FIRST AMERICAN FINANCIAL REPORTS OPERATING RESULTS FOR THE THIRD QUARTER 1999


October 27, 1999, SANTA ANA, Calif.

The First American Financial Corporation (NYSE: FAF), the leading provider of business information and related products and services, announced today earnings and revenues for the third quarter and nine months ended Sept. 30, 1999.

Earnings for the third quarter ended Sept. 30, 1999, were $21.9 million, or 33 cents per diluted share. These results include the effects of a previously reported revenue recognition accounting change for the company's tax service contracts, which became effective Jan. 1, 1999, on a prospective basis. This accounting change resulted in a decrease of $7.1 million on an after-tax basis, or 11 cents per diluted share. Thus, earnings for the third quarter of 1999 would have been $29.0 million, or 44 cents per diluted share, under the former revenue-recognition policy. These results compare to record-setting third quarter 1998 net income of $56.2 million, or 87 cents per diluted share. Revenues for the third quarter of 1999 were $762.6 million, a 1.6 percent decrease when compared with the same period last year.

Earnings for the nine-month period were $75.0 million, or $1.13 per diluted share. These results include the effects of the accounting change mentioned above, which resulted in a decrease of $21.7 million on an after-tax basis, or 33 cents per diluted share. Thus, earnings for the nine months ended Sept. 30, 1999, would have been $96.7 million, or $1.46 per diluted share, under the former revenue- recognition policy. These results compare to $128.0 million, or $2.07 per diluted share, for the same 1998 period. Revenues for the nine months of 1999 totaled $2.26 billion, an increase of 7.6 percent when compared with revenues of $2.10 billion for the nine months of 1998. (1998 excludes an investment gain of $32.4 million relating to the joint venture agreement with Experian.) Had it not been for the tax service accounting change, the company would have reported additional revenues for the third quarter and nine months of 1999 of $14.5 million and $44.1 million, respectively.

"The third quarter was marked by a continuing trend of higher mortgage interest rates and lower mortgage refinance business," stated Parker S. Kennedy, president of First American Financial. "Company-wide, refinance transactions declined approximately 60 percent during the third quarter of this year versus last year, which significantly reduced revenue in our direct title operations and our information services segment. We have experienced a higher-than-anticipated drop in new orders, including resale activity, during the latter part of the third quarter due in part to higher interest rates, a decrease in consumer confidence and seasonal factors. This decline will have an adverse effect on our reported fourth quarter results. We are monitoring our labor efficiencies closely and will continue to aggressively reduce staffing levels and expenses to match the shrinking volume of new orders in order to maximize profitability.

"During the third quarter, we substantially completed our Year 2000 program initiatives. Year to date, the company has expensed approximately $22.1 million, of which $7.1 million was incurred during the third quarter of 1999. The majority of these expenses, approximately 80 percent, were incurred by the company's real estate information services segment."

Kennedy added: "We continue to enhance our technological capabilities in order to improve efficiencies and expand our real estate and consumer information and services segments. Several initiatives, including a national training and cross-selling program, multi-product e-commerce solutions and a strategic acquisitions program, are underway to enhance market share and improve profitability in all our business segments. We continue to focus on expanding our nontitle segments, especially the consumer information services segment, which will provide, noncyclical, steady growth for the future."

The First American Financial Corporation, based in Santa Ana, Calif., is the nation's leading provider of business information and related products and services. The corporation's three primary business segments include: title insurance; real estate information and services, which includes mortgage origination, mortgage servicing and database products and services; and consumer information and services, which provides home warranties; automotive, subprime and direct-to-consumer credit reporting; property and automotive insurance tracking services; resident screening; pre-employment screening; lender-placed flood and hazard insurance; investment advisory; and trust and banking services. Through its family of companies, First American Financial has nearly 20,000 employees in more than 600 branch offices in the United States and abroad. Information about the company and an archive of its press releases can be found on the Internet at www.firstam.com.

Any statements in this document that look forward in time involve risks and uncertainties, including but not limited to the following: the effect of interest rate fluctuations; changes in the performance of the real estate markets; the effect of changing economic conditions; general volatility in the capital markets; the demand for and the acceptance of the company's products; changes in applicable government regulations; continued consolidation among the company's significant customers; consolidation among significant competitors: the impact of the legal proceedings commenced by the California attorney general and related litigation; the continued ability to identify businesses to be acquired; changes in the company's ability to integrate businesses with its acquires; and the contingencies associated with the Year 2000 issue. The company's actual results, performance or achievement could differ materially from those expressed in, or implied by, any forward-looking statements, and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what impact they will have on the results of operations or financial condition of the company.

Quarter ended September 30:

1999

1998

Revenues

$ 762,592,000

$ 775,028,000

Income before income taxes and minority interests

$ 38,378,000

$ 101,760,000

Income taxes

$ 13,700,000

$ 35,600,000

Minority interest

$ 2,738,000

$ 9,992,000

Net income

$ 21,940,000

$ 56,168,000

Net income per share

   

Basic

$ .34

$ .91

Diluted

$ .33

$ .87

Average shares outstanding:

   

Basic

65,213,000

61,597,000

Diluted

66,166,000

64,303,000

     
     
     

Nine months ended September 30:

   

Revenues

$2,255,032,000

$2,129,664,000

Income before income taxes and minority interests

$ 133,792,000

$ 269,164,000

Income taxes

$ 46,900,000

$ 95,400,000

Minority interest

$ 11,853,000

$ 26,163,000

Net income

$ 75,039,000

$ 147,601,000

Net income per share

   

Basic

$ 1.16

$ 2.49

Diluted

$ 1.13

$ 2.39

Average shares outstanding:

   

Basic

64,564,000

59,310,000

Diluted

66,296,000

61,702,000

All periods presented include the operating results of NAIG accounted for under the pooling-of-interests method of accounting.

 

SELECTED FINANCIAL DATA
(Unaudited)

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