same years were to
fluctuate by 100 basis points, the resulting impact would be $318.0 million. A material change in expected ultimate losses and
corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical
norms. The estimates made by management in determining the appropriate level of IBNR reserves could ultimately prove to
be materially different from actual claims experience.
The Company provides for claims losses relating to its home warranty business based on the average cost per claim and
historical loss experience as applied to the total of current claims incurred. The average cost per home warranty claim is
calculated using the average of the most recent 12 months of claims experience adjusted for estimated future increases in costs.
A summary of the Company’s loss reserves is as follows:
December 31,
2024
2023
(dollars in millions)
Known title claims
$
55.3
4.6% $
55.5
4.3%
IBNR title claims
1,109.4
93.0%
1,186.5
92.5%
Total title claims
1,164.7
97.6%
1,242.0
96.8%
Non-title claims
28.7
2.4%
40.4
3.2%
Total loss reserves
$ 1,193.4
100.0% $ 1,282.4
100.0%
31
Activity in the reserve for known title claims is summarized as follows:
December 31,
2024
2023
2022
(in millions)
Balance at beginning of year
$
55.5
$
62.1
$
66.3
Provision transferred from IBNR title claims related to:
Current year
38.6
24.6
28.4
Prior years
166.3
138.9
144.0
204.9
163.5
172.4
Payments, net of recoveries, related to:
Current year
35.2
21.9
25.0
Prior years
168.8
147.6
152.0
204.0
169.5
177.0
Other
(1.1)
(0.6)
0.4
Balance at end of year
$
55.3
$
55.5
$
62.1
Activity in the reserve for IBNR title claims is summarized as follows:
December 31,
2024
2023
2022
(in millions)
Balance at beginning of year
$
1,186.5
$
1,207.2
$
1,143.5
Provision related to:
Current year
172.9
161.5
248.4
Prior years
(34.6)
(21.6)
—
138.3
139.9
248.4
Provision transferred to known title claims related to:
Current year
38.6
24.6
28.4
Prior years
166.3
138.9
144.0
204.9
163.5
172.4
Other
(10.5)
2.9
(12.3)
Balance at end of year
$
1,109.4
$
1,186.5
$
1,207.2
The provisions for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, were
3.0%, 3.25% and 4.0% for the years ended December 31, 2024, 2023 and 2022, respectively. The 3.0% loss provision rate in
the current year reflects an ultimate loss rate of 3.75% for the current policy year and a reserve release of 0.75%, or
$34.6 million and for prior policy years, all of which are based on title insurance premiums and escrow fees for the year ended
December 31, 2024.
The provision in 2024 related to current year increased by $11.4 million, or 7.1%, from 2023 as a result of increases in
title premiums and escrow fees in 2024 from 2023. The provision in 2023 related to current year decreased by $86.9 million,
or 35.0%, from 2022 as a result of decreases in title premiums and escrow fees in 2023 from 2022.
For further discussion of title provision recorded in 2024, 2023 and 2022, see Results of Operations, page 38.
32
Fair value of debt securities
The Company categorizes the fair values of its debt securities using a three-level hierarchy for fair value measurements
that distinguishes between market participant assumptions developed based on market data obtained from sources independent
of the Company (observable inputs) and the Company’s own assumptions about market participant assumptions developed
based on the best information available in the circumstances (unobservable inputs). The hierarchy for inputs used in
determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that
observable inputs be used when available. The hierarchy level assigned to each security was based on management’s
assessment of the transparency and reliability of the inputs used to estimate the fair values at the measurement date. See
Note 17 Fair Value Measurements to the consolidated financial statements for a more detailed description of the three-level
hierarchy and a description for each level.
The fair values of debt securities were based on the market values obtained from independent pricing services that were
evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information and
price quotes from well-established, independent broker-dealers. The independent pricing services monitor market indicators,
industry and economic events, and for broker-quoted only securities, obtain quotes from market makers or broker-dealers that
they recognize to be market participants. The pricing services utilize the market approach in determining the fair values of the
debt securities held by the Company. The Company obtains an understanding of the valuation models and assumptions utilized
by the services and has controls in place to determine that the values provided represent fair values. The Company’s validation
procedures include comparing prices received from the pricing services to quotes received from other third-party sources for
certain securities with market prices that are readily verifiable. If the price comparison results in differences over a predefined
threshold, the Company will assess the reasonableness of the changes relative to prior periods given the prevailing market
conditions and assess changes in the issuers’ credit worthiness, performance of any underlying collateral and prices of the
instrument relative to similar issuances. To date, the Company has not made any material adjustments to the fair value
measurements provided by the pricing services.
Typical inputs and assumptions to pricing models used to value the Company’s debt securities include, but are not limited
to, benchmark yields, reported trades, broker-dealer quotes, credit spreads, credit ratings, bond insurance (if applicable),
benchmark securities, bids, offers, reference data and industry and economic events. For mortgage-backed securities, inputs
and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment
speeds.
Credit losses on debt securities
When the fair value of an available-for-sale debt security falls below its amortized cost, the Company must determine
whether the decline in fair value is due to credit-related factors or noncredit-related factors. Declines in fair value that are
credit-related are recorded on the balance sheet through an allowance for credit losses with a corresponding adjustment to
earnings and declines that are noncredit-related are recognized through other comprehensive income/loss.
If the Company intends to sell a debt security in an unrealized loss position or determines that it is more likely than not
that the Company will be required to sell a debt security before it recovers its amortized cost basis, the debt security is impaired
and it is written down to fair value with all losses recognized in earnings. As of December 31, 2024, the Company did not
intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be
required to sell any debt securities before recovery of their amortized cost basis.
For debt securities in an unrealized loss position for which the Company does not intend to sell the debt security and it
is not more likely than not that the Company will be required to sell the debt security, the Company determines whether the
loss is due to credit-related factors or noncredit-related factors. For debt securities in an unrealized loss position for which the
losses are primarily due to credit-related factors, the Company’s policy is to recognize the entire loss in earnings. For debt
securities in an unrealized loss position for which the losses are determined to be the result of both credit-related and noncredit-
related factors, the credit loss is determined as the difference between the present value of the cash flows expected to be
collected and the amortized cost basis of the debt security. The cash flows expected to be collected are discounted using the
effective interest rate (i.e., purchase yield) and for variable rate securities the interest rate is fixed at the rate in effect at the
credit loss measurement date.
Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security,
including the probability of default and the estimated timing and amount of recovery. The detailed inputs used to project
expected future cash flows may be different depending on the nature of the individual debt security.
33
Impairment assessment for goodwill
The Company is required to perform an annual goodwill impairment assessment for each reporting unit for which
goodwill has been allocated. The reporting units that have been allocated goodwill include title insurance and home warranty.
The Company’s trust and other services reporting unit has no allocated goodwill and is, therefore, not assessed for impairment.
The Company has elected to perform this annual assessment in the fourth quarter of each fiscal year or sooner if circumstances
indicate possible impairment. Based on accounting guidance, the Company has the option to perform a qualitative assessment
to determine if the fair value is more likely than not (i.e., a likelihood of greater than 50%) less than the carrying amount as a
basis for determining whether it is necessary to perform a quantitative impairment test, or may choose to forego a qualitative
assessment and perform a quantitative impairment test. The qualitative factors considered in this assessment may include
macroeconomic conditions, industry and market considerations, overall financial performance as well as other relevant events
and circumstances as determined by the Company. The Company evaluates the weight of each factor to determine whether it
is more likely than not that impairment may exist. If the results of a qualitative assessment indicate the more likely than not
threshold was not met, the Company may choose not to perform a quantitative impairment test. If, however, the more likely
than not threshold is met, the Company will perform a quantitative test as required and discussed below.
Management’s quantitative impairment testing compares the fair value of each reporting unit to its carrying amount. The
fair value of each reporting unit is determined by using discounted cash flow analysis and, where appropriate, market approach
valuations. If the fair value of the reporting unit exceeds its carrying amount, the goodwill is not considered impaired and no
additional analysis is required. However, if the carrying amount is greater than the fair value, an impairment charge is
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized limited
to the total amount of goodwill allocated to that reporting unit.
The quantitative impairment test for goodwill utilizes a variety of valuation techniques, all of which require the Company
to make estimates and judgments. Fair value is determined by employing an expected present value technique, which utilizes
expected cash flows and an appropriate discount rate. The use of comparative market multiples (the “market approach”)
compares the reporting unit to other comparable companies (if such comparables are present in the marketplace) based on
valuation multiples to arrive at a fair value. In assessing the fair value, the Company utilizes the results of the valuations
(including the market approach to the extent comparables are available) and considers the range of fair values determined under
all methods and the extent to which the fair value exceeds the carrying amount of the reporting unit.
The valuation of each reporting unit includes the use of assumptions and estimates of many critical factors, including
revenue growth rates and operating margins, discount rates and future market conditions, determination of market multiples
and the establishment of a control premium, among others. Forecasts of future operations are based, in part, on operating
results and the Company’s expectations as to future market conditions. These types of analyses contain uncertainties because
they require the Company to make assumptions and to apply judgments to estimate industry economic factors and the
profitability of future business strategies. However, if actual results are not consistent with the Company’s estimates and
assumptions, the Company may be exposed to future impairment losses that could be material.
The Company performed qualitative assessments for both reporting units in 2024 and 2022. In 2023, the Company chose
to perform a quantitative impairment test for its title insurance reporting unit and a qualitative assessment for its home warranty
reporting unit. The results of the Company’s qualitative assessments in 2024 and 2022 for both reporting units and, in 2023,
for the home warranty reporting unit, supported the conclusion that the reporting unit fair values were not more likely than not
less than their carrying amounts and, therefore, a quantitative impairment test was not considered necessary. Based on the
results of the quantitative test in 2023, the Company determined that the fair value for the title insurance reporting unit exceeded
its carrying amount and no additional analysis was required. As a result of the Company’s annual goodwill impairment
assessments, the Company did not record any goodwill impairment losses for 2024, 2023 or 2022.
34
Income taxes
The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. The Company evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of
existing temporary differences, the period in which they are expected to be recovered and expected levels of taxable income.
A valuation allowance is established when it is considered more likely than not that some or all of the deferred tax assets will
not be realized.
The Company recognizes the effect of income tax positions only if sustaining those positions is considered more likely
than not. Changes in recognition or measurement of uncertain tax positions are reflected in the period in which a change in
judgment occurs. The Company recognizes interest and penalties, related to uncertain tax positions in income tax expense.
Pending Accounting Pronouncements
See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included
in Item 8. Financial Statements and Supplementary Data of Part II of this report.
35
Results of Operations
Overview
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
(dollars in millions)
$ Change
% Change
$ Change
% Change
Revenues by Segment
Title insurance and services
$ 5,737.3
$ 5,724.8
$ 7,546.9
$
12.5
0.2
$(1,822.1)
(24.1)
Home warranty
425.7
417.2
419.0
8.5
2.0
(1.8)
(0.4)
Corporate and eliminations
(34.9)
(138.5)
(360.7)
103.6
74.8
222.2
61.6
$ 6,128.1
$ 6,003.5
$ 7,605.2
$
124.6
2.1
$(1,601.7)
(21.1)
A substantial portion of the revenues for the Company’s title insurance and services segment result from sales of, and
refinancings of loans on, residential and commercial real estate. In the home warranty segment, revenues associated with the
initial year of coverage are impacted by volatility in residential purchase transactions. Traditionally, the greatest volume of
real estate activity, particularly residential purchase activity, has occurred in the spring and summer months. However, changes
in interest rates, as well as other changes in general economic conditions in the United States and abroad, can cause fluctuations
in the traditional pattern of real estate activity.
The Company’s total revenues for 2024 were $6.1 billion, which reflected an increase of $124.6 million, or 2.1%, when
compared with $6.0 billion for 2023. This increase was primarily attributable to increases in direct premiums and escrow fees
of $193.9 million, or 8.6%, agent premiums of $112.6 million, or 4.6%, and information and other revenue of $22.3 million,
or 2.4%. The Company’s total revenues for 2024 also included $401.6 million of net investment losses compared to
$206.4 million of net investment losses for the prior year. The increase in direct premiums and escrow fees attributable to the
title insurance and services segment for 2024 totaled $191.9 million, or 10.3%, which included increases from domestic
residential refinance transactions, residential purchase transactions and domestic commercial transactions of $13.0 million, or
15.9%, $56.6 million, or 6.3% and $103.8 million, or 15.8%, respectively, in 2024, when compared to 2023.
According to the Mortgage Bankers Association’s January 19, 2025 Mortgage Finance Forecast (the “MBA Forecast”),
based on the total dollar value of the transactions, residential mortgage originations in the United States increased 22.0%,
purchase originations increased 4.0% and refinance originations increased 124.2% in 2024, when compared to 2023. This
volume of domestic residential mortgage origination activity contributed to an increase in direct premiums and escrow fees for
the Company’s direct title operations of 6.3% from domestic residential purchase transactions and a decrease of 15.9% from
domestic refinance transactions in 2024, when compared to 2023.
During 2024, the level of domestic title orders opened per day by the Company’s direct title operations were flat when
compared to 2023. Also, during 2024, residential refinance opened orders per day, residential purchase opened orders per day
and commercial opened orders per day increased by 20.2%, 1.4%, and 2.7%, respectively, when compared to 2023.
During 2024, the Company initiated a strategic investment portfolio rebalancing project. In connection with its
rebalancing project, the Company sold certain debt securities in an unrealized loss position, which resulted in realized losses
of $345.4 million and proceeds of $2.8 billion.
36
Title Insurance and Services
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
(dollars in millions)
$ Change
% Change
$ Change
% Change
Revenues
Direct premiums and escrow
fees
$ 2,048.3
$ 1,856.4
$ 2,662.9
$
191.9
10.3
$
(806.5)
(30.3)
Agent premiums
2,561.9
2,449.3
3,547.6
112.6
4.6
(1,098.3)
(31.0)
Information and other
938.2
917.1
1,127.1
21.1
2.3
(210.0)
(18.6)
Net investment income
534.3
540.2
359.1
(5.9)
(1.1)
181.1
50.4
Net investment losses
(345.4)
(38.2)
(149.8)
(307.2)
NM1
111.6
74.5
5,737.3
5,724.8
7,546.9
12.5
0.2
(1,822.1)
(24.1)
Expenses
Personnel costs
1,953.2
1,876.0
2,272.9
77.2
4.1
(396.9)
(17.5)
Premiums retained by agents
2,044.6
1,952.2
2,829.7
92.4
4.7
(877.5)
(31.0)
Other operating expenses
992.5
937.7
1,155.4
54.8
5.8
(217.7)
(18.8)
Provision for policy losses and
other claims
138.3
139.9
248.4
(1.6)
(1.1)
(108.5)
(43.7)
Depreciation and amortization
202.2
183.6
162.3
18.6
10.1
21.3
13.1
Premium taxes
63.7
59.1
86.6
4.6
7.8
(27.5)
(31.8)
Interest
96.6
82.3
34.2
14.3
17.4
48.1
140.6
5,491.1
5,230.8
6,789.5
260.3
5.0
(1,558.7)
(23.0)
Income before income taxes
$
246.2
$
494.0
$
757.4
$ (247.8)
(50.2)
$
(263.4)
(34.8)
Pretax margin
4.3%
8.6%
10.0%
(4.3)%
(50.0)
(1.4)%
(14.0)
(1)
Not meaningful
Direct premiums and escrow fees increased $191.9 million, or 10.3%, in 2024 from 2023 and decreased $806.5 million,
or 30.3%, in 2023 from 2022. The increase in direct premiums and escrow fees in 2024 from 2023 was primarily due to
increases in both domestic average revenue per order and the number of domestic title orders closed by the Company’s direct
title operations. The decrease in 2023 from 2022 was primarily due to a reduction in the number of domestic title orders closed
by the Company’s direct title operations, partially offset by an increase in domestic average revenue per order. The domestic
average revenues per order closed were $3,914, $3,651 and $3,498 for 2024, 2023 and 2022, respectively. The 7.2% increase
in average revenues per order closed in 2024 from 2023 was primarily due to increases in average revenues per order on
commercial and purchase transactions, partially offset by a shift in the mix from higher premium commercial transactions to
lower premium refinance transactions. The 4.4% increase in average revenues per order closed in 2023 from 2022 was due to
a shift in the mix from lower premium residential refinance and default transactions to higher premium commercial transactions,
partially offset by a decrease in the average revenues per order from commercial transactions. The Company’s direct title
operations closed 468,800, 455,500 and 695,900 domestic title orders during 2024, 2023 and 2022, respectively. The 2.9%
increase in orders closed in 2024 from 2023 and the 34.5% decrease in orders closed in 2023 from 2022 were generally
consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast.
Agent premiums increased $112.6 million, or 4.6%, in 2024 from 2023 and decreased $1.1 billion, or 31.0%, in 2023
from 2022. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash
payment is received by the Company. As a result, there is generally a delay between the agent’s issuance of a title policy and
the Company’s recognition of agent premiums. Therefore, full year agent premiums typically reflect mortgage origination
activity from the fourth quarter of the prior year through the third quarter of the current year. The increase in agent premiums
in 2024 from 2023 was generally consistent with the 2.6% decrease in the Company’s direct premiums and escrow fees in the
twelve months ended September 30, 2024 as compared with the twelve months ended September 30, 2023. The decrease in
agent premiums in 2023 from 2022 was generally consistent with the 34.0% decrease in the Company’s direct premiums and
escrow fees in the twelve months ended September 30, 2023 as compared with the twelve months ended September 30, 2022.
37
Information and other revenues primarily consist of revenues generated from fees associated with title search and related
reports, title and other real property records and images, other non-insured settlement services and risk mitigation products and
services. These revenues generally trend with direct premiums and escrow fees but are typically less volatile since a portion
of the revenues are subscription based and do not fluctuate with transaction volumes.
Information and other revenues increased $21.1 million, or 2.3%, in 2024 from 2023 and decreased $210.0 million, or
18.6%, in 2023 from 2022. The increase in information and other revenues in 2024 from 2023 was primarily attributable to
increased volume in the Company's commercial and international businesses. The decrease in information and other revenues
in 2023 from 2022 was primarily attributable to decreases in the demand for the Company’s information products, post-close
services and document generation services.
Net investment income decreased $5.9 million, or 1.1%, in 2024 from 2023 and increased $181.1 million, or 50.4%, in
2023 from 2022. The decrease in 2024 from 2023 was primarily attributable to declines in the Company’s escrow and tax-
deferred property exchange balances, partially offset by an increase in interest income from the Company’s warehouse lending
business and investment portfolio. The increase in 2023 from 2022 was primarily attributable to the positive impact of higher
interest rates on the Company’s cash balances, tax-deferred property exchange and escrow balances and investment
portfolio. The increase was also driven by an increase in interest income from the company’s warehouse lending business.
Net investment gains/losses totaled losses of $345.4 million for 2024 and were primarily attributable to losses realized
from the Company’s investment portfolio rebalancing project discussed above and asset impairments, partially offset by an
increase in the fair values of marketable equity securities. Net investment losses of $38.2 million for 2023 were primarily
attributable to losses recognized on sales of debt securities, partially offset by changes in the fair values of marketable equity
securities. Net investment losses of $149.8 million for 2022 were primarily attributable to losses recognized on sales of debt
securities and changes in the fair values of marketable equity securities, partially offset by a $51.1 million gain realized on the
sale of an investment in a title insurance business.
Direct operations in the title insurance and services segment are labor intensive; accordingly, a major expense component
is personnel costs. Labor costs are driven by two primary considerations: the need to optimize staffing levels to match the level
of corresponding or anticipated new orders and the need to provide quality service. The Company continues to closely monitor
order volumes and related staffing levels and adjusts staffing levels as considered necessary. The Company’s direct title
operations opened 634,300, 629,100 and 895,500 domestic title orders in 2024, 2023 and 2022, respectively, representing an
increase of 0.8% in 2024 from 2023 and a decrease of 29.7% in 2023 from 2022.
Personnel costs increased $77.2 million, or 4.1%, in 2024 from 2023 and decreased $396.9 million, or 17.5%, in 2023
from 2022. The increase in personnel costs in 2024 from 2023 was primarily attributable to higher salary expense, incentive
compensation due to higher revenue and profitability, employee benefits and payroll tax expense. The decrease in personnel
costs in 2023 from 2022 was primarily attributable to lower incentive compensation as a result of lower revenue and
profitability, declines in salary, payroll tax and employee benefit expense driven by lower headcount, lower overtime and
temporary labor expense on lower volumes and lower severance expense. Personnel costs included severance expenses of
$8.3 million, $12.6 million, and $34.7 million for 2024, 2023, and 2022, respectively.
A summary of premiums retained by agents and agent premiums is as follows:
(dollars in millions)
2024
2023
2022
Premiums retained by agents
$
2,044.6
$
1,952.2
$
2,829.7
Agent premiums
$
2,561.9
$
2,449.3
$
3,547.6
% retained by agents
79.8%
79.7%
79.8%
The premium split between underwriter and agents is in accordance with the respective agency contracts and can vary
from region to region due to divergences in real estate closing practices and state regulations. As a result, the percentage of
title premiums retained by agents can vary due to the geographic mix of revenues from agency operations. The changes in the
percentage of title premiums retained by agents in 2024 from 2023 and in 2023 from 2022 were primarily due to changes in
the geographic mix of agency revenues.
38
Other operating expenses increased $54.8 million, or 5.8%, in 2024 from 2023 and decreased $217.7 million, or 18.8%,
in 2023 from 2022. The increase in 2024 from 2023 was primarily attributable to higher production expense, software expense,
legal expense and the impact of an out-of-period adjustment of $6.2 million to write-off certain uncollectible balances related
to fees that should have been previously written off, and lower bank credits. The decrease in 2023 from 2022 was primarily
attributable to lower production expense due to lower transaction volumes, a decline in professional services expense and an
increase in bank credits, partially offset by an increase in software expense.
The provisions for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees,
were 3.0%, 3.25%, and 4.0% for 2024, 2023, and 2022, respectively.
The 3.0% loss provision rate in the current year reflects an ultimate loss rate of 3.75% for the current policy year and a
reserve release of 0.75%, or $34.6 million and for prior policy years, all of which are based on title insurance premiums and
escrow fees for 2024.
As of December 31, 2024, the IBNR claims reserve for the title insurance and services segment was $1.1 billion, which
reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of
$965.8 million to $1.2 billion. The range limits are $143.6 million below and $135.7 million above management’s best
estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve.
Actuarial estimates are sensitive to assumptions used in models, as well as the structures of the models themselves, and to
changes in claims payment and incurral patterns, which can vary materially due to economic conditions, among other factors.
The 2023 loss provision rate of 3.25% reflected the ultimate loss rate for policy year 2023 of 3.75% and a reserve release
of 0.5%, or $21.6 million for prior policy years, all of which are based on title insurance premiums and escrow fees for
2023. The 2022 loss provision rate of 4.0% reflected the ultimate loss rate for policy year 2022 and no change in loss reserve
estimates for prior policy years.
Depreciation and amortization expense increased $18.6 million, or 10.1%, in 2024 from 2023 and $21.3 million, or
13.1%, in 2023 from 2022. The increase in depreciation and amortization expense in 2024 from 2023 was primarily attributable
to higher amortization of capitalized software from recently deployed digital settlement products, partially offset by lower
purchase-related amortization. The increase in depreciation and amortization expense in 2023 from 2022 was primarily
attributable to higher amortization of capitalized software.
Insurers generally are not subject to state income or franchise taxes. However, in lieu thereof, a premium tax is imposed
on certain operating revenues, as defined by statute. Tax rates and bases vary from state to state; accordingly, the total premium
tax burden is dependent upon the geographical mix of operating revenues. The Company’s noninsurance subsidiaries are
subject to state income tax and do not pay premium tax. Accordingly, the Company’s total tax burden at the state level for the
title insurance and services segment is composed of a combination of premium taxes and state income taxes. Premium taxes
as a percentage of title insurance premiums and escrow fees were 1.4% for 2024, 2023 and 2022.
Interest expense increased $14.3 million, or 17.4%, in 2024 from 2023 and $48.1 million, or 140.6%, in 2023 from
2022. The increases in 2024 from 2023 and 2023 from 2022 were primarily attributable to higher interest expense in the
Company’s warehouse lending business. The increase in 2023 from 2022 was also attributable to higher deposit balances at
the Company's banking operations.
Pretax margins for the title insurance business reflect the high cost of performing the essential services required before
insuring title, whereas the corresponding revenues are subject to regulatory and competitive pricing restraints. Due to the
relatively high proportion of fixed costs in the title insurance business, pretax margins generally improve as closed order
volumes increase. Pretax margins for the segment are also impacted by (1) net investment income and net investment gains or
losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and
type (resale, refinancing or new construction) of real estate activity and (3) the percentage of title insurance premiums generated
by agency operations as margins from direct operations are generally higher than from agency operations due primarily to the
large portion of the premium that is retained by the agent. The title insurance and services segment recorded pretax margins of
4.3%, 8.6% and 10.0% for 2024, 2023 and 2022, respectively.
39
Home Warranty
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
(dollars in millions)
$ Change
% Change
$ Change
% Change
Revenues
Direct premiums
$
397.8
$
395.6
$
413.1
$
2.2
0.6
$
(17.5)
(4.2)
Information and other
22.5
21.7
13.3
0.8
3.7
8.4
63.2
Net investment income
4.0
5.9
5.1
(1.9)
(32.2)
0.8
15.7
Net investment gains (losses)
1.4
(6.0)
(12.5)
7.4
123.3
6.5
52.0
425.7
417.2
419.0
8.5
2.0
(1.8)
(0.4)
Expenses
Personnel costs
81.2
77.8
77.3
3.4
4.4
0.5
0.6
Other operating expenses
86.0
82.8
75.7
3.2
3.9
7.1
9.4
Provision for policy losses and other
claims
184.4
193.1
211.8
(8.7)
(4.5)
(18.7)
(8.8)
Depreciation and amortization
5.1
4.8
5.1
0.3
6.3
(0.3)
(5.9)
Premium taxes
4.6
4.4
4.5
0.2
4.5
(0.1)
(2.2)
361.3
362.9
374.4
(1.6)
(0.4)
(11.5)
(3.1)
Income before income taxes
$
64.4
$
54.3
$
44.6
$
10.1
18.6
$
9.7
21.7
Pretax margin
15.1%
13.0%
10.6%
2.1%
16.2
2.4%
22.6
Direct premiums increased $2.2 million, or 0.6%, in 2024 from 2023 and decreased $17.5 million, or 4.2% in 2023 from
2022. The increase in direct premiums in 2024 from 2023 was primarily attributable to an increase in the average price per
policy. The decrease in direct premiums in 2023 from 2022 was primarily attributable to a decline in real estate transactions.
Net investment gains/losses totaled gains of $1.4 million for 2024 and were primarily due to an increase in the fair values
of marketable equity securities. Net investment gains/losses totaled losses of $6.0 million for 2023 and were primarily due to
losses recognized on sales of debt securities. Net investment gains/losses totaled losses of $12.5 million for 2022 and were
primarily due to losses recognized on sales of debt securities and from decreases in the fair values of marketable equity
securities.
Personnel costs and other operating expenses increased $6.6 million, or 4.1%, in 2024 from 2023 and $7.6 million, or
5.0%, in 2023 from 2022. The increase in 2024 from 2023 was primarily attributable to higher advertising, postage, salary and
employee benefits expense, partially offset by lower sales tax, technology, and deferred policy acquisition expense. The
increase in 2023 from 2022 was primarily attributable to higher advertising expense.
The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 46.4% in 2024,
48.8% in 2023 and 51.3% in 2022. The decrease in the claims rate in 2024 from 2023 was primarily attributable to lower
severity, partially offset by higher frequency. The decrease in the claims rate in 2023 from 2022 was primarily attributable to
lower claims severity, partially offset by higher claims volume.
A large part of the revenues for the home warranty segment are generated by renewals and are not dependent on the
level of real estate activity in the year of renewal. With the exception of the provision for losses, the majority of the expenses
for this segment are variable in nature and, therefore, generally fluctuate with revenue. Accordingly, pretax margins (before
provision for losses) are relatively constant, although, as a result of some fixed expenses, profit margins (before provision for
losses) should nominally improve as premium revenues increase. Pretax margins are also impacted by net investment income
and net investment gains or losses, which may not move in the same direction as premium revenues. The home warranty
segment recorded pretax margins of 15.1%, 13.0% and 10.6% for 2024, 2023 and 2022, respectively.
40
Corporate
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
(dollars in millions)
$ Change
% Change
$ Change
% Change
Revenues
Direct premiums and escrow fees
$
—
$
—
$
8.8
$
—
—
$
(8.8)
(100.0)
Information and other
—
—
8.1
—
—
(8.1)
(100.0)
Net investment income (loss)
24.1
25.1
(21.7)
(1.0)
(4.0)
46.8
215.7
Net investment losses
(57.5)
(162.3)
(353.4)
104.8
64.6
191.1
54.1
(33.4)
(137.2)
(358.2)
103.8
75.7
221.0
61.7
Expenses
Personnel costs
24.9
35.3
(10.6)
(10.4)
(29.5)
45.9
433.0
Other operating expenses
35.2
46.5
41.2
(11.3)
(24.3)
5.3
12.9
Provision for policy losses and other
claims
(2.7)
3.3
26.1
(6.0)
(181.8)
(22.8)
(87.4)
Depreciation and amortization
0.1
0.1
0.1
—
—
—
—
Interest
54.3
51.4
61.2
2.9
5.6
(9.8)
(16.0)
111.8
136.6
118.0
(24.8)
(18.2)
18.6
15.8
Loss before income taxes
$ (145.2) $ (273.8) $ (476.2) $
128.6
47.0
$
202.4
42.5
Net investment income/loss totaled income of $24.1 million and $25.1 million for 2024 and 2023, respectively, and
losses of $21.7 million in 2022. The changes in net investment income/loss for all years were primarily attributable to
fluctuations in earnings and losses on investments associated with the Company’s deferred compensation plan.
Net investment losses totaled $57.5 million, $162.3 million and $353.4 million for 2024, 2023, and 2022, respectively,
resulting from impairment charges and observable pricing changes on non-marketable equity investments within the
Company’s venture investment portfolio and included unrealized losses and gains resulting from fluctuations in the fair value
of the Company’s investment in Offerpad Solutions Inc.
Personnel costs and other operating expenses totaled $60.1 million, $81.8 million and $30.6 million in 2024, 2023 and
2022, respectively. The decrease in 2024 when compared to 2023 and the increase in 2023 when compared to 2022 were
primarily attributable to fluctuations in returns on participant investments within the Company’s deferred compensation plan.
The decrease in 2024 also included a reinsurance credit related to the wind down of the property and casualty insurance business
and lower legal and incentive compensation expense related to the cybersecurity incident in 2023.
Interest expense increased $2.9 million, or 5.6%, in 2024 from 2023 and decreased $9.8 million, or 16.0%, in 2023 from
2022. The increase in 2024 from 2023 was primarily due to the issuance of $450 million 5.45% senior unsecured notes in
September 2024, partially offset by the repayment of the Company's $300 million 4.60% senior unsecured notes, upon maturity,
in November 2024. The decrease in 2023 from 2022 was primarily attributable to the repayment of the Company's $250 million
4.30% senior unsecured notes, upon maturity, in February 2023.
Eliminations
The Company’s inter-segment eliminations were not material for 2024, 2023 and 2022.
41
Income Taxes
The Company's actual income tax expense differs from the expense computed by applying the federal income tax rate of
21% for 2024, 2023 and 2022. A reconciliation of these differences is as follows:
Year ended December 31,
2024
2023
2022
(dollars in millions)
Taxes calculated at federal rate
$
34.7
21.0% $
57.6
21.0% $
68.4
21.0%
State taxes, net of federal benefit
(8.3)
(5.0)
(6.4)
(2.3)
(5.3)
(1.5)
Change in liability for tax positions
6.8
4.1
10.7
3.9
(0.8)
(0.3)
Foreign income taxed at different rates
8.6
5.2
9.5
3.5
2.1
0.6
Unremitted foreign earnings
(1.4)
(0.8)
1.2
0.4
—
—
Federal tax credits
(14.6)
(8.8)
(17.3)
(6.3)
—
—
Valuation allowance
11.4
6.9
7.7
2.8
—
—
Other items, net
(4.4)
(2.8)
(4.1)
(1.5)
(4.0)
(1.1)
$
32.8
19.8% $
58.9
21.5% $
60.4
18.7%
The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were
19.8% for 2024, 21.5% for 2023 and 18.7% for 2022. The differences in the effective tax rates year over year are typically due
to changes in state and foreign income taxes resulting from fluctuations in the Company’s noninsurance and foreign
subsidiaries’ contributions to pretax income and changes in the ratio of permanent differences to income before income
taxes. The effective income tax rates also reflect the impact on pretax earnings from impairment losses on the Company’s
venture investment portfolio and, for 2024, realized losses from sales of debt securities in an unrealized loss position in
connection with the Company’s portfolio rebalancing project. In addition, the effective tax rates for 2024 and 2023 reflect tax
credits claimed in current and prior years and a valuation allowance recorded against losses on certain equity investments. The
effective tax rate for 2022 also reflects the benefits from the resolution of state tax matters from prior years.
Net Income and Net Income Attributable to the Company
Net income and per share information are summarized as follows:
Year ended December 31,
2024
2023
2022
(in millions, except per share amounts)
Net income attributable to the Company
$
131.1
$
216.8
$
263.0
Net income per share attributable to the Company’s
stockholders:
Basic
$
1.26
$
2.08
$
2.46
Diluted
$
1.26
$
2.07
$
2.45
Weighted-average common shares outstanding:
Basic
103.9
104.3
107.0
Diluted
104.3
104.6
107.3
See Note 15 Earnings Per Share to the consolidated financial statements for further discussion of earnings per share.
42
Liquidity and Capital Resources
Cash requirements. The Company generates cash primarily from sales of its products and services and from investment
income. The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on
its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments and loans in
private companies and repurchases of its common stock. Management forecasts the cash needs of the holding company and
its primary subsidiaries and regularly reviews their short-term and long-term projected sources and uses of funds, as well as
the asset, liability, investment and cash flow assumptions underlying such forecasts. Based on the Company’s ability to
generate cash flows from operations, its liquid-asset position and amounts available on its revolving credit facility, management
believes that its resources are sufficient to satisfy its anticipated operational cash requirements and obligations for at least the
next twelve months.
The substantial majority of the Company’s business is dependent upon activity in the real estate and mortgage markets,
which are cyclical and seasonal. Periods of increasing interest rates and reduced affordability, supply and mortgage financing
availability generally have an adverse effect on residential real estate activity and, therefore, typically decrease the Company’s
revenues. In contrast, periods of declining interest rates and increased affordability, supply and mortgage financing availability
generally have a positive effect on residential real estate activity, which typically increases the Company’s
revenues. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and
summer months. Residential refinance activity is typically more volatile than purchase activity and is highly impacted by
changes in interest rates. Commercial real estate volumes are less sensitive to changes in interest rates but fluctuate based on
local supply and demand conditions for space and financing availability.
Cash provided by operating activities totaled $897.5 million, $354.3 million and 777.6 million for 2024, 2023 and 2022,
respectively, after claim payments, net of recoveries, of $397.8 million, $381.8 million and $434.3 million, respectively. The
principal nonoperating uses of cash and cash equivalents for 2024, 2023 and 2022 were advances and repayments under secured
financing agreements, purchases of debt and equity securities, dividends to common stockholders, capital expenditures and
repurchases of company shares. Principal nonoperating uses of cash and cash equivalents also included decreases in deposits
at the Company’s banking operations for 2024, repayment of senior unsecured notes for 2024 and 2023, and acquisitions for
2022. The most significant nonoperating sources of cash and cash equivalents for 2024, 2023 and 2022 were borrowings and
collections under secured financing agreements, and proceeds from the sales and maturities of debt and equity securities.
Principal nonoperating sources of cash and cash equivalents also included proceeds from issuance of unsecured senior notes in
2024 and increases in deposits at the Company’s banking operations for 2023 and 2022. The net effect of all activities on total
cash and cash equivalents were decreases of $1.9 billion and $4.5 million for 2024 and 2022, respectively, and an increase of
$2.4 billion for 2023. The increases to cash and cash equivalents and deposits in 2023 related to the cybersecurity incident are
further discussed below.
The decreases in the Company’s cash and deposit liability balances at December 31, 2024 when compared to
December 31, 2023, reflect the Company’s return to a normal allocation process for managing escrow deposits at its federal
savings bank subsidiary in 2024. Due to the cybersecurity incident in late December 2023, the Company maintained a higher
proportion of escrow deposits at its federal savings bank at December 31, 2023.
The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock
repurchases, capital expenditures, acquisitions and investments. In September 2024, the quarterly cash dividend was increased
to 54 cents per common share, representing a 2% increase. The dividend increase was effective beginning with the September
2024 dividend. In January 2025, the Company's board of directors approved a first quarter cash dividend of 54 cents per
common share. Management expects that the Company will continue to pay quarterly cash dividends at or above the current
level. The timing, declaration and payment of future dividends, however, falls within the discretion of the Company’s board
of directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital
requirements of the Company’s businesses, restrictions imposed by applicable law and any other factors the board of directors
deems relevant from time to time.
The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $145.4 million
remained as of December 31, 2024. Purchases may be made from time to time by the Company in the open market at prevailing
market prices or in privately negotiated transactions. During the year ended December 31, 2024, the Company repurchased
and retired 1.2 million shares of its common stock for a total purchase price of $68.5 million and, as of December 31, 2024,
the Company has repurchased and retired 4.7 million shares of its common stock under the current authorization for a total
purchase price of $254.6 million.
43
Holding company. First American Financial Corporation is a holding company that conducts all of its operations
through its subsidiaries. The holding company’s current cash requirements include payments of principal and interest on its
debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses. The
holding company is dependent upon dividends and other payments from its operating subsidiaries to meet its cash
requirements. The Company’s target is to maintain a cash balance at the holding company equal to at least twelve months of
estimated cash requirements. At certain points in time, the actual cash balance at the holding company may vary from this
target due to, among other factors, the timing and amount of cash payments made and dividend payments received. Pursuant
to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans
and advances available to the holding company is limited, principally for the protection of policyholders. As of
December 31, 2024, under such regulations, the maximum amount available to the holding company from its insurance
subsidiaries for 2025, without prior approval from applicable regulators, was dividends of $535.0 million and loans and
advances of $114.2 million. However, the timing and amount of dividends paid by the Company’s insurance subsidiaries to
the holding company falls within the discretion of each insurance subsidiary’s board of directors and will depend upon many
factors, including the level of total statutory capital and surplus required to support minimum financial strength ratings by
certain rating agencies. Such restrictions have not had, nor are they expected to have, an impact on the holding company’s
ability to meet its cash obligations.
As of December 31, 2024, the holding company’s sources of liquidity included $196.2 million of cash and cash
equivalents and $900.0 million available on the Company’s revolving credit facility. Management believes that liquidity at the
holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months.
Financing. On November 15, 2024, the Company repaid its $300.0 million 4.60% senior unsecured notes, upon
maturity, through available cash at the holding company.
In September 2024, the Company issued $450.0 million of 5.45% senior unsecured notes due in 2034. Interest is due
semi-annually on March 30 and September 30, beginning March 30, 2025.
The Company maintains a senior unsecured credit agreement with JPMorgan Chase Bank, N.A., in its capacity as
administrative agent, and the lenders party thereto that provides for a $900.0 million revolving credit facility. The credit
agreement includes an expansion option that permits the Company, subject to satisfaction of certain conditions, to increase the
revolving commitments and/or add term loan tranches in an aggregate amount not to exceed $450.0 million. The obligations
of the Company under the credit agreement are neither secured nor guaranteed. Proceeds from borrowings made from time to
time under the credit agreement may be used for general corporate purposes. Unless terminated earlier, the credit agreement
will terminate on May 17, 2028. At December 31, 2024, the Company had no outstanding borrowings under the facility.
At the Company’s election, borrowings of revolving loans under the credit agreement bear interest at (a) the Alternate
Base Rate plus the applicable spread, (b) the Adjusted Term SOFR Rate plus the applicable spread, or (c) the Adjusted Daily
Simple SOFR plus the applicable spread (in each case as defined in the credit agreement). The Company may select interest
periods of one, three or six months for Adjusted Term SOFR Rate borrowings of loans. The applicable spread varies depending
upon the Debt Rating assigned by Moody’s Investor Service, Inc., Standard & Poor's Rating Services and/or Fitch Ratings Inc.
The minimum applicable spread for Alternate Base Rate borrowings is 0.125% and the maximum is 0.75%. The minimum
applicable spread for Adjusted Term SOFR Rate and Adjusted Daily Simple SOFR borrowings is 1.125% and the maximum
is 1.75%. The Alternate Base Rate is subject to a floor of 1.00% and the Adjusted Term SOFR Rate and the Adjusted Daily
Simple SOFR are each subject to a floor of 0.00%. The rate of interest on any term loans incurred in connection with the
expansion option will be established at or about the time such loans are made and may differ from the rate of interest on
revolving loans.
The credit agreement includes representations and warranties, reporting covenants, affirmative covenants, negative
covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of
default the lenders may accelerate the loans. Upon the occurrence of certain insolvency and bankruptcy events of default the
loans will automatically accelerate. As of December 31, 2024, the Company was in compliance with the financial covenants
under the credit agreement.
44
In addition to amounts available under its credit facility, certain subsidiaries of the Company maintain separate financing
arrangements. The primary financing arrangements maintained by subsidiaries of the Company are as follows:
•
FirstFunding, Inc., a specialized warehouse lender to correspondent mortgage lenders, maintains secured warehouse
lending facilities with several banking institutions. At December 31, 2024, outstanding borrowings under these
facilities totaled $643.8 million.
•
First American Trust, FSB (“FA Trust”), a federal savings bank, maintains a secured line of credit with the Federal
Home Loan Bank and maintains access to the Federal Reserve's Discount Window. At December 31, 2024, no
amounts were outstanding under any of these facilities.
•
First Canadian Title Company Limited, a Canadian title insurance and services company, maintains credit facilities
with certain Canadian banking institutions. At December 31, 2024, no amounts were outstanding under these
facilities.
The Company’s debt to capitalization ratios were 30.8% and 28.6% at December 31, 2024 and 2023, respectively. The
Company’s adjusted debt to capitalization ratios, excluding secured financings payable of $643.8 million and $553.3 million
and accumulated other comprehensive loss of $496.4 million and $655.8 million at December 31, 2024 and 2023, were 22.2%
and 20.2%, respectively.
Investment portfolio. The Company maintains a high quality, liquid portfolio of debt and marketable equity securities
that is primarily held at its insurance and banking subsidiaries. As of December 31, 2024, 95% of the Company’s investment
portfolio consisted of debt securities, of which 71% were either United States government-backed or rated AAA/Aaa and 97%
were either rated or classified as investment grade or better. Percentages are based on the estimated fair values of the securities.
Credit ratings reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated
differently among the rating agencies, the lowest rating was selected. For further information on the credit quality of the
Company’s debt securities portfolio at December 31, 2024, see Note 3 Debt Securities to the consolidated financial statements.
In addition to its debt and marketable equity securities portfolio, the Company maintains investments in non-marketable
equity securities and securities accounted for under the equity method. For further information on the Company’s equity
securities, see Note 4 Equity Securities to the consolidated financial statements.
Capital expenditures. Capital expenditures, which are primarily related to software development costs and purchases
of property and equipment and software licenses, totaled $235.2 million, $278.7 million and $274.9 million for 2024, 2023 and
2022, respectively.
Off-balance sheet arrangements. The Company administers escrow deposits as a service to customers in its direct title
operations. Escrow deposits totaled $8.9 billion and $10.6 billion at December 31, 2024 and 2023, respectively, of which
$4.0 billion and $6.3 billion, respectively, were held at FA Trust. The remaining deposits were held at third-party financial
institutions. Escrow deposits held at third-party financial institutions are not considered assets of the Company and, therefore,
are not included in the accompanying consolidated balance sheets. All such amounts are placed in deposit accounts insured,
up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the
disposition of these assets.
Trust assets administered by FA Trust totaled $4.8 billion and $4.4 billion at December 31, 2024 and 2023, respectively,
of which $169.4 million and $197.1 million, respectively, were held at FA Trust. The remaining trust assets were held at third-
party financial institutions. Trust assets administered by FA Trust and held at third-party institutions are fiduciary client
assets. As such, these trust assets are not considered assets of the Company and, therefore, are not included in the accompanying
consolidated balance sheets. The Company could be held contingently liable if FA Trust were to breach any of its fiduciary
duties.
In conducting its operations, the Company often holds customers’ assets in escrow, pending completion of real estate
transactions and, as a result, the Company has ongoing programs for realizing economic benefits with various financial
institutions. The results from these programs are included as either income or as a reduction in expense, as appropriate, in the
consolidated statements of income based on the nature of the arrangement and benefit received.
45
The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue
Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37. As a facilitator and intermediary, the
Company holds the proceeds from sales transactions and takes temporary title to property identified by the customer to be
acquired with such proceeds. Upon the completion of each such exchange, the identified property is transferred to the customer
or, if the exchange does not take place, an amount equal to the sales proceeds or, in the case of a reverse exchange, title to the
property held by the Company is transferred to the customer. Like-kind exchange funds administered by the Company totaled
$2.3 billion and $1.8 billion at December 31, 2024 and 2023, respectively. The like-kind exchange deposits are held at third-
party financial institutions and, due to the structure utilized to facilitate these transactions, the proceeds and property are not
considered assets of the Company and, therefore, are not included in the accompanying consolidated balance sheets. All such
amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The
Company could be held contingently liable to the customer for the transfers of property, disbursements of proceeds and the
returns on such proceeds.
In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of
its clients. Cash deposits totaled $901.0 million and $830.5 million at December 31, 2024 and 2023, respectively, of which
$606.5 million and $485.7 million, respectively, were held at FA Trust. The remaining deposits were held at third-party
financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company and,
therefore, are not included in the accompanying consolidated balance sheets. All such amounts are placed in deposit accounts
insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable
for the disposition of these assets. In connection with certain accounts, the Company has ongoing programs for realizing
economic benefits with various financial institutions whereby it earns economic benefits either as income or as a reduction in
expense.
Deposit balances held at FA Trust are temporarily invested in cash and cash equivalents and debt securities, with
offsetting liabilities included in deposits in the accompanying consolidated balance sheets.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
The Company’s assets and liabilities include financial instruments subject to the risk of loss from adverse changes in
market rates and prices. The Company’s primary market risk exposures relate to interest rate risk, equity price risk, foreign
currency risk and credit risk.
The Company manages its primary market risk exposures through an investment committee made up of certain senior
executives which is advised by an experienced investment management staff.
While the hypothetical scenarios below are considered to be near-term reasonably possible changes demonstrating
potential risk, they are for illustrative purposes only and do not reflect the Company’s expectations about future market changes.
Interest Rate Risk
The Company monitors its risk associated with fluctuations in interest rates and makes investment decisions to manage
accordingly. The Company does not currently use derivative financial instruments in any material amount to hedge these risks.
The Company’s exposure to interest rate changes primarily results from the Company’s significant portfolio of debt
securities, which includes a high proportion of fixed-income securities, and from its financing activities. In general, the fair
value of a fixed-income security increases or decreases inversely with a change in market interest rates. The Company also
considers its investments in preferred stock to be exposed to interest rate risk. The fair values of the Company’s debt securities
portfolio at December 31, 2024 and 2023 were $7.3 billion and $7.2 billion, respectively. One means of assessing the exposure
of the Company’s debt securities portfolio to interest rate changes is a duration-based analysis that measures the potential
changes in fair value resulting from a hypothetical parallel and instantaneous shift in interest rates across all maturities. Under
this model, with all other factors held constant, the Company estimates that increases in interest rates of 100 and 200 basis
points could cause the fair value of its debt securities portfolio (including investments in preferred stock) at December 31, 2024
to decrease by approximately $387.2 million, or 5.3%, and $752.9 million, or 10.3%, respectively, and at December 31, 2023
to decrease by approximately $337.1 million, or 4.7%, and $675.0 million, or 9.4%, respectively.
46
With respect to adjustable-rate debt, the Company is primarily exposed to the effects of changes in prevailing interest
rates through its variable-rate credit facility and its interest bearing escrow deposit liabilities. As of December 31, 2024 and
2023, the Company had no outstanding borrowings under its credit facility. Assuming the full utilization of available funds
under the facility of $900.0 million at December 31, 2024 and 2023, respectively, and assuming that the borrowings were
outstanding for the entire year, increases of 50 and 100 basis points in the prevailing interest rate on the Company’s credit
facility would result in increases in interest expense of $4.5 million and $9.0 million, respectively, for 2024 and 2023.
The Company’s interest bearing escrow and mortgage loan subservicing deposit liabilities totaled $2.6 billion and
$2.5 billion at December 31, 2024 and 2023, respectively. These variable-rate customer savings accounts are subject to market
rate fluctuations. The weighted-average interest rates were 1.89% and 1.52% for 2024 and 2023, respectively. Assuming
increases in interest rates of 25 and 50 basis points and that the deposit amounts at December 31, 2024 and 2023 were held
constant for the entire year, interest expense for 2024 would be higher by $6.5 million and $13.0 million, respectively, and
2023 would be higher by $6.4 million and $12.7 million, respectively.
Equity Price Risk
The Company is also subject to equity price risk related to its marketable equity securities portfolio. The fair value of
the Company’s marketable equity securities portfolio (excluding preferred stock of $12.1 million and $12.4 million) was
$374.7 million and $424.5 million as of December 31, 2024 and 2023, respectively. Assuming broad-based declines in equity
market prices of 10% and 20%, with all other factors held constant, the fair value of the Company’s marketable equity securities
portfolio at December 31, 2024 could decrease by $37.5 million and $74.9 million, respectively, and at December 31, 2023
could decrease by $42.5 million and $84.9 million, respectively.
Foreign Currency Risk
Although the Company has exchange rate risk for its operations in certain foreign countries, this risk is not material to
the Company’s financial condition or results of operations. The Company does not currently use derivative financial
instruments in any material amount to hedge its foreign exchange risk.
Credit Risk
The Company’s debt securities portfolio is subject to credit risk. The Company manages its credit risk through actively
monitoring issuer financial reports, credit spreads, security pricing and credit rating migration. Further, diversification and
concentration limits by asset type and credit rating are established and monitored by the Company’s investment committee.
The Company holds a large concentration in U.S. government agency securities, including agency mortgage-backed
securities. In the event of discontinued U.S. government support of its federal agencies, material credit risk could be observed
in the portfolio. The Company views that scenario as unlikely but possible.
The Company’s debt securities portfolio maintains an average credit quality rating of AA. For further information on
the credit quality of the Company’s debt securities portfolio at December 31, 2024, see Note 3 Debt Securities to the
consolidated financial statements.
47
Item 8.
Financial Statements and Supplementary Data
INDEX
Page No.
Report of Independent Registered Public Accounting Firm (PCAOB ID 238) ................................................................
48
Financial Statements:
Consolidated Balance Sheets as of December 31, 2024 and 2023 ..........................................................................
50
Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022...............................
51
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022.....
52
Consolidated Statements of Equity for the years ended December 31, 2024, 2023 and 2022................................
53
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022........................
54
Notes to Consolidated Financial Statements ...........................................................................................................
Financial Statement Schedules:
I. Summary of Investments—Other than Investments in Related Parties as of December 31, 2024 ................
97
II. Condensed Financial Information of Registrant as of December 31, 2024 and 2023 and for the years
ended December 31, 2024, 2023 and 2022 ....................................................................................................
98
III. Supplementary Insurance Information as of December 31, 2024 and 2023 and for the years ended
December 31, 2024, 2023 and 2022...............................................................................................................
103
IV. Reinsurance for the years ended December 31, 2024, 2023 and 2022...........................................................
105
V. Valuation and Qualifying Accounts for the years ended December 31, 2024, 2023 and 2022......................
106
Financial statement schedules not listed are either omitted because they are not applicable or the required information is
shown in the consolidated financial statements or in the notes thereto.
48
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of First American Financial Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of First American Financial Corporation and its subsidiaries
(the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, of comprehensive
income, of equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related
notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial
statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is
to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
49
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of the Incurred But Not Reported Loss Reserve - Title Claims
As described in Notes 1 and 11 to the consolidated financial statements, as of December 31, 2024, approximately $1.109 billion
of the Company’s reserve for known and incurred but not reported claims represented the incurred but not reported (“IBNR”)
loss reserve balance for the title insurance and services segment. Management provides for title insurance losses through a
charge to expense when the related premium revenue is recognized. The amount charged to expense is generally determined
by applying a loss provision rate to total title insurance premiums and escrow fees. Management estimates the loss provision
rate at the beginning of each year and reassesses the rate quarterly, which involves an evaluation of the results of an in-house
actuarial review.
The Company’s in-house actuary performs a reserve analysis utilizing generally accepted actuarial methods that incorporate
cumulative historical claims experience and loss development factors. For recent policy years at early stages of development
(generally the last three years), IBNR is generally estimated using a combination of expected loss rate and multiplicative loss
development factor calculations. For more mature policy years, IBNR generally is estimated using multiplicative loss
development factor calculations. Current economic and business trends are also reviewed and used in the reserve analysis.
These include conditions in the real estate and mortgage markets, changes in residential and commercial real estate values, and
changes in the levels of defaults and foreclosures that may affect claims levels and patterns of emergence, as well as any
company-specific factors that may be relevant to past and future claims experience.
The principal considerations for our determination that performing procedures relating to the valuation of the IBNR loss reserve
- title claims is a critical audit matter are the significant judgment by management when developing their estimate of the IBNR
loss reserve, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating audit evidence relating to the actuarial methods, which included significant assumptions related to loss development
factors and expected loss rate. Also, the audit effort involved the use of professionals with specialized skill and knowledge to
assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
management’s valuation of the IBNR loss reserve - title claims, including controls over the selection of actuarial methods and
development of significant assumptions related to loss development factors and expected loss rate. For certain product lines,
these procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist
in developing an independent estimate of the IBNR loss reserve for title claims, on a test basis, and comparison of this
independent estimate to management’s actuarially determined reserve. Developing the independent estimate involved testing
the completeness and accuracy of data provided by management. For other product lines, procedures also included, among
others, testing the completeness and accuracy of data provided by management and the involvement of professionals with
specialized skill and knowledge to assist in evaluating the appropriateness of management’s actuarial methods and evaluating
the reasonableness of assumptions related to loss development factors and expected loss rate used in those methods.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 20, 2025
We have served as the Company’s auditor since 2009.
50
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(in millions, except for par values)
December 31,
2024
2023
ASSETS
Cash and cash equivalents
$
1,718.1
$
3,605.3
Accounts and accrued income receivable, less allowances for credit losses of $21.5 and $21.8
374.8
509.4
Income taxes receivable
61.3
75.7
Investments:
Deposits with banks
85.4
55.8
Debt securities (amortized cost of $7,730.9 and $7,895.2; pledged of $92.4 and $107.0)
7,265.9
7,157.5
Equity securities
691.3
735.6
8,042.6
7,948.9
Secured financings receivable
690.0
636.5
Property and equipment, net
745.1
749.6
Operating lease assets
214.7
229.3
Title plants and other indexes
673.9
652.4
Deferred income taxes
43.8
50.1
Goodwill
1,804.3
1,807.5
Other intangible assets, net
125.2
153.8
Other assets
414.8
384.3
$
14,908.6
$
16,802.8
LIABILITIES AND EQUITY
Deposits
$
5,048.1
$
7,308.0
Accounts payable and accrued liabilities:
Accounts payable
66.7
63.3
Personnel costs
278.1
256.6
Pension costs and other retirement plans
425.2
399.2
Other
173.3
160.4
943.3
879.5
Deferred revenue
210.4
196.8
Reserve for known and incurred but not reported claims
1,193.4
1,282.4
Income taxes payable
27.0
15.9
Deferred income taxes
139.1
63.6
Operating lease liabilities
229.9
246.6
Secured financings payable
643.8
553.3
Notes and contracts payable
1,546.6
1,393.9
9,981.6
11,940.0
Commitments and contingencies (Note 21)
Stockholders’ equity:
Preferred stock, $0.00001 par value; Authorized—0.5 shares;
Outstanding—none
—
—
Common stock, $0.00001 par value; Authorized—300.0 shares;
Outstanding—103.0 shares and 103.1 shares
—
—
Additional paid-in capital
1,787.6
1,793.3
Retained earnings
3,617.3
3,710.6
Accumulated other comprehensive loss
(496.4)
(655.8)
Total stockholders’ equity
4,908.5
4,848.1
Noncontrolling interests
18.5
14.7
Total equity
4,927.0
4,862.8
$
14,908.6
$
16,802.8
See Notes to Consolidated Financial Statements
51
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Year Ended December 31,
2024
2023
2022
Revenues:
Direct premiums and escrow fees
$
2,446.0
$
2,252.1
$
3,084.8
Agent premiums
2,561.9
2,449.3
3,547.6
Information and other
960.8
938.5
1,148.5
Net investment income
561.0
570.0
340.1
Net investment losses (realized of $(335.1), $(80.9), $(85.4))
(401.6)
(206.4)
(515.8)
6,128.1
6,003.5
7,605.2
Expenses:
Personnel costs
2,059.4
1,989.1
2,339.6
Premiums retained by agents
2,044.6
1,952.2
2,829.7
Other operating expenses
1,113.4
1,067.0
1,272.3
Provision for policy losses and other claims
320.0
336.3
486.3
Depreciation and amortization
207.4
188.5
167.5
Premium taxes
68.3
63.5
91.1
Interest
149.6
132.5
93.0
5,962.7
5,729.1
7,279.5
Income before income taxes
165.4
274.4
325.7
Income taxes
32.8
58.9
60.4
Net income
132.6
215.5
265.3
Less: Net income (loss) attributable to noncontrolling interests
1.5
(1.3)
2.3
Net income attributable to the Company
$
131.1
$
216.8
$
263.0
Net income per share attributable to the Company’s stockholders:
Basic
$
1.26
$
2.08
$
2.46
Diluted
$
1.26
$
2.07
$
2.45
Cash dividends per share
$
2.14
$
2.10
$
2.06
Weighted-average common shares outstanding:
Basic
103.9
104.3
107.0
Diluted
104.3
104.6
107.3
See Notes to Consolidated Financial Statements
52
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Year Ended December 31,
2024
2023
2022
Net income
$
132.6
$
215.5
$
265.3
Other comprehensive income (loss), net of tax:
Change in unrealized losses on debt securities
199.9
198.0
(780.9)
Change in foreign currency translation adjustment
(46.1)
17.2
(42.2)
Change in pension benefit adjustment
5.6
(2.1)
46.6
Total other comprehensive income (loss), net of tax
159.4
213.1
(776.5)
Comprehensive income (loss)
292.0
428.6
(511.2)
Less: Comprehensive income (loss) attributable to noncontrolling
interests
1.5
(1.3)
2.3
Comprehensive income (loss) attributable to the Company
$
290.5
$
429.9
$
(513.5)
See Notes to Consolidated Financial Statements
53
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
First American Financial Corporation Stockholders
Shares
Common
stock
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
stockholders’
equity
Noncontrolling
interests
Total
Balance at December 31, 2021
109.7
$
—
$ 2,179.2
$3,672.9 $
(92.4) $
5,759.7
$
16.1
$5,775.8
Net income
—
—
—
263.0
—
263.0
2.3
265.3
Dividends on common shares
—
—
—
(217.5)
—
(217.5)
—
(217.5)
Repurchases of Company shares
(7.5)
—
(440.7)
—
—
(440.7)
—
(440.7)
Shares issued in connection with
share-based compensation
1.0
—
6.6
(4.1)
—
2.5
—
2.5
Share-based compensation
—
—
67.3
—
—
67.3
—
67.3
Net activity related to
noncontrolling interests
—
—
—
—
—
—
5.0
5.0
Other comprehensive loss
—
—
—
—
(776.5)
(776.5)
—
(776.5)
Balance at December 31, 2022
103.2
—
1,812.4
3,714.3
(868.9)
4,657.8
23.4
4,681.2
Net income
—
—
—
216.8
—
216.8
(1.3)
215.5
Dividends on common shares
—
—
—
(216.6)
—
(216.6)
—
(216.6)
Repurchases of Company shares
(1.3)
—
(72.8)
—
—
(72.8)
—
(72.8)
Shares issued in connection with
share-based compensation
1.2
—
4.3
(3.9)
—
0.4
—
0.4
Share-based compensation
—
—
49.1
—
—
49.1
—
49.1
Net activity related to
noncontrolling interests
—
—
0.3
—
—
0.3
(7.4)
(7.1)
Other comprehensive income
—
—
—
—
213.1
213.1
—
213.1
Balance at December 31, 2023
103.1
—
1,793.3
3,710.6
(655.8)
4,848.1
14.7
4,862.8
Net income
—
—
—
131.1
—
131.1
1.5
132.6
Dividends on common shares
—
—
—
(220.7)
—
(220.7)
—
(220.7)
Repurchases of Company shares
(1.2)
—
(68.5)
—
—
(68.5)
—
(68.5)
Shares issued in connection with
share-based compensation
1.1
—
10.6
(3.7)
—
6.9
—
6.9
Share-based compensation
—
—
52.0
—
—
52.0
—
52.0
Net activity related to
noncontrolling interests
—
—
0.2
—
—
0.2
2.3
2.5
Other comprehensive income
—
—
—
—
159.4
159.4
—
159.4
Balance at December 31, 2024
103.0
$
—
$ 1,787.6
$3,617.3 $
(496.4) $
4,908.5
$
18.5
$4,927.0
See Notes to Consolidated Financial Statements
54
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended December 31,
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
132.6
$
215.5
$
265.3
Adjustments to reconcile net income to cash provided by operating activities:
Provision for policy losses and other claims
320.0
336.3
486.3
Depreciation and amortization
207.4
188.5
167.5
Amortization of premiums and accretion of discounts on debt securities, net
(3.0)
8.6
18.8
Net investment losses
401.6
206.4
515.8
Share-based compensation
52.0
49.1
67.3
Equity in earnings of affiliates, net
(7.4)
(5.4)
(11.0)
Dividends from equity method investments
6.4
6.5
11.2
Changes in assets and liabilities excluding effects of acquisitions and noncash
transactions:
Claims paid, including assets acquired, net of recoveries
(397.8)
(381.8)
(434.3)
Net change in income tax accounts
35.2
(60.8)
(130.0)
Decrease (increase) in accounts and accrued income receivable
126.2
(159.1)
82.7
Increase (decrease) in accounts payable and accrued liabilities
45.9
(51.9)
(265.9)
Increase (decrease) in deferred revenue
13.7
(0.1)
(27.9)
Other, net
(35.3)
2.5
31.8
Cash provided by operating activities
897.5
354.3
777.6
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions/dispositions, net of cash acquired/divested
(16.4)
(24.7)
(277.5)
Net (increase) decrease in deposits with banks
(35.0)
7.9
(7.7)
Purchases of debt securities
(6,298.8)
(1,287.8)
(2,980.0)
Proceeds from sales of debt securities
5,462.9
1,676.9
1,753.3
Proceeds from maturities of debt securities
675.5
812.3
1,171.0
Purchases of equity securities
(44.7)
(170.7)
(157.1)
Proceeds from sales of equity securities
69.1
71.0
241.4
Net change in other investments
(7.6)
(11.6)
(6.8)
Advances under secured financing agreements
(29,164.2)
(13,309.9)
(15,657.8)
Collections of secured financings receivable
29,114.2
13,097.2
15,778.2
Capital expenditures
(218.3)
(263.4)
(259.8)
Proceeds from sales of property and equipment
0.6
0.1
6.8
Proceeds from insurance settlement
4.0
2.2
3.0
Cash (used for) provided by investing activities
(458.7)
599.5
(393.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in deposits
(2,259.9)
1,788.3
451.1
Borrowings under secured financing agreements
28,408.3
13,383.7
15,532.6
Repayments of secured financings payable
(28,317.8)
(13,196.7)
(15,695.3)
Net proceeds from issuance of unsecured senior notes
444.0
—
—
Repayment of senior unsecured notes
(300.0)
(250.0)
—
Repayments of other notes and contracts payable
(4.2)
(6.2)
(6.9)
Net activity related to noncontrolling interests
2.5
(7.1)
(2.2)
Net proceeds in connection with share-based compensation
6.9
0.4
2.5
Repurchases of Company shares
(68.5)
(72.7)
(440.7)
Payments of cash dividends
(220.7)
(216.6)
(217.5)
Cash (used for) provided by financing activities
(2,309.4)
1,423.1
(376.4)
Effect of exchange rate changes on cash
(16.6)
4.9
(12.7)
Net (decrease) increase in cash and cash equivalents
(1,887.2)
2,381.8
(4.5)
Cash and cash equivalents—Beginning of year
3,605.3
1,223.5
1,228.0
Cash and cash equivalents—End of year
$
1,718.1
$
3,605.3
$
1,223.5
SUPPLEMENTAL INFORMATION:
Cash paid (received) during the year for:
Interest
$
150.6
$
124.2
$
86.5
Premium taxes
$
57.3
$
84.2
$
112.6
Income taxes paid
$
22.1
$
121.0
$
191.1
Income tax refunds
$
(23.6)
$
(1.0)
$
(2.2)
See Notes to Consolidated Financial Statements
55
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
Basis of Presentation and Significant Accounting Policies:
First American Financial Corporation (the “Company”), through its subsidiaries, is engaged in the business of providing
financial services. The Company consists of the following reportable segments:
•
The title insurance and services segment issues title insurance policies on residential and commercial property in
the United States and offers similar or related products and services internationally. This segment also provides
closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services
and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and
provides access to title plant data and records; provides appraisals and other valuation-related products and
services; provides lien release, document custodial and default-related products and services; provides document
generation services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust
and wealth management services. The Company, through its principal title insurance subsidiary and such
subsidiary’s affiliates, transacts its title insurance business through a network of direct operations and
agents. Through this network, the Company issues policies in the 49 states that permit the issuance of title insurance
policies, the District of Columbia and certain United States territories. The Company also offers title insurance,
closing services and similar or related products and services, either directly or through third parties in other
countries, including Canada, the United Kingdom, South Korea, Australia, New Zealand and various other
established and emerging markets.
•
The home warranty segment sells products including residential service contracts that cover residential systems,
such as heating and air conditioning systems, and certain appliances against failures that occur as the result of
normal usage during the coverage period. This business currently operates in 36 states and the District of
Columbia.
•
The corporate segment includes investments in venture-stage companies, certain financing facilities and corporate
services that support the Company’s business operations.
Principles of Consolidation
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles
(“GAAP”) and reflect the consolidated operations of the Company. The consolidated financial statements include the accounts
of First American Financial Corporation and all controlled subsidiaries. All significant intercompany transactions and balances
have been eliminated. Equity investments in which the Company exercises significant influence, but does not control and is
not the primary beneficiary, are accounted for using the equity method of accounting. Equity investments in which the
Company does not exercise significant influence over the investee and without readily determinable fair values, or non-
marketable equity securities, are accounted for at cost, less impairment, and are adjusted up or down for any observable price
changes.
The Company has certain investments in nonconsolidated variable interest entities, which are accounted for using the
equity method of accounting, that are primarily investments in funds that are limited partnerships. As of December 31, 2024
and 2023, the carrying values of these investments were $65.7 million and $40.4 million, respectively, and are included in
equity securities on the Company’s consolidated balance sheets. At December 31, 2024, the Company’s maximum exposure
to loss related to these investments, including any future funding commitments, was $71.7 million.
Revisions and out-of-period adjustments
During 2024, the Company identified certain uncollectible balances related to fees within its title insurance and services
segment, which primarily related to reporting periods in 2023 and prior, that should have been previously written off. To
correct for this error, the Company recorded an adjustment in 2024, which increased other operating expenses and increased
accounts payable and accrued liabilities by $6.2 million.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
56
During 2023, the Company identified deferred compensation agreements with certain former employees who have been
receiving benefit payments from the Company for which it has understated its obligation to make future benefit payments. As
this error primarily related to reporting periods prior to 2020, the Company corrected for this error by revising retained earnings
at December 31, 2021 and 2022 in the consolidated statements of equity. The impact of this revision, which has been
consistently applied to all periods presented, included decreases to retained earnings and deferred income tax liabilities of
$7.0 million and $2.5 million, respectively, and an increase to pension costs and other retirement plans liability of $9.5 million.
The Company does not consider these adjustments to be material, individually or in the aggregate, to any previously
issued consolidated financial statements.
Use of estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and
assumptions that affect the statements. Actual results could differ from the estimates and assumptions used.
Cash equivalents
The Company considers cash equivalents to include all unrestricted short-term investments that have an initial maturity
of 90 days or less.
Accounts and accrued income receivable
Accounts receivable are generally due within thirty days and are recorded net of an allowance for credit losses. The
Company considers accounts outstanding longer than the contractual payment terms as past due. The Company determines the
allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss
history, a specific customer’s ability to pay its obligations to the Company and the current condition, and future expectations,
of the general economy and industry as a whole. Amounts are written off in the period in which they are deemed to be
uncollectible.
The Company’s policy is to present accrued interest receivable on financial assets measured at amortized cost within
accounts and accrued income receivable on the balance sheet. Accrued interest receivable at December 31, 2024 and 2023
totaled $14.0 million and $24.5 million, respectively. The Company has elected to not measure an allowance for credit losses
for accrued interest receivable and maintains a policy that all receivables ninety days past due are written off to credit loss
expense. Accounts are placed on non-accrual status, and accrual of interest is discontinued, when management determines that
collectibility of contractual amounts is not reasonably assured. Payments of interest for accounts in non-accrual status are
applied under the cost recovery method.
Deposits with banks
Deposits with banks are short-term investments with initial maturities of generally more than 90 days and included
restricted cash and cash equivalents of $20.7 million and $4.0 million at December 31, 2024 and 2023, respectively.
Debt securities
Debt securities are carried at fair value and consist primarily of investments in obligations of the United States Treasury,
foreign governments, various U.S. and foreign corporations, certain state and political subdivisions and mortgage-backed
securities. The Company classifies its debt securities as available-for-sale with unrealized gains or losses recorded as a
component of accumulated other comprehensive income/loss.
Interest income, as well as the related amortization of premium and accretion of discount, on debt securities are
recognized under the effective yield method and are included in the accompanying consolidated statements of income in net
investment income. Realized gains and losses on sales of debt securities are determined on a first-in, first-out basis.
When the fair value of an available-for-sale debt security falls below its amortized cost, entities must determine whether
the decline in fair value is due to credit-related factors or noncredit-related factors. Declines in fair value that are credit-related
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
57
are recorded on the balance sheet through an allowance for credit losses with a corresponding adjustment to earnings and
declines that are noncredit-related are recognized through other comprehensive income/loss.
If the Company intends to sell a debt security in an unrealized loss position or determines that it is more likely than not
that the Company will be required to sell a debt security before it recovers its amortized cost basis, the debt security is impaired
and it is written down to fair value with all losses recognized in earnings. As of December 31, 2024, the Company did not
intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be
required to sell any debt securities before recovery of their amortized cost basis.
For debt securities in an unrealized loss position for which the Company does not intend to sell the debt security and it
is not more likely than not that the Company will be required to sell the debt security, the Company determines whether the
loss is due to credit-related factors or noncredit-related factors. For debt securities in an unrealized loss position for which the
losses are primarily due to credit-related factors, the Company’s policy is to recognize the entire loss in earnings. For debt
securities in an unrealized loss position for which the losses are determined to be the result of both credit-related and noncredit-
related factors, the credit loss is determined as the difference between the present value of the cash flows expected to be
collected and the amortized cost basis of the debt security. The cash flows expected to be collected are discounted using the
effective interest rate (i.e., purchase yield) and for variable rate securities the interest rate is fixed at the rate in effect at the
credit loss measurement date.
Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security,
including the probability of default and the estimated timing and amount of recovery. The detailed inputs used to project
expected future cash flows may be different depending on the nature of the individual debt security.
The Company’s policy is to present accrued interest receivable on debt securities within accounts and accrued income
receivable on the balance sheet. Accrued interest receivable on debt securities at December 31, 2024 and 2023 totaled
$38.8 million and $35.1 million, respectively. The Company has elected to not measure an allowance for accrued interest
receivable on debt securities and maintains a policy that all receivables ninety days past due are written off to credit loss
expense. Debt securities are placed on non-accrual status, and accrual of interest is discontinued, when management determines
that collectibility of contractual amounts is not reasonably assured. Interest income is recognized on a cash basis for interest
payments received on debt securities in non-accrual status.
The Company maintains investments in debt securities in accordance with certain statutory requirements for the funding
of statutory premium reserves and state deposits. At December 31, 2024 and 2023, the fair values of such investments totaled
$92.4 million and $107.0 million, respectively. See Note 2 Statutory Restrictions on Investments and Stockholders’ Equity for
additional discussion of the Company’s statutory restrictions.
Equity securities
Marketable equity securities are carried at fair value and consist primarily of investments in exchange traded funds,
mutual funds and preferred stocks of corporate entities. Changes in the fair values of the Company’s equity securities are
recognized in net investment gains/losses on the consolidated statements of income.
Equity investments in which the Company exercises significant influence but does not control, and is not the primary
beneficiary, are accounted for under the equity method of accounting. These investments are initially measured at cost and are
generally adjusted by the Company’s share of equity in the income or losses of the investee. The carrying values of these
investments are written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. In
making the determination as to whether an individual investment is impaired, the Company assesses the current and expected
financial condition of each relevant entity, including, but not limited to, the results of valuation work performed with respect
to the entity, the entity’s anticipated ability to generate sufficient cash flows and the market conditions in the industry in which
the entity is operating.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
58
The Company has elected to measure its non-marketable equity securities in which it does not exercise significant
influence over the investee and without readily determinable fair values at cost, less impairment, adjusted up or down for any
observable price changes from orderly transactions for the identical or a similar investment of the same issuer. The carrying
values of these investments are written down, or impaired, to fair value when a qualitative assessment indicates that the fair
value is less than the carrying value. In making the determination as to whether an individual investment is impaired, the
Company assesses such qualitative factors as the current and expected financial condition of each relevant entity, the market
conditions in the industry in which the entity operates and the entity’s anticipated ability to generate sufficient cash flows.
Notes Receivable
Notes receivable are carried at cost, less allowance for credit losses. An allowance for credit losses is established on an
individual note based on the Company’s estimate of the net amount expected to be collected. The allowance for credit losses
is based upon the Company’s assessment of the borrower’s overall financial condition, resources and payment record; and, if
appropriate, the realizable value of any collateral. These estimates consider all available evidence including the expected future
cash flows, estimated fair value of collateral on secured notes, general economic conditions and trends, and other relevant
factors, as appropriate. Notes are placed on non-accrual status when management determines that the collectibility of
contractual amounts is not reasonably assured. Notes receivable at December 31, 2024 and 2023 totaled $34.4 million and
$22.4 million, respectively. Notes receivable are included in other assets on the consolidated balance sheets.
Secured financings receivable and payable
Secured financings receivable, which are generated through the Company’s warehouse lending operations, are
collateralized by mortgage loans on residential real estate. Collections of amounts due from mortgage loan originators occur
upon sale of the underlying mortgage loans to investors in the secondary market, generally within 30 days and more typically
in less than 10 days. No allowance for credit losses has been recorded on these receivables due to, among other factors, the
Company typically identifying investors in the underlying mortgage loans prior to making advances, the short-term nature of
these receivables and the lack of significant historical credit losses experienced by the Company. Interest income is recorded
on an accrual basis during the period the principal balance remains outstanding.
Secured financings payable reflect borrowings under secured warehouse lending facilities with several banking
institutions. Repayment of the warehouse borrowing occurs upon sale of the mortgage loan to investors as noted above. Interest
expense is recorded during the period the borrowing remains outstanding.
Property and equipment
Buildings and furniture and equipment are initially recorded at cost and are generally depreciated using the straight-line
method over estimated useful lives ranging from 10 to 40 years and from 1 to 15 years, respectively. Leasehold improvements
are initially recorded at cost and are amortized over the lesser of the remaining term of the respective lease or the estimated
useful life, using the straight-line method. Computer software developed for internal use and for use with the Company’s
products is amortized over estimated useful lives ranging from 1 to 15 years using the straight-line method. Software
development and implementation costs, which include certain payroll-related costs of employees directly associated with
developing or implementing software and payments to third parties directly associated with developing or implementing
software are capitalized during the application development or implementation stage until the software is ready for its intended
use.
Management evaluates the carrying value of property and equipment to be held and used when events and circumstances
warrant such a review. The carrying value is considered impaired when the anticipated undiscounted future cash flow from the
asset is separately identifiable and is less than the carrying value. In that event, a loss is recognized based on the amount by
which the carrying value exceeds the fair value of the asset. Fair value is determined primarily through estimated future cash
flows associated with the asset under review, discounted at a rate commensurate with the risk involved, or other valuation
techniques. Losses on property and equipment to be disposed of are determined in a similar manner, except that fair value is
reduced for the cost of disposal, if any.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
59
Impairment losses on property and equipment for the year ended December 31, 2024 primarily included $39.5 million in
impairment losses to internally developed software due to either abandonment or the carrying amount was no longer deemed
recoverable and exceeded its fair value as a result of either being replaced with new technologies or determined to be of
diminished value due to a change in management strategy. These impairment losses, which were included in the title insurance
and services segment, are included in net investment losses on the consolidated statements of income. Impairment losses for
the years ended December 31, 2023 and 2022 were not material.
Leases
The Company is, generally, a lessee in leases of commercial real estate, including office buildings and office space, and
also certain equipment. Most of the Company’s leases of commercial real estate include one or more options to renew, with
renewal terms that can extend the lease term from one to five years, and some leases include options to terminate the lease
within the first year.
In connection with its lease commitments, the Company recognizes a lease liability equal to the present value of future
lease payments discounted using its incremental borrowing rate and recognizes a lease asset equal to the lease liability, adjusted
for any prepaid or accrued lease payments, lease incentives and initial direct costs.
As most of the Company’s leases do not provide an implicit discount rate, the Company applies its incremental borrowing
rate, which is based on the information available as of the commencement date, in determining the present value of its lease
payments.
The Company does not separately account for nonlease components (e.g., common-area maintenance costs) from the
associated lease components (e.g., fixed payments including rent, real estate taxes and insurance costs) on leases of commercial
real estate and instead accounts for both components as a single lease component for purposes of recognizing lease assets and
liabilities. Variable lease costs, which include any variable lease and nonlease components and rents that vary based on changes
to an index or rate, are expensed as incurred.
The Company excludes any leases with an initial term of 12 months or less from recognition on the balance sheet and for
which lease expense is recognized on a straight-line basis over the lease term.
Management recognizes an impairment loss when the carrying amount of a lease asset is not recoverable and exceeds its
fair value. The carrying amount is considered not recoverable if it exceeds the sum of the undiscounted future cash flows that
are directly associated with, and that are expected to arise as a result of, the use and eventual disposition of the lease asset. An
impairment loss is measured as the amount by which the carrying amount of a lease asset exceeds its fair value. Impairment
losses related to the Company’s commercial real estate may occur if the Company ceased use of all, or a portion, of a leased
property while a contractual obligation remains. Impairment losses related to commercial real estate leases totaled $2.2 million
and $2.6 million for the years ended December 31, 2024 and 2022, respectively, and was immaterial for the year ended
December 31, 2023.
For further information on the Company’s leasing arrangements see Note 7 Leases.
Title plants and other indexes
Title plants are carried at cost, with the costs of daily maintenance (updating) charged to expense as incurred. Because
properly maintained title plants have indefinite lives and do not diminish in value with the passage of time, no provision has
been made for depreciation or amortization. The Company analyzes its title plants at least annually for impairment. This
analysis includes, but is not limited to, the effects of obsolescence, duplication, demand and other economic factors. Capitalized
real estate data is initially recorded at cost and is amortized using the straight-line method over a 15 year estimated useful life.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
60
Management uses estimated future cash flows (undiscounted and excluding interest) to measure the recoverability of title
plants whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. If the
undiscounted cash flow analysis indicates that the carrying amount is not recoverable, an impairment loss is recorded for the
excess of the carrying amount over its fair value.
Business Combinations
Amounts paid for acquisitions are allocated to the tangible and intangible assets acquired and liabilities assumed and are
based on their estimated fair values at the date of acquisition. The excess of the fair value of purchase consideration over the
fair values of the identifiable assets and liabilities is recorded as goodwill. Acquisition-related costs are expensed in the periods
in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial
statements from the date of acquisition.
Goodwill Impairment
The Company is required to perform an annual goodwill impairment assessment for each reporting unit for which
goodwill has been allocated. The reporting units that have been allocated goodwill include title insurance and home warranty.
The Company’s trust and other services reporting unit has no allocated goodwill and is, therefore, not assessed for impairment.
The Company has elected to perform this annual assessment in the fourth quarter of each fiscal year or sooner if circumstances
indicate possible impairment. Based on accounting guidance, the Company has the option to perform a qualitative assessment
to determine if the fair value is more likely than not (i.e., a likelihood of greater than 50%) less than the carrying amount as a
basis for determining whether it is necessary to perform a quantitative impairment test, or may choose to forego a qualitative
assessment and perform a quantitative impairment test. The qualitative factors considered in this assessment may include
macroeconomic conditions, industry and market considerations, overall financial performance as well as other relevant events
and circumstances as determined by the Company. The Company evaluates the weight of each factor to determine whether it
is more likely than not that impairment may exist. If the results of a qualitative assessment indicate the more likely than not
threshold was not met, the Company may choose not to perform a quantitative impairment test. If, however, the more likely
than not threshold is met, the Company will perform a quantitative test as required and discussed below.
Management’s quantitative impairment testing compares the fair value of each reporting unit to its carrying amount. The
fair value of each reporting unit is determined by using discounted cash flow analysis and, where appropriate, market approach
valuations. If the fair value of the reporting unit exceeds its carrying amount, the goodwill is not considered impaired and no
additional analysis is required. However, if the carrying amount is greater than the fair value, an impairment charge is
recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized limited
to the total amount of goodwill allocated to that reporting unit.
The quantitative impairment test for goodwill utilizes a variety of valuation techniques, all of which require the Company
to make estimates and judgments. Fair value is determined by employing an expected present value technique, which utilizes
expected cash flows and an appropriate discount rate. The use of comparative market multiples (the “market approach”)
compares the reporting unit to other comparable companies (if such comparables are present in the marketplace) based on
valuation multiples to arrive at a fair value. In assessing the fair value, the Company utilizes the results of the valuations
(including the market approach to the extent comparables are available) and considers the range of fair values determined under
all methods and the extent to which the fair value exceeds the carrying amount of the reporting unit.
The valuation of each reporting unit includes the use of assumptions and estimates of many critical factors, including
revenue growth rates and operating margins, discount rates and future market conditions, determination of market multiples
and the establishment of a control premium, among others. Forecasts of future operations are based, in part, on operating
results and the Company’s expectations as to future market conditions. These types of analyses contain uncertainties because
they require the Company to make assumptions and to apply judgments to estimate industry economic factors and the
profitability of future business strategies. However, if actual results are not consistent with the Company’s estimates and
assumptions, the Company may be exposed to future impairment losses that could be material.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
61
The Company performed qualitative assessments for both reporting units in 2024 and 2022. In 2023, the Company chose
to perform a quantitative impairment test for its title insurance reporting unit and a qualitative assessment for its home warranty
reporting unit. The results of the Company’s qualitative assessments in 2024 and 2022 for both reporting units and, in 2023,
for the home warranty reporting unit, supported the conclusion that the reporting unit fair values were not more likely than not
less than their carrying amounts and, therefore, a quantitative impairment test was not considered necessary. Based on the
results of the quantitative test in 2023, the Company determined that the fair value for the title insurance reporting unit exceeded
its carrying amount and no additional analysis was required. As a result of the Company’s annual goodwill impairment
assessments, the Company did not record any goodwill impairment losses for 2024, 2023 or 2022.
Other intangible assets
The Company’s finite-lived intangible assets consist of customer relationships, noncompete agreements, trademarks,
internal-use software licenses and patents. These assets are amortized on a straight-line basis over their useful lives ranging
from 1 to 20 years and are subject to impairment assessments when there is an indication of a triggering event or abandonment.
The Company’s indefinite-lived other intangible assets consist of licenses which are not amortized but rather assessed for
impairment by comparing the fair values to carrying amounts at least annually, and when an indicator of potential impairment
has occurred.
Management uses estimated future cash flows (undiscounted and excluding interest) to measure the recoverability of
intangible assets with finite lives, whenever events or changes in circumstances indicate that the carrying amount may not be
fully recoverable. If the undiscounted cash flow analysis indicates that the carrying amount is not recoverable, an impairment
loss is recorded for the excess of the carrying amount over its fair value. Management’s impairment assessment for indefinite-
lived other intangible assets include a valuation using a discounted cash flow analysis or through a market approach. If the fair
value exceeds its carrying amount, the asset is not considered impaired and no additional analysis is required. However, if the
carrying amount is greater than the fair value, an impairment loss is recorded equal to the excess.
Reserve for known and incurred but not reported claims
The Company provides for title insurance losses through a charge to expense when the related premium revenue is
recognized. The amount charged to expense is generally determined by applying a rate (the loss provision rate) to total title
insurance premiums and escrow fees. The Company’s management estimates the loss provision rate at the beginning of each
year and reassesses the rate quarterly to ensure that the resulting incurred but not reported (“IBNR”) loss reserve and known
claims reserve included in the Company’s consolidated balance sheets together reflect management’s best estimate of the total
costs required to settle all IBNR and known claims. If the ending IBNR reserve is not considered adequate, an adjustment is
recorded.
The process of assessing the loss provision rate and the resulting IBNR reserve involves an evaluation of the results of
an in-house actuarial review. The Company’s in-house actuary performs a reserve analysis utilizing generally accepted
actuarial methods that incorporate cumulative historical claims experience and information provided by in-house claims and
operations personnel. Current economic and business trends are also contemplated as part of the reserve analysis. These
include conditions in the real estate and mortgage markets, changes in residential and commercial real estate values, and
changes in the levels of defaults and foreclosures that may affect claims levels and patterns of emergence, as well as any
company-specific factors that may be relevant to past and future claims experience. Results from the analysis include, but are
not limited to, a range of IBNR reserve estimates and a single point estimate for IBNR as of the balance sheet date.
For recent policy years at early stages of development (generally the last three years), IBNR is generally estimated using
a combination of expected loss rate and multiplicative loss development factor calculations. For more mature policy years,
IBNR generally is estimated using multiplicative loss development factor calculations. The expected loss rate method estimates
IBNR by applying an expected loss rate to total title insurance premiums and escrow fees and by adjusting for policy year
maturity using estimated loss development patterns. Multiplicative loss development factor calculations estimate IBNR by
applying factors derived from loss development patterns to losses realized to date. The expected loss rate and loss development
patterns are based on historical experience and the relationship of the history to the applicable policy years.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
62
The Company’s management uses the IBNR point estimate from the in-house actuary’s analysis and other relevant
information concerning claims to determine what it considers to be the best estimate of the total amount required for the IBNR
reserve.
The volume and timing of title insurance claims are subject to cyclical influences from both the real estate and mortgage
markets. Title policies issued to lenders constitute a large portion of the Company’s title insurance volume. These policies
insure lenders against losses on mortgage loans due to title defects in the collateral property. Even if an underlying title defect
exists that could result in a claim, often the lender must realize an actual loss, or at least be likely to realize an actual loss, for
a title insurance liability to exist. As a result, title insurance claims exposure is sensitive to lenders’ losses on mortgage loans
and is affected in turn by external factors that affect mortgage loan losses, particularly macroeconomic factors.
A general decline in real estate prices can expose lenders to greater risk of losses on mortgage loans, as loan-to-value
ratios increase and defaults and foreclosures increase. Title insurance claims exposure for a given policy year is also affected
by the quality of mortgage loan underwriting during the corresponding origination year. The Company believes that the
sensitivity of claims to external conditions in the real estate and mortgage markets is an inherent feature of title insurance’s
business economics that applies broadly to the title insurance industry.
Title insurance policies are long-duration contracts with the majority of the claims reported to the Company within the
first few years following the issuance of the policy. Generally, 65% to 75% of claim amounts become known in the first six
years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected
ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material
adjustment to the IBNR reserves. A material change in expected ultimate losses and corresponding loss rates for older policy
years is also possible, particularly for policy years with loss rates exceeding historical norms. The estimates made by
management in determining the appropriate level of IBNR reserves could ultimately prove to be materially different from actual
claims experience.
The Company provides for claims losses relating to its home warranty business based on the average cost per claim and
historical loss experience as applied to the total of current claims incurred. The average cost per home warranty claim is
calculated using the average of the most recent 12 months of claims experience adjusted for estimated future increases in costs.
Contingent litigation and regulatory liabilities
Amounts related to contingent litigation and regulatory liabilities are accrued if it is probable that a liability has been
incurred and an amount is reasonably estimable. The Company records legal fees in other operating expenses in the period
incurred.
Revenues
Premiums on title policies issued directly by the Company are recognized on the effective date of the title policy and
escrow fees are recorded upon close of the escrow.
Revenues from title policies issued by agents are recorded when notice of issuance is received from the agent, which is
generally when cash payment is received by the Company.
Premiums on home warranty contracts are generally recognized ratably in proportion to expected claims experience over
the duration of the policy or contract, which is typically 12 months.
Information and other revenues are recognized when control of the promised goods or services is transferred to the
customer and in an amount that reflects the consideration the Company expects to be entitled to in exchange for these goods or
services.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
63
For those products and services where the Company’s performance obligation is satisfied at a point in time and for which
there is no ongoing obligation, revenue is recognized upon delivery. For those products and services where the Company
satisfies its performance obligation over time as the product or service is being transferred to the customer, revenue is generally
recognized using the output method as the products or services are delivered.
The Company applies the optional exemptions allowed under accounting guidance whereby the Company is not required
to disclose either the transaction price allocated to performance obligations that are unsatisfied as of the end of the period or an
explanation as to when the Company expects to recognize the related revenue. Such contracts generally include performance
obligations that are contingent upon the closing of a real estate transaction or include variable consideration based on order
volumes and have remaining contract terms of generally less than three years. The Company is allowed to apply the optional
exemptions to its remaining performance obligations due to (1) the performance obligation is part of a contract that has an
original duration of one year or less, (2) the associated revenue is based on the Company’s right to invoice for the value of the
product or service delivered, (3) the associated variable consideration is allocated entirely to wholly unsatisfied performance
obligations or (4) immateriality.
The Company also applies the practical expedient allowed under accounting guidance whereby it can disregard the impact
to the transaction price of the effects of a significant financing component for arrangements where the Company expects the
period between delivery of the product or service and customer payment to be one year or less. In addition, the Company
applies the practical expedient whereby it recognizes the incremental costs of obtaining a contract as an expense when incurred
if the amortization period for the asset that the Company otherwise would have recognized is one year or less.
The Company records a contract asset, and recognizes revenue, upon delivery of certain products related to the closing
of a real estate transaction where the Company’s right to payment is subject to the closing of the transaction. The Company
records a contract liability for payments received in advance of revenue recognition for certain products or services. Contract
assets and liabilities were not material at December 31, 2024 and 2023. Revenues recognized during the years ended
December 31, 2024, 2023 and 2022 that were included in contract liabilities at the beginning of the respective period were not
material.
For information about the Company’s revenues disaggregated by reportable segment see Note 22 Segment Financial
Information.
Premium taxes
Title insurance and home warranty companies, like other types of insurers, are generally not subject to state income or
franchise taxes. However, in lieu thereof, most states impose a tax based primarily on insurance premiums written. This
premium tax is reported as a separate line item in the consolidated statements of income in order to provide a more meaningful
disclosure of the taxation of the Company.
Income taxes
The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. The Company evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of
existing temporary differences, the period in which they are expected to be recovered and expected levels of taxable income.
A valuation allowance is established when it is considered more likely than not that some or all of the deferred tax assets will
not be realized.
The Company recognizes the effect of income tax positions only if sustaining those positions is considered more likely
than not. Changes in recognition or measurement of uncertain tax positions are reflected in the period in which a change in
judgment occurs. The Company recognizes interest and penalties, related to uncertain tax positions in income tax expense.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
64
Share-based compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on
the grant-date fair value of the award. The cost is recognized in the Company’s financial statements over the requisite service
period of the award using the straight-line method for awards that contain only a service condition and the graded vesting
method for awards that contain a performance or market condition. For awards with retirement eligibility provisions, the cost
is recognized through the date the employee becomes eligible to retire and is no longer required to provide service to earn the
award. The Company accounts for forfeitures as they occur. The Company utilizes a Monte Carlo valuation model to estimate
the fair value of its market-based equity-settled performance awards.
The Company’s primary means of providing share-based compensation is through the granting of restricted stock units
(“RSUs”). RSUs granted generally have graded vesting features and include a service condition; and, for certain employees
and executives, may also include either a performance or market condition. The Company also grants performance restricted
stock units (“PRSUs”) to certain employees and executives, which generally contain service and either performance or market
conditions. RSUs and PRSUs receive dividend equivalents in the form of RSUs/PRSUs having the same vesting requirements
as the initial grant.
The Company also offers an employee stock purchase plan that allows eligible employees the option to purchase common
stock of the Company at 85% of the lower of the closing price on either the first or last day of each offering period. The
offering periods are three-month periods beginning on January 1, April 1, July 1 and October 1 of each fiscal year. The
Company recognizes an expense in the amount equal to the value of the 15% discount and look-back feature over the three-
month offering period.
Earnings per share
Basic earnings per share is computed by dividing net income available to the Company’s stockholders by the weighted-
average number of common shares outstanding. The computation of diluted earnings per share is similar to the computation
of basic earnings per share, except that the weighted-average number of common shares outstanding is increased to include the
effect of dilutive potential common shares outstanding during the period using the treasury stock method. Potential dilutive
common shares include RSUs and PRSUs.
Employee benefit plans
The Company recognizes the underfunded status of its unfunded supplemental benefit plans as a liability on its
consolidated balance sheets. Actuarial gains and losses and prior service costs and credits that have not been previously
recognized as a component of net periodic benefit cost are recorded as a component of accumulated other comprehensive
income/loss. Plan obligations are measured annually as of December 31.
The Company informally funds its nonqualified deferred compensation plan through tax-advantaged investments known
as variable universal life insurance. The Company’s deferred compensation plan assets are included as a component of other
assets and the Company’s deferred compensation plan liability is included as a component of pension costs and other retirement
plans on the consolidated balance sheets. The income or loss earned on the Company’s plan assets is included as a component
of net investment income and the income or loss earned by the plan participants is included as a component of personnel costs
on the consolidated statements of income.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
65
Foreign currency
The Company operates in other countries, including Canada, the United Kingdom, South Korea, Australia and New
Zealand. The functional currencies of the Company’s foreign subsidiaries are generally their respective local currencies. The
financial statements of foreign subsidiaries with local currencies that were determined to be the functional currency are
translated into U.S. dollars as follows: assets and liabilities at the exchange rate as of the balance sheet date, equity at the
historical rates of exchange, and income and expense amounts at average rates prevailing during the period. Translation
adjustments resulting from the translation of the subsidiaries’ accounts are included in accumulated other comprehensive
income/loss as a separate component of stockholders’ equity. For those foreign subsidiaries where the U.S. dollar has been
determined to be the functional currency, non-monetary assets and liabilities are translated using historical rates, while
monetary assets and liabilities are translated at current rates, with remeasurement gains and losses included in other operating
expenses. Gains and losses resulting from foreign currency transactions are included within other operating expenses.
Reinsurance
The Company’s title insurance business assumes and cedes large title insurance risks through reinsurance. Additionally,
the Company has limited reinsurance arrangements related to certain products offered through its international operations. In
reinsurance arrangements, the primary insurer retains a certain amount of risk under a policy and cedes the remainder of the
risk under the policy to the reinsurer. The primary insurer pays the reinsurer a premium in exchange for accepting this risk of
loss. The primary insurer generally remains liable to its insured for the total risk but is reinsured under the terms of the
reinsurance agreement. The amount of premiums assumed and ceded is recorded as a component of direct premiums and
escrow fees on the Company’s consolidated statements of income. The total amount of premiums assumed and ceded in
connection with reinsurance and payments and recoveries on reinsured losses were not material during the years ended
December 31, 2024, 2023 and 2022.
Escrow deposits and trust assets
The Company administers escrow deposits as a service to customers in its direct title operations. Escrow deposits totaled
$8.9 billion and $10.6 billion at December 31, 2024 and 2023, respectively, of which $4.0 billion and $6.3 billion, respectively,
were held at First American Trust, FSB (“FA Trust”). The remaining deposits were held at third-party financial
institutions. Escrow deposits held at third-party financial institutions are not considered assets of the Company and, therefore,
are not included in the accompanying consolidated balance sheets. All such amounts are placed in deposit accounts insured,
up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the
disposition of these assets.
Trust assets administered by FA Trust totaled $4.8 billion and $4.4 billion at December 31, 2024 and 2023, respectively,
of which $169.4 million and $197.1 million, respectively, were held at FA Trust. The remaining trust assets were held at third-
party financial institutions. Trust assets administered by FA Trust and held at third-party institutions are fiduciary client
assets. As such, these trust assets are not considered assets of the Company and, therefore, are not included in the accompanying
consolidated balance sheets. The Company could be held contingently liable if FA Trust were to breach any of its fiduciary
duties.
In conducting its operations, the Company often holds customers’ assets in escrow, pending completion of real estate
transactions and, as a result, the Company has ongoing programs for realizing economic benefits with various financial
institutions. The results from these programs are included as either income or as a reduction in expense, as appropriate, in the
consolidated statements of income based on the nature of the arrangement and benefit received.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
66
Like-kind exchanges
The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue
Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37. As a facilitator and intermediary, the
Company holds the proceeds from sales transactions and takes temporary title to property identified by the customer to be
acquired with such proceeds. Upon the completion of each such exchange, the identified property is transferred to the customer
or, if the exchange does not take place, an amount equal to the sales proceeds or, in the case of a reverse exchange, title to the
property held by the Company is transferred to the customer. Like-kind exchange funds administered by the Company totaled
$2.3 billion and $1.8 billion at December 31, 2024 and 2023, respectively. The like-kind exchange deposits are held at third-
party financial institutions and, due to the structure utilized to facilitate these transactions, the proceeds and property are not
considered assets of the Company and, therefore, are not included in the accompanying consolidated balance sheets. All such
amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The
Company could be held contingently liable to the customer for the transfers of property, disbursements of proceeds and the
returns on such proceeds.
Subservicing deposits
In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of
its clients. Cash deposits totaled $901.0 million and $830.5 million at December 31, 2024 and 2023, respectively, of which
$606.5 million and $485.7 million, respectively, were held at FA Trust. The remaining deposits were held at third-party
financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company and,
therefore, are not included in the accompanying consolidated balance sheets. All such amounts are placed in deposit accounts
insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable
for the disposition of these assets. In connection with certain accounts, the Company has ongoing programs for realizing
economic benefits with various financial institutions whereby it earns economic benefits either as income or as a reduction in
expense.
Deposit balances held at FA Trust are temporarily invested in cash and cash equivalents and debt securities, with
offsetting liabilities included in deposits in the accompanying consolidated balance sheets.
The Company regularly reviews the financial strength of third-party financial institutions where deposits are held and,
based on this review and the fact that all amounts are placed in deposit accounts insured, up to applicable limits, by the Federal
Deposit Insurance Corporation, does not expect any credit losses; therefore the Company has not recorded a liability for credit
losses.
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued updated guidance to improve financial
reporting by requiring entities to disclose additional information about the components of certain expense captions on an entity's
income statement in the notes to the financial statements. The updated guidance improves reportable segment disclosure
requirements, primarily through enhanced disclosures about significant segment expenses. The updated guidance, which was
adopted for 2024 annual reporting and applied retrospectively to all periods presented, did not have a material impact on the
Company's consolidated financial statements except for the disclosure requirements provided in Note 22 Segment Financial
Information.
In June 2022, the FASB issued updated guidance intended to increase the comparability of financial information across
reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions
preventing the sale of those securities. The updated guidance clarified that a contractual restriction on the sale of an equity
security is not considered part of the unit of account of the equity security and, as a result, should not be considered in measuring
fair value. In addition, new disclosures are required about the nature of the restrictions and their remaining duration. The
updated guidance, which was adopted on January 1, 2024, had no impact on the Company's consolidated financial statements.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
67
Pending Accounting Pronouncements
In November 2024, the FASB issued updated guidance intended to improve financial reporting by requiring entities to
disclose additional information in the notes to the financial statements about specific expense categories within the income
statement. The updated guidance is effective for annual reporting periods beginning after December 15, 2026 and interim
periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The updated disclosures can be
applied either prospectively or retrospectively in the Company's financial statements. Except for the disclosure requirements,
the Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In December 2023, the FASB issued updated guidance intended to enhance the transparency and decision usefulness of
income tax disclosures. The updated guidance requires disclosure of specific categories and greater disaggregation of
information included in the rate reconciliation and additional disclosures related to income taxes paid. The updated guidance
is effective for annual reporting periods beginning after December 15, 2024. Except for the disclosure requirements, the
Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.
In August 2023, the FASB issued updated guidance that is intended to provide decision-useful information to investors
and reduce diversity in practice in accounting for contributions made to a joint venture, upon formation, in a joint venture’s
separate financial statements. The updated guidance will require joint ventures to recognize and initially measure their assets
and liabilities at fair value, with certain exceptions to fair value measurement consistent with business combination guidance.
The updated guidance is effective prospectively for all joint venture formations with a formation date on or after
January 1, 2025. The Company does not expect the adoption of this guidance to have a material impact on its consolidated
financial statements.
NOTE 2. Statutory Restrictions on Investments and Stockholders’ Equity:
Investments totaling $127.2 million and $124.1 million were on deposit with state treasurers in accordance with statutory
requirements for the protection of policyholders at December 31, 2024 and 2023, respectively.
Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of
dividends, loans and advances available to the Company is limited, principally for the protection of policyholders. As of
December 31, 2024, under such regulations, the maximum amount available to the Company from its insurance subsidiaries in
2025, without prior approval from applicable regulators, was dividends of $535.0 million and loans and advances of
$114.2 million.
The Company’s principal title insurance subsidiary, First American Title Insurance Company (“FATICO”), maintained
total statutory capital and surplus of $1.6 billion and $1.5 billion as of December 31, 2024 and 2023, respectively. Statutory
net income for the years ended December 31, 2024, 2023 and 2022 was $182.8 million, $198.3 million and $436.3 million,
respectively. FATICO was in compliance with the minimum statutory capital and surplus requirements as of
December 31, 2024.
FATICO is domiciled in Nebraska and its statutory-based financial statements are prepared in accordance with
accounting practices prescribed or permitted by the Nebraska Department of Insurance. The National Association of Insurance
Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of
prescribed or permitted practices by the state of Nebraska. The state of Nebraska has adopted certain prescribed accounting
practices that differ from those found in the NAIC SAP. Specifically, the timing of amounts released from the statutory
premium reserve under Nebraska’s required practice differs from NAIC SAP resulting in total statutory capital and surplus that
was lower than if reported in accordance with NAIC SAP by $354.6 million and $347.1 million at December 31, 2024 and
2023, respectively.
Statutory accounting principles differ in some respects from GAAP, and these differences include, but are not limited to,
non-admission of certain assets (principally limitations on deferred tax assets, goodwill, furniture and equipment, investment
in subsidiaries and affiliates, real estate, capitalized software, and premiums and other receivables 90 days past due), reporting
of bonds at amortized cost, recognition of credit losses, the lack of recognition of operating lease assets and liabilities on the
balance sheet for lease commitments in which the Company is a lessee, changes in the fair values of marketable equity
securities, amortization of goodwill, deferral of premiums received as statutory premium reserve, supplemental reserve (if
applicable) and exclusion of the incurred but not reported claims reserve.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
68
NOTE 3. Debt Securities:
Investments in debt securities, classified as available-for-sale, are as follows:
Amortized
Gross unrealized
Estimated
(in millions)
cost
gains
losses
fair value
December 31, 2024
U.S. Treasury bonds
$
180.7
$
0.1
$
(5.2) $
175.6
Municipal bonds
844.9
5.3
(73.7)
776.5
Foreign government bonds
217.1
1.6
(7.1)
211.6
Governmental agency bonds
203.8
—
(14.0)
189.8
Governmental agency mortgage-backed securities
4,844.4
1.7
(343.8)
4,502.3
U.S. corporate debt securities
948.4
5.6
(28.4)
925.6
Foreign corporate debt securities
491.6
5.3
(12.4)
484.5
$
7,730.9
$
19.6
$
(484.6) $
7,265.9
December 31, 2023
U.S. Treasury bonds
$
203.3
$
0.5
$
(4.5) $
199.3
Municipal bonds
1,373.7
8.8
(136.7)
1,245.8
Foreign government bonds
228.4
1.4
(10.5)
219.3
Governmental agency bonds
207.7
0.2
(12.5)
195.4
Governmental agency mortgage-backed securities
4,396.2
6.3
(526.8)
3,875.7
U.S. corporate debt securities
1,007.0
6.6
(55.2)
958.4
Foreign corporate debt securities
478.9
5.8
(21.1)
463.6
$
7,895.2
$
29.6
$
(767.3) $
7,157.5
Sales of debt securities resulted in realized gains of $22.2 million, $7.2 million and $4.9 million, realized losses of
$357.3 million, $88.1 million and $141.4 million, and proceeds of $5.5 billion, $1.7 billion and $1.8 billion for the years ended
December 31, 2024, 2023 and 2022, respectively.
In 2024, the Company initiated a strategic investment portfolio rebalancing project. In connection with its rebalancing
project, the Company sold certain debt securities in an unrealized loss position, which resulted in realized losses of
$345.4 million and proceeds of $2.8 billion.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
69
Investments in debt securities in an unrealized loss position, and their respective length of time in such position, are as
follows:
Less than 12 months
12 months or longer
Total
(in millions)
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
Estimated
fair value
Unrealized
losses
December 31, 2024
U.S. Treasury bonds
$
81.8
$
(1.8) $
52.9
$
(3.4) $
134.7
$
(5.2)
Municipal bonds
248.3
(4.4)
417.0
(69.3)
665.3
(73.7)
Foreign government bonds
29.8
(0.2)
72.7
(6.9)
102.5
(7.1)
Governmental agency bonds
144.4
(5.3)
37.9
(8.7)
182.3
(14.0)
Governmental agency mortgage-backed
securities
2,977.2
(98.4)
1,290.4
(245.4)
4,267.6
(343.8)
U.S. corporate debt securities
435.2
(9.6)
117.5
(18.8)
552.7
(28.4)
Foreign corporate debt securities
159.4
(3.2)
110.5
(9.2)
269.9
(12.4)
$
4,076.1
$
(122.9) $
2,098.9
$
(361.7) $ 6,175.0
$
(484.6)
December 31, 2023
U.S. Treasury bonds
$
8.2
$
(0.1) $
55.4
$
(4.4) $
63.6
$
(4.5)
Municipal bonds
107.4
(0.9)
956.8
(135.8)
1,064.2
(136.7)
Foreign government bonds
33.3
(0.1)
101.4
(10.4)
134.7
(10.5)
Governmental agency bonds
0.4
—
118.9
(12.5)
119.3
(12.5)
Governmental agency mortgage-backed
securities
338.3
(6.6)
3,225.3
(520.2)
3,563.6
(526.8)
U.S. corporate debt securities
45.1
(0.4)
602.5
(54.8)
647.6
(55.2)
Foreign corporate debt securities
19.3
(0.1)
267.3
(21.0)
286.6
(21.1)
$
552.0
$
(8.2) $
5,327.6
$
(759.1) $ 5,879.6
$
(767.3)
Based on the Company’s review of its debt securities in an unrealized loss position it determined that the losses were due
to non-credit factors and, therefore, it does not consider these securities to be credit impaired at December 31, 2024. As of
December 31, 2024, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more
likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.
In determining credit losses on its debt securities in an unrealized loss position, the Company considers certain factors
that may include, among others, severity of the unrealized loss, security type, industry sector, credit rating, yield to maturity,
profitability and stock performance.
In the normal course of operations, the Company may seek to optimize its investment portfolio and prospective
investment returns by selling certain debt securities in an unrealized loss (or gain) position for which such unrealized loss or
gain has been deferred in other comprehensive income. Sales of such debt securities could result in the realization of material
gains or losses recorded in net income in the period the debt securities are sold.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
70
Investments in debt securities at December 31, 2024, by contractual maturities, are as follows:
(in millions)
Due in one
year or less
Due after
one
through
five years
Due after
five
through
ten years
Due after
ten years
Total
U.S. Treasury bonds
Amortized cost
$
32.9
$
117.6
$
4.7
$
25.5
$
180.7
Estimated fair value
$
32.8
$
114.7
$
4.6
$
23.5
$
175.6
Municipal bonds
Amortized cost
7.1
83.0
283.1
471.7
844.9
Estimated fair value
7.1
80.5
247.6
441.3
776.5
Foreign government bonds
Amortized cost
13.0
123.7
73.7
6.7
217.1
Estimated fair value
13.0
125.1
67.9
5.6
211.6
Governmental agency bonds
Amortized cost
8.6
1.4
149.5
44.3
203.8
Estimated fair value
8.6
1.4
144.2
35.6
189.8
U.S. corporate debt securities
Amortized cost
12.4
545.2
295.6
95.2
948.4
Estimated fair value
12.5
539.0
290.5
83.6
925.6
Foreign corporate debt securities
Amortized cost
22.1
309.9
128.4
31.2
491.6
Estimated fair value
22.0
308.4
126.1
28.0
484.5
Total debt securities, excluding mortgage-backed
securities
Amortized cost
$
96.1
$
1,180.8
$
935.0
$
674.6
$
2,886.5
Estimated fair value
$
96.0
$
1,169.1
$
880.9
$
617.6
$
2,763.6
Total mortgage-backed securities
Amortized cost
4,844.4
Estimated fair value
4,502.3
Total debt securities
Amortized cost
$
7,730.9
Estimated fair value
$
7,265.9
Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity as
borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
71
The composition of the debt securities portfolio at December 31, 2024, by credit rating, is as follows:
A- or higher
BBB+ to BBB-
Non-Investment Grade
Total
(dollars in millions)
Estimated
fair value
Percentage
Estimated
fair value
Percentage
Estimated
fair value
Percentage
Estimated
fair value
U.S. Treasury bonds
$
175.6
100.0% $
—
—% $
—
—% $
175.6
Municipal bonds
755.1
97.3
21.1
2.7
0.3
—
776.5
Foreign government bonds
206.5
97.6
4.4
2.1
0.7
0.3
211.6
Governmental agency bonds
189.8
100.0
—
—
—
—
189.8
Governmental agency
mortgage-backed securities
4,502.3
100.0
—
—
—
—
4,502.3
U.S. corporate debt securities
444.1
48.0
314.5
34.0
167.0
18.0
925.6
Foreign corporate debt securities
259.2
53.5
181.0
37.4
44.3
9.1
484.5
$ 6,532.6
89.9% $
521.0
7.2% $
212.3
2.9% $
7,265.9
Included in debt securities at December 31, 2024, were bank loans totaling $139.7 million, of which $128.4 million were
non-investment grade; high yield corporate debt securities totaling $75.4 million, all of which were non-investment grade; and
emerging market debt securities totaling $32.6 million, of which $8.2 million were non-investment grade.
The composition of the debt securities portfolio in an unrealized loss position at December 31, 2024, by credit rating, is
as follows:
A- or higher
BBB+ to BBB-
Non-Investment Grade
Total
(dollars in millions)
Estimated
fair value
Percentage
Estimated
fair value
Percentage
Estimated
fair value
Percentage
Estimated
fair value
U.S. Treasury bonds
$
134.7
100.0% $
—
—% $
—
—% $
134.7
Municipal bonds
649.2
97.6
15.8
2.4
0.3
—
665.3
Foreign government bonds
97.4
95.0
4.4
4.3
0.7
0.7
102.5
Governmental agency bonds
182.3
100.0
—
—
—
—
182.3
Governmental agency
mortgage-backed securities
4,267.6
100.0
—
—
—
—
4,267.6
U.S. corporate debt securities
317.2
57.4
202.4
36.6
33.1
6.0
552.7
Foreign corporate debt securities
165.1
61.2
89.9
33.3
14.9
5.5
269.9
$ 5,813.5
94.1% $
312.5
5.1% $
49.0
0.8% $
6,175.0
Debt securities in an unrealized loss position at December 31, 2024, included bank loans totaling $17.3 million, of which
$17.0 million were non-investment grade; high yield corporate debt securities totaling $27.5 million, all of which were non-
investment grade; and emerging market debt securities totaling $24.0 million, of which $4.2 million were non-investment
grade.
The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating
agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency
mortgage-backed securities are not rated by any of the rating agencies; however, these securities have been included in the
above table in the “A- or higher” rating category because the payments of principal and interest are guaranteed by the
governmental agency that issued the security.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
72
NOTE 4. Equity Securities:
Investments in equity securities, by accounting classification, are summarized as follows:
December 31,
(in millions)
2024
2023
Marketable equity securities
$
386.8
$
436.9
Non-marketable equity securities
202.4
224.1
Equity method investments
102.1
74.6
$
691.3
$
735.6
Investments in marketable equity securities are summarized as follows:
(in millions)
Cost
Unrealized
gains (losses)
Estimated
fair value
December 31, 2024
Common stocks
$
397.3
$
(22.6) $
374.7
Preferred stocks
12.0
0.1
12.1
$
409.3
$
(22.5) $
386.8
December 31, 2023
Common stocks
$
429.4
$
(4.9) $
424.5
Preferred stocks
15.7
(3.3)
12.4
$
445.1
$
(8.2) $
436.9
Net gains of $4.3 million and $54.9 million resulting from changes in the fair values of marketable equity securities were
recognized for the years ended December 31, 2024 and 2023, respectively, which included net unrealized gains of $0.9 million
and $51.2 million on securities still held at December 31, 2024 and 2023, respectively. Included in net gains during the years
ended December 31, 2024 and 2023 were unrealized losses of $37.9 million and unrealized gains of $12.7 million, respectively,
related to the Company's investment in Offerpad Solutions Inc., a tech-enabled real estate company.
A summary of the changes in the carrying amounts of non-marketable equity securities, which primarily relate to the
Company's venture investment portfolio, for the years ended December 31, 2024 and 2023, is as follows:
Year ended December 31,
(in millions)
2024
2023
Carrying amount, beginning of period
$
224.1
$
395.8
Net additions (disposals)
6.0
(4.0)
Gross unrealized gains
1.5
1.5
Gross unrealized losses and impairments
(29.2)
(169.2)
Carrying amount, end of period
$
202.4
$
224.1
Cumulative gross unrealized gains and cumulative gross unrealized losses and impairments related to non-marketable
equity securities at December 31, 2024 and 2023, are summarized as follows:
December 31,
(in millions)
2024
2023
Cumulative gross unrealized gains
$
244.8
$
243.3
Cumulative gross unrealized losses and impairments
$
351.6
$
322.4
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
73
NOTE 5. Allowance for Credit Losses – Accounts Receivable:
Activity in the allowance for credit losses on accounts receivable is summarized as follows:
Year Ended December 31,
(in millions)
2024
2023
Balance at beginning of period
$
21.8
$
21.3
Provision for expected credit losses
8.7
8.1
Write-offs/recoveries
(9.0)
(7.6)
Balance at end of period
$
21.5
$
21.8
NOTE 6. Property and Equipment:
Property and equipment is summarized as follows:
December 31,
(in millions)
2024
2023
Land
$
26.5
$
26.6
Buildings
195.8
193.4
Leasehold improvements
66.5
71.3
Furniture and equipment
175.7
184.8
Capitalized software
1,283.2
1,268.8
1,747.7
1,744.9
Accumulated depreciation and amortization
(1,002.6)
(995.3)
$
745.1
$
749.6
NOTE 7. Leases:
Lease assets and liabilities are summarized as follows:
December 31,
(in millions)
2024
2023
Classification
Assets
Operating lease assets
$
214.7
$
229.3
Operating lease assets
Finance lease assets
6.2
3.2
Other assets
Total lease assets
$
220.9
$
232.5
Liabilities
Operating lease liabilities
$
229.9
$
246.6
Operating lease liabilities
Finance lease liabilities
5.7
3.1
Notes and contracts payable
Total lease liabilities
$
235.6
$
249.7
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
74
The components of lease expense are summarized as follows:
Year ended December 31,
(in millions)
2024
2023
2022
Classification
Operating lease cost
$
85.6
$
89.0
$
93.1
Other operating expenses
Finance lease cost:
Amortization of lease assets
2.7
1.7
1.7
Depreciation and amortization
Interest of lease liabilities
0.2
0.1
0.1
Interest
Variable lease cost
29.7
31.8
34.2
Other operating expenses
Short-term lease cost
1.4
2.1
2.6
Other operating expenses
Sublease income
(2.7)
(2.7)
(1.2) Information and other
Net lease cost
$
116.9
$
122.0
$
130.5
Future minimum lease payments under operating and finance leases with noncancelable lease terms, as of
December 31, 2024, are summarized as follows:
(in millions)
Operating
Leases
Finance
Leases
Total
2025
$
79.9
$
2.3
$
82.2
2026
62.0
1.9
63.9
2027
43.8
0.8
44.6
2028
26.1
0.7
26.8
2029
15.8
0.2
16.0
Thereafter
32.6
—
32.6
Total lease payments
260.2
5.9
266.1
Interest
(30.3)
(0.2)
(30.5)
Present value of lease liabilities
$
229.9
$
5.7
$
235.6
Information related to lease terms and discount rates is summarized as follows:
December 31,
2024
2023
Weighted-average remaining lease terms (years):
Operating leases
4.5
4.0
Finance leases
3.2
2.6
Weighted-average discount rates:
Operating leases
5.03%
4.06%
Finance leases
2.29%
3.01%
Cash flow information related to lease liabilities is summarized as follows:
Year ended December 31,
(in millions)
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
87.4
$
91.5
$
95.9
Operating cash flows from finance leases
$
0.2
$
0.1
$
0.1
Financing cash flows from finance leases
$
2.6
$
1.8
$
1.9
Operating lease assets obtained in exchange for new operating lease liabilities
$
61.7
$
58.9
$
66.2
Finance lease assets obtained in exchange for new finance lease liabilities
$
6.1
$
1.5
$
2.8
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
75
NOTE 8. Goodwill:
A summary of the changes in the carrying amounts of goodwill, by reportable segment, for the years ended
December 31, 2024 and 2023, is as follows:
(in millions)
Title
Insurance
and Services
Home
Warranty
Total
Balance as of December 31, 2022
$
1,757.3
$
40.9
$
1,798.2
Acquisitions
7.5
—
7.5
Dispositions
(0.9)
—
(0.9)
Foreign currency translation
2.7
—
2.7
Balance as of December 31, 2023
$
1,766.6
$
40.9
$
1,807.5
Acquisitions
1.4
—
1.4
Foreign currency translation
(4.6)
—
(4.6)
Balance as of December 31, 2024
$
1,763.4
$
40.9
$
1,804.3
NOTE 9. Other Intangible Assets:
Other intangible assets are summarized as follows:
December 31,
(in millions)
2024
2023
Finite-lived intangible assets:
Customer relationships
$
160.8
$
191.4
Noncompete agreements
10.5
28.2
Trademarks
70.7
70.6
Internal-use software licenses
21.7
16.5
Patents
2.8
2.8
266.5
309.5
Accumulated amortization
(158.2)
(172.6)
108.3
136.9
Indefinite-lived intangible assets:
Licenses
16.9
16.9
$
125.2
$
153.8
Amortization expense for finite-lived intangible assets was $44.4 million, $51.5 million and $53.2 million for the years
ended December 31, 2024, 2023 and 2022, respectively.
Estimated amortization expense for finite-lived intangible assets for the next five years is as follows:
Year
(in millions)
2025
$
32.0
2026
$
27.5
2027
$
12.9
2028
$
8.4
2029
$
5.9
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
76
NOTE 10. Deposits:
Deposit accounts are summarized as follows:
December 31,
(dollars in millions)
2024
2023
Escrow deposits:
Interest bearing
$
1,999.9
$
2,063.0
Non-interest bearing
2,247.8
4,531.3
4,247.7
6,594.3
Mortgage loan subservicing deposits:
Interest bearing
606.5
485.7
Other deposits
193.9
228.0
$
5,048.1
$
7,308.0
Weighted-average interest rate:
Interest bearing deposit accounts
1.89%
1.52%
NOTE 11. Reserve for Known and Incurred But Not Reported Claims:
Activity in the reserve for known and incurred but not reported claims is summarized as follows:
December 31,
(in millions)
2024
2023
2022
Balance at beginning of year
$
1,282.4
$
1,325.3
$
1,283.8
Provision related to:
Current year
357.3
354.6
468.3
Prior years
(37.3)
(18.3)
18.0
320.0
336.3
486.3
Payments, net of recoveries, related to:
Current year
204.6
199.6
225.8
Prior years
193.2
182.2
208.5
397.8
381.8
434.3
Other
(11.2)
2.6
(10.5)
Balance at end of year
$
1,193.4
$
1,282.4
$
1,325.3
The provisions for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, were
3.0%, 3.25% and 4.0% for the years ended December 31, 2024, 2023 and 2022, respectively.
The 3.0% loss provision rate in the current year reflects an ultimate loss rate of 3.75% for the current policy year and a
reserve release of 0.75%, or $34.6 million and for prior policy years, all of which are based on title insurance premiums and
escrow fees for the year ended December 31, 2024.
The 2023 loss provision rate of 3.25% reflected an ultimate loss rate of 3.75% for the 2023 policy year and a reserve
release of 0.5%, or $21.6 million and for prior policy years, all of which are based on title insurance premiums and escrow fees
for the year ended December 31, 2023. The 2022 loss provision rate of 4.0% reflected the ultimate loss rate for policy year
2022 and no change in loss reserve estimates for prior policy years.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
77
A summary of the Company’s loss reserves is as follows:
December 31,
(dollars in millions)
2024
2023
Known title claims
$
55.3
4.6% $
55.5
4.3%
IBNR title claims
1,109.4
93.0%
1,186.5
92.5%
Total title claims
1,164.7
97.6%
1,242.0
96.8%
Non-title claims
28.7
2.4%
40.4
3.2%
Total loss reserves
$
1,193.4
100.0% $
1,282.4
100.0%
Short-Duration Insurance Contracts
Home Warranty
The following reflects information as of December 31, 2024 about incurred and paid claims development as well as
cumulative claims frequency by claims event, and the total of incurred but not reported claims plus expected development on
reported claims included with the net incurred claims amounts.
The information below about incurred and paid claims development for the years ended December 31, 2015 to 2023, is
presented as supplementary information.
Incurred claims and allocated claim adjustment expenses
December 31,
2024
Accident
Years ended December 31,
Cumulative
number of
reported
Year
2015*
2016*
2017*
2018*
2019*
2020*
2021*
2022*
2023*
2024
claims
(in millions)
2015
143.7
143.7
143.7
143.7
143.7
143.7
143.7
143.7
143.7
$
143.7
0.9
2016
172.7
172.7
172.7
172.7
172.7
172.7
172.7
172.7
172.7
1.0
2017
167.2
167.2
167.2
167.2
167.2
167.2
167.2
167.2
1.0
2018
179.8
179.8
179.8
179.8
179.8
179.8
179.8
1.1
2019
174.1
174.1
174.1
174.1
174.1
174.1
1.1
2020
197.4
197.4
197.4
197.4
197.4
1.2
2021
218.2
218.2
218.2
218.2
1.2
2022
211.8
211.8
211.8
1.1
2023
193.2
193.2
1.0
2024
184.4
1.0
Total
$1,842.5
*Amounts unaudited.
Cumulative paid claims and allocated claim adjustment expenses
Accident
Years ended December 31,
Year
2015*
2016*
2017*
2018*
2019*
2020*
2021*
2022*
2023*
2024
(in millions)
2015
129.5
143.7
143.7
143.7
143.7
143.7
143.7
143.7
143.7
$
143.7
2016
155.4
172.7
172.7
172.7
172.7
172.7
172.7
172.7
172.7
2017
151.1
167.2
167.2
167.2
167.2
167.2
167.2
167.2
2018
163.0
179.8
179.8
179.8
179.8
179.8
179.8
2019
159.2
174.1
174.1
174.1
174.1
174.1
2020
177.8
197.4
197.4
197.4
197.4
2021
198.7
218.2
218.2
218.2
2022
192.3
211.8
211.8
2023
177.5
193.2
2024
169.0
Total
$ 1,827.1
All outstanding liabilities before 2015
—
Liabilities for claims and claims adjustment expenses
$
15.4
*Amounts unaudited.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
78
A reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment
expense at December 31, 2024, is as follows:
December 31, 2024
(in millions)
Liability for unpaid claims and claim adjustment expenses — short-duration:
Home warranty
$
15.4
Property and casualty insurance
13.3
28.7
Insurance lines other than short-duration:
Title insurance
1,164.7
Total liability for unpaid claims and claims adjustment expenses
$
1,193.4
Supplementary information about average historical claims duration for the Company’s home warranty business as of
December 31, 2024, is as follows:
Average annual percentage payout of incurred claims by age (unaudited)
Years
1
2
Annual payout
90.8%
9.2%
NOTE 12. Notes and Contracts Payable:
December 31,
2024
2023
(dollars in millions)
5.45% senior unsecured notes due September 30, 2034, effective interest rate of
5.49%
$
450.0
$
—
2.40% senior unsecured notes due August 15, 2031, effective interest rate of 2.44%
650.0
650.0
4.00% senior unsecured notes due May 15, 2030, effective interest rate of 4.05%
450.0
450.0
4.60% senior unsecured notes due November 15, 2024, effective interest rate of
4.60%
—
300.0
Other notes and contracts payable with maturities through 2029, weighted
-average interest rates of 3.77% and 3.41%
11.0
4.2
1,561.0
1,404.2
Unamortized discounts and debt issuance costs
(14.4)
(10.3)
$
1,546.6
$
1,393.9
In November 2024, the Company repaid its $300.0 million 4.60% senior unsecured notes, upon maturity, with cash
available at the holding company.
In September 2024, the Company issued $450.0 million of 5.45% senior unsecured notes due in 2034. Interest is due
semi-annually on March 30 and September 30, beginning March 30, 2025.
The Company maintains a senior unsecured credit agreement with JPMorgan Chase Bank, N.A., in its capacity as
administrative agent, and the lenders party thereto that provides for a $900.0 million revolving credit facility. The credit
agreement includes an expansion option that permits the Company, subject to satisfaction of certain conditions, to increase the
revolving commitments and/or add term loan tranches in an aggregate amount not to exceed $450.0 million. The obligations
of the Company under the credit agreement are neither secured nor guaranteed. Proceeds from borrowings made from time to
time under the credit agreement may be used for general corporate purposes. Unless terminated earlier, the credit agreement
will terminate on May 17, 2028. Upon entry into the credit agreement, the previous $700.0 million senior unsecured credit
agreement was terminated. At December 31, 2024, the Company had no outstanding borrowings under the facility.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
79
At the Company’s election, borrowings of revolving loans under the credit agreement bear interest at (a) the Alternate
Base Rate plus the applicable spread, (b) the Adjusted Term SOFR Rate plus the applicable spread, or (c) the Adjusted Daily
Simple SOFR plus the applicable spread (in each case as defined in the credit agreement). The Company may select interest
periods of one, three or six months for Adjusted Term SOFR Rate borrowings of loans. The applicable spread varies depending
upon the Debt Rating assigned by Moody’s Investor Service, Inc., Standard & Poor's Rating Services and/or Fitch Ratings Inc.
The minimum applicable spread for Alternate Base Rate borrowings is 0.125% and the maximum is 0.75%. The minimum
applicable spread for Adjusted Term SOFR Rate and Adjusted Daily Simple SOFR borrowings is 1.125% and the maximum
is 1.75%. The Alternate Base Rate is subject to a floor of 1.00% and the Adjusted Term SOFR Rate and the Adjusted Daily
Simple SOFR are each subject to a floor of 0.00%. The rate of interest on any term loans incurred in connection with the
expansion option will be established at or about the time such loans are made and may differ from the rate of interest on
revolving loans.
The credit agreement includes representations and warranties, reporting covenants, affirmative covenants, negative
covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of
default the lenders may accelerate the loans. Upon the occurrence of certain insolvency and bankruptcy events of default the
loans will automatically accelerate. As of December 31, 2024, the Company was in compliance with the financial covenants
under the credit agreement.
The aggregate annual maturities for notes and contracts payable for the next five years and thereafter are summarized as
follows:
Year
Annual
maturities
(in millions)
2025
$
3.5
2026
3.2
2027
2.1
2028
2.0
2029
0.2
Thereafter
1,550.0
$
1,561.0
NOTE 13. Net Investment Income:
Net investment income includes interest and earnings on the following investments:
Year ended December 31,
2024
2023
2022
(in millions)
Deposits and other investments
$
282.3
$
303.5
$
142.3
Debt securities
244.6
231.7
206.1
Deferred compensation plan assets
19.5
21.9
(25.3)
Dividends on equity securities
10.4
10.5
9.0
Equity in earnings of affiliates, net
7.4
5.4
11.0
564.2
573.0
343.1
Investment expenses
(3.2)
(3.0)
(3.0)
Net investment income
$
561.0
$
570.0
$
340.1
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
80
NOTE 14. Income Taxes:
For the years ended December 31, 2024, 2023 and 2022, domestic and foreign pretax income, before noncontrolling
interests, were $83.2 million and $82.2 million, $193.4 million and $81.0 million, and $268.0 million and $57.7 million,
respectively.
Income taxes are summarized as follows:
Year ended December 31,
2024
2023
2022
(in millions)
Current:
Federal
$
(0.7) $
55.4
$
132.3
State
6.1
2.8
18.5
Foreign
17.3
11.6
18.3
22.7
69.8
169.1
Deferred:
Federal
21.4
(8.6)
(80.3)
State
(16.6)
(10.9)
(25.2)
Foreign
5.3
8.6
(3.2)
10.1
(10.9)
(108.7)
$
32.8
$
58.9
$
60.4
The Company’s actual income tax expense differs from the expense computed by applying the federal income tax rate
of 21% for the years ended December 31, 2024, 2023 and 2022. A reconciliation of these differences is as follows:
Year ended December 31,
2024
2023
2022
(dollars in millions)
Taxes calculated at federal rate
$
34.7
21.0% $
57.6
21.0% $
68.4
21.0%
State taxes, net of federal benefit
(8.3)
(5.0)
(6.4)
(2.3)
(5.3)
(1.5)
Change in liability for tax positions
6.8
4.1
10.7
3.9
(0.8)
(0.3)
Foreign income taxed at different rates
8.6
5.2
9.5
3.5
2.1
0.6
Unremitted foreign earnings
(1.4)
(0.8)
1.2
0.4
—
—
Federal tax credits
(14.6)
(8.8)
(17.3)
(6.3)
—
—
Valuation allowance
11.4
6.9
7.7
2.8
—
—
Other items, net
(4.4)
(2.8)
(4.1)
(1.5)
(4.0)
(1.1)
$
32.8
19.8% $
58.9
21.5% $
60.4
18.7%
The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were
19.8%, 21.5%, and 18.7% for the years ended December 31, 2024, 2023, and 2022, respectively. The effective income tax
rates differ from the federal statutory rate as a result of state and foreign income taxes for which the Company is liable, as well
as permanent differences between amounts reported for financial statement purposes and amounts reported for income tax
purposes, including the recognition of excess tax benefits or tax deficiencies associated with share-based payment transactions
through income tax expense. The effective income tax rates also reflect the impact on pretax earnings from impairment losses
on the Company’s venture investment portfolio and, for 2024, realized losses from sales of debt securities in an unrealized loss
position in connection with the Company’s portfolio rebalancing project. In addition, the effective income tax rates for 2024
and 2023 reflect tax credits claimed in current and prior years and a valuation allowance recorded against losses on certain
equity investments. The effective income tax rate for 2022 also reflects the benefits from the resolution of state tax matters
from prior years.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
81
The primary components of temporary differences that give rise to the Company’s net deferred tax liability are as follows:
December 31,
2024
2023
(in millions)
Deferred tax assets:
Deferred revenue
$
10.4
$
8.6
Employee benefits
103.9
101.1
Bad debt reserves
7.9
8.7
Pension
11.3
13.3
Net operating loss carryforward
27.6
21.8
Foreign tax credit
3.5
3.8
Operating lease liabilities
47.1
52.3
Investments in affiliates
17.2
13.9
Securities
124.1
189.7
Other
17.5
12.2
370.5
425.4
Valuation allowance
(27.9)
(13.7)
342.6
411.7
Deferred tax liabilities:
Depreciable and amortizable assets
264.6
275.8
Claims and related salvage
119.2
88.5
Operating lease assets
43.2
47.7
Unremitted foreign earnings
10.9
13.2
437.9
425.2
Net deferred tax liability
$
95.3
$
13.5
Effective in 2024, the Company is subject to international anti-base erosion rules that assess a minimum tax rate of 15%
in the jurisdictions in which it operates. Commonly known as “Pillar II,” these rules apply to large multinational enterprises
and are designed to address the tax challenges arising from the globalization and digitalization of the economy. The Company
has calculated the minimum tax on a jurisdiction-by-jurisdiction basis and has determined that the resulting tax is not material
to its financial results.
The vesting of RSUs represents a tax benefit that has been reflected as a reduction to income taxes payable and income
tax expense for the years ended December 31, 2024, 2023 and 2022. The benefits recorded were $0.3 million, $0.7 million
and $2.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
At December 31, 2024, the Company had available a $3.2 million foreign tax credit carryover, net of a valuation
allowance, and expects to utilize this credit within the carryover period.
At December 31, 2024, the Company had available net operating loss carryforwards for income tax purposes totaling
$383.1 million, consisting of federal, state and foreign losses of $38.4 million, $332.7 million and $12.0 million, respectively.
Of the aggregate net operating losses, $68.1 million has an indefinite expiration and $315.0 million will begin to expire in
various years starting in 2028.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
82
The Company evaluates the realizability of its deferred tax assets by assessing the valuation allowance and makes
adjustments to the allowance as necessary. The factors used by the Company in assessing the likelihood of realization of its
deferred tax assets include forecasts of future taxable income and available tax planning strategies that could be
implemented. The Company’s ability to achieve forecasted taxable income in the applicable taxing jurisdictions could affect
the ultimate realization of its deferred tax assets. At December 31, 2024 and 2023, the Company carried a valuation allowance
of $27.9 million and $13.7 million, respectively. The balances as of December 31, 2024 and 2023 include $24.7 million and
$9.6 million related to capital losses, $2.9 million and $3.0 million related to net operating losses, and $0.3 million and
$1.1 million related to other deferred tax assets, respectively. The increase in the overall valuation allowance during 2024 was
primarily due to the Company’s assessment of its ability to realize tax benefits related to capital losses on certain equity
investments. Based on future operating results in certain jurisdictions, it is possible that the current valuation allowance
positions of those jurisdictions could be adjusted during the next 12 months.
As of December 31, 2024, 2023 and 2022, the liability for income taxes associated with uncertain tax positions was
$31.6 million, $12.4 million and $3.2 million, respectively. The net increases in the liability in 2024 from 2023 and in 2023
from 2022 were primarily attributable to positions taken on the Company’s tax returns for current and prior years. The liabilities
could be reduced by $3.7 million, $0.8 million and $2.2 million as of December 31, 2024, 2023 and 2022, respectively, due to
offsetting tax benefits associated with the correlative effects of potential adjustments, including timing adjustments, and state
income taxes. The net liability, if recognized, would favorably affect the Company’s effective income tax rate.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended
December 31, 2024, 2023 and 2022 is as follows:
Year ended December 31,
2024
2023
2022
(in millions)
Unrecognized tax benefits—beginning balance
$
12.4
$
3.2
$
7.9
Gross increases (decreases)—prior period tax
positions
14.8
8.4
(0.2)
Gross increases—current period tax positions
4.4
5.2
0.8
Settlements with taxing authorities
—
(4.4)
(5.3)
Unrecognized tax benefits—ending balance
$
31.6
$
12.4
$
3.2
The Company’s continuing practice is to recognize interest and penalties related to uncertain tax positions in income tax
expense. Accrued interest and penalties, net of tax benefits, related to uncertain tax positions as of December 31, 2024, 2023,
and 2022, were not material.
The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, various state jurisdictions
and in various non-U.S. jurisdictions. The primary non-federal jurisdictions are California, Canada, India and the United
Kingdom. As of December 31, 2024, the Company is generally no longer subject to income tax examinations for U.S. federal,
state and non-U.S. jurisdictions for years prior to 2021, 2019 and 2014, respectively.
It is reasonably possible that the unrecognized benefit with respect to certain of the Company’s unrecognized tax
positions may increase or decrease within the next 12 months. Any such change may be the result of either ongoing audits or
the expiration of federal and state statutes of limitations for the assessment of taxes.
The Company records a liability for potential tax assessments based on its estimate of the potential exposure. New tax
laws and new interpretations of laws and rulings by taxing authorities may affect the liability for potential tax assessments.
Due to the subjectivity and complex nature of the underlying issues, actual payments or assessments may differ from estimates.
To the extent that the Company’s estimates differ from actual payments or assessments, income tax expense could change. The
Company’s income tax returns in several jurisdictions are being examined by various taxing authorities. The Company believes
that adequate amounts of tax and related interest from any adjustments that may result from these examinations have been
provided for.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
83
NOTE 15. Earnings Per Share:
The computation of basic and diluted earnings per share is as follows:
Year ended December 31,
2024
2023
2022
(in millions, except per share data)
Numerator
Net income attributable to the Company
$
131.1
$
216.8
$
263.0
Denominator
Basic weighted-average shares
103.9
104.3
107.0
Effect of dilutive RSUs (1)
0.4
0.3
0.3
Diluted weighted-average shares
104.3
104.6
107.3
Net income per share attributable to the Company’s
stockholders
Basic
$
1.26
$
2.08
$
2.46
Diluted
$
1.26
$
2.07
$
2.45
(1)
Includes 79 and 32 thousand dilutive PRSUs for the years ended December 31, 2024 and 2023, respectively.
For the years ended December 31, 2024, 2023, and 2022, 44 thousand, 8 thousand and 19 thousand RSUs, respectively,
and for the years ended December 31, 2024 and 2023, 45 thousand and 13 thousand PRSUs, respectively, were excluded from
the weighted-average diluted common shares outstanding due to their antidilutive effect.
NOTE 16. Employee Benefit Plans:
The First American Financial Corporation 401(k) Savings Plan (the “Savings Plan”) allows for employee-elective
contributions up to the maximum amount as determined by the Internal Revenue Code. The Company makes discretionary
contributions to the Savings Plan based on profitability as well as on the contributions of participants. The Savings Plan held
1.3 million shares and 1.4 million shares of the Company’s common stock, representing 1.2% and 1.4% of the Company’s total
common shares outstanding at December 31, 2024 and 2023, respectively. Effective July 1, 2015, additional investments in
common stock of the Company are no longer allowed.
The Company maintains a deferred compensation plan for certain employees that allows participants to defer up to 100%
of their salary, commissions and certain bonuses. Participants can allocate their deferrals among a variety of investment
crediting options (known as “deemed investments”). The term deemed investments means that the participant has no ownership
interest in the funds they select; the funds are only used to measure the gains or losses that will be attributed to each participant’s
deferral account over time. Participants can elect to have their deferral balance paid out while they are still employed or after
their employment ends. The deferred compensation plan is exempt from most provisions of the Employee Retirement Income
Security Act because it is only available to a select group of management and highly compensated employees and is not a
qualified employee benefit plan. To preserve the tax-deferred savings advantages of a nonqualified deferred compensation
plan, federal law requires that it be unfunded or informally funded. Participant deferrals, and any earnings on those deferrals,
are general unsecured obligations of the Company. The Company informally funds the deferred compensation plan through a
tax-advantaged investment known as variable universal life insurance. Deferred compensation plan assets are held as an asset
of the Company within a special trust, known as a “Rabbi Trust.” At December 31, 2024 and 2023, the value of the assets held
in the Rabbi Trust of $148.0 million and $130.9 million, respectively, and the unfunded liabilities of $164.2 million and
$151.6 million, respectively, were included in the consolidated balance sheets in other assets and pension costs and other
retirement plans, respectively.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
84
The Company also has nonqualified, unfunded supplemental benefit plans covering certain management personnel,
which are comprised primarily of the Executive and Management Supplemental Benefit Plans and the smaller Pension
Restoration Plan (collectively, the “unfunded supplemental benefit plans”). The Executive and Management Supplemental
Benefit Plans, subject to certain limitations, provide participants with maximum annual benefits of 30% and 15%, respectively,
of average annual compensation over a fixed five-year period. Effective January 1, 2011, the plans were closed to new
participants.
Certain of the Company’s subsidiaries have separate savings and employee benefit plans. Expenses related to these plans
and the Company’s deferred compensation plans are included below under “other plans, net.”
The principal components of employee benefit costs are summarized as follows:
Year ended December 31,
2024
2023
2022
(in millions)
Expense:
Savings plan
$
60.5 $
34.5 $
37.3
Unfunded supplemental benefit plans
12.0
12.3
12.2
Other plans, net
26.4
26.8
(14.7)
$
98.9 $
73.6 $
34.8
The following table summarizes the benefit obligations and funded status associated with the Company’s unfunded
supplemental benefit plans:
December 31,
2024
2023
(in millions)
Change in projected benefit obligation:
Benefit obligation at beginning of year
$
196.0
$
196.4
Service costs
0.1
0.1
Interest costs
9.6
10.2
Actuarial (gain) loss
(5.3)
4.8
Benefits paid
(15.3)
(15.5)
Projected benefit obligation at end of year
185.1
196.0
Change in plan assets:
Contributions
15.3
15.5
Benefits paid
(15.3)
(15.5)
Fair value of plan assets at end of year
—
—
Reconciliation of funded status:
Unfunded status of the plans
$
185.1
$
196.0
Amounts recognized in the consolidated balance sheet:
Accrued benefit liability
$
185.1
$
196.0
Amounts recognized in accumulated other
comprehensive income/loss:
Unrecognized net actuarial loss
$
43.3
$
50.9
$
43.3
$
50.9
Accumulated benefit obligation at end of year
$
185.1
$
196.0
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
85
Net periodic benefit costs related to the Company’s unfunded supplemental benefit pension plans are summarized as
follows:
Year ended December 31,
2024
2023
2022
(in millions)
Expense:
Service costs
$
0.1
$
0.1
$
0.2
Interest costs
9.6
10.2
6.0
Amortization of net actuarial loss
2.3
2.0
5.8
Amortization of prior service cost
—
—
0.2
$
12.0
$
12.3
$
12.2
Net actuarial loss for the unfunded supplemental benefit plans expected to be amortized from accumulated other
comprehensive income/loss into net periodic benefit cost during 2025 is $1.9 million.
The weighted-average discount rate assumptions used to determine net periodic benefit costs for the Executive and
Management Supplemental Benefit Plans for the years ended December 31, 2024, 2023 and 2022, are as follows:
Year ended December 31,
2024
2023
2022
Discount rates:
Projected benefit obligation
5.21%
5.56%
2.89%
Service cost
5.40%
5.75%
3.29%
Interest cost
5.15%
5.45%
2.37%
The weighted-average discount rate assumptions used to determine the projected benefit obligations for the Executive
and Management Supplemental Benefit Plans at December 31, 2024 and 2023, are as follows:
December 31,
2024
2023
Discount rate
5.64%
5.21%
The discount rate assumptions used reflect the yield available on high-quality, fixed-income debt securities that match
the expected timing of the benefit obligation payments.
The Company expects to make cash contributions of $16.3 million to its unfunded supplemental benefit plans during
2025.
Benefit payments, which reflect expected future service, as appropriate, are expected to be made as follows:
Year
(in millions)
2025
$
16.3
2026
$
17.0
2027
$
16.7
2028
$
16.4
2029
$
16.1
Five years thereafter
$
74.0
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
86
NOTE 17. Fair Value Measurements:
Certain of the Company’s assets and liabilities are carried at fair value. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date.
The Company categorizes its assets and liabilities carried at fair value using a three-level hierarchy for fair value
measurements that distinguishes between market participant assumptions developed based on market data obtained from
sources independent of the Company (observable inputs) and the Company’s own assumptions about market participant
assumptions developed based on the best information available in the circumstances (unobservable inputs). The hierarchy for
inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by
requiring that observable inputs be used when available. The hierarchy level assigned to the assets and liabilities is based on
management’s assessment of the transparency and reliability of the inputs used to estimate the fair values at the measurement
date. The three hierarchy levels are defined as follows:
Level 1—Valuations based on unadjusted quoted market prices in active markets for identical assets or liabilities.
Level 2—Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets or
liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either
directly or indirectly.
Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement and
involve management judgment.
If the inputs used to measure fair value fall into different levels of the fair value hierarchy, the hierarchy level assigned
is based upon the lowest level of input that is significant to the fair value measurement.
Assets measured at fair value on a recurring basis
The valuation techniques and inputs used by the Company to estimate the fair value of assets measured on a recurring
basis are summarized as follows:
Debt securities
The fair values of debt securities were based on the market values obtained from independent pricing services that were
evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information and
price quotes from well-established, independent broker-dealers. The independent pricing services monitor market indicators,
industry and economic events, and for broker-quoted only securities, obtain quotes from market makers or broker-dealers that
they recognize to be market participants. The pricing services utilize the market approach in determining the fair values of the
debt securities held by the Company. The Company obtains an understanding of the valuation models and assumptions utilized
by the services and has controls in place to determine that the values provided represent fair values. The Company’s validation
procedures include comparing prices received from the pricing services to quotes received from other third-party sources for
certain securities with market prices that are readily verifiable. If the price comparison results in differences over a predefined
threshold, the Company will assess the reasonableness of the changes relative to prior periods given the prevailing market
conditions and assess changes in the issuers’ credit worthiness, performance of any underlying collateral and prices of the
instrument relative to similar issuances. To date, the Company has not made any material adjustments to the fair value
measurements provided by the pricing services.
Typical inputs and assumptions to pricing models used to value the Company’s debt securities include, but are not limited
to, benchmark yields, reported trades, broker-dealer quotes, credit spreads, credit ratings, bond insurance (if applicable),
benchmark securities, bids, offers, reference data and industry and economic events. For mortgage-backed securities, inputs
and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment
speeds.
Marketable equity securities
The fair values of marketable equity securities, including preferred and common stocks, were based on quoted market
prices for identical assets that are readily and regularly available in an active market.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
87
The following tables present the fair values of the Company’s assets, measured on a recurring basis, as of
December 31, 2024 and 2023:
(in millions)
Total
Level 1
Level 2
Level 3
December 31, 2024
Debt securities:
U.S. Treasury bonds
$
175.6
$
—
$
175.6
$
—
Municipal bonds
776.5
—
776.5
—
Foreign government bonds
211.6
—
211.6
—
Governmental agency bonds
189.8
—
189.8
—
Governmental agency mortgage-backed securities
4,502.3
—
4,502.3
—
U.S. corporate debt securities
925.6
—
925.6
—
Foreign corporate debt securities
484.5
—
484.5
—
7,265.9
—
7,265.9
—
Equity securities:
Common stocks
374.7
374.7
—
—
Preferred stocks
12.1
12.1
—
—
386.8
386.8
—
—
Total
$
7,652.7
$
386.8
$
7,265.9
$
—
(in millions)
Total
Level 1
Level 2
Level 3
December 31, 2023
Debt securities:
U.S. Treasury bonds
$
199.3
$
—
$
199.3
$
—
Municipal bonds
1,245.8
—
1,245.8
—
Foreign government bonds
219.3
—
219.3
—
Governmental agency bonds
195.4
—
195.4
—
Governmental agency mortgage-backed securities
3,875.7
—
3,875.7
—
U.S. corporate debt securities
958.4
—
958.4
—
Foreign corporate debt securities
463.6
—
463.6
—
7,157.5
—
7,157.5
—
Equity securities:
Common stocks
424.5
424.5
—
—
Preferred stocks
12.4
12.4
—
—
436.9
436.9
—
—
Mortgage loans held for sale
13.1
—
11.8
1.3
Total
$
7,607.5
$
436.9
$
7,169.3
$
1.3
There were no transfers between Levels 1, 2 and 3 during the years ended December 31, 2024 and 2023. Transfers into
or out of the Level 3 category occur when unobservable inputs become either more, or less, significant to the fair value
measurement. The Company’s policy is to recognize transfers between levels in the fair value hierarchy at the end of the
reporting period.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
88
Financial instruments not measured at fair value
In estimating the fair values of its financial instruments not measured at fair value, the Company used the following
methods and assumptions:
Cash and cash equivalents
The carrying amount for cash and cash equivalents approximates fair value due to the short-term maturity of these
investments.
Deposits with banks
The fair value of deposits with banks is estimated based on rates currently offered for deposits of similar remaining
maturities, where applicable.
Notes receivable, net
The fair value of notes receivable, net is estimated based on current market rates offered for notes with similar maturities
and credit quality.
Secured financings receivable
The carrying amount of secured financings receivable approximates fair value due to the short-term nature of these assets.
Secured financings payable
The carrying amount of secured financings payable approximates fair value due to the short-term nature of these
liabilities.
Notes and contracts payable
The fair value of notes and contracts payable is estimated based on market values obtained from independent pricing
services for the Company's senior unsecured notes.
The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments not
measured at fair value as of December 31, 2024 and 2023:
Carrying
Estimated fair value
(in millions)
Amount
Total
Level 1
Level 2
Level 3
December 31, 2024
Assets:
Cash and cash equivalents
$
1,718.1
$
1,718.1
$
1,718.1
$
—
$
—
Deposits with banks
$
85.4
$
85.3
$
20.7
$
64.6
$
—
Notes receivable, net
$
34.4
$
34.6
$
—
$
—
$
34.6
Secured financings receivable
$
690.0
$
690.0
$
—
$
690.0
$
—
Liabilities:
Secured financings payable
$
643.8
$
643.8
$
—
$
643.8
$
—
Notes and contracts payable
$
1,546.6
$
1,399.4
$
—
$
1,388.4
$
11.0
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
89
Carrying
Estimated fair value
(in millions)
Amount
Total
Level 1
Level 2
Level 3
December 31, 2023
Assets:
Cash and cash equivalents
$
3,605.3
$
3,605.3
$
3,605.3
$
—
$
—
Deposits with banks
$
55.8
$
55.6
$
4.0
$
51.6
$
—
Notes receivable, net
$
22.4
$
23.2
$
—
$
—
$
23.2
Secured financings receivable
$
636.5
$
636.5
$
—
$
636.5
$
—
Liabilities:
Secured financings payable
$
553.3
$
553.3
$
—
$
553.3
$
—
Notes and contracts payable
$
1,393.9
$
1,219.6
$
—
$
1,215.4
$
4.2
Assets measured at fair value on a non-recurring basis
Estimated fair value (3)
(in millions)
Total
Level 1
Level 2
Level 3
December 31, 2024
Non-marketable equity securities (1)
$
23.4
$
—
$
5.1
$
18.3
December 31, 2023
Non-marketable equity securities (2)
$
95.1
$
—
$
56.5
$
38.6
(1)
Excludes $179.0 million of non-marketable equity securities for which no observable price changes or impairment charges occurred during the
year.
(2)
Excludes $129.0 million of non-marketable equity securities for which no observable price changes or impairment charges occurred during the
year.
(3)
Estimated fair values were determined during the year as of the dates that either an observable transaction occurred or an impairment assessment
was made.
Non-marketable equity securities that have been remeasured during the year based on observable price changes are classified within
Level 2 in the fair value hierarchy because the fair value is determined based only on significant inputs that are observable, such as
observable transactions at the transaction date.
The following table presents the valuation techniques and significant unobservable inputs used in measuring the fair value of non-
marketable equity securities classified within Level 3 of the fair value hierarchy as of December 31, 2024:
(in millions)
Fair Value
Approach
Input
Range
Weighted Average (1)
Non-marketable equity securities
$
18.3
Market
Revenue Multiple
12.2-12.3
12.2
(1)
Weighted average is calculated based on the fair values of the non-marketable equity securities.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
90
NOTE 18. Share-Based Compensation Plans:
The First American Financial Corporation 2020 Incentive Compensation Plan (the “Incentive Compensation Plan”),
permits the granting of stock options, stock appreciation rights, restricted stock, RSUs, PRSUs, performance shares and other
stock-based awards. Eligible participants, which include the Company’s directors and officers, as well as other employees,
may elect to defer the distribution of their RSUs to a future date beyond the scheduled vesting date. In March 2023, the
Company’s board of directors approved an amendment and restatement of the Incentive Compensation Plan, which increased
the maximum number of shares of company common stock available for grant from 4.3 million to 6.5 million. At
December 31, 2024, 2.1 million shares of common stock remain available to be issued by the Company, subject to certain
annual limits based on the type of award granted. The Company settles its equity awards with authorized but unissued shares
of its common stock. The Incentive Compensation Plan terminates 10 years from its effective date unless canceled earlier by
the Company’s board of directors.
The First American Financial Corporation 2010 Employee Stock Purchase Plan (the “ESPP”), as amended and restated,
allows eligible employees the option to purchase common stock of the Company at 85% of the lower of the closing price on
either the first or last day of each quarterly offering period. There were 0.5 million, 0.5 million, and 0.6 million shares issued
in connection with this plan for the years ended December 31, 2024, 2023 and 2022, respectively. The plan terminates on
July 1, 2032. At December 31, 2024, there were 8.0 million shares reserved for future issuances.
The following table summarizes the costs associated with the Company’s share-based compensation plans:
Year ended December 31,
2024
2023
2022
(in millions)
Expense:
RSUs
$
40.2
$
38.4
$
57.9
PRSUs
5.6
4.5
2.8
Employee stock purchase plan
6.2
6.2
6.6
$
52.0
$
49.1
$
67.3
The following table summarizes RSU and PRSU activity for the year ended December 31, 2024:
(in millions, except weighted-average grant-date fair value)
Shares
Weighted-average
grant-date
fair value
Unvested at December 31, 2023
1.0
$
64.19
Granted during 2024
0.9
58.91
Vested during 2024
(0.7)
60.44
Unvested at December 31, 2024
1.2
$
62.37
As of December 31, 2024, there was $38.1 million of total unrecognized compensation cost related to unvested RSUs
and PRSUs that is expected to be recognized over a weighted-average period of 2.0 years. The weighted-average grant-date
fair values of RSUs and PRSUs for the years ended December 31, 2024, 2023, and 2022 was $58.91, $63.73 and $67.65,
respectively. The total fair values of shares distributed for the years ended December 31, 2024, 2023 and 2022 were
$55.1 million, $62.7 million and $57.2 million, respectively. At December 31, 2024, 0.7 million shares were vested but not
distributed.
NOTE 19. Stockholders’ Equity:
The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $145.4 million
remained as of December 31, 2024. Purchases may be made from time to time by the Company in the open market at prevailing
market prices or in privately negotiated transactions. During the year ended December 31, 2024, the Company repurchased
and retired 1.2 million shares of its common stock for a total purchase price of $68.5 million and, as of December 31, 2024,
the Company has repurchased and retired 4.7 million shares of its common stock under the current authorization for a total
purchase price of $254.6 million.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
91
NOTE 20. Accumulated Other Comprehensive Income (Loss) (“AOCI”):
The following table presents a summary of the changes in each component of AOCI for the years ended
December 31, 2024, 2023 and 2022:
(in millions)
Unrealized
gains (losses)
on debt
securities
Foreign
currency
translation
adjustment
Pension
benefit
adjustment
Accumulated
other
comprehensive
income (loss)
Balance at December 31, 2021
$
29.3
$
(39.9) $
(81.8) $
(92.4)
Change in unrealized gains (losses) on debt securities
(1,044.9)
—
—
(1,044.9)
Change in foreign currency translation adjustment
—
(43.3)
—
(43.3)
Net actuarial gain
—
—
57.4
57.4
Amortization of net actuarial loss
—
—
5.8
5.8
Amortization of prior service cost
—
—
0.2
0.2
Tax effect
264.0
1.1
(16.8)
248.3
Balance at December 31, 2022
(751.6)
(82.1)
(35.2)
(868.9)
Change in unrealized gains (losses) on debt securities
262.3
—
—
262.3
Change in foreign currency translation adjustment
—
17.7
—
17.7
Net actuarial loss
—
—
(4.8)
(4.8)
Amortization of net actuarial loss
—
—
2.0
2.0
Tax effect
(64.3)
(0.5)
0.7
(64.1)
Balance at December 31, 2023
(553.6)
(64.9)
(37.3)
(655.8)
Change in unrealized gains (losses) on debt securities
272.7
—
—
272.7
Change in foreign currency translation adjustment
—
(47.1)
—
(47.1)
Net actuarial gain
—
—
5.3
5.3
Amortization of net actuarial loss
—
—
2.3
2.3
Tax effect
(72.8)
1.0
(2.0)
(73.8)
Balance at December 31, 2024
$
(353.7) $
(111.0) $
(31.7) $
(496.4)
The following table presents the other comprehensive income (loss) reclassification adjustments for the years ended
December 31, 2024, 2023 and 2022:
Unrealized
gains (losses)
on debt
securities
Foreign
currency
translation
adjustment
Pension
benefit
adjustment
Total
other
comprehensive
income (loss)
(in millions)
Year ended December 31, 2024
Pretax change before reclassifications
$
(62.4) $
(47.1) $
5.3
$
(104.2)
Reclassifications out of AOCI
335.1
—
2.3
337.4
Tax effect
(72.8)
1.0
(2.0)
(73.8)
Total other comprehensive income (loss), net of tax
$
199.9
$
(46.1) $
5.6
$
159.4
Year ended December 31, 2023
Pretax change before reclassifications
$
181.4
$
17.7
$
(4.8) $
194.3
Reclassifications out of AOCI
80.9
—
2.0
82.9
Tax effect
(64.3)
(0.5)
0.7
(64.1)
Total other comprehensive income (loss), net of tax
$
198.0
$
17.2
$
(2.1) $
213.1
Year ended December 31, 2022
Pretax change before reclassifications
$
(1,181.4) $
(43.3) $
57.4
$
(1,167.3)
Reclassifications out of AOCI
136.5
—
6.0
142.5
Tax effect
264.0
1.1
(16.8)
248.3
Total other comprehensive income (loss), net of tax
$
(780.9) $
(42.2) $
46.6
$
(776.5)
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
92
The following table presents the effects of the reclassifications out of AOCI on the respective line items in the
consolidated statements of income:
Year ended December 31,
(in millions)
2024
2023
2022
Affected line items
Unrealized gains (losses) on debt
securities:
Net realized losses on sales of debt
securities
$
(335.1)
$
(80.9)
$
(136.5)
Net investment losses
Tax effect
$
89.5
$
19.8
$
36.2
Pension benefit adjustment (1):
Amortization of net actuarial loss
$
(2.3)
$
(2.0)
$
(5.8)
Other operating expenses
Amortization of prior service cost
—
—
(0.2)
Other operating expenses
Pretax total
$
(2.3)
$
(2.0)
$
(6.0)
Tax effect
$
0.6
$
0.5
$
1.6
(1)
Amounts are components of net periodic cost. See Note 16 Employee Benefit Plans for additional details.
NOTE 21. Litigation and Regulatory Contingencies:
The Company and its subsidiaries are parties to lawsuits and are also involved in ongoing routine legal and regulatory
proceedings related to their operations. These lawsuits and proceedings frequently are similar in nature to other lawsuits and
proceedings pending against the Company’s competitors. When the Company has determined that a loss is both probable and
reasonably estimable, a liability representing the best estimate of the Company’s financial exposure based on known facts has
been recorded. Actual losses may materially differ from the amounts recorded.
With respect to the Company’s outstanding ordinary course lawsuits and proceedings, other than the Sjobring matter
discussed below, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range
of loss, if any, is not expected to have a material adverse effect on the Company’s financial condition, results of operations or
cash flows.
The Company’s ordinary course lawsuits include class actions or purported class action lawsuits, which challenge
practices in the Company’s home warranty and title insurance and settlement services businesses. On February 25, 2005, a
lawsuit styled, Sjobring vs. First American Title Insurance Company, et al., was filed and is pending in the Superior Court of
the State of California, County of Los Angeles. Plaintiff asserts on behalf of a class that he was charged more than the
Company’s filed rates for a lender’s title policy when issued in conjunction with a certain type of owner’s title policy. A class
has been certified and the case is currently set for a jury trial on February 24, 2025. The complex factual issues of the case and
the unpredictable nature of jury trials make it difficult for the Company to estimate the amount of damages which the plaintiff
might successfully prove, and therefore the Company has not yet been able to assess the probability of loss or estimate the
possible loss or the range of loss.
Most of the Company’s businesses are regulated by various federal, state and local governmental agencies. Many of the
Company’s other businesses operate within statutory guidelines. Consequently, the Company may from time to time be subject
to examination or investigation by such governmental agencies. Currently, governmental agencies are examining or
investigating certain of the Company’s operations.
The Company does not believe that any pending examinations or investigations will have a material adverse effect on
the Company’s financial condition, results of operations or cash flows. Some of these exams or investigations could, however,
result in changes to the Company’s business practices which could ultimately have a material adverse impact on the Company’s
financial condition, results of operations or cash flows.
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
93
NOTE 22. Segment Financial Information:
For the title insurance and services segment and the home warranty segment, the Company's chief operating decision
maker, who is its chief executive officer, uses revenue and pretax margin to assess performance, allocate resources and
determine compensation for certain employees. For the corporate segment, the performance of investments in venture-stage
companies is primarily used to assess performance and allocate resources to the segment.
The Accounting policies for the Company's reportable segments are the same as those described in Note 1. Basis of
Presentation and Significant Accounting Policies.
Information about reportable segment performance, significant expenses and assets for the years ended
December 31, 2024, 2023 and 2022, are as follows:
Year Ended December 31, 2024
Title
Insurance and
Services
Home
Warranty
Corporate
Consolidated
(dollars in millions)
Total segment revenue (1)
$
5,737.3
$
425.7
$
(33.4)
$
6,129.6
Elimination of intersegment revenue
(1.5)
Total consolidated revenue
$
6,128.1
Less: (2)
Personnel costs
1,953.2
81.2
24.9
2,059.3
Premiums retained by agents
2,044.6
—
—
2,044.6
Other operating expenses (3)
992.5
86.0
35.2
1,113.7
Provision for policy losses
138.3
184.4
(2.7)
320.0
Depreciation and amortization
202.2
5.1
0.1
207.4
Premium taxes
63.7
4.6
—
68.3
Interest
96.6
—
54.3
150.9
Segment income (loss) before income taxes
$
246.2
$
64.4
$
(145.2)
$
163.9
Elimination of intersegment expenses
1.5
Consolidated income before income taxes
$
165.4
Pretax margin
4.3%
15.1%
Segment assets
$
13,989.6
$
370.4
$
754.6
$
15,114.6
Elimination of intersegment assets (4)
(206.0)
Consolidated total assets
$
14,908.6
Segment capital expenditures
$
229.3
$
5.9
$
—
$
235.2
(1)
Intersegment revenue is included within amounts shown.
(2)
The significant expense categories and amounts align with segment level information that is regularly provided to the chief operating decision maker.
Intersegment expenses are included within amounts shown.
(3)
Other operating expenses for each segment primarily include the following:
Title insurance and services - title and data search expenses, office and occupancy expenses and software expense.
Home warranty - advertising expense, office and occupancy expenses, software expense, delivery and storage expenses.
Corporate - employee benefit expense and certain overhead expenses.
(4)
Elimination of intercompany asset balances:
Holding company cash balances also included in the title insurance and services segment
$
206.0
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
94
Year Ended December 31, 2023
Title
Insurance and
Services
Home
Warranty
Corporate
Consolidated
(dollars in millions)
Total segment revenue (1)
$
5,724.8
$
417.2
$
(137.2)
$
6,004.8
Elimination of intersegment revenue
(1.3)
Total consolidated revenue
$
6,003.5
Less: (2)
Personnel costs
1,876.0
77.8
35.3
1,989.1
Premiums retained by agents
1,952.2
—
—
1,952.2
Other operating expenses (3)
937.7
82.8
46.5
1,067.0
Provision for policy losses
139.9
193.1
3.3
336.3
Depreciation and amortization
183.6
4.8
0.1
188.5
Premium taxes
59.1
4.4
—
63.5
Interest
82.3
—
51.4
133.7
Segment income (loss) before income taxes
$
494.0
$
54.3
$
(273.8)
$
273.2
Elimination of intersegment expenses
1.2
Consolidated income before income taxes
$
274.4
Pretax margin
8.6%
13.0%
Segment assets
$
15,768.2
$
351.9
$
832.5
$
16,952.6
Elimination of intersegment assets (4)
(149.8)
Consolidated total assets
$
16,802.8
Segment capital expenditures
$
271.1
$
7.6
$
—
$
278.7
(1)
Intersegment revenue is included within amounts shown.
(2)
The significant expense categories and amounts align with segment level information that is regularly provided to the chief operating decision maker.
Intersegment expenses are included within amounts shown.
(3)
Other operating expenses for each segment primarily include the following:
Title insurance and services - title and data search expenses, office and occupancy expenses and software expense.
Home warranty - advertising expense, office and occupancy expenses, software expense, delivery and storage expenses.
Corporate - employee benefit expense and certain overhead expenses
(4)
Elimination of intercompany asset balances:
Holding company cash balances also included in the title insurance segment and services segment
$
(94.8)
Holding company dividend receivable from a subsidiary within the title insurance and services segment
(10.0)
Holding company receivable from a subsidiary within the title insurance and services segment
(45.0)
$
(149.8)
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
95
Year Ended December 31, 2022
Title
Insurance and
Services
Home
Warranty
Corporate
Consolidated
(dollars in millions)
Total segment revenue (1)
$
7,546.9
$
419.0
$
(358.2)
$
7,607.7
Elimination of intersegment revenue
(2.5)
Total consolidated revenue
$
7,605.2
Less: (2)
Personnel costs
2,272.9
77.3
(10.6)
2,339.6
Premiums retained by agents
2,829.7
—
—
2,829.7
Other operating expenses (3)
1,155.4
75.7
41.2
1,272.3
Provision for policy losses
248.4
211.8
26.1
486.3
Depreciation and amortization
162.3
5.1
0.1
167.5
Premium taxes
86.6
4.5
—
91.1
Interest
34.2
—
61.2
95.4
Segment income (loss) before income taxes
$
757.4
$
44.6
$
(476.2)
$
323.3
Elimination of intersegment expenses
2.4
Consolidated income before income taxes
$
325.7
Pretax margin
10.0%
10.6%
Segment assets
$
13,911.2
$
389.7
$
1,257.8
$
15,558.7
Elimination of intersegment assets (4)
(603.4)
Consolidated total assets
$
14,955.3
Segment capital expenditures
$
271.3
$
3.6
$
—
$
274.9
(1)
Intersegment revenue is included within amounts shown.
(2)
The significant expense categories and amounts align with segment level information that is regularly provided to the chief operating decision maker.
Intersegment expenses are included within amounts shown.
(3)
Other operating expenses for each segment primarily include the following:
Title insurance and services - title and data search expenses, office and occupancy expenses and software expense.
Home warranty - advertising expense, office and occupancy expenses, software expense, delivery and storage expenses.
Corporate - employee benefit expense and certain overhead expenses
(4)
Elimination of intercompany asset balances:
Holding company cash balances also included in the title insurance and services segment
$
(603.4)
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
96
Information about the Company’s revenues, by segment, for the years ended December 31, 2024, 2023 and 2022, is as
follows:
Direct
premiums and
escrow fees
Agent
premiums
Information
and other
Net
investment
income
Net investment
gains (losses)
Total
Revenues
(in millions)
2024
Title Insurance and Services
$
2,048.3
$
2,561.9
$
938.2
$
534.3
$
(345.4) $
5,737.3
Home Warranty
397.8
—
22.5
4.0
1.4
425.7
Corporate and Eliminations
(0.1)
—
0.1
22.7
(57.6)
(34.9)
$
2,446.0
$
2,561.9
$
960.8
$
561.0
$
(401.6) $
6,128.1
2023
Title Insurance and Services
$
1,856.4
$
2,449.3
$
917.1
$
540.2
$
(38.2) $
5,724.8
Home Warranty
395.6
—
21.7
5.9
(6.0)
417.2
Corporate and Eliminations
0.1
—
(0.3)
23.9
(162.2)
(138.5)
$
2,252.1
$
2,449.3
$
938.5
$
570.0
$
(206.4) $
6,003.5
2022
Title Insurance and Services
$
2,662.9
$
3,547.6
$
1,127.1
$
359.1
$
(149.8) $
7,546.9
Home Warranty
413.1
—
13.3
5.1
(12.5)
419.0
Corporate and Eliminations
8.8
—
8.1
(24.1)
(353.5)
(360.7)
$
3,084.8
$
3,547.6
$
1,148.5
$
340.1
$
(515.8) $
7,605.2
The Company’s title insurance and services segment offers title insurance, closing services and similar or related products
and services both domestically and internationally. The operations of the Company’s home warranty and corporate segments
are entirely domestic.
Domestic and foreign revenues from external customers for the title insurance and services segment are as follows:
Year Ended December 31,
2024
2023
2022
Domestic
Foreign
Domestic
Foreign
Domestic
Foreign
(in millions)
Revenues
$
5,314.6
$
421.4
$
5,351.6
$
372.2
$
7,128.4
$
416.2
Domestic and foreign long-lived assets for the title insurance and services segment are as follows:
December 31,
2024
2023
2022
Domestic
Foreign
Domestic
Foreign
Domestic
Foreign
(in millions)
Long-lived assets
$
961.5
$
55.5
$
977.2
$
53.0
$
1,000.9
$
51.0
97
SCHEDULE I
1 OF 1
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
SUMMARY OF INVESTMENTS—OTHER THAN INVESTMENTS IN RELATED PARTIES
(in millions)
December 31, 2024
Column A
Column B
Column C
Column D
Type of investment
Cost
Market value
Amount at
which shown in
the balance
sheet
Deposits with banks:
Consolidated
$
85.4
$
85.3
$
85.4
Debt securities:
U.S. Treasury bonds
Consolidated
$
180.7
$
175.6
$
175.6
Municipal bonds
Consolidated
$
844.9
$
776.5
$
776.5
Foreign government bonds
Consolidated
$
217.1
$
211.6
$
211.6
Governmental agency bonds
Consolidated
$
203.8
$
189.8
$
189.8
Governmental agency mortgage-backed securities
Consolidated
$
4,844.4
$
4,502.3
$
4,502.3
U.S. corporate debt securities
Consolidated
$
948.4
$
925.6
$
925.6
Foreign corporate debt securities
Consolidated
$
491.6
$
484.5
$
484.5
Total debt securities:
Consolidated
$
7,730.9
$
7,265.9
$
7,265.9
Equity securities:
Consolidated (1)
$
713.8
$
691.3
$
691.3
Notes receivable, net:
Consolidated
$
34.4
$
34.6
$
34.4
Total investments:
Consolidated
$
8,564.5
$
8,077.1
$
8,077.0
(1)
Included in equity securities are non-marketable equity securities and equity method investments, at carrying amount.
Estimates of fair value for these investments could not be made without incurring excessive costs.
98
SCHEDULE II
1 OF 5
FIRST AMERICAN FINANCIAL CORPORATION
(Parent Company)
CONDENSED BALANCE SHEETS
(in millions, except par values)
December 31,
2024
2023
Assets
Cash and cash equivalents
$
196.2
$
179.3
Dividends receivable
—
10.0
Due from subsidiaries, net
7.6
58.2
Income taxes receivable
61.3
75.7
Investment in subsidiaries
6,529.5
6,152.6
Equity securities
14.6
52.5
Deferred income taxes
43.8
50.1
Other assets
162.1
144.0
$
7,015.1
$
6,722.4
Liabilities and Equity
Accounts payable and other accrued liabilities
$
32.0
$
35.3
Pension costs and other retirement plans
354.4
355.1
Income taxes payable
27.0
15.9
Deferred income taxes
139.1
63.6
Notes and contracts payable
1,535.6
1,389.7
2,088.1
1,859.6
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.00001 par value; Authorized—0.5 shares;
Outstanding—none
—
—
Common stock, $0.00001 par value; Authorized—300.0 shares;
Outstanding—103.0 shares and 103.1 shares
—
—
Additional paid-in capital
1,787.6
1,793.3
Retained earnings
3,617.3
3,710.6
Accumulated other comprehensive loss
(496.4)
(655.8)
Total stockholders’ equity
4,908.5
4,848.1
Noncontrolling interests
18.5
14.7
Total equity
4,927.0
4,862.8
$
7,015.1
$
6,722.4
See Notes to Condensed Financial Statements
99
SCHEDULE II
2 OF 5
FIRST AMERICAN FINANCIAL CORPORATION
(Parent Company)
CONDENSED STATEMENTS OF INCOME
(in millions)
Year Ended December 31,
2024
2023
2022
Revenues:
Dividends from subsidiaries
$
172.5
$
411.3
$
732.7
Other income (loss)
20.2
22.5
(22.2)
Net investment (losses) gains
(37.9)
12.5
(192.4)
154.8
446.3
518.1
Expenses:
Other expenses
88.6
97.8
55.1
Income before income taxes and equity in undistributed earnings of
subsidiaries
66.2
348.5
463.0
Income taxes
13.2
74.8
86.0
Equity in undistributed earnings (losses) of subsidiaries
79.6
(58.2)
(111.7)
Net income
132.6
215.5
265.3
Less: Net income (loss) attributable to noncontrolling interests
1.5
(1.3)
2.3
Net income attributable to the Company
$
131.1
$
216.8
$
263.0
See Notes to Condensed Financial Statements
100
SCHEDULE II
3 OF 5
FIRST AMERICAN FINANCIAL CORPORATION
(Parent Company)
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Year Ended December 31,
2024
2023
2022
Net income
$
132.6
$
215.5
$
265.3
Other comprehensive income (loss), net of tax:
Change in unrealized losses on debt securities
199.9
198.0
(780.9)
Change in foreign currency translation adjustment
(46.1)
17.2
(42.2)
Change in pension benefit adjustment
5.6
(2.1)
46.6
Total other comprehensive income (loss), net of tax
159.4
213.1
(776.5)
Comprehensive income (loss)
292.0
428.6
(511.2)
Less: Comprehensive income (loss) attributable to noncontrolling
interests
1.5
(1.3)
2.3
Comprehensive income (loss) attributable to the Company
$
290.5
$
429.9
$
(513.5)
See Notes to Condensed Financial Statements
101
SCHEDULE II
4 OF 5
FIRST AMERICAN FINANCIAL CORPORATION
(Parent Company)
CONDENSED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Cash provided by operating activities
$
221.8
$
309.0
$
778.7
Cash flows from investing activities:
Acquisitions/dispositions, net of cash acquired/divested
—
(2.5)
(296.0)
Net payments to subsidiaries
(70.8)
(160.8)
(154.6)
Purchases of equity securities
—
(25.0)
—
Proceeds from insurance settlement
4.0
—
—
Cash used for investing activities
(66.8)
(188.3)
(450.6)
Cash flows from financing activities:
Net proceeds from issuance of unsecured senior notes
444.0
—
—
Repayment of senior unsecured notes
(300.0)
(250.0)
—
Net activity related to noncontrolling interests
0.2
0.3
—
Net proceeds in connection with share-based
compensation
6.9
0.4
2.5
Repurchases of Company shares
(68.5)
(72.7)
(440.7)
Payments of cash dividends
(220.7)
(216.6)
(217.5)
Cash used for financing activities
(138.1)
(538.6)
(655.7)
Net increase (decrease) in cash and cash equivalents
16.9
(417.9)
(327.6)
Cash and cash equivalents—Beginning of period
179.3
597.2
924.8
Cash and cash equivalents—End of period
$
196.2
$
179.3
$
597.2
See Notes to Condensed Financial Statements
102
SCHEDULE II
5 OF 5
FIRST AMERICAN FINANCIAL CORPORATION
(Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. Description of the Company:
First American Financial Corporation is a holding company that conducts all of its operations through its subsidiaries.
The Parent Company financial statements should be read in connection with the consolidated financial statements and notes
thereto included elsewhere in this Form 10-K.
NOTE 2. Dividends Received:
The holding company received cash dividends from subsidiaries of $148.3 million, $355.6 million and $731.0 million
for the years ended December 31, 2024, 2023 and 2022, respectively.
103
SCHEDULE III
1 OF 2
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions)
BALANCE SHEET CAPTIONS
Column A
Column B
Column C
Column D
Segment
Deferred policy
acquisition costs
Claims
reserves
Deferred
revenues
2024
Title Insurance and Services
$
—
$
1,164.7
$
4.0
Home Warranty
21.7
15.4
206.4
Corporate and Eliminations
—
13.3
—
Total
$
21.7
$
1,193.4
$
210.4
2023
Title Insurance and Services
$
—
$
1,242.0
$
3.9
Home Warranty
20.2
15.7
192.9
Corporate and Eliminations
—
24.7
—
Total
$
20.2
$
1,282.4
$
196.8
104
SCHEDULE III
2 OF 2
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions)
INCOME STATEMENT CAPTIONS
Column A
Column F
Column G
Column H
Column I
Column J
Column K
Segment
Premiums
and escrow
fees
Net
investment
income (1)
Loss
provision
Amortization
of deferred
policy
acquisition
costs (credits)
Other
operating
expenses
Premiums
written
2024
Title Insurance and Services
$
4,610.2
$
188.9
$
138.3
$
—
$
992.5
$
—
Home Warranty
397.8
5.4
184.4
(1.4)
86.0
411.3
Corporate and Eliminations
(0.1)
(34.9)
(2.7)
—
34.9
—
Total
$
5,007.9
$
159.4
$
320.0
$
(1.4)
$
1,113.4
$
411.3
2023
Title Insurance and Services
$
4,305.7
$
502.0
$
139.9
$
—
$
937.7
$
—
Home Warranty
395.6
(0.1)
193.1
(0.2)
82.8
398.4
Corporate and Eliminations
0.1
(138.3)
3.3
—
46.5
—
Total
$
4,701.4
$
363.6
$
336.3
$
(0.2)
$
1,067.0
$
398.4
2022
Title Insurance and Services
$
6,210.5
$
209.3
$
248.4
$
—
$
1,155.4
$
—
Home Warranty
413.1
(7.4)
211.8
1.9
75.7
394.9
Corporate and Eliminations
8.8
(377.6)
26.1
2.4
41.2
(1.0)
Total
$
6,632.4
$
(175.7) $
486.3
$
4.3
$
1,272.3
$
393.9
(1) Includes net investment income and net investment gains (losses).
105
SCHEDULE IV
1 OF 1
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
REINSURANCE
(dollars in millions)
Segment
Premiums
and escrow
fees before
reinsurance
Ceded to
other
companies
Assumed
from
other
companies
Premiums
and escrow
fees
Percentage of
amount
assumed to
premiums
and escrow
fees
Title Insurance and Services
2024
$
4,629.5
$
21.1
$
1.8
$
4,610.2
0.0%
2023
$
4,321.2
$
17.6
$
2.1
$
4,305.7
0.0%
2022
$
6,228.2
$
18.9
$
1.2
$
6,210.5
0.0%
106
SCHEDULE V
1 OF 3
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Year Ended December 31, 2024
Column A
Column B
Column C
Column D
Column E
Additions
Description
Balance at
beginning
of period
Charged to
costs and
expenses
Charged
to other
accounts
Deductions
from
reserve
Balance
at end
of period
Reserve deducted from accounts receivable:
Consolidated
$
21.8
$
8.7
$
—
$
9.0 (1) $
21.5
Reserve for known and incurred but not reported
claims:
Consolidated
$
1,282.4
$
320.0
$
(11.2) $
397.8 (2) $ 1,193.4
Reserve deducted from notes receivable:
Consolidated
$
0.3
$
1.7
$
—
$
—
$
2.0
Reserve deducted from deferred income taxes:
Consolidated
$
13.7
$
15.6
$
—
$
1.4
$
27.9
(1)
Amount represents accounts written off, net of recoveries.
(2)
Amount represents claim payments, net of recoveries.
107
SCHEDULE V
2 OF 3
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Year Ended December 31, 2023
Column A
Column B
Column C
Column D
Column E
Additions
Description
Balance at
beginning
of period
Charged to
costs and
expenses
Charged
to other
accounts
Deductions
from
reserve
Balance
at end
of period
Reserve deducted from accounts receivable:
Consolidated
$
21.3
$
8.1
$
—
$
7.6 (1) $
21.8
Reserve for known and incurred but not reported
claims:
Consolidated
$
1,325.3
$
336.3
$
2.6
$
381.8 (2) $
1,282.4
Reserve deducted from notes receivable:
Consolidated
$
6.8
$
—
$
—
$
6.5
$
0.3
Reserve deducted from deferred income taxes:
Consolidated
$
7.4
$
7.6
$
—
$
1.3
$
13.7
(1)
Amount represents accounts written off, net of recoveries.
(2)
Amount represents claim payments, net of recoveries.
108
SCHEDULE V
3 OF 3
FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Year Ended December 31, 2022
Column A
Column B
Column C
Column D
Column E
Additions
Description
Balance at
beginning
of period
Charged to
costs and
expenses
Charged
to other
accounts
Deductions
from
reserve
Balance
at end
of period
Reserve deducted from accounts receivable:
Consolidated
$
14.0
$
11.4
$
—
$
4.1 (1) $
21.3
Reserve for known and incurred but not reported
claims:
Consolidated
$
1,283.8
$
486.3
$
(10.5) $
434.3 (2) $
1,325.3
Reserve deducted from notes receivable:
Consolidated
$
0.3
$
27.7
$
—
$
21.2
$
6.8
Reserve deducted from deferred income taxes:
Consolidated
$
8.1
$
—
$
—
$
0.7
$
7.4
(1)
Amount represents accounts written off, net of recoveries.
(2)
Amount represents claim payments, net of recoveries.
109
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company’s chief executive officer and chief financial officer have concluded that, as of December 31, 2024, the end
of the fiscal year covered by this Annual Report on Form 10-K, the Company’s disclosure controls and procedures, as defined
in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, were effective, based on the evaluation of these controls
and procedures required by Rule 13a-15(b) thereunder.
Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting has been designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles (“GAAP”).
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with GAAP, and that receipts and expenditures are being made only in accordance with authorization of management and
directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). Based on that
assessment under the framework in Internal Control—Integrated Framework (2013), management determined that, as of
December 31, 2024, the Company’s internal control over financial reporting was effective.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the Company’s
consolidated financial statements provided in Item 8, above, has issued a report on the Company’s internal control over financial
reporting.
Changes in Internal Control Over Financial Reporting
There was no change in the Company’s internal control over financial reporting during the quarter ended
December 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Item 9B. Other Information
(a)
On February 18, 2025, the Company entered into amended and restated employment agreements with Kenneth D.
DeGiorgio, Mark E. Seaton and Lisa W. Cornehl. Pursuant to the amendments, the term of each of the revised agreements was
extended by one year and now expires on December 31, 2027. Each of the revised agreements incorporates the executive’s
base salary at the time of the execution of the agreement. The description of the amended and restated employment agreements
provided herein is qualified in its entirety by reference to the employment agreements, which are attached hereto as Exhibits
10.6 to 10.8.
110
(b)
During the quarter ended December 31, 2024, no director or Section 16 officer informed the Company of the adoption
or termination of any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in
Item 408(a) of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
111
PART III
The information required by Items 10 through 14 of this report is expected to be set forth in the definitive proxy statement
to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2024 for
the Company’s upcoming 2025 meeting of stockholders (the “2025 Proxy Statement”). If the 2025 Proxy Statement is not
filed within 120 days after the fiscal year ended December 31, 2024, the Company will file an amendment to this Annual Report
on Form 10-K to include the information required by Items 10 through 14.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item will be set forth under the captions “Information Regarding the Nominees for
Election,” “Information Regarding the Other Incumbent Directors,” “Executive Officers,” “Delinquent Section 16(a) Reports,”
if any, “Code of Ethics” and “Board and Committee Meetings,” and "Insider Trading Policy" in the 2025 Proxy Statement and
is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item will be set forth under the captions “Executive Compensation,” “Compensation
Discussion and Analysis,” “Executive Compensation Tables,” “Pay Versus Performance,” “Director Compensation,”
“Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” in the 2025 Proxy
Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will be set forth under the captions “Securities Authorized for Issuance under
Equity Compensation Plans,” “Who are the largest principal stockholders outside of management?” and “Security Ownership
of Management” in the 2025 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item will be set forth under the captions “Independence of Directors” and “Transactions
and Litigation with Management and Others” in the 2025 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item will be set forth under the captions “Principal Accountant Fees and Services” and
“Policy on Audit Committee Pre-approval of Audit and Permissible Nonaudit Services of Independent Auditor” in the 2025
Proxy Statement and is incorporated herein by reference.
112
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a ) 1. & 2.
Financial Statements and Financial Statement Schedules
The Financial Statements and Financial Statement Schedules filed as part of this report are listed in the
accompanying index at page 47 in Item 8 of Part II of this report.
3. Exhibits. Each management contract or compensatory plan or arrangement in which any director or named
executive officer of First American Financial Corporation, as defined by Item 402(a)(3) of Regulation S-K (17
C.F.R. §229.402(a)(3)), participates that is included among the exhibits listed on the Exhibit Index is identified
on the Exhibit Index by an asterisk (*).
Exhibit No.
Description
Location
3.1
Amended and Restated Certificate of Incorporation of
First American Financial Corporation dated May 28,
2010.
Incorporated by reference herein to Exhibit 3.1 to
the Current Report on Form 8-K filed June 1,
2010.
3.2
Bylaws of First American Financial Corporation,
amended and restated effective as of November 7,
2023.
Incorporated by reference herein to Exhibit 3.1 to
the Current Report on Form 8-K filed November
9, 2023.
4.1
Description of the Registrant's Securities.
Incorporated by reference herein to Exhibit 4.1 to
the Annual Report on Form 10-K for the year
ended December 31, 2022.
4.2
Indenture, dated as of January 24, 2013, between First
American Financial Corporation and U.S. Bank
National Association, as Trustee.
Incorporated by reference herein to Exhibit 4.1 to
the Form S-3ASR filed January 24, 2013.
4.3
First Supplemental Indenture, dated as of January 29,
2013, between First American Financial Corporation
and U.S. Bank National Association, as Trustee.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed January 29,
2013.
4.4
Second Supplemental Indenture, dated as of November
10, 2014, between First American Financial
Corporation and U.S. Bank National Association, as
Trustee.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed November
10, 2014.
4.5
Third Supplemental Indenture, dated as of May 15,
2020, between First American Financial Corporation
and U.S. Bank National Association, as Trustee.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed May 15,
2020.
4.6
Fourth Supplemental Indenture, dated as of August 3,
2021, between First American Financial Corporation
and U.S. Bank National Association, as Trustee.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed August 3,
2021.
4.7
Fifth Supplemental Indenture, dated as of September
30, 2024, between First American Financial
Corporation and U.S. Bank Trust Company, National
Association, as Trustee.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed September
30, 2024.
4.8
Form of 4.00% Senior Notes due 2030.
Incorporated by reference herein to Exhibit A to
Exhibit 4.2 to the Current Report on Form 8-K
filed May 15, 2020.
4.9
Form of 2.40% Senior Notes due 2031.
Incorporated by reference herein to Exhibit A to
Exhibit 4.2 to the Current Report on Form 8-K
filed August 3, 2021.
4.10
Form of 5.45% Senior Notes due 2034.
Incorporated by reference herein to Exhibit 4.2 to
the Current Report on Form 8-K filed September
30, 2024.
113
Exhibit No.
Description
Location
10.1
Credit Agreement dated as of May 17, 2023, among
First American Financial Corporation, the Lenders
party thereto and JPMorgan Chase Bank, N.A., as
Administrative Agent.
Incorporated by reference herein to Exhibit 10.1 to
the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2023.
*10.2
First American Financial Corporation Executive
Supplemental Benefit Plan, amended and restated
effective as of January 1, 2011.
Incorporated by reference herein to Exhibit 10.12
to the Annual Report on Form 10-K for the year
ended December 31, 2010.
*10.2.1
Amendment No. 1, dated January 21, 2015, to First
American Financial Corporation Executive
Supplemental Benefit Plan.
Incorporated by reference herein to Exhibit 10.5.1
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2014.
*10.3
First American Financial Corporation Deferred
Compensation Plan, amended and restated effective as
of January 1, 2012.
Incorporated by reference herein to Exhibit 10.13
to the Annual Report on Form 10-K for the year
ended December 31, 2011.
*10.3.1
First Amendment, effective July 1, 2015, to the First
American Financial Corporation Deferred
Compensation Plan.
Incorporated by reference herein to Exhibit 10.1 to
the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2015.
*10.3.2
Second Amendment, effective July 1, 2017, to the First
American Financial Corporation Deferred
Compensation Plan.
Incorporated by reference herein to Exhibit 10.2 to
the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2017.
*10.4
First American Financial Corporation 2010 Incentive
Compensation Plan, amended and restated effective as
of February 4, 2019.
Incorporated by reference herein to Exhibit 10.6 to
the 10-K for the fiscal year ended December 31,
2018.
*10.5
First American Financial Corporation 2020 Incentive
Compensation Plan, as amended and restated effective
May 9, 2023.
Incorporated by reference herein to Appendix B to
the Proxy Statement on Schedule 14A filed April
6, 2023.
*10.5.1
Form of Notice of Restricted Stock Unit Grant (Non-
Employee Director) and Restricted Stock Unit Award
Agreement (Non-Employee Director) for Non-
Employee Director Restricted Stock Unit Award
approved January 19, 2021.
Incorporated by reference herein to Exhibit 10.6.1
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2020.
*10.5.2
Form of Notice of Restricted Stock Unit Grant
(Employee) and Restricted Stock Unit Award
Agreement (Employee), approved January 19, 2021.
Incorporated by reference herein to Exhibit 10.6.2
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2020.
*10.5.3
Form of Notice of Restricted Stock Unit Grant (Non-
Employee Director) and Restricted Stock Unit Award
Agreement (Non-Employee Director) for Non-
Employee Director Restricted Stock Unit Award
approved February 2, 2022.
Incorporated by reference herein to Exhibit 10.6.2
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2021.
*10.5.4
Form of Notice of Restricted Stock Unit Grant
(Employee) and Restricted Stock Unit Award
Agreement (Employee), approved February 2, 2022.
Incorporated by reference herein to Exhibit 10.6.4
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2021.
*10.5.5
Form of Performance Restricted Stock Unit Grant
(Employee) and Performance Restricted Stock Unit
Award Agreement (Employee), approved February 2,
2022.
Incorporated by reference herein to Exhibit 10.6.5
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2021.
114
Exhibit No.
Description
Location
*10.5.6
Form of Notice of Restricted Stock Unit Grant (Non-
Employee Director) and Restricted Stock Unit Award
Agreement (Non-Employee Director) for Non-
Employee Director Restricted Stock Unit Award
approved January 17, 2023.
Incorporated by reference herein to Exhibit 10.5.6
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2022.
*10.5.7
Form of Notice of Restricted Stock Unit Grant
(Employee) and Restricted Stock Unit Award
Agreement (Employee), approved January 17, 2023.
Incorporated by reference herein to Exhibit 10.5.7
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2022.
*10.5.8
Form of Performance Restricted Stock Unit Grant
(Employee) and Performance Restricted Stock Unit
Award Agreement (Employee), approved January 17,
2023.
Incorporated by reference herein to Exhibit 10.5.8
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2022.
*10.5.9
Form of Notice of Restricted Stock Unit Grant (Non-
Employee Director) and Restricted Stock Unit Award
Agreement (Non-Employee Director) for Non-
Employee Director Restricted Stock Unit Award
approved January 16, 2024.
Incorporated by reference herein to Exhibit 10.5.7
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2023.
*10.5.10
Form of Notice of Restricted Stock Unit Grant
(Employee) and Restricted Stock Unit Award
Agreement (Employee), approved January 16, 2024.
Incorporated by reference herein to Exhibit 10.5.8
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2023.
*10.5.11
Form of Performance Restricted Stock Unit Grant
(Employee) and Performance Restricted Stock Unit
Award Agreement (Employee), approved January 16,
2024.
Incorporated by reference herein to Exhibit 10.5.9
to the Annual Report on Form 10-K for the fiscal
year ended December 31, 2023.
*10.5.12
Form of Notice of Restricted Stock Unit Grant (Non-
Employee Director) and Restricted Stock Unit Award
Agreement (Non-Employee Director) for Non-
Employee Director Restricted Stock Unit Award
approved January 21, 2025.
Attached.
*10.5.13
Form of Notice of Restricted Stock Unit Grant
(Employee) and Restricted Stock Unit Award
Agreement (Employee), approved January 21, 2025.
Attached.
*10.5.14
Form of Performance Restricted Stock Unit Grant
(Employee) and Performance Restricted Stock Unit
Award Agreement (Employee), approved January 21,
2025.
Attached.
*10.6
Employment Agreement, dated February 18, 2025,
between First American Financial Corporation and
Kenneth D. DeGiorgio.
Attached.
*10.7
Employment Agreement, dated February 18, 2025,
between First American Financial Corporation and
Mark E. Seaton.
Attached.
*10.8
Employment Agreement, dated February 18, 2025,
between First American Financial Corporation and
Lisa W. Cornehl.
Attached.
*10.9
First American Financial Corporation Form of
Amended and Restated Change in Control Agreement
as of December 31, 2010.
Incorporated by reference herein to Exhibit 10(c)
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2010.
19
Policy Regarding Trading in the Stock of First
American Financial Corporation.
Attached.
115
Exhibit No.
Description
Location
21
Subsidiaries of the Registrant.
Attached.
23
Consent of Independent Registered Public Accounting
Firm.
Attached.
31(a)
Certification by Chief Executive Officer Pursuant to
Rule 13a-14(a) under the Securities Exchange Act of
1934.
Attached.
31(b)
Certification by Chief Financial Officer Pursuant to
Rule 13a-14(a) under the Securities Exchange Act of
1934.
Attached.
32(a)
Certification by Chief Executive Officer Pursuant to
18 U.S.C. Section 1350.
Attached.
32(b)
Certification by Chief Financial Officer Pursuant to 18
U.S.C. Section 1350.
Attached.
97
Policy Governing the Recovery of Certain Incentive
Compensation.
Incorporated by reference herein to Exhibit 97 to
the Annual Report on Form 10-K for the fiscal
year ended December 31, 2023.
101.INS
Inline XBRL Instance Document. The instance
document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline
XBRL document.
N/A.
101.SCH
Inline XBRL Taxonomy Extension Schema with
Embedded Linkbases Document.
Attached.
104
Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).
N/A.
Item 16. Form 10-K Summary
None.
116
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FIRST AMERICAN FINANCIAL CORPORATION
(Registrant)
By
/S/ KENNETH D. DEGIORGIO
Kenneth D. DeGiorgio
Chief Executive Officer
(Principal Executive Officer)
Date: February 20, 2025
By
/S/ MARK E. SEATON
Mark E. Seaton
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
Date: February 20, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/S/ KENNETH D. DEGIORGIO
Kenneth D. DeGiorgio
Chief Executive Officer and Director
(Principal Executive Officer)
February 20, 2025
/S/ MARK E. SEATON
Mark E. Seaton
Executive Vice President, Chief Financial
Officer (Principal Financial Officer)
February 20, 2025
/S/ STEVEN A. ADAMS
Steven A. Adams
Chief Accounting Officer
(Principal Accounting Officer)
February 20, 2025
/S/ DENNIS J. GILMORE
Dennis J. Gilmore
Chairman of the Board of Directors
February 20, 2025
/S/ JAMES L. DOTI
James L. Doti
Director
February 20, 2025
/S/ REGINALD H. GILYARD
Reginald H. Gilyard
Director
February 20, 2025
/S/ PARKER S. KENNEDY
Parker S. Kennedy
Director
February 20, 2025
/S/ MARGARET M. MCCARTHY
Margaret M. McCarthy
Director
February 20, 2025
/S/ MICHAEL D. MCKEE
Michael D. McKee
Director
February 20, 2025
/S/ MARK C. OMAN
Mark C. Oman
Director
February 20, 2025
117
Signature
Title
Date
/S/ MARSHA A. SPENCE
Marsha A Spence
Director
February 20, 2025
/S/ DEBORAH L. WAHL
Deborah L. Wahl
Director
February 20, 2025
/S/ MARTHA B. WYRSCH
February 20, 2025
Martha B. Wyrsch
Director