Business Wire | Feb 11, 2021 06:45AM EST

First American Financial Reports Results for the Fourth Quarter and Full Year of 2020

Feb. 11, 2021

SANTA ANA, Calif.--(BUSINESS WIRE)--Feb. 11, 2021--First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today announced financial results for the fourth quarter ended Dec. 31, 2020.

Current Quarter Highlights

* Total revenue of $2.2 billion, up 24 percent compared with last year Closed title orders up 32 percent, driven by a 75 percent increase in refinance orders Average revenue per order down 6 percent, driven by the shift to refinance transactions * Net realized investment gains of $55.5 million, or 38 cents per diluted share, primarily due to the change in the fair value of equity securities * Title Insurance and Services segment record pretax margin of 18.9 percent 16.8 percent excluding net realized investment gains * Commercial revenues of $226.6 million, down 5 percent compared with last year * In January 2021, entered into book transfer agreements to facilitate exit from the property and casualty insurance business within the Specialty Insurance segment Transfer expected to be complete by the third quarter of 2022 * Board of directors approved a new $300 million share repurchase plan * Repurchased 1.4 million shares for a total of $69.7 million at an average price of $49.20 * Debt-to-capital ratio of 23.7 percent, or 17.0 percent excluding secured financings payable of $516.2 million

Full Year 2020 Highlights

* Total revenue of $7.1 billion, up 14 percent compared with last year * Title Insurance and Services segment pretax margin of 15.7 percent 14.6 percent excluding net realized investment gains * Specialty Insurance segment pretax margin of -4.7 percent * Cash flow from operations of $1.1 billion, up 19 percent compared with last year * Return on equity of 14.9 percent * Closed $350 million acquisition of Docutech * Repurchased 3.2 million shares for a total of $138.6 million at an average price of $43.44 * Raised the common stock dividend by 5 percent in both January and November to an annual rate of $1.84 per share * Named to the Fortune 100 Best Companies to Work For(r) list for the fifth consecutive year

Selected Financial Information($ in millions, except per share data)

Three Months Ended Full Year Ended

December 31, December 31,

2020 2019 2020 2019

Total revenue $ 2,151.3 $ 1,728.7 $ 7,086.7 $ 6,202.1

Income before taxes 382.3 288.5 923.3 905.0



Net income $ 280.3 $ 224.0 $ 696.4 $ 707.4

Net income per diluted 2.49 1.97 6.16 6.22 share

Total revenue for the fourth quarter of 2020 was $2.2 billion, an increase of 24 percent relative to the fourth quarter of 2019. Net income in the current quarter was $280.3 million, or $2.49 per diluted share, compared with net income of $224.0 million, or $1.97 per diluted share, in the fourth quarter of 2019. Net realized investment gains in the current quarter were $55.5 million, or 38 cents per diluted share, compared with net realized investment gains of $23.8 million, or 16 cents per diluted share, in the fourth quarter of last year. The current quarter was also impacted by two items related to the company's decision to exit the property and casualty insurance business within the Specialty Insurance segment.

The first was a reversal of a portion of the impairment initially taken in the third quarter, resulting in an $18.3 million benefit, or 13 cents per diluted share. The second was a permanent tax difference of $7.4 million, or 7 cents per diluted share, which adversely impacted the tax rate.

Total revenue for the full year of 2020 was $7.1 billion, up 14 percent compared with the prior year. Net income was $696.4 million, or $6.16 per diluted share, compared with net income of $707.4 million, or $6.22 per diluted share, in 2019. Net realized investment gains were $105.0 million, or 71 cents per diluted share, compared with net realized investment gains of $66.4 million, or 46 cents per diluted share last year. In addition, the company recorded a pretax impairment of $54.9 million, or 45 cents per diluted share, related to the property and casualty insurance business within the Specialty Insurance segment.

"Our 2020 performance demonstrated the remarkable resilience of our people amidst the challenges presented by the pandemic," said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. "The company closed over one million transactions while most of our people were working from home. Historically high industry mortgage originations supported revenue growth of 14 percent to $7.1 billion, a new record for the company, and we achieved a pretax title margin of 15.7 percent.

"During the year, we executed on our commitment to return capital to shareholders. The company increased the common stock dividend by 5 percent in both January and November to an annual rate of $1.84 per share. We also repurchased 3.2 million shares for a total of $139 million.

"Looking ahead, the robust mortgage market has continued into 2021, with strong refinance and purchase activity, driven by elevated housing demand and low mortgage rates. We are also encouraged by the rebound in the commercial market in the fourth quarter and expect our commercial business performance will continue to improve throughout the year. In January, the company also entered into book transfer agreements to facilitate our exit from the property and casualty insurance business, enabling us to maintain focus on our core business and redeploy the capital to areas with higher expected returns. We expect to complete the transfer by the third quarter of 2022."

Title Insurance and Services($ in millions, except average revenue per order)

Three Months Ended

December 31,

2020 2019

Total revenues $ 2,000.1 $ 1,591.2



Income before taxes $ 377.2 $ 283.8

Pretax margin 18.9 % 17.8 %



Title open orders^(1) 354,600 251,700

Title closed orders^(1) 295,100 224,200



U.S. Commercial

Total revenues $ 226.6 $ 238.9

Open orders 32,100 32,900

Closed orders 19,400 20,900

Average revenue per order $ 11,700 $ 11,400

^(1) U.S. direct title insurance orders only.

Total revenues for the Title Insurance and Services segment during the fourth quarter were $2.0 billion, up 26 percent compared with the same quarter of 2019. Direct premiums and escrow fees were up 24 percent compared with the fourth quarter of 2019, driven by a 32 percent increase in the number of direct title orders closed that was partially offset by a 6 percent decline in the average revenue per direct title order closed. The average revenue per direct title order declined to $2,457, primarily due to the shift in the order mix from higher-premium commercial and purchase transactions to lower-premium residential refinance transactions. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were up 25 percent in the current quarter as compared with last year.

Information and other revenues were $281.6 million during the quarter, up 39 percent compared with the same quarter of last year. The increase was primarily due to the growth in mortgage originations that led to higher demand for the company's title information products and the recent acquisition of Docutech.

Investment income was $51.6 million in the fourth quarter, down $18.2 million, or 26 percent. The decline was primarily due to the impact of lower short-term interest rates on the investment portfolio and cash balances, partially offset by higher interest income from the company's warehouse lending business. Net realized investment gains totaled $50.4 million in the current quarter, compared with gains of $20.6 million in the fourth quarter of 2019, primarily due to the change in the fair value of equity securities for both periods.

Personnel costs were $514.7 million in the fourth quarter, an increase of $64.6 million, or 14 percent, compared with the same quarter of 2019. This increase was primarily attributable to higher incentive compensation and salary expense, as well as the impact of recent acquisitions.

Other operating expenses were $299.6 million in the fourth quarter, up $75.6 million, or 34 percent, compared with the fourth quarter of 2019. The increase was primarily due to higher production-related costs as a result of the growth in order volume, higher professional services and the impact of recent acquisitions.

The provision for policy losses and other claims was $80.8 million in the fourth quarter, or 5.0 percent of title premiums and escrow fees, an increase from a 4.0 percent loss provision rate in the prior year. The current quarter rate reflects an ultimate loss rate of 4.5 percent for the current policy year with an $8.1 million increase in the loss reserve estimates for prior policy years.

Depreciation and amortization expense was $36.6 million in the fourth quarter, up $7.0 million, or 24 percent, compared with the same period last year, primarily due to the amortization of intangibles related to recent acquisitions.

Pretax income for the Title Insurance and Services segment was $377.2 million in the fourth quarter, compared with $283.8 million in the fourth quarter of 2019. Pretax margin was 18.9 percent in the current quarter, compared with 17.8 percent last year. Excluding the impact of net realized investment gains, the pretax margin was 16.8 percent this year, unchanged compared with last year.

Specialty Insurance($ in millions)

Three Months Ended

December 31,

2020 2019

Total revenues $ 140.6 $ 131.6



Income before taxes $ 26.7 $ 22.0

Pretax margin 19.0 % 16.7 %

Total revenues for the Specialty Insurance segment were $140.6 million in the fourth quarter of 2020, an increase of 7 percent compared with the fourth quarter of 2019. This quarter, the segment's financial results benefited from an $18.3 million reversal of a portion of the impairment initially recorded in the third quarter within the property and casualty business. The overall loss ratio for the segment was 65.2 percent, up from 51.2 percent last year due to higher claim losses in both the property and casualty and home warranty businesses. The home warranty business continued to experience higher claim frequency in the fourth quarter, significantly driven by claims in the appliance and plumbing trades.

Teleconference/Webcast

First American's fourth quarter 2020 results will be discussed in more detail on Thursday, February 11, 2021, at 11 a.m. EST, via teleconference. The toll-free dial-in number is 877-407-8293. Callers from outside the United States may dial +1-201-689-8349.

The live audio webcast of the call will be available on First American's website at www.firstam.com/investor. An audio replay of the conference call will be available through February 25, 2021, by dialing 201-612-7415 and using the conference ID 13714735. An audio archive of the call will also be available on First American's investor website.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; banking, trust and wealth management services; and other related products and services. With total revenue of $7.1 billion in 2020, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2020, First American was named to the Fortune 100 Best Companies to Work For(r) list for the fifth consecutive year. More information about the company can be found at www.firstam.com.

Website Disclosure

First American posts information of interest to investors at www.firstam.com/investor. This includes opened and closed title insurance order counts for its U.S. direct title insurance operations, which are posted approximately 10 to 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary contain, and responses to investor questions may contain, 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 the performance of the real estate markets; volatility in the capital markets; unfavorable economic conditions; the coronavirus pandemic and responses thereto; impairments in the company's goodwill or other intangible assets; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; 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; climate change, health crises, severe weather conditions 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; material variance between actual and expected claims experience; 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; 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; the company's use of a global workforce; inability of the company's subsidiaries to pay dividends or repay funds; and other factors described in the company's quarterly report on Form 10-Q for the quarter ended September 30, 2020, as filed with the Securities and Exchange Commission. 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.

Use of Non-GAAP Financial Measures

This news release and related management commentary contain certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including an adjusted debt to capitalization ratio, personnel and other operating expense ratios, success ratios, net operating revenues; and adjusted revenues, adjusted pretax income, adjusted earnings per share, and adjusted pretax margins for the company, its title insurance and services segment and its specialty insurance segment. The company is presenting these non-GAAP financial measures because they provide the company's management and investors with additional insight into the financial leverage, operational efficiency and performance of the company relative to earlier periods and relative to the company's competitors. The company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. In this news release, these non-GAAP financial measures have been presented with, and reconciled to, the most directly comparable GAAP financial measures. Investors should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures.

First American Financial Corporation

Summary of Consolidated Financial Results and Selected Information

(in thousands, except per share amounts and title orders, unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Total revenues $ 2,151,274 $ 1,728,664 $ 7,086,667 $ 6,202,061



Income before $ 382,280 $ 288,513 $ 923,270 $ 905,018 income taxes

Income tax 100,915 63,907 222,774 195,170 expense

Net income 281,365 224,606 700,496 709,848

Less: Netincomeattributable to 1,074 608 4,067 2,438 noncontrollinginterests

Net incomeattributable to $ 280,291 $ 223,998 $ 696,429 $ 707,410 the Company



Net income pershare attributable tostockholders:

Basic $ 2.50 $ 1.98 $ 6.18 $ 6.26

Diluted $ 2.49 $ 1.97 $ 6.16 $ 6.22



Cash dividendsdeclared per $ 0.46 $ 0.42 $ 1.78 $ 1.68 share



Weightedaverage common sharesoutstanding:

Basic 112,165 113,301 112,746 113,080

Diluted 112,486 113,984 113,020 113,655



Selected TitleInsurance SegmentInformation

Title orders 354,600 251,700 1,470,900 1,093,000 opened^(1)

Title orders 295,100 224,200 1,043,800 795,800 closed^(1)

Paid title $ 43,252 $ 42,469 $ 164,104 $ 162,207 claims



(1) U.S. directtitle insurance orders only.

First American Financial Corporation

Selected Consolidated Balance Sheet Information

(in thousands, unaudited)

December 31,

December 31,

2020

2019

Cash and cash equivalents

$

1,275,466

$

1,485,959

Investments

7,214,820

6,589,443

Goodwill and other intangible assets, net

1,573,102

1,242,741

Total assets

12,795,988

11,519,167

Reserve for claim losses

1,178,004

1,063,044

Notes and contracts payable

1,010,756

728,232

Total stockholders' equity

$

4,909,972

$

4,420,484

First American Financial Corporation

Selected Consolidated Balance Sheet Information

(in thousands, unaudited)



December 31, December 31,

2020 2019

Cash and cash equivalents $ 1,275,466 $ 1,485,959

Investments 7,214,820 6,589,443

Goodwill and other intangible assets, net 1,573,102 1,242,741

Total assets 12,795,988 11,519,167

Reserve for claim losses 1,178,004 1,063,044

Notes and contracts payable 1,010,756 728,232

Total stockholders' equity $ 4,909,972 $ 4,420,484

First American Financial Corporation

Segment Information

(in thousands, unaudited)

Three Months Ended

Title

Specialty

Corporate

December 31, 2020

Consolidated

Insurance

Insurance

(incl. Elims.)

Revenues

Direct premiums and escrow fees

$

906,957

$

777,045

$

129,912

$

-

Agent premiums

839,444

839,444

-

-

Information and other

284,797

281,609

3,447

(259

)

Net investment income

64,530

51,600

2,118

10,812

Net realized investment gains

55,546

50,418

5,128

-

2,151,274

2,000,116

140,605

10,553

Expenses

Personnel costs

549,032

514,735

22,436

11,861

Premiums retained by agents

663,861

663,861

-

-

Other operating expenses

330,701

299,609

21,374

9,718

Provision for policy losses and other claims

165,506

80,808

84,698

-

Depreciation and amortization

38,327

36,587

1,703

37

Impairments on disposition of business

(18,329

)

-

(18,329

)

-

Premium taxes

23,950

21,896

2,054

-

Interest

15,946

5,372

-

10,574

1,768,994

1,622,868

113,936

32,190

Income (loss) before income taxes

$

382,280

$

377,248

$

26,669

$

(21,637

)

Three Months Ended

Title

Specialty

Corporate

December 31, 2019

Consolidated

Insurance

Insurance

(incl. Elims.)

Revenues

Direct premiums and escrow fees

$

748,443

$

626,130

$

122,313

$

-

Agent premiums

671,602

671,602

-

-

Information and other

205,973

202,972

3,253

(252

)

Net investment income

78,806

69,843

2,753

6,210

Net realized investment gains

23,840

20,608

3,232

-

1,728,664

1,591,155

131,551

5,958

Expenses

Personnel costs

476,683

450,153

19,874

6,656

Premiums retained by agents

529,749

529,749

-

-

Other operating expenses

256,251

224,024

23,421

8,806

Provision for policy losses and other claims

114,515

51,912

62,603

-

Depreciation and amortization

31,484

29,600

1,846

38

Impairments on disposition of business

-

-

-

-

Premium taxes

19,725

17,950

1,775

-

Interest

11,744

3,951

-

7,793

1,440,151

1,307,339

109,519

23,293

Income (loss) before income taxes

$

288,513

$

283,816

$

22,032

$

(17,335

)

First American Financial Corporation

Segment Information

(in thousands, unaudited)



Three Months Ended Title Specialty Corporate

December 31, 2020 Consolidated Insurance Insurance (incl. Elims.)

Revenues

Direct premiums and $ 906,957 $ 777,045 $ 129,912 $ - escrow fees

Agent premiums 839,444 839,444 - -

Information and other 284,797 281,609 3,447 (259 )

Net investment income 64,530 51,600 2,118 10,812

Net realized 55,546 50,418 5,128 - investment gains

2,151,274 2,000,116 140,605 10,553

Expenses

Personnel costs 549,032 514,735 22,436 11,861

Premiums retained by 663,861 663,861 - - agents

Other operating 330,701 299,609 21,374 9,718 expenses

Provision for policylosses and other 165,506 80,808 84,698 - claims

Depreciation and 38,327 36,587 1,703 37 amortization

Impairments ondisposition of (18,329 ) - (18,329 ) - business

Premium taxes 23,950 21,896 2,054 -

Interest 15,946 5,372 - 10,574

1,768,994 1,622,868 113,936 32,190

Income (loss) before $ 382,280 $ 377,248 $ 26,669 $ (21,637 )income taxes



Three Months Ended Title Specialty Corporate

December 31, 2019 Consolidated Insurance Insurance (incl. Elims.)

Revenues

Direct premiums and $ 748,443 $ 626,130 $ 122,313 $ - escrow fees

Agent premiums 671,602 671,602 - -

Information and other 205,973 202,972 3,253 (252 )

Net investment income 78,806 69,843 2,753 6,210

Net realized 23,840 20,608 3,232 - investment gains

1,728,664 1,591,155 131,551 5,958

Expenses

Personnel costs 476,683 450,153 19,874 6,656

Premiums retained by 529,749 529,749 - - agents

Other operating 256,251 224,024 23,421 8,806 expenses

Provision for policylosses and other 114,515 51,912 62,603 - claims

Depreciation and 31,484 29,600 1,846 38 amortization

Impairments ondisposition of - - - - business

Premium taxes 19,725 17,950 1,775 -

Interest 11,744 3,951 - 7,793

1,440,151 1,307,339 109,519 23,293

Income (loss) before $ 288,513 $ 283,816 $ 22,032 $ (17,335 )income taxes

First American Financial Corporation

Segment Information

(in thousands, unaudited)

Year Ended

Title

Specialty

Corporate

December 31, 2020

Consolidated

Insurance

Insurance

(incl. Elims.)

Revenues

Direct premiums and escrow fees

$

2,987,525

$

2,489,992

$

497,533

$

-

Agent premiums

2,759,455

2,759,455

-

-

Information and other

1,013,360

1,000,805

13,439

(884

)

Net investment income

221,290

199,228

9,123

12,939

Net realized investment gains

105,037

86,194

12,328

6,515

7,086,667

6,535,674

532,423

18,570

Expenses

Personnel costs

1,941,477

1,834,832

86,834

19,811

Premiums retained by agents

2,184,420

2,184,420

-

-

Other operating expenses

1,119,108

999,701

83,104

36,303

Provision for policy losses and other claims

579,507

262,456

317,051

-

Depreciation and amortization

148,979

141,292

7,535

152

Impairments on disposition of business

54,935

-

54,935

-

Premium taxes

77,504

69,256

8,248

-

Interest

57,467

18,211

-

39,256

6,163,397

5,510,168

557,707

95,522

Income (loss) before income taxes

$

923,270

$

1,025,506

$

(25,284

)

$

(76,952

)

Year Ended

Title

Specialty

Corporate

December 31, 2019

Consolidated

Insurance

Insurance

(incl. Elims.)

Revenues

Direct premiums and escrow fees

$

2,659,273

$

2,188,056

$

471,217

$

-

Agent premiums

2,373,140

2,373,140

-

-

Information and other

787,831

776,124

12,742

(1,035

)

Net investment income

315,413

282,910

11,249

21,254

Net realized investment gains

66,404

55,722

10,682

-

6,202,061

5,675,952

505,890

20,219

Expenses

Personnel costs

1,806,005

1,701,742

80,120

24,143

Premiums retained by agents

1,874,266

1,874,266

-

-

Other operating expenses

923,298

805,480

80,705

37,113

Provision for policy losses and other claims

446,040

182,450

263,590

-

Depreciation and amortization

129,021

121,643

7,225

153

Impairments on disposition of business

-

-

-

-

Premium taxes

70,612

62,938

7,674

-

Interest

47,801

15,220

-

32,581

5,297,043

4,763,739

439,314

93,990

Income (loss) before income taxes

$

905,018

$

912,213

$

66,576

$

(73,771

)

First American Financial Corporation

Segment Information

(in thousands, unaudited)



Year Ended Title Specialty Corporate

December 31, 2020 Consolidated Insurance Insurance (incl. Elims.)

Revenues

Direct premiums and $ 2,987,525 $ 2,489,992 $ 497,533 $ - escrow fees

Agent premiums 2,759,455 2,759,455 - -

Information and other 1,013,360 1,000,805 13,439 (884 )

Net investment income 221,290 199,228 9,123 12,939

Net realized 105,037 86,194 12,328 6,515 investment gains

7,086,667 6,535,674 532,423 18,570

Expenses

Personnel costs 1,941,477 1,834,832 86,834 19,811

Premiums retained by 2,184,420 2,184,420 - - agents

Other operating 1,119,108 999,701 83,104 36,303 expenses

Provision for policylosses and other 579,507 262,456 317,051 - claims

Depreciation and 148,979 141,292 7,535 152 amortization

Impairments ondisposition of 54,935 - 54,935 - business

Premium taxes 77,504 69,256 8,248 -

Interest 57,467 18,211 - 39,256

6,163,397 5,510,168 557,707 95,522

Income (loss) before $ 923,270 $ 1,025,506 $ (25,284 ) $ (76,952 )income taxes



Year Ended Title Specialty Corporate

December 31, 2019 Consolidated Insurance Insurance (incl. Elims.)

Revenues

Direct premiums and $ 2,659,273 $ 2,188,056 $ 471,217 $ - escrow fees

Agent premiums 2,373,140 2,373,140 - -

Information and other 787,831 776,124 12,742 (1,035 )

Net investment income 315,413 282,910 11,249 21,254

Net realized 66,404 55,722 10,682 - investment gains

6,202,061 5,675,952 505,890 20,219

Expenses

Personnel costs 1,806,005 1,701,742 80,120 24,143

Premiums retained by 1,874,266 1,874,266 - - agents

Other operating 923,298 805,480 80,705 37,113 expenses

Provision for policylosses and other 446,040 182,450 263,590 - claims

Depreciation and 129,021 121,643 7,225 153 amortization

Impairments ondisposition of - - - - business

Premium taxes 70,612 62,938 7,674 -

Interest 47,801 15,220 - 32,581

5,297,043 4,763,739 439,314 93,990

Income (loss) before $ 905,018 $ 912,213 $ 66,576 $ (73,771 )income taxes

First American Financial Corporation

Reconciliation of Pretax Margins and Earnings per Diluted Share

Excluding Net Realized Investment Gains and Losses ("NRIG(L)")

(in thousands, except margin and per share amounts, unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Consolidated

Total revenues

$

2,151,274

$

1,728,664

$

7,086,667

$

6,202,061

Less: NRIG(L)

55,546

23,840

105,037

66,404

Total revenues excluding NRIG(L)

$

2,095,728

$

1,704,824

$

6,981,630

$

6,135,657

Pretax income

$

382,280

$

288,513

$

923,270

$

905,018

Less: NRIG(L)

55,546

23,840

105,037

66,404

Pretax income excluding NRIG(L)

$

326,734

$

264,673

$

818,233

$

838,614

Pretax margin

17.8

%

16.7

%

13.0

%

14.6

%

Less: Pretax margin impact of NRIG(L)

2.2

%

1.2

%

1.3

%

0.9

%

Pretax margin excluding NRIG(L)

15.6

%

15.5

%

11.7

%

13.7

%

Earnings per diluted share (EPS)

$

2.49

$

1.97

$

6.16

$

6.22

Less: EPS impact of NRIG(L)

0.38

0.16

0.71

0.46

EPS excluding NRIG(L)

$

2.11

$

1.80

$

5.45

$

5.76

Title Insurance and Services Segment

Total revenues

$

2,000,116

$

1,591,155

$

6,535,674

$

5,675,952

Less: NRIG(L)

50,418

20,608

86,194

55,722

Total revenues excluding NRIG(L)

$

1,949,698

$

1,570,547

$

6,449,480

$

5,620,230

Pretax income

$

377,248

$

283,816

$

1,025,506

$

912,213

Less: NRIG(L)

50,418

20,608

86,194

55,722

Pretax income excluding NRIG(L)

$

326,830

$

263,208

$

939,312

$

856,491

Pretax margin

18.9

%

17.8

%

15.7

%

16.1

%

Less: Pretax margin impact of NRIG(L)

2.1

%

1.0

%

1.1

%

0.9

%

Pretax margin excluding NRIG(L)

16.8

%

16.8

%

14.6

%

15.2

%

Specialty Insurance Segment

Total revenues

$

140,605

$

131,551

$

532,423

$

505,890

Less: NRIG(L)

5,128

3,232

12,328

10,682

Total revenues excluding NRIG(L)

$

135,477

$

128,319

$

520,095

$

495,208

Pretax income

$

26,669

$

22,032

$

(25,284

)

$

66,576

Less: NRIG(L)

5,128

3,232

12,328

10,682

Pretax income excluding NRIG(L)

$

21,541

$

18,800

$

(37,612

)

$

55,894

Pretax margin

19.0

%

16.7

%

(4.7

)%

13.2

%

Less: Pretax margin impact of NRIG(L)

3.1

%

2.0

%

2.5

%

1.9

%

Pretax margin excluding NRIG(L)

15.9

%

14.7

%

(7.2

)%

11.3

%

Totals may not sum due to rounding.

First American Financial Corporation

Reconciliation of Pretax Margins and Earnings per Diluted Share

Excluding Net Realized Investment Gains and Losses ("NRIG(L)")

(in thousands, except margin and per share amounts, unaudited)



Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Consolidated

Total revenues $ 2,151,274 $ 1,728,664 $ 7,086,667 $ 6,202,061

Less: NRIG(L) 55,546 23,840 105,037 66,404

Total revenuesexcluding NRIG $ 2,095,728 $ 1,704,824 $ 6,981,630 $ 6,135,657 (L)



Pretax income $ 382,280 $ 288,513 $ 923,270 $ 905,018

Less: NRIG(L) 55,546 23,840 105,037 66,404

Pretax incomeexcluding NRIG $ 326,734 $ 264,673 $ 818,233 $ 838,614 (L)



Pretax margin 17.8 % 16.7 % 13.0 % 14.6 %

Less: Pretaxmargin impact 2.2 % 1.2 % 1.3 % 0.9 %of NRIG(L)

Pretax marginexcluding NRIG 15.6 % 15.5 % 11.7 % 13.7 %(L)



Earnings perdiluted share $ 2.49 $ 1.97 $ 6.16 $ 6.22 (EPS)

Less: EPSimpact of NRIG 0.38 0.16 0.71 0.46 (L)

EPS excluding $ 2.11 $ 1.80 $ 5.45 $ 5.76 NRIG(L)



Title Insuranceand Services Segment

Total revenues $ 2,000,116 $ 1,591,155 $ 6,535,674 $ 5,675,952

Less: NRIG(L) 50,418 20,608 86,194 55,722

Total revenuesexcluding NRIG $ 1,949,698 $ 1,570,547 $ 6,449,480 $ 5,620,230 (L)



Pretax income $ 377,248 $ 283,816 $ 1,025,506 $ 912,213

Less: NRIG(L) 50,418 20,608 86,194 55,722

Pretax incomeexcluding NRIG $ 326,830 $ 263,208 $ 939,312 $ 856,491 (L)



Pretax margin 18.9 % 17.8 % 15.7 % 16.1 %

Less: Pretaxmargin impact 2.1 % 1.0 % 1.1 % 0.9 %of NRIG(L)

Pretax marginexcluding NRIG 16.8 % 16.8 % 14.6 % 15.2 %(L)



SpecialtyInsurance Segment

Total revenues $ 140,605 $ 131,551 $ 532,423 $ 505,890

Less: NRIG(L) 5,128 3,232 12,328 10,682

Total revenuesexcluding NRIG $ 135,477 $ 128,319 $ 520,095 $ 495,208 (L)



Pretax income $ 26,669 $ 22,032 $ (25,284 ) $ 66,576

Less: NRIG(L) 5,128 3,232 12,328 10,682

Pretax incomeexcluding NRIG $ 21,541 $ 18,800 $ (37,612 ) $ 55,894 (L)



Pretax margin 19.0 % 16.7 % (4.7 ) 13.2 % %

Less: Pretaxmargin impact 3.1 % 2.0 % 2.5 % 1.9 %of NRIG(L)

Pretax margin )excluding NRIG 15.9 % 14.7 % (7.2 % 11.3 %(L)



Totals may notsum due to rounding.

First American Financial Corporation

Expense and Success Ratio Reconciliation

Title Insurance and Services Segment

($ in thousands, unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2020

2019

2020

2019

Total revenues

$

2,000,116

$

1,591,155

$

6,535,674

$

5,675,952

Less: Net realized investment gains

50,418

20,608

86,194

55,722

Net investment income

51,600

69,843

199,228

282,910

Premiums retained by agents

663,861

529,749

2,184,420

1,874,266

Net operating revenues

$

1,234,237

$

970,955

$

4,065,832

$

3,463,054

Personnel and other operating expenses

$

814,344

$

674,177

$

2,834,533

$

2,507,222

Ratio (% net operating revenues)

66.0

%

69.4

%

69.7

%

72.4

%

Ratio (% total revenues)

40.7

%

42.4

%

43.4

%

44.2

%

Change in net operating revenues

$

263,282

$

602,778

Change in personnel and other operating expenses

140,167

327,311

Success Ratio(1)

53

%

54

%

(1) Change in personnel and other operating expenses divided by change in net operating revenues.

First American Financial Corporation

Expense and Success Ratio Reconciliation

Title Insurance and Services Segment

($ in thousands, unaudited)





Three Months Ended Year Ended

December 31, December 31,

2020 2019 2020 2019

Total revenues $ 2,000,116 $ 1,591,155 $ 6,535,674 $ 5,675,952

Less: Netrealized 50,418 20,608 86,194 55,722 investmentgains

Net investment 51,600 69,843 199,228 282,910 income

Premiumsretained by 663,861 529,749 2,184,420 1,874,266 agents

Net operating $ 1,234,237 $ 970,955 $ 4,065,832 $ 3,463,054 revenues





Personnel andother operating $ 814,344 $ 674,177 $ 2,834,533 $ 2,507,222 expenses

Ratio (% netoperating 66.0 % 69.4 % 69.7 % 72.4 %revenues)

Ratio (% total 40.7 % 42.4 % 43.4 % 44.2 %revenues)





Change in netoperating $ 263,282 $ 602,778 revenues

Change inpersonnel and 140,167 327,311 other operatingexpenses

Success Ratio^ 53 % 54 % (1)



(1) Change in personnel and other operating expenses divided by change in net operating revenues.

First American Financial Corporation

Supplemental Direct Title Insurance Order Information(1)

(unaudited)

Q420

Q320

Q220

Q120

Q419

Open Orders per Day

Purchase

1,925

2,405

1,919

1,978

1,622

Refinance

2,923

3,154

2,898

2,884

1,487

Refinance as % of residential orders

60

%

57

%

60

%

59

%

48

%

Commercial

509

486

362

510

522

Default and other

273

370

310

345

364

Total open orders per day

5,629

6,416

5,489

5,716

3,995

Closed Orders per Day

Purchase

1,740

1,820

1,310

1,277

1,469

Refinance

2,430

2,320

2,222

1,451

1,391

Refinance as % of residential orders

58

%

56

%

63

%

53

%

49

%

Commercial

307

248

232

265

332

Default and other

207

167

213

276

366

Total closed orders per day

4,684

4,555

3,977

3,269

3,559

Average Revenue per Order (ARPO)

Purchase

$

2,826

$

2,726

$

2,581

$

2,526

$

2,541

Refinance

1,228

1,204

1,194

1,165

1,195

Commercial

11,703

8,993

7,373

9,690

11,425

Default and other

55

46

41

299

209

Total ARPO

$

2,457

$

2,193

$

1,950

$

2,315

$

2,603

Business Days

63

64

64

62

63

(1) U.S. operations only.

Totals may not sum due to rounding.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210211005252/en/

CONTACT: Media Contact: Marcus Ginnaty Corporate Communications First American Financial Corporation 714-250-3298

CONTACT: Investor Contact: Craig Barberio Investor Relations First American Financial Corporation 714-250-5214