(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No 1☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No 1☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 1☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes 1☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes 1 No 1

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

On October ~~20, 2017,~~19, 2020 there were ~~110,817,359~~111,645,048 shares of common stock outstanding.

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.

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.

	September 30, 2017			December 31, 2016			September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	1,141,915		$	1,006,138		$	1,512,369	$	1,485,959
Accounts and accrued income receivable, net		341,395			299,799
Accounts and accrued income receivable, less allowances of $12,600 and $12,676								392,885		324,385
Income taxes receivable		11,102			67,970			8,814		10,967
Investments:
Deposits with banks		20,940			21,222			41,551		44,422
Debt securities, includes pledged securities of $100,681 and $110,647		4,803,484			4,553,363
Debt securities, includes pledged securities of $88,049 and $91,636 (amortized cost of $5,732,761 and $5,796,755; allowance for credit losses of $821 at September 30, 2020)								5,939,224		5,913,636
Equity securities		446,185			404,085			393,180		392,318
Other investments		120,514			162,029			325,652		239,067
		5,391,123			5,140,699			6,699,607		6,589,443
Secured financings receivable								722,156		287,459
Property and equipment, net		438,136			434,050			442,409		442,014
Operating lease assets								272,367		291,385
Title plants and other indexes		566,599			564,309			580,462		579,674
Deferred income taxes		20,037			20,037			18,283		18,283
Goodwill		1,145,464			1,017,417			1,355,289		1,150,908
Other intangible assets, net		75,126			78,898			196,691		91,833
Assets held for sale								198,283		—
Other assets		216,150			202,460			239,195		246,857
	$	9,347,047		$	8,831,777		$	12,638,810	$	11,519,167
Liabilities and Equity
Deposits	$	2,965,426		$	2,779,478		$	3,499,640	$	3,337,431
Accounts payable and accrued liabilities		741,569			793,955			830,050		820,356
Deferred revenue		250,917			228,905			202,291		252,331
Reserve for known and incurred but not reported claims		1,021,648			1,025,863			1,069,859		1,063,044
Income taxes payable		92,841			10,376			47,817		25,475
Deferred income taxes		242,158			242,158			266,108		266,108
Operating lease liabilities								301,525		322,776
Liabilities held for sale								148,283		—
Secured financings payable								526,544		278,412
Notes and contracts payable		734,091			736,693			1,011,758		728,232
		6,048,650			5,817,428			7,903,875		7,094,165
Commitments and contingencies (Note 13)
Commitments and contingencies (Note 17)
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—500 shares; Outstanding—NaN								0		0
Common stock, $0.00001 par value; Authorized—300,000 shares; Outstanding—111,645 shares and 112,476 shares								1		1
Additional paid-in capital		2,226,691			2,191,756			2,273,007		2,300,926
Retained earnings		1,128,981			1,046,822			2,426,949		2,161,049
Accumulated other comprehensive loss		(61,779	)		(230,400	)
Accumulated other comprehensive income (loss)								23,813		(41,492	)
Total stockholders’ equity		3,293,894			3,008,179			4,723,770		4,420,484
Noncontrolling interests		4,503			6,170			11,165		4,518
Total equity		3,298,397			3,014,349			4,734,935		4,425,002
	$	9,347,047		$	8,831,777		$	12,638,810	$	11,519,167

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues
Direct premiums and escrow fees	$	807,947	$	728,610	$	2,080,568	$	1,910,830
Agent premiums		722,434		656,154		1,920,011		1,701,538
Information and other		285,882		208,297		728,563		581,858
Net investment income		52,466		76,628		156,760		236,607
Net realized investment gains		44,992		1,507		49,491		42,564
		1,913,721		1,671,196		4,935,393		4,473,397
Expenses
Personnel costs		511,298		470,683		1,392,445		1,329,322
Premiums retained by agents		572,780		518,824		1,520,559		1,344,517
Other operating expenses		281,079		248,252		788,407		667,047
Provision for policy losses and other claims		157,836		124,683		414,001		331,525
Depreciation and amortization		38,227		31,719		110,652		97,537
Impairments on assets held for sale (Note 2)		73,264		0		73,264		0
Premium taxes		19,885		19,484		53,554		50,887
Interest		15,981		12,213		41,521		36,057
		1,670,350		1,425,858		4,394,403		3,856,892
Income before income taxes		243,371		245,338		540,990		616,505
Income taxes		59,780		57,171		121,859		131,263
Net income		183,591		188,167		419,131		485,242
Less: Net income attributable to noncontrolling interests		1,312		985		2,993		1,830
Net income attributable to the Company	$	182,279	$	187,182	$	416,138	$	483,412
Net income per share attributable to the Company's stockholders (Note 11):
Basic	$	1.62	$	1.65	$	3.69	$	4.28
Diluted	$	1.62	$	1.65	$	3.68	$	4.26
Cash dividends declared per share	$	0.44	$	0.42	$	1.32	$	1.26
Weighted-average common shares outstanding (Note 11):
Basic		112,584		113,163		112,913		112,983
Diluted		112,843		113,741		113,176		113,509

	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, 2019		112,476		$	1	$	2,300,926		$	2,161,049		$	(41,492	)	$	4,420,484		$	4,518		$	4,425,002
Net income for three months ended March 31, 2020		0			0		0			63,204			0			63,204			642			63,846
Dividends on common shares		0			0		0			(49,702	)		0			(49,702	)		0			(49,702	)
Purchase of Company shares		(1,703	)		0		(65,785	)		0			0			(65,785	)		0			(65,785	)
Shares issued in connection with share-based compensation		644			0		(13,547	)		(831	)		0			(14,378	)		0			(14,378	)
Share-based compensation		0			0		25,903			0			0			25,903			0			25,903
Net activity related to noncontrolling interests		0			0		72			0			0			72			4,417			4,489
Other comprehensive loss		0			0		0			0			(20,453	)		(20,453	)		0			(20,453	)
Balance at March 31, 2020		111,417			1		2,247,569			2,173,720			(61,945	)		4,359,345			9,577			4,368,922
Net income for three months ended June 30, 2020		0			0		0			170,655			0			170,655			1,039			171,694
Dividends on common shares		0			0		0			(48,996	)		0			(48,996	)		0			(48,996	)
Purchase of Company shares		(71	)		0		(3,079	)		0			0			(3,079	)		0			(3,079	)
Shares issued in connection with share-based compensation		173			0		5,308			(827	)		0			4,481			0			4,481
Share-based compensation		0			0		9,693			0			0			9,693			0			9,693
Net activity related to noncontrolling interests		0			0		0			0			0			0			(405	)		(405	)
Other comprehensive income		0			0		0			0			73,301			73,301			0			73,301
Balance at June 30, 2020		111,519			1		2,259,491			2,294,552			11,356			4,565,400			10,211			4,575,611
Net income for three months ended September 30, 2020		0			0		0			182,279			0			182,279			1,312			183,591
Dividends on common shares		0			0		0			(49,070	)		0			(49,070	)		0			(49,070	)
Shares issued in connection with share-based compensation		126			0		5,112			(812	)		0			4,300			0			4,300
Share-based compensation		0			0		8,404			0			0			8,404			0			8,404
Net activity related to noncontrolling interests		0			0		0			0			0			0			(358	)		(358	)
Other comprehensive income		0			0		0			0			12,457			12,457			0			12,457
Balance at September 30, 2020		111,645		$	1	$	2,273,007		$	2,426,949		$	23,813		$	4,723,770		$	11,165		$	4,734,935

	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, 2018		111,496		$	1	$	2,258,290		$	1,644,165		$	(160,575	)	$	3,741,881		$	3,507		$	3,745,388
Cumulative-effect adjustment		0			0		0			1,283			0			1,283			0			1,283
Net income for three months ended March 31, 2019		0			0		0			109,575			0			109,575			229			109,804
Dividends on common shares		0			0		0			(47,021	)		0			(47,021	)		0			(47,021	)
Purchase of Company shares		(47	)		0		(2,066	)		0			0			(2,066	)		0			(2,066	)
Shares issued in connection with share-based compensation		623			0		(10,618	)		(862	)		0			(11,480	)		0			(11,480	)
Share-based compensation		0			0		19,597			0			0			19,597			0			19,597
Net activity related to noncontrolling interests		0			0		(60	)		0			0			(60	)		(1,226	)		(1,286	)
Other comprehensive income (loss)		0			0		0			0			66,318			66,318			(1	)		66,317
Balance at March 31, 2019		112,072			1		2,265,143			1,707,140			(94,257	)		3,878,027			2,509			3,880,536
Net income for three months ended June 30, 2019		0			0		0			186,655			0			186,655			616			187,271
Dividends on common shares		0			0		0			(47,084	)		0			(47,084	)		0			(47,084	)
Shares issued in connection with share-based compensation		145			0		3,836			(846	)		0			2,990			0			2,990
Share-based compensation		0			0		7,758			0			0			7,758			0			7,758
Net activity related to noncontrolling interests		0			0		0			0			0			0			20			20
Other comprehensive income		0			0		0			0			56,543			56,543			0			56,543
Balance at June 30, 2019		112,217			1		2,276,737			1,845,865			(37,714	)		4,084,889			3,145			4,088,034
Net income for three months ended September 30, 2019		0			0		0			187,182			0			187,182			985			188,167
Dividends on common shares		0			0		0			(47,139	)		0			(47,139	)		0			(47,139	)
Shares issued in connection with share-based compensation		119			0		4,466			(835	)		0			3,631			0			3,631
Share-based compensation		0			0		7,556			0			0			7,556			0			7,556
Net activity related to noncontrolling interests		0			0		(22	)		0			0			(22	)		(49	)		(71	)
Other comprehensive income		0			0		0			0			6,044			6,044			0			6,044
Balance at September 30, 2019		112,336		$	1	$	2,288,737		$	1,985,073		$	(31,670	)	$	4,242,141		$	4,081		$	4,246,222

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenues

Direct premiums and escrow fees

$
651,104

$
649,726

$
1,819,193

$
1,775,615

Agent premiums

629,186

625,953

1,757,796

1,653,990

Information and other

201,819

188,727

586,179

526,575

Net investment income

44,460

34,422

117,109

92,717

Net realized investment (losses) gains

(7,001
)

9,516

10,763

22,692

1,519,568

1,508,344

4,291,040

4,071,589

Expenses

Personnel costs

599,380

438,692

1,458,928

1,239,129

Premiums retained by agents

497,911

495,130

1,387,608

1,303,838

Other operating expenses

218,959

219,959

649,182

622,995

Provision for policy losses and other claims

120,349

137,015

333,695

366,473

Depreciation and amortization

36,000

24,491

96,292

70,905

Premium taxes

19,900

18,288

52,527

48,692

Interest

9,107

7,838

26,812

23,427

1,501,606

1,341,413

4,005,044

3,675,459

Income before income taxes

17,962

166,931

285,996

396,130

Income tax (benefit) expense

(3,224
)

59,539

84,846

133,615

Net income

21,186

107,392

201,150

262,515

Less: Net (loss) income attributable to noncontrolling interests

(197
)

72

(772
)

545

Net income attributable to the Company

$
21,383

$
107,320

$
201,922

$
261,970

Net income per share attributable to the Company's
stockholders (Note 8):

Basic

$
0.19

$
0.97

$
1.81

$
2.37

Diluted

$
0.19

$
0.96

$
1.80

$
2.36

Cash dividends declared per share

$
0.38

$
0.34

$
1.06

$
0.86

Weighted-average common shares outstanding (Note 8):

Basic

111,799

110,571

111,578

110,423

Diluted

112,575

111,251

112,254

111,006

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	419,131		$	485,242
Adjustments to reconcile net income to cash provided by operating activities:
Provision for policy losses and other claims		414,001			331,525
Depreciation and amortization		110,652			97,537
Impairments on assets held for sale		73,264			0
Amortization of premiums and accretion of discounts on debt securities, net		28,678			18,646
Net realized investment gains		(49,491	)		(42,564	)
Share-based compensation		44,000			34,911
Equity in earnings of equity method investments, net		(3,556	)		(1,802	)
Dividends from equity method investments		4,383			4,077
Changes in assets and liabilities excluding effects of acquisitions and noncash transactions:
Claims paid, including assets acquired, net of recoveries		(342,721	)		(305,174	)
Net change in income tax accounts		(47	)		17,523
Increase in accounts and accrued income receivable		(72,670	)		(52,757	)
Increase in accounts payable and accrued liabilities		32,030			10,686
Increase in deferred revenue		21,668			19,484
Other, net		1,723			(5,653	)
Cash provided by operating activities		681,045			611,681
Cash flows from investing activities:
Net cash effect of acquisitions/dispositions		(387,024	)		(19,674	)
Net decrease (increase) in deposits with banks		1,859			(3,749	)
Purchases of debt and equity securities		(2,073,802	)		(1,611,934	)
Proceeds from sales of debt and equity securities		784,750			979,019
Proceeds from maturities of debt securities		1,157,725			666,749
Investments in unconsolidated entities		(57,966	)		(77,000	)
Net change in other investments		(8,960	)		(4,707	)
Advances under secured financing agreements		(11,619,818	)		(5,311,828	)
Collections of secured financings receivable		11,185,121			5,036,122
Capital expenditures		(91,601	)		(78,158	)
Proceeds from sales of property and equipment		13,951			105
Proceeds from insurance settlement		123			0
Cash used for investing activities		(1,095,642	)		(425,055	)

Condensed Consolidated Statements of ~~Comprehensive Income~~Cash Flows – (Continued)

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

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

Cash flows from financing activities:
Net change in deposits		162,209			54,545
Borrowings under secured financing agreements		10,964,792			5,195,063
Repayments of secured financings payable		(10,716,660	)		(5,037,893	)
Net proceeds from issuance of unsecured senior notes		443,936			0
Borrowings under unsecured credit facility		120,000			160,000
Repayments of borrowings under unsecured credit facility		(280,000	)		(160,000	)
Repayments of notes and contracts payable		(4,228	)		(4,280	)
Net activity related to noncontrolling interests		(2,090	)		(1,112	)
Net payments in connection with share-based compensation		(5,597	)		(4,859	)
Repurchases of Company shares		(68,864	)		(2,066	)
Payments of cash dividends		(147,768	)		(141,244	)
Cash provided by financing activities		465,730			58,154
Effect of exchange rate changes on cash		(3,122	)		(910	)
Net increase in cash and cash equivalents		48,011			243,870
Cash and cash equivalents—Beginning of period		1,485,959			1,467,129
Reclassification to assets held for sale		(21,601	)		0
Cash and cash equivalents—End of period	$	1,512,369		$	1,710,999
Supplemental information:
Cash paid during the period for:
Interest	$	30,034		$	34,053
Premium taxes	$	59,523		$	55,229
Income taxes, less refunds of $3,168 and $930	$	122,086		$	113,723

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.~~2019. 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.

~~During~~The coronavirus pandemic and responses to it have created significant volatility, uncertainty and economic disruption. The extent to which the ~~third quarter of 2017,~~coronavirus pandemic impacts the Company’s business, operations and financial results will depend on numerous factors that the Company ~~identified certain title plant assets within its title insurance~~may not be able to accurately predict, including: the duration and scope of the pandemic and restrictions and responses to it; governmental, business and individual actions that have been and will continue to be taken in response to the pandemic; the ongoing impact of the pandemic on economic activity and actions taken in response, including the efficacy of governmental relief efforts; the effect on participants in real estate transactions and the demand for the Company’s products and services, ~~segment~~including as a result of higher unemployment, business closures and economic uncertainty; and the Company’s ability to sell and provide its services and solutions, including as a result of illness, travel restrictions, people working from home, governmental closure orders and partial or full closures of business and government offices. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that ~~should have been previously written off, and certain title plant imaging assets that were misclassified as title plant assets. To correct for these errors,~~affect the ~~Company recorded adjustments to net realized investment gains, depreciation and amortization and title plants and other indexes. The~~financial statements, some of which consider the impact or expected impact of ~~these adjustments included an increase~~the coronavirus pandemic. Actual results could differ from the estimates and assumptions used due 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~~the uncertainty created by the coronavirus pandemic, as well as 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 in accounts payable and accrued liabilities of $0.5 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.~~factors.

In ~~October 2016,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued updated guidance intended to ~~amend~~reduce potential diversity in practice in accounting for the ~~consolidation guidance on how a reporting entity that is the single decision maker~~costs of ~~a variable interest entity should treat indirect interests in the entity held through related parties~~implementing cloud computing arrangements (i.e., hosting arrangements) that are ~~under common control~~service contracts. The updated guidance aligns the requirements for capitalizing implementation costs for these arrangements with the ~~reporting entity when determining whether it is the primary beneficiary of~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that ~~variable interest entity.~~include an internal-use software license. The updated guidance is effective for interim and annual reporting periods beginning after December 15, ~~2016.~~2019. The adoption of this guidance, ~~had no~~effective January 1, 2020, did not have a material impact on the Company’s condensed consolidated financial statements.

In ~~March 2016,~~August 2018, the FASB issued updated guidance as part of its disclosure framework project intended to ~~simplify~~improve the effectiveness of disclosures in the notes to the financial statements. The updated guidance eliminates, adds 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.modifies certain disclosure requirements related to fair value measurements. The updated guidance is effective for interim and annual reporting periods beginning after December 15, ~~2016. While the~~2019. The adoption of this guidance, ~~did have an impact on the Company’s~~ effective ~~income tax rate for 2017, it~~January 1, 2020, did not have a material impact on the Company’s 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.

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

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.

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 will 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.~~2019. The ~~Company does not expect the~~ adoption of this guidance, toeffective January 1, 2020, did not have a material impact on ~~its~~the Company’s 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~~2019. The adoption ~~permitted. The Company is currently assessing the impact~~ of ~~the new~~this guidance on ~~its~~a modified-retrospective basis, effective January 1, 2020, did not have a material impact, except for the disclosure requirements, on the Company’s condensed consolidated financial statements. See Note 4 Debt and Equity Securities and Note 5 Credit Losses – Financial Assets and Off-Balance Sheet Credit Exposures for further information on the Company’s credit losses.

In ~~February 2016,~~December 2019, the FASB issued updated guidance ~~that requires~~intended to simplify and improve 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~~accounting for income taxes. The updated guidance ~~lessees will be required to recognize a right-of-use asset~~eliminates certain exceptions and ~~a liability to make lease payments~~clarifies and ~~disclose key information about leasing arrangements.~~amends certain areas of the guidance. The updated guidance is effective for interim and annual reporting periods beginning after December 15, ~~2018,~~2020, 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~~adoption of this guidance to have a material impact on its condensed consolidated financial statements.

In the third quarter of 2020, the Company committed to a plan to sell its property and casualty insurance business, which is expected to be completed within one year. As a result of this decision, the Company remeasured the assets and liabilities of its property and casualty insurance business at estimated fair value, less costs to sell, and recorded pretax impairment losses to goodwill, other intangible assets, property and equipment and other assets totaling $73.3 million for the three and nine months ended September 30, 2020. In addition, the assets and liabilities of the property and casualty insurance business have been reclassified as held for sale on the Company’s condensed consolidated balance sheet at September 30, 2020. The impairment losses are included in impairments on assets held for sale on the condensed consolidated statements of income and in the operating results of the specialty insurance segment.

The major classes of assets and liabilities classified as held for sale, as of September 30, 2020, are summarized as follows:

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

The Company administers escrow deposits and trust assets as a service to its customers. Escrow deposits totaled $7.9 billion and ~~$6.8~~$7.3 billion at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, of which ~~$2.8~~$3.3 billion and ~~$2.6~~$3.2 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. The remaining escrow deposits were held at third-party financial institutions.

Trust assets held or managed by First American Trust, FSB totaled ~~$3.5~~$4.3 billion and ~~$3.2~~$4.2 billion at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, 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 to Condensed Consolidated Financial Statements – (Continued)~~
~~(unaudited)~~

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 by the Company totaled ~~$2.3~~$2.0 billion and ~~$2.0~~$3.0 billion at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, 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.

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

On January 1, 2020, the Company adopted updated accounting guidance that changed the impairment methodology for available-for-sale debt securities. Under the new guidance, when the fair value of an available-for-sale debt security falls below its amortized cost, entities must determine whether the decline in fair value is due to credit-related factors or noncredit-related factors. Declines in fair value that are credit-related are now recorded on the balance sheet through an allowance for credit losses with a corresponding adjustment to earnings and declines that are noncredit-related are recognized through other comprehensive income/loss.

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

(in thousands)	Amortized cost		Gross unrealized					Estimated fair value		(in thousands)	Amortized cost		Allowance for credit losses (1)			Gross unrealized					Estimated fair value
(in thousands)	Amortized cost		Gains		Losses			Estimated fair value		(in thousands)	Amortized cost		Allowance for credit losses (1)			Gains		Losses			Estimated fair value
September 30, 2017
September 30, 2020										September 30, 2020
U.S. Treasury bonds	$	145,396	$	1,484	$	(1,427	)	$	145,453	U.S. Treasury bonds	$	111,183	$	0		$	890	$	(1	)	$	112,072
Municipal bonds		1,068,611		14,546		(10,795	)		1,072,362	Municipal bonds		1,036,502		0			67,396		(1,115	)		1,102,783
Foreign government bonds		162,550		556		(1,457	)		161,649	Foreign government bonds		181,885		(111	)		5,425		(215	)		186,984
Governmental agency bonds		223,546		1,063		(2,891	)		221,718	Governmental agency bonds		255,359		0			11,663		(170	)		266,852
Governmental agency mortgage-backed securities		2,238,222		4,098		(16,400	)		2,225,920	Governmental agency mortgage-backed securities		3,272,439		0			76,010		(2,112	)		3,346,337
U.S. corporate debt securities		716,299		13,400		(2,771	)		726,928	U.S. corporate debt securities		533,446		(496	)		35,153		(1,428	)		566,675
Foreign corporate debt securities		244,777		5,201		(524	)		249,454	Foreign corporate debt securities		341,947		(214	)		16,993		(1,205	)		357,521
	$	4,799,401	$	40,348	$	(36,265	)	$	4,803,484		$	5,732,761	$	(821	)	$	213,530	$	(6,246	)	$	5,939,224
December 31, 2016
December 31, 2019										December 31, 2019
U.S. Treasury bonds	$	155,441	$	416	$	(4,466	)	$	151,391	U.S. Treasury bonds	$	143,825	$	0		$	469	$	(353	)	$	143,941
Municipal bonds		1,004,659		6,340		(26,666	)		984,333	Municipal bonds		1,043,252		0			47,804		(217	)		1,090,839
Foreign government bonds		141,887		600		(2,439	)		140,048	Foreign government bonds		179,554		0			1,497		(961	)		180,090
Governmental agency bonds		197,343		691		(4,166	)		193,868	Governmental agency bonds		316,318		0			5,820		(219	)		321,919
Governmental agency mortgage-backed securities		2,187,482		2,983		(26,792	)		2,163,673	Governmental agency mortgage-backed securities		3,241,966		0			43,599		(7,307	)		3,278,258
U.S. corporate debt securities		675,683		8,282		(5,441	)		678,524	U.S. corporate debt securities		535,878		0			18,466		(972	)		553,372
Foreign corporate debt securities		240,526		2,490		(1,490	)		241,526	Foreign corporate debt securities		335,962		0			9,468		(213	)		345,217
	$	4,603,021	$	21,802	$	(71,460	)	$	4,553,363		$	5,796,755	$	0		$	127,123	$	(10,242	)	$	5,913,636

13Sales of debt securities resulted in realized gains of $7.1 million and $16.4 million, realized losses of $0.4 million and $3.4 million, and proceeds of $200.1 million and $694.6 million for the three and nine months ended September 30, 2020, respectively, and realized gains of $3.3 million and $8.2 million, realized losses of $0.5 million and $5.2 million, and proceeds of $229.4 million and $852.1 million for the three and nine months ended September 30, 2019, respectively.

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

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

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 losses on investments in debt ~~and equity~~ securities for which an allowance for credit losses has not been recorded, are as follows:

	Less than 12 months					12 months or longer					Total					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			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses			Estimated fair value		Unrealized losses
September 30, 2017
Debt securities:
September 30, 2020
U.S. Treasury bonds	$	61,500	$	(584	)	$	20,177	$	(843	)	$	81,677	$	(1,427	)	$	56,635	$	(1	)	$	0	$	0		$	56,635	$	(1	)
Municipal bonds		124,976		(775	)		247,001		(10,020	)		371,977		(10,795	)		91,375		(1,115	)		0		0			91,375		(1,115	)
Foreign government bonds		97,341		(1,058	)		10,471		(399	)		107,812		(1,457	)		68,562		(215	)		0		0			68,562		(215	)
Governmental agency bonds		106,783		(778	)		81,053		(2,113	)		187,836		(2,891	)		12,372		(170	)		0		0			12,372		(170	)
Governmental agency mortgage-backed securities		686,814		(4,572	)		832,251		(11,828	)		1,519,065		(16,400	)		257,038		(1,601	)		109,180		(511	)		366,218		(2,112	)
U.S. corporate debt securities		113,028		(1,484	)		50,152		(1,287	)		163,180		(2,771	)		59,593		(1,409	)		1,551		(19	)		61,144		(1,428	)
Foreign corporate debt securities		62,671		(457	)		3,492		(67	)		66,163		(524	)		41,839		(1,193	)		255		(12	)		42,094		(1,205	)
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:
																$	587,414	$	(5,704	)	$	110,986	$	(542	)	$	698,400	$	(6,246	)
December 31, 2019
U.S. Treasury bonds	$	111,748	$	(4,466	)	$	—	$	—		$	111,748	$	(4,466	)	$	12,507	$	(350	)	$	3,193	$	(3	)	$	15,700	$	(353	)
Municipal bonds		635,531		(26,317	)		16,485		(349	)		652,016		(26,666	)		29,333		(207	)		2,827		(10	)		32,160		(217	)
Foreign government bonds		63,044		(2,371	)		324		(68	)		63,368		(2,439	)		112,167		(934	)		11,001		(27	)		123,168		(961	)
Governmental agency bonds		148,112		(4,166	)		—		—			148,112		(4,166	)		24,493		(142	)		14,923		(77	)		39,416		(219	)
Governmental agency mortgage-backed securities		1,295,790		(19,097	)		432,349		(7,695	)		1,728,139		(26,792	)		719,602		(2,785	)		637,009		(4,522	)		1,356,611		(7,307	)
U.S. corporate debt securities		193,533		(4,560	)		24,499		(881	)		218,032		(5,441	)		42,607		(451	)		10,216		(521	)		52,823		(972	)
Foreign corporate debt securities		78,658		(1,150	)		8,154		(340	)		86,812		(1,490	)		30,895		(108	)		12,373		(105	)		43,268		(213	)
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	)
																$	971,604	$	(4,977	)	$	691,542	$	(5,265	)	$	1,663,146	$	(10,242	)

14Based on the Company’s review of its debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, it determined that the losses were due to non-credit factors. As such, the Company does not consider these securities to be credit impaired at September 30, 2020.

If the Company intends to sell a debt security in an unrealized loss position or determines that it is more likely than not that the Company will be required to sell a debt security before it recovers its amortized cost basis, the debt security is impaired and it is written down to fair value with all losses recognized in earnings. As of September 30, 2020, 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.

For debt securities in an unrealized loss position for which the Company does not intend to sell the debt security and it is not more likely than not that the Company will be required to sell the debt security, the Company determines whether the loss is due to credit-related factors or noncredit-related factors. For debt securities in an unrealized loss position for which the losses are primarily due to credit-related factors, the Company’s policy is to recognize the entire loss in earnings. For debt securities in an unrealized loss position for which the losses are determined to be the result of both credit-related and noncredit-related factors, the credit loss is determined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security. The cash flows expected to be collected are discounted using the effective interest rate (i.e., purchase yield) and for variable rate securities the interest rate is fixed at the rate in effect at the credit loss measurement date.

Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security, including the probability of default and the estimated timing and amount of recovery. The detailed inputs used to project expected future cash flows may be different depending on the nature of the individual debt security.

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

Activity in the allowance for credit losses on debt securities for the three and nine months ended September 30, 2020 is summarized as follows:

In determining credit losses on its debt securities in 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, profitability and stock performance.

The Company’s policy is to present accrued interest receivable on debt securities within accounts and accrued income receivable on the balance sheet. Accrued interest receivable on debt securities at September 30, 2020 totaled $26.4 million. The Company has elected to not measure an allowance for credit losses for accrued interest receivable on debt securities and maintains a policy that all receivables ninety days past due are written off as credit loss expense. Debt securities are placed on non-accrual status, and accrual of interest is discontinued, when management determines that collectibility of contractual amounts is not reasonably assured. Interest income is recognized on a cash basis for interest payments received on debt securities in non-accrual status.

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

Investments in debt securities at September 30, ~~2017,~~2020, 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		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	$	82,169	$	25,321	$	907	$	2,786	$	111,183
Estimated fair value	$	24,937	$	48,104	$	28,338	$	44,074	$	145,453	$	82,442	$	25,755	$	1,023	$	2,852	$	112,072
Municipal bonds
Amortized cost	$	61,831	$	314,910	$	254,976	$	436,894	$	1,068,611	$	46,100	$	111,450	$	391,718	$	487,234	$	1,036,502
Estimated fair value	$	61,960	$	318,703	$	259,744	$	431,955	$	1,072,362	$	46,478	$	115,646	$	420,952	$	519,707	$	1,102,783
Foreign government bonds
Amortized cost	$	7,772	$	129,408	$	9,699	$	15,671	$	162,550	$	48,951	$	57,372	$	60,917	$	14,645	$	181,885
Estimated fair value	$	7,783	$	128,568	$	9,864	$	15,434	$	161,649	$	48,975	$	59,281	$	62,930	$	15,798	$	186,984
Governmental agency bonds
Amortized cost	$	15,430	$	106,826	$	55,085	$	46,205	$	223,546	$	20,045	$	108,735	$	71,939	$	54,640	$	255,359
Estimated fair value	$	15,415	$	105,946	$	54,607	$	45,750	$	221,718	$	20,197	$	112,761	$	74,429	$	59,465	$	266,852
U.S. corporate debt securities
Amortized cost	$	29,681	$	299,209	$	314,805	$	72,604	$	716,299	$	9,704	$	307,185	$	145,883	$	70,674	$	533,446
Estimated fair value	$	29,800	$	302,345	$	319,329	$	75,454	$	726,928	$	9,771	$	325,903	$	154,727	$	76,274	$	566,675
Foreign corporate debt securities
Amortized cost	$	14,843	$	120,804	$	93,769	$	15,361	$	244,777	$	11,204	$	188,095	$	99,704	$	42,944	$	341,947
Estimated fair value	$	14,869	$	121,807	$	96,350	$	16,428	$	249,454	$	11,281	$	196,961	$	105,032	$	44,247	$	357,521
Total debt securities excluding mortgage-backed securities
Amortized cost	$	154,523	$	1,019,426	$	756,652	$	630,578	$	2,561,179	$	218,173	$	798,158	$	771,068	$	672,923	$	2,460,322
Estimated fair value	$	154,764	$	1,025,473	$	768,232	$	629,095	$	2,577,564	$	219,144	$	836,307	$	819,093	$	718,343	$	2,592,887
Total mortgage-backed securities
Amortized cost									$	2,238,222									$	3,272,439
Estimated fair value									$	2,225,920									$	3,346,337
Total debt securities
Amortized cost									$	4,799,401									$	5,732,761
Estimated fair value									$	4,803,484									$	5,939,224

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)

Net gains (realized and unrealized) of $26.0 million and $2.6 million were recognized for the three and nine months ended September 30, 2020, respectively, as a result of changes in the fair values of equity securities. Included in net gains during the three and nine months ended September 30, 2020 were net unrealized gains of $26.1 million and $2.4 million, respectively, related to equity securities still held at September 30, 2020. Net gains (realized and unrealized) of $0.2 million and $41.6 million were recognized for the three and nine months ended September 30, 2019, respectively, as a result of changes in the fair values of equity securities. Included in net gains during the three and nine months ended September 30, 2019, were net unrealized losses of $1.5 million and net unrealized gains of $35.9 million, respectively, related to equity securities still held at September 30, 2019.

The composition of the investment portfolio at September 30, ~~2017,~~2020, by credit rating, is as follows:

	A- or higher			BBB+ to BBB-			Non-Investment Grade			Total			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	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	$	112,072		100.0	$	—		—	$	—		—	$	112,072		100.0
Municipal bonds		999,995	93.2		54,521	5.1		17,846	1.7		1,072,362	100.0		1,065,632		96.6		37,151		3.4		—		—		1,102,783		100.0
Foreign government bonds		133,945	82.9		22,184	13.7		5,520	3.4		161,649	100.0		170,806		91.3		13,686		7.4		2,492		1.3		186,984		100.0
Governmental agency bonds		221,718	100.0		—	—		—	—		221,718	100.0		266,852		100.0		—		—		—		—		266,852		100.0
Governmental agency mortgage-backed securities		2,225,920	100.0		—	—		—	—		2,225,920	100.0		3,346,337		100.0		—		—		—		—		3,346,337		100.0
U.S. corporate debt securities		249,320	34.3		262,936	36.2		214,672	29.5		726,928	100.0		266,057		47.0		246,872		43.5		53,746		9.5		566,675		100.0
Foreign corporate debt securities		123,674	49.6		96,553	38.7		29,227	11.7		249,454	100.0		149,096		41.7		187,669		52.5		20,756		5.8		357,521		100.0
Total debt securities		4,100,025	85.3		436,194	9.1		267,265	5.6		4,803,484	100.0		5,376,852		90.5		485,378		8.2		76,994		1.3		5,939,224		100.0
Preferred stocks		—	—		13,616	73.5		4,911	26.5		18,527	100.0		44		0.3		16,063		93.1		1,137		6.6		17,244		100.0
Total	$	4,100,025	85.1	$	449,810	9.3	$	272,176	5.6	$	4,822,011	100.0	$	5,376,896		90.3	$	501,441		8.4	$	78,131		1.3	$	5,956,468		100.0

Included in debt securities at September 30, ~~2017, the estimated fair value of total debt securities included $144.3~~2020, were bank loans totaling $54.9 million, of ~~bank loans, of~~ which ~~$133.7~~$51.5 million ~~was~~were non-investment grade; ~~$106.7 million of~~ high yield corporate debt securities totaling $20.3 million, all of which ~~was~~were non-investment grade; and ~~$74.3 million of~~ emerging market debt securities totaling $65.2 million, of which ~~$9.0~~$5.2 million ~~was~~were non-investment grade.

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

The composition of the ~~investment~~debt securities portfolio in an unrealized loss position at September 30, ~~2017,~~2020, by credit rating, is as follows:

	A- or higher			BBB+ to BBB-			Non-Investment Grade			Total			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	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	$	56,635		100.0	$	—		—	$	—		—	$	56,635		100.0
Municipal bonds		355,301	95.6		15,057	4.0		1,619	0.4		371,977	100.0		80,589		88.2		10,786		11.8		—		—		91,375		100.0
Foreign government bonds		95,300	88.4		9,663	9.0		2,849	2.6		107,812	100.0		68,227		99.5		335		0.5		—		—		68,562		100.0
Governmental agency bonds		187,836	100.0		—	—		—	—		187,836	100.0		12,372		100.0		—		—		—		—		12,372		100.0
Governmental agency mortgage-backed securities		1,519,065	100.0		—	—		—	—		1,519,065	100.0		366,218		100.0		0		0		0		0		366,218		100.0
U.S. corporate debt securities		46,440	28.5		80,803	49.5		35,937	22.0		163,180	100.0		13,148		21.5		8,436		13.8		39,560		64.7		61,144		100.0
Foreign corporate debt securities		40,649	61.4		23,108	34.9		2,406	3.7		66,163	100.0		18,845		44.8		12,222		29.0		11,027		26.2		42,094		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	$	616,034		88.2	$	31,779		4.6	$	50,587		7.2	$	698,400		100.0

Debt securities in an unrealized loss position at September 30, 2020, included ~~$26.4~~bank loans totaling $48.5 million, of ~~bank loans, of~~ which ~~$26.0~~$45.2 million ~~was~~were non-investment grade; ~~$11.6 million of~~ high yield corporate debt securities totaling $4.2 million, all of which ~~was~~were non-investment grade; and ~~$15.4 million of~~ emerging market debt securities totaling $3.9 million, of which ~~$3.6~~$1.2 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.

Note 5 – Credit Losses – Financial Assets and Off-Balance Sheet Credit Exposures

On January 1, 2020, the Company adopted updated accounting guidance which requires financial assets measured at amortized cost to be presented at the net amount expected to be collected with credit losses recorded through an allowance account that is deducted from the amortized cost of the financial asset. The updated guidance also requires the measurement of expected credit losses on off-balance sheet credit exposures.

The Company’s financial assets, which are measured at amortized cost, primarily include accounts receivable, accrued interest receivable and secured financings receivable. See Note 4 Debt and Equity Securities for discussion of accrued interest receivable on debt securities.

Accounts receivable are generally due within thirty days and are recorded net of an allowance for credit losses. The Company considers accounts outstanding longer than the contractual payment terms as past due. The Company determines the allowance by considering a number of factors, including the length of time trade accounts receivable are past due, previous loss history, a specific customer’s ability to pay its obligations to the Company and the current condition, and future expectations, of the general economy and industry as a whole. Amounts are charged off in the period in which they are deemed to be uncollectible.

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

Activity in the allowance for credit losses on accounts receivable for the three and nine months ended September 30, 2020 is summarized as follows:

The Company’s policy is to present accrued interest receivable on financial assets measured at amortized cost within accounts and accrued income receivable on the balance sheet. Accrued interest receivable at September 30, 2020 totaled $2.5 million. The Company has elected to not measure an allowance for credit losses for accrued interest receivable and maintains a policy that all receivables ninety days past due are written off as credit loss expense. Accounts are placed on non-accrual status, and accrual of interest is discontinued, when management determines that collectibility of contractual amounts is not reasonably assured. Payments of interest for accounts in non-accrual status are applied under the cost recovery method.

The Company’s secured financings receivable are collateralized by mortgage loans on residential real estate. Collections of the receivable balance occur upon sale of the underlying mortgage loan to investors in the secondary market, generally within 30 days and more typically in less than 10 days. No allowance for credit losses has been recorded due to, among other factors, the Company typically identifying investors in the underlying mortgage loans prior to making advances, the short-term nature of these receivables, the underlying mortgage loans are predominantly Qualified Mortgages (QM) and due to the receivable having no history of significant prior credit losses.

Escrow deposits held at third-party financial institutions are not considered assets or liabilities of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All 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. The Company regularly reviews the financial strength of third-party financial institutions where escrow deposits are held and, based on this review and the fact that all amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation, does not expect any credit losses; therefore the Company has not recorded a liability for credit losses.

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

Like-kind exchange deposits held at third-party financial institutions are not considered assets or liabilities of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All 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. The Company regularly reviews the financial strength of third-party financial institutions where like-kind exchange deposits are held and, based on this review and the fact that all amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation, does not expect any credit losses; therefore the Company has not recorded a liability for credit losses.

See Note 43 Escrow Deposits, Like-Kind Exchange Deposits and Trust Assets for further information about the Company’s escrow deposits and like-kind exchange deposits.

A summary of the changes in the carrying amount of goodwill, by ~~operating~~reportable segment, for the nine months ended September 30, ~~2017,~~2020, is as follows:

(in thousands)									Title Insurance and Services			Specialty Insurance			Total
Balance at December 31, 2019
Goodwill									$	1,104,143		$	46,765		$	1,150,908
Accumulated impairment losses										0			0			0
										1,104,143			46,765			1,150,908
(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			240,436			0			240,436
Dispositions										(358	)		0			(358	)
Impairment losses										0			(34,178	)		(34,178	)
Foreign currency translation		4,391			—		4,391			(1,519	)		0			(1,519	)
Other adjustments		(298	)		—		(298	)
Balance as of September 30, 2017	$	1,098,699		$	46,765	$	1,145,464
Balance at September 30, 2020
Goodwill										1,342,702			46,765			1,389,467
Accumulated impairment losses										0			(34,178	)		(34,178	)
									$	1,342,702		$	12,587		$	1,355,289

The Company’s ~~four~~4 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~~2020, there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying ~~amount.~~amount for the title insurance, home warranty and trust and other services reporting units.

~~For further discussion about~~In the ~~Company’s acquisitions~~third quarter of 2020, the Company committed to a plan to sell its property and casualty insurance business, which triggered a goodwill impairment test for the property and casualty insurance reporting unit. Based on the results of the goodwill impairment test, the Company determined that the fair value of the property and casualty insurance reporting unit did not exceed its carrying amount. As a result, the Company recorded a pretax impairment loss to goodwill of $34.2 million for the three and nine months ended September 30, ~~2017,~~2020. See Note 2 Disposition of the Property and Casualty Insurance Business for further information on the sale of the business.

For discussion about the Company’s acquisitions in 2020, see Note 1418 Business Combinations.

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

(in thousands)	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
Finite-lived intangible assets:
Customer relationships	$	77,600		$	78,542		$	167,278		$	99,905
Noncompete agreements		10,210			10,007			38,045			13,150
Trademarks		7,210			6,472			23,344			10,520
Internal-use software licenses		27,632			16,038			22,820			21,982
Patents		2,840			2,840			2,840			2,840
		125,492			113,899			254,327			148,397
Accumulated amortization		(67,250	)		(51,885	)		(74,423	)		(73,449	)
		58,242			62,014			179,904			74,948
Indefinite-lived intangible assets:
Licenses		16,884			16,884			16,787			16,885
	$	75,126		$	78,898		$	196,691		$	91,833

Amortization expense for finite-lived intangible assets was ~~$7.0~~$11.6 million and ~~$19.7~~$31.4 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, and ~~$3.7~~$6.7 million and ~~$9.3~~$22.0 million for the three and nine months ended September 30, ~~2016,~~2019, respectively. The current year increase in finite-lived intangible assets primarily reflects the impact of acquisitions during 2020. For further discussion about the Company’s acquisitions in 2020, see Note 18 Business Combinations.

In connection with the decision to sell the property and casualty insurance business, the Company recognized pretax impairment losses on its finite-lived intangible assets – customer relationships of $3.2 million for the three and nine months ended September 30, 2020. See Note 2 Disposition of the Property and Casualty Insurance Business for further information on the sale of the business.

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

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

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

	Nine months ended September 30,				Nine Months Ended September 30,
(in thousands)	2017		2016		2020			2019
Balance at beginning of period	$	1,025,863	$	983,880	$	1,063,044		$	1,042,679
Provision related to:
Current year		330,342		345,556		379,987			325,012
Prior years		3,353		20,917		34,014			6,513
		333,695		366,473		414,001			331,525
Payments, net of recoveries, related to:
Current year		165,914		160,693		179,654			158,285
Prior years		185,483		190,656		163,067			146,889
		351,397		351,349		342,721			305,174
Other		13,487		19,036		(3,882	)		(14,306	)
Reclassification to liabilities held for sale (1)						(60,583	)		—
Balance at end of period	$	1,021,648	$	1,018,040	$	1,069,859		$	1,054,724

The provision for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, was 5.0% for the three and nine months ended September 30, 2020 compared to 4.0% for the three and nine months ended September 30, ~~2017 compared to 5.5% for the three and nine months ended September 30, 2016.~~2019, respectively. The current quarter rate of ~~4.0%~~5.0% reflects ~~the~~an ultimate loss rate of 4.5% for 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 ultimate loss rate of 5.0% for the 2016 policy year and~~ a ~~$5.8 million~~ net increase in the loss reserve estimates for prior policy years of $7.0 million. The 4.0% rate for the third quarter of 2019 reflected the ultimate loss rate for the 2019 policy year and 0 change in the loss reserve estimates for prior policy years.

To date, the Company has not experienced an increase in title claims as a result of the coronavirus pandemic. Incurred title claims for the three and nine months ended September 30, 2020 were lower by 21.0% and 18.1%, respectively, when compared with the same periods of the prior year, and significantly below the Company’s actuarial expectation. However, title claims generally increase when economic conditions deteriorate. Due to the recent deterioration in economic conditions in connection with the coronavirus pandemic and responses to it, the Company increased its calendar year loss rate from 4.0% in 2019 to 5.0% in 2020.

(in thousands, except percentages)	September 30, 2017				December 31, 2016				September 30, 2020				December 31, 2019
Known title claims	$	74,755	7.3	%	$	83,805	8.1	%	$	63,865	6.0	%	$	83,382	7.8	%
Incurred but not reported claims		889,079	87.0	%		888,126	86.6	%		981,837	91.7	%		903,994	85.1	%
Total title claims		963,834	94.3	%		971,931	94.7	%		1,045,702	97.7	%		987,376	92.9	%
Non-title claims		57,814	5.7	%		53,932	5.3	%		24,157	2.3	%		75,668	7.1	%
Total loss reserves	$	1,021,648	100.0	%	$	1,025,863	100.0	%	$	1,069,859	100.0	%	$	1,063,044	100.0	%

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

In May 2020, the Company issued $450.0 million of 4.00% 10 year senior unsecured notes due in 2030. Interest is due semi-annually on May 15 and November 15, beginning November 15, 2020. The Company used a portion of the net proceeds from the sale to repay all borrowings outstanding under its credit facility, increasing the unused capacity thereunder to the full $700.0 million size of the facility.

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were ~~-17.9%~~24.6% and ~~29.7%~~22.5% for the three and nine months ended September 30, ~~2017,~~2020, respectively, and ~~35.7%~~23.3% and ~~33.7%~~21.3% for the three and nine months ended September 30, ~~2016,~~2019, respectively. The Company’s effective tax rates differ from the statutory federal rate of ~~35% primarily~~21.0% due to ~~changes in~~ state and foreign income taxes resulting from fluctuations in 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,incurred, 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. The impact to~~expense. In addition, the Company of adopting this guidance was a reduction in 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~~2020 reflect a benefit related to foreign tax law changes, and the rates for 2019 reflect the resolution of ~~certain tax authority examinations and 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 tostate tax matters from 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 tax matters 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 by the Company to assess the likelihood of realization include ~~the Company’s~~its forecast of future taxable income and available tax planning strategies that could be implemented to realize ~~the~~its deferred tax assets. 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. 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~~2020 and December 31, ~~2016,~~2019, the liability for income taxes associated with uncertain tax positions was ~~$12.8~~$7.0 million and ~~$18.1~~$1.5 million, respectively. The ~~net decrease~~increase in the ~~liability during 2017 was~~current year results primarily ~~attributable to settlements with taxing authorities relating to tax~~from positions taken byon the ~~Company on~~Company’s tax returns for prior ~~year tax returns.~~years. As of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the liability could be reduced by ~~$5.4~~$2.0 million and ~~$5.7~~$0.4 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 0t material as of September 30, 2020 and December 31, 2019.

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 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 various non-U.S. jurisdictions. The primary non-federal jurisdictions are California, Canada, India and the United Kingdom. ~~During 2016,~~As of September 30, 2020, the Company had concluded U.S. federal income tax examinations ~~for calendar years 2005~~ through ~~2013. The Company~~2015 and is generally no longer subject to ~~U.S. federal,~~ state and non-U.S. income tax examinations for years prior to ~~2005.~~2014.

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

		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)		2017		2016		2017		2016		2020		2019		2020		2019
Numerator	Numerator
Net income attributable to the Company	Net income attributable to the Company	$	21,383	$	107,320	$	201,922	$	261,970	$	182,279	$	187,182	$	416,138	$	483,412
Denominator	Denominator
Basic weighted-average shares	Basic weighted-average shares		111,799		110,571		111,578		110,423		112,584		113,163		112,913		112,983
Effect of dilutive employee stock options and restricted stock units (“RSUs”)	Effect of dilutive employee stock options and restricted stock units (“RSUs”)		776		680		676		583		259		578		263		526
Diluted weighted-average shares	Diluted weighted-average shares		112,575		111,251		112,254		111,006		112,843		113,741		113,176		113,509
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	$	1.62	$	1.65	$	3.69	$	4.28
Diluted	Diluted	$	0.19	$	0.96	$	1.80	$	2.36	$	1.62	$	1.65	$	3.68	$	4.26

For the three and nine months ended September 30, ~~2017, 1~~2020, 172 thousand ~~RSUs~~ and 8284 thousand RSUs, respectively, were excluded from the weighted-average diluted common shares outstanding due to their antidilutive effect. For the three ~~months ended September 30, 2016, no RSUs had an antidilutive effect on weighted-average diluted common shares outstanding,~~ and ~~for the~~ nine months ended September 30, ~~2016, 17 thousand~~2019, RSUs ~~were~~ excluded from the weighted-average diluted common shares outstanding due to their antidilutive ~~effect. No~~effect were not material. NaN stock options had ~~an antidilutive~~a dilutive effect on weighted-average ~~diluted~~ common shares outstanding ~~for either period in~~during the ~~current year or in~~three and nine months ended September 30, 2020, as all remaining stock options outstanding were exercised during the ~~prior year.~~fourth quarter of 2019.

Net periodic cost related to the Company’s ~~defined benefit pension and~~unfunded supplemental benefit plans includes the following components:

		Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)		2017			2016			2017			2016			2020			2019			2020			2019
Expense:	Expense:
Service costs	Service costs	$	184		$	260		$	551		$	781		$	44		$	70		$	134		$	211
Interest costs	Interest costs		2,086			5,999			11,185			18,000			1,781			2,280			5,343			6,838
Settlement costs			152,388			—			152,388			—
Expected return on plan assets			—			(3,083	)		(4,740	)		(9,250	)
Amortization of net actuarial loss	Amortization of net actuarial loss		1,958			7,043			15,792			21,153			1,321			916			3,961			2,746
Amortization of prior service credit	Amortization of prior service credit		(1,045	)		(1,211	)		(3,268	)		(3,633	)		(777	)		(1,018	)		(2,331	)		(3,053	)
		$	155,571		$	9,008		$	171,908		$	27,051		$	2,369		$	2,248		$	7,107		$	6,742

The Company contributed $10.8 million to its unfunded supplemental benefit plans during the nine months ended September 30, 2020, and ~~settlement~~expects to contribute an additional $4.6 million during the remainder of 2020.

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.

Certain of the Company’s assets 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.

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:

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~~values 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.~~values. 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.

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

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~~2020 and December 31, ~~2016:~~2019:

(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
September 30, 2017
Assets:
September 30, 2020
Debt securities:
U.S. Treasury bonds	$	145,453	$	—	$	145,453	$	—	$	112,072	$	0	$	112,072	$	0
Municipal bonds		1,072,362		—		1,072,362		—		1,102,783		0		1,102,783		0
Foreign government bonds		161,649		—		161,649		—		186,984		0		186,984		0
Governmental agency bonds		221,718		—		221,718		—		266,852		0		266,852		0
Governmental agency mortgage-backed securities		2,225,920		—		2,225,920		—		3,346,337		0		3,346,337		0
U.S. corporate debt securities		726,928		—		714,419		12,509		566,675		0		566,675		0
Foreign corporate debt securities		249,454		—		248,581		873		357,521		0		357,521		0
		4,803,484		—		4,790,102		13,382		5,939,224		0		5,939,224		0
Equity securities:
Preferred stocks		18,527		18,527		—		—		17,244		17,244		0		0
Common stocks		427,658		427,658		—		—		375,936		375,936		0		0
		446,185		446,185		—		—		393,180		393,180		0		0
Total assets	$	5,249,669	$	446,185	$	4,790,102	$	13,382	$	6,332,404	$	393,180	$	5,939,224	$	0

(in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
December 31, 2016
Assets:
December 31, 2019
Debt securities:
U.S. Treasury bonds	$	151,391	$	—	$	151,391	$	—	$	143,941	$	0	$	143,941	$	0
Municipal bonds		984,333		—		984,333		—		1,090,839		0		1,090,839		0
Foreign government bonds		140,048		—		140,048		—		180,090		0		180,090		0
Governmental agency bonds		193,868		—		193,868		—		321,919		0		321,919		0
Governmental agency mortgage-backed securities		2,163,673		—		2,163,673		—		3,278,258		0		3,278,258		0
U.S. corporate debt securities		678,524		—		631,859		46,665		553,372		0		553,372		0
Foreign corporate debt securities		241,526		—		235,258		6,268		345,217		0		345,217		0
		4,553,363		—		4,500,430		52,933		5,913,636		0		5,913,636		0
Equity securities:
Preferred stocks		15,582		15,582		—		—		18,094		18,094		0		0
Common stocks		388,503		388,503		—		—		374,224		374,224		0		0
		404,085		404,085		—		—		392,318		392,318		0		0
Total assets	$	4,957,448	$	404,085	$	4,500,430	$	52,933	$	6,305,954	$	392,318	$	5,913,636	$	0

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

There were no0 transfers between Levels 1, 2 and 23 during the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~2019. 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.

~~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)

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

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

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

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

The carrying ~~values~~amount of ~~escrow and other deposit accounts approximate~~secured financings receivable approximates fair value due to the short-term nature of these assets.

The carrying amount of secured financings payable approximates fair value due to the short-term nature of these liabilities.

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~~2020 and December 31, ~~2016:~~2019:

	Carrying		Estimated fair value								Carrying		Estimated fair value
(in thousands)	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
September 30, 2017
September 30, 2020
Assets:
Cash and cash equivalents	$	1,141,915	$	1,141,915	$	1,141,915	$	—	$	—	$	1,512,369	$	1,512,369	$	1,512,369	$	0	$	0
Deposits with banks	$	20,940	$	20,887	$	265	$	20,622	$	—	$	41,551	$	41,687	$	3,194	$	38,493	$	0
Notes receivable, net	$	7,466	$	7,297	$	—	$	—	$	7,297	$	29,986	$	28,851	$	0	$	0	$	28,851
Secured financings receivable											$	722,156	$	722,156	$	0	$	722,156	$	0
Liabilities:
Deposits	$	2,965,426	$	2,965,426	$	2,965,426	$	—	$	—
Secured financings payable											$	526,544	$	526,544	$	0	$	526,544	$	0
Notes and contracts payable	$	734,091	$	756,536	$	—	$	752,070	$	4,466	$	1,011,758	$	1,114,323	$	0	$	1,107,735	$	6,588

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

The Company measures the fair value of certain assets on a non-recurring basis when events or changes in circumstances indicate that the carrying amount may not be recoverable. These assets generally include goodwill, title plants and other indexes, other intangible assets, property and equipment and cost and equity-method investments.

In connection with the decision to sell the property and casualty insurance business, the Company recognized impairment losses of $34.2 million, $17.6 million and $3.2 million to goodwill, property and equipment and other intangible assets, respectively, during the three and nine months ended September 30, 2020. The impairment charges were determined based on fair values utilizing Level 3 unobservable inputs. See Note 2 Disposition of the Property and Casualty Insurance Business for further information on the sale of the business.

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

		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)		2017		2016		2017		2016		2020		2019		2020		2019
Expense:	Expense:
RSUs	RSUs	$	5,866	$	5,401	$	28,634	$	25,766	$	7,049	$	6,608	$	39,763	$	31,761
Stock options			69		68		203		203
Employee stock purchase plan	Employee stock purchase plan		682		659		2,359		2,127		1,355		948		4,237		3,150
		$	6,617	$	6,128	$	31,196	$	28,096	$	8,404	$	7,556	$	44,000	$	34,911

The following table summarizes RSU activity for the nine months ended September 30, ~~2017:~~2020:

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

The Company maintains a stock repurchase plan with authorization up to $250.0 million, of which $92.7 million remained as of September 30, 2020. Repurchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. The Company did 0t repurchase any shares of its common stock during the three months ended September 30, 2020. During the nine months ended September 30, 2020, the Company repurchased and retired 1.8 million shares of its common stock for a total purchase price of $68.9 million, and as of September 30, 2020, had repurchased and retired 5.4 million shares of its common stock under the current authorization for a total purchase price of $157.3 million.

The following table presents a summary of the changes in each component of AOCI for the nine months ended September 30, ~~2017:~~2020:

(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												NCI
(in thousands)	Unrealized gains (losses) on debt securities			Foreign currency translation adjustment			Pension benefit adjustment			Accumulated other comprehensive income (loss)			Accumulated other comprehensive income (loss)		Balance
Balance at December 31, 2019	$	83,117		$	(51,668	)	$	(72,941	)	$	(41,492	)	$	1	$	(41,491	)
Change in unrealized gains (losses) on debt securities		97,031			—			—			97,031			0		97,031
Change in unrealized gains (losses) on debt securities for which credit-related portion was recognized in earnings		186			—			—			186			0		186
Change in foreign currency translation adjustment		—			(9,498	)		—			(9,498	)		—		(9,498	)
Amortization of net actuarial loss		—			—			3,961			3,961			—		3,961
Amortization of prior service credit		—			—			(2,331	)		(2,331	)		—		(2,331	)
Tax effect		(24,000	)		389			(433	)		(24,044	)		0		(24,044	)
Balance at September 30, 2020	$	156,334		$	(60,777	)	$	(71,744	)	$	23,813		$	1	$	23,814

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~~2020 and ~~2016:~~2019:

(in thousands)	Unrealized gains (losses) on securities			Foreign currency translation adjustment			Pension benefit adjustment			Total other comprehensive income (loss)			Unrealized gains (losses) on debt securities			Foreign currency translation adjustment			Pension benefit adjustment			Total other comprehensive income (loss)
Three Months Ended September 30, 2017
Three Months Ended September 30, 2020
Pretax change before reclassifications	$	22,833		$	11,415		$	(8,646	)	$	25,602		$	9,110		$	10,817		$	0		$	19,927
Reclassifications out of AOCI		(928	)		—			153,301			152,373			(6,627	)		0			544			(6,083	)
Tax effect		(7,976	)		—			(58,764	)		(66,740	)		(499	)		(743	)		(145	)		(1,387	)
Total other comprehensive income (loss), net of tax	$	13,929		$	11,415		$	85,891		$	111,235		$	1,984		$	10,074		$	399		$	12,457
Three Months Ended September 30, 2016
Three Months Ended September 30, 2019
Pretax change before reclassifications	$	12,435		$	(3,459	)	$	—		$	8,976		$	19,348		$	(7,614	)	$	0		$	11,734
Reclassifications out of AOCI		(8,687	)		—			5,832			(2,855	)		(2,165	)		0			(102	)		(2,267	)
Tax effect		(1,169	)		—			(2,230	)		(3,399	)		(3,690	)		241			26			(3,423	)
Total other comprehensive income (loss), net of tax	$	2,579		$	(3,459	)	$	3,602		$	2,722		$	13,493		$	(7,373	)	$	(76	)	$	6,044

The following table presents the other comprehensive income (loss) reclassification adjustments for the nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:

(in thousands)	Unrealized gains (losses) on securities			Foreign currency translation adjustment		Pension benefit adjustment			Total other comprehensive income (loss)			Unrealized gains (losses) on debt securities			Foreign currency translation adjustment			Pension benefit adjustment			Total other comprehensive income (loss)
Nine Months Ended September 30, 2017
Nine Months Ended September 30, 2020
Pretax change before reclassifications	$	95,329		$	23,558	$	(8,646	)	$	110,241		$	102,392		$	(9,498	)	$	0		$	92,894
Reclassifications out of AOCI		(14,285	)		—		164,912			150,627			(5,175	)		0			1,630			(3,545	)
Tax effect		(29,030	)		—		(63,205	)		(92,235	)		(24,000	)		389			(433	)		(24,044	)
Total other comprehensive income (loss), net of tax	$	52,014		$	23,558	$	93,061		$	168,633		$	73,217		$	(9,109	)	$	1,197		$	65,305
Nine Months Ended September 30, 2016
Nine Months Ended September 30, 2019
Pretax change before reclassifications	$	96,612		$	3,066	$	—		$	99,678		$	166,647		$	3,146		$	0		$	169,793
Reclassifications out of AOCI		(13,222	)		—		17,520			4,298			(1,830	)		0			(307	)		(2,137	)
Tax effect		(31,303	)		—		(6,701	)		(38,004	)		(38,645	)		(187	)		80			(38,752	)
Total other comprehensive income (loss), net of tax	$	52,087		$	3,066	$	10,819		$	65,972		$	126,172		$	2,959		$	(227	)	$	128,904

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
			Amounts reclassified from AOCI											��			Three Months Ended September 30,						Nine Months Ended September 30,						Affected line items
(in thousands)	(in thousands)		Three Months Ended September 30,						Nine Months Ended September 30,						Affected line items in the condensed	(in thousands)	2020			2019			2020			2019			Affected line items
(in thousands)	(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
Unrealized gains (losses) on debt securities:																Unrealized gains (losses) on debt securities:
Net realized gains (losses) on sales of debt securities																Net realized gains (losses) on sales of debt securities	$	6,694		$	2,165		$	12,749		$	1,830		Net realized investment gains
Credit losses recognized on debt securities																Credit losses recognized on debt securities		(67	)		0			(7,574	)		0		Net realized investment gains
Pretax total	Pretax total	$	928		$	8,687		$	14,285		$	13,222				Pretax total	$	6,627		$	2,165		$	5,175		$	1,830
Tax effect	Tax effect	$	(332	)	$	(3,261	)	$	(5,778	)	$	(5,057	)			Tax effect	$	(1,322	)	$	(465	)	$	(1,278	)	$	(429	)
Pension benefit adjustment:
Pension benefit adjustment (1):																Pension benefit adjustment (1):
Amortization of net actuarial loss	Amortization of net actuarial loss	$	(1,958	)	$	(7,043	)	$	(15,792	)	$	(21,153	)	(1	)	Amortization of net actuarial loss	$	(1,321	)	$	(916	)	$	(3,961	)	$	(2,746	)	Other operating expenses
Amortization of prior service credit	Amortization of prior service credit		1,045			1,211			3,268			3,633		(1	)	Amortization of prior service credit		777			1,018			2,331			3,053		Other operating expenses
Settlement costs			(152,388	)		—			(152,388	)		—		(1	)
Pretax total	Pretax total	$	(153,301	)	$	(5,832	)	$	(164,912	)	$	(17,520	)			Pretax total	$	(544	)	$	102		$	(1,630	)	$	307
Tax effect	Tax effect	$	62,276		$	2,229		$	66,702		$	6,701				Tax effect	$	145		$	(26	)	$	433		$	(80	)

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

The Company 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,~~It is, however, ~~it is~~often not possible to assess the probability of loss. ~~Most of these lawsuits~~Lawsuits that 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.

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

Furthermore, ~~because most of these lawsuits are~~for 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 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~~subsidiaries 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~~builders 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~~ including:

These lawsuits are putative class actions for which a class has not been certified; however, the appellate court has remanded the Wilmot action back for certification of a subclass. 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.

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

The Company and/or its subsidiaries are also parties to class action lawsuits as a result of the ~~State~~information security incident that occurred during the second quarter of ~~California, County of Los Angeles,~~

2019. 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.~~loss.

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, 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.

~~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, 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 orand investigations include ~~inquiries~~two investigations initiated in connection with the information security incident that occurred during the second quarter of 2019, one being conducted by the Securities and Exchange Commission (“SEC”) enforcement staff and the other by the New York Department of Financial Services. The SEC enforcement staff is questioning the adequacy of disclosures the Company made at the time of the incident and the adequacy of its disclosure controls. In September 2020, the Company received a Wells Notice informing the Company that the enforcement staff has made a preliminary determination to recommend a filing of an enforcement action by the SEC against the Company. The Company believes that its disclosures and disclosure controls complied with the securities laws and has availed itself of the opportunity to provide a response to convince the SEC that an enforcement action is inappropriate under the circumstances. The New York Department of Financial Services has alleged violations of its cyber security requirements for financial services companies and has filed a statement of charges and scheduled an administrative hearing in connection therewith. These exams and investigations also include an inquiry by the New York Attorney General and the Massachusetts Attorney General into ~~among other matters, pricing and rate setting~~competitive practices in the title insurance ~~industry, competition in the title insurance industry, real estate settlement service, customer acquisition and retention practices and agency relationships.~~industry. With respect to matters where the Company has determined that a loss is both probable and reasonably estimable, the Company ~~has recorded~~records 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~~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,~~During July 2019, the Company ~~believes~~received an assessment from the Canadian taxing authority. The amount of the assessment is $14.9 million, which is based on the exchange rate as of, and includes interest charges through, September 30, 2020. As the Company does not believe that the ~~guidance may result~~services in ~~an assessment. The amount, if any, of such assessment is not currently known, and any such assessment would be~~question are subject to ~~negotiation. In the event that the Company disagrees with the ultimate assessment, the Company~~excise tax, it intends to avail itself of avenues of ~~appeal. While the Company~~appeal, and it believes it is reasonably likely that the Company ~~would~~will prevail on the ~~merits,~~merits. Accordingly, the Company filed a ~~loss associated~~notice of appeal with the ~~matter is possible. In light of~~Canadian taxing authority in March 2020. Based on 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,current facts and circumstances, the Company does not believe ~~that this matter will have~~ a ~~material adverse effect on the Company’s overall financial condition or liquidity.~~ loss is probable, therefore no liability has been recorded.

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.

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

During the ~~three and~~ nine months ended September 30, ~~2017,~~2020, the Company completed acquisitions for an aggregate purchase price of ~~$87.3~~$391.9 million, which were funded through cash on hand and ~~$91.1~~additional borrowings of $120.0 million ~~respectively. The~~under the Company’s credit facility. For acquisitions in which the Company has ~~recorded~~not completed its purchase price allocation, 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.~~have been recorded. 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~~Current year acquisitions included the ~~three~~purchase of a company that provides document, eClose and ~~nine months ended September 30, 2016,~~fulfillment technology for the ~~Company completed acquisitions~~mortgage industry on March 2, 2020 for ~~an aggregate~~a purchase price of ~~$56.9~~$350.0 million. In connection with the purchase, the Company recorded goodwill, property and equipment and other intangible assets of $201.9 million, $19.0 million and ~~$75.5~~$121.0 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)~~

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

The corporate function consists primarily of certain financing facilities as well as the 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:

(in thousands)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures		Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures
Title Insurance and Services	$	1,397,262		$	181,199		$	34,363	$	33,750	$	1,771,993		$	337,480		$	36,194	$	33,034
Specialty Insurance		118,481			6,178			1,599		2,015		136,332			(72,129	)		1,995		2,114
Corporate		4,108			(169,415	)		38		—		6,055			(21,980	)		38		0
Eliminations		(283	)		—			—		—		(659	)		0			0		0
	$	1,519,568		$	17,962		$	36,000	$	35,765	$	1,913,721		$	243,371		$	38,227	$	35,148

(in thousands)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures		Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures
Title Insurance and Services	$	1,395,727		$	188,706		$	22,994	$	41,948	$	4,535,558		$	648,261		$	104,705	$	86,456
Specialty Insurance		109,782			1,781			1,401		844		391,818			(51,954	)		5,832		8,015
Corporate		2,855			(23,556	)		96		—		9,260			(55,317	)		115		0
Eliminations		(20	)		—			—		—		(1,243	)		0			0		0
	$	1,508,344		$	166,931		$	24,491	$	42,792	$	4,935,393		$	540,990		$	110,652	$	94,471

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

(in thousands)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures		Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures
Title Insurance and Services	$	3,937,119		$	476,746		$	91,471	$	100,059	$	4,084,795		$	628,392		$	92,043	$	71,839
Specialty Insurance		343,908			25,779			4,697		5,797		374,340			44,546			5,379		7,187
Corporate		10,872			(216,529	)		124		—		15,456			(56,433	)		115		0
Eliminations		(859	)		—			—		—		(1,194	)		0			0		0
	$	4,291,040		$	285,996		$	96,292	$	105,856	$	4,473,397		$	616,505		$	97,537	$	79,026

(in thousands)	Revenues			Income (loss) before income taxes			Depreciation and amortization		Capital expenditures		Direct premiums and escrow fees		Agent premiums		Information and other		Net investment income		Net realized investment gains (losses)		Total Revenues
Title Insurance and Services	$	3,750,118		$	448,815		$	66,510	$	99,887	$	1,561,926	$	1,701,538	$	573,150	$	213,067	$	35,114	$	4,084,795
Specialty Insurance		317,246			18,744			4,107		3,928		348,904		0		9,490		8,496		7,450		374,340
Corporate		4,265			(71,429	)		288		—
Eliminations		(40	)		—			—		—
	$	4,071,589		$	396,130		$	70,905	$	103,815	$	1,910,830	$	1,701,538	$	582,640	$	221,563	$	42,564	$	4,459,135

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,~~“ESTIMATE,” “PROJECT,” “WILL BE,” “WILL CONTINUE,” “WILL LIKELY RESULT,” OR OTHER SIMILAR WORDS AND PHRASES OR FUTURE OR CONDITIONAL VERBS SUCH AS “WILL,” “MAY,” “MIGHT,” “SHOULD,” “WOULD,” OR “COULD.” THESE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS REGARDING FUTURE OPERATIONS, PERFORMANCE, FINANCIAL CONDITION, PROSPECTS, PLANS AND STRATEGIES. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS THAT MAY PROVE TO BE INCORRECT.

RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE 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~~effect of ~~recent acquisitions.~~secured financings payable. 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.

~~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.~~2019. Changes in 2020 to the Company’s significant accounting policies, which are dependent upon estimates and assumptions, include the adoption of new accounting guidance for the recognition of credit losses. For discussion of the new guidance and the related changes to the Company’s accounting policy, see Recently Adopted Accounting Pronouncements, Note 4 Debt and Equity Securities and Note 5 Credit Losses – Financial Assets and Off-Balance Sheet Credit Exposures to the condensed consolidated financial statements.

In ~~March 2016,~~August 2018, the FASB issued updated guidance as part of its disclosure framework project intended to ~~simplify~~improve the effectiveness of disclosures in the notes to the financial statements. The updated guidance eliminates, adds 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.modifies certain disclosure requirements related to fair value measurements. The updated guidance is effective for interim and annual reporting periods beginning after December 15, ~~2016. While the~~2019. The adoption of this guidance, ~~did have an impact on the Company’s~~ effective ~~income tax rate for 2017, it~~January 1, 2020, did not have a material impact on the Company’s condensed consolidated financial statements. See Note 7 Income Taxes to the condensed consolidated financial statements 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 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~~2019. The adoption ~~permitted. The Company is currently assessing the impact~~ of ~~the new~~this guidance on ~~its~~a modified-retrospective basis, effective January 1, 2020, did not have a material impact, except for the disclosure requirements, on the Company’s condensed consolidated financial statements. See Note 4 Debt and Equity Securities and Note 5 Credit Losses – Financial Assets and Off-Balance Sheet Credit Exposures to the condensed consolidated financial statements for further information on the Company’s credit losses.

A substantial portion of the revenues for the Company’s title insurance and services segment results from the sale and refinancing of residential and commercial real estate. In the Company’s specialty insurance 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 increased $242.5 million, or 14.5%, in the third quarter of 2020 when compared with the third quarter of 2019. This increase was primarily attributable to an increase in direct premiums and escrow fees of $79.3 million, or 10.9%, an increase in information and other services revenue of $77.6 million, or 37.2%, and an increase in agent premiums of $66.3 million, or 10.1%. Direct premiums and escrow fees in the title insurance and services segment increased $74.1 million, or 12.2%. Direct premiums and escrow fees from domestic residential refinance and purchase transactions increased $85.6 million, or 91.9%, and $52.3 million, or 19.7%, respectively, while direct premiums and escrow fees from domestic commercial transactions decreased $57.1 million, or 28.6%, in the third quarter of 2020 when compared with the third quarter of 2019.

According to the Mortgage Bankers Association’s October ~~24, 2017~~21, 2020 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%~~increased 25.7% in the third quarter of ~~2017~~2020 when compared with the third quarter of ~~2016.~~2019. According to the MBA Forecast, the dollar amount of purchase originations increased ~~7.4%~~4.9% and refinance originations ~~decreased 42.6%~~increased 56.3%. This volume of domestic residential mortgage origination activity contributed to ~~a 9.9% increase~~increases in direct premiums and escrow fees for the Company’s direct title operations of 19.7% from domestic ~~residential~~ purchase transactions and ~~a 40.4% decrease in direct premiums and escrow fees~~91.9% from domestic residential refinance transactions in the third quarter of ~~2017~~2020 when compared towith the third quarter of ~~2016.~~2019.

During the third quarter of ~~2017,~~2020, the level of domestic title orders opened per day by the Company’s direct title operations ~~decreased by 22.5%~~increased 29.4% when compared with the third quarter of ~~2016.~~2019. Residential refinance ~~open~~and purchase opened orders per day increased 64.1% and 14.1%, respectively, while commercial opened orders per day decreased by 46.4%, while purchase and commercial open orders per day increased by 2.2% and 0.5%, respectively. The sharp decline in residential refinance orders opened per day was attributable to higher mortgage interest rates in the third quarter of 20177.0% when compared to the third quarter of ~~2016.~~2019.

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.~~2020, the Company committed to a plan to sell its property and casualty insurance business, which is expected to be completed within one year. As a result of this decision, the Company remeasured the assets and liabilities of its property and casualty insurance business at estimated fair value, less costs to sell, and recorded pretax impairment losses to goodwill, other intangible assets, property and equipment and other assets totaling $73.3 million for the three and nine months ended September 30, 2020. The ~~Company estimates an annual reduction of approximately $22 million~~impairment losses are included in ~~personnel costs related to the pension plans within the corporate segment, based~~impairments on assets held for sale on the ~~level~~condensed consolidated statements of ~~these expenses for~~income and in the ~~year ended December 31, 2016. For further discussion~~operating results of the ~~pension termination see~~specialty insurance segment. See Note ~~9 Employee Benefit Plans~~2 Disposition of the Property and Casualty Insurance Business to the condensed consolidated financial ~~statements.~~statements for further information on the sale of the business.

~~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~~is increasingly utilizing innovative technologies, processes and techniques to ~~ultimately have~~speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk. These efforts include streamlining the closing process by converting certain manual processes into automated ones, in an endeavor to improve the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication. The Company increasingly is employing advanced technologies to automate various processes, including various processes related to the building, maintaining and updating of title plants and other data assets, as well as the search and examination of information in connection with the issuance of title insurance policies. As a result of the reduction in interest rates in connection with the coronavirus pandemic, the Company has experienced a significant ~~impact to its condensed consolidated financial statements. While~~increase in refinance orders. To facilitate the processing of these orders, the Company ~~does~~has expanded the use of certain of these advanced technologies. While many of these initiatives are also designed to decrease risk, they present risks of their own. The degree to which these innovative efforts will be successful, and their ultimate impact on the Company’s results of operations, is uncertain.

In addition to the Company’s innovative activities, other participants in the real estate industry are seeking to innovate in ways that could impact the Company’s businesses. These participants include certain of the Company’s sources of business, competitors 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 products and services. The Company has made and will likely continue to make high-risk, illiquid investments in some of these participants, typically during their early- and growth-stages. If any of these companies do not ~~expect a significant impact to its financial results,~~succeed, the Company ~~expects the wildfires in California~~could lose and/or be required to ~~negatively impact~~impair all or part of its ~~property and casualty business in its specialty insurance segment~~investment in the ~~fourth quarter~~unsuccessful company. The risk of ~~2017.~~failure or impairment for these investments is greater in the current economic environment. These investments 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, resulting in a reduction in market share, reduced profitability and/or a loss of invested funds. The ~~Company expects losses from~~ultimate degree to which these ~~fires to continue to develop~~ and ~~expects to reach its reinsurance retention limit~~other innovations in the real estate industry will impact the Company’s business and results of ~~$5.0 million.~~operations is uncertain.

~~In addition,~~Additionally, the Company continues to monitor developments in its regulatory environment. ~~Currently, federal~~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,~~data privacy regulations, 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 coronavirus pandemic and responses to it have created significant volatility, uncertainty and economic disruption. The extent to which the ~~nature~~coronavirus pandemic impacts the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able to accurately predict, including: the duration and scope of the pandemic and restrictions and responses to it; governmental, business and individual actions that have been and continue to be taken in response to the pandemic; the ongoing impact of ~~any future changes~~the pandemic on economic activity and actions taken in response, including the efficacy of governmental relief efforts; the effect on participants in real estate transactions and the demand for the Company’s products and services, including as a result of higher unemployment, business closures and economic uncertainty; and the Company’s ability to sell and provide its services and solutions, including as a result of illness, travel restrictions, people working from home, governmental closure orders and partial or full closures of business and government offices.

In response to the pandemic, early on, the Company activated its business continuity plan, which enabled most employees to work from home. Currently, the vast majority of the Company’s global workforce is ~~unknown.~~working remotely, and the Company believes it is likely to remain this way through the end of the year.

The Company’s residential purchase business experienced a consistent recovery since the trough in April when purchase orders opened by the Company’s direct title operations were down 38.2% compared to April 2019. The Company’s pipeline is strong heading into the fourth quarter, as purchase orders opened were up 14.1% in the third quarter of 2020 when compared to the third quarter of 2019, and this trend has continued into October.

Low rates continue to support elevated residential refinance orders opened by the Company’s direct title operations, which averaged 3,200 per day in the third quarter of 2020. For the first three weeks of October, refinance orders opened averaged 2,800 orders per day. The Company believes the refinance market will remain elevated for the remainder of the year.

In the Company’s commercial business, revenue in the third quarter of 2020 declined 28.6% when compared to the third quarter of 2019, improving from the 39.3% decline in the second quarter of 2020 when compared to the second quarter of 2019. The overall commercial market continues its recovery with improvement varying by asset class. While the Company’s commercial pipeline is improving, the Company does not expect commercial revenue for the fourth quarter of 2020 to equal the level of commercial revenue from the fourth quarter of 2019.

	Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change			(in thousands, except percentages)	2020			2019			$ Change			% Change			2020			2019			$ Change			% Change
Revenues																									Revenues
Direct premiums and escrow fees	$	538,063		$	544,427		$	(6,364	)		(1.2	)%	$	1,492,258		$	1,471,338		$	20,920			1.4	%	Direct premiums and escrow fees	$	680,910		$	606,812		$	74,098			12.2	%	$	1,712,946		$	1,561,926		$	151,020			9.7	%
Agent premiums		629,186			625,953			3,233			0.5			1,757,796			1,653,990			103,806			6.3		Agent premiums		722,434			656,154			66,280			10.1			1,920,011			1,701,538			218,473			12.8
Information and other		199,271			187,979			11,292			6.0			578,549			524,199			54,350			10.4		Information and other		282,671			205,282			77,389			37.7			719,196			573,150			146,046			25.5
Net investment income		37,901			28,986			8,915			30.8			99,181			81,389			17,792			21.9		Net investment income		44,726			72,044			(27,318	)		(37.9	)		147,628			213,067			(65,439	)		(30.7	)
Net realized investment (losses) gains		(7,159	)		8,382			(15,541	)		(185.4	)		9,335			19,202			(9,867	)		(51.4	)
Net realized investment gains																									Net realized investment gains		41,252			449			40,803			NM	¹		35,777			35,114			663			1.9
		1,397,262			1,395,727			1,535			0.1			3,937,119			3,750,118			187,001			5.0				1,771,993			1,540,741			231,252			15.0			4,535,558			4,084,795			450,763			11.0
Expenses																									Expenses
Personnel costs		421,849			409,345			12,504			3.1			1,222,277			1,154,225			68,052			5.9		Personnel costs		481,417			447,795			33,622			7.5			1,320,097			1,251,590			68,507			5.5
Premiums retained by agents		497,911			495,130			2,781			0.6			1,387,608			1,303,838			83,770			6.4		Premiums retained by agents		572,780			518,824			53,956			10.4			1,520,559			1,344,517			176,042			13.1
Other operating expenses		196,455			198,147			(1,692	)		(0.9	)		579,431			559,141			20,290			3.6		Other operating expenses		251,304			218,687			32,617			14.9			700,090			581,455			118,635			20.4
Provision for policy losses and other claims		46,689			64,352			(17,663	)		(27.4	)		130,037			171,994			(41,957	)		(24.4	)	Provision for policy losses and other claims		70,167			50,519			19,648			38.9			181,648			130,539			51,109			39.2
Depreciation and amortization		34,363			22,994			11,369			49.4			91,471			66,510			24,961			37.5		Depreciation and amortization		36,194			29,822			6,372			21.4			104,705			92,043			12,662			13.8
Premium taxes		17,871			16,301			1,570			9.6			46,973			43,488			3,485			8.0		Premium taxes		17,522			17,310			212			1.2			47,360			44,988			2,372			5.3
Interest		925			752			173			23.0			2,576			2,107			469			22.3		Interest		5,129			4,214			915			21.7			12,838			11,271			1,567			13.9
		1,216,063			1,207,021			9,042			0.7			3,460,373			3,301,303			159,070			4.8				1,434,513			1,287,171			147,342			11.4			3,887,297			3,456,403			430,894			12.5
Income before income taxes	$	181,199		$	188,706		$	(7,507	)		(4.0	)%	$	476,746		$	448,815		$	27,931			6.2	%	Income before income taxes	$	337,480		$	253,570		$	83,910			33.1	%	$	648,261		$	628,392		$	19,869			3.2	%
Margins		13.0	%		13.5	%		(0.5	)%		(3.7	)%		12.1	%		12.0	%		0.1	%		0.8	%
Pretax margins																									Pretax margins		19.0	%		16.5	%		2.5	%		15.2	%		14.3	%		15.4	%		(1.1	)%		(7.1	)%

Direct premiums and escrow fees were ~~$538.1~~$680.9 million and ~~$1.5~~$1.7 billion for the three and nine months ended September 30, ~~2017,~~2020, respectively, ~~a decrease~~increases of ~~$6.4~~$74.1 million, or ~~1.2%~~12.2%, and ~~an increase of $20.9~~$151.0 million, or ~~1.4%~~9.7%, when compared with the respective periods of the prior year. The decrease for the three months ended September 30, 2017 was primarily due to a decrease in the domestic title orders closed, partially offset by 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 $2,215increases for the three and nine months ended September 30, ~~2017,~~2020 were primarily due to increases in the number of domestic title orders closed by the Company’s direct title operations, partially offset by decreases in the average domestic revenues per order closed. The domestic average revenues per order closed were $2,193 and $2,143 for the three and nine months ended September 30, 2020, respectively, ~~increases~~decreases of ~~23.6%~~12.7% and ~~15.3%~~15.6% when compared with ~~$1,859~~$2,513 and ~~$1,921~~$2,540 for the respective periods of the prior year. The ~~increases~~decreases in average revenues per order closed ~~for the three and nine months ended September 30, 2017~~ were primarily ~~attributable~~due to a shift in the mix of direct revenues generated from higher premium commercial products to 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 residential purchase transactions.products. The Company’s direct title operations closed ~~214,300~~291,500 and ~~619,500~~748,700 domestic title orders during the three and nine months ended September 30, ~~2017,~~2020, respectively, ~~decreases~~increases of ~~20.2%~~30.1% and ~~12.2%~~31.0% when compared with ~~268,400~~224,100 and ~~705,700~~571,600 title orders closed during the respective periods of the prior ~~year. Domestic~~year, which was generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast. For the three and nine months ended September 30, 2020, domestic residential refinance orders closed per day ~~decreased~~increased by ~~42.5%~~84.8% and ~~32.9%~~120.3%, ~~while~~respectively, and domestic residential purchase orders closed per day increased by ~~4.8%~~11.1% and ~~3.9% for the three and nine months ended September 30, 2017~~decreased by 1.6%, respectively, when compared to the ~~same~~respective periods of ~~2016.~~the prior year.

Agent premiums were ~~$629.2~~$722.4 million and ~~$1.8~~$1.9 billion for the three and nine months ended September 30, ~~2017,~~2020, respectively, increases of ~~$3.2~~$66.3 million, or ~~0.5%~~10.1%, and ~~$103.8~~$218.5 million, or ~~6.3%~~12.8%, when compared with the respective periods of the prior year. ~~Agent premiums are recorded when notice of issuance is received~~The increases were primarily attributable to higher premium revenue from ~~the agent, which is generally when cash payment is received~~residential refinance transactions, partially offset by ~~the Company. As a result, there is generally a delay between the agent’s issuance of a title policy~~lower premium revenue from commercial and the Company’s recognition of agent premiums. Therefore, current quarter agent premiums typically reflect prior quarter mortgage origination activity. The increase in agent premiums for the three months ended September 30, 2017 is generally consistent with the 1.8% increase in the Company’s direct premiums and escrow fees in the second quarter of 2017 as compared with the second quarter of 2016.residential purchase transactions.

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~~$282.7 million and ~~$578.5~~$719.2 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, increases of ~~$11.3~~$77.4 million, or ~~6.0%~~37.7%, and ~~$54.4~~$146.0 million, or ~~10.4%~~25.5%, when compared with the respective periods of the prior ~~year.~~ year. The increases were ~~driven by recent acquisitions. Excluding~~primarily attributable to the ~~$23.6 million and $68.2 million~~ impact of new acquisitions, which were $23.7 million and $55.1 million for the three and nine months ended September 30, ~~2017,~~2020, respectively; growth in mortgage origination activity that led to higher demand for the Company’s title information products; and revenues from services provided to support a temporary government program related to the coronavirus pandemic in Canada.

Net investment income totaled $44.7 million and $147.6 million for the three and nine months ended September 30, 2020, respectively, ~~information and other revenues decreased $12.3~~decreases of $27.3 million, or ~~6.6%~~37.9%, and ~~$13.8~~$65.4 million, or ~~2.6%~~30.7%, 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~~attributable to lower ~~demand for~~short-term interest rates, which drove lower income from the Company’s ~~default information products driven by~~cash and investment portfolio, escrow balances and tax-deferred property exchange business. The decreases in net investment income were also partially attributable to lower ~~loss mitigation activities and lower demand for~~average balances in the Company’s ~~valuation services, fulfillment services, and automated products driven by lower mortgage origination volumes. The decrease for~~tax-deferred property exchange business, which is consistent with the ~~nine months ended September 30, 2017 was partially offset by higher fees earned on non-insured products related~~decline in the Company’s commercial business in 2020 when compared to ~~commercial transactions.~~2019.

Net realized investment ~~income~~gains totaled ~~$37.9~~$41.3 million and ~~$99.2~~$35.8 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.~~2020, respectively. 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 million for the three months ended September 30, 2017 and~~ net realized investment gains totaled $9.3 million for the nine months ended September 30, 2017. Net realized investment losses for the three months ended September 30, 2017 primarily related to a $6.6 million loss recognized when the Company purchased the remaining equity ownership in an investment in an affiliate during the third quarter 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,~~2020 were primarily attributable to increases in the fair values of equity securities and ~~were primarily~~gains from the sales of debt ~~and equity~~ securities. Net realized investment gains for the nine months ended September 30, ~~2016~~2020 also included a gain recognized upon purchase of the remaining equity ownership in an investment in affiliate during the first quarter of 2020. Net realized investment gains totaled $0.4 million and $35.1 million for the three and nine months ended September 30, 2019. The net realized investment gains for the three months ended September 30, 2019 were primarily from the sales of ~~real estate and certain regional operations.~~debt securities, partially offset by impairments related to software. The net realized investment gains for the nine months ended September 30, 2019 were primarily from an increase in the fair values of equity securities.

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~~$481.4 million and ~~$1.2~~$1.3 billion for the three and nine months ended September 30, ~~2017,~~2020, respectively, increases of ~~$12.5~~$33.6 million, or ~~3.1%~~7.5%, and ~~$68.1~~$68.5 million, or ~~5.9%~~5.5%, 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 periods of the prior year. The decrease in personnel costs for the three months ended September 30, 2017, adjusted for2020 were primarily attributable to the impact of new acquisitions, ~~was primarily attributable to decreases in~~which were $10.1 million and $26.7 million for the three and nine months ended September 30, 2020, respectively, and higher incentive compensation, salary, overtime and temporary labor ~~costs, overtime expense and medical insurance expense. These decreases were~~expenses, partially offset by ~~$9.0 million~~lower employee benefit expense. The increases in ~~out-of-period adjustments recorded~~incentive compensation expense were due to ~~correct for errors~~higher revenue and profitability. The increases in ~~recording certain personnel costs.~~salary expense were due to higher average salaries and higher headcount. The increases in overtime and temporary labor expenses were driven by higher volumes. The decreases in employee benefit expense were primarily due to the impact of lower expense related to the Company’s expected 401(k) saving plan match. The increase in personnel costs for the nine months ended September 30, ~~2017, adjusted for the impact of new acquisitions,~~2020 was ~~primarily~~also partially attributable to increased ~~salary~~share-based compensation expense due to ~~an increase~~a higher dollar value of restricted stock units granted in ~~average salaries; an increase in incentive compensation due~~the first quarter of 2020 related 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.2019 performance.

Agents retained ~~$497.9~~$572.8 million and ~~$1.4~~$1.5 billion of title premiums generated by agency operations for the three and nine months ended September 30, ~~2017, respectively,~~2020, which compares with ~~$495.1~~$518.8 million and $1.3 billion for the respective periods of the prior year. The percentage of title premiums retained by agents was ~~79.1%~~79.3% and ~~78.9%~~79.2% for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared to 79.1% and ~~78.8%~~79.0% for the respective periods of the prior year.

Other operating expenses for the title insurance and services segment were ~~$196.5~~$251.3 million and ~~$579.4~~$700.1 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 expenses for the three months ended September 30, 2017 were essentially unchanged when compared with the three months ended September 30, 2016 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, other operating expenses decreased $12.2 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 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 when compared to the same period of the prior year. The decrease for the nine months ended September 30, 2017, adjusted for the impact of acquisitions, was primarily attributable to lower software related expenses, lower legal expense, and higher foreign currency exchange gains; partially offset by the first quarter of 2016 benefitting from the recovery of an insurance claim.

The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was 4.0% for the three and nine months ended September 30, 2017 compared to 5.5% for the three and nine months ended September 30, 2016. The current quarter rate of 4.0% reflects the ultimate loss rate for 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 ultimate loss rate of 5.0% for the 2016 policy year and a $5.8 million net increase in the loss reserve estimates for prior policy years.

~~Depreciation and amortization expense was $34.4 million and $91.5 million for the three and nine months ended September 30, 2017,~~2020, respectively, increases of ~~$11.4~~$32.6 million, or ~~49.4%~~14.9%, and ~~$25.0~~$118.6 million, or ~~37.5%~~20.4%, when compared with the respective periods of the prior year. The increases were primarily attributable to ~~$4.7 million in out-of-period adjustments recorded~~higher production related costs due 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 software licenses. The higher amortization expense related to internally developed technology included $1.2increased transaction volumes; the impact of new acquisitions, which was $7.7 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.

~~Premium taxes were $17.9 million and $47.0~~$18.6 million for the three and nine months ended September 30, ~~2017,~~2020, respectively; and increases in professional services expense, computer hardware related costs and software expense, partially offset by lower travel and entertainment expenses.

The provision for policy losses and other claims, expressed as a percentage of title premiums and escrow fees, was 5.0% for the three and nine months ended September 30, 2020 compared to 4.0% for the three and nine months ended September 30, 2019, respectively. The current quarter rate of 5.0% reflects an ultimate loss rate of 4.5% for the current policy year and a net increase in the loss reserve estimates for prior policy years of $7.0 million. The 4.0% rate for the third quarter of 2019 reflected the ultimate loss rate for the 2019 policy year and no change in the loss reserve estimates for prior policy years.

Depreciation and amortization expense was $36.2 million and $104.7 million for the three and nine months ended September 30, 2020, respectively, increases of ~~$1.6~~$6.4 million, or ~~9.6%~~21.4%, and ~~$3.5~~$12.7 million, or ~~8.0%~~13.8%, when compared with the respective periods of the prior year. The increases were primarily attributable to the impact of new acquisitions, which were $6.2 million and $14.8 million for the three and nine months ended September 30, 2020, respectively, and primarily related to the amortization of software and other intangible assets.

Premium taxes were $17.5 million and $47.4 million for the three and nine months ended September 30, 2020, respectively, increases of $0.2 million, or 1.2%, and $2.4 million, or 5.3%, respectively, compared to ~~$16.3~~$17.3 million and ~~$43.5~~$45.0 million for the same periods of the prior year. Premium taxes as a percentage of title insurance premiums and escrow fees were ~~1.5%~~1.2% and 1.3% for the three and nine months ended September 30, 2020, respectively, and were 1.4% for the three and nine months ended September 30, ~~2017, respectively, compared to 1.4%~~2019.

Interest expense was $5.1 million and $12.8 million for the three and nine months ended September 30, ~~2016.~~2020, respectively, increases of $0.9 million, or 21.7%, and $1.6 million, or 13.9%, when compared with the respective periods of the prior year. The increases were primarily attributable to higher interest paid on secured financings payable due to higher average balances outstanding, partially offset by lower interest paid related to customer deposits at the Company’s banking subsidiary, First American Trust, FSB, due to lower interest rates.

The profit 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, title insurance profit margins generally improve as closed order volumes increase. Title insurance profit margins are also impacted by the segment’s net investment income and net realized investment gains or losses, which may not move in the same direction as closed order volumes. Title insurance profit margins are affected by the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity. Title insurance profit margins are also affected by the percentage of title insurance premiums generated by agency operations. Profit 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 pretax margins for the three and nine months ended September 30, ~~2017~~2020 were ~~13.0%~~19.0% and ~~12.1%~~14.3%, respectively, compared with ~~13.5%~~16.5% and ~~12.0%~~15.4% in the respective periods of the prior year.

	Three Months Ended September 30,												Nine Months Ended September 30,													Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change			(in thousands, except percentages)	2020			2019			$ Change			% Change			2020			2019			$ Change			% Change
Revenues																									Revenues
Direct premiums	$	113,041		$	105,299		$	7,742			7.4	%	$	326,935		$	304,277		$	22,658			7.4	%	Direct premiums	$	127,037		$	121,798		$	5,239			4.3	%	$	367,622		$	348,904		$	18,718			5.4	%
Information and other		2,814			754			2,060			273.2			8,427			2,394			6,033			252.0		Information and other		3,450			3,270			180			5.5			9,992			9,490			502			5.3
Net investment income		2,468			2,595			(127	)		(4.9	)		7,118			7,085			33			0.5		Net investment income		2,105			3,064			(959	)		(31.3	)		7,005			8,496			(1,491	)		(17.5	)
Net realized investment gains		158			1,134			(976	)		(86.1	)		1,428			3,490			(2,062	)		(59.1	)	Net realized investment gains		3,740			1,058			2,682			253.5			7,199			7,450			(251	)		(3.4	)
		118,481			109,782			8,699			7.9			343,908			317,246			26,662			8.4				136,332			129,190			7,142			5.5			391,818			374,340			17,478			4.7
Expenses																									Expenses
Personnel costs		18,478			17,347			1,131			6.5			53,632			51,149			2,483			4.9		Personnel costs		22,271			20,742			1,529			7.4			64,398			60,246			4,152			6.9
Other operating expenses		16,537			14,603			1,934			13.2			50,588			43,563			7,025			16.1		Other operating expenses		20,899			19,230			1,669			8.7			61,731			57,284			4,447			7.8
Provision for policy losses and other claims		73,660			72,663			997			1.4			203,658			194,479			9,179			4.7		Provision for policy losses and other claims		87,669			74,164			13,505			18.2			232,353			200,986			31,367			15.6
Depreciation and amortization		1,599			1,401			198			14.1			4,697			4,107			590			14.4		Depreciation and amortization		1,995			1,859			136			7.3			5,832			5,379			453			8.4
Impairments on assets held for sale																									Impairments on assets held for sale		73,264			—			73,264			—			73,264			—			73,264			—
Premium taxes		2,029			1,987			42			2.1			5,554			5,204			350			6.7		Premium taxes		2,363			2,174			189			8.7			6,194			5,899			295			5.0
		112,303			108,001			4,302			4.0			318,129			298,502			19,627			6.6				208,461			118,169			90,292			76.4			443,772			329,794			113,978			34.6
Income before income taxes	$	6,178		$	1,781		$	4,397			246.9	%	$	25,779		$	18,744		$	7,035			37.5	%
(Loss) income before income taxes																									(Loss) income before income taxes	$	(72,129	)	$	11,021		$	(83,150	)		NM	¹%	$	(51,954	)	$	44,546		$	(96,500	)		(216.6	)%
Margins		5.2	%		1.6	%		3.6	%		225.0	%		7.5	%		5.9	%		1.6	%		27.1	%	Margins		(52.9	)%		8.5	%		(61.4	)%		NM	¹%		(13.3	)%		11.9	%		(25.2	)%		(211.8	)%

Direct premiums were ~~$113.0~~$127.0 million and ~~$326.9~~$367.6 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, increases of ~~$7.7~~$5.2 million, or ~~7.4%~~4.3%, and ~~$22.7~~$18.7 million, or 7.4%, when compared with the respective periods of the prior year. The increases were 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.

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 million for the three and nine months ended September 30, 2017, respectively, increases of $3.1 million, or 9.6%, and $9.5 million, or 10.0%5.4%, when compared with the respective periods of the prior year. The increases were primarily attributable to higher premiums earned in the home warranty business.

Net realized investment gains for the specialty insurance segment totaled $3.7 million and $7.2 million for the three and nine months ended September 30, 2020. The net realized investment gains for the three months ended September 30, 2020 were primarily from the increase in the fair values of equity securities. The net realized investment gains for the nine months ended September 30, 2020 were primarily from a ~~change~~gain from the sale of real estate. Net realized investment gains for the specialty insurance segment totaled $1.1 million and $7.5 million for the three and nine months ended September 30, 2019, respectively, and were primarily from the increase in ~~how~~ the ~~Company reports installment fees~~fair values of equity securities.

Personnel costs and other operating expenses were $43.2 million and $126.1 million for the three and nine months ended September 30, 2020, respectively, increases of $3.2 million, or 8.0%, and $8.6 million, or 7.3%, when compared with the respective periods of the prior year. The increases were primarily attributable to increased salary expense, due to higher average headcount, and higher advertising expense related to the home warranty ~~residential service contracts which is further discussed above.~~business.

The provision for home warranty claims, expressed as a percentage of home warranty premiums, was ~~60.1%~~64.5% and ~~56.1%~~54.1% for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared with ~~69.8%~~59.9% and 63.4% for the respective periods of the prior year. The decrease in the claims rate for the three months ended September 30, 2017 was primarily attributable to a decrease in the frequency 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%52.0% for the respective periods of the prior year. The increase in the claims rate for the three months ended September 30, ~~2017~~2020 was primarily attributable to higher claims frequency driven by claims in the appliance and plumbing trades likely due to the coronavirus pandemic. The provision for property and casualty claims, expressed as a percentage of property and casualty insurance premiums, was 82.7% and 89.9% for the three and nine months ended September 30, 2020, respectively, compared with 63.8% and 73.8% for the respective periods of the prior year. The increase in the claims rate for the three months ended September 30, 2020 was primarily attributable to an increase in large losses and the ~~severity~~impact of west coast wildfires.

In the third quarter of 2020, the Company committed to a plan to sell its property and ~~frequency~~casualty insurance business, which is expected to be completed within one year. As a result of ~~claims.~~

~~Premium taxes were $2.0 million~~this decision, the Company recorded pretax impairment losses to goodwill, other intangible assets, property and ~~$5.6~~equipment and other assets totaling $73.3 million for the three and nine months ended September 30, ~~2017,~~2020. See Note 2 Disposition of the Property and Casualty Insurance Business to the condensed consolidated financial statements for further information on the sale of the business.

Premium taxes were $2.4 million and $6.2 million for the three and nine months ended September 30, 2020, respectively, compared with ~~$2.0~~$2.2 million and ~~$5.2~~$5.9 million for the respective periods of the prior year. Premium taxes as a percentage of specialty insurance segment premiums were 1.9% and 1.7% for the three and nine months ended September 30, 2020, respectively, and 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.~~2019, respectively.

A large part of the revenues for the specialty insurance businesses 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 majority of the expenses for this segment are variable in nature and therefore generally fluctuate consistent with revenue fluctuations. Accordingly, profit 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~~Specialty insurance profit margins are also impacted by the segment’s net investment income and net realized investment gains or losses, which may not move in the same direction as premium revenues. The profit margins for the three and nine months ended September 30, ~~2017~~2020 were ~~5.2%~~also impacted by the impairments on assets held for sale recorded during the three months ended September 30, 2020. The pretax margin losses for the three and ~~7.5%~~nine months ended September 30, 2020 were (52.9%) and (13.3%), respectively, compared with ~~1.6%~~pretax margins of 8.5% and ~~5.9%~~11.9% in the respective periods of the prior year.

	Three Months Ended September 30,												Nine Months Ended September 30,												Three Months Ended September 30,												Nine Months Ended September 30,
(in thousands, except percentages)	2017			2016			$ Change			% Change			2017			2016			$ Change			% Change			2020			2019			$ Change			% Change			2020			2019			$ Change			% Change
Revenues
Net investment income	$	4,108		$	2,855		$	1,253			43.9	%	$	10,872		$	4,265		$	6,607			154.9	%	$	6,055		$	1,770		$	4,285			242.1	%	$	2,745		$	15,456		$	(12,711	)		(82.2	)%
Net realized investment gains																										—			—			—			—			6,515			—			6,515			—
		4,108			2,855			1,253			43.9			10,872			4,265			6,607			154.9			6,055			1,770			4,285			242.1			9,260			15,456			(6,196	)		(40.1	)
Expenses
Personnel costs		159,053			12,000			147,053			NM	¹		183,019			33,755			149,264			442.2			7,610			2,146			5,464			254.6			7,950			17,486			(9,536	)		(54.5	)
Other operating expenses		6,233			7,215			(982	)		(13.6	)		19,960			20,309			(349	)		(1.7	)		9,115			10,590			(1,475	)		(13.9	)		27,211			29,090			(1,879	)		(6.5	)
Depreciation and amortization		38			96			(58	)		(60.4	)		124			288			(164	)		(56.9	)		38			38			—			—			115			115			—			—
Interest		8,199			7,100			1,099			15.5			24,298			21,342			2,956			13.9			11,272			8,249			3,023			36.6			29,301			25,198			4,103			16.3
		173,523			26,411			147,112			557.0			227,401			75,694			151,707			200.4			28,035			21,023			7,012			33.4			64,577			71,889			(7,312	)		(10.2	)
Loss before income taxes	$	(169,415	)	$	(23,556	)	$	(145,859	)		(619.2	)%	$	(216,529	)	$	(71,429	)	$	(145,100	)		(203.1	)%	$	(21,980	)	$	(19,253	)	$	(2,727	)		(14.2	)%	$	(55,317	)	$	(56,433	)	$	1,116			2.0	%

Net investment income totaled ~~$4.1~~$6.1 million and ~~$10.9~~$2.7 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared with ~~$2.9~~net investment income of $1.8 million and ~~$4.3~~$15.5 million for the respective periods of the prior year. The ~~increases~~increase in net investment income for the three months ended September 30, 2020 and the decrease in net investment income for the nine months ended September 30, ~~2017~~2020 were primarily attributable to ~~higher~~fluctuations in earnings on investments associated with the Company’s deferred compensation plan when compared to the same periods of ~~2016.~~2019.

Net realized investment gains for the corporate segment totaled $6.5 million for the nine months ended September 30, 2020 and were primarily from the sale of real estate. There were no realized investment gains or losses for the corporate segment for the three months ended September 30, 2020 and the three and nine months ended September 30, 2019.

Corporate personnel costs and other operating expenses were ~~$165.3~~$16.7 million and ~~$203.0~~$35.2 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared with ~~$19.2~~$12.7 million and ~~$54.1~~$46.6 million for the respective periods of the prior year. The ~~increases were~~increase for the three months ended September 30, 2020 was primarily attributable to pension settlement costs of $152.4 million that the Company recognized during the third quarter of 2017 upon completing the termination of its funded defined benefit pension plans. For further discussion of the pension termination see Note 9 Employee Benefit Planshigher expense related to the ~~condensed consolidated financial statements.~~Company’s deferred compensation plan. The decrease for the nine months ended September 30, 2020 was primarily attributable to lower expense related to the Company’s deferred compensation plan.

Interest expense was ~~$8.2~~$11.3 million and ~~$24.3~~$29.3 million for the three and nine months ended September 30, ~~2017,~~2020, respectively, increases of ~~$1.1 million, or 15.5%, and~~ $3.0 million, or ~~13.9%~~36.6%, and $4.1 million, or 16.3%, when compared with the respective periods of the prior year. The increases were ~~due~~attributable to the interest accrued on the $450.0 million of 4.00% 10 year senior unsecured notes that the Company ~~borrowing $160.0 million under its credit facility during September 2016.~~issued in May 2020.

The Company’s inter-segment eliminations were not material for the three and nine months ended September 30, ~~2017~~2020 and ~~2016.~~2019.

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were ~~-17.9%~~24.6% and ~~29.7%~~22.5% for the three and nine months ended September 30, ~~2017,~~2020, respectively, compared with ~~35.7%~~23.3% and ~~33.7%~~21.3% for the respective periods of the prior year. The ~~Company’s~~differences in the effective tax rates for 2017 reflect state tax benefits relating to the termination of the Company’s pension plan, as well as the release 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 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 million for the three and nine months ended September 30, ~~2017, respectively. See Note 1 Basis~~2020 when compared with the respective periods of ~~Condensed Consolidated Financial Statements~~the prior year were primarily due to state income taxes related to the ~~condensed consolidated financial statements for further discussion of the new guidance. The~~ Company’s ~~effective tax rates for 2016 reflect~~noninsurance businesses, foreign exchange rate fluctuation, and the resolution in 2019 of ~~certain~~state tax ~~authority examinations and tax credits claimed in 2016 and in~~matters from prior years.

Net income for the three and nine months ended September 30, ~~2017~~2020 was ~~$21.2~~$183.6 million and ~~$201.2~~$419.1 million, respectively, compared with ~~$107.4~~$188.2 million and ~~$262.5~~$485.2 million for the respective periods of the prior year. Net income attributable to the Company for the three and nine months ended September 30, ~~2017~~2020 was ~~$21.4~~$182.3 million, or ~~$0.19~~$1.62 per diluted share, and ~~$201.9~~$416.1 million, or ~~$1.80~~$3.68 per diluted share, respectively, compared with ~~$107.3~~$187.2 million, or ~~$0.96~~$1.65 per diluted share, and ~~$262.0~~$483.4 million, or ~~$2.36~~$4.26 per diluted share, for the respective periods of the prior year.

Cash requirements. The Company generates cash primarily from the sale of its products and services and 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 unconsolidated entities 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. In making this assessment, management considered the impact that the coronavirus pandemic and related responses has had, or is expected to have, on the Company’s liquidity and capital resources, such as uncertainty related to cash flows from operations and potential volatility in the Company’s investment portfolio, among other factors.

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 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 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 $681.0 million and ~~$252.2~~$611.7 million for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, after claim payments, net of recoveries, of ~~$351.4~~$342.7 million and ~~$351.3~~$305.2 million, respectively. The principal nonoperating uses of cash and cash equivalents for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 were advances and repayments related to secured financing transactions, purchases of debt and equity securities, ~~business acquisitions, capital expenditures and~~repayment of borrowings under the unsecured credit facility, dividends to common ~~stockholders.~~stockholders, capital expenditures, investments in unconsolidated entities, and for the nine months ended September 30, 2020, business acquisitions and repurchases of Company shares. The ~~most significant~~principal nonoperating sources of cash and cash equivalents for the nine months ended September 30, ~~2017~~2020 and 2019 were borrowings and collections related to secured financing transactions, proceeds from the sales and maturities of debt and equity securities, borrowings under the unsecured credit facility, and for the nine months ended September 30, 2020, proceeds from the issuance of unsecured senior notes and 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 of ~~$135.8~~$48.0 million and ~~$416.0~~$243.9 million for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In ~~August 2017,~~September 2020, the ~~Company’s board of directors approved an increase in the Company’s quarterly~~Company paid a third quarter cash dividend ~~to 38~~of 44 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 million, of which ~~$182.4~~$92.7 million remained as of September 30, ~~2017. Purchases~~2020. Repurchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. The Company did not repurchase any shares of its common stock during the three months ended September 30, 2020. During the nine months ended September 30, ~~2017~~2020, the Company repurchased and retired 1.8 million shares of its common stock for a total purchase price of $68.9 million, and as of September 30, ~~2017,~~2020, had repurchased and retired ~~3.2~~5.4 million shares of its common stock under the current authorization for a total purchase price of ~~$67.6~~$157.3 million.

During the nine months ended September 30, 2020, the Company completed acquisitions for an aggregate purchase price of $391.9 million, which were funded through cash on hand and additional borrowings of $120.0 million under the Company’s credit facility.

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,~~2020, 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,~~2020, without prior approval from applicable regulators, was ~~$759.7~~dividends of $304.2 million and loans and advances of $110.3 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,~~2020, the holding company’s sources of liquidity included ~~$259.3~~$67.4 million of cash and cash equivalents and ~~$540.0~~$700.0 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.

Financing. In May 2020, the Company issued $450.0 million of 4.00% 10 year senior unsecured notes due in 2030. Interest is due semi-annually on May 15 and November 15, beginning November 15, 2020. The Company used a portion of the net proceeds from the sale to repay all borrowings outstanding under its credit facility, increasing the unused capacity thereunder to the full $700.0 million size of the facility.

The Company maintains a credit agreement with JPMorgan Chase Bank, N.A. in its capacity as administrative agent and the lenders party thereto. The credit agreement, which is comprised of a $700.0 million revolving credit ~~facility.~~facility, 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 in an aggregate amount not to exceed $350.0 million. Unless terminated earlier, ~~the revolving loan commitments under~~ the credit agreement will terminate on ~~May 14, 2019.~~April 30, 2024. 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,~~2020, the Company had no 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 million. Incremental Term Loans, if made, may not mature prior to the revolving commitment termination date, provided that amortization may occur prior to such date.facility.

At the Company’s election, borrowings of revolving loans 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 credit agreement). The Company may select interest periods of one, two, three or six months or (if agreed 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.~~Services and/or Fitch Ratings Inc. The minimum applicable spread for Alternate Base Rate borrowings is ~~0.625%~~0.25% and the maximum is 1.00%. The minimum applicable spread for Adjusted LIBOR rate borrowings is ~~1.625%~~1.25% and the maximum is 2.00%. The rate of interest on ~~Incremental Term Loans~~any term loans incurred in connection with the expansion option 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,~~2020, the Company was in compliance with the financial covenants under the credit agreement.

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 are as follows:

The Company’s ~~liquidity management activities~~debt to capitalization ratios were 24.5% and 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 million under these agreements. As of September 30, 2017, no amounts remained outstanding under these agreements.

~~Notes and contracts payable as a percentage of total capitalization was 18.2% and 19.6%~~18.5% at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively. The Company’s adjusted debt to capitalization ratios, excluding secured financings payable of $526.5 million and $278.4 million at September 30, 2020 and December 31, 2019, were 17.6% and 14.1%, respectively.

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%~~2020, 94% of the Company’s investment portfolio consisted of ~~fixed income~~debt securities, of which ~~60%~~67% were either United States government-backed or rated AAA and ~~94%~~99% 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 portfolio at September 30, ~~2017,~~2020, see Note 34 Debt and 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 its customers. Escrow deposits totaled $7.9 billion and ~~$6.8~~$7.3 billion at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively, of which ~~$2.8~~$3.3 billion and ~~$2.6~~$3.2 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. The remaining escrow deposits were held at third-party financial institutions.

At September 30, 2017 and December 31, 2016, the Company was contingently liable for guarantees 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 require 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 as a result of these guarantees and has not recorded a liability on its condensed consolidated balance sheets related to these guarantees at September 30, 2017 and December 31, 2016.

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.~~2019.

The Company’s chief executive officer and chief financial officer have concluded that, as of September 30, ~~2017,~~2020, 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,~~2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.~~loss.

The discussion below describes the most significant factors, uncertainties and events that make an investment in our securities risky. 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.

1.Conditions in the real estate market generally impact the demand for a substantial portion of the Company’s products and services and the Company’s claims experience

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 decreases in the following ~~situations:~~situations, among others:

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.

2.Unfavorable economic conditions ~~may have a material adverse effect on~~adversely affect the Company

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~~core title and ~~other companies~~settlement businesses. Uncertainty and a deterioration in ~~its industries. In addition,~~economic conditions in connection with the coronavirus pandemic have adversely affected the Company. These conditions also tend to negatively impact the amount of funds the Company ~~holds investments~~receives from third parties to be 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 losses incurred on those investments will be reflected in the Company’s consolidated results. 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. Certain rules promulgated in connection with the coronavirus pandemic allow certain borrowers to request forbearance of the payment of their mortgages. In certain circumstances, if a borrower requests forbearance on a mortgage originated through the Company’s warehouse lender before that mortgage is sold to a third party, the Company’s warehouse lender may have to retain that loan. In addition, the Company holds investments in entities, such as title agencies and settlement service providers, 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, the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and cash flows, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt facilities, 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.

3.The coronavirus pandemic and the responses thereto could adversely affect the Company

The coronavirus pandemic and responses to it have created significant volatility, uncertainty and economic disruption. The extent to which the coronavirus pandemic impacts the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able to accurately predict, including: the duration and scope of the pandemic and restrictions and responses to it; governmental, business and individual actions that have been and continue to be taken in response to the pandemic; the ongoing impact of the pandemic on economic activity and actions taken in response, including the efficacy of governmental relief efforts; the effect on participants in real estate transactions and the demand for the Company’s products and services, including as a result of higher unemployment, business closures and economic uncertainty; and the Company’s ability to sell and provide, or its efficiency in selling and providing, its services and solutions, including as a result of illness, travel restrictions, people working from home, governmental closure orders and partial or full closures of business and government offices. The Company is experiencing, for example, a decrease in the number of opened commercial orders relative to the same period last year, and experienced a decrease in the number of opened residential purchase orders earlier in the pandemic. The Company also has experienced increased volatility in the Company’s investment portfolio. The Company is also taking certain underwriting risks that could result in increased claims. In addition, the Company has made changes to certain of its production processes that also could result in increased claims. While the Company is unable to predict the ultimate impact the coronavirus pandemic and related responses will have on its businesses, these events have adversely affected, and are expected to continue to adversely affect, its business and results of operations and, if prolonged, could materially adversely affect the Company’s financial condition. The impacts of the coronavirus pandemic may also exacerbate the risks discussed elsewhere in Part II, Item 1A of this Quarterly Report.

4.Unfavorable economic or other conditions could cause the Company to write off a portion of its goodwill and other intangible assets

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 ~~no longer fully recoverable,~~impaired, in which case the Company would be required to write off the portion believed to be ~~unrecoverable.~~impaired. In the third quarter of 2020, the Company committed to a plan to sell its property and casualty insurance business, which triggered goodwill and other intangible assets impairment tests. Based on the results of the impairment tests, the Company recorded pretax impairment losses to goodwill and other intangible assets of $34.2 million and $3.2 million, respectively, for the three and nine months ended September 30, 2020. Total goodwill and other intangible assets reflected on the Company’s condensed consolidated balance sheet as of September 30, ~~2017~~2020 are ~~$1.2~~$1.6 billion. 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.

4. 5.Uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark may affect the Company’s cost of capital and net investment income

In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021, which is expected to result in these widely used reference rates no longer being available. The Company has exposure to LIBOR-based financial instruments, such as LIBOR-based securities held in its investment portfolio. Borrowings under the Company’s $700.0 million senior unsecured credit facility and some of its warehouse credit facilities also are LIBOR-based, although each allows for the use of an unspecified alternative benchmark rate if LIBOR is no longer available. Potential changes to LIBOR, as well as uncertainty related to such potential changes and the establishment of any alternative reference rate, may adversely affect the Company’s cost of capital and the market for LIBOR-based securities, which could have an adverse impact on the earnings from or value of the Company’s investment portfolio. At this time, the Company cannot predict the overall effect of the modification or discontinuation of LIBOR or the establishment of any alternative benchmark rate.

6.Failures at financial institutions at which the Company deposits funds could adversely affect the Company

The Company deposits substantial funds in financial institutions. These funds include amounts owned by third parties, such as escrow deposits and like-kind exchange 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. Given the current economic environment, the probability of these failures has increased. In the event of any such failure, the Company also could be held liable for the funds owned by third parties.

~~5. Changes~~7.Regulatory oversight and changes in government regulation could require the Company to raise capital, make it more difficult to deploy capital, including dividends to shareholders and repurchases of the Company’s shares, prohibit or limit the Company’s operations, make it more costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services

Many of the Company’s businesses, including its title insurance, property and casualty insurance, home warranty, banking, trust and ~~investment~~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. 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 general, the Company is experiencing increasing regulatory oversight and is subject to increasingly complex statutory guidelines. This is due, among other factors, to the passing of, and significant changes in, laws and regulations pertaining to privacy and data protection and to the Company’s status as a savings and loan holding company.

Regulatory oversight could require the Company to raise capital, and/or make it more difficult to deploy capital, including dividends to shareholdersand repurchases of the Company’s shares. For example, regulatory capital requirements for the Company have historically applied only at the subsidiary level, specifically to the Company’s federal savings bank subsidiary and the Company’s insurance underwriter subsidiaries. However, both the National Association of Insurance Commissioners and the Board of Governors of the Federal Reserve System have issued proposals for group capital calculations. These proposals, if finalized and adopted in their current forms, would apply to the Company at the group level and would be in addition to existing subsidiary-level capital requirements. It is possible that the requirements, 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 shareholdersand repurchases of the Company’s shares.

In addition, 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 costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in ~~our~~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, 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. 8.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 Company

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.~~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 financial condition and liquidity.

Governmental entities have routinely inquired into certain practices in 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,~~Consumer Financial Protection Bureau (“CFPB”), for example, has actively ~~been utilizing~~utilized 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 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 and other settlement services providers in their respective jurisdictions. Currently the Company is the subject of a number of regulatory inquiries.

Further, from time to time plaintiffs’ lawyers ~~may~~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 ~~may~~often involve large groups of plaintiffs and claims for substantial damages. ~~Any of these~~These types of inquiries or proceedings have from time to time resulted, and may in the future result, in ~~a finding~~findings 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~~conduct. This could impact ~~its~~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 risk by settling claims or by ending practices that generate revenues, earnings and cash flows. Currently the Company is a party to a number of class action lawsuits.

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

The Company ~~increasingly~~ utilizes social media to communicate with ~~customers,~~ current and potential customers and employees, ~~and~~as well as 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.

8. 10.Regulation of title insurance rates could adversely affect the ~~Company’s results of operations~~Company

Title insurance rates 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~~These regulations 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. 11.Changes in certain laws and regulations, and in the regulatory environment in which the Company operates, could adversely affect the ~~Company’s competitive position and results of operations~~Company

Federal and state officials are ~~currently~~ 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,~~additional data privacy regulations, 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. In addition, in connection with the coronavirus pandemic, the Company and generally its agents have been deemed in most areas an essential business and have been permitted to operate. A change in this determination, particularly in jurisdictions where the Company generates a large portion of its revenues, could adversely impact the Company’s businesses.

12.Recent and pending privacy and data protection laws and regulations could adversely affect the Company

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, including the California Consumer Privacy Act and the European Union General Data Protection Regulation. 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.

~~10.~~ 13.Climate change, severe weather conditions, health crises and other catastrophe events could adversely affect the Company

Climate change, global or extensive health crises, severe weather and other catastrophe events could adversely affect the Company, and the current coronavirus pandemic and responses to it are having an adverse effect on the Company. These include impacts on the results of the Company’s property and casualty insurance business due to any increase in the frequency and severity of wildfires, hurricanes, floods, earthquakes or other catastrophe or severe weather events, as well as increased claims in the Company’s home warranty business. Home warranty claims, including those pertaining to climate control units, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent. In addition, the Company manages its financial exposure for losses in its title insurance business and in its property and casualty insurance business with third-party reinsurance. Catastrophic events could adversely affect the cost and availability of that reinsurance. Moreover, to the extent climate change, health crises, severe weather conditions and other catastrophe events impact companies or municipalities whose securities the Company invests in, the value of its investment portfolio may also decrease due to these factors. In addition, these factors may impact real estate markets and the broader economy, which could also impact the Company. The frequency, severity, duration, and geographic location and scope of such health crises, catastrophe and severe whether events are inherently unpredictable, and, therefore, the Company is unable to predict the ultimate impact climate change and such events will have on its businesses.

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.

~~11.~~ 15.Changes in the Company’s relationships with large mortgage lenders or government–sponsored enterprises could adversely affect the Company

~~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. This influence enhances the negotiating power of these large mortgage lenders with respect to the pricing and the terms on which they purchase the Company’s products and other matters. 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’ requirement for title insurance 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.

~~12.~~ 16.A downgrade by ratings agencies, reductions in statutory capital and surplus maintained by the Company’s title insurance underwriters or a deterioration in other measures of financial strength ~~may negatively~~could adversely affect the ~~Company’s results of operations and competitive position~~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”~~“A2” 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~~.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~~$1.5 billion of total statutory capital and surplus as of December 31, ~~2016.~~2019. 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.

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

The Company maintains a substantial investment portfolio, primarily consisting of fixed income ~~securities (including mortgage-backed securities).~~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, as well as preferred and common stock.~~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. If~~conditions, including during the ~~carrying~~current pandemic. Debt and equity securities are carried at fair value ofon the ~~investments exceeds~~Company’s balance sheet. Changes in the fair value ~~and~~of debt securities is recorded as a component of accumulated other comprehensive income/loss on the ~~decline~~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 value ~~is deemed to be other-than-temporary,~~of equity securities are recognized in earnings. Changes in the fair value of securities in the Company’s investment portfolio have had an adverse impact on the Company ~~will be required to write down the value of the investments, which~~and could have a material adverse effect on the Company’s results of operations, statutory surplus, financial condition and ~~financial condition.~~ cash flow.

~~14.~~ 18.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,~~In uncertain economic times, such as those currently being experienced as a result of the coronavirus pandemic, an even larger change is more likely. As examples, 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~~$131.1 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $262.2 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.

~~15.~~ 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.

19.The issuance of the Company’s title insurance policies and related activities by title agents, which operate with substantial independence from the Company, could adversely affect the Company

The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that operate ~~with a substantial degree~~largely independent 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.~~ 20.The Company’s risk management framework could prove inadequate, ~~resulting in financial and/or reputational harm~~which could adversely affect the Company

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~~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. 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 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 ~~may experience significant financial and/or reputational harm.~~ could be adversely affected.

~~17.~~ 21.Systems damage, failures, interruptions, cyberattacks and intrusions, and unauthorized data disclosures by the Company or its service providers may disrupt the Company’s business, harm the Company’s reputation, result in material claims for damages or otherwise adversely affect the Company

The Company uses computer 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 these 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 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 attacks,~~cyberattacks, phishing attacks and other malicious activity. These attacks have increased in frequency and sophistication, ~~in recent years.~~particularly as a result of the coronavirus pandemic. The Company’s employees working remotely are more susceptible to social engineering attacks, intrusions and other malicious activity, and this risk has increased given that a substantial number of the Company’s employees are working from home as a result of the coronavirus pandemic. 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 and power or telecommunications failures. These incidents, regardless of their underlying causes, could expose the Company to system-related ~~damage,~~damages, failures, interruptions, cyberattacks 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. Adverse consequences for the Company in the event of a significant event involving the systems of its service providers or the information residing thereon include, among others, delays in the delivery of the Company’s products and services, direct or indirect financial loss, loss of business and reputational damage.

During the third quarter of 2019, the Company concluded an investigation regarding unauthorized access to non-public personal information as a result of a vulnerability in one of the Company's applications. The investigation identified imaged documents containing non-public personal information pertaining to 32 consumers that likely were accessed without authorization. These 32 consumers were notified and offered complimentary credit monitoring services. This incident triggered numerous federal and state governmental inquiries as well as private lawsuits against the Company. While the incident is not expected to have a material impact on the Company’s business, it increases the risk associated with any future incidents, particularly the risk of damage to the Company’s reputation.

Certain laws and contracts the Company has entered into require it to notify various parties, including consumers or customers, in the event of certain actual or potential data breaches or systems ~~failures.~~failures, including those of the Company’s service providers. These notifications can result, among other things, in the loss of customers, lawsuits, adverse publicity, diversion of management’s time and energy, the attention of regulatory authorities, fines and disruptions in sales. 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 to prevent or adequately respond to the issues described above could disrupt the Company’s business, inhibit its ability to retain existing customers or attract new customers, otherwise harm its reputation and/or result in financial losses, litigation, increased costs or other adverse consequences that could be material to the Company.

22.The Company is pursuing various innovative initiatives, which could result in increased title claims or otherwise adversely affect the Company

In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk, the Company is increasingly utilizing innovative technologies, processes and techniques in the creation of its products and services. These efforts include streamlining the closing process by converting certain manual processes into automated ones, in an endeavor to improve the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication. The Company increasingly is employing advanced technologies to automate various processes, including various processes related to the building, maintaining and updating of title plants and other data assets, as well as the search and examination of information in connection with the issuance of title insurance policies. As a result of the recent reduction in interest rates in connection with the coronavirus pandemic, the Company has experienced a significant increase in refinance orders. To facilitate the processing of these orders, the Company has expanded the use of certain of these advanced 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 that may prove inadequate, 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.

~~18.~~ 23.Potentially disruptive innovation in the real estate industry and/or the Company’s participation in these efforts could adversely affect 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 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 products and services. The Company has made and will likely continue to make high-risk, illiquid investments in some of these participants, typically during their early- and growth-stages. If any of these companies do not succeed, the Company could lose and/or be required to impair all or part of its investment in the unsuccessful company. The risk of failure or impairment for these investments is greater in the current economic environment. These investments 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.

24.Errors and fraud involving the transfer of funds may ~~result in material financial losses or harm~~adversely affect the ~~Company’s reputation~~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 in frequency and ~~sophistication in recent years.~~sophistication. Funds transferred to a fraudulent recipient are often not 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.~~ 25.The Company’s use of a global workforce involves risks that could ~~negatively impact~~adversely affect the Company

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.~~costs, which the Company has experienced during the coronavirus pandemic. 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 or regulations that require the Company to use labor based in the United States or effectively increase the ~~cost of the~~ Company’s labor costs abroad also could be enacted. 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 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.

~~21.~~ 26.As a holding company, the Company depends on distributions from its subsidiaries, and if distributions from its subsidiaries are materially impaired, the Company’s ability to declare and pay dividends may be adversely affected; in addition, insurance and other regulations limit the amount of dividends, loans and advances available from the Company’s insurance subsidiaries

The Company is a holding company whose primary assets are investments in its operating subsidiaries. The Company’s ability to 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. 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. As of September 30, ~~2017,~~2020, under such regulations, the maximum amount ~~of dividends, loans and advances~~ available for the remainder of ~~2017~~2020 from these insurance subsidiaries, without prior approval from applicable regulators, was ~~$759.7~~dividends of $304.2 million and loans and advances of $110.3 million.

~~22.~~ 27.Certain provisions of the Company’s bylaws and certificate of incorporation may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that the Company’s stockholders might consider favorable

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, 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.

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 (*).

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~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

PART I: FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	A. Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019	5

	B. Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	6

	C. Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	7

	D. Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity for each of the quarters within the nine months ended September 30, ~~2017~~2020 and 2019	8

	E. Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2020 and ~~2016~~	9

	~~F. Notes to Condensed Consolidated Financial Statements~~2019	10

	F. Notes to Condensed Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3239

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4451

Item 4.	Controls and Procedures	4451

PART II: OTHER INFORMATION

Item 1.	Legal Proceedings	4452

Item 1A.	Risk Factors	4654

Item 6.	Exhibits	5364

(in thousands)	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020 (1)
Balance at beginning of period	$	12,172		$	12,676
Provision for expected credit losses		1,526			4,547
Reclassification to assets held for sale (2)		(365	)		(365	)
Write-offs, net of recoveries		(733	)		(4,258	)
Balance at end of period	$	12,600		$	12,600

	Cost		Gross unrealized					Estimated fair value
(in thousands)	Cost		Gains		Losses			Estimated fair value
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

(in thousands)		Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Balance at beginning of period	$	(1,380	)	$	0
Credit losses recognized during the period		0			(7,493	)
Net decreases to credit losses previously recognized		278			3,738
Reductions for securities sold		271			2,924
Reclassification to assets held for sale (1)		10			10
Balance at end of period	$	(821	)	$	(821	)

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

Year	(in thousands)
Remainder of 2020	$	11,141
2021	$	37,722
2022	$	33,858
2023	$	30,353
2024	$	23,293
2025	$	17,174

	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, 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

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, effective as of August 16, 2017.	Incorporated by reference herein to Exhibit 3.1 to the Current Report on Form 8-K ~~dated~~filed August ~~16,~~22, 2017.

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 Document.	Attached.

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	Attached.

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

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

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	Attached.

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	N/A.

	FIRST AMERICAN FINANCIAL CORPORATION (Registrant)

Date: October 22, 2020	By	/s/ Dennis J. Gilmore
		Dennis J. Gilmore
		Chief Executive Officer (Principal Executive Officer)

Date: October 22, 2020	By	/s/ Mark E. Seaton
		Mark E. Seaton
		Executive Vice President, Chief Financial Officer (Principal Financial Officer)

Large accelerated filer

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Smaller reporting company

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