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FINANCIAL RESULTS
First American's Specialty Insurance segment produced a double-digit percentage increase in operating revenues
and a triple-digit percentage rise in income before income taxes and minority interests in 2002 over 2001. Operating
revenues rose to $143.3 million, an increase of 28 percent from the previous year's result, and income before
income taxes and minority interests more than doubled to $24.5 million.
SEGMENT ACTIVITY
Aided by a strong market for property resales, First American Home Buyers Protection Corporation ended the
year with record-breaking gross premiums. The company continued strengthening its position as one of the nation's
leading providers of home warranty contracts, ending 2002 with a record 302,000
warranties in force. It is significant that about one-third of these warranties were renewals
of existing policies, demonstrating the reliability of a steady income stream that is not
dependent on real estate market cycles.
First American Property & Casualty Insurance Company and First American Specialty
Insurance Company continued to work in parallel with other First American companies,
supporting homeowners with property and casualty insurance that focuses on personal
lines, including homeowner's coverage. At the end of 2002, these companies had
approximately 140,000 total policies in force. First American Property & Casualty
Insurance Company also received an "A" rating from the recognized rating service
A.M. Best Company.
This type of protection is usually required to be in place before a home purchase or refinance
transaction can close. Our property and casualty operations are uniquely situated to benefit from two distribution
channels. The first includes a highly skilled group of property and casualty insurance agents who provide quality
service to our customer base. The other leverages our Title Company's direct and agency operations, which are
already involved in thousands of residential property transactions each year, by allowing
qualified representatives within these operations to distribute our insurance products cost
effectively through the escrow process.
MARKET GROWTH
First American Home Buyers Protection continued its geographic expansion by qualifying
to do business in eight additional states in 2002. The firm now provides services in 27
states — more than twice the number in which it operated in 2000. A major goal is to
expand this fast-growing company's presence to provide nationwide market coverage in
the next few years.
Homeowners have a continuing need for the residential insurance coverage provided by First American Property &
Casualty Insurance Company and First American Specialty Insurance Company. Because the homeowner policy is
a renewable product that is not directly tied to the real estate cycle, it is much less cyclical than products or services
involved solely in property purchases or refinancing. This provides a recurring revenue opportunity that allows First
American to create a balanced diversity that should serve the Company well into the future.
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