The cash dividend is payable on June 17, 2013 to shareholders of record as of June 10, 2013.

About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, 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; property and casualty insurance; and banking, trust, and investment advisory services. With revenues of approximately $4.5 billion in 2012, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.

Download the complete press release as a PDF (244 KB)

Current Quarter Highlights

• Total revenues up 19 percent compared with last year
• Agent premiums up 29 percent compared with last year
• Title Insurance and Services segment pretax margin of 6.0 percent
  • Includes $28.6 million reserve strengthening, largely due to 2006-2007 commercial claims
• Title order mix shifting to higher-premium resale transactions
  • Resale open orders per day up 13 percent
  • Refinance open orders per day down 7 percent
• Commercial division revenues of $86.9 million, up 7 percent compared with last year
• Specialty Insurance segment total revenues up 10 percent, with a pretax margin of 19.5 percent

Total revenues for the first quarter of 2013 were $1.1 billion, an increase of 19 percent relative to the first quarter of 2012. Net income in the current quarter was $36.2 million, or 33 cents per diluted share, compared with net income of $31.3 million, or 29 cents per diluted share, in the first quarter of 2012. The current quarter results include net realized investment gains of $9.3 million, or 5 cents per diluted share, compared with net realized investment losses of $0.9 million, or 1 cent per diluted share, in the first quarter of 2012.

"Market conditions were good in the first quarter with an increase in closed orders that drove our 19 percent revenue growth," said Dennis J. Gilmore, chief executive officer for First American Financial Corporation. "And we're pleased that a solid increase in our higher-premium resale and commercial open orders fully offset the decline we experienced in refinance volume.

"Our financial results for the first quarter were negatively impacted by a $29 million reserve strengthening in the title segment, primarily driven by a few large commercial claims from policy years 2006 and 2007. Although it's unusual to have this level of large commercial claim activity in a single quarter, we continue to see a general decline in paid title claims as legacy policy years become more seasoned and recent policy years demonstrate lower claims activity. Putting aside the impact of the large commercial claims, our first quarter results indicate that the year is off to a good start.

"Our business outlook remains positive as we enter the important spring selling season. So far in April, our resale open orders are running 4 percent higher than in March and up 21 percent compared with last year. We believe the housing market is improving and that the company is well positioned to deliver strong financial results as the multiyear recovery continues."      

Total revenues for the Title Insurance and Services segment were $1.1 billion, a 19 percent increase from the same quarter of 2012. Direct premiums and escrow fees were up 16 percent from the first quarter of 2012, driven by a 12 percent increase in the number of direct title orders closed in the quarter and a 4 percent increase in the revenue per direct title order to $1,373. The increase in revenue per direct title order overall was primarily attributable to higher revenue per order from residential resale and commercial transactions. Agent premiums were up 29 percent in the current quarter, which is consistent with the increase in direct premiums experienced in the previous quarter, reflecting the typical reporting lag of approximately one quarter.

Information and other revenues were $151.7 million this quarter, down 2 percent compared with the same quarter of last year. The decline was primarily due to lower demand for title-related services in Canada, largely offset by higher demand for the company's default information products. Total investment income was $26.4 million in the first quarter, an increase of $11.1 million from the first quarter of 2012, reflecting higher net realized investment gains in the current quarter.

Personnel costs were $316.8 million in the first quarter, an increase of $39.3 million, or 14 percent, compared with the first quarter of 2012. This increase was primarily due to higher staffing levels required to support the increase in order volume.

Other operating expenses were $188.6 million in the first quarter, up $16.9 million, or 10 percent, compared with the first quarter of 2012. The increase was primarily due to higher production-related expenses and temporary labor costs driven by the increase in order volumes in the current quarter.

The provision for policy losses and other claims was $77.4 million in the first quarter, or 8.7 percent of title premiums and escrow fees, up $25.2 million compared with the same quarter of the prior year. The current quarter rate of 8.7 percent reflects an ultimate loss rate of 5.6 percent for the current policy year and a $28.6 million net increase in the loss reserve estimates for prior policy years. The increase in loss reserve estimates for prior policy years reflected claims development above expected levels during the first quarter, primarily due to a few large commercial claims from policy years 2006 and 2007.

Pretax income for the Title Insurance and Services segment was $64.3 million in the first quarter, compared with $60.8 million in the first quarter of 2012. Pretax margin was 6.0 percent in the current quarter, compared with 6.8 percent last year.

Total revenues for the Specialty Insurance segment were $81.5 million in the first quarter of 2013, an increase of 10 percent compared with the first quarter of 2012. The increase in revenues was driven by higher premiums earned in both the home warranty and property and casualty business lines. The overall loss ratio in the Specialty Insurance segment was 50 percent in the current quarter, compared with a 49 percent loss ratio in the prior year. Both business lines delivered operating leverage that increased the pretax margin to 19.5 percent from 17.3 percent in the first quarter of 2012.

Teleconference/Webcast

First American's first quarter 2013 results will be discussed in more detail on Thursday, April 25, 2013, at 11 a.m. ET, via teleconference. The toll-free dial-in number is (888) 606-8414. Callers from outside the United States may dial (212) 547-0240. The passcode for the event is "First American."

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 May 3, 2013, by dialing (203) 369-1472. 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 and settlement services to the real estate and mortgage industries, 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; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $4.5 billion in 2012, the company offers its products and services directly and through its agents throughout the United States and abroad. 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 direct title insurance operations, which are posted approximately 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary and responses to investor questions, including but not limited to those related to the outlook for the housing market and its effects on the company, future title claims experience, future refinance volumes, the commercial transaction pipeline, and improving operating leverage, 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: interest rate fluctuations; changes in the performance 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; changes in applicable government regulations; 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; reform of government-sponsored mortgage enterprises; limitations on access to public records and other data; product migration; changes in relationships with large mortgage lenders; 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; expenses of and funding obligations to the pension plan; 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; systems interruptions and intrusions, wire transfer errors or unauthorized data disclosures; inability to realize the benefits of the company's offshore strategy; inability of the company's subsidiaries to pay dividends or repay funds; and other factors described in the company's annual report on Form 10-K for the year ended December 31, 2012, 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 personnel and other operating expense ratios. The company is presenting these non-GAAP financial measures because they provide the company's management and investors with additional insight into the 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.

(Additional Financial Data Follows)

SOURCE First American Financial Corporation

Download the complete press release as a PDF (244 KB)

The call will follow the release of the company’s earnings results for the first quarter of 2013, which is scheduled earlier that day at 7:00 a.m. ET.

The conference call, which will also be broadcast over the Internet and is open to investors, members of the financial community, the media and other members of the public, can be accessed online at www.firstam.com/investor or by dialing toll free (888) 606-8414. Callers from outside the United States may dial (212) 547-0240. The pass code for the event is "First American."

An audio replay of the conference call will be available through May 3, 2013, by dialing (203) 369-1472. An audio archive of the call and a copy of the first-quarter 2013 earnings release, including the financial information contained therein, 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 and settlement services to the real estate and mortgage industries, 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; property and casualty insurance; and banking, trust, and investment advisory services. With revenues of approximately $4.5 billion in 2012, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.

Seaton, who began his career with First American in 2006 and until his appointment served as senior vice president of finance, will replace current Executive Vice President and Chief Financial Officer Max O. Valdes, who is retiring after 25 years with the company. Valdes will remain with the company until March 2014 to assist with the transition.  

During his tenure with First American, Seaton’s roles have included management of the company’s financial planning, treasury, investments and investor relations activities. In addition, he has been a driving influence on the company’s strategic planning and margin improvement initiatives.

"Mark’s proven financial management and strategic planning skills make him an ideal choice to fill the chief financial officer role," said Dennis Gilmore, chief executive officer of First American Financial Corporation. "These skills, together with the depth of his knowledge about our company and our industry, have earned him the confidence of our employees, our board of directors and our investors."  

Prior to joining First American, Seaton worked in private equity and in the investment banking industry.  He holds a bachelor’s degree in economics from Stanford University and a Master of Business Administration degree from The Tuck School of Business at Dartmouth College.

Valdes joined First American in 1988 and filled a variety of financial management roles prior to being named CFO of First American Financial Corporation in 2010. "Max’s contribution to our company over the last 25 years will have a lasting impact," Gilmore noted.  "As we streamlined our business and positioned it for growth over the last several years, his counsel and leadership proved invaluable."

About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, 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; property and casualty insurance; and banking, trust, and investment advisory services. With revenues of approximately $4.5 billion in 2012, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.

Oman retired from Wells Fargo & Company in 2011, after serving that firm for more than 30 years. He held a variety of management positions at Wells Fargo, most recently senior executive vice president and head of Wells Fargo’s Home and Consumer Finance Group. During his tenure, Wells Fargo grew to be the largest originator of home mortgages in the United States and the second largest mortgage servicer.

“Our ability to execute on our strategy to grow our core businesses and improve our customers’ experience has been greatly enhanced by the addition of Mark to our board,” said Parker S. Kennedy, chairman of First American Financial Corporation.  “Mark brings skills that are critical in our competitive and changing environment: a deep insight into the needs of our customers, extensive experience in the mortgage industry and a demonstrated history of leadership.”

Oman serves on the boards of the University of Northern Iowa Foundation and the Greater Des Moines Community Foundation. He is a member of the Iowa Business Hall of Fame and serves on various other professional and community boards, panels and committees. Oman holds a bachelor's degree from the University of Northern Iowa, Cedar Falls.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, 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; property and casualty insurance; and banking, trust, and investment advisory services. With revenues of approximately $4.5 billion in 2012, the company offers its products and services directly and through its agents throughout the United States and abroad. More information about the company can be found at www.firstam.com.

.
Current Quarter Highlights:

• Title Insurance and Services segment pretax margin of 12.7 percent
• Commercial division revenues of $146.0 million, up 36 percent compared to last year
• Specialty Insurance segment pretax margin of 16.6 percent
• Cash flow from operations of $178.2 million
• Completed $250 million offering of 10-year, 4.3 percent senior notes on Jan. 29, 2013

Download the complete press release as a PDF (260 kb)

Total revenues for the fourth quarter of 2012 were $1.3 billion, an increase of 28 percent relative to the fourth quarter of 2011. Net income in the current quarter was $93.3 million, or 85 cents per diluted share, compared with net income of $40.2 million, or 38 cents per diluted share, in the fourth quarter of 2011. The current quarter results include net realized investment gains of $6.2 million, or 4 cents per diluted share, compared with net realized losses of $2.2 million, or 1 cent per diluted share, in the prior year. The fourth quarter results for 2011 also include a $19.2 million charge for a legal settlement, or 11 cents per diluted share.

Total revenues for the full year of 2012 were $4.5 billion, an increase of 19 percent relative to the prior year. Net income was $301.0 million, or $2.77 per diluted share, compared with $78.3 million, or 73 cents per diluted share, in 2011. The results for the full year 2012 include $57.0 million of net realized investment gains, or 34 cents per diluted share, primarily due to the sale of CoreLogic common stock, compared with net realized investment losses of $9.2 million, or 5 cents per diluted share, in 2011. In addition, the prior year results for 2011 include charges of $77.5 million, or 43 cents per diluted share, which incorporate a $45.3 million reserve addition for the guaranteed valuation product offered in Canada and $32.2 million for a legal settlement.

"2012 was a successful year for the company," said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. "We grew total revenue by 19 percent and, due to strong operating leverage, we significantly improved our profitability. Our pretax title margin of 11.3 percent and return on equity of 13.7 percent both exceeded the goals we established back in 2010 prior to the spinoff.

"During the fourth quarter, closed orders in our title business were the strongest of the year, driven by refinance and commercial activity. Revenues in our commercial division were $146 million for the quarter, up 36 percent compared to the prior year. The company delivered a strong title segment pretax margin of 12.7 percent.

"In late January of this year, we completed a $250 million offering of 10-year, 4.3 percent senior notes to provide the company with long-term financing that increases our financial flexibility going forward.

"With new and existing home purchases in the early stages of recovery, we are optimistic that the housing market will continue to improve. We also expect continued strength in the commercial market. While there is uncertainty concerning the impact and timing of the expected decline in refinance activity and the magnitude of growth in the purchase market, we believe the company is well positioned going into 2013."

* See footnote (2) on page 8.

** Includes commercial activity from the National Commercial Services division only.

Total revenues for the Title Insurance and Services segment were $1.2 billion in the fourth quarter of 2012, an increase of 30 percent from the same quarter of 2011. Direct premiums and escrow fees were up 38 percent compared to the fourth quarter of 2011, due to a 34 percent increase in the number of direct title orders closed in the quarter and a small increase in average revenue per order. Average revenue per direct title order was $1,547, an increase of 3 percent compared with the fourth quarter of 2011, as the shift in the mix of revenues to lower-premium refinance transactions was more than offset by an increase in the average revenue per closed order for commercial and purchase transactions. Agent premiums were up by 30 percent in the current quarter, reflecting the normal reporting lag of approximately one quarter.

Information and other revenues were $161.9 million this quarter, up 5 percent as compared to the same quarter of last year, driven by higher demand for the company's title plant information and default information products, partly offset by lower demand for title-related services in Canada. Total investment income was up $10.7 million compared to the fourth quarter of 2011, primarily reflecting higher net realized investment gains and an increase in income from the investment portfolio.

Personnel costs were $339.1 million in the fourth quarter, an increase of $56.1 million, or 20 percent, compared with the fourth quarter of 2011. This increase was primarily due to higher incentive-based compensation driven by improved revenues and profitability and, to a lesser extent, higher staffing levels required to support the increased order volume compared to the prior year.

Other operating expenses were $210.9 million in the fourth quarter, up $42.1 million, or 25 percent, compared with the fourth quarter of 2011. This increase was primarily due to higher production-related expenses and temporary labor costs driven by the increase in order volumes in the current quarter.

The provision for policy losses and other claims was $70.7 million in the fourth quarter, or 7.0 percent of title premiums and escrow fees, up $6.2 million compared with the same quarter of the prior year. The current quarter rate of 7.0 percent reflects an ultimate loss rate of 5.1 percent for the current policy year and a net increase in the loss reserve estimates for prior policy years.

Pretax income for the Title Insurance and Services segment was $152.5 million in the fourth quarter, compared with $75.8 million in the fourth quarter of 2011, or an increase of 101 percent. Pretax margin was 12.7 percent in the current quarter.

*See footnote (2) on page 8.

Total revenues for the Specialty Insurance segment were $80.0 million in the fourth quarter of 2012, up 11 percent compared with the fourth quarter of 2011. Higher premiums and favorable loss experience combined to deliver a pretax margin of 16.6 percent, up from 14.1 percent in the fourth quarter of 2011. The overall loss ratio in the Specialty Insurance segment was 51 percent in the current quarter, down from 53 percent in the prior year. 

Teleconference/Webcast

First American's fourth quarter and full year 2012 results will be discussed in more detail on Thursday, Feb. 21, 2013, at 11 a.m. ET, via teleconference. The toll-free dial-in number is (800) 369-1861. Callers from outside the United States may dial (517) 308-9158. The passcode for the event is "First American."

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 March 1, 2013, by dialing (203) 369-0799. 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 and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889. First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $4.5 billion in 2012, the company offers its products and services directly and through its agents and partners in all 50 states and abroad. 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 direct title insurance operations, which are posted approximately 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary and responses to investor questions, including but not limited to those related to recovery of the home purchase market, improvement in the housing market, improvement in the commercial market, future refinance activity and growth in the purchase market, the company's future performance, incurred and paid claims trends, investment in value-creating projects in the company's core business, strategic acquisitions that complement the company's existing business, and the return of capital to the shareholders, 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: interest rate fluctuations; changes in the performance 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; changes in applicable government regulations; 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; reform of government-sponsored mortgage enterprises; limitations on access to public records and other data; product migration; changes in relationships with large mortgage lenders; changes in measures of the strength of the company's title insurance underwriters, including ratings and statutory surpluses; losses in the company's investment portfolio; expenses of and funding obligations to the pension plan; 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; systems interruptions and intrusions, wire transfer errors or unauthorized data disclosures; inability to realize the benefits of the company's offshore strategy; 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, 2012, 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 a personnel and other operating expense ratio. The company is presenting these non-GAAP financial measures because they provide the company's management and investors with additional insight into the 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.

(Additional Financial Data Follows)

The call will follow the release of the company’s earnings results for the fourth quarter of 2012, which is scheduled earlier that day at 7:00 a.m. ET.

The conference call, which will also be broadcast over the Internet and is open to investors, members of the financial community, the media and other members of the public, can be accessed online at www.firstam.com/investor or by dialing toll free (800) 369-1861. Callers from outside the United States may dial (517) 308-9158. The pass code for the event is “First American.”

An audio replay of the conference call will be available through March 1, 2013, by dialing (203) 369-0799. An audio archive of the call and a copy of the fourth-quarter 2012 earnings release, including the financial information contained therein, 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 and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889. First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $3.8 billion in 2011, the company offers its products and services directly and through its agents and partners in all 50 states and abroad. More information about the company can be found at www.firstam.com.

The notes were priced at 99.638 percent to yield 4.345 percent. Interest will be paid semi-annually on Feb. 1 and Aug. 1, beginning Aug. 1, 2013. The company intends to use the net proceeds from the sale of the notes to repay all borrowings outstanding under its revolving credit facility and for general corporate purposes.

J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, and U.S. Bancorp Investments, Inc., acted as the joint book-running managers for the offering. Copies of the prospectus supplement and accompanying base prospectus for the offering may be obtained by contacting J.P. Morgan Securities LLC, 383 Madison Avenue, New York, NY, 10179, Attention: High Grade Syndicate Desk, 3rd Floor; telephone:  (212) 834-4533; or by contacting Wells Fargo Securities, LLC, 1525 West W.T. Harris Blvd., NC 0675, Charlotte, NC 28262, Attention: Capital Markets Client Support; telephone: (800) 326-5897. An electronic copy of the prospectus supplement and accompanying base prospectus for the offering may also be obtained at www.sec.gov.

This press release does not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any sale of any of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities being offered have not been approved or disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the prospectus supplement or the shelf registration statement or prospectus.

About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889.  First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services.

Forward-Looking Statements
Certain statements made in this press release, including the net proceeds generated by the offering and the use of such proceeds, 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. 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: interest rate fluctuations; changes in the performance of the real estate markets; volatility in the capital markets; unfavorable economic conditions; and other factors described in the company’s quarterly report on Form 10-Q for the quarter ended Sept. 30, 2012, 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.

The offering is expected to close on Jan. 29, 2013, subject to customary conditions, and is being made pursuant to the company’s shelf registration statement filed with the Securities and Exchange Commission.

The notes will be general senior unsecured obligations of the company and will rank equally in right of payment with the company’s existing and future senior unsecured indebtedness.

The notes were priced at 99.638 percent to yield 4.345 percent. Interest will be paid semi-annually on Feb. 1 and Aug. 1, beginning Aug. 1, 2013. The company intends to use the net proceeds from the sale of the notes to repay all borrowings outstanding under its revolving credit facility and for general corporate purposes.

J.P. Morgan Securities LLC, Wells Fargo Securities, LLC, and U.S. Bancorp Investments, Inc., are acting as the joint book-running managers for the offering. Copies of the prospectus supplement and accompanying base prospectus for the offering may be obtained by contacting J.P. Morgan Securities LLC, 383 Madison Avenue, New York, NY, 10179, Attention: High Grade Syndicate Desk, 3rd Floor; telephone:  (212) 834-4533; or by contacting Wells Fargo Securities, LLC, 1525 West W.T. Harris Blvd., NC 0675, Charlotte, NC 28262, Attention: Capital Markets Client Support; telephone: (800) 326-5897. An electronic copy of the prospectus supplement and accompanying base prospectus for the offering may also be obtained at www.sec.gov.

This press release does not constitute an offer to sell or a solicitation of an offer to buy securities, nor shall there be any sale of any of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The securities being offered have not been approved or
disapproved by any regulatory authority, nor has any such authority passed upon the accuracy or adequacy of the prospectus supplement or the shelf registration statement or prospectus.

About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889.  First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services.

Forward-Looking Statements
Certain statements made in this press release, including the closing date of the offering, the net proceeds to be generated thereby and the use of such proceeds, 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. 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: interest rate fluctuations; changes in the performance of the real estate markets; volatility in the capital markets; unfavorable economic conditions; and other factors described in the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2012, 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.

The cash dividend is payable on March 15, 2013 to shareholders of record as of March 8, 2013.  

About First American
First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889. First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $3.8 billion in 2011, the company offers its products and services directly and through its agents and partners in all 50 states and abroad. More information about the company can be found at www.firstam.com.

At the present time, the company expects to issue press releases announcing quarterly and year-to-date financial results on the following dates:

• Thursday, Feb. 21, 2013 – 2012 fourth-quarter and year-end results
• Thursday, April 25, 2013 – First-quarter results
• Thursday, July 25, 2013 – Second-quarter results
• Thursday, Oct. 24, 2013 – Third-quarter results

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889. First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $3.8 billion in 2011, the company offers its products and services directly and through its agents and partners in all 50 states and abroad. More information about the company can be found at www.firstam.com.

Download the complete press release as a PDF (120 kb)

Current Quarter Highlights
• Total revenues up 25 percent compared to last year
• Title Insurance and Services segment pretax margin of 12.9 percent
     - Includes net realized gains that increased the segment pretax margin by 160 basis points
• Title open orders per day up 29 percent compared to last year
• Commercial division revenues of $106.3 million, up 19 percent compared to last year
• Cash flow from operations of $147.2 million
• Sold remaining 8.9 million CoreLogic shares, which resulted in $40.4 million net realized investment gain

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

Total revenues for the third quarter of 2012 were $1.2 billion, an increase of 25 percent relative to the third quarter of 2011. Net income in the current quarter was $103.5 million, or 95 cents per diluted share, compared with net income of $21.0 million, or20 cents per diluted share, in the third quarter of 2011. The current quarter results include net realized investment gains of$47.3 million, or 27 cents per diluted share, compared with net realized investment losses of $3.3 million, or 2 cents per diluted share, in the third quarter of 2011.

"Given continued strong financial results in 2012 and our increasing confidence in the outlook for the housing and mortgage markets, I am pleased to report that our board of directors has approved a 50 percent increase in the regular quarterly dividend," said Dennis J. Gilmore, chief executive officer for First American Financial Corporation.

"Our strong results in the third quarter were driven by the company's efficient operations and continued improvement in title activity," Gilmore noted. "Open orders were up 29 percent year-over-year, primarily driven by refinance activity which, combined with our commercial business, provides us with a healthy pipeline as we move into the fourth quarter."

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

* See footnote (2) on page 8.
**Includes commercial activity from the National Commercial Services division only.

Total revenues for the Title Insurance and Services segment were $1.1 billion, a 23 percent increase from the same quarter of 2011. Direct premiums and escrow fees were up 29 percent from the third quarter of 2011, driven by a 35 percent increase in the number of direct title orders closed in the quarter, partially offset by a 4 percent decline in the average revenue per direct title order to $1,502. The decline in average revenue per order was primarily attributable to an increase in the mix of direct revenues generated from lower-premium refinance transactions. Agent premiums were up 21 percent in the current quarter, which is consistent with the 27 percent increase in direct premiums experienced in the previous quarter, reflecting the normal reporting lag of approximately one quarter.

Information and other revenues were $158.8 million this quarter, essentially flat compared to the same quarter of last year. While U.S. revenues increased 6 percent this quarter, they were offset by lower revenues in Canada due to a decline in mortgage transactions resulting primarily from the recent tightening of lending requirements. Total investment income was$39.3 million in the current quarter, an increase of $21.1 million from the third quarter of 2011, reflecting higher net realized investment gains primarily from the sale of CoreLogic common stock.  

Personnel costs were $317.2 million in the third quarter, an increase of $43.1 million, or 16 percent, compared with the third quarter of 2011.  This increase was primarily due to higher incentive-based compensation driven by improved revenues and profitability and, to a lesser extent, higher staffing levels required to support the increased order volume compared to the prior year.

Other operating expenses were $197.0 million in the third quarter, up $20.7 million, or 12 percent, compared with the third quarter of 2011. The increase was primarily due to higher production-related expenses and temporary labor costs driven by the increase in order volumes in the current quarter.

The provision for policy losses and other claims was $59.7 million in the third quarter, or 6.6 percent of title premiums and escrow fees, down $9.8 million compared with the same quarter of the prior year. The current quarter rate of 6.6 percent reflects an ultimate loss rate of 5.6 percent for the current policy year and a net increase in the loss reserve estimates for prior policy years.

Pretax income for the Title Insurance and Services segment was $141.9 million in the third quarter, compared with $52.8 million in the third quarter of 2011. Pretax margin was 12.9 percent in the current quarter, compared with 5.9 percent last year.

Specialty Insurance
($ in millions)

* See footnote (2) on page 8.

Total revenues for the Specialty Insurance segment were $81.4 million in the third quarter of 2012, an increase of 10 percent compared with the third quarter of 2011. The increase in revenues was driven by higher premiums earned in both the home warranty and property and casualty business lines. The overall loss ratio in the Specialty Insurance segment was 61 percent in the current quarter, as compared with a 60 percent loss ratio in the prior year. Total investment income was $4.4 million in the current quarter, up $1.6 million from the prior year due to higher net realized investment gains. As a result of higher total investment income in the current quarter, pretax margin was 10.0 percent, up from 9.2 percent in the third quarter of 2011.

Sale of CoreLogic Common Stock

During the third quarter, the company sold its remaining position in CoreLogic common stock. Proceeds from the sale were$207.9 million, which generated a net realized gain of $40.4 million.  Of the approximately 8.9 million shares sold in the quarter, 6.0 million were held by First American's holding company and 2.9 million were held by its primary insurance subsidiary, First American Title Insurance Company, with net realized gains of $25.4 million and $15.0 million, respectively.

Dividend Increase

First American's board of directors has declared a quarterly cash dividend of 12 cents per common share, representing a 50 percent increase from the prior level of 8 cents per common share. The cash dividend is payable on December 31, 2012 to shareholders of record as of December 14, 2012.

Teleconference/Webcast

First American's third quarter 2012 results will be discussed in more detail on Thursday, October 25, 2012, at 11 a.m. ET, via teleconference. The toll-free dial-in number is (800) 369-1839. Callers from outside the United States may dial (517) 308-9177. The pass code for the event is "First American."

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 Oct. 31, 2012, by dialing (402) 220-4725. 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 and settlement services to the real estate and mortgage industries, that traces its heritage back to 1889. First American and its affiliated companies also provide title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and investment advisory services. With revenues of $3.8 billion in 2011, the company offers its products and services directly and through its agents and partners in all 50 states and abroad. 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 direct title insurance operations, which are posted approximately 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary and responses to investor questions, including but not limited to those related to the outlook for the housing and mortgage markets, title order pipelines and closed order outlook, future title margins, future title claims experience, corporate expense expectations, pursuit of growth in the core business, future tax rates, and future debt-to-capital ratios, 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: interest rate fluctuations; changes in the performance 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; changes in applicable government regulations; 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; reform of government-sponsored mortgage enterprises; limitations on access to public records and other data; product migration; changes resulting from increases in the size of the company's customers; changes in measures of the strength of the company's title insurance underwriters, including ratings and statutory surpluses; losses in the company's investment portfolio; expenses of and funding obligations to the pension plan; 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; systems interruptions and intrusions, wire transfer errors or unauthorized data disclosures; inability to realize the benefits of the company's offshore strategy; 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 June 30, 2012, 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 a personnel and other operating expense ratio and adjusted corporate net expense. The company is presenting these non-GAAP financial measures because they provide the company's management and investors with additional insight into the operational efficiency, level of corporate expenses 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.

(Additional Financial Data Follows)