Index First American Profile Financial Highlights Letter to Stockholders First American's Strength in Numbers Title Information and Services Real Estate Information and Services Consumer Information and Services Management's Discussion and Analysis Selected Financial Data Common Stock Prices and Dividends Quarterly Financial Data Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Stockholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Accountants Officers Board of Directors Primary Companies Stockholder Information Back Cover

letter to stockholders

2001 was an excellent year for First American.

Our earnings before income taxes and minority interests were $329.5 million for the year. Our cash flow from operations was $388.2 million, an all-time record. Diluted earnings per share were $2.27 for the year, up 83 percent over 2000.

But earnings are only part of the story. During 2001, First American emerged as a truly diversified provider of business information. Earnings outside of our title insurance segment surpassed our earnings within it. We now provide information and services in connection with each of the major financial events in a consumer’s life. We’re involved when a person buys or mortgages a home, purchases or leases an automobile, rents an apartment, gets a job, buys or finances a business, and even when they retire.

No other company offers the business mix that we do. We’ve developed this mix to reach our goal of becoming a ubiquitous presence in the lives of America’s consumers and businesspeople. We are well on our way to achieving this goal. Our prominence in the credit-reporting arena is a good example. First American is the largest provider of specialty credit reports, which are based upon information from the three primary credit bureaus, to the mortgage and auto-financing industries. And, we own the largest subprime credit bureau in the country. In addition to mortgage and auto lenders, we provide credit reports to employers (regarding prospective employees), landlords (regarding prospective tenants), and directly to consumers. All in all, we issue more than 4 million credit-related reports in a good month.

Our background screening operations had a watershed year during 2001, a success that is continuing in early 2002. We began this operation with the purchase of a pre-employment screening company in 1998, providing employers with credit and criminal record information regarding prospective employees. We later purchased The Registry, which provides credit, eviction, and criminal information to landlords relative to prospective tenants. To add to our pre-employment screening operations, we purchased Substance Abuse Management, Inc., which assists employers in the drug-screening process. In January 2002, First American acquired American Driving Records, Inc., which provides employers with driving record information on a national basis. We are the only company that combines these four products. After three years and acquisitions totaling in excess of $100 million, these businesses now warrant the establishment of a separate segment.

Our real estate database products also grew to a point where a separate segment is justified. This new segment will consist of our title plant operations, our real property characteristics database operations, and our imaged recorded document database operations. Each of the three businesses is by far the largest in their fields and all made significant progress during 2001.

Of particular note was the progress made in our property characteristics division, which is providing innovative electronic appraisal-oriented products designed to completely transform the way real estate will be viewed in the future. Among other innovations, our team, in conjunction with a major property and casualty insurer, created the first insured appraisal product for the mortgage lending community.

Worthy of special mention is our CreditOnline™ Network. This product electronically links the majority of new car dealerships with many of the largest auto-financing institutions in the nation. We now have strategic agreements with industry leaders that include the Dealer Services Group of Automatic Data Processing, Inc. (ADP), The Reynolds and Reynolds Company, and Universal Computer Systems, Inc. These groups provide auto-sale processing software systems that give us access to the majority of new-car franchises in the nation. As time goes by, this system will provide substantial profits to First American and allow us the opportunity to effectively sell credit information and other products to users of the system.

Our real estate information group had an especially strong year. Operating revenues rose from $558 million in 2000 to $724 million in 2001, an increase of 30 percent, yet our employee count remained unchanged. Earnings grew from $58 million in 2000 to $184 million in 2001. Our mortgage credit, tax service, and flood certification divisions each had a very good year. During October, we did more than 1 million flood certifications—a new record.

The title insurance segment, still by far our largest, had an excellent year in 2001. Our prospects for earnings growth in this business are very significant. Title insurance is evolving from a primarily manual process to a database and systems-oriented technology business. 2001 marked the very successful emergence of our FAST suite of products. These systems allow us to centralize our production, making title processing more integrated and efficient. Our FAST Transaction System integrates the title production and closing functions and will substantially improve our margins in title insurance. We are well ahead of our competitors in creating these products. In 2001, we successfully rolled the product out in 75 offices and it is working very well. An additional 100 offices implemented this system during the first quarter of 2002, with roll out to all First American Title offices expected by year end.

While our Company has diversified in recent years, title insurance has in no way diminished in importance. Indeed, the growth prospects in this business are incredible as it moves, county by county, to a fully automated environment. We are the industry leader in this transformation. Further growth will be driven by market share, which has risen steadily for many years. We will see substantial growth in international markets, which accounted for more than $65 million in revenues in 2001. The prospects for our title company have never been better.

Our stock price declined during 2001, going from $29.31 per share at the beginning of the year to $18.74 per share by the end of the year. Clearly, the markets feared a drop in real estate transaction levels, especially in the refinance area. This decline never materialized. Our goal is to convince investors that our Company does not live and die with real estate interest rates. We are very focused on making First American a better-understood company by the investment community. This effort, coupled with the creation of several new segments in 2002 and continued improvement in our earnings, will lead to growth in the value of our stock. We are very committed to the interests of our shareholders.

Interest rates continue to be favorable to the real estate markets; however, it is difficult to predict where rates are headed. Whether they increase or decline, we are confident in First American’s future growth. Many of our businesses are not significantly affected by interest rate changes. These businesses provide a cushion and make our earnings less cyclical. We hope that rates will stay low, but look ahead with confidence irrespective of rate movements.

During the year, Craig DeRoy and Tom Klemens, our general counsel and chief financial officer, respectively, were promoted to senior executive vice presidents. Roger Hull was appointed senior vice president and chief information officer. Our congratulations to Craig, Tom, and Roger.

Also during the year, George Argyros, chairman and chief executive officer of Arnel & Affiliates, was asked by President Bush to serve as our Ambassador to Spain. This led to his resignation as a director of First American. He served on our board for 13 years and was especially supportive of our expansion into new businesses. He was truly an excellent board member, and his involvement with our Company will be missed. We congratulate George and wish him all the best. Replacing George will be Herb Tasker, who serves as vice chairman and managing director of Centre Capital Group, Inc. Herb, a former president of the National Mortgage Bankers Association of America, has served on the board of our title insurance company for three years and will continue in his new capacity to provide special insight into the mortgage-lending industry. We certainly appreciate Herb’s willingness to serve.

On behalf of the officers and directors of First American, we thank you for your continued support.