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 First American Financial Reports Results for the Fourth Quarter and Full Year of 2017
   Thursday, February 08, 2018 6:45:01 AM ET

----Includes $1.01 per Share Net Benefit Related to Tax Reform--

First American Financial Corporation (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 and year ended Dec. 31, 2017.

Current Quarter Highlights

-- Total revenue of $1.5 billion, down 2 percent compared with last year -- Closed title orders down 19 percent, driven by a 41 percent decline in refinance orders

-- Average revenue per order up 23 percent, driven by the shift in the mix to higher-premium purchase and commercial transactions

-- Title Insurance and Services segment pretax margin of 12.2 percent

-- Commercial revenues of $196.2 million, up 6 percent compared with last year

-- Specialty Insurance segment pretax margin of 9.2 percent -- Property and casualty loss rate of 108.1 percent impacted by California wildfires

-- Debt-to-capital ratio of 17.4 percent as of Dec. 31, 2017

-- Net tax benefit of $114.1 million, or $1.01 per diluted share, related to tax reform

Full Year 2017 Highlights

-- Total revenue of $5.8 billion, up 4 percent compared with last year

-- Title Insurance and Services segment pretax margin of 12.1 percent

-- Closed acquisitions totaling $91 million

-- Completed termination of pension plan, resulting in annualized savings of $22 million

-- Raised common stock dividend 12 percent to an annual rate of $1.52 per share

-- Cash flow from operations of $632.1 million, up 29 percent from last year

-- Return on equity of 13.0 percent

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

                                                                   Three Months Ended                                                                     Full Year Ended
                                                                                                                                                  December 31,                                                                                                               December 31,
                                                                                                                 -------------------------------------------------------------------------------                                          ----------------------------------------------------------------------------------
                                                                                                                     2017        2016                                                2017         2016
                                                                                                                 -------------------- -------                      -------------------- -------                                           -------------------- -------                      -------------------- ----------
                                          Total revenue                                                                             $ 1,481.3                                         $ 1,504.3                                                              $ 5,772.4                                         $    5,575.8
                                          Income before taxes                                                                           159.3                                              81.5                                                                  445.3                                                477.6
                                                                                                                                                                                                                                                                                             
                                          Net income                                                                                $   221.1                                         $    81.0                                                              $   423.0                                         $      343.0
                                          Net income per diluted share                                                                   1.96                                              0.73                                                                   3.76                                                 3.09
                                                                                                                                                                                                                                                                                             

Total revenue for the fourth quarter of 2017 was $1.5 billion, a decline of 2 percent relative to the fourth quarter of 2016. Net income in the current quarter was $221.1 million, or $1.96 per diluted share, compared with net income of $81.0 million, or 73 cents per diluted share, in the fourth quarter of 2016.

This quarter’s effective tax rate of negative 38.5 percent includes a net benefit of $114.1 million, or $1.01 per diluted share, primarily due to the re-measurement of net deferred tax liabilities as a result of recent tax reform legislation.

Total revenue for the full year of 2017 was $5.8 billion, an increase of 4 percent relative to the prior year. Net income was $423.0 million, or $3.76 per diluted share, compared with net income of $343.0 million, or $3.09 per diluted share, in 2016.

"The company had strong results in 2017, achieving earnings per share of $3.76 and a return on equity of 13 percent," said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. "Total revenue grew 4 percent, primarily driven by strength in our purchase and commercial businesses, which offset the sharp drop in refinance transactions. We continued to manage the company at a high level of efficiency, enabling us to deliver a pretax margin of 12.1 percent in our title segment.

"In 2018, we will maintain our efforts to develop innovative solutions for our customers and acquire companies that strengthen our core business. In addition, we believe the company will continue to benefit from the ongoing improvement in housing and the general economy. We will remain focused on operating efficiently and strategically deploying our capital in ways that create shareholder value."

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

                                                                                         Three Months Ended
                                                                                                                                                                        December 31,
                                                                                                                  -------------------------------------------------------------------------------------------------------------------------
                                                                                                                      2017          2016   
                                                                                                                  -------------------- ------- --------------------                      -------------------- ------- --------------------
                                          Total revenues                                                                             $ 1,356.0                                                              $ 1,384.0
                                                                                                                                                                                          
                                          Income before taxes                                                                        $   165.6                                                              $   150.1
                                          Pretax margin                                                                                   12.2 %                                                                 10.8 %
                                                                                                                                                                                          
                                          Direct open orders                                                                           231,500                                                                265,800
                                          Direct closed orders                                                                         204,200                                                                252,700
                                                                                                                                                                                          
                                          U.S. Commercial
                                              Total revenues                                                                         $   196.2                                                              $   185.5
                                              Open orders                                                                               30,300                                                                 30,000
                                              Closed orders                                                                             20,600                                                                 21,100
                                              Average revenue per order                                                              $   9,500                                                              $   8,800
                                                                                                                                                                                          

Total revenues for the Title Insurance and Services segment during the fourth quarter were $1.4 billion, down 2 percent compared with the same quarter of 2016. Direct premiums and escrow fees were down 1 percent compared with the fourth quarter of 2016, driven by a 19 percent decline in the number of direct title orders closed that was largely offset by a 23 percent increase in the average revenue per direct title order. The growth in the average revenue per direct title order to $2,411 was primarily attributable to the shift in the order mix to higher-premium residential purchase and commercial transactions. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were down 5 percent in the current quarter as compared with last year.

Information and other revenues were $187.5 million this quarter, down 1 percent compared with the same quarter of last year. Higher revenues from recent acquisitions were offset by lower revenues from the company’s centralized lender business, largely due to the decline in refinance activity.

Investment income was $38.3 million in the fourth quarter, up $8.9 million, or 30 percent, primarily due to the increase in short-term interest rates that drove higher interest income in the company’s investment portfolio and cash balances. Net realized investment losses totaled $2.7 million in the current quarter, compared with losses of $0.3 million in the fourth quarter of 2016.

Personnel costs were $414.2 million in the fourth quarter, a decrease of $9.8 million, or 2 percent, compared with the same quarter of 2016. This decline was primarily driven by lower temporary labor, overtime and incentive compensation expenses, partially offset by personnel costs associated with recent acquisitions.

Other operating expenses were $208.6 million in the fourth quarter, up $3.3 million, or 2 percent, compared with the fourth quarter of 2016. The increase was due to an $8.5 million write off of uncollectible balances this quarter, partially offset by lower production-related costs as a result of the decline in order volume.

The provision for policy losses and other claims was $45.3 million in the fourth quarter, or 4.0 percent of title premiums and escrow fees, compared with a 5.5 percent loss provision rate in the fourth quarter of 2016. The current quarter rate reflects an ultimate loss rate of 4.0 percent for the current policy year and no change in the loss reserve estimates for prior policy years.

Depreciation and amortization expense was $30.1 million in the fourth quarter, an increase of $3.5 million, or 13 percent, compared with the same period last year. The increase was primarily attributable to higher amortization expense associated with both internally developed and purchased software.

Pretax income for the Title Insurance and Services segment was $165.6 million in the fourth quarter, compared with $150.1 million in the fourth quarter of 2016. Pretax margin was 12.2 percent in the current quarter, compared with 10.8 percent last year.

Specialty Insurance ($ in millions)

                                                                              Three Months Ended
                                                                                                                                                             December 31,
                                                                                                        ----------------------------------------------------------------------------------------------------------------------
                                                                                                           2017        2016   
                                                                                                        -------------------- ----- --------------------                      -------------------- ------ --------------------
                                          Total revenues                                                                   $ 121.1                                                              $  118.6
                                                                                                                                                                              
                                          Income before taxes                                                              $  11.1                                                              $   21.3
                                          Pretax margin                                                                        9.2 %                                                                18.0 %
                                                                                                                                                                              

Total revenues for the Specialty Insurance segment were $121.1 million in the fourth quarter of 2017, an increase of 2 percent compared with the fourth quarter of 2016. The results from the home warranty business benefited from both lower claim severity and frequency. The decline in severity was primarily driven by operational improvements in claims management processes. The company’s property and casualty business experienced high claim losses in the quarter due to two separate California wildfires, with losses exceeding our $5 million reinsurance retention limit for each event. As a result, the overall loss ratio for the segment increased to 63.5 percent this quarter, compared with 54.6 percent last year. The segment’s pretax margin in the current quarter was 9.2 percent, compared with 18.0 percent in the fourth quarter of last year.

Teleconference/Webcast

First American’s fourth-quarter and year-end 2017 results will be discussed in more detail on Thursday, Feb. 8, 2018, 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 Feb. 22, 2018, by dialing 201-612-7415 and using the conference ID 13675613. An audio archive of the call will also be available on First American’s investor website.

About First American

First American Financial Corporation (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; property and casualty insurance; and banking, trust and wealth management services. With total revenue of $5.8 billion in 2017, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016 and again in 2017, First American was named to the Fortune 100 Best Companies to Work For(R) list. 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; impairments in the company’s goodwill or other intangible assets; failures at financial institutions where the company deposits funds; changes in applicable laws and 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; use of social media by the company and other parties; regulation of title insurance rates; limitations on access to public records and other data; 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 and intrusions or unauthorized data disclosures; 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; inability to realize the benefits of, and challenges arising from, the company’s acquisition strategy; and other factors described in the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2017, 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, and success 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.

 
                                                                                                                                                                           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,
                                                                                                           -----------------------------------------------------------------------------------------------------------------------------                                          ---------------------------------------------------------------------------------------------------------
                                                                                                                2017                               2016                                                    2017                               2016
                                                                                                           -------------------- --------- --------------------                      -------------------- --------- --------------------                                           -------------------- --------- --------------------                      -------------------- ----------
Total revenues                                                                                                                $ 1,481,323                                                              $ 1,504,257                                                                                   $ 5,772,363                                                              $  5,575,846
                                                                                                                                                                                                                                                                                                                                                            
Income before income taxes                                                                                                    $   159,335                                                              $    81,451                                                                                   $   445,331                                                              $    477,581
Income taxes                                                                                                   (61,378 )                                                 490                                                  23,468                             134,105
                                                                                                           -------------------- --------- --------------------                      -------------------- --------- --------------------                                           -------------------- --------- --------------------                      -------------------- ----------
Net income                                                                                                                        220,713                                                                   80,961                                                                                       421,863                                                                   343,476
Less: Net (loss) income attributable to noncontrolling interests                                                  (414 )                                                 (62 )                                                                   (1,186 )                                                  483
                                                                                                           -------------------- --------- --------------------                      -------------------- --------- --------------------                                           -------------------- --------- --------------------                      -------------------- ----------
Net income attributable to the Company                                                                                        $   221,127                                           $    81,023                                                                $   423,049                                           $    342,993
                                                                                                           ==================== ========= ====================                      ==================== ========= ====================                                           ==================== ========= ====================                      ==================== ==========
                                                                                                                                                                                                                                                                                                                                                            
Net income per share attributable to stockholders:
Basic                                                                                                                         $      1.98                                                              $      0.73                                                                                   $      3.79                                                              $       3.10
Diluted                                                                                                                       $      1.96                                                              $      0.73                                                                                   $      3.76                                                              $       3.09
                                                                                                                                                                                                                                                                                                                                                            
Cash dividends declared per share                                                                                             $      0.38                                                              $      0.34                                                                                   $      1.44                                                              $       1.20
                                                                                                                                                                                                                                                                                                                                                            
Weighted average common shares outstanding:
Basic                                                                                                                             111,904                                                                  110,740                                                                                       111,668                                                                   110,548
Diluted                                                                                                                           112,846                                                                  111,464                                                                                       112,435                                                                   111,156
                                                                                                                                                                                                                                                                                                                                                            
Selected Title Insurance Segment Information
----------------------------------------------------------------
Title orders opened(1)                                                                                                            231,500                                                                  265,800                                                                                     1,069,000                                                                 1,281,400
Title orders closed(1)                                                                                                            204,200                                                                  252,700                                                                                       823,700                                                                   958,400
Paid title claims                                                                                                                  51,262                                                                   51,149                                                                                       200,350                                                                   210,241
                                                                                                                                                                                                                                                                                                                                                            
(1) U.S. direct title insurance orders only.
 
 
                                                                                  First American Financial Corporation
                                                                                   Selected Balance Sheet Information
                                                                                        (in thousands, unaudited)
                                                                                            
                                                                                                         December 31,                                                              December 31,
                                                                                                     2017                                                  2016
                                                                                                -------------------- ---------                                           -------------------- ----------
Cash and cash equivalents                                                                                          $ 1,387,226                                                              $  1,006,138
Investments                                                                                                          5,378,303                                                                 5,140,699
Goodwill and other intangible assets, net                                                                            1,212,918                                                                 1,096,315
Total assets                                                                                                         9,573,222                                                                 8,831,777
Reserve for claim losses                                                                                             1,028,933                                                                 1,025,863
Notes and contracts payable                                                                                            732,810                                                                   736,693
Total stockholders’ equity                                                              $ 3,479,955                                                              $  3,008,179
                                                                                                                                                                          
 
                                                                                                                                                                                 First American Financial Corporation
                                                                                                                                                                                          Segment Information
                                                                                                                                                                                       (in thousands, unaudited)
                                                                                                                                                                                    
Three Months Ended                                                                                                                                                                       Title                                                                               Specialty                                                                               Corporate
December 31, 2017                                                                                Consolidated                                                                          Insurance                                                                             Insurance                                                                            (incl. Elims.)
                                                                                       --------------------------------                                          ----------------------------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Revenues
Direct premiums and escrow fees                                                                           $    642,661                                                              $   530,126                                                                                   $        112,535                                                              $ --
Agent premiums                                                                                                 602,863                                                                  602,863                                                                                     --                                                                --
Information and other                                                                                          190,035                                                                  187,469                                                                                              2,832                                                                          (266 )
Net investment income                                                                                           45,293                                                                   38,258                                                                                              2,595                                                                         4,440
Net realized investment gains (losses)(1)                                                       471                                                (2,679 )                                                                         3,150                                             --  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          1,481,323                                             1,356,037                                                      121,112                                                      4,174  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
Expenses
Personnel costs                                                                                                439,623                                                                  414,206                                                                                             17,973                                                                         7,444
Premiums retained by agents                                                                                    475,748                                                                  475,748                                                                                     --                                                                --
Other operating expenses                                                                                       231,692                                                                  208,590                                                                                             17,225                                                                         5,877
Provision for policy losses and other claims                                                                   116,715                                                                   45,285                                                                                             71,430                                                                --
Depreciation and amortization                                                                                   31,761                                                                   30,068                                                                                              1,655                                                                            38
Premium taxes                                                                                                   17,274                                                                   15,572                                                                                              1,702                                                                --
Interest                                                                                      9,175                                                   950                                               --                                                      8,225  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          1,321,988                                             1,190,419                                                      109,985                                                     21,584  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                     
                                                                                       --------------------------------                                          ----------------------------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Income (loss) before income taxes                                                                         $    159,335                                                              $   165,618                                                                $         11,127                                                              $        (17,410 )
                                                                                       ==================== ==========                                           ==================== ========= ====================                                           ==================== ==============                                           ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                                              
Three Months Ended                                                                                                                                                                       Title                                                                               Specialty                                                                               Corporate
December 31, 2016                                                                                Consolidated                                                                          Insurance                                                                             Insurance                                                                            (incl. Elims.)
                                                                                       --------------------------------                                          ----------------------------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Revenues
Direct premiums and escrow fees                                                                           $    640,424                                                              $   533,347                                                                                   $        107,077                                                              $ --
Agent premiums                                                                                                 632,640                                                                  632,640                                                                                     --                                                                --
Information and other                                                                                          197,415                                                                  188,938                                                                                              8,483                                                                            (6 )
Net investment income                                                                                           33,417                                                                   29,368                                                                                              2,391                                                                         1,658
Net realized investment gains (losses)(1)                                                       361                                                  (287 )                                                                           648                                             --  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          1,504,257                                             1,384,006                                                      118,599                                                      1,652  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
Expenses
Personnel costs                                                                                                517,504                                                                  424,019                                                                                             16,584                                                                        76,901
Premiums retained by agents                                                                                    497,733                                                                  497,733                                                                                     --                                                                --
Other operating expenses                                                                                       230,846                                                                  205,247                                                                                             19,047                                                                         6,552
Provision for policy losses and other claims                                                                   122,128                                                                   63,667                                                                                             58,461                                                                --
Depreciation and amortization                                                                                   28,142                                                                   26,560                                                                                              1,485                                                                            97
Premium taxes                                                                                                   17,666                                                                   15,976                                                                                              1,690                                                                --
Interest                                                                                      8,787                                                   749                                               --                                                      8,038  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          1,422,806                                             1,233,951                                                       97,267                                                     91,588  
                                                                                       -------------------- ----------                                           -------------------- --------- --------------------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                                     
                                                                                       --------------------------------                                          ----------------------------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Income (loss) before income taxes                                                                         $     81,451                                                              $   150,055                                                                $         21,332                                                              $        (89,936 )
                                                                                       ==================== ==========                                           ==================== ========= ====================                                           ==================== ==============                                           ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                                              
(1) Includes impairment losses recorded in earnings, except for
impairments on investments accounted for under the equity method,
which are recorded in net investment income.
 
 
                                                                                                                                                                       First American Financial Corporation
                                                                                                                                                                                Segment Information
                                                                                                                                                                             (in thousands, unaudited)
                                                                                                                                                                
Year Ended                                                                                                                                                                     Title                                                                     Specialty                                                                               Corporate
December 31, 2017                                                                                Consolidated                                                                Insurance                                                                   Insurance                                                                            (incl. Elims.)
                                                                                       --------------------------------                                          --------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Revenues
Direct premiums and escrow fees                                                                           $  2,461,854                                                              $  2,022,384                                                              $        439,470                                                              $ --
Agent premiums                                                                                               2,360,659                                                                 2,360,659                                                                --                                                                --
Information and other                                                                                          776,214                                                                   766,018                                                                        11,259                                                                        (1,063 )
Net investment income                                                                                          162,402                                                                   137,439                                                                         9,713                                                                        15,250
Net realized investment gains(1)                                                             11,234                                                  6,656                                                      4,578                                             --  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          5,772,363                                              5,293,156                                                    465,020                                                     14,187  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
Expenses
Personnel costs                                                                                              1,898,551                                                                 1,636,483                                                                        71,604                                                                       190,464
Premiums retained by agents                                                                                  1,863,356                                                                 1,863,356                                                                --                                                                --
Other operating expenses                                                                                       880,874                                                                   788,020                                                                        67,813                                                                        25,041
Provision for policy losses and other claims                                                                   450,410                                                                   175,322                                                                       275,088                                                                --
Depreciation and amortization                                                                                  128,053                                                                   121,540                                                                         6,351                                                                           162
Premium taxes                                                                                                   69,801                                                                    62,545                                                                         7,256                                                                --
Interest                                                                                     35,987                                                  3,526                                             --                                                     32,461  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          5,327,032                                              4,650,792                                                    428,112                                                    248,128  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                 
                                                                                       --------------------------------                                          --------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Income (loss) before income taxes                                                                         $    445,331                                                              $    642,364                                                              $         36,908                                                              $       (233,941 )
                                                                                       ==================== ==========                                           ==================== ==========                                           ==================== ==============                                           ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                          
Year Ended                                                                                                                                                                     Title                                                                     Specialty                                                                               Corporate
December 31, 2016                                                                                Consolidated                                                                Insurance                                                                   Insurance                                                                            (incl. Elims.)
                                                                                       --------------------------------                                          --------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Revenues
Direct premiums and escrow fees                                                                           $  2,416,039                                                              $  2,004,686                                                              $        411,353                                                              $ --
Agent premiums                                                                                               2,286,630                                                                 2,286,630                                                                --                                                                --
Information and other                                                                                          723,990                                                                   713,137                                                                        10,877                                                                           (24 )
Net investment income                                                                                          126,134                                                                   110,757                                                                         9,476                                                                         5,901
Net realized investment gains(1)                                                             23,053                                                 18,915                                                      4,138                                             --  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          5,575,846                                              5,134,125                                                    435,844                                                      5,877  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
Expenses
Personnel costs                                                                                              1,756,633                                                                 1,578,244                                                                        67,733                                                                       110,656
Premiums retained by agents                                                                                  1,801,571                                                                 1,801,571                                                                --                                                                --
Other operating expenses                                                                                       853,841                                                                   764,388                                                                        62,610                                                                        26,843
Provision for policy losses and other claims                                                                   488,601                                                                   235,661                                                                       252,940                                                                --
Depreciation and amortization                                                                                   99,047                                                                    93,069                                                                         5,593                                                                           385
Premium taxes                                                                                                   66,358                                                                    59,464                                                                         6,894                                                                --
Interest                                                                                     32,214                                                  2,856                                             --                                                     29,358  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                          5,098,265                                              4,535,253                                                    395,770                                                    167,242  
                                                                                       -------------------- ----------                                           -------------------- ----------                                           -------------------- --------------                                           -------------------- -------------- --------------------
                                                                                                                                                                                                                                                                 
                                                                                       --------------------------------                                          --------------------------------                                          ------------------------------------                                          ---------------------------------------------------------
Income (loss) before income taxes                                                                         $    477,581                                                              $    598,872                                                              $         40,074                                                              $       (161,365 )
                                                                                       ==================== ==========                                           ==================== ==========                                           ==================== ==============                                           ==================== ============== ====================
                                                                                                                                                                                                                                                                                                                          
(1) Includes impairment losses recorded in earnings, except for
impairments on investments accounted for under the equity method,
which are recorded in net investment income.
 
 
                                                                                                                                                                             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,
                                                                                           -----------------------------------------------------------------------------------------------------------------------------                                          -----------------------------------------------------------------------------------------------------------------------------
                                                                                                2017                               2016                                                    2017                               2016    
                                                                                           -------------------- --------- --------------------                      -------------------- --------- --------------------                                           -------------------- --------- --------------------                      -------------------- --------- --------------------
Total revenues                                                                                                $ 1,356,037                                                              $ 1,384,006                                                                                   $ 5,293,156                                                              $ 5,134,125
Less: Net realized investment (losses) gains                                                                       (2,679 )                                                                   (287 )                                                                                       6,656                                                                   18,915
Net investment income                                                                                              38,258                                                                   29,368                                                                                       137,439                                                                  110,757
Premiums retained by agents                                                                    475,748                            497,733                                               1,863,356                          1,801,571  
                                                                                           -------------------- --------- --------------------                      -------------------- --------- --------------------                                           -------------------- --------- --------------------                      -------------------- --------- --------------------
Net operating revenues                                                                                        $   844,710                                           $   857,192                                                                $ 3,285,705                                           $ 3,202,882  
                                                                                           ==================== ========= ====================                      ==================== ========= ====================                                           ==================== ========= ====================                      ==================== ========= ====================
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
Personnel and other operating expenses                                                                        $   622,796                                                              $   629,266                                                                                   $ 2,424,503                                                              $ 2,342,632
Ratio (% net operating revenues)                                                                                     73.7 %                                                                   73.4 %                                                                                        73.8 %                                                                   73.1 %
Ratio (% total revenues)                                                                                             45.9 %                                                                   45.5 %                                                                                        45.8 %                                                                   45.6 %
                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                            
Change in net operating revenues                                                                              $   (12,482 )                                                                                                                                                          $    82,823
Change in personnel and other operating expenses                                                                   (6,470 )                                                                                                                                                               81,871
Success Ratio(1)                                                                                                       52 %                                                                                                                                                                   99 %
                                                                                                                                                                                                                                                                                                                                            
(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)
                                                                                                                                                                                                                                                        
                                                                                                     Q417                                                                                      Q317                                                                                      Q217                                                                                      Q117                                                                                      Q416
                                                                               ------------------------------------------------                                          ------------------------------------------------                                          ------------------------------------------------                                          ------------------------------------------------                                          -------------------------------------------------
Open Orders per Day
Purchase                                                                                            1,686                                                                                     2,156                                                                                     2,313                                                                                     1,977                                                                                      1,623
Refinance                                                                                           1,239                                                                                     1,379                                                                                     1,319                                                                                     1,236                                                                                      1,777
Refinance as % of residential orders                                                                   42 %                                                                                      39 %                                                                                      36 %                                                                                      38 %                                                                                       52 %
Commercial                                                                                            489                                                                                       495                                                                                       506                                                                                       507                                                                                        484
Default and other                                                                  321                                                 387                                                 544                                                 468                                                  403  
                                                                               -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total open orders per day                                                        3,734                                               4,417                                               4,681                                               4,187                                                4,287  
                                                                               ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Closed Orders per Day
Purchase                                                                                            1,550                                                                                     1,724                                                                                     1,718                                                                                     1,298                                                                                      1,504
Refinance                                                                                           1,035                                                                                       985                                                                                       910                                                                                     1,030                                                                                      1,758
Refinance as % of residential orders                                                                   40 %                                                                                      36 %                                                                                      35 %                                                                                      44 %                                                                                       54 %
Commercial                                                                                            333                                                                                       309                                                                                       324                                                                                       310                                                                                        340
Default and other                                                                  376                                                 384                                                 390                                                 448                                                  475  
                                                                               -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ----- --------------------                                           -------------------- ------ --------------------
Total closed orders per day                                                      3,294                                               3,402                                               3,342                                               3,085                                                4,076  
                                                                               ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ===== ====================                                           ==================== ====== ====================
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Average Revenue per Order (ARPO)
Purchase                                                                                          $ 2,389                                                                                   $ 2,336                                                                                   $ 2,319                                                                                   $ 2,215                                                                                   $  2,206
Refinance                                                                                             962                                                                                       928                                                                                       907                                                                                       912                                                                                        899
Commercial                                                                                          9,508                                                                                     9,024                                                                                     8,589                                                                                     7,617                                                                                      8,808
Default and other                                                                                     203                                                                                       230                                                                                       201                                                                                       238                                                                                        199
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Total ARPO                                                                                        $ 2,411                                                                                   $ 2,298                                                                                   $ 2,294                                                                                   $ 2,035                                                                                   $  1,958
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Business Days                                                                                          62                                                                                        63                                                                                        64                                                                                        62                                                                                         62
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
(1) U.S. operations only.
                                                                                                                                                                                                                                                                                                                                                                                                                                                        
Totals may not add due to rounding.
                                                                                                                                                                                                                                                                                                                                                                                                                                                        

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180208005433r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180208005433/en/

SOURCE: First American Financial Corporation

First American Financial Corporation 
Media Contact: 
Marcus Ginnaty 
Corporate Communications 
714-250-3298 
or 
Investor Contact: 
Craig Barberio 
Investor Relations 
714-250-5214


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