FIRST AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

INFORMATION INCLUDED IN REPORT


PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	A. Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023	5

	B. Condensed Consolidated Statements of Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	6

	C. Condensed Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	7

	D. Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and 2023	8

	E. Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	910

	F. Notes to Condensed Consolidated Financial Statements	1011

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3228

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4437

Item 4.	Controls and Procedures	4437

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	4438

Item 1A.	Risk Factors	4638

Item 6.2.	~~Exhibits~~Unregistered Sales of Equity Securities and Use of Proceeds	5348

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosures	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

~~Items 2 through 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.~~

THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS 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.

•

INTEREST RATE FLUCTUATIONS;

•

CHANGES IN ~~THE PERFORMANCE~~CONDITIONS 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;

•

REGULATORY OVERSIGHT AND CHANGES IN APPLICABLE LAWS AND GOVERNMENT ~~REGULATIONS;~~

REGULATIONS, INCLUDING PRIVACY AND DATA PROTECTION LAWS;

•

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;

•

CLIMATE CHANGE, HEALTH CRISES, TERRORIST ATTACKS, SEVERE WEATHER CONDITIONS AND OTHER CATASTROPHE EVENTS;

•

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 OR VENTURE 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;~~

FRAMEWORK OR USE OF MODELS;

•

SYSTEMS DAMAGE, FAILURES, INTERRUPTIONS, CYBERATTACKS AND INTRUSIONS, OR UNAUTHORIZED DATA DISCLOSURES;

•

INNOVATION EFFORTS OF THE COMPANY AND OTHER INDUSTRY PARTICIPANTS AND ANY RELATED MARKET DISRUPTION;

•

ERRORS AND FRAUD INVOLVING THE TRANSFER OF FUNDS;

•

FAILURES TO RECRUIT AND RETAIN QUALIFIED EMPLOYEES;

•

THE COMPANY’S USE OF A GLOBAL WORKFORCE;

•

INABILITY OF THE ~~COMPANY’S SUBSIDIARIES~~COMPANY TO FULFILL PARENT COMPANY OBLIGATIONS AND/OR PAY ~~DIVIDENDS OR REPAY FUNDS;~~

DIVIDENDS;

•

INABILITY TO REALIZE ~~THE BENEFITS~~ANTICIPATED SYNERGIES OR PRODUCE RETURNS THAT JUSTIFY INVESTMENT IN ACQUIRED BUSINESSES;

•

a reduction in the deposits at the Company’s federal savings bank subsidiary;

•

CLAIMS OF ~~AND CHALLENGES ARISING FROM,~~INFRINGEMENT or INABILITY TO ADEQUATELY PROTECT THE COMPANY’S ~~ACQUISITION STRATEGY; AND~~

INTELLECTUAL PROPERTY; and

•

OTHER FACTORS DESCRIBED IN THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN ITEM 1A OF PART II.

•

~~OTHER FACTORS DESCRIBED IN THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN ITEM 1A OF PART II.~~

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.

PART I: FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements.~~

Item 1. Financial Statements.

FIRST AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

(in ~~thousands,~~millions, except par values)

(unaudited)


	September 30, 2017			December 31, 2016			March 31, 2024			December 31, 2023
Assets
Cash and cash equivalents	$	1,141,915		$	1,006,138		$	1,506.4		$	3,605.3
Accounts and accrued income receivable, net		341,395			299,799
Accounts and accrued income receivable, less allowance for credit losses of $20.8 and $21.8								365.7			509.4
Income taxes receivable		11,102			67,970			71.1			75.7
Investments:
Deposits with banks		20,940			21,222			77.1			55.8
Debt securities, includes pledged securities of $100,681 and $110,647		4,803,484			4,553,363
Debt securities (amortized cost of $7,859.0 and $7,895.2; pledged of $89.9 and $107.0)								7,054.4			7,157.5
Equity securities		446,185			404,085			733.0			735.6
Other investments		120,514			162,029
		5,391,123			5,140,699		$	7,864.5		$	7,948.9
Secured financings receivable								831.4			636.5
Property and equipment, net		438,136			434,050			765.6			749.6
Operating lease assets								218.4			229.3
Title plants and other indexes		566,599			564,309			656.2			652.4
Deferred income taxes		20,037			20,037			50.1			50.1
Goodwill		1,145,464			1,017,417			1,807.3			1,807.5
Other intangible assets, net		75,126			78,898			147.6			153.8
Other assets		216,150			202,460			413.5			384.3
	$	9,347,047		$	8,831,777		$	14,697.8		$	16,802.8
Liabilities and Equity
Deposits	$	2,965,426		$	2,779,478			5,303.2			7,308.0
Accounts payable and accrued liabilities		741,569			793,955			745.0			879.5
Deferred revenue		250,917			228,905			183.0			196.8
Reserve for known and incurred but not reported claims		1,021,648			1,025,863			1,261.6			1,282.4
Income taxes payable		92,841			10,376			15.3			15.9
Deferred income taxes		242,158			242,158			63.6			63.6
Operating lease liabilities								235.4			246.6
Secured financings payable								688.8			553.3
Notes and contracts payable		734,091			736,693			1,396.0			1,393.9
		6,048,650			5,817,428		$	9,891.9		$	11,940.0
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.00001 par value; Authorized—500 shares; Outstanding—none		—			—
Common stock, $0.00001 par value; Authorized—300,000 shares; Outstanding��110,817 shares and 109,944 shares		1			1
Preferred stock, $0.00001 par value; Authorized—0.5 shares; Outstanding—none								—			—
Common stock, $0.00001 par value; Authorized—300.0 shares; Outstanding—103.7 shares and 103.1 shares								—			—
Additional paid-in capital		2,226,691			2,191,756			1,806.0			1,793.3
Retained earnings		1,128,981			1,046,822			3,701.6			3,710.6
Accumulated other comprehensive loss		(61,779	)		(230,400	)		(720.5	)		(655.8	)
Total stockholders’ equity		3,293,894			3,008,179		$	4,787.1		$	4,848.1
Noncontrolling interests		4,503			6,170			18.8			14.7
Total equity		3,298,397			3,014,349		$	4,805.9		$	4,862.8
	$	9,347,047		$	8,831,777		$	14,697.8		$	16,802.8

See notes to condensed consolidated financial statements.

FIRST AMERICAN ~~FINANCIAL~~FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income

(in ~~thousands,~~millions, except per share amounts)

(unaudited)


	Three Months Ended					Nine Months Ended					Three Months Ended
	September 30,					September 30,					March 31,
	2017			2016		2017			2016		2024		2023
Revenues
Direct premiums and escrow fees	$	651,104		$	649,726	$	1,819,193		$	1,775,615	$	500.9	$	502.2
Agent premiums		629,186			625,953		1,757,796			1,653,990		563.8		590.4
Information and other		201,819			188,727		586,179			526,575		223.0		226.9
Net investment income		44,460			34,422		117,109			92,717		127.9		134.0
Net realized investment (losses) gains		(7,001	)		9,516		10,763			22,692
Net investment gains (losses) (realized of $(3.4) and $(4.5))												9.0		(7.4	)
		1,519,568			1,508,344		4,291,040			4,071,589		1,424.6		1,446.1
Expenses
Personnel costs		599,380			438,692		1,458,928			1,239,129		484.9		487.6
Premiums retained by agents		497,911			495,130		1,387,608			1,303,838		447.8		469.0
Other operating expenses		218,959			219,959		649,182			622,995		265.8		258.5
Provision for policy losses and other claims		120,349			137,015		333,695			366,473		69.5		82.3
Depreciation and amortization		36,000			24,491		96,292			70,905		50.1		45.5
Premium taxes		19,900			18,288		52,527			48,692		13.9		14.5
Interest		9,107			7,838		26,812			23,427		34.3		29.1
		1,501,606			1,341,413		4,005,044			3,675,459		1,366.3		1,386.5
Income before income taxes		17,962			166,931		285,996			396,130		58.3		59.6
Income tax (benefit) expense		(3,224	)		59,539		84,846			133,615
Income taxes												11.6		13.6
Net income		21,186			107,392		201,150			262,515		46.7		46.0
Less: Net (loss) income attributable to noncontrolling interests		(197	)		72		(772	)		545
Less: Net income attributable to noncontrolling interests												—		0.1
Net income attributable to the Company	$	21,383		$	107,320	$	201,922		$	261,970	$	46.7	$	45.9
Net income per share attributable to the Company's stockholders (Note 8):
Net income per share attributable to the Company's stockholders (Note 10):
Basic	$	0.19		$	0.97	$	1.81		$	2.37	$	0.45	$	0.44
Diluted	$	0.19		$	0.96	$	1.80		$	2.36	$	0.45	$	0.44
Cash dividends declared per share	$	0.38		$	0.34	$	1.06		$	0.86
Weighted-average common shares outstanding (Note 8):
Cash dividends per share											$	0.53	$	0.52
Weighted-average common shares outstanding (Note 10):
Basic		111,799			110,571		111,578			110,423		104.1		104.5
Diluted		112,575			111,251		112,254			111,006		104.4		104.8

See notes to condensed consolidated financial statements.

FIRST AM~~ERICAN~~AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Comprehensive Income

(in ~~thousands)~~millions)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net income
$
21,186


$
107,392


$
201,150


$
262,515

Other comprehensive income (loss), net of tax:

Unrealized gains on securities

13,929

2,579

52,014

52,087

Foreign currency translation adjustment

11,415

(3,459
)

23,558

3,066

Pension benefit adjustment

85,891


3,602


93,061


10,819

Total other comprehensive income, net of tax

111,235

2,722

168,633

65,972

Comprehensive income

132,421


110,114


369,783


328,487

Less: Comprehensive (loss) income attributable to noncontrolling interests

(192
)

77


(760
)

566

Comprehensive income attributable to the Company
$
132,613

$
110,037

$
370,543


$
327,921


	Three Months Ended March 31,
	2024			2023
Net income	$	46.7		$	46.0
Other comprehensive income (loss), net of tax:
Unrealized (losses) gains on debt securities		(50.6	)		110.1
Foreign currency translation adjustment		(14.5	)		2.6
Pension benefit adjustment		0.4			0.3
Total other comprehensive (loss) income, net of tax		(64.7	)		113.0
Comprehensive (loss) income		(18.0	)		159.0
Less: Comprehensive income attributable to noncontrolling interests		—			0.1
Comprehensive (loss) income attributable to the Company	$	(18.0	)	$	158.9

See notes to condensed consolidated financial statements.

FIRST AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity

(in ~~thousands)~~millions)

(unaudited)

First American Financial Corporation Stockholders

Shares


Common
stock


Additional
paid-in
capital


Retained
earnings

Accumulated
other
comprehensive
loss

Total
stockholders’
equity

Noncontrolling
interests

Total

Balance at December 31, 2016

109,944

$
1

$
2,191,756

$
1,046,822

$
(230,400
)

$
3,008,179

$
6,170

$
3,014,349

Net income (loss) for nine months ended September 30, 2017

—



—



—



201,922


—

201,922


(772
)

201,150

Dividends on common shares

—



—



—



(117,174
)

—

(117,174
)

—

(117,174
)
Shares issued in connection with share-based compensation plans

873



—



3,784



(2,589
)

—

1,195

—

1,195

Share-based compensation

—



—



31,196



—

—

31,196

—

31,196

Net activity related to noncontrolling interests

—



—



(45
)


—

—

(45
)

(907
)

(952
)
Other comprehensive income (Note 12)

—



—



—



—

168,621

168,621

12

168,633

Balance at  September 30, 2017

110,817


$
1


$
2,226,691


$
1,128,981


$
(61,779
)

$
3,293,894

$
4,503

$
3,298,397


	First American Financial Corporation Stockholders
	Shares			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)			Total stockholders’ equity			Noncontrolling interests		Total
Balance at December 31, 2023		103.1		$	—	$	1,793.3		$	3,710.6		$	(655.8	)	$	4,848.1		$	14.7	$	4,862.8
Net income for three months ended March 31, 2024		—			—		—			46.7			—			46.7			—		46.7
Dividends on common shares		—			—		—			(54.9	)		—			(54.9	)		—		(54.9	)
Repurchases of Company shares		(0.1	)		—		(3.5	)		—			—			(3.5	)		—		(3.5	)
Shares issued in connection with share-based compensation		0.7			—		(7.2	)		(0.8	)		—			(8.0	)		—		(8.0	)
Share-based compensation		—			—		23.4			—			—			23.4			—		23.4
Net activity related to noncontrolling interests		—			—		—			—			—			—			4.1		4.1
Other comprehensive loss		—			—		—			—			(64.7	)		(64.7	)		—		(64.7	)
Balance at March 31, 2024		103.7		$	—	$	1,806.0		$	3,701.6		$	(720.5	)	$	4,787.1		$	18.8	$	4,805.9

See notes to condensed consolidated financial statements.

FIRST AMERICAN FINANCIAL ~~CORPORATION~~CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity – (Continued)

(in ~~thousands)~~millions)

(unaudited)

Nine Months Ended
September 30,

2017

2016

Cash flows from operating activities:

Net income

$
201,150

$
262,515

Adjustments to reconcile net income to cash provided by operating activities:

Provision for policy losses and other claims

333,695

366,473

Depreciation and amortization

96,292

70,905

Amortization of premiums and accretion of discounts on debt securities, net

25,013

20,267

Excess tax benefits from share-based compensation

—

(3,197
)
Net realized investment gains

(10,763
)

(22,692
)
Share-based compensation

31,196

28,096

Equity in earnings of affiliates, net

(4,550
)

(5,771
)
Dividends from equity method investments

9,593

7,953

Changes in assets and liabilities excluding effects of acquisitions and noncash transactions:

Claims paid, including assets acquired, net of recoveries

(351,397
)

(351,349
)
Net change in income tax accounts

34,462

20,765

Increase in accounts and accrued income receivable

(11,907
)

(43,454
)
Increase (decrease) in accounts payable and accrued liabilities

95,383

(99,777
)
Increase in deferred revenue

20,313

23,342

Other, net

(12,953
)

(21,857
)
Cash provided by operating activities

455,527

252,219

Cash flows from investing activities:

Net cash effect of acquisitions/dispositions

(82,993
)

(73,173
)
Net decrease in deposits with banks

1,171

608

Purchases of debt and equity securities

(1,276,401
)

(1,490,824
)
Proceeds from sales of debt and equity securities

599,365

494,717

Proceeds from maturities of debt securities

457,334

744,411

Net change in other investments

2,555

2,798

Capital expenditures

(103,064
)

(103,735
)
Proceeds from sales of property and equipment

9,882

9,218

Cash used for investing activities

(392,151
)

(415,980
)
Cash flows from financing activities:

Net change in deposits

185,948

519,113

Net proceeds from issuance of debt

—

160,000

Repayment of debt

(4,128
)

(3,745
)
Net activity related to noncontrolling interests

(964
)

(1,004
)
Excess tax benefits from share-based compensation

—

3,197

Net proceeds (payments) in connection with share-based compensation plans

1,195

(754
)
Purchase of Company shares

—

(454
)
Cash dividends

(117,174
)

(94,202
)
Cash provided by financing activities

64,877

582,151

Effect of exchange rate changes on cash

7,524

(2,399
)
Net increase in cash and cash equivalents

135,777

415,991

Cash and cash equivalents—Beginning of period

1,006,138

1,027,321

Cash and cash equivalents—End of period

$
1,141,915

$
1,443,312

Supplemental information:

Cash paid during the period for:

Interest

$
24,619

$
21,097

Premium taxes

$
55,233

$
54,151

Income taxes, less refunds of $52,828 and $2,731

$
50,264

$
112,401


	First American Financial Corporation Stockholders
	Shares			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)			Total stockholders’ equity			Noncontrolling interests			Total
Balance at December 31, 2022		103.2		$	—	$	1,812.4		$	3,714.3		$	(868.9	)	$	4,657.8		$	23.4		$	4,681.2
Net income for three months ended March 31, 2023		—			—		—			45.9			—			45.9			0.1			46.0
Dividends on common shares		—			—		—			(53.8	)		—			(53.8	)		—			(53.8	)
Repurchases of Company shares		(0.6	)		—		(30.4	)		—			—			(30.4	)		—			(30.4	)
Shares issued in connection with share-based compensation		0.7			—		(4.9	)		(1.1	)		—			(6.0	)		—			(6.0	)
Share-based compensation		—			—		23.0			—			—			23.0			—			23.0
Net activity related to noncontrolling interests		—			—		—			—			—			—			(1.1	)		(1.1	)
Other comprehensive income		—			—		—			—			113.0			113.0			—			113.0
Balance at March 31, 2023		103.3		$	—	$	1,800.1		$	3,705.3		$	(755.9	)	$	4,749.5		$	22.4		$	4,771.9

See notes to condensed consolidated financial statements.

FIRST AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows

(in millions)

9(unaudited)


	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net income	$	46.7		$	46.0
Adjustments to reconcile net income to cash provided by operating activities:
Provision for policy losses and other claims		69.5			82.3
Depreciation and amortization		50.1			45.5
Amortization of premiums and accretion of discounts on debt securities, net		2.1			1.6
Net investment (gains) losses		(9.0	)		7.4
Share-based compensation		23.4			23.0
Equity in earnings of affiliates, net		(1.1	)		(0.5	)
Dividends from equity method investments		0.8			1.6
Changes in assets and liabilities excluding effects of acquisitions and noncash transactions:
Claims paid, including assets acquired, net of recoveries		(91.6	)		(95.2	)
Net change in income tax accounts		20.9			11.7
Decrease in accounts and accrued income receivable		160.2			12.7
Decrease in accounts payable and accrued liabilities		(143.7	)		(202.9	)
Decrease in deferred revenue		(13.8	)		(12.8	)
Other, net		(45.2	)		(12.7	)
Cash provided by (used for) operating activities		69.3			(92.3	)
Cash flows from investing activities:
Acquisitions/dispositions, net of cash acquired/divested		(3.5	)		(4.9	)
Net (increase) decrease in deposits with banks		(23.3	)		9.3
Purchases of debt securities		(332.5	)		(246.3	)
Proceeds from sales of debt securities		224.5			715.5
Proceeds from maturities of debt securities		132.8			210.5
Purchases of equity securities		(31.6	)		(34.2	)
Proceeds from sales of equity securities		44.2			11.1
Net change in other investments		(1.6	)		(0.8	)
Advances under secured financing agreements		(4,792.6	)		(2,778.4	)
Collections of secured financings receivable		4,601.0			2,606.0
Capital expenditures		(51.7	)		(63.1	)
Proceeds from sales of property and equipment		—			0.1
Proceeds from insurance settlement		2.9			2.1
Cash (used for) provided by investing activities		(231.4	)		426.9
Cash flows from financing activities:
Net change in deposits		(2,004.8	)		630.2
Borrowings under secured financing agreements		4,732.8			2,749.4
Repayments of secured financings payable		(4,597.3	)		(2,612.8	)
Repayment of senior unsecured notes		—			(250.0	)
Repayments of other notes and contracts payable		(0.6	)		(1.8	)
Net activity related to noncontrolling interests		4.1			(1.1	)
Net payments in connection with share-based compensation		(8.0	)		(6.0	)
Repurchases of Company shares		(3.5	)		(30.4	)
Payments of cash dividends		(54.9	)		(53.8	)
Cash (used for) provided by financing activities		(1,932.2	)		423.7
Effect of exchange rate changes on cash		(4.6	)		1.6
Net (decrease) increase in cash and cash equivalents		(2,098.9	)		759.9
Cash and cash equivalents—Beginning of period		3,605.3			1,223.5
Cash and cash equivalents—End of period	$	1,506.4		$	1,983.4
Supplemental information:
Cash paid (received) during the period for:
Interest	$	36.2		$	25.9
Premium taxes	$	19.5		$	30.6
Income taxes paid	$	3.4		$	1.9
Income tax refunds	$	(12.7	)	$	(0.2	)

See notes to condensed consolidated financial statements.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES

Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 – Basis of Condensed Consolidated Financial Statements

Basis of Presentation

The condensed consolidated financial information included in this report has been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Securities and Exchange Commission ~~(“SEC”)~~ Regulation S-X. The principles for condensed interim financial information do not require the inclusion of all the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the ~~Company’s~~First American Financial Corporation (the “Company”) Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023. The condensed consolidated financial statements included herein are unaudited; however, in the opinion of management, they contain all normal recurring adjustments necessary for a fair statement of the consolidated results for the interim periods. All material intercompany transactions and balances have been eliminated upon consolidation.

~~Out-of-Period Adjustments~~Out-of-period adjustment

During the ~~third quarter of 2017,~~three months ended March 31, 2024, the Company identified certain ~~title plant assets~~uncollectible balances related to fees within its title insurance and services segment, which primarily related to reporting periods in 2023 and prior, that should have been previously written ~~off, and certain title plant imaging assets that were misclassified as title plant assets.~~off. To correct for ~~these errors,~~this error, the Company recorded ~~adjustments to net realized investment gains, depreciation~~an adjustment in the current quarter, which increased other operating expenses and amortization and title plants and other indexes. The impact of these adjustments included an increase to depreciation and amortization of $4.7 million, a decrease to net realized investment gains of $1.8 million and a decrease to title plant and other indexes of $6.5 million. In addition, during the third quarter of 2017, the Company recorded adjustments to correct for errors in recording certain personnel costs within its title insurance and services segment. The impact of these adjustments included an increase to personnel costs of $9.0 million, a decrease to other assets of $8.5 million and an increase inincreased accounts payable and accrued liabilities ~~of $0.5~~by $6.2 million.

~~The Company does not consider these adjustments to be material, individually or in the aggregate, to either the current period or any previously issued condensed consolidated financial statements.~~

Recently Adopted Accounting Pronouncements

In ~~October 2016,~~June 2022, the Financial Accounting Standards Board (“FASB”) issued updated guidance intended to ~~amend~~increase the ~~consolidation~~comparability of financial information across reporting entities that have investments in equity securities measured at fair value that are subject to contractual restrictions preventing the sale of those securities. The updated guidance clarified that a contractual restriction on ~~how~~the sale of an equity security is not considered part of the unit of account of the equity security and, as a ~~reporting entity that is~~result, should not be considered in measuring fair value. In addition, new disclosures were required about the ~~single~~nature of the restrictions and their remaining duration. The updated guidance, which was adopted on January 1, 2024, had no impact on the Company's condensed consolidated financial statements.

Pending Accounting Pronouncements

In December 2023, the FASB issued updated guidance intended to enhance the transparency and decision ~~maker~~usefulness of ~~a variable interest entity should treat indirect interests~~income tax disclosures. The updated guidance requires disclosure of specific categories and greater disaggregation of information included in the ~~entity held through~~rate reconciliation and additional disclosures related ~~parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that variable interest entity.~~to income taxes paid. The updated guidance is effective for ~~interim and~~ annual reporting periods beginning after December 15, ~~2016. The~~2024. Except for the disclosure requirements, the Company does not expect the adoption of this guidance ~~had no~~to have a material impact ~~on the Company’s~~its condensed consolidated financial statements.

In ~~March 2016,~~November 2023, the FASB issued updated guidance intended to ~~simplify and~~ improve ~~several aspects~~financial reporting by requiring disclosure of the accounting for share-based payment transactions, including the income tax consequences, classification of such awards as either equity or liabilities and classification on the statement of cash flows.incremental segment information to enable investors to develop more decision-useful financial analyses. The updated guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The updated guidance is effective for ~~interim and~~ annual reporting periods beginning after December 15, ~~2016. While~~2023 and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this update are required to applied retrospectively to all periods presented in the financial statements. Except for the disclosure requirements, the Company does not expect the adoption of this guidance ~~did have an impact on the Company’s effective income tax rate for 2017, it did not~~to have a material impact on ~~the Company’s~~its condensed consolidated financial statements. See Note 7 Income Taxes for further discussion of the Company’s effective income tax rates. Beginning in 2017, excess tax benefits from share-based compensation are presented in the condensed consolidated statements of cash flows in cash flows from operating activities within net change in income tax accounts.

In March 2016, the FASB issued updated guidance intended to simplify the accounting treatment for investments that become qualified for the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2016. The adoption of this guidance had no impact on the Company’s condensed consolidated financial statements.11

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

~~Pending Accounting Pronouncements~~

In ~~May 2017,~~August 2023, the FASB issued updated guidance that is intended to provide decision-useful information to investors and reduce diversity in practice ~~by clarifying which changes~~in accounting for contributions made to ~~the terms or conditions of~~ a ~~share-based payment award~~joint venture, upon formation, in a joint venture’s separate financial statements. The updated guidance will require ~~an entity~~joint ventures to ~~apply modification accounting.~~recognize and initially measure their assets and liabilities at fair value, with certain exceptions to fair value measurement consistent with business combination guidance. The updated guidance is effective prospectively for ~~interim and annual reporting periods beginning~~all joint venture formations with a formation date on or after ~~December 15, 2017,~~January 1, 2025, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In March 2017, the FASB issued updated guidance to amend the amortization period for certain purchased callable debt securities held at a premium to shorten the amortization period for the premium to the earliest call date. The updated guidance is intended to more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities, and is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In March 2017, the FASB issued updated guidance intended to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost through the disaggregation of the service cost component from the other components of net benefit cost. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In January 2017, the FASB issued updated guidance intended to simplify how an entity tests goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the updated guidance, an entity will perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized limited to the total amount of goodwill allocated to that reporting unit. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In January 2017, the FASB issued updated guidance to clarify the definition of a business with the objective of providing guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In November 2016, the FASB issued updated guidance intended to reduce the diversity in practice on presenting restricted cash or restricted cash equivalents in the statement of cash flows. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In October 2016, the FASB issued updated guidance intended to simplify and improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The updated guidance, which eliminates the intra-entity transfers exception, requires entities to recognize the income tax consequences of intra-entity transfers of assets, other than inventory, when the transfers occur. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In August 2016, the FASB issued updated guidance intended to eliminate the diversity in practice regarding the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated statements of cash flows.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

In June 2016, the FASB issued updated guidance intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The updated guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires the consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is currently assessing the impact of the new guidance on its condensed consolidated financial statements.

In February 2016, the FASB issued updated guidance that requires the rights and obligations associated with leasing arrangements be reflected on the balance sheet in order to increase transparency and comparability among organizations. Under the updated guidance, lessees will be required to recognize a right-of-use asset and a liability to make lease payments and disclose key information about leasing arrangements. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. While the Company is currently evaluating the impact the new guidance will have on its condensed consolidated financial statements, the Company expects the adoption of the new guidance will result in a material increase in the assets and liabilities on its condensed consolidated balance sheets and will likely have an insignificant impact on its condensed consolidated statements of income and statements of cash flows.

In January 2016, the FASB issued updated guidance intended to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. In addition to making other targeted improvements to current guidance, the updated guidance also requires all equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in the fair value recognized through net income. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted in certain circumstances. While the Company expects the adoption of this guidance to impact its condensed consolidated statements of income, the materiality of the impact will depend upon the size of, and level of volatility experienced within, the Company’s equity portfolio.

In May 2014, the FASB issued updated guidance for recognizing revenue from contracts with customers to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within and across industries, and across capital markets. The new revenue standard contains principles that an entity will apply to determine the measurement of revenue and the timing of recognition. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. Revenue from insurance contracts is not within the scope of this guidance. In August 2015, the FASB issued updated guidance which defers the effective date of this guidance by one year. In 2016, the FASB issued additional updates to the new guidance primarily to clarify, among other things, the implementation guidance related to principal versus agent considerations, identifying performance obligations, accounting for licenses of intellectual property, and to provide narrow-scope improvements and additional practical expedients. In February 2017, the FASB issued an additional update to the new guidance to clarify the scope of derecognition guidance for nonfinancial assets and to provide guidance for partial sales of nonfinancial assets. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption prohibited. The Company expects to adopt the new guidance under the modified retrospective approach and, except for certain disclosure requirements, does not expect the new guidance to have a material impact on its condensed consolidated financial statements.

Note 2 ––Trust Assets, Escrow ~~Deposits, Like-kind Exchange Deposits~~ and ~~Trust Assets~~Other Deposits

The Company administers escrow deposits ~~and trust assets~~ as a service to customers in its ~~customers.~~direct title operations. Escrow deposits totaled ~~$7.9~~$8.9 billion and ~~$6.8~~$10.6 billion at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively, of which ~~$2.8~~$4.3 billion and ~~$2.6~~$6.3 billion, respectively, were ~~held at the Company’s federal savings bank subsidiary, First American Trust, FSB. The escrow deposits~~ held at First American Trust, FSB ~~are temporarily invested in cash and cash equivalents and debt securities, with offsetting liabilities included in deposits in the accompanying condensed consolidated balance sheets.~~(“FA Trust”). The remaining ~~escrow~~ deposits were held at third-party financial institutions.

~~Trust assets held or managed by First American Trust, FSB totaled $3.5 billion and $3.2 billion at September 30, 2017 and December 31, 2016, respectively.~~ Escrow deposits held at third-party financial institutions ~~and trust assets~~ are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. ~~However,~~All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes~~Trust assets administered by FA Trust totaled $4.6 billion and $4.4 billion at March 31, 2024 and December 31, 2023, respectively, of which $127.4 million and $197.1 million, respectively, were held at FA Trust. The remaining trust assets were held at third-party financial institutions. Trust assets, which are administered by FA Trust and held at third-party institutions, are fiduciary client assets and are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. The Company could be held contingently liable if FA Trust were to ~~Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~breach any of its fiduciary duties.

In conducting its operations, the Company often holds customers’ assets in escrow, pending completion of real estate transactions and, as a result, the Company has ongoing programs for realizing economic benefits with various financial institutions. The results from these programs are included ~~in the condensed consolidated financial statements~~ as income or a reduction in expense, as appropriate, in the condensed consolidated statements of income based on the nature of the arrangement and benefit received.

The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37. As a facilitator and intermediary, the Company holds the proceeds from sales transactions and takes temporary title to property identified by the customer to be acquired with such proceeds. Upon the completion of each such exchange, the identified property is transferred to the customer or, if the exchange does not take place, an amount equal to the sales proceeds or, in the case of a reverse exchange, title to the property held by the Company is transferred to the customer. Like-kind exchange funds ~~held~~administered by the Company totaled ~~$2.3~~$1.7 billion and ~~$2.0~~$1.8 billion at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively. The like-kind exchange deposits are held at third-party financial institutions and, due to the structure utilized to facilitate these transactions, the proceeds and property are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable to the customer for the transfers of property, disbursements of proceeds and the returns on such proceeds.

In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $1.0 billion and $830.5 million at March 31, 2024 and December 31, 2023, respectively, of which $623.2 million and $485.7 million, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets. In connection with certain accounts, the Company has ongoing programs for realizing economic benefits with various financial institutions whereby it earns economic benefits either as income or as a reduction in expense.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Deposit balances held at FA Trust are temporarily invested in cash and cash equivalents and debt securities, with offsetting liabilities included in deposits in the accompanying condensed consolidated balance sheets.

Note 3 – Debt ~~and Equity~~ Securities

Investments in debt securities, classified as available-for-sale, are as follows:


	Amortized		Gross unrealized					Estimated
(in millions)	cost		Gains		Losses			fair value
March 31, 2024
U.S. Treasury bonds	$	163.1	$	—	$	(5.9	)	$	157.2
Municipal bonds		1,381.2		7.1		(139.0	)		1,249.3
Foreign government bonds		209.9		0.2		(10.7	)		199.4
Governmental agency bonds		214.3		—		(13.9	)		200.4
Governmental agency mortgage-backed securities		4,316.7		2.2		(573.0	)		3,745.9
U.S. corporate debt securities		1,075.4		4.4		(58.6	)		1,021.2
Foreign corporate debt securities		498.4		4.0		(21.4	)		481.0
	$	7,859.0	$	17.9	$	(822.5	)	$	7,054.4
December 31, 2023
U.S. Treasury bonds	$	203.3	$	0.5	$	(4.5	)	$	199.3
Municipal bonds		1,373.7		8.8		(136.7	)		1,245.8
Foreign government bonds		228.4		1.4		(10.5	)		219.3
Governmental agency bonds		207.7		0.2		(12.5	)		195.4
Governmental agency mortgage-backed securities		4,396.2		6.3		(526.8	)		3,875.7
U.S. corporate debt securities		1,007.0		6.6		(55.2	)		958.4
Foreign corporate debt securities		478.9		5.8		(21.1	)		463.6
	$	7,895.2	$	29.6	$	(767.3	)	$	7,157.5

Sales of debt securities resulted in realized gains of $0.8 million and $5.5 million, realized losses of $4.2 million and $10.0 million and proceeds of $224.5 million and $715.5 million for the three months ended March 31, 2024 and 2023, respectively.

(in thousands)
Amortized
cost

Gross unrealized

Estimated
fair value

Gains

Losses

September 30, 2017

U.S. Treasury bonds
$
145,396

$
1,484

$
(1,427
)

$
145,453

Municipal bonds

1,068,611

14,546

(10,795
)

1,072,362

Foreign government bonds

162,550

556

(1,457
)

161,649

Governmental agency bonds

223,546

1,063

(2,891
)

221,718

Governmental agency mortgage-backed securities

2,238,222

4,098

(16,400
)

2,225,920

U.S. corporate debt securities

716,299

13,400

(2,771
)

726,928

Foreign corporate debt securities

244,777

5,201

(524
)

249,454

$
4,799,401

$
40,348

$
(36,265
)

$
4,803,484

December 31, 2016

U.S. Treasury bonds
$
155,441

$
416

$
(4,466
)

$
151,391

Municipal bonds

1,004,659

6,340

(26,666
)

984,333

Foreign government bonds

141,887

600

(2,439
)

140,048

Governmental agency bonds

197,343

691

(4,166
)

193,868

Governmental agency mortgage-backed securities

2,187,482

2,983

(26,792
)

2,163,673

U.S. corporate debt securities

675,683

8,282

(5,441
)

678,524

Foreign corporate debt securities

240,526

2,490

(1,490
)

241,526

$
4,603,021

$
21,802

$
(71,460
)

$
4,553,363

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Investments in ~~equity~~debt securities ~~classified as available-for-sale,~~in an unrealized loss position, and their respective length of time in such position, are as follows:

Cost

Gross unrealized

Estimated
fair value

(in thousands)

Gains

Losses

September 30, 2017

Preferred stocks
$
19,269

$
202

$
(944
)

$
18,527

Common stocks

381,622

47,204

(1,168
)

427,658

$
400,891

$
47,406

$
(2,112
)

$
446,185

December 31, 2016

Preferred stocks
$
18,926

$
—

$
(3,344
)

$
15,582

Common stocks

367,169

26,034

(4,700
)

388,503

$
386,095

$
26,034

$
(8,044
)

$
404,085


	Less than 12 months					12 months or longer					Total
(in millions)	Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
March 31, 2024
U.S. Treasury bonds	$	101.2	$	(1.3	)	$	50.4	$	(4.6	)	$	151.6	$	(5.9	)
Municipal bonds		133.1		(1.5	)		970.8		(137.5	)		1,103.9		(139.0	)
Foreign government bonds		68.3		(0.2	)		96.1		(10.5	)		164.4		(10.7	)
Governmental agency bonds		83.0		(0.6	)		117.4		(13.3	)		200.4		(13.9	)
Governmental agency mortgage-backed securities		490.3		(15.4	)		3,103.7		(557.6	)		3,594.0		(573.0	)
U.S. corporate debt securities		127.1		(1.6	)		598.1		(57.0	)		725.2		(58.6	)
Foreign corporate debt securities		64.8		(0.6	)		257.7		(20.8	)		322.5		(21.4	)
	$	1,067.8	$	(21.2	)	$	5,194.2	$	(801.3	)	$	6,262.0	$	(822.5	)
December 31, 2023
U.S. Treasury bonds	$	8.2	$	(0.1	)	$	55.4	$	(4.4	)	$	63.6	$	(4.5	)
Municipal bonds		107.4		(0.9	)		956.8		(135.8	)		1,064.2		(136.7	)
Foreign government bonds		33.3		(0.1	)		101.4		(10.4	)		134.7		(10.5	)
Governmental agency bonds		0.4		—			118.9		(12.5	)		119.3		(12.5	)
Governmental agency mortgage-backed securities		338.3		(6.6	)		3,225.3		(520.2	)		3,563.6		(526.8	)
U.S. corporate debt securities		45.1		(0.4	)		602.5		(54.8	)		647.6		(55.2	)
Foreign corporate debt securities		19.3		(0.1	)		267.3		(21.0	)		286.6		(21.1	)
	$	552.0	$	(8.2	)	$	5,327.6	$	(759.1	)	$	5,879.6	$	(767.3	)

Based on the Company’s review of its debt securities in an unrealized loss position it determined that the losses were due to non-credit factors and, therefore, it does not consider these securities to be credit impaired at March 31, 2024. As of March 31, 2024, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.

Sales of debt and equity securities resulted in realized gains of $1.7 million and $8.9 million, and realized losses of $0.7 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and realized gains of $21.8 million and $22.1 million, and realized losses of $5.9 million and $7.2 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Gross unrealized~~In determining credit losses on ~~investments~~its debt securities in ~~debt~~an unrealized loss position, the Company considers certain factors that may include, among others, severity of the unrealized loss, security type, industry sector, credit rating, yield to maturity, profitability and ~~equity securities are as follows:~~

stock performance.

Less than 12 months

12 months or longer

Total

(in thousands)
Estimated
fair value


Unrealized
losses

Estimated
fair value


Unrealized
losses

Estimated
fair value


Unrealized
losses

September 30, 2017







Debt securities:







U.S. Treasury bonds
$
61,500


$
(584
)

$
20,177


$
(843
)

$
81,677


$
(1,427
)
Municipal bonds

124,976



(775
)

247,001

(10,020
)

371,977



(10,795
)
Foreign government bonds

97,341



(1,058
)

10,471

(399
)

107,812



(1,457
)
Governmental agency bonds

106,783



(778
)

81,053



(2,113
)

187,836



(2,891
)
Governmental agency mortgage-backed securities

686,814

(4,572
)

832,251

(11,828
)

1,519,065

(16,400
)
U.S. corporate debt securities

113,028



(1,484
)

50,152



(1,287
)

163,180



(2,771
)
Foreign corporate debt securities

62,671



(457
)

3,492



(67
)

66,163



(524
)
Total debt securities

1,253,113



(9,708
)

1,244,597



(26,557
)

2,497,710



(36,265
)
Equity securities

36,407



(485
)

28,115



(1,627
)

64,522



(2,112
)
Total
$
1,289,520


$
(10,193
)

$
1,272,712


$
(28,184
)

$
2,562,232


$
(38,377
)
December 31, 2016







Debt securities:







U.S. Treasury bonds
$
111,748

$
(4,466
)

$
—

$
—

$
111,748

$
(4,466
)
Municipal bonds

635,531

(26,317
)

16,485

(349
)

652,016

(26,666
)
Foreign government bonds

63,044

(2,371
)

324

(68
)

63,368

(2,439
)
Governmental agency bonds

148,112

(4,166
)

—

—

148,112

(4,166
)
Governmental agency mortgage-backed securities

1,295,790

(19,097
)

432,349

(7,695
)

1,728,139

(26,792
)
U.S. corporate debt securities

193,533

(4,560
)

24,499

(881
)

218,032

(5,441
)
Foreign corporate debt securities

78,658

(1,150
)

8,154

(340
)

86,812

(1,490
)
Total debt securities

2,526,416

(62,127
)

481,811

(9,333
)

3,008,227

(71,460
)
Equity securities

70,261

(1,173
)

59,019

(6,871
)

129,280

(8,044
)
Total
$
2,596,677

$
(63,300
)

$
540,830

$
(16,204
)

$
3,137,507

$
(79,504
)

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Investments in debt securities at ~~September 30, 2017,~~March 31, 2024, by contractual maturities, are as follows:

(in thousands)	Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total

(in millions)											Due in one year or less		Due after one through five years		Due after five through ten years		Due after ten years		Total
U.S. Treasury bonds
Amortized cost	$	24,966	$	48,269	$	28,318	$	43,843	$	145,396	$	5.7	$	136.9	$	0.4	$	20.1	$	163.1
Estimated fair value	$	24,937	$	48,104	$	28,338	$	44,074	$	145,453	$	5.7	$	132.1	$	0.3	$	19.1	$	157.2
Municipal bonds
Amortized cost	$	61,831	$	314,910	$	254,976	$	436,894	$	1,068,611		12.6		382.4		478.4		507.8		1,381.2
Estimated fair value	$	61,960	$	318,703	$	259,744	$	431,955	$	1,072,362		12.5		351.1		413.1		472.6		1,249.3
Foreign government bonds
Amortized cost	$	7,772	$	129,408	$	9,699	$	15,671	$	162,550		31.2		104.5		67.5		6.7		209.9
Estimated fair value	$	7,783	$	128,568	$	9,864	$	15,434	$	161,649		31.0		103.8		58.6		6.0		199.4
Governmental agency bonds
Amortized cost	$	15,430	$	106,826	$	55,085	$	46,205	$	223,546		—		166.6		1.6		46.1		214.3
Estimated fair value	$	15,415	$	105,946	$	54,607	$	45,750	$	221,718		—		161.6		1.5		37.3		200.4
U.S. corporate debt securities
Amortized cost	$	29,681	$	299,209	$	314,805	$	72,604	$	716,299		13.9		732.1		245.6		83.8		1,075.4
Estimated fair value	$	29,800	$	302,345	$	319,329	$	75,454	$	726,928		13.8		693.1		239.8		74.5		1,021.2
Foreign corporate debt securities
Amortized cost	$	14,843	$	120,804	$	93,769	$	15,361	$	244,777		31.9		313.5		121.2		31.8		498.4
Estimated fair value	$	14,869	$	121,807	$	96,350	$	16,428	$	249,454		31.3		302.6		118.5		28.6		481.0
Total debt securities excluding mortgage-backed securities
Total debt securities (excluding mortgage-backed securities)
Amortized cost	$	154,523	$	1,019,426	$	756,652	$	630,578	$	2,561,179	$	95.3	$	1,836.0	$	914.7	$	696.3	$	3,542.3
Estimated fair value	$	154,764	$	1,025,473	$	768,232	$	629,095	$	2,577,564	$	94.3	$	1,744.3	$	831.8	$	638.1	$	3,308.5
Total mortgage-backed securities
Amortized cost									$	2,238,222										4,316.7
Estimated fair value									$	2,225,920										3,745.9
Total debt securities
Amortized cost									$	4,799,401									$	7,859.0
Estimated fair value									$	4,803,484									$	7,054.4

Mortgage-backed securities, which include contractual terms to maturity, are not categorized by contractual maturity ~~because~~as borrowers may have the right to call or prepay obligations with, or without, call or prepayment penalties.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

The composition of the ~~investment~~debt securities portfolio at ~~September 30, 2017,~~March 31, 2024, by credit rating, is as follows:

A- or higher

BBB+ to BBB-

Non-Investment Grade

Total

(in thousands, except percentages)
Estimated
fair value

Percentage

Estimated
fair value

Percentage

Estimated
fair value

Percentage

Estimated
fair value

Percentage

September 30, 2017

Debt securities:

U.S. Treasury bonds
$
145,453

100.0

$
—

—

$
—

—

$
145,453

100.0

Municipal bonds

999,995

93.2

54,521

5.1

17,846

1.7

1,072,362

100.0

Foreign government bonds

133,945

82.9

22,184

13.7

5,520

3.4

161,649

100.0

Governmental agency bonds

221,718

100.0

—

—

—

—

221,718

100.0

Governmental agency mortgage-backed securities

2,225,920

100.0

—

—

—

—

2,225,920

100.0

U.S. corporate debt securities

249,320

34.3

262,936

36.2

214,672

29.5

726,928

100.0

Foreign corporate debt securities

123,674

49.6

96,553

38.7

29,227

11.7

249,454

100.0

Total debt securities

4,100,025

85.3

436,194

9.1

267,265

5.6

4,803,484

100.0

Preferred stocks

—

—

13,616

73.5

4,911

26.5

18,527

100.0

Total
$
4,100,025

85.1

$
449,810

9.3

$
272,176

5.6

$
4,822,011

100.0


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	157.2		100.0	%	$	—		—	%	$	—		—	%	$	157.2
Municipal bonds		1,223.0		97.9			24.6		2.0			1.7		0.1			1,249.3
Foreign government bonds		193.9		97.2			4.7		2.4			0.8		0.4			199.4
Governmental agency bonds		200.4		100.0			—		—			—		—			200.4
Governmental agency mortgage- backed securities		3,745.9		100.0			—		—			—		—			3,745.9
U.S. corporate debt securities		492.0		48.1			380.5		37.3			148.7		14.6			1,021.2
Foreign corporate debt securities		251.9		52.3			193.2		40.2			35.9		7.5			481.0
	$	6,264.3		88.8	%	$	603.0		8.5	%	$	187.1		2.7	%	$	7,054.4

~~As of September 30, 2017, the estimated fair value of total~~

Included in debt securities ~~included $144.3~~at March 31, 2024, were bank loans totaling $122.3 million, of ~~bank loans, of~~ which ~~$133.7~~$109.0 million ~~was~~were non-investment grade; ~~$106.7 million of~~ high yield corporate debt securities totaling $71.2 million, all of which ~~was~~were non-investment grade; and ~~$74.3 million of~~ emerging market debt securities totaling $39.4 million, of which ~~$9.0~~$5.2 million ~~was~~were non-investment grade.

The composition of the ~~investment~~debt securities portfolio in an unrealized loss position at ~~September 30, 2017,~~March 31, 2024, by credit rating, is as follows:

A- or higher

BBB+ to BBB-

Non-Investment Grade

Total

(in thousands, except percentages)
Estimated
fair value

Percentage

Estimated
fair value

Percentage

Estimated
fair value

Percentage

Estimated
fair value

Percentage

September 30, 2017

Debt securities:

U.S. Treasury bonds
$
81,677

100.0

$
—

—

$
—

—

$
81,677

100.0

Municipal bonds

355,301

95.6

15,057

4.0

1,619

0.4

371,977

100.0

Foreign government bonds

95,300

88.4

9,663

9.0

2,849

2.6

107,812

100.0

Governmental agency bonds

187,836

100.0

—

—

—

—

187,836

100.0

Governmental agency mortgage-backed securities

1,519,065

100.0

—

—

—

—

1,519,065

100.0

U.S. corporate debt securities

46,440

28.5

80,803

49.5

35,937

22.0

163,180

100.0

Foreign corporate debt securities

40,649

61.4

23,108

34.9

2,406

3.7

66,163

100.0

Total debt securities

2,326,268

93.1

128,631

5.1

42,811

1.8

2,497,710

100.0

Preferred stocks

—

—

7,990

66.3

4,063

33.7

12,053

100.0

Total
$
2,326,268

92.7

$
136,621

5.4

$
46,874

1.9

$
2,509,763

100.0


	A- or higher					BBB+ to BBB-					Non-Investment Grade					Total
(dollars in millions)	Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value		Percentage			Estimated fair value
U.S. Treasury bonds	$	151.6		100.0	%	$	—		—	%	$	—		—	%	$	151.6
Municipal bonds		1,084.3		98.3			19.3		1.7			0.3		—			1,103.9
Foreign government bonds		162.3		98.7			1.3		0.8			0.8		0.5			164.4
Governmental agency bonds		200.4		100.0			—		—			—		—			200.4
Governmental agency mortgage- backed securities		3,594.0		100.0			—		—			—		—			3,594.0
U.S. corporate debt securities		394.5		54.4			273.8		37.8			56.9		7.8			725.2
Foreign corporate debt securities		188.3		58.4			116.2		36.0			18.0		5.6			322.5
	$	5,775.4		92.2	%	$	410.6		6.6	%	$	76.0		1.2	%	$	6,262.0

~~As of September 30, 2017, the estimated fair value of total debt~~Debt securities in an unrealized loss position at March 31, 2024, included ~~$26.4~~bank loans totaling $25.1 million, of ~~bank loans, of~~ which ~~$26.0~~$23.3 million ~~was~~were non-investment grade; ~~$11.6 million of~~ high yield corporate debt securities totaling $47.5 million, all of which ~~was~~were non-investment grade; and ~~$15.4 million of~~ emerging market debt securities totaling $32.7 million, of which ~~$3.6~~$4.9 million ~~was~~were non-investment grade.

The credit ratings in the above tables reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. Governmental agency mortgage-backed securities are not rated by any of the ratings agencies; however, these securities have been included in the above table in the “A- or higher” rating category because the payments of principal and interest are guaranteed by the governmental agency that issued the security.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 4 – ~~Goodwill~~Equity Securities

Investments in equity securities, by accounting classification, are summarized as follows:


(in millions)	March 31, 2024		December 31, 2023
Marketable equity securities	$	415.0	$	436.9
Non-marketable equity securities		226.1		224.1
Equity method investments		91.9		74.6
	$	733.0	$	735.6

Investments in marketable equity securities are summarized as follows:


(in millions)	Cost		Unrealized losses			Estimated fair value
March 31, 2024
Common stocks	$	409.8	$	(8.8	)	$	401.0
Preferred stocks		15.3		(1.3	)		14.0
	$	425.1	$	(10.1	)	$	415.0
December 31, 2023
Common stocks	$	429.4	$	(4.9	)	$	424.5
Preferred stocks		15.7		(3.3	)		12.4
	$	445.1	$	(8.2	)	$	436.9

Net gains of $10.9 million and $12.4 million resulting from changes in the fair values of marketable equity securities were recognized for the three months ended March 31, 2024 and 2023, respectively, which included net unrealized gains of $10.5 million and $11.7 million on securities still held at March 31, 2024 and 2023, respectively. Included in net gains for the three months ended March 31, 2024 were unrealized losses of $11.0 million related to the Company's investment in Offerpad Solutions Inc. ("Offerpad"), a tech-enabled real estate company.

A summary of the changes in the carrying amounts of non-marketable equity securities, which primarily relate to the Company's venture investment portfolio, for the three months ended March 31, 2024 and 2023, is as follows:


	Three Months Ended March 31,
(in millions)	2024		2023
Carrying amount, beginning of period	$	224.1	$	395.8
Net additions		1.8		6.1
Gross unrealized gains		0.2		—
Gross unrealized losses and impairments		—		(17.2	)
Carrying amount, end of period	$	226.1	$	384.7

Cumulative gross unrealized gains and cumulative gross unrealized losses and impairments related to non-marketable equity securities at March 31, 2024 and December 31, 2023, are as follows:


(in millions)	March 31, 2024		December 31, 2023
Cumulative gross unrealized gains	$	243.5	$	243.3
Cumulative gross unrealized losses and impairments	$	322.4	$	322.4

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 5 – Allowance for Credit Losses – Accounts Receivable

Activity in the allowance for credit losses on accounts receivable is summarized as follows:


	Three Months Ended March 31,
(in millions)	2024			2023
Balance at beginning of period	$	21.8		$	21.3
Provision for expected credit losses		0.8			0.7
Write-offs/recoveries		(1.8	)		(1.4	)
Balance at end of period	$	20.8		$	20.6

Note 6 – Goodwill

A summary of the changes in the carrying amount of goodwill, by ~~operating~~reportable segment, for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, is as follows:


(in millions)	Title Insurance and Services			Home Warranty		Total
Balance at beginning of period	$	1,766.6		$	40.9	$	1,807.5
Acquisitions		1.3			—		1.3
Foreign currency translation		(1.5	)		—		(1.5	)
Balance at end of period	$	1,766.4		$	40.9	$	1,807.3

(in thousands)
Title
Insurance
and Services

Specialty
Insurance


Total

Balance as of December 31, 2016
$
970,652

$
46,765

$
1,017,417

Acquisitions

123,954

—

123,954

Foreign currency translation

4,391

—



4,391

Other adjustments

(298
)

—



(298
)
Balance as of September 30, 2017
$
1,098,699


$
46,765


$
1,145,464

The Company’s four reporting units for purposes of assessing goodwill for impairment are title insurance, home warranty, property and casualty insurance and trust and other services. During the nine months ended September 30, 2017 there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying amount.

~~For further discussion about the Company’s acquisitions for the three and nine months ended September 30, 2017, see Note 14 Business Combinations.~~

Note 57 – Other Intangible Assets

Other intangible assets ~~consist of the following:~~are summarized as follows:

(in thousands)	September 30, 2017			December 31, 2016

(in millions)							March 31, 2024			December 31, 2023
Finite-lived intangible assets:
Customer relationships	$	77,600		$	78,542		$	192.3		$	191.4
Noncompete agreements		10,210			10,007			10.8			28.2
Trademarks		7,210			6,472			70.6			70.6
Internal-use software licenses		27,632			16,038			17.2			16.5
Patents		2,840			2,840			2.8			2.8
		125,492			113,899			293.7			309.5
Accumulated amortization		(67,250	)		(51,885	)		(163.0	)		(172.6	)
		58,242			62,014			130.7			136.9
Indefinite-lived intangible assets:
Licenses		16,884			16,884			16.9			16.9
	$	75,126		$	78,898		$	147.6		$	153.8

Amortization expense for finite-lived intangible assets was ~~$7.0~~$12.3 million and ~~$19.7~~$13.5 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~$3.7 million and $9.3 million for the three and nine months ended September 30, 2016,~~2023, respectively.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Estimated amortization expense for finite-lived intangible assets for the next five years is as follows:


Year	(in millions)
Remainder of 2024	$	30.1
2025	$	28.0
2026	$	26.4
2027	$	11.8
2028	$	7.3
2029	$	5.3

Year
(in thousands)

Remainder of 2017
$
7,975

2018
$
15,920

2019
$
9,210

2020
$
5,221

2021
$
2,976

2022
$
2,380

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

Note 68 – Reserve for Known and Incurred But Not Reported Claims

Activity in the reserve for known and incurred but not reported claims is summarized as follows:

	Nine months ended September 30,
(in thousands)	2017		2016
					Three Months Ended March 31,
(in millions)					2024			2023
Balance at beginning of period	$	1,025,863	$	983,880	$	1,282.4		$	1,325.3
Provision related to:
Current year		330,342		345,556		77.0			83.1
Prior years		3,353		20,917		(7.5	)		(0.8	)
		333,695		366,473		69.5			82.3
Payments, net of recoveries, related to:
Current year		165,914		160,693		30.6			31.1
Prior years		185,483		190,656		61.0			64.1
		351,397		351,349		91.6			95.2
Other		13,487		19,036		1.3			2.1
Balance at end of period	$	1,021,648	$	1,018,040	$	1,261.6		$	1,314.5

The provision for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, was ~~4.0%~~3.0% and 3.5% for the three ~~and nine~~ months ended ~~September 30, 2017 compared to 5.5% for the three~~March 31, 2024 and ~~nine months ended September 30, 2016.~~ 2023, respectively.

The ~~current quarter~~3.0% loss provision rate ~~of 4.0% reflects the ultimate loss rate for~~in the current ~~policy~~ year ~~and no change in the loss reserve estimates for prior policy years. The third quarter of 2016 rate of 5.5% reflected the~~reflects an ultimate loss rate of ~~5.0%~~3.75% for the ~~2016~~2024 policy year and ~~a $5.8~~reserve releases of 0.75%, or $7.3 million ~~net increase in the loss reserve estimates~~ for prior policy ~~years.~~years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2024.

The 3.5% loss provision rate for the three months ended March 31, 2023 reflected an ultimate loss rate of 3.75% for the 2023 policy year and reserve releases of 0.25%, or $2.5 million for prior policy years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2023.

A summary of the Company’s loss reserves is as follows:


(dollars in millions)	March 31, 2024				December 31, 2023
Known title claims	$	61.6	4.9	%	$	55.5	4.3	%
Incurred but not reported claims		1,162.5	92.1	%		1,186.5	92.5	%
Total title claims		1,224.1	97.0	%		1,242.0	96.8	%
Non-title claims		37.5	3.0	%		40.4	3.2	%
Total loss reserves	$	1,261.6	100.0	%	$	1,282.4	100.0	%

(in thousands, except percentages)
September 30, 2017

December 31, 2016

Known title claims
$
74,755



7.3
%

$
83,805

8.1
%
Incurred but not reported claims

889,079



87.0
%

888,126

86.6
%
Total title claims

963,834



94.3
%

971,931

94.7
%
Non-title claims

57,814



5.7
%

53,932

5.3
%
Total loss reserves
$
1,021,648



100.0
%

$
1,025,863

100.0
%

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 79 – Income Taxes

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were ~~-17.9%~~19.9% and ~~29.7%~~22.8% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024 and ~~35.7% and 33.7% for the three and nine months ended September 30, 2016,~~2023, respectively. The ~~Company’s~~ effective income tax rates differ from the federal statutory ~~federal~~ rate as a result of ~~35% primarily due to changes in~~ state and foreign income taxes ~~resulting from fluctuations in~~for which the Company’s noninsurance and foreign subsidiaries’ contributions to pretax income and changes in the ratio of permanent differences to income before income taxes. The Company’s effective tax rates for 2017 also reflect state tax benefits relating to the termination of the Company’s pension plan,Company is liable, as well as permanent differences between amounts reported for financial statement purposes and amounts reported for income tax purposes, including the ~~release~~recognition of reserves relating to tax positions taken on prior year tax returns. In addition, the Company’s effective tax rates for 2017 reflect the adoption of new accounting guidance related to the accounting for share-based payment transactions, which requires, among other items, that all excess tax benefits ~~and~~or tax deficiencies associated with share-based payment transactions ~~be recorded in~~through income tax ~~expense rather than in additional paid-in capital, as previously required.~~expense. The ~~impact to the Company of adopting this guidance was a reduction in~~effective income tax expense of $0.1 million and $2.8 million for the three and nine months ended September 30, 2017, respectively. See Note 1 Basis of Condensed Consolidated Financial Statements for further discussion of the new guidance. The Company’s effective tax rates ~~for 2016~~ also reflect the ~~resolution of certain~~impact on pretax earnings from losses and impairments on equity investments. In addition, the effective income tax ~~authority examinations and~~rate for 2024 reflects tax credits claimed in ~~2016 and in prior years.~~

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

In connection with the Company’s June 2010 spin-off from its prior parent, which subsequently assumed the name CoreLogic, Inc. (“CoreLogic”), it entered into a tax sharing agreement which governs the Company’s and CoreLogic’s respective rights, responsibilities and obligations for certain tax related matters. At September 30, 2017 and December 31, 2016, the Company had a net payable to CoreLogic of $13.0 million and $16.3 million, respectively, related to tax matters prior to the spin-off. This amount is included in the Company’s condensed consolidated balance sheets in accounts payable and accrued liabilities. The decrease during the current year ~~was primarily due to payments made for~~and benefits of a state tax ~~matters~~matter from prior ~~to the spin-off.~~years.

The Company evaluates the realizability of its deferred tax assets by assessing the valuation allowance and makes adjustments to the allowance as necessary. The factors used ~~to assess~~in assessing the likelihood of realization include ~~the Company’s forecast~~forecasts of future taxable income and available tax planning strategies that could be ~~implemented to realize the deferred tax assets.~~implemented. The Company’s ability ~~or failure~~ to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of its deferred tax assets. As of March 31, 2024 and December 31, 2023, the Company carried a valuation allowance of $13.7 million. Based on ~~actual~~ future operating results in certain jurisdictions, it is possible that the current valuation allowance positions of those jurisdictions could be adjusted induring the next 12 months.

As of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, the liability for income taxes associated with uncertain tax positions was ~~$12.8~~$13.5 million and ~~$18.1~~$12.4 million, respectively. The net ~~decrease~~increase in the liability during ~~2017~~2024 was primarily attributable to ~~settlements with taxing authorities relating to tax~~ positions taken byon the ~~Company on prior year~~Company’s tax ~~returns. As~~returns for current year. The liabilities as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016, the liability~~2023 could be reduced by ~~$5.4~~$0.9 million and ~~$5.7~~$0.8 million, respectively, due to offsetting tax benefits associated with the correlative effects of potential adjustments, including timing adjustments, and state income taxes. The net ~~amounts of $7.4 million and $12.4 million as of September 30, 2017 and December 31, 2016, respectively,~~liability, if recognized, would favorably affect the Company’s effective income tax rate.

The Company’s continuing practice is to recognize interest and penalties ~~if any,~~ related to uncertain tax positions in income tax expense. ~~As of September 30, 2017 and December 31, 2016, the Company had accrued $4.5 million and $4.1 million, respectively, of~~Accrued interest and penalties, ~~(net~~net of tax benefits, ~~of $2.0 million and $1.8 million, respectively)~~ related to uncertain tax ~~positions.~~positions were not material as of March 31, 2024 and December 31, 2023.

It is reasonably possible that ~~the amount of~~ the unrecognized benefit with respect to certain of the Company’s unrecognized tax positions may ~~significantly~~ increase or decrease within the next 12 months. Any such change may be the result of either ongoing audits or the expiration of federal and state statutes of limitations for the assessment of taxes.

The Company, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and in various non-U.S. jurisdictions. The primary non-federal jurisdictions are California, Canada, India and the United Kingdom. ~~During 2016,~~As of March 31, 2024, the ~~Company concluded U.S. federal income tax examinations for calendar years 2005 through 2013. The~~ Company is, generally, no longer subject to income tax examinations for U.S. federal, state and non-U.S. ~~income tax examinations~~jurisdictions for years prior to ~~2005.~~2020, 2019 and 2014, respectively.

Effective in calendar year 2024, the Company is subject to international anti-base erosion rules that assess a minimum tax rate of 15% in the jurisdictions in which it operates. Commonly known as “Pillar II,” these rules apply to large multinational enterprises and are designed to address the tax challenges arising from the globalization and digitalization of the economy. The Company has calculated the minimum tax on a jurisdiction-by-jurisdiction basis and has determined that the resulting tax is immaterial to its financial results.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 810 – Earnings Per Share

The computation of basic and diluted earnings per share is as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)		2017		2016		2017		2016
										Three Months Ended March 31,
(in millions, except per share amounts)										2024		2023
Numerator	Numerator
Net income attributable to the Company	Net income attributable to the Company	$	21,383	$	107,320	$	201,922	$	261,970	$	46.7	$	45.9
Denominator	Denominator
Basic weighted-average shares	Basic weighted-average shares		111,799		110,571		111,578		110,423		104.1		104.5
Effect of dilutive employee stock options and restricted stock units (“RSUs”)			776		680		676		583
Effect of dilutive restricted stock units (“RSUs”) and performance restricted stock units (“PRSUs”)											0.3		0.3
Diluted weighted-average shares	Diluted weighted-average shares		112,575		111,251		112,254		111,006		104.4		104.8
Net income per share attributable to the Company’s stockholders	Net income per share attributable to the Company’s stockholders
Basic	Basic	$	0.19	$	0.97	$	1.81	$	2.37	0.45		$	0.44
Diluted	Diluted	$	0.19	$	0.96	$	1.80	$	2.36	0.45		$	0.44

For the three ~~and nine~~ months ended ~~September 30, 2017, 1~~March 31, 2024, 85 thousand RSUs ~~and 8 thousand RSUs, respectively,~~ were excluded from diluted weighted-average ~~diluted~~ common shares outstanding due to their antidilutive effect. For the three months ended ~~September 30, 2016, no~~March 31, 2023, 333 thousand RSUs ~~had an antidilutive effect on weighted-average diluted common shares outstanding,~~ and ~~for the nine months ended September 30, 2016, 17~~37 thousand ~~RSUs~~PRSUs were excluded from diluted weighted-average ~~diluted~~ common shares outstanding due to their antidilutive effect. ~~No stock options had an antidilutive effect on weighted-average diluted common shares outstanding for either period in the current year or in the prior year.~~

Note 911 – Employee Benefit Plans

Net periodic ~~cost~~benefit costs related to the Company’s ~~defined~~unfunded supplemental benefit pension ~~and~~plans are summarized as follows:


	Three Months Ended March 31,
(in millions)	2024		2023
Expense:
Interest costs	$	2.4	$	2.5
Amortization of net actuarial loss		0.6		0.5
	$	3.0	$	3.0

The Company contributed $3.8 million to its unfunded supplemental benefit pension plans ~~includes~~during the ~~following components:~~three months ended March 31, 2024 and expects to contribute an additional $12.4 million during the remainder of 2024.

Three Months Ended
September 30,

Nine Months Ended
September 30,

(in thousands)

2017

2016

2017

2016

Expense:

Service costs
$
184


$
260


$
551


$
781

Interest costs

2,086


5,999


11,185


18,000

Settlement costs

152,388

—

152,388

—

Expected return on plan assets

—

(3,083
)

(4,740
)

(9,250
)
Amortization of net actuarial loss

1,958


7,043


15,792


21,153

Amortization of prior service credit

(1,045
)

(1,211
)

(3,268
)

(3,633
)

$
155,571


$
9,008


$
171,908


$
27,051

~~Pension termination and settlement~~

In May 2016, the Company’s board of directors terminated the Company’s funded defined benefit pension plan known as the First American Financial Corporation Pension Plan, effective as of July 31, 2016. The pension plan was closed to new entrants effective December 31, 2001 and amended to “freeze” all benefit accruals as of April 30, 2008. Also, in May 2016, a subsidiary of the Company terminated its small regional funded defined benefit pension plan effective as of August 31, 2016. All financial impacts discussed below reflect the termination of both pension plans.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

The pension plans offered participants annuity payments based on a number of factors and, for certain participants, an alternative lump sum distribution option. During 2016, the Company made additional cash contributions of $84.8 million above scheduled amounts and offered lump sum distributions to certain participants. The lump sum distributions were settled through distributions of pension plan assets in the fourth quarter totaling $127.2 million for which the Company recognized $66.3 million in settlement costs.

The Company made cash contributions of $34.0 million in March 2017 to fully fund its pension obligation. In July 2017, the Company completed the transfer of all remaining benefit obligations related to the pension plans to a highly rated insurance company and recognized $152.4 million in settlement costs in the condensed consolidated statements of income in the third quarter of 2017.

Note 1012 – Fair Value Measurements

Certain of the Company’s assets and liabilities are carried at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company categorizes its assets and liabilities carried at fair value using a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and the Company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. The hierarchy level assigned to the assets and liabilities is based on management’s assessment of the transparency and reliability of the inputs used to estimate the fair values at the measurement date. The three hierarchy levels are defined as follows:

Level 1—Valuations based on unadjusted quoted market prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets or liabilities at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly.

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement and involve management judgment.

If the inputs used to measure fair value fall into different levels of the fair value hierarchy, the hierarchy level assigned is based upon the lowest level of input that is significant to the fair value measurement.

~~Assets measured at fair value on a recurring basis~~

~~The valuation techniques and inputs used by the Company to estimate the fair value of assets measured on a recurring basis are summarized as follows:~~

~~Debt securities~~

The fair values of debt securities were based on the market values obtained from independent pricing services that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information and price quotes from well-established independent broker-dealers. The independent pricing services monitor market indicators, industry and economic events, and for broker-quoted only securities, obtain quotes from market makers or broker-dealers that they recognize to be market participants. The pricing services utilize the market approach in determining the fair value of the debt securities held by the Company. The Company obtains an understanding of the valuation models and assumptions utilized by the services and has controls in place to determine that the values provided represent fair value. The Company’s validation procedures include comparing prices received from the pricing services to quotes received from other third party sources for certain securities with market prices that are readily verifiable. If the price comparison results in differences over a predefined threshold, the Company will assess the reasonableness of the changes relative to prior periods given the prevailing market conditions and assess changes in the issuers’ credit worthiness, performance of any underlying collateral and prices of the instrument relative to similar issuances. To date, the Company has not made any material adjustments to the fair value measurements provided by the pricing services.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

Typical inputs and assumptions to pricing models used to value the Company’s U.S. Treasury bonds, municipal bonds, foreign government bonds, governmental agency bonds, governmental agency mortgage-backed securities and U.S. and foreign corporate debt securities include, but are not limited to, benchmark yields, reported trades, broker-dealer quotes, credit spreads, credit ratings, bond insurance (if applicable), benchmark securities, bids, offers, reference data and industry and economic events. For mortgage-backed securities, inputs and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment speeds. Certain corporate debt securities were not actively traded and there were fewer observable inputs available requiring the use of more judgment in determining their fair values, which resulted in their classification as Level 3.

~~Equity securities~~

~~The fair values of equity securities, including preferred and common stocks, were based on quoted market prices for identical assets that are readily and regularly available in an active market.~~

The following tables present the fair values of the Company’s assets, measured on a recurring basis, as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016:~~2023:


(in millions)	Total		Level 1		Level 2		Level 3
March 31, 2024
Debt securities:
U.S. Treasury bonds	$	157.2	$	—	$	157.2	$	—
Municipal bonds		1,249.3		—		1,249.3		—
Foreign government bonds		199.4		—		199.4		—
Governmental agency bonds		200.4		—		200.4		—
Governmental agency mortgage-backed securities		3,745.9		—		3,745.9		—
U.S. corporate debt securities		1,021.2		—		1,021.2		—
Foreign corporate debt securities		481.0		—		481.0		—
		7,054.4		—		7,054.4		—
Equity securities:
Common stocks		401.0		401.0		—		—
Preferred stocks		14.0		14.0		—		—
		415.0		415.0		—		—
Mortgage loans held for sale		13.0		—		11.7		1.3
Total	$	7,482.4	$	415.0	$	7,066.1	$	1.3

(in thousands)

Total

Level 1

Level 2

Level 3

September 30, 2017

Assets:

Debt securities:

U.S. Treasury bonds

$
145,453

$
—

$
145,453

$
—

Municipal bonds

1,072,362

—

1,072,362

—

Foreign government bonds

161,649

—

161,649

—

Governmental agency bonds

221,718

—

221,718

—

Governmental agency mortgage-backed securities

2,225,920

—

2,225,920

—

U.S. corporate debt securities

726,928

—

714,419

12,509

Foreign corporate debt securities

249,454

—

248,581

873

4,803,484

—

4,790,102

13,382

Equity securities:

Preferred stocks

18,527

18,527

—

—

Common stocks

427,658

427,658

—

—

446,185

446,185

—

—

Total assets

$
5,249,669

$
446,185

$
4,790,102

$
13,382

(in thousands)

Total

Level 1

Level 2

Level 3

December 31, 2016

Assets:

Debt securities:

U.S. Treasury bonds

$
151,391

$
—

$
151,391

$
—

Municipal bonds

984,333

—

984,333

—

Foreign government bonds

140,048

—

140,048

—

Governmental agency bonds

193,868

—

193,868

—

Governmental agency mortgage-backed securities

2,163,673

—

2,163,673

—

U.S. corporate debt securities

678,524

—

631,859

46,665

Foreign corporate debt securities

241,526

—

235,258

6,268

4,553,363

—

4,500,430

52,933

Equity securities:

Preferred stocks

15,582

15,582

—

—

Common stocks

388,503

388,503

—

—

404,085

404,085

—

—

Total assets

$
4,957,448

$
404,085

$
4,500,430

$
52,933

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

There were no transfers between Levels 1 and 2 during the three and nine months ended September 30, 2017 and 2016. Transfers into or out of the Level 3 category occur when unobservable inputs become more or less significant to the fair value measurement. For the three and nine months ended September 30, 2017 and 2016, transfers between Level 2 and Level 3 were based on market liquidity and related transparency of pricing and associated observable inputs for certain of the Company’s corporate debt securities. The Company’s policy is to recognize transfers between levels in the fair value hierarchy at the end of the reporting period.


(in millions)	Total		Level 1		Level 2		Level 3
December 31, 2023
Debt securities:
U.S. Treasury bonds	$	199.3	$	—	$	199.3	$	—
Municipal bonds		1,245.8		—		1,245.8		—
Foreign government bonds		219.3		—		219.3		—
Governmental agency bonds		195.4		—		195.4		—
Governmental agency mortgage-backed securities		3,875.7		—		3,875.7		—
U.S. corporate debt securities		958.4		—		958.4		—
Foreign corporate debt securities		463.6		—		463.6		—
		7,157.5		—		7,157.5		—
Equity securities:
Common stocks		424.5		424.5		—		—
Preferred stocks		12.4		12.4		—		—
		436.9		436.9		—		—
Mortgage loans held for sale		13.1		—		11.8		1.3
Total	$	7,607.5	$	436.9	$	7,169.3	$	1.3

~~The following table presents a summary of the changes in the fair values of Level 3 assets, measured on a recurring basis, for the three months ended September 30, 2017 and 2016:~~

September 30, 2017

September 30, 2016

(in thousands)
U.S. corporate
debt
securities

Foreign corporate
debt securities

Total

U.S. corporate
debt
securities

Foreign corporate
debt securities

Total

Fair value at beginning of period
$
18,128

$
1,915

$
20,043

$
14,493

$
723

$
15,216

Transfers into Level 3

3,747

573

4,320

5,968

—

5,968

Transfers out of Level 3

(6,788
)

—

(6,788
)

(4,546
)

—

(4,546
)
Net realized and unrealized gains (losses):

Included in earnings

26

(1
)

25

5

—

5

Included in other comprehensive income (loss)

(86
)

(5
)

(91
)

115

43

158

Purchases

901

149

1,050

1,866

1,045

2,911

Sales

(1,231
)

—

(1,231
)

(46
)

(50
)

(96
)
Settlements

(2,188
)

(1,758
)

(3,946
)

(356
)

—

(356
)
Fair value at end of period
$
12,509

$
873

$
13,382

$
17,499

$
1,761

$
19,260

~~The following table presents a summary of the changes in the fair values of Level 3 assets, measured on a recurring basis, for the nine months ended September 30, 2017 and 2016:~~

September 30, 2017

September 30, 2016

(in thousands)
U.S. corporate
debt
securities

Foreign corporate
debt securities

Total

U.S. corporate
debt
securities

Foreign corporate
debt securities

Total

Fair value at beginning of period
$
46,665

$
6,268

$
52,933

$
43,567

$
6,572

$
50,139

Transfers into Level 3

377

198

575

269

—

269

Transfers out of Level 3

(27,066
)

(2,111
)

(29,177
)

(27,764
)

(3,822
)

(31,586
)
Net realized and unrealized gains (losses):

Included in earnings

117

11

128

(88
)

(48
)

(136
)
Included in other comprehensive income (loss)

(460
)

(47
)

(507
)

1,053

88

1,141

Purchases

7,994

1,075

9,069

10,132

1,243

11,375

Sales

(2,824
)

(1,954
)

(4,778
)

(4,750
)

(1,045
)

(5,795
)
Settlements

(12,294
)

(2,567
)

(14,861
)

(4,920
)

(1,227
)

(6,147
)
Fair value at end of period
$
12,509

$
873

$
13,382

$
17,499

$
1,761

$
19,260

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

~~Financial instruments not measured at fair value~~

~~In estimating the fair values of its financial instruments not measured at fair value, the Company used the following methods and assumptions:~~

~~Cash and cash equivalents~~

~~The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.~~

~~Deposits with banks~~

~~The fair value of deposits with banks is estimated based on rates currently offered for deposits of similar remaining maturities, where applicable.~~

~~Notes receivable, net~~

~~The fair value of notes receivable, net is estimated based on current market rates being offered for notes with similar maturities and credit quality.~~

~~Deposits~~

~~The carrying values of escrow and other deposit accounts approximate fair value due to the short-term nature of these liabilities.~~

~~Notes and contracts payable~~

~~The fair value of notes and contracts payable is estimated based on current rates offered to the Company for debt of similar remaining maturities.~~

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016:~~2023:


	Carrying		Estimated fair value
(in millions)	Amount		Total		Level 1		Level 2		Level 3
March 31, 2024
Assets:
Cash and cash equivalents	$	1,506.4	$	1,506.4	$	1,506.4	$	—	$	—
Deposits with banks	$	77.1	$	77.0	$	20.1	$	56.9	$	—
Notes receivable, net	$	23.8	$	24.6	$	—	$	—	$	24.6
Secured financings receivable	$	831.4	$	831.4	$	—	$	831.4	$	—
Liabilities:
Secured financings payable	$	688.8	$	688.8	$	—	$	688.8	$	—
Notes and contracts payable	$	1,396.0	$	1,226.3	$	—	$	1,220.5	$	5.8


	Carrying		Estimated fair value
(in millions)	Amount		Total		Level 1		Level 2		Level 3
December 31, 2023
Assets:
Cash and cash equivalents	$	3,605.3	$	3,605.3	$	3,605.3	$	—	$	—
Deposits with banks	$	55.8	$	55.6	$	4.0	$	51.6	$	—
Notes receivable, net	$	22.4	$	23.2	$	—	$	—	$	23.2
Secured financings receivable	$	636.5	$	636.5	$	—	$	636.5	$	—
Liabilities:
Secured financings payable	$	553.3	$	553.3	$	—	$	553.3	$	—
Notes and contracts payable	$	1,393.9	$	1,219.6	$	—	$	1,215.4	$	4.2

Carrying

Estimated fair value

(in thousands)

Amount

Total

Level 1

Level 2

Level 3

September 30, 2017

Assets:

Cash and cash equivalents

$
1,141,915

$
1,141,915

$
1,141,915

$
—

$
—

Deposits with banks

$
20,940

$
20,887

$
265

$
20,622

$
—

Notes receivable, net

$
7,466

$
7,297

$
—

$
—

$
7,297

Liabilities:

Deposits

$
2,965,426

$
2,965,426

$
2,965,426

$
—

$
—

Notes and contracts payable

$
734,091

$
756,536

$
—

$
752,070

$
4,466

Carrying

Estimated fair value

(in thousands)

Amount

Total

Level 1

Level 2

Level 3

December 31, 2016

Assets:

Cash and cash equivalents

$
1,006,138

$
1,006,138

$
1,006,138

$
—

$
—

Deposits with banks

$
21,222

$
21,176

$
1,017

$
20,159

$
—

Notes receivable, net

$
7,799

$
7,542

$
—

$
—

$
7,542

Liabilities:

Deposits

$
2,779,478

$
2,779,478

$
2,779,478

$
—

$
—

Notes and contracts payable

$
736,693

$
734,812

$
—

$
729,658

$
5,154

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 1113 – Share-Based Compensation

The following table ~~presents compensation expense~~summarizes the costs associated with the Company’s share-based compensation plans:


	Three Months Ended March 31,
(in millions)	2024		2023
Expense:
RSUs	$	18.9	$	19.0
PRSUs		2.4		1.8
Employee stock purchase plan		2.1		2.2
	$	23.4	$	23.0

Three Months Ended
September 30,


Nine Months Ended
September 30,

(in thousands)

2017


2016


2017


2016

Expense:

RSUs
$
5,866


$
5,401


$
28,634


$
25,766

Stock options

69

68

203

203

Employee stock purchase plan

682



659



2,359



2,127


$
6,617


$
6,128


$
31,196


$
28,096

The following table summarizes RSU and PRSU activity for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2024:


(in millions, except weighted-average grant-date fair value)	Shares			Weighted-average grant-date fair value
Unvested at December 31, 2023		1.0		$	64.19
Granted during 2024		0.6		$	58.92
Vested during 2024		(0.6	)	$	60.84
Unvested at March 31, 2024		1.0		$	62.77

(in thousands, except weighted-average grant-date fair value)

Shares

Weighted-average
grant-date
fair value

Unvested at December 31, 2016

1,510

$
33.38

Granted during 2017

893

$
39.26

Vested during 2017

(957
)

$
34.53

Forfeited during 2017

(9
)

$
35.22

Unvested at September 30, 2017

1,437

$
36.25

Note 14 – Stockholders’ Equity

The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $210.4 million remained as of March 31, 2024. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2024, the Company repurchased and retired 59 thousand shares of its common stock for a total purchase price of $3.5 million and, as of March 31, 2024, repurchased and retired 3.6 million shares of its common stock under the current authorization for a total purchase price of $189.6 million.

Note 1215 – Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The following table presents a summary of the changes in each component of AOCI for the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2024:


(in millions)	Unrealized gains (losses) on debt securities			Foreign currency translation adjustment			Pension benefit adjustment			Accumulated other comprehensive income (loss)
Balance at December 31, 2023	$	(553.6	)	$	(64.9	)	$	(37.3	)	$	(655.8	)
Change in unrealized losses on debt securities		(66.9	)		—			—			(66.9	)
Change in foreign currency translation adjustment		—			(14.9	)		—			(14.9	)
Amortization of net actuarial loss		—			—			0.6			0.6
Tax effect		16.3			0.4			(0.2	)		16.5
Balance at March 31, 2024	$	(604.2	)	$	(79.4	)	$	(36.9	)	$	(720.5	)

(in thousands)
Unrealized
gains (losses)
on securities

Foreign
currency
translation
adjustment

Pension
benefit
adjustment

Accumulated
other
comprehensive
income (loss)

Balance at December 31, 2016
$
(26,760
)

$
(63,576
)

$
(140,057
)

$
(230,393
)
Change in unrealized gains (losses) on securities

81,044

—

—

81,044

Change in foreign currency translation adjustment

—

23,558

—

23,558

Net actuarial loss

—

—

(8,646
)

(8,646
)
Amortization of net actuarial loss

—

—

15,792

15,792

Amortization of prior service credit

—

—

(3,268
)

(3,268
)
Settlement costs

—

—

152,388

152,388

Tax effect

(29,030
)

—

(63,205
)

(92,235
)
Balance at September 30, 2017
$
25,254

$
(40,018
)

$
(46,996
)

$
(61,760
)
Allocated to the Company
$
25,235

$
(40,018
)

$
(46,996
)

$
(61,779
)
Allocated to noncontrolling interests

19

—

—

19

Balance at September 30, 2017
$
25,254

$
(40,018
)

$
(46,996
)

$
(61,760
)

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

The following table presents the other comprehensive income (loss) reclassification adjustments for the three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~2023:


(in millions)	Unrealized gains (losses) on debt securities			Foreign currency translation adjustment			Pension benefit adjustment			Total other comprehensive income (loss)
Three Months Ended March 31, 2024
Pretax change before reclassifications	$	(70.3	)	$	(14.9	)	$	—		$	(85.2	)
Reclassifications out of AOCI		3.4			—			0.6			4.0
Tax effect		16.3			0.4			(0.2	)		16.5
Total other comprehensive (loss) income, net of tax	$	(50.6	)	$	(14.5	)	$	0.4		$	(64.7	)
Three Months Ended March 31, 2023
Pretax change before reclassifications	$	142.0		$	2.6		$	—		$	144.6
Reclassifications out of AOCI		4.5			—			0.5			5.0
Tax effect		(36.4	)		—			(0.2	)		(36.6	)
Total other comprehensive income, net of tax	$	110.1		$	2.6		$	0.3		$	113.0

(in thousands)
Unrealized
gains (losses)
on securities

Foreign
currency
translation
adjustment

Pension
benefit
adjustment

Total
other
comprehensive
income (loss)

Three Months Ended September 30, 2017

Pretax change before reclassifications
$
22,833

$
11,415

$
(8,646
)

$
25,602

Reclassifications out of AOCI

(928
)

—

153,301

152,373

Tax effect

(7,976
)

—

(58,764
)

(66,740
)
Total other comprehensive income (loss), net of tax
$
13,929

$
11,415

$
85,891

$
111,235

Three Months Ended September 30, 2016

Pretax change before reclassifications
$
12,435

$
(3,459
)

$
—

$
8,976

Reclassifications out of AOCI

(8,687
)

—

5,832

(2,855
)
Tax effect

(1,169
)

—

(2,230
)

(3,399
)
Total other comprehensive income (loss), net of tax
$
2,579

$
(3,459
)

$
3,602

$
2,722

~~The following table presents the other comprehensive income (loss) reclassification adjustments for the nine months ended September 30, 2017 and 2016:~~

(in thousands)
Unrealized
gains (losses)
on securities

Foreign
currency
translation
adjustment

Pension
benefit
adjustment

Total
other
comprehensive
income (loss)

Nine Months Ended September 30, 2017

Pretax change before reclassifications
$
95,329

$
23,558

$
(8,646
)

$
110,241

Reclassifications out of AOCI

(14,285
)

—

164,912

150,627

Tax effect

(29,030
)

—

(63,205
)

(92,235
)
Total other comprehensive income (loss), net of tax
$
52,014

$
23,558

$
93,061

$
168,633

Nine Months Ended September 30, 2016

Pretax change before reclassifications
$
96,612

$
3,066

$
—

$
99,678

Reclassifications out of AOCI

(13,222
)

—

17,520

4,298

Tax effect

(31,303
)

—

(6,701
)

(38,004
)
Total other comprehensive income (loss), net of tax
$
52,087

$
3,066

$
10,819

$
65,972

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

The following table presents the effects of the reclassifications out of AOCI on the respective line items in the condensed consolidated statements of income:

Amounts reclassified from AOCI

��

(in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

Affected line items in the condensed

2017

2016

2017

2016

consolidated statements of income
Unrealized gains (losses) on securities:

Net realized gains on
sales of securities
$
928

$
8,687

$
14,285

$
13,707

Net realized investment (losses) gains
Net other-than-temporary impairment losses

—

—

—

(485
)

Net realized investment (losses) gains
Pretax total
$
928

$
8,687

$
14,285

$
13,222

Tax effect
$
(332
)

$
(3,261
)

$
(5,778
)

$
(5,057
)

Pension benefit adjustment:

Amortization of net actuarial loss
$
(1,958
)

$
(7,043
)

$
(15,792
)

$
(21,153
)
(1
)
Amortization of prior service
credit

1,045

1,211

3,268

3,633

(1
)
Settlement costs

(152,388
)

—

(152,388
)

—

(1
)
Pretax total
$
(153,301
)

$
(5,832
)

$
(164,912
)

$
(17,520
)

Tax effect
$
62,276

$
2,229

$
66,702

$
6,701


	Three Months Ended March 31,
(in millions)	2024			2023			Affected line items
Unrealized gains (losses) on debt securities:
Net realized losses on sales of debt securities	$	(3.4	)	$	(4.5	)	Net investment gains (losses)
Tax effect	$	0.8		$	1.1
Pension benefit adjustment (1):
Amortization of net actuarial loss	$	(0.6	)	$	(0.5	)	Other operating expenses
Tax effect	$	0.2		$	0.2


~~(1)~~	~~These components of AOCI are included in the computation of net periodic cost. See Note 9 Employee Benefit Plans for additional details.~~

(1)

Amounts are components of net periodic cost. See Note 11 Employee Benefit Plans for additional details.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Note 1316 – Litigation and Regulatory Contingencies

The Company and its subsidiaries are parties to ~~a number of non-ordinary course lawsuits.~~lawsuits and are also involved in ongoing routine legal and regulatory proceedings related to their operations. These lawsuits and proceedings frequently are similar in nature to other lawsuits and proceedings pending against the Company’s competitors.

~~For those non-ordinary course lawsuits where~~ When the Company has determined that a loss is both probable and reasonably estimable, a liability representing the best estimate of the Company’s financial exposure based on known facts has been recorded. Actual losses may materially differ from the amounts recorded.

For a substantial majority of these lawsuits, however, it is not possible to assess the probability of loss. Most of these lawsuits are putative class actions which require a plaintiff to satisfy a number of procedural requirements before proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in some manner the Company’s activities, the making of factual allegations sufficient to suggest that the Company’s activities exceeded the limits of the law and a determination by the court—known as class certification—that the law permits a group of individuals to pursue the case together as a class. In certain instances the Company may also be able to compel the plaintiff to arbitrate its claim on an individual basis. If these procedural requirements are not met, either the lawsuit cannot proceed or, as is the case with class certification or compelled arbitration, the plaintiffs lose the financial incentive to proceed with the case (or the amount at issue effectively becomes de minimis). Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court. As a result of, among other factors, ambiguities and inconsistencies in the myriad laws applicableWith respect to the Company’s business and the uniqueness of the factual issues presented in any given lawsuit, the Company often cannot determine the probability of loss until a court has finally determined that a plaintiff has satisfied applicable procedural requirements.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

Furthermore, because most of these lawsuits are putative class actions, it is often impossible to estimate the possible loss or a range of loss amounts, even where the Company has determined that a loss is reasonably possible. Generally class actions involve a large number of people and the effort to determine which people satisfy the requirements to become plaintiffs—or class members—is often time consuming and burdensome. Moreover, these lawsuits raise complex factual issues which result in uncertainty as to their outcome and, ultimately, make it difficult for the Company to estimate the amount of damages which a plaintiff might successfully prove. In addition, many of the Company’s businesses are regulated by various federal, state, local and foreign governmental agencies and are subject to numerous statutory guidelines. These regulations and statutory guidelines often are complex, inconsistent or ambiguous, which results in additional uncertainty as to the outcome of a given lawsuit—including the amount of damages a plaintiff might be afforded—or makes it difficult to analogize experience in one case or jurisdiction to another case or jurisdiction.

~~Most of the non-ordinary~~outstanding ordinary course lawsuits ~~to which the Company~~ and its subsidiaries are parties challenge practices in the Company’s title insurance business, though a limited number of cases also pertain to the Company’s other businesses. These lawsuits include, among others, cases alleging, among other assertions, that the Company, one of its subsidiaries and/or one of its agents overcharged or improperly charged fees for products and services, conspired to fix prices, participated in the conveyance of illusory property interests, denied home warranty claims, improperly handled property and casualty claims, and gave items of value to brokers and others as inducements to refer business in violation of certain laws, such as consumer protection laws and laws generally prohibiting unfair business practices, and certain obligations, including

~~Chavez v. First American Specialty Insurance Company, filed on June 29, 2017 and pending in the Superior Court of the State of California, County of Los Angeles,~~

~~Downing v. First American Title Insurance Company, et al., filed on July 26, 2016 and pending in the United States District Court for the Northern District of Georgia,~~

~~Kaufman v. First American Financial Corporation, et al., filed on December 21, 2007 and pending in the Superior Court of the State of California, County of Los Angeles,~~

~~Lennen v. First American Financial Corporation, et al., filed on May 19, 2016 and pending in the United States District court for the Middle District of Florida,~~

~~McCormick v. First American Real Estate Services, Inc., et al., filed on December 31, 2015 and pending in the Superior Court of the State of California, County of Orange,~~

~~Sjobring v. First American Financial Corporation, et al., filed on February 25, 2005 and pending in the Superior Court of the State of California, County of Los Angeles,~~

~~Tenefufu vs. First American Specialty Insurance Company, filed on June 1, 2017, pending in the Superior Court of the State of California, County of Sacramento,~~

~~Wilmot v. First American Financial Corporation, et al., filed on April 20, 2007 and pending in the Superior Court of the State of California, County of Los Angeles, and~~

~~In re First American Home Buyers Protection Corporation, consolidated on October 9, 2014 and pending in the United States District Court for the Southern District of California.~~

All of these lawsuits, except Kaufman and Sjobring, are putative class actions for which a class has not been certified. For the reasons described above, the Company has not yet been able to assess the probability of loss or estimate the possible loss or the range of loss or, where the Company has been able to make an estimate, the Company believes the amount is not material to the condensed consolidated financial statements as a whole.

While some of the lawsuits described above may be material to the Company’s operating results in any particular period if an unfavorable outcome results, the Company does not believe that any of these lawsuits will have a material adverse effect on the Company’s overall financial condition or liquidity.

~~The Company also is a party to non-ordinary course lawsuits other than those described above. With respect to these lawsuits,~~proceedings, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range of loss, if any, iswill not have a material toadverse effect on the ~~condensed consolidated~~Company’s financial ~~statements as a whole.~~condition, results of operations or cash flows. The Company’s ordinary course lawsuits include putative or purported class action lawsuits, which challenge practices in the Company’s title insurance and services and home warranty businesses.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

The Company’s title insurance, property and casualty insurance, home warranty, mortgage servicing and subservicing, banking, ~~thrift,~~ trust and ~~investment advisory~~wealth management businesses are regulated by various federal, state and local governmental agencies. Many of the Company’s other businesses operate within statutory guidelines. Consequently, the Company may from time to time be subject to examination or investigation by such governmental agencies. Currently, governmental agencies are examining or investigating certain of the Company’s operations. These exams or investigations include inquiries into, among other matters, pricing and rate setting practices in the title insurance industry, competition in the title insurance industry, real estate settlement service, customer acquisition and retention practices and agency relationships. With respect to matters where the Company has determined that a loss is both probable and reasonably estimable, the Company has recorded a liability representing its best estimate of the financial exposure based on known facts. While the ultimate disposition of each such exam or investigation is not yet determinable, the

The Company does not believe that ~~individually~~any pending examinations or ~~in the aggregate they~~investigations will have a material adverse effect on the Company’s financial condition, results of operations or cash flows. ~~These~~Some of these exams or investigations could, however, result in changes to the Company’s business practices which could ultimately have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

The Company’s Canadian operations provide certain services to lenders which it believes to be exempt from excise tax under applicable Canadian tax laws. However, in October 2014, the Canadian taxing authority provided internal guidance that the services in question should be subject to the excise tax. While discussions with the taxing authority are ongoing, the Company believes that the guidance may result in an assessment. The amount, if any, of such assessment is not currently known, and any such assessment would be subject to negotiation. In the event that the Company disagrees with the ultimate assessment, the Company intends to avail itself of avenues of appeal. While the Company believes it is reasonably likely that the Company would prevail on the merits, a loss associated with the matter is possible. In light of the foregoing, the Company is not currently able to reasonably estimate a loss or range of loss associated with the matter. While such a loss could be material to the Company’s operating results in any particular period if an unfavorable outcome results, the Company does not believe that this matter will have a material adverse effect on the Company’s overall financial condition or liquidity.

The Company and its subsidiaries also are involved in numerous ongoing routine legal and regulatory proceedings related to their operations. With respect to each of these proceedings, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range of loss, if any, is not material to the condensed consolidated financial statements as a whole.

~~Note 14 – Business Combinations~~

During the three and nine months ended September 30, 2017, the Company completed acquisitions for an aggregate purchase price of $87.3 million and $91.1 million, respectively. The Company has recorded preliminary fair value estimates for the assets acquired and liabilities assumed, which are subject to change pending completion of the Company’s purchase price allocation. The Company allocates the purchase price of each acquisition to the assets acquired and liabilities assumed using a variety of valuation techniques, including discounted cash flow analysis. These acquisitions have been included in the Company’s title insurance and services segment.

During the three and nine months ended September 30, 2016, the Company completed acquisitions for an aggregate purchase price of $56.9 million and $75.5 million, respectively. These acquisitions have been included in the Company’s title insurance and services segment.

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

Note 1517 – Segment Information

The Company consists of the following reportable ~~segments and a corporate function:~~segments:

•

The ~~Company’s~~ title insurance and services segment issues title insurance policies on residential and commercial property in the United States and offers similar or related products and services internationally. This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions ~~involving the use of real property related data~~ designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant ~~records~~data and ~~images;~~records; provides ~~evidence of title;~~appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides document generation services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust ~~document custodial~~ and ~~investment advisory~~wealth management services. The Company, through its principal title insurance subsidiary and such subsidiary’s affiliates, transacts its title insurance business through a network of direct operations and agents. Through this network, the Company issues policies in the 49 states that permit the issuance of title insurance policies, ~~and~~ the District of ~~Columbia.~~Columbia and certain United States territories. The Company also offers title insurance, closing services and ~~other insurance~~similar or related products and ~~guarantee products, as well as related settlement~~ services, either directly or through third parties in ~~foreign~~other countries, including Canada, the United Kingdom, Australia, New Zealand, South Korea and various other established and emerging markets.

•

The Company’s specialty insurance segment issues property and casualty insurance policies and sells home warranty products. The property and casualty insurance business provides insurance coverage to residential homeowners and renters for liability losses and typical hazards such as fire, theft, vandalism and other types of property damage. This business is licensed to issue policies in all 50 states and the District of Columbia and actively issues policies in 47 states. The majority of policy liability is in the western United States, including approximately 65% in California. In certain markets it also offers preferred risk auto insurance to better compete with other carriers offering bundled home and auto insurance. The home warranty ~~business provides~~segment sells products including residential service contracts that cover residential systems, such as heating and air conditioning systems, and certain appliances against failures that occur as the result of normal usage during the coverage period. This business currently operates in 3936 states and the District of Columbia.

•

The corporate ~~function consists primarily of~~segment includes investments in venture-stage companies, certain financing facilities ~~as well as the~~and corporate services that support the Company’s business operations.

FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
Notes to Condensed Consolidated Financial Statements – (Continued)
(unaudited)

Selected financial information about the Company’s operations, by segment, is as follows:

For the three months ended ~~September 30, 2017:~~March 31, 2024:

(in thousands)
Revenues

Income (loss)
before
income taxes

Depreciation
and
amortization

Capital
expenditures

Title Insurance and Services
$
1,397,262


$
181,199

$
34,363

$
33,750

Specialty Insurance

118,481


6,178

1,599

2,015

Corporate

4,108

(169,415
)

38

—

Eliminations

(283
)

—

—

—

$
1,519,568


$
17,962

$
36,000

$
35,765


(in millions)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures
Title Insurance and Services	$	1,319.8		$	72.7		$	48.8	$	59.6
Home Warranty		105.2			20.3			1.3		1.9
Corporate and Eliminations		(0.4	)		(34.7	)		—		—
	$	1,424.6		$	58.3		$	50.1	$	61.5


(in millions)	Direct premiums and escrow fees		Agent premiums		Information and other			Net investment income (loss)		Net investment gains (losses)			Total Revenues
Title Insurance and Services	$	403.2	$	563.8	$	217.2		$	116.7	$	18.9		$	1,319.8
Home Warranty		97.7		—		5.9			0.9		0.7			105.2
Corporate and Eliminations		—		—		(0.1	)		10.3		(10.6	)		(0.4	)
	$	500.9	$	563.8	$	223.0		$	127.9	$	9.0		$	1,424.6

For the three months ended ~~September 30, 2016:~~March 31, 2023:


(in millions)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures
Title Insurance and Services	$	1,348.6		$	88.2		$	44.2	$	66.3
Home Warranty		103.7			15.9			1.3		1.2
Corporate and Eliminations		(6.2	)		(44.5	)		—		—
	$	1,446.1		$	59.6		$	45.5	$	67.5


(in millions)	Direct premiums and escrow fees		Agent premiums		Information and other			Net investment income (loss)		Net investment losses			Total Revenues
Title Insurance and Services	$	405.6	$	590.4	$	221.5		$	124.6	$	6.5		$	1,348.6
Home Warranty		96.6		—		5.5			1.4		0.2			103.7
Corporate and Eliminations		—		—		(0.1	)		8.0		(14.1	)		(6.2	)
	$	502.2	$	590.4	$	226.9		$	134.0	$	(7.4	)	$	1,446.1

(in thousands)
Revenues

Income (loss)
before
income taxes

Depreciation
and
amortization

Capital
expenditures

Title Insurance and Services
$
1,395,727


$
188,706

$
22,994

$
41,948

Specialty Insurance

109,782


1,781

1,401

844

Corporate

2,855

(23,556
)

96

—

Eliminations

(20
)

—

—

—

$
1,508,344


$
166,931

$
24,491

$
42,792

~~FIRST AMERICAN FINANCIAL CORPORATION~~
~~AND SUBSIDIARY COMPANIES~~
~~Notes to Condensed Consolidated~~Item 2. Management’s Discussion and Analysis of Financial ~~Statements – (Continued)~~
~~(unaudited)~~Condition and Results of Operations.

~~For the nine months ended September 30, 2017:~~

(in thousands)
Revenues

Income (loss)
before
income taxes

Depreciation
and
amortization


Capital
expenditures

Title Insurance and Services
$
3,937,119


$
476,746

$
91,471

$
100,059

Specialty Insurance

343,908


25,779

4,697

5,797

Corporate

10,872

(216,529
)

124

—

Eliminations

(859
)

—

—

—

$
4,291,040


$
285,996

$
96,292

$
105,856

F~~or the nine months ended September 30, 2016:~~

(in thousands)
Revenues

Income (loss)
before
income taxes

Depreciation
and
amortization

Capital
expenditures

Title Insurance and Services
$
3,750,118

$
448,815

$
66,510

$
99,887

Specialty Insurance

317,246

18,744

4,107

3,928

Corporate

4,265

(71,429
)

288

—

Eliminations

(40
)

—

—

—

$
4,071,589

$
396,130

$
70,905

$
103,815

It~~em 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations.~~

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-Q ~~CONTAINS~~ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS ~~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,~~“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.PHRASES.

RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE THE FACTORS SET FORTH ON PAGES 3-4 OF THIS QUARTERLY REPORT. 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.

This Management’s Discussion and Analysis contains ~~certain~~the financial ~~measures~~measure adjusted debt to capitalization ratio that ~~are~~is not presented in accordance with ~~U.S.~~ generally accepted accounting principles (“GAAP”), ~~including adjusted information and other revenues, adjusted personnel costs and adjusted other operating expenses, in each case excluding~~as it excludes the effects of ~~recent acquisitions.~~secured financings payable and accumulated other comprehensive loss. The Company is presenting ~~these~~this non-GAAP financial ~~measures~~measure because ~~they provide~~it provides the Company’s management and readers of this Quarterly Report on Form 10-Q with additional insight into the ~~operational performance~~financial leverage of the ~~Company relative to earlier periods.~~Company. The Company does not intend for ~~these~~this non-GAAP financial ~~measures~~measure to be a substitute for any GAAP financial information. In this Quarterly Report on Form 10-Q, ~~these~~this non-GAAP financial ~~measures have~~measure has been presented with, and reconciled to, the most directly comparable GAAP financial ~~measures.~~measure. Readers of this Quarterly Report on Form 10-Q should use ~~these~~this non-GAAP financial ~~measures~~measure only in conjunction with the comparable GAAP financial ~~measures.~~measure.Because not all companies use identical calculations, the presentation of adjusted debt to capitalization ratio may not be comparable to other similarly titled measures of other companies.

CRITICAL ACCOUNTING ESTIMATES

~~There have been no material changes to the Company’s critical accounting estimates since the filing of its Annual Report on Form 10-K for the year ended December 31, 2016.~~ A summary of the Company’s significant accounting policies that it considers to be the most dependent on the application of estimates and assumptions can be found in the Management’s Discussion and Analysis section of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023.

Recently Adopted Accounting Pronouncements

In October 2016, the Financial Accounting Standards Board (“FASB”) issued updated guidance to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that variable interest entity. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2016. The adoption of this guidance had no impact on the Company’s condensed consolidated financial statements.

In March 2016, the FASB issued updated guidance intended to simplify and improve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of such awards as either equity or liabilities and classification on the statement of cash flows. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2016. While the adoption of this guidance did have an impact on the Company’s effective income tax rate for 2017, it did not have a material impact on the Company’s condensed consolidated financial statements. See Note ~~7 Income Taxes~~1 Basis of Condensed Consolidated Financial Statements to the condensed consolidated financial ~~statements for further discussion~~statements.

Pending Accounting Pronouncements

See Note 1 Basis of ~~the Company’s effective income tax rates. Beginning in 2017, excess tax benefits from share-based compensation are presented in~~Condensed Consolidated Financial Statements to the condensed consolidated ~~statements of cash flows in cash flows from operating activities within net change in income tax accounts.~~

~~Pending Accounting Pronouncements~~

In May 2017, the FASB issued updated guidance intended to reduce diversity in practice by clarifying which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

Results of Operations

~~Summary of Third Quarter~~

Summary


	Three Months Ended March 31,
(dollars in millions)	2024			2023			$ Change			% Change
Total Revenues by Segment
Title Insurance and Services	$	1,319.8		$	1,348.6		$	(28.8	)		(2.1	)%
Home Warranty		105.2			103.7			1.5			1.4
Corporate and Eliminations		(0.4	)		(6.2	)		5.8			93.5
	$	1,424.6		$	1,446.1		$	(21.5	)		(1.5	)%

A substantial portion of the revenues for the Company’s title insurance and services segment ~~results~~result from ~~the sale~~sales of, and ~~refinancing~~refinancings of loans on, residential and commercial real estate. In the ~~Company’s specialty insurance~~home warranty segment, revenues associated with the initial year of coverage ~~in both the home warranty and property and casualty operations~~ are impacted by volatility in residential purchase transactions. Traditionally, the greatest volume of real estate activity, particularly residential purchase activity, has occurred in the spring and summer months. However, changes in interest rates, as well as other changes in general economic conditions in the United States and abroad, can cause fluctuations in the traditional pattern of real estate activity.

The Company’s total revenues decreased $21.5 million, or 1.5%, in the first quarter of 2024 when compared with the first quarter of 2023. This decrease was primarily attributable to a decline in agent premiums in the title insurance business of $26.6 million, or 4.5%, and a decrease in net investment income of $6.1 million, or 4.6%, partially offset by net investment gains of $9.0 million, an increase of $16.4 million, when compared to $7.4 million in net investment losses recognized in the prior year. In the title insurance and services segment, direct premiums and escrow fees from domestic commercial and residential refinance transactions decreased $5.5 million, or 3.7%, and $2.6 million, or 13.2%, respectively, while direct premiums and escrow fees from domestic residential purchase transactions increased $4.0 million, or 2.1%, in the first quarter of 2024 when compared to the first quarter of 2023.

According to the Mortgage Bankers Association’s ~~October 24, 2017~~April 18, 2024 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) ~~decreased 16.0%~~are forecasted to increase 13.2% in the ~~third~~first quarter of ~~2017~~2024 when compared with the ~~third~~first quarter of ~~2016.~~2023. According to the MBA Forecast, the dollar amount of purchase originations ~~increased 7.4% and refinance originations decreased 42.6%~~are forecasted to increase 9.0%. This volume of domestic residential mortgage origination activity contributed to ~~a 9.9%~~an increase of 2.1% in direct premiums and escrow fees for the Company’s direct title operations from domestic residential purchase transactions and a ~~40.4%~~ decrease ~~in direct premiums and escrow fees~~of 13.2% from domestic refinance transactions in the ~~third~~first quarter of ~~2017~~2024 when compared towith the ~~third~~first quarter of ~~2016.~~2023.

During the ~~third~~first quarter of ~~2017,~~2024, the level of domestic title orders opened per day by the Company’s direct title operations decreased ~~by 22.5%~~9.9% when compared with the ~~third~~first quarter of ~~2016.~~2023. Residential refinance ~~open~~opened orders per day decreased ~~by 46.4%~~5.0%, while residential purchase and commercial ~~open~~opened orders per day increased ~~by 2.2%~~2.7% and ~~0.5%~~0.8%, ~~respectively. The sharp decline in residential refinance orders opened per day was attributable to higher mortgage interest rates in~~respectively, when compared with the ~~third~~first quarter of ~~2017 when compared to the third quarter of 2016.~~

In 2016, the Company terminated its funded defined benefit pension plans. In July 2017, the Company completed the transfer of all remaining benefit obligations related to the pension plans to a highly rated insurance company and recognized $152.4 million of pension expense in personnel costs in the corporate segment in the third quarter of 2017. The Company estimates an annual reduction of approximately $22 million in personnel costs related to the pension plans within the corporate segment, based on the level of these expenses for the year ended December 31, 2016. For further discussion of the pension termination see Note 9 Employee Benefit Plans to the condensed consolidated financial statements.

During the third quarter of 2017 and in October 2017, hurricanes and wildfires impacted many regions across the country. The Company does not expect these events to ultimately have a significant impact to its condensed consolidated financial statements. While the Company does not expect a significant impact to its financial results, the Company expects the wildfires in California to negatively impact its property and casualty business in its specialty insurance segment in the fourth quarter of 2017. The Company expects losses from these fires to continue to develop and expects to reach its reinsurance retention limit of $5.0 million.

In addition, the Company continues to monitor developments in its regulatory environment. Currently, federal officials are discussing various potential changes to laws and regulations that could impact the Company’s businesses, including changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the reform or privatization of government-sponsored enterprises such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), and tax reform, including changes that could affect the mortgage interest deduction, state and local tax deductions and the availability of tax-deferred property exchanges, among others. Changes in these areas, and more generally in the regulatory environment, in which the Company and its customers operate, could impact the volume of mortgage originations in the United States and the Company’s competitive position and results of operations. At this time, the nature and impact of any future changes is unknown.

2023.

Title Insurance and Services

	Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change
																									Three Months Ended March 31,
(dollars in millions)																									2024			2023			$ Change			% Change
Revenues
Direct premiums and escrow fees	$	538,063		$	544,427		$	(6,364	)		(1.2	)%	$	1,492,258		$	1,471,338		$	20,920			1.4	%	$	403.2		$	405.6		$	(2.4	)		(0.6	)%
Agent premiums		629,186			625,953			3,233			0.5			1,757,796			1,653,990			103,806			6.3			563.8			590.4			(26.6	)		(4.5	)
Information and other		199,271			187,979			11,292			6.0			578,549			524,199			54,350			10.4			217.2			221.5			(4.3	)		(1.9	)
Net investment income		37,901			28,986			8,915			30.8			99,181			81,389			17,792			21.9			116.7			124.6			(7.9	)		(6.3	)
Net realized investment (losses) gains		(7,159	)		8,382			(15,541	)		(185.4	)		9,335			19,202			(9,867	)		(51.4	)
Net investment gains																										18.9			6.5			12.4			190.8
		1,397,262			1,395,727			1,535			0.1			3,937,119			3,750,118			187,001			5.0			1,319.8			1,348.6			(28.8	)		(2.1	)
Expenses
Personnel costs		421,849			409,345			12,504			3.1			1,222,277			1,154,225			68,052			5.9			452.5			458.8			(6.3	)		(1.4	)
Premiums retained by agents		497,911			495,130			2,781			0.6			1,387,608			1,303,838			83,770			6.4			447.8			469.0			(21.2	)		(4.5	)
Other operating expenses		196,455			198,147			(1,692	)		(0.9	)		579,431			559,141			20,290			3.6			233.7			224.1			9.6			4.3
Provision for policy losses and other claims		46,689			64,352			(17,663	)		(27.4	)		130,037			171,994			(41,957	)		(24.4	)		29.0			34.9			(5.9	)		(16.9	)
Depreciation and amortization		34,363			22,994			11,369			49.4			91,471			66,510			24,961			37.5			48.8			44.2			4.6			10.4
Premium taxes		17,871			16,301			1,570			9.6			46,973			43,488			3,485			8.0			12.9			13.5			(0.6	)		(4.4	)
Interest		925			752			173			23.0			2,576			2,107			469			22.3			22.4			15.9			6.5			40.9
		1,216,063			1,207,021			9,042			0.7			3,460,373			3,301,303			159,070			4.8			1,247.1			1,260.4			(13.3	)		(1.1	)
Income before income taxes	$	181,199		$	188,706		$	(7,507	)		(4.0	)%	$	476,746		$	448,815		$	27,931			6.2	%	$	72.7		$	88.2		$	(15.5	)		(17.6	)%
Margins		13.0	%		13.5	%		(0.5	)%		(3.7	)%		12.1	%		12.0	%		0.1	%		0.8	%
Pretax margins																										5.5	%		6.5	%		(1.0	)%		(15.4	)%

Direct premiums and escrow fees were ~~$538.1~~$403.2 million ~~and $1.5 billion~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, a decrease of ~~$6.4~~$2.4 million, or ~~1.2%, and an increase of $20.9 million, or 1.4%~~0.6%, when compared with the ~~respective periods~~same period of the prior year. The decrease was due to reductions in the number of domestic title orders closed by the Company’s direct title operations, partially offset by increases in domestic average revenues per order. Domestic average revenues per order closed was $3,516 for the three months ended ~~September 30, 2017~~March 31, 2024, an increase of 2.6% when compared with $3,428 for the three months ended March 31, 2023, which was ~~primarily~~ due to a ~~decrease~~shift in ~~the domestic title orders closed, partially offset by~~mix from lower premium default transactions to higher premium purchase transactions and an increase in the average revenues per order closed. The increase for the nine months ended September 30, 2017 was primarily due to an increase in the average revenues per order closed, partially offset by a decrease in the domestic title orders closed. The average revenues per order closed were $2,298 and $2,215 for the three and nine months ended September 30, 2017, respectively, increases of 23.6% and 15.3% when compared with $1,859 and $1,921 for the respective periods of the prior year. The increases in average revenues per order closed for the three and nine months ended September 30, 2017 were primarily attributable to a shift in the mix of direct revenues generated from lower premium residential refinance products to higher premium residential purchase and commercial products, higher average revenues per order from commercial transactions, higher residential real estate values, and, to a lesser extent, premium and fee increases related to residentialon purchase transactions. The Company’s direct title operations closed ~~214,300 and 619,500~~102,700 domestic title orders during the three ~~and nine~~ months ended ~~September 30, 2017, respectively, decreases~~March 31, 2024, a decrease of ~~20.2% and 12.2%~~3.7% when compared with ~~268,400 and 705,700~~106,600 domestic title orders closed during the ~~respective periods~~same period of the prior ~~year.~~year, which were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast. Domestic residential refinance and purchase orders closed per day decreased by ~~42.5%~~3.2% and ~~32.9%, while domestic residential purchase orders closed per day~~ increased by ~~4.8% and 3.9%~~0.3%, respectively, for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 when compared to the same ~~periods~~period of ~~2016.~~the prior year.

Agent premiums were ~~$629.2~~$563.8 million ~~and $1.8 billion~~ for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases~~March 31, 2024, a decrease of ~~$3.2~~$26.6 million, or ~~0.5%, and $103.8 million, or 6.3%~~4.5%, when compared with the ~~respective periods~~same period of the prior year. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company. As a result, there is generally a delay between the agent’s issuance of a title policy and the Company’s recognition of agent premiums. Therefore, current quarter agent premiums typically reflect prior quarter mortgage origination activity. The ~~increase~~decrease in agent premiums for the three months ended ~~September 30, 2017~~March 31, 2024 is generally consistent with the ~~1.8% increase~~19.7% decrease in the Company’s direct premiums and escrow fees in the ~~second~~fourth quarter of ~~2017~~2023 as compared with the ~~second~~fourth quarter of ~~2016.~~2022.

Information and other revenues primarily consist of revenues generated from fees associated with title search and related reports, title and other real property records and images, other non-insured settlement services and risk mitigation products and services. These revenues generally trend with direct premiums and escrow fees but are typically less volatile since a portion of the revenues are subscription based and do not fluctuate with transaction volumes.

Information and other revenues were $199.3 million and $578.5 million for the three and nine months ended September 30, 2017, respectively, increases of $11.3 million, or 6.0%, and $54.4 million, or 10.4%, when compared with the respective periods of the prior year. The increases were driven by recent acquisitions. Excluding the $23.6 million and $68.2 million impact of new acquisitions for the three and nine months ended September 30, 2017, respectively, information and other revenues decreased $12.3 million, or 6.6%, and $13.8 million, or 2.6%, when compared with the respective periods of the prior year. The decreases in information and other revenues for the three and nine months ended September 30, 2017, adjusted for the impact of acquisitions, were primarily due to lower demand for the Company’s default information products driven by lower loss mitigation activities and lower demand for the Company’s valuation services, fulfillment services, and automated products driven by lower mortgage origination volumes. The decrease for the nine months ended September 30, 2017 was partially offset by higher fees earned on non-insured products related to commercial transactions.

Net investment income totaled $37.9 million and $99.2 million for the three and nine months ended September 30, 2017, respectively, increases of $8.9 million, or 30.8%, and $17.8 million, or 21.9%, when compared with the respective periods of the prior year. The increases were primarily attributable to increases in short-term interest rates which drove higher interest income on balances held in connection with the Company’s tax-deferred property exchange business, the floating rate mortgage-backed securities portfolio, and escrow deposits. In addition, interest income from the debt securities portfolio increased due to higher average balances when compared to the same periods of the prior year.

~~Net realized investment losses totaled $7.2~~$217.2 million for the three months ended ~~September 30, 2017~~March 31, 2024, a decrease of $4.3 million, or 1.9%, when compared with the same period of the prior year. The decrease was primarily due to the increased capture rate of title premiums from an affiliated title agent, which caused a decrease in information and ~~net realized~~other revenues and a comparable increase in direct premiums and escrow fees.

Net investment ~~gains~~income totaled ~~$9.3~~$116.7 million ~~for the nine months ended September 30, 2017. Net realized investment losses~~ for the three months ended ~~September 30, 2017 primarily related to~~March 31, 2024, a ~~$6.6 million loss recognized when the Company purchased the remaining equity ownership in an investment in an affiliate during the third quarter~~decrease of 2017. This investment, which was previously accounted for using the equity method of accounting, is now consolidated for financial reporting purposes. Net realized investment gains for the nine months ended September 30, 2017 primarily related to sales of equity securities, partially offset by the third quarter loss of $6.6 million described above. Net realized investment gains totaled $8.4 million and $19.2 million for the three and nine months ended September 30, 2016, respectively, and were primarily from the sales of debt and equity securities. Net realized investment gains for the nine months ended September 30, 2016 also included gains from the sales of real estate and certain regional operations.

The title insurance and services segment (primarily direct operations) is labor intensive; accordingly, a major expense component is personnel costs. This expense component is affected by two primary factors: the need to monitor personnel changes to match the level of corresponding or anticipated new orders and the need to provide quality service.

~~Personnel costs were $421.8 million and $1.2 billion for the three and nine months ended September 30, 2017, respectively, increases of $12.5~~$7.9 million, or ~~3.1%, and $68.1 million, or 5.9%~~6.3%, when compared with the respective periods of the prior year. The increases were primarily driven by recent acquisitions. Excluding the $17.4 million and $50.1 million impact of new acquisitions for the three and nine months ended September 30, 2017, respectively, personnel costs decreased $4.9 million, or 1.2%, and increased $18.0 million, or 1.6%, when compared with the respective periodssame period of the prior year. The decrease in ~~personnel costs~~investment income was primarily driven by declines in the Company’s escrow and tax-deferred property exchange balances, partially offset by an increase in interest income from the Company’s warehouse lending business.

Net investment gains of $18.9 million and $6.5 million for the three months ended ~~September 30, 2017, adjusted~~March 31, 2024 and 2023, respectively, were primarily attributable to changes in the fair values of marketable equity securities, partially offset by losses recognized on sales of debt securities.

Personnel costs were $452.5 million for the ~~impact~~three months ended March 31, 2024, a decrease of ~~new acquisitions,~~$6.3 million, or 1.4%, when compared with the same period of the prior year. The decrease was primarily attributable to ~~decreases in~~lower salary expense driven by lower headcount and lower temporary labor ~~costs, overtime~~and severance expense, ~~and medical insurance expense. These decreases were~~ partially offset by $9.0 million in out-of-period adjustments recorded to correct for errors in recording certain personnel costs. The increase in personnel costs for the nine months ended September 30, 2017, adjusted for the impact of new acquisitions, was primarily attributable to increased salary expense due to an increase in average salaries; an increase in incentive compensation due to higher revenue and profitability; and the $9.0 million in out-of-period adjustments recorded to correct for errors in recording certain personnel costs; partially offset by a decrease in temporary labor costs and overtime expense. ~~For further discussion of the out-of-period adjustments see Note 1 Basis of Condensed Consolidated Financial Statements.~~

Agents retained ~~$497.9~~$447.8 million ~~and $1.4 billion~~ of title premiums generated by agency operations for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2024, which compares with ~~$495.1~~$469.0 million ~~and $1.3 billion~~ for the ~~respective periods~~same period of the prior year. The percentage of title premiums retained by agents was ~~79.1% and 78.9% for the three and nine months ended September 30, 2017, respectively, compared to 79.1% and 78.8% for the respective periods of the prior year.~~

Other operating expenses for the title insurance and services segment were $196.5 million and $579.4 million for the three and nine months ended September 30, 2017, respectively, a decrease of $1.7 million, or 0.9%, and an increase of $20.3 million, or 3.6%, when compared with the respective periods of the prior year. These expenses79.4% for the three months ended ~~September 30, 2017 were essentially unchanged when compared with the three months ended September 30, 2016~~March 31, 2024 and the increase for the nine months ended September 30, 2017 was driven by recent acquisitions. Excluding the $10.5 million and $28.6 million impact of new acquisitions for the three and nine months ended September 30, 2017, respectively, other2023.

Other operating expenses ~~decreased $12.2~~were $233.7 million ~~or 6.2%, and $8.3 million, or 1.5%, when compared with the respective periods of the prior year. The decrease~~ for the three months ended ~~September 30, 2017, adjusted for the impact~~March 31, 2024, an increase of ~~acquisitions, was primarily attributable to lower production related costs driven by lower order volumes, lower legal expense, lower bad debt expense, and lower software expenses~~$9.6 million, or 4.3%, when compared towith the same period of the prior year. The ~~decrease for the nine months ended September 30, 2017, adjusted for the impact of acquisitions,~~increase was primarily ~~attributable~~due to ~~lower software~~an out-of-period adjustment of $6.2 million recorded in the current quarter to write-off certain uncollectible balances related ~~expenses, lower~~to fees that should have been previously written off. The increase in the current quarter also reflects higher legal ~~expense, and higher foreign currency exchange gains; partially offset by the first quarter of 2016 benefitting from the recovery of an insurance claim.~~expenses.

The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was ~~4.0%~~3.0% and 3.5% for the three ~~and nine~~ months ended ~~September 30, 2017 compared to 5.5% for the three~~March 31, 2024 and ~~nine months ended September 30, 2016.~~2023, respectively. The ~~current quarter~~3.0% loss provision rate ~~of 4.0% reflects the ultimate loss rate for~~in the current ~~policy~~ year ~~and no change in the loss reserve estimates for prior policy years. The third quarter of 2016 rate of 5.5% reflected the~~reflects an ultimate loss rate of ~~5.0%~~3.75% for the ~~2016~~2024 policy year and ~~a $5.8~~reserve releases of 0.75%, or $7.3 million ~~net increase in the loss reserve estimates~~ for prior policy ~~years.~~years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2024. The 3.5% loss provision rate for the three months ended March 31, 2023 reflected an ultimate loss rate of 3.75% for the 2023 policy year and reserve releases of 0.25%, or $2.5 million for prior policy years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2023.

Depreciation and amortization expense was ~~$34.4 million and $91.5~~$48.8 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases~~March 31, 2024, an increase of ~~$11.4~~$4.6 million, or ~~49.4%, and $25.0 million, or 37.5%~~10.4%, when compared with the ~~respective periods~~same period of the prior year. The ~~increases were~~increase was primarily ~~attributable~~due to ~~$4.7 million in out-of-period adjustments recorded to fully amortize certain title plant imaging assets that were misclassified as title plants assets and~~ higher amortization ~~expense associated with internally developed technology and purchased~~of capitalized software licenses. The higher amortization expense related to internally developed technology included $1.2 million and $5.3 million of accelerated amortization for the three and nine months ended September 30, 2017, respectively, resulting from ~~a shortened useful life for a software interface. For further discussion of the out-of-period adjustments see Note 1 Basis of Condensed Consolidated Financial Statements.~~recently deployed digital settlement products.

Premium taxes were ~~$17.9 million and $47.0~~$12.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases~~March 31, 2024, a decrease of ~~$1.6~~$0.6 million, or ~~9.6%~~4.4%, ~~and $3.5 million, or 8.0%, respectively,~~when compared ~~to $16.3 million and $43.5 million for~~with the same ~~periods~~period of the prior year. Premium taxes as a percentage of title insurance premiums and escrow fees were ~~1.5%~~1.3% and 1.4% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared to 1.4%~~March 31, 2024 and 2023, respectively.

Interest expense was $22.4 million for the three ~~and nine~~ months ended ~~September 30, 2016.~~March 31, 2024, an increase of $6.5 million, or 40.9%, when compared with the same period of the prior year. The increase was primarily attributable to higher interest expense in the Company’s warehouse lending business.

~~The profit~~Pretax margins for the title insurance business reflect the high cost of performing the essential services required before insuring title, whereas the corresponding revenues are subject to regulatory and competitive pricing restraints. Due to ~~this~~the relatively high proportion of fixed costs in the title insurance ~~profit~~business, pretax margins generally improve as closed order volumes increase. ~~Title insurance profit~~Pretax margins for the segment are ~~affected~~also impacted by (1) net investment income and net investment gains or losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate ~~activity. Title insurance profit margins are also affected by~~activity and (3) the percentage of title insurance premiums generated by agency ~~operations. Profit~~operations as margins from direct operations are generally higher than from agency operations due primarily to the large portion of the premium that is retained by the agent. ~~Pre-tax~~The title insurance and services segment recorded pretax margins of 5.5% and 6.5% for the three ~~and nine~~ months ended ~~September 30, 2017 were 13.0%~~March 31, 2024 and ~~12.1%, respectively, compared with 13.5% and 12.0% in the respective periods of the prior year.~~2023, respectively.

Home Warranty


	Three Months Ended March 31,
(dollars in millions)	2024			2023			$ Change			% Change
Revenues
Direct premiums	$	97.7		$	96.6		$	1.1			1.1	%
Information and other		5.9			5.5			0.4			7.3
Net investment income		0.9			1.4			(0.5	)		(35.7	)
Net investment gains		0.7			0.2			0.5			250.0
		105.2			103.7			1.5			1.4
Expenses
Personnel costs		19.8			19.2			0.6			3.1
Other operating expenses		22.1			20.6			1.5			7.3
Provision for policy losses and other claims		40.7			45.7			(5.0	)		(10.9	)
Depreciation and amortization		1.3			1.3			—			—
Premium taxes		1.0			1.0			—			—
		84.9			87.8			(2.9	)		(3.3	)
Income before income taxes	$	20.3		$	15.9		$	4.4			27.7	%
Pretax margins		19.3	%		15.3	%		4.0	%		26.1	%

~~Specialty Insurance~~

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)
2017

2016

$ Change

% Change

2017

2016

$ Change

% Change

Revenues

Direct premiums
$
113,041


$
105,299


$
7,742


7.4
%

$
326,935


$
304,277


$
22,658


7.4
%
Information and other

2,814


754


2,060

273.2

8,427


2,394


6,033

252.0

Net investment income

2,468


2,595


(127
)

(4.9
)

7,118


7,085


33

0.5

Net realized investment gains

158


1,134


(976
)


(86.1
)

1,428


3,490


(2,062
)


(59.1
)

118,481


109,782


8,699

7.9

343,908


317,246


26,662

8.4

Expenses

Personnel costs

18,478


17,347


1,131

6.5

53,632


51,149


2,483

4.9

Other operating expenses

16,537


14,603


1,934

13.2

50,588


43,563


7,025

16.1

Provision for policy losses and other claims

73,660


72,663


997

1.4

203,658


194,479


9,179

4.7

Depreciation and amortization

1,599


1,401


198

14.1

4,697


4,107


590

14.4

Premium taxes

2,029


1,987


42

2.1

5,554


5,204


350

6.7

112,303


108,001


4,302

4.0

318,129


298,502


19,627

6.6

Income before income taxes
$
6,178


$
1,781


$
4,397

246.9
%

$
25,779


$
18,744


$
7,035

37.5
%
Margins

5.2
%

1.6
%

3.6
%

225.0
%

7.5
%

5.9
%

1.6
%

27.1
%

Direct premiums were ~~$113.0 million and $326.9~~$97.7 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases~~March 31, 2024, an increase of ~~$7.7~~$1.1 million, or ~~7.4%, and $22.7 million, or 7.4%~~1.1%, when compared with the ~~respective periods~~same period of the prior year. The ~~increases were~~increase was primarily attributable to ~~higher premiums earned in the home warranty business driven by~~ an increase in ~~the number of home warranty residential service contracts issued and an increase in the average price charged per contract.~~policy renewals.

Information and other revenues were $2.8 million and $8.4 million for the three and nine months ended September 30, 2017, respectively, increases of $2.1 million, or 273.2%, and $6.0 million, or 252.0%, when compared with the respective periods of the prior year. The increases were due to a change in how the Company reports installment fees related to home warranty residential service contracts. Beginning December 31, 2016, the Company reported installment fees in information and other revenues, while prior to December 31, 2016, the Company reported installment fees as a reduction in other operating expenses. This change resulted in an increase to information and other revenues and an increase to other operating expenses of $2.1 million and $6.0 million for the three and nine months ended September 30, 2017, respectively, when compared with the respective periods of the prior year.

Net realized investment gains totaled $0.2 million and $1.4 million for the three and nine months ended September 30, 2017, respectively, and $1.1 million and $3.5 million for the three and nine months ended September 30, 2016, respectively. The net realized gains for the three and nine months ended September 30, 2017 were from the sales of debt and equity securities. The net realized gains for the three months ended September 30, 2016 were primarily from the sales of debt securities. The net realized gains for the nine months ended September 30, 2016 were primarily from the sale of real estate and, to a lesser extent, from the sales of debt securities.

Personnel costs and other operating expenses ~~were $35.0 million and $104.2~~totaled $41.9 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases~~March 31, 2024, an increase of ~~$3.1~~$2.1 million, or ~~9.6%, and $9.5 million, or 10.0%~~5.3%, when compared with the ~~respective periods~~same period of the prior year. The ~~increases were~~increase was primarily attributable to ~~a change in how the Company reports installment fees related to home warranty residential service contracts which is further discussed above.~~higher advertising, professional services and salary expense.

The provision for home warranty claims, expressed as a percentage of home warranty premiums, was ~~60.1%~~41.7% and ~~56.1%~~47.3% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with 69.8%~~March 31, 2024 and ~~63.4% for the respective periods of the prior year.~~2023, respectively. The decrease in the claims rate ~~for the three months ended September 30, 2017~~ was primarily attributable to ~~a decrease in the frequency~~lower claims volume and severity of claims and, to a lesser extent, an increase in average revenue per contract. The decrease in the severity of claims was primarily due to more efficient claims management, which was mainly driven by improved rates with contractors and more efficient allocation of claims to contractors. The severity and frequency of home warranty claims also benefited from milder weather conditions when compared to the same quarter of the prior year. The provision for property and casualty claims, expressed as a percentage of property and casualty insurance premiums, was 77.8% and 77.3% for the three and nine months ended September 30, 2017, respectively, compared with 67.3% and 65.0% for the respective periods of the prior year. The increase in the claims rate for the three months ended September 30, 2017 was primarily attributable to an increase in the severity and frequency of claims.severity.

Premium taxes were $2.0 million and $5.6 million for the three and nine months ended September 30, 2017, respectively, compared with $2.0 million and $5.2 million for the respective periods of the prior year. Premium taxes as a percentage of specialty insurance segment premiums were 1.8% and 1.7% for the three and nine months ended September 30, 2017, respectively, compared with 1.9% and 1.7% in the respective periods of the prior year.

A large part of the revenues for the ~~specialty insurance businesses~~home warranty segment are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of ~~loss expense,~~the provision for losses, the majority of the expenses for this segment are variable in nature and, therefore, generally fluctuate ~~consistent~~ with ~~revenue fluctuations.~~revenue. Accordingly, ~~profit~~pretax margins ~~for this segment~~ (before loss expense) are relatively constant, although, as a result of some fixed expenses, profit margins (before loss expense) should nominally improve as premium revenues increase. ~~Pre-tax~~Pretax margins are also impacted by net investment income and net investment gains or losses, which may not move in the same direction as premium revenues. The home warranty segment recorded pretax margins of 19.3% and 15.3% for the three ~~and nine~~ months ended ~~September 30, 2017 were 5.2%~~March 31, 2024 and ~~7.5%, respectively, compared with 1.6% and 5.9% in the respective periods of the prior year.~~2023, respectively.

Corporate

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages)
2017


2016

$ Change

% Change

2017

2016

$ Change

% Change

Revenues



Net investment income
$
4,108


$
2,855

$
1,253

43.9
%

$
10,872

$
4,265

$
6,607

154.9
%

4,108



2,855

1,253

43.9

10,872

4,265

6,607

154.9

Expenses

Personnel costs

159,053



12,000

147,053

NM
¹

183,019

33,755

149,264

442.2

Other operating expenses

6,233



7,215

(982
)

(13.6
)

19,960

20,309

(349
)

(1.7
)
Depreciation and amortization

38



96

(58
)

(60.4
)

124

288

(164
)

(56.9
)
Interest

8,199



7,100

1,099

15.5


24,298

21,342

2,956

13.9

173,523



26,411

147,112

557.0

227,401

75,694

151,707

200.4

Loss before income taxes
$
(169,415
)

$
(23,556
)

$
(145,859
)

(619.2
)%

$
(216,529
)

$
(71,429
)

$
(145,100
)

(203.1
)%

~~(1)~~

~~Not meaningful~~


	Three Months Ended March 31,
(dollars in millions)	2024			2023			$ Change			% Change
Revenues
Information and other	$	—		$	0.1		$	(0.1	)		(100.0	)
Net investment income		10.7			8.2			2.5			30.5
Net investment losses		(10.6	)		(14.2	)		3.6			25.4
		0.1			(5.9	)		6.0			101.7
Expenses
Personnel costs		12.5			9.6			2.9			30.2
Other operating expenses		10.0			13.8			(3.8	)		(27.5	)
Provision for policy losses and other claims		(0.2	)		1.8			(2.0	)		(111.1	)
Interest		12.5			13.4			(0.9	)		(6.7	)
		34.8			38.6			(3.8	)		(9.8	)%
Loss before income taxes	$	(34.7	)	$	(44.5	)	$	9.8			22.0	%

Net investment income totaled ~~$4.1~~$10.7 million and ~~$10.9~~$8.2 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with $2.9 million~~March 31, 2024 and ~~$4.3 million for the respective periods of the prior year.~~2023, respectively. The ~~increases~~change in net investment income ~~for the three and nine months ended September 30, 2017 were~~was primarily attributable to ~~higher~~fluctuations in earnings on investments associated with the Company’s deferred compensation ~~plan when compared~~plan.

Net investment losses of $10.6 million for the three months ended March 31, 2024 were primarily related to changes in the ~~same periods~~fair value of ~~2016.~~the Company's investment in Offerpad. Net investment losses of $14.2 million for the three months ended March 31, 2023 were primarily related to impairment charges and observable pricing changes on non-marketable equity investments within the Company's venture investment portfolio.

~~Corporate personnel~~Personnel costs and other operating expenses ~~were $165.3~~totaled $22.5 million and ~~$203.0~~$23.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with $19.2 million~~March 31, 2024 and ~~$54.1 million for the respective periods of the prior year.~~2023, respectively. The ~~increases were~~decrease was primarily attributable to ~~pension settlement costs of $152.4 million~~reinsurance charges in the property and casualty business in the prior year that did not reoccur in the ~~Company recognized during~~current year, partially offset by higher returns on participant investments within the ~~third quarter of 2017 upon completing~~Company’s deferred compensation plan in the ~~termination of its funded defined benefit pension plans. For further discussion of the pension termination see Note 9 Employee Benefit Plans to the condensed consolidated financial statements.~~current year.

Interest expense ~~was $8.2~~totaled $12.5 million and ~~$24.3~~$13.4 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, increases of $1.1 million, or 15.5%,~~March 31, 2024 and ~~$3.0 million, or 13.9%, when compared with~~2023, respectively. The decrease was primarily attributable to the ~~respective periods~~repayment of the ~~prior year. The increases were due to the Company borrowing $160.0~~Company's $250 million ~~under its credit facility during September 2016.~~

~~Eliminations~~4.30% senior unsecured notes, upon maturity, in February 2023.

Eliminations

The Company’s inter-segment eliminations were not material for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016.~~2023.

INCOME TAXES

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were ~~-17.9%~~19.9% and ~~29.7%~~22.8% for the three ~~and nine~~ months ended ~~September 30, 2017, respectively, compared with 35.7%~~March 31, 2024 and ~~33.7% for~~2023, respectively. The difference in the ~~respective periods of the prior year. The Company’s~~ effective tax rates ~~for 2017 reflect state tax benefits relating~~is primarily due to the ~~termination~~impact on state income taxes resulting from the relative proportion of income derived from the Company’s ~~pension plan, as well as the release of reserves relating to tax positions taken on prior year tax returns.~~insurance and non-insurance businesses. In addition, the ~~Company’s~~ effective tax rates for 2017 reflect the adoption of new accounting guidance related to the accounting for share-based payment transactions, which requires, among other items, that all excess tax benefits and tax deficiencies associated with share-based payment transactions be recorded in income tax expense rather than in additional paid-in capital, as previously required. The impact to the Company of adopting this guidance was a reduction in income tax expense of $0.1 million and $2.8 millionrate for the three and nine months ended September 30, 2017, respectively. See Note 1 Basis of Condensed Consolidated Financial Statements to the condensed consolidated financial statements for further discussion of the new guidance. The Company’s effective tax rates for 2016 reflect the resolution of certain tax authority examinations and2024 reflects tax credits claimed in ~~2016~~the current year and inbenefits of a state tax matter from prior years.

The Company evaluates the realizability of its deferred tax assets by assessing the valuation allowance and makes adjustments to the allowance as necessary. The factors used ~~to assess~~in assessing the likelihood of realization include ~~the Company’s forecast~~forecasts of future taxable income and available tax planning strategies that could be ~~implemented to realize the deferred tax assets.~~implemented. The Company’s ability or ~~failure~~inability to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of its deferred tax assets. Based on ~~actual~~ future operating results in certain jurisdictions, it is possible that the current valuation allowance positions of those jurisdictions could be adjusted induring the next 12 months.

NET INCOME AND NET INCOME ATTRIBUTABLE TO THE COMPANY

Net income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and 2023 was ~~$21.2~~$46.7 million and ~~$201.2~~$46.0 million, ~~respectively, compared with $107.4 million and $262.5 million for the respective periods of the prior year.~~respectively. Net income attributable to the Company for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and 2023 was ~~$21.4~~$46.7 million, or ~~$0.19~~$0.45 per diluted share, and ~~$201.9~~$45.9 million, or ~~$1.80~~$0.44 per diluted share, ~~respectively, compared with $107.3 million, or $0.96 per diluted share, and $262.0 million, or $2.36 per diluted share, for the respective periods of the prior year.~~respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash requirements. The Company generates cash primarily from ~~the sale~~sales of its products and services and from investment income. The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments in private companies (primarily those in the venture-stage) and repurchases of its common stock. Management forecasts the cash needs of the holding company and its primary subsidiaries and regularly reviews their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts. Based on the Company’s ability to generate cash flows from operations, its liquid-asset position and amounts available on its revolving credit facility, management believes that its resources are sufficient to satisfy its anticipated operational cash requirements and obligations for at least the next twelve months.

The substantial majority of the Company’s business is dependent upon activity in the real estate and mortgage markets, which are cyclical and seasonal. Periods of increasing interest rates and reduced affordability, supply and mortgage financing availability generally have an adverse effect on residential real estate activity and, therefore, typically decrease the Company’s revenues. In contrast, periods of declining interest rates and increased affordability, supply and mortgage financing availability generally have a positive effect on residential real estate activity, which typically increases the Company’s revenues. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months. Residential refinance activity is typically more volatile than purchase activity and is highly impacted by changes in interest rates. Commercial real estate volumes are less sensitive to changes in interest rates but fluctuate based on local supply and demand conditions for space and ~~mortgage~~ financing availability.

Cash provided by operating activities ~~amounted to $455.5~~totaled $69.3 million and ~~$252.2~~cash used for operating activities totaled $92.3 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively, after claim payments, net of recoveries, of ~~$351.4~~$91.6 million and ~~$351.3~~$95.2 million, respectively. The principal nonoperating uses of cash and cash equivalents for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023 were advances and repayments related to secured financing transactions, purchases of debt and equity securities, ~~business acquisitions, capital expenditures and~~ dividends to common ~~stockholders.~~stockholders and capital expenditures. Principal nonoperating uses of cash and cash equivalents also included decreases in deposits at the Company's banking operations for the three months ended March 31, 2024 and repurchases of Company shares and repayment of senior unsecured notes for the three months ended March 31, 2023. The ~~most significant~~principal nonoperating sources of cash and cash equivalents for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and 2023 were borrowings and collections related to secured financing transactions, proceeds from the sales and maturities of debt and equity securities and, for the three months ended March 31, 2023, increases in the deposit balances at the Company’s banking operations. The most significant nonoperating sources of cash and cash equivalents for the nine months ended September 30, 2016 were proceeds from the sales and maturities of debt and equity securities, increases in the deposit balances at the Company’s banking operations and net proceeds from the issuance of debt. The net effect of all activities on ~~total~~ cash and cash equivalents ~~were increases~~was a decrease of ~~$135.8 million~~$2.1 billion and ~~$416.0~~an increase of $759.9 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016,~~2023, respectively.

The decreases in the Company’s cash and deposit liability balances at March 31, 2024 when compared to December 31, 2023, reflect the Company’s return to a normal allocation process for managing escrow deposits at its federal savings bank subsidiary in the first quarter of 2024. Due to the cybersecurity incident in late December 2023, the Company maintained a higher proportion of escrow deposits at its federal savings bank at December 31, 2023.

The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In ~~August 2017,~~March 2024, the ~~Company’s board of directors approved an increase in the Company’s quarterly~~Company paid a first quarter cash dividend ~~to 38~~of 53 cents per common ~~share, representing a 12% increase from the prior level of 34 cents per common~~ share. ~~The dividend increase became effective beginning with the September 2017 dividend.~~ Management expects that the Company will continue to pay quarterly cash dividends at or above the current level. The timing, declaration and payment of future dividends, however, falls within the discretion of the Company’s board of directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of the Company’s businesses, restrictions imposed by applicable law and any other factors the board of directors deems relevant from time to time.

~~In March 2014, the Company’s board of directors approved an increase in the size of the Company’s~~The Company maintains a stock repurchase plan ~~from $150.0 million~~with authorization up to ~~$250.0~~$400.0 million, of which ~~$182.4~~$210.4 million remained as of ~~September 30, 2017.~~March 31, 2024. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. ~~The~~During the three months ended March 31, 2024, the Company ~~did not repurchase any~~repurchased and retired 59 thousand shares of its common stock ~~during the nine months ended September 30, 2017~~for a total purchase price of $3.5 million and, as of ~~September 30, 2017, had~~March 31, 2024, repurchased and retired ~~3.2~~3.6 million shares of its common stock under the current authorization for a total purchase price of ~~$67.6~~$189.6 million.

Holding Company. First American Financial Corporation is a holding company that conducts all of its operations through its subsidiaries. The holding company’s current cash requirements include payments of principal and interest on its debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses. The holding company is dependent upon dividends and other payments from its operating subsidiaries to meet its cash requirements. The Company’s target is to maintain a cash balance at the holding company equal to at least twelve months of estimated cash requirements. At certain points in time, the actual cash balance at the holding company may vary from this target due to, among other factors, the timing and amount of cash payments made and dividend payments received. Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available to the holding company is limited, principally for the protection of policyholders. As of ~~September 30, 2017,~~March 31, 2024, under such regulations, the maximum amount ~~of dividends, loans and advances~~ available to the holding company from its insurance subsidiaries for the remainder of ~~2017,~~2024, without prior approval from applicable regulators, was ~~$759.7~~dividends of $614.7 million and loans and advances of $108.3 million. However, the timing and amount of dividends paid by the Company’s insurance subsidiaries to the holding company falls within the discretion of each insurance subsidiary’s board of directors and will depend upon many factors, including the level of total statutory capital and surplus required to support minimum financial strength ratings by certain rating agencies. Such restrictions have not had, nor are they expected to have, an impact on the holding company’s ability to meet its cash obligations.

As of ~~September 30, 2017,~~March 31, 2024, the holding company’s sources of liquidity included ~~$259.3~~$104.1 million of cash and cash equivalents and ~~$540.0~~$900.0 million available on the Company’s revolving credit facility. Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months.

The Company expects to repay its $300.0 million 4.60% senior unsecured notes due November 15, 2024, upon maturity, through available cash at the holding company, borrowings under its credit facility or through the issuance of additional bonds.

Financing. The Company maintains a senior unsecured credit agreement with JPMorgan Chase Bank, N.A., in its capacity as administrative agent, and the lenders party ~~thereto. The credit agreement is comprised of~~thereto that provides for a ~~$700.0~~$900.0 million revolving credit facility. Unless terminated earlier, the revolving loan commitments under the credit agreement will terminate on May 14, 2019. The obligations of the Company under the credit agreement are neither secured nor guaranteed. Proceeds under the credit agreement may be used for general corporate purposes. At September 30, 2017, outstanding borrowings under the facility totaled $160.0 million at an interest rate of 2.99%.

The credit agreement includes an expansion option that permits the Company, subject to satisfaction of certain conditions, to increase the revolving commitments and/or add term loan tranches ~~(“Incremental Term Loans”)~~ in an aggregate amount not to exceed ~~$150.0~~$450.0 million. ~~Incremental Term Loans, if made, may not mature prior to~~The obligations of the ~~revolving commitment termination date, provided that amortization may occur prior to such date.~~

~~At the Company’s election, borrowings~~Company under the credit agreement bear interest at either (a) the Alternate Base Rate plus the applicable spread or (b) the Adjusted LIBOR rate plus the applicable spread (in each case as defined in the agreement). The Company may select interest periods of one, two, three or six months or (if agreedare neither secured nor guaranteed. Proceeds from borrowings made from time to by all lenders) such other number of months for Eurodollar borrowings of loans. The applicable spread varies depending upon the debt rating assigned by Moody’s Investor Service, Inc. and/or Standard & Poor’s Rating Services. The minimum applicable spread for Alternate Base Rate borrowings is 0.625% and the maximum is 1.00%. The minimum applicable spread for Adjusted LIBOR rate borrowings is 1.625% and the maximum is 2.00%. The rate of interest on Incremental Term Loans will be established at or about the time ~~such loans are made and may differ from the rate of interest on revolving loans.~~

The credit agreement includes representations and warranties, reporting covenants, affirmative covenants, negative covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of default the lenders may accelerate the loans. Upon the occurrence of certain insolvency and bankruptcy events of default the loans will automatically accelerate. As of September 30, 2017, the Company was in compliance with the financial covenants under the credit ~~agreement.~~agreement may be used for general corporate purposes. Unless terminated earlier, the credit agreement will terminate on May 17, 2028. At March 31, 2024, the Company had no outstanding borrowings under the facility.

In addition to amounts available under its credit facility, certain subsidiaries of the Company ~~are parties to master repurchase agreements which are used as part~~maintain separate financing arrangements. The primary financing arrangements maintained by subsidiaries of the ~~Company’s liquidity management activities and~~Company are as follows:

•

FirstFunding, Inc., a specialized warehouse lender to support its risk management activities. In particular, securities loaned or sold under repurchase agreements may be used as short-term funding sources. During the nine months ended September 30, 2017, the Company financed securities for funds received totaling $10.0 millioncorrespondent mortgage lenders, maintains secured warehouse lending facilities with several banking institutions. At March 31, 2024, outstanding borrowings under these ~~agreements. As~~facilities totaled $688.8 million.

•

First American Trust, FSB (“FA Trust”), a federal savings bank, maintains a secured line of ~~September 30, 2017,~~credit with the Federal Home Loan Bank and maintains access to the Federal Reserve's Discount Window. At March 31, 2024, no amounts ~~remained~~were outstanding under any of these facilities.

•

First Canadian Title Company Limited, a Canadian title insurance and services company, maintains credit facilities with certain Canadian banking institutions. At March 31, 2024, no amounts were outstanding under these ~~agreements.~~

facilities.

~~Notes~~The Company’s debt to capitalization ratios were 30.3% and ~~contracts payable as a percentage of total capitalization was 18.2% and 19.6%~~28.6% at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively. The Company’s adjusted debt to capitalization ratio, excluding secured financings payable of $688.8 million and $553.3 million and accumulated other comprehensive loss of $720.5 million and $655.8 million at March 31, 2024 and December 31, 2023, was 20.2%.

Investment Portfolio. The Company maintains a high quality, liquid investment portfolio that is primarily held at its insurance and banking subsidiaries. As of ~~September 30, 2017, 92%~~March 31, 2024, 94% of the Company’s investment portfolio consisted of ~~fixed income~~debt securities, of which ~~60%~~64% were either United States government-backed or rated AAA and ~~94%~~97% were either rated or classified as investment grade. Percentages are based on the estimated fair values of the securities. Credit ratings reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. For further information on the credit quality of the Company’s ~~investment~~debt securities portfolio at ~~September 30, 2017,~~March 31, 2024, see Note 3 Debt Securities to the condensed consolidated financial statements.

In addition to its debt and marketable equity securities portfolio, the Company maintains investments in non-marketable equity securities and securities accounted for under the equity method. For further information on the Company’s equity securities, see Note 4 Equity Securities to the condensed consolidated financial statements.

~~In addition to its debt and equity securities portfolio, the Company maintains certain money-market and other short-term investments.~~

Off-balance sheet arrangements. The Company administers escrow deposits ~~and trust assets~~ as a service to customers in its ~~customers.~~direct title operations. Escrow deposits totaled ~~$7.9~~$8.9 billion and ~~$6.8~~$10.6 billion at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, respectively, of which ~~$2.8~~$4.3 billion and ~~$2.6~~$6.3 billion, respectively, were held at ~~the Company’s federal savings bank subsidiary, First American Trust, FSB.~~FA Trust. The escrow deposits held at First American Trust, FSB are temporarily invested in cash and cash equivalents and debt securities, with offsetting liabilities included in deposits in the accompanying condensed consolidated balance sheets. The remaining ~~escrow~~ deposits were held at third-party financial institutions.

Trust assets administered by FA Trust totaled $4.6 billion and $4.4 billion at March 31, 2024 and December 31, 2023, respectively, of which $127.4 million and $197.1 million, respectively, were held at FA Trust. The remaining trust assets were held at third-party financial institutions. Trust assets, which are administered by FA Trust and held at third-party institutions, are fiduciary client assets and are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. The Company could be held contingently liable if FA Trust were to breach any of its fiduciary duties.

~~At September 30, 2017~~In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $1.0 billion and $830.5 million at March 31, 2024 and December 31, ~~2016,~~2023, respectively, of which $623.2 million and $485.7 million, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company ~~was~~and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for ~~guarantees~~the disposition of indebtedness owed by affiliates and third parties to banks and others totaling $5.6 million and $7.1 million, respectively. The guarantee arrangements relate to promissory notes and other contracts that contingently requirethese assets. In connection with certain accounts, the Company to make payments to the guaranteed party upon the failure of debtors to make scheduled payments according to the terms of the notes and contracts. The Company’s maximum potential obligation under these guarantees totaled $5.6 million and $7.1 million at September 30, 2017 and December 31, 2016, respectively, and is limited in duration to the terms of the underlying indebtedness. The Company has ~~not incurred any costs~~ongoing programs for realizing economic benefits with various financial institutions whereby it earns economic benefits either as income or as a ~~result of these guarantees~~reduction in expense.

Deposit balances held at FA Trust are temporarily invested in cash and ~~has not recorded a liability on its~~cash equivalents and debt securities, with offsetting liabilities included in deposits in the accompanying condensed consolidated balance ~~sheets related to these guarantees at September 30, 2017 and December 31, 2016.~~sheets.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk.~~

The Company’s primary exposure to market risk relates to interest rate risk associated with certain financial instruments. Although the Company monitors its risk associated with fluctuations in interest rates, it does not currently use derivative financial instruments on any significant scale to hedge these risks.

There have been no material changes in the Company’s market risks since the filing of its Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023.

The Company’s chief executive officer and chief financial officer have concluded that, as of ~~September 30, 2017,~~March 31, 2024, the end of the quarterly period covered by this Quarterly Report on Form 10-Q, the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, were effective, based on the evaluation of these controls and procedures required by Rule 13a-15(b) thereunder.

There was no change in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

See Note 16 Litigation and ~~its subsidiaries are parties to a number of non-ordinary course lawsuits. These lawsuits frequently are similar in nature to other lawsuits pending against the Company’s competitors.~~

For those non-ordinary course lawsuits where the Company has determined that a loss is both probable and reasonably estimable, a liability representing the best estimate of the Company’s financial exposure based on known facts has been recorded. Actual losses may materially differ from the amounts recorded.

For a substantial majority of these lawsuits, however, it is not possible to assess the probability of loss. Most of these lawsuits are putative class actions which require a plaintiff to satisfy a number of procedural requirements before proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in some manner the Company’s activities, the making of factual allegations sufficient to suggest that the Company’s activities exceeded the limits of the law and a determination by the court—known as class certification—that the law permits a group of individuals to pursue the case together as a class. In certain instances the Company may also be able to compel the plaintiff to arbitrate its claim on an individual basis. If these procedural requirements are not met, either the lawsuit cannot proceed or, as is the case with class certification or compelled arbitration, the plaintiffs lose the financial incentive to proceed with the case (or the amount at issue effectively becomes de minimis). Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court. As a result of, among other factors, ambiguities and inconsistencies in the myriad laws applicable to the Company’s business and the uniqueness of the factual issues presented in any given lawsuit, the Company often cannot determine the probability of loss until a court has finally determined that a plaintiff has satisfied applicable procedural requirements.

Most of the non-ordinary course lawsuits to which the Company and its subsidiaries are parties challenge practices in the Company’s title insurance business, though a limited number of cases also pertain to the Company’s other businesses. These lawsuits include, among others, cases alleging, among other assertions, that the Company, one of its subsidiaries and/or one of its agents overcharged or improperly charged fees for products and services, conspired to fix prices, participated in the conveyance of illusory property interests, denied home warranty claims, improperly handled property and casualty claims, and gave items of value to brokers and others as inducements to refer business in violation of certain laws, such as consumer protection laws and laws generally prohibiting unfair business practices, and certain obligations, including

~~estimate the possible loss or the range of loss or, where the Company has been able to make an estimate, the Company believes the amount is not material~~Regulatory Contingencies to the condensed consolidated financial statements ~~as a whole.~~

~~While some~~included in “Item 1. Financial Statements (unaudited)” of ~~the lawsuits described above may be material to the Company’s operating results in any particular period if an unfavorable outcome results, the Company does not believe that any~~Part I of ~~these lawsuits will have a material adverse effect on the Company’s overall financial condition or liquidity.~~

~~The Company also~~this report, which is a party to non-ordinary course lawsuits other than those described above. With respect to these lawsuits, the Company has determined either that a loss is not reasonably possible or that the estimated loss or rangeincorporated by reference into this Item 1 of ~~loss, if any, is not material to the condensed consolidated financial statements as a whole.~~Part II.

The Company’s title insurance, property and casualty insurance, home warranty, banking, thrift, trust and investment advisory businesses are regulated by various federal, state and local governmental agencies. Many of the Company’s other businesses operate within statutory guidelines. Consequently, the Company may from time to time be subject to examination or investigation by such governmental agencies. Currently, governmental agencies are examining or investigating certain of the Company’s operations. These exams or investigations include inquiries into, among other matters, pricing and rate setting practices in the title insurance industry, competition in the title insurance industry, real estate settlement service, customer acquisition and retention practices and agency relationships. With respect to matters where the Company has determined that a loss is both probable and reasonably estimable, the Company has recorded a liability representing its best estimate of the financial exposure based on known facts. While the ultimate disposition of each such exam or investigation is not yet determinable, the Company does not believe that individually or in the aggregate they will have a material adverse effect on the Company’s financial condition, results of operations or cash flows. These exams or investigations could, however, result in changes to the Company’s business practices which could ultimately have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

The following “risk factors” could materially and adversely affect the Company’s business, operations, reputation, financial position or future financial performance. You should carefully consider each of the following risk factors and the other information contained in this Quarterly Report on Form 10-Q. The Company faces risks other than those listed here, including those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial. Because of the following factors, as well as other variables affecting the Company’s operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

The Company’s risk management framework is designed to identify, monitor and mitigate risks that could have a negative impact on the Company’s financial condition or reputation. This framework includes departments or groups dedicated to enterprise risk management, treasury management, information security, disaster recovery and other information technology-related risks, business continuity, legal and compliance, compensation structures and other human resources matters, vendor management and internal audit, among others. Many of the processes overseen by these departments function at the enterprise level, but many also function through, or rely to a certain degree upon, risk mitigation efforts in local operating groups. This is especially the case with respect to the Company’s operations outside of the United States and recently acquired businesses, which may not be fully integrated into the Company’s risk management framework. Similarly, with respect to the risks the Company assumes in the ordinary course of its business through the issuance of title insurance policies and the provision of related products and services, the Company employs localized, as well as centralized risk mitigation efforts. These efforts include the implementation of underwriting policies and procedures, automated underwriting and other risk-decisioning tools and other mechanisms for assessing and managing risk. Underwriting title insurance policies and making other risk-assumption decisions frequently involves a substantial degree of individual judgment and, accordingly, underwriters are maintained at the state, regional, divisional, and corporate levels with varying degrees of underwriting authority. These individuals may be encouraged by customers or others to assume risks or to expeditiously make risk determinations. If the Company’s risk mitigation efforts prove inadequate, the Company could be adversely affected.

In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk, the Company is utilizing innovative technologies, processes and techniques, including artificial intelligence, in the production and delivery of its products and services. These efforts include converting certain manual processes into automated ones to streamline searches, examinations and other underwriting functions in connection with the issuance of title insurance policies, building and maintaining title plants and other data assets, and digitizing and automating components of the settlement process. The Company believes these innovations will improve the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication, and expects to continue expanding its use of these technologies. Risks from these and other innovative initiatives include those associated with potential defects in the design and development of the technologies used to automate processes; misapplication of technologies; the reliance on data, rules or assumptions that may prove inadequate; information security vulnerabilities; and failure to meet customer expectations, among others. As a result of these risks, the Company could experience increased claims, reputational damage or other adverse effects, which could be material to the Company.

In addition to the Company’s innovative activities, other participants in the real estate industry are seeking to innovate in ways that could adversely impact the Company’s businesses. These participants include certain of the Company’s sources of business, competitors, investments and ultimate customers. Innovations by these participants may change the demand for the Company’s products and services, the manner in which the Company’s products and services are ordered or fulfilled and the revenue or profitability derived from the Company’s products and services. The Company’s investments in some of these participants could also facilitate efforts that ultimately disrupt the Company’s business or enable competitors. Accordingly, the Company’s efforts to anticipate and participate in these transformations could require significant additional investment and management attention and may not succeed. These innovative efforts by third parties, and the manner in which the Company, its agents and other industry participants respond to them, could therefore have an adverse effect on the Company.

Demand for a substantial portion of the Company’s products and services generally decreases as the number of real estate transactions in which its products and services are purchased decreases. The number of real estate transactions in which the Company’s products and services are purchased typically decreases in the following ~~situations:~~situations, among others:

~~These~~Certain of these circumstances, particularly when combined with declining real estate values and the increase in foreclosures that often results therefrom, also tend to adversely impact the Company’s title claims experience. National inventory levels for residential homes for sale remain below historical average levels, and, combined with sustained high mortgage interest rates and elevated home prices, which decreased demand, contributed to historically weak residential purchase activity. Residential refinance activity is also strongly correlated with changes in mortgage interest rates and rising mortgage rates, beginning in 2022, expectedly, had an adverse impact on the Company’s refinance business that is expected to continue for so long as mortgage rates remain high relative to the interest rates of outstanding mortgages. Higher interest rates also negatively impacted commercial transactions beginning in the latter half of 2022 and will likely continue to impact our volumes.

Historically, uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and a general decline in the value of real property, have created a difficult operating environment for the ~~Company’s businesses~~Company. These conditions also tend to negatively impact, and ~~other companies in its industries. In addition,~~recently have impacted, the amount of funds the Company ~~holds investments~~receives from third parties held in ~~entities, such as title agencies~~trust pending the closing of commercial and ~~settlement service providers,~~residential real estate transactions. The Company deposits a substantial portion of these funds, as well as ~~securities in~~ its ~~investment portfolio, which may be negatively impacted by these conditions. The Company also owns a~~own funds, with the federal savings bank ~~into which~~ it ~~deposits some of its own funds and some funds held in trust for third parties. This~~owns. The Company’s bank invests those funds and any realized and unrealized losses ~~incurred~~on those investments will be reflected in the Company’s consolidated ~~results.~~financial statements. The likelihood of such losses, which generally would not occur if the Company were to deposit these funds in an unaffiliated entity, increases when economic conditions are unfavorable. Moreover, during periods of unfavorable economic conditions, the return on these funds deposited at the Company’s bank, as well as funds the Company deposits with third party financial institutions, tends to decline. In addition, the Company holds investments in entities, such as title agencies, settlement service providers and venture-stage companies, some of which have been negatively impacted by these conditions, as well as other securities in its investment portfolio, which also may be, and recently have been, negatively impacted by these conditions.

Depending upon the ultimate severity and duration of any economic downturn and other negative economic conditions, the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and cash flows, higher claims, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt facilities and other contracts, difficulties in obtaining access to capital, challenges to the Company’s ability to pay dividends at currently anticipated levels, deterioration in the value of or return on its investments and increased credit risk from customers and others with obligations to the Company.

The Company utilizes models to ~~write off a portion of its goodwill~~support decisions related to risk management, capital and liquidity planning, financial accounting, data extraction and other ~~intangible assets~~

~~The Company performs an impairment test of the carrying value of goodwill~~business purposes. Models are, by their nature, inherently limited due to their reliance on statistical, economic, financial or mathematical theories, techniques, data and other indefinite-lived intangible assets annually in the fourth quarter, or sooner if circumstances indicate a possible impairment. Finite-lived intangible assets are subject to impairment tests on a periodic basis. Factorsassumptions that may be ~~considered~~erroneous or inappropriate for the intended or actual use. Flawed models or uses of models, particularly those that rely on artificial intelligence, may result in, ~~connection with this review include, without limitation, underperformance relative to historical~~among other consequences, erroneous, biased or ~~projected future operating results, reductions in~~misleading outputs, imprudent business decisions, inadequate risk management or enhanced regulatory supervision. Heightened regulatory supervision and an evolving regulatory landscape could hinder the pace of the Company’s ~~stock price~~innovation and ~~market capitalization, increased cost of capital and negative macroeconomic, industry and company-specific trends. These and other factors could lead~~may require burdensome changes to a conclusion that goodwill or other intangible assets are no longer fully recoverable, in which case the Company would be required to write off the portion believed to be unrecoverable. Total goodwill and other intangible assets reflected on the Company’s ~~condensed consolidated balance sheet as of September 30, 2017 are $1.2 billion. Any substantial goodwill~~existing governance, processes and ~~other intangible asset impairments that may be required~~controls. These risks and uncertainties could have a material adverse effect on the Company’s results of operations, financial condition and ~~financial condition.~~reputation.

Climate change, global or extensive health crises, severe weather, terrorist attacks and other catastrophe events and responses to these events could adversely affect the Company. The ~~Company deposits substantial funds in~~extent to which these catastrophe events and responses to them impact the Company’s business, operations and financial ~~institutions. These funds include amounts owned by third parties, such as escrow deposits. Should one or more of the financial institutions at which deposits are maintained fail, there is no guarantee~~results will depend on numerous factors that the Company ~~would recover~~may not be able to accurately predict, including: the ~~funds deposited, whether through Federal Deposit Insurance Corporation coverage~~duration and scope of the catastrophe event and restrictions and responses to it; the impact of the catastrophe event on economic activity and actions taken in response, including the efficacy of governmental and other relief efforts or ~~otherwise. In~~countermeasures; the ~~event of any such failure,~~effect on participants in real estate transactions and the ~~Company also could be held liable for the funds owned by third parties.~~

~~5. Changes in government regulation could prohibit or limit the Company’s operations, make it more burdensome to conduct such operations or result in decreased~~ demand for the Company’s products and ~~services~~services.

~~Many~~The Company’s home warranty business has been and may be impacted by increases in the frequency and severity of weather events. Home warranty claims, including those pertaining to HVAC systems, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent.

In addition, the ~~Company’s businesses, including~~Company manages its financial exposure for losses in its title insurance property and casualty insurance, home warranty, banking, trust and investment businesses, are regulated by various federal, state, local and foreign governmental agencies. These and other of the Company’s businesses also operate within statutory guidelines. The industry in which the Company operates and the markets into which it sells its products are also regulated and subject to statutory guidelines. Changes in the applicable regulatory environment, statutory guidelines or interpretations of existing regulations or statutes, enhanced governmental oversight or efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit or limit its future operations or make it more burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in our competitive position. The impact of these changes would be more significant if they involve jurisdictions in which the Company generates a greater portion of its title premiums, such as the states of Arizona, California, Florida, Michigan, New York, Ohio, Pennsylvania and Texas. These changes may compel the Company to reduce its prices, may restrict its ability to implement price increases or acquire assets or businesses, may limit the manner in which the Company conducts its business ~~or otherwise may have a negative impact on its ability to generate revenues, earnings and cash flows.~~

~~6. Scrutiny of the Company’s businesses and the industries in which it operates by governmental entities and others could adversely affect its operations and financial condition~~

The real estate settlement services industry, an industry in which the Company generates a substantial portion of its revenue and earnings, is subject to continuous scrutiny by regulators, legislators, the media and plaintiffs’ attorneys. Though often directed at the industry generally, these groups may also focus their attention directly on the Company’s businesses. In either case, this scrutiny may result in changes whichwith third-party reinsurance. Catastrophe events could adversely affect the ~~Company’s operations~~cost and ~~therefore, its financial condition and liquidity.~~

~~Governmental entities have routinely inquired into certain practices in~~availability of that reinsurance. Moreover, to the real estate settlement services industry to determine whether certain of the Company’s businesses or its competitors have violated applicable laws, which include, among others, the insurance codes of the various jurisdictions and the Real Estate Settlement Procedures Act and similar state, federal and foreign laws. The CFPB, for example, has actively been utilizing its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against various participants in the mortgage and settlement industries. Departments of insurance in the various states, the CFPBextent climate change, health crises, terrorist attacks, severe weather conditions and other ~~federal regulators and applicable regulators in international jurisdictions, either separately~~catastrophe events impact companies or ~~together, also periodically conduct targeted inquiries into the practices of title insurance companies and other settlement services providers in their respective jurisdictions.~~

~~Further, from time to time plaintiffs’ lawyers may target~~municipalities whose securities the Company and other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct. These lawsuits may involve large groups of plaintiffs and claims for substantial damages. Any of these types of inquiries or proceedings may resultinvests in, a finding of a violation of the law or other wrongful conduct and may result in the payment of fines or damages or the imposition of restrictions on the Company’s conduct which could impact its operations and financial condition. Moreover, these laws and standards of conduct often are ambiguous and, thus, it may be difficult to ensure compliance. This ambiguity may force the Company to mitigate its risk by settling claims or by ending practices that generate revenues, earnings and cash flows.

~~7. The use of social media by the Company and other parties could result in damage to the Company’s reputation and adversely affect its business or results of operations~~

The Company increasingly utilizes social media to communicate with customers, current and potential employees and other individuals interested in the Company. Information delivered by the Company, or by third parties about the Company, via social media can be easily accessed and rapidly disseminated, and could result in reputational harm, decreased customer loyalty or other issues that could diminish the value of ~~the Company’s brand or result in significant liability.~~its investments may also decrease due to these factors.

~~8. Regulation~~The frequency, severity, duration, and geographic location and scope of ~~title insurance rates could adversely affect the Company’s results of operations~~

~~Title insurance rates~~such health crises, catastrophe and severe weather events are subject to extensive regulation, which varies from state to state. In many states the approval of the applicable state insurance regulator is required prior to implementing a rate change. This regulation could hinder the Company’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect its results of operations, particularly in a rapidly declining market.

~~9. Changes in certain laws~~inherently unpredictable, and, ~~regulations, and in the regulatory environment in which~~therefore, the Company ~~operates, could adversely affect~~is unable to predict the ~~Company’s competitive position~~ultimate impact climate change, catastrophe events and ~~results~~responses to them will have on its businesses. The impacts of ~~operations~~

~~Federal officials are currently discussing various potential changes~~catastrophe events and responses to ~~laws and regulations that could impact~~them may also exacerbate the ~~Company’s businesses, including changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the reform or privatization~~risks discussed elsewhere in Part II, Item 1A of government-sponsored enterprises such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), and tax reform, including changes that could affect the mortgage interest deduction, among others. Changes in these areas, and more generally in the regulatory environment in which the Company and its customers operate, could adversely impact the volume of mortgage originations in the United States and the Company’s competitive position and results of operations. this Quarterly Report.

Certain data used and supplied by the Company are subject to regulation by various federal, state and local regulatory authorities. Compliance with existing federal, state and local laws and regulations with respect to such data has not had a material adverse effect on the Company’s results of operations ~~financial condition or liquidity~~ to date. Nonetheless, federal, state and local laws and regulations in the United States designed to protect the public from the misuse of personal information in the marketplace and adverse publicity or potential litigation concerning the commercial use of such information may affect the Company’s operations and could result in substantial regulatory compliance expense, litigation expense and a loss of revenue. The suppliers of data to the Company face similar burdens. As a result of these and other factors, the Company may find it financially burdensome to acquire necessary data.

~~The~~Large mortgage ~~market in the United States is concentrated. Due to the consolidated nature of the industry, the Company derives a significant percentage of its revenues from a relatively small base of~~ lenders and ~~their borrowers, which enhances the negotiating power of these lenders with respect to the pricing and the terms on which they purchase the Company’s products and other matters. Similarly,~~ government-sponsored enterprises, because of their significant role in the mortgage process, have significant influence over the Company and other service providers. ~~These circumstances could adversely affect the Company’s revenues and profitability.~~ Changes in the Company’s relationship with any of these lenders or government-sponsored enterprises, the loss of all or a portion of the business the Company derives from these parties, or any refusal of these parties to accept the Company’s products and services, the modification of the government-sponsored enterprises’ requirements for title insurance or mortgage servicing in connection with mortgages they purchase or the use of alternatives to the Company’s products and services, could have a material adverse effect on the Company.

Certain of the Company’s customers use measurements of the financial strength of the Company’s title insurance underwriters, including, among others, ratings provided by ratings agencies and levels of statutory capital and surplus maintained by those underwriters, in determining the amount of a policy they will accept and the amount of reinsurance required. Each of the major ratings agencies currently rates the Company’s title insurance operations. The Company’s principal title insurance underwriter’s financial strength ratings are “A3” by Moody’s Investor Services, Inc., “A” by Fitch Ratings, Inc., “A-” by Standard & Poor’s Ratings Services and “A” by A.M. Best Company, Inc.These ratings provide the agencies’ perspectives on the financial strength, operating performance and cash generating ability of those operations. These agencies continually review these ratings and the ratings are subject to change. Statutory capital and surplus, or the amount by which statutory assets exceed statutory liabilities, is also a measure of financial strength. ~~The Company’s principal title insurance underwriter maintained $1.2 billion of total statutory capital and surplus as of December 31, 2016.~~ Accordingly, if the ratings or statutory capital and surplus of these title insurance underwriters are reduced from their current levels, or if there is a deterioration in other measures of financial strength, the Company’s results of operations, competitive position and liquidity could be adversely affected.

~~13. The Company’s investment portfolio is subject to certain risks and could experience losses~~

~~The Company maintains~~ In addition, a substantial investment portfolio, primarily consisting of fixed income securities (including mortgage-backed securities). The investment portfolio also includes money-market and other short-term investments, as well as preferred and common stock. Securitiesdowngrade in the ratings or rankings for the Company’s ~~investment portfolio are subject to certain economic and financial market risks, such as credit risk, interest rate (including call, prepayment and extension) risk and/~~federal savings bank subsidiary or liquidity risk. The risk of loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions. If the carrying value of the investments exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, the Company will be required to write down the value of the investments, whichits mortgage servicing business could have ~~a material~~an adverse effect on ~~the Company’s results of operations, statutory surplus and financial condition.~~ that particular business.

~~14. Actual claims experience could materially vary from the expected claims experience reflected in the Company’s reserve for incurred but not reported claims~~

The Company maintains a reserve for incurred but not reported (“IBNR”) claims pertaining to its title, escrow and other insurance and guarantee products. The majority of this reserve pertains to title insurance policies, which are long-duration contracts with the majority of the claims reported within the first few years following the issuance of the policy. Generally, 70% to 80% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves. Based on historical experience, management believes a 50 basis point change to the loss rates for recent policy years, positive or negative, is reasonably likely given the long duration nature of a title insurance policy. For example, if the expected ultimate losses for each of the last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be an increase or decrease, as the case may be, of $115.9 million. A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical norms. The estimates made by management in determining the appropriate level of IBNR reserves could ultimately prove to be materially different from actual claims experience.

The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that usually operate with a substantial ~~degree of~~ independence from the Company. ~~While~~There is no guarantee that these title agents ~~are subject~~will fulfill their contractual obligations to ~~certain contractual~~the Company, which contracts include limitations that are designed to limit the Company’s risk with respect to their ~~activities, there is no guarantee that the agents will fulfill their contractual obligations to the Company.~~activities. In addition, regulators are increasingly seeking to hold the Company responsible for the actions of these title agents and, under certain circumstances, the Company may be held liable directly to third parties for actions (including defalcations) or omissions of these agents. ~~Recent case~~Case law in certain states also suggests that the Company is liable for the actions or omissions of its agents in those states, regardless of contractual limitations. As a result, the Company’s use of title agents could result in increased claims on the Company’s policies issued through agents and an increase in other costs and expenses.

~~16. The Company’s risk management framework could prove inadequate, resulting in financial and/or reputational harm~~

The Company’s risk management framework is designed to identify, monitor and mitigate risks that could have a negative impact on the Company’s financial condition or reputation. This framework includes departments or groups dedicated to enterprise risk management, information security, disaster recovery and other information technology-related risks, business continuity, legal and compliance, compensation structures and other human resources matters, vendor management and internal audit, among others. While many of the processes overseen by these departments function at the enterprise level, many also function through, or rely to a certain degree upon, risk mitigation efforts in local operating groups. Similarly, with respect to the risks the Company assumes in the ordinary course of its business through the issuance of title insurance policies and the provision of related products and services, the Company employs localized as well as centralized risk mitigation efforts. These efforts include the implementation of underwriting policies and procedures and other mechanisms for assessing risk. Underwriting title insurance policies and making other risk-assumption decisions frequently involves a substantial degree of individual judgment and, accordingly, underwriters are maintained at the regional, divisional and corporate levels with varying degrees of underwriting authority. These individuals may be encouraged by customers or others to assume risks or to expeditiously make risk determinations. If the Company’s risk mitigation efforts prove inadequate, the Company may experience significant financial and/or reputational harm.

The Company uses computer software applications, systems and other technologies (collectively referred to as “systems”), some of which it owns and manages and some of which are owned and/or managed by third parties, including providers of distributed computing infrastructure platforms commonly known as the “cloud.” The Company and its agents, suppliers, service providers, and customers use systems to receive, process, store and transmit business information, including ~~highly sensitive~~ non-public personal information as well as data from suppliers and other information upon which ~~its~~the Company’s business relies. ItThe Company also uses these systems to manage substantial cash, investment assets, bank deposits, trust assets, ~~and~~ escrow account balances and custodial balances on behalf of ~~the Company~~itself and its customers, among other activities. Many of the Company’s products, services and solutions involving the use of real property related data are fully reliant on ~~its~~these systems and are only available electronically. Accordingly, for a variety of reasons, the integrity of ~~the Company’s computer~~these systems and the protection of the information that resides ~~on those systems~~thereon are critically important to ~~its~~the Company’s successful operation. ~~The Company’s core computer~~

These systems are primarily located in a data center it manages and secondarily in a disaster recovery data center maintained by a third party. The Company is currently engaged in a multi-year process of transitioning to third party cloud-based hosting of its computer systems.

~~The Company’s computer systems and systems used by its agents, suppliers and customers~~ have been subject to, and are likely to continue to be the target of, ~~computer viruses, cyber~~malware, cyberattacks and cyberterrorism, ransomware attacks, phishing attacks, unauthorized access, online and offline fraud and other malicious activity. These attacks ~~have increased~~are prevalent, continue to increase in frequency and sophistication, ~~in recent years.~~and are increasingly difficult to detect. These systems also have known and unknown vulnerabilities. Once identified, the Company’s information technology and information security personnel seek to remediate these vulnerabilities based on the level of risk presented. For a number of reasons, including the introduction of new vulnerabilities, resource constraints, competing business demands and dependence on third parties, a number of unremediated vulnerabilities will always exist. Remediation of some vulnerabilities are outside of the control of the Company and third-party remediation efforts may not be timely provided or implemented or otherwise

adequate, even when the level of risk is critical or high. Further, certain other potential causes of system damage or other negative system-related events are wholly or partially beyond the Company’s control, such as natural disasters, vendor failures to satisfy service level requirements, third party negligence or intentional acts, and power or telecommunications failures. These ~~incidents, regardless of their underlying causes,~~circumstances could expose the Company to system-related ~~damage,~~damages, failures, interruptions, cyberattacks, as the Company experienced in December 2023 (as described further in Item 1C. Cybersecurity of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023), and other negative events or could otherwise disrupt the Company’s business and could also result in the loss or unauthorized release, gathering, monitoring or destruction of confidential, proprietary and other information pertaining to the Company, its customers, employees, agents or suppliers.

In conducting its business and delivering its products and services, the Company also utilizes service providers. These service providers and the systems they utilize are typically subject to similar types of system- and information security-related risks that the Company faces. The Company provides certain of these service providers with data, including nonpublic personal information. There is no guarantee that the Company’s due diligence or ongoing vendor oversight will be sufficient to ensure the integrity and security of the systems utilized by these service providers or the protection of the information that resides thereon.

Certain laws and contracts the Company has entered into require it to comply with certain information security requirements and to notify various parties, including consumers or customers, in the event of certain actual or potential data breaches or systems ~~failures. These notifications can result, among other things, in~~failures, including those of the ~~loss of customers, lawsuits, adverse publicity, diversion of management’s time and energy, the attention of regulatory authorities, fines and disruptions in sales.~~Company’s service providers. Further, the Company’s financial institution customers have obligations to safeguard their ~~computer~~ systems and sensitive information and itthe Company may be bound contractually and/or by regulation to comply with the same requirements. If the Company ~~fails~~or its service providers fail to comply with applicable regulations and contractual requirements, itthe Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences.

~~Accordingly, any~~Any inability of the Company or its service providers to prevent or adequately respond to the issues described above could disrupt the Company’s business, delay the delivery of its products and services, inhibit its ability to retain existing customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences ~~which~~that could be material to the Company.

The Company relies on its systems, employees and domestic and international banks to transfer ~~funds.~~its own funds and the funds of third parties. In addition to relying on third-party banks to transfer these funds, the Company’s federal savings bank subsidiary transfers funds on behalf of the Company as well as title agents that are not affiliates of the Company. These transfers are susceptible to user input error, fraud, system interruptions, incorrect processing and similar errors that ~~could~~from time to time result in lost funds or delayed transactions. The Company’s email and computer systems and systems used by its agents, customers and other parties involved in a transaction have been subject to, and are likely to continue to be the target of, fraudulent attacks, including attempts to cause the Company or its agents to improperly transfer funds. These attacks ~~have increased~~continue to increase in frequency and ~~sophistication in recent years.~~sophistication. Funds transferred to a fraudulent recipient ~~are often~~may not be recoverable. In certain instances the Company may be liable for those unrecovered funds. The controls and procedures used by the Company to prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or other adverse consequences which could be material to the Company.

~~19.~~ The Company’s continued success depends, in large part, on its ability to hire and retain qualified people. Competition for highly qualified people is significant, and there is no assurance that the Company will be successful in attracting, training or retaining people. If the Company is unable to attract and retain qualified people, its business and operations may be impaired or disrupted.

The Company utilizes lower cost labor in countries such as India and the Philippines, among others. These countries are subject to relatively high degrees of political and social instability and may lack the infrastructure to withstand natural ~~disasters.~~disasters, health crises and other catastrophe events. Such disruptions could decrease efficiency and increase the Company’s costs. Weakness of the United States dollar in relation to the currencies used in these countries may also reduce the savings achievable through this strategy. Furthermore, the practice of utilizing labor based in other countries is subject to heightened scrutiny in the United States and, as a result, the Company could face pressure to decrease its use of labor based outside the United States. Laws, regulations, business requirements or ~~regulations that~~social or political pressures may require the Company to use labor based in the United States or may otherwise effectively increase ~~the cost of~~ the Company’s labor costs ~~abroad also could be enacted.~~abroad. The Company may not be able to pass on these increased costs to its customers.

The Company has in the past acquired, and is expected to acquire in the future, other businesses. When businesses are acquired, the Company may not be able to integrate or manage these businesses in such a manner as to realize the anticipated synergies or otherwise produce returns that justify the investment. Acquired businesses may subject the Company to increased regulatory or compliance requirements. The Company’s acquisitions have involved, and are likely to continue to involve, the entry into businesses in which the Company’s management has limited prior experience, making the Company reliant on the management team of the acquired business. The Company may not be able to successfully retain employees of acquired businesses or integrate them, and could lose customers, suppliers or other partners as a result of the acquisitions. For these and other reasons, including changes in market conditions, the projections used to value the acquired businesses may prove inaccurate. In addition, the Company might incur unanticipated liabilities from acquisitions. These and other factors related to acquisitions could have a material adverse effect on the Company’s results of operations, financial condition and liquidity. The Company’s management also will continue to be required to dedicate substantial time and effort to the integration of its acquisitions. These efforts could divert management’s focus and resources from other strategic opportunities and operational matters.

Many of the Company’s businesses, including its title insurance, property and casualty insurance, home warranty, mortgage servicing and subservicing, banking, trust and wealth management businesses, are regulated by various federal, state, local and foreign governmental agencies. These and other of the Company’s businesses also operate within statutory guidelines, which can include requirements to maintain certain licenses at the federal, state and/or local levels. The industry in which the Company operates and the markets into which it sells its products are also regulated and subject to statutory guidelines. In general, in recent years, the Company experienced increasing regulatory oversight and became subject to increasingly complex statutory guidelines.

Regulatory oversight could require the Company to raise capital, and/or make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares. It is possible that the group capital calculations, particularly in an economic downturn, could have the effect of requiring the Company to raise capital and/or making it more difficult to otherwise deploy capital, including dividends to stockholders and repurchases of the Company’s shares.

An increasing number of federal, state, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data. The effects of these privacy and data protection laws, including the cost of compliance and required changes in the manner in which the Company conducts its business, are not fully known and are potentially significant, and the failure to comply could adversely affect the Company. The Company has incurred costs to comply with these laws and to respond to inquiries about its compliance with them.

In addition, changes in the applicable regulatory environment, such as the announcement by the Consumer Financial Protection Bureau (“CFPB”) that it intends to consider a policy that would prohibit lenders from directly passing the cost of lenders title insurance to consumers; statutory guidelines or interpretations of existing regulations or statutes; reform of government-sponsored enterprises such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); enhanced governmental oversight or efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit or limit its future operations or make it more costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in its competitive position. The impact of these changes would be more significant if they involve jurisdictions in which the Company generates a greater portion of its title premiums, such as the states of Arizona, California, Florida, New York, and Texas. These changes may compel the Company to reduce its prices, may restrict its ability to implement price increases or acquire assets or businesses, may limit the manner in which the Company conducts its business or otherwise may have a negative impact on ~~distributions~~its ability to generate revenues, earnings and cash flows.

The real estate settlement services industry, an industry in which the Company generates a substantial portion of its revenue and earnings, and the mortgage servicing and subservicing industry are subject to continuous scrutiny by regulators, legislators, the media and plaintiffs’ attorneys. Though often directed at these industries generally, these groups also focus their attention directly on the Company’s businesses from time to time. In either case, this scrutiny may result in changes which could adversely affect the Company’s operations and, therefore, its ~~subsidiaries,~~financial condition and ~~if distributions~~liquidity.

Governmental entities have routinely inquired into certain practices in the real estate settlement services industry and the mortgage servicing and subservicing industry to determine whether certain of the Company’s businesses or its competitors have violated applicable laws, which include, among others, the insurance codes of the various jurisdictions, the Real Estate Settlement Procedures Act, the Truth in Lending Act and similar state, federal and foreign laws. The CFPB, for example, has actively utilized its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against various participants in the mortgage and settlement industries and we expect that such enforcement activity will intensify. Departments of insurance in the various states, the CFPB and other federal regulators and applicable regulators in international jurisdictions, either separately or together, also periodically conduct targeted inquiries into the practices of title insurance companies, other settlement services providers and mortgage servicers in their respective jurisdictions. Currently, the Company is the subject of regulatory inquiries.

Further, from time to time plaintiffs’ lawyers have targeted, and are expected to continue to target, the Company and other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct. These lawsuits often involve large groups of plaintiffs and claims for substantial damages. These types of inquiries or proceedings have from time to time resulted, and may in the future result, in findings of a violation of the law or other wrongful conduct and the payment of fines or damages or the imposition of restrictions on the Company’s conduct. This could impact the Company’s operations and financial condition. Moreover, these laws and standards of conduct often are ambiguous and, thus, it may be difficult to ensure compliance. This ambiguity may force the Company to mitigate its ~~subsidiaries~~risk by settling claims or by ending practices that generate revenues, earnings and cash flows. Currently the Company is a party to class action lawsuits.

Title insurance rates are ~~materially impaired,~~subject to extensive regulation, which varies from state to state. In many states the approval of the applicable state insurance regulator is required prior to implementing a rate change. These regulations could hinder the Company’s ability to ~~declare~~promptly adapt to changing market dynamics through price adjustments, which could adversely affect its results of operations, particularly in a rapidly declining market.

The Company deposits substantial funds in financial institutions. These funds include amounts owned by third parties, such as escrow deposits, like-kind exchange deposits and investor, mortgagor and subservicer deposits. Should one or more of the financial institutions at which deposits are maintained fail, there is no guarantee that the Company would recover the funds deposited, whether through Federal Deposit Insurance Corporation coverage or otherwise. In the event of any such failure, the Company also could be held liable for the funds owned by third parties. Unfavorable economic conditions, like those experienced in 2023, may lead to a heightened risk of failures of financial institutions at which the Company maintains deposits. Such failures may be difficult to predict and the Company may not be able to react in a sufficiently timely manner to avoid adverse effects on the Company.

The Company performs an impairment test of the carrying value of goodwill and other indefinite-lived intangible assets annually in the fourth quarter, or sooner if circumstances indicate a possible impairment. Finite-lived intangible assets are subject to impairment tests on a periodic basis. Factors that may be considered in connection with this review include, without limitation, underperformance relative to historical or projected future operating results, reductions in the Company’s stock price and market capitalization, increased cost of capital and negative macroeconomic, industry and company-specific trends. These and other factors could lead to a conclusion that goodwill or other intangible assets are impaired, in which case the Company would be required to write off the portion believed to be impaired. Any substantial goodwill and other intangible asset

impairments that may be required could have a material adverse effect on the Company’s results of operations and financial condition.

The Company maintains a substantial investment portfolio, primarily consisting of fixed income debt securities. The investment portfolio also includes adjustable-rate debt securities, common and preferred stock, as well as money-market and other short-term investments. Securities in the Company’s investment portfolio are subject to certain economic and financial market risks, such as credit risk, interest rate (including call, prepayment and extension) risk and/or liquidity risk. The risk of loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions, such as during the current environment precipitated by rapidly rising interest rates. Debt and equity securities are carried at fair value on the Company’s balance sheet. Changes in the fair values of debt securities are recorded as a component of accumulated other comprehensive income/loss on the balance sheet. For debt securities in an unrealized loss position, where the loss is determined to be due to credit-related factors, the Company records the loss in earnings. Changes in the fair values of marketable equity securities are recognized in earnings. Changes in the fair values of securities in the Company’s investment portfolio have had an adverse impact on the Company and could have a material adverse effect on the Company’s results of operations, statutory surplus, financial condition and cash flow.

The Company’s venture investment portfolio is primarily comprised of investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and a similar investment that is trading publicly. The venture investment portfolio is managed independent of the Company’s portfolio of debt securities and marketable equity securities, which is overseen by the Company’s investment department and an investment committee. The Company may continue to make similar venture investments. These positions are concentrated in a limited number of holdings and are high-risk, illiquid investments. In certain circumstances, such as when one of these companies raises capital, merges with another company or sells itself at a valuation that is less than the valuation at which the Company made its investment or when one of these companies fails and/or liquidates itself, the Company has been and could be required to impair all or part of its investment in that company or write down the value of an investment if future growth prospects deteriorate. The prospects of these companies depend on a number of factors, including the condition of the general economy, the general availability of capital, the performance of and volatility in the public markets, the regulatory and political environments, the condition of the real estate industry, the competitive environment for such companies and the operational and financial performance of such companies. Even if one of these companies is successful, the Company’s ability to realize the value of its investment may take a significant amount of time and may be dependent on the occurrence of a liquidity event, such as an initial public offering or the sale of the company. Even when a liquidity event occurs, the Company may be subject to restrictions on resale or may choose to continue to hold the investment for strategic or other reasons and, as a result, the Company may not monetize the value of its investment during periods in which it could be financially advantageous to sell the investment. These investments may cause material fluctuations in the Company’s quarterly results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, impairments, subsequent equity sales, or price changes in investments that begin trading publicly, which changes can be volatile.

The Company maintains a reserve for incurred but not reported (“IBNR”) claims pertaining to its title, escrow and other insurance and guarantee products. The majority of this reserve pertains to title insurance policies, which are long-duration contracts with the majority of the claims reported within the first few years following the issuance of the policy. Generally, 65% to 75% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves. In uncertain economic times, an even larger change is more likely. A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical norms. The estimates made by management in determining the appropriate level of IBNR reserves could ultimately prove to be materially different from actual claims experience.

Changes in laws or regulations impacting real estate, particularly when applied retroactively, may cause a material change in expected ultimate losses and corresponding loss rates for recent and/or older policy years. For example, the 2020 United States Supreme Court decision in McGirt v. Oklahoma calls into question the governing authority for certain real estate-related matters in Native American reservations once thought to have been disestablished. To the extent the Company, in those areas,

underwrote title insurance policies or closed real estate transactions in conformity with authority that ultimately proves inapplicable, expected ultimate losses arising from those policies and transactions could change materially and could result in a material change to loss rates.

The Company is a holding company whose primary assets are investments in its operating subsidiaries. The Company’s ability to fulfill parent company obligations and/or declare and pay dividends is dependent on the ability of its subsidiaries to pay dividends or repay funds. If the Company’s operating subsidiaries are not able to pay dividends or repay funds, the Company may not be able to fulfill parent company obligations and/or declare and pay ~~dividends to its stockholders.~~dividends. Moreover, pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available is limited. AsSee Item 2 – MD&A – Liquidity and Capital Resources for details on dividend restrictions. The Company may also be required to invest capital in its subsidiaries which could further limit its ability to fulfill parent company obligations and/or declare and pay dividends.

The deposits of ~~September 30, 2017, under such regulations,~~ the ~~maximum amount~~Company’s federal savings bank subsidiary consist almost entirely of ~~dividends,~~funds deposited by its affiliates, the majority of which are from third parties to be held in trust pending the closing of real estate transactions. When real estate transactions decline, aggregate deposits held in trust at the Company’s bank tend to decline. There is also a portion of the bank’s deposits that are custodial funds held on behalf of clients of the Company’s residential mortgage subservicer subsidiary. Such clients may cause their custodial funds to be moved out of the Company’s bank subsidiary in connection with the transfer of ownership of mortgage servicing rights or loans, ~~and advances available for~~termination of subservicing contracts or otherwise. The likelihood of these clients causing funds to be moved increases as interest rates rise, which could result in a marked decline in the ~~remainder of 2017 from these insurance subsidiaries, without prior approval from applicable regulators, was $759.7 million.~~bank’s deposits. When there is a reduction in the bank’s deposits, the Company could be required to borrow funds to maintain the bank’s liquidity.

The Company’s bylaws and certificate of incorporation contain provisions that could be considered “anti-takeover” provisions because they make it harder for a third-party to acquire the Company without the consent of the Company’s incumbent board of directors. Under these provisions:

While the Company believes that they are appropriate, these provisions ~~which~~ may only be amended by the affirmative vote of the holders of approximately 67% of the Company’s issued voting ~~shares,~~shares. In addition, federal banking laws and regulations and state insurance laws and regulations require third parties to obtain prior approval to acquire control of the Company due to its status as a savings and loan holding company and an insurance holding company. These provisions and regulatory requirements could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a change of control transaction that might involve a premium price or otherwise be considered favorably by the Company’s stockholders.

The Company relies on a combination of patents, trademarks, copyrights, trade secret laws, non-disclosure agreements, contractual provisions and systems of internal safeguards to protect its intellectual property. As the Company expands its utilization of innovative technologies, processes and techniques in the production and delivery of its products and services, the Company may increasingly have to litigate to enforce and protect its intellectual property rights, which may divert Company resources, cause reputational harm to the Company or result in other adverse consequences, including a loss of competitive advantage, and there is no guarantee that such protection and enforcement efforts would be successful. In addition, third parties may allege that the Company’s operations or activities infringe on their intellectual property rights, including through the Company’s use of software containing open source code, which may expose the Company to third-party claims of ownership of, or demands for the release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license. Many of the risks associated with usage of open source cannot be eliminated, and could, if not properly addressed, adversely affect the Company’s business. Infringement claims may give rise to litigation, which could result in damages, injunctions prohibiting the Company from providing certain products or services, entry into costly licensing arrangements or other adverse consequences.

During the quarter ended March 31, 2024, the Company did not issue any unregistered common stock.

Pursuant to the share repurchase program approved by the Company’s board of directors in June 2022, which program has no expiration date, the Company may repurchase up to $400.0 million of the Company’s issued and outstanding common stock. The following table describes purchases by the Company under the share repurchase program that settled during each period set forth in the table. Prices in column (b) include commissions. Cumulatively, as of March 31, 2024, the Company had repurchased $189.6 million (including commissions) of its shares authorized under the share repurchase program and had the authority to repurchase an additional $210.4 million (including commissions) under that program.

Each management contract or compensatory plan or arrangement in which any director or named executive officer of First American Financial Corporation, as defined by Item 402(a)(3) of Regulation S-K (17 C.F.R. §229.402(a)(3)), participates that is included among the exhibits listed on the Exhibit Index is identified on the Exhibit Index by an asterisk (*).


~~Incorporated in~~ Delaware		26-1911571
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 First American Way, Santa Ana, California		92707-5913
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.00001 par value	FAF	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

		Emerging growth company	☐

(in thousands)	Amortized cost		Gross unrealized					Estimated fair value
(in thousands)	Amortized cost		Gains		Losses			Estimated fair value
September 30, 2017
U.S. Treasury bonds	$	145,396	$	1,484	$	(1,427	)	$	145,453
Municipal bonds		1,068,611		14,546		(10,795	)		1,072,362
Foreign government bonds		162,550		556		(1,457	)		161,649
Governmental agency bonds		223,546		1,063		(2,891	)		221,718
Governmental agency mortgage-backed securities		2,238,222		4,098		(16,400	)		2,225,920
U.S. corporate debt securities		716,299		13,400		(2,771	)		726,928
Foreign corporate debt securities		244,777		5,201		(524	)		249,454
	$	4,799,401	$	40,348	$	(36,265	)	$	4,803,484
December 31, 2016
U.S. Treasury bonds	$	155,441	$	416	$	(4,466	)	$	151,391
Municipal bonds		1,004,659		6,340		(26,666	)		984,333
Foreign government bonds		141,887		600		(2,439	)		140,048
Governmental agency bonds		197,343		691		(4,166	)		193,868
Governmental agency mortgage-backed securities		2,187,482		2,983		(26,792	)		2,163,673
U.S. corporate debt securities		675,683		8,282		(5,441	)		678,524
Foreign corporate debt securities		240,526		2,490		(1,490	)		241,526
	$	4,603,021	$	21,802	$	(71,460	)	$	4,553,363


(in thousands)	Title Insurance and Services			Specialty Insurance		Total
Balance as of December 31, 2016	$	970,652		$	46,765	$	1,017,417
Acquisitions		123,954			—		123,954
Foreign currency translation		4,391			—		4,391
Other adjustments		(298	)		—		(298	)
Balance as of September 30, 2017	$	1,098,699		$	46,765	$	1,145,464

Year	(in thousands)
Remainder of 2017	$	7,975
2018	$	15,920
2019	$	9,210
2020	$	5,221
2021	$	2,976
2022	$	2,380

	September 30, 2017									September 30, 2016
(in thousands)	U.S. corporate debt securities			Foreign corporate debt securities			Total			U.S. corporate debt securities			Foreign corporate debt securities			Total
Fair value at beginning of period	$	18,128		$	1,915		$	20,043		$	14,493		$	723		$	15,216
Transfers into Level 3		3,747			573			4,320			5,968			—			5,968
Transfers out of Level 3		(6,788	)		—			(6,788	)		(4,546	)		—			(4,546	)
Net realized and unrealized gains (losses):
Included in earnings		26			(1	)		25			5			—			5
Included in other comprehensive income (loss)		(86	)		(5	)		(91	)		115			43			158
Purchases		901			149			1,050			1,866			1,045			2,911
Sales		(1,231	)		—			(1,231	)		(46	)		(50	)		(96	)
Settlements		(2,188	)		(1,758	)		(3,946	)		(356	)		—			(356	)
Fair value at end of period	$	12,509		$	873		$	13,382		$	17,499		$	1,761		$	19,260

(in thousands)	Unrealized gains (losses) on securities			Foreign currency translation adjustment			Pension benefit adjustment			Accumulated other comprehensive income (loss)
Balance at December 31, 2016	$	(26,760	)	$	(63,576	)	$	(140,057	)	$	(230,393	)
Change in unrealized gains (losses) on securities		81,044			—			—			81,044
Change in foreign currency translation adjustment		—			23,558			—			23,558
Net actuarial loss		—			—			(8,646	)		(8,646	)
Amortization of net actuarial loss		—			—			15,792			15,792
Amortization of prior service credit		—			—			(3,268	)		(3,268	)
Settlement costs		—			—			152,388			152,388
Tax effect		(29,030	)		—			(63,205	)		(92,235	)
Balance at September 30, 2017	$	25,254		$	(40,018	)	$	(46,996	)	$	(61,760	)
Allocated to the Company	$	25,235		$	(40,018	)	$	(46,996	)	$	(61,779	)
Allocated to noncontrolling interests		19			—			—			19
Balance at September 30, 2017	$	25,254		$	(40,018	)	$	(46,996	)	$	(61,760	)

		Amounts reclassified from AOCI											��
(in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,						Affected line items in the condensed
(in thousands)		2017			2016			2017			2016			consolidated statements of income
Unrealized gains (losses) on securities:
Net realized gains on sales of securities	$	928		$	8,687		$	14,285		$	13,707			Net realized investment (losses) gains
Net other-than-temporary impairment losses		—			—			—			(485	)		Net realized investment (losses) gains
Pretax total	$	928		$	8,687		$	14,285		$	13,222
Tax effect	$	(332	)	$	(3,261	)	$	(5,778	)	$	(5,057	)
Pension benefit adjustment:
Amortization of net actuarial loss	$	(1,958	)	$	(7,043	)	$	(15,792	)	$	(21,153	)	(1	)
Amortization of prior service credit		1,045			1,211			3,268			3,633		(1	)
Settlement costs		(152,388	)		—			(152,388	)		—		(1	)
Pretax total	$	(153,301	)	$	(5,832	)	$	(164,912	)	$	(17,520	)
Tax effect	$	62,276		$	2,229		$	66,702		$	6,701


	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31, 2024		13,200	$	59.59		13,200	$	213,048,183
February 1 to February 29, 2024		45,400		59.31		45,400		210,355,467
March 1, 2024 to March 31, 2024		—		—		—		210,355,467
Total		58,600	$	59.37		58,600	$	210,355,467


Exhibit No.	Description	Location

3.1	Amended and Restated Certificate of Incorporation of First American Financial Corporation dated May 28, 2010.	Incorporated by reference herein to Exhibit 3.1 to the Current Report on Form 8-K ~~dated~~filed June 1, 2010.

3.2	~~Amended and Restated~~ Bylaws of First American Financial Corporation, amended and restated effective as of ~~August 16, 2017.~~January 19, 2022.	Incorporated by reference herein to Exhibit 3.1 to the Current Report on Form 8-K ~~dated August 16, 2017.~~filed January 21, 2022.

31(a)	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.	Attached.

31(b)	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.	Attached.

32(a)	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.	Attached.

32(b)	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.	Attached.

101.INS	Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	~~Attached.~~N/A.

101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document.	Attached.

~~101.CAL~~104	Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Calculation Linkbase Document.~~and contained in Exhibit 101).	~~Attached.~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document.~~	~~Attached.~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document.~~	~~Attached.~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document.~~	~~Attached.~~N/A.


	FIRST AMERICAN FINANCIAL CORPORATION (Registrant)

Date: April 25, 2024	By	/s/ ~~Dennis J. Gilmore~~Kenneth D. DeGiorgio
		~~Dennis J. Gilmore~~Kenneth D. DeGiorgio
		Chief Executive Officer (Principal Executive Officer)

Date: April 25, 2024	By	/s/ Mark E. Seaton
		Mark E. Seaton
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)