Corelogic (CLGX) 10-Q 2005 Q2 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 001-13585

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

Incorporated in California	95-1068610
(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)

(714) 800-3000

(Registrant’s telephone number, including area code)

(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  x    No  ¨

Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  x    No  ¨

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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  ¨    No  ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

On August 1, 2005, there were 95,184,415 shares of Common stock outstanding.

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

INFORMATION INCLUDED IN REPORT

Part I:	Financial Information
Item 1.	Financial Statements
	A. Condensed Consolidated Balance Sheets	3
	B. Condensed Consolidated Statements of Income and Comprehensive Income	4
	C. Condensed Consolidated Statements of Cash Flows	5
	D. Condensed Consolidated Statements of Stockholders’ Equity	6
	E. Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
Part II:	Other Information
Item 1.	Legal Proceedings	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 4.	Submission of Matters to a Vote of Security Holders	19
Item 6.	Exhibits	19
	Items 3 and 5 of Part II have been omitted because they are not applicable with respect to the current reporting period.

CERTAIN STATEMENTS MADE IN THIS QUARTERLY REPORT ON FORM 10-Q INCLUDING THOSE RELATING TO THE COMPANY’S OWNERSHIP IN FIRST ADVANTAGE CORPORATION AFTER THE CONTRIBUTION OF ITS CREDIT INFORMATION GROUP, THE CLOSING DATE OF THE TRANSACTION WITH FIRST ADVANTAGE CORPORATION, PENSION PLAN CONTRIBUTIONS, CASH REQUIREMENTS, THE MICHIGAN CLASS ACTION AND ROUTINE LEGAL PROCEEDINGS ARE FORWARD LOOKING. RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE: INTEREST RATE FLUCTUATIONS; CHANGES IN THE PERFORMANCE OF THE REAL ESTATE MARKETS; LIMITATIONS ON ACCESS TO PUBLIC RECORDS AND OTHER DATA; GENERAL VOLATILITY IN THE CAPITAL MARKETS; CHANGES IN APPLICABLE GOVERNMENT REGULATIONS; CONSOLIDATION AMONG THE COMPANY’S SIGNIFICANT CUSTOMERS AND COMPETITORS; THE COMPANY’S CONTINUED ABILITY TO IDENTIFY BUSINESSES TO BE ACQUIRED; CHANGES IN THE COMPANY’S ABILITY TO INTEGRATE BUSINESSES WHICH IT ACQUIRES; AND OTHER FACTORS DESCRIBED IN THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT CIRCUMSTANCES OR EVENTS THAT OCCUR AFTER THE DATE THE FORWARD-LOOKING STATEMENTS ARE MADE.

2

Part I:Financial Information

Item 1: Financial Statements

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

(in thousands)

	June 30, 2005			December 31, 2004
	($000)			($000)
	(unaudited)
Assets
Cash and cash equivalents	$	1,542,122		$	1,336,643
Accounts and accrued income receivable, net		551,703			438,365
Income taxes receivable		—			34,074
Investments:
Deposits with savings and loan associations and banks		90,571			94,445
Debt securities		964,165			705,674
Equity securities		46,306			46,190
Other long-term investments		338,787			305,571
		1,439,829			1,151,880
Loans receivable, net		90,312			101,341
Property and equipment, net		632,967			593,401
Title plants and other indexes		520,253			497,430
Deferred income taxes		10,462			39,886
Goodwill, net		1,772,538			1,605,879
Other assets		476,124			409,466
	$	7,036,310		$	6,208,365
Liabilities and Stockholders’ Equity
Demand deposits	$	767,915		$	399,429
Accounts payable and accrued liabilities		824,821			883,761
Deferred revenue		749,093			729,537
Reserve for known and incurred but not reported claims		582,022			526,516
Income taxes payable		54,961			—
Notes and contracts payable		753,485			732,770
Deferrable interest subordinated notes		100,000			100,000
Minority interests in consolidated subsidiaries		406,193			372,788
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1 par value Authorized - 500 shares; outstanding - none
Common stock, $1 par value:
Authorized - 180,000 shares Outstanding – 94,979 and 90,058 shares		94,979			90,058
Additional paid-in capital		905,119			757,931
Retained earnings		1,881,134			1,696,636
Accumulated other comprehensive loss		(83,412	)		(81,061	)
		2,797,820			2,463,564
	$	7,036,310		$	6,208,365

See notes to condensed consolidated financial statements.

3

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2005		2004			2005			2004
Revenues
Operating revenues	$	1,924,899	$	1,685,098		$	3,588,457		$	3,130,631
Investment and other income		55,027		36,237			94,331			63,144
Net realized investment gains		4,049		2,718			5,671			4,049
		1,983,975		1,724,053			3,688,459			3,197,824
Expenses
Salaries and other personnel costs		601,487		534,622			1,149,972			1,008,397
Premiums retained by agents		539,665		458,502			1,025,624			882,736
Other operating expenses		413,774		372,438			777,347			713,277
Provision for policy losses and other claims		99,857		85,686			190,634			157,107
Depreciation and amortization		37,202		31,326			72,949			60,696
Premium taxes		15,413		13,090			28,943			25,630
Interest		11,017		9,198			23,728			19,660
		1,718,415		1,504,862			3,269,197			2,867,503
Income before income taxes and minority interests		265,560		219,191			419,262			330,321
Income taxes		100,700		79,300			154,500			116,700
Income before minority interests		164,860		139,891			264,762			213,621
Minority interests		25,367		23,365			46,107			42,139
Net income		139,493		116,526			218,655			171,482
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on securities		3,808		(7,585	)		(2,351	)		(5,998	)
Minimum pension liability adjustment		661		(650	)		—			(2,600	)
		4,469		(8,235	)		(2,351	)		(8,598	)
Comprehensive income	$	143,962	$	108,291		$	216,304		$	162,884
Net income per share (Note 4):
Basic	$	1.47	$	1.32		$	2.35		$	2.05
Diluted	$	1.43	$	1.27		$	2.27		$	1.90
Cash dividends per share	$	.18	$	.15		$	.36		$	.30
Weighted average number of shares (Note 4):
Basic		94,639		88,071			93,106			83,697
Diluted		97,990		92,083			96,559			91,373

See notes to condensed consolidated financial statements.

4

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	For the Six Months Ended June 30,
	2005			2004
Cash flows from operating activities:
Net income	$	218,655		$	171,482
Adjustments to reconcile net income to cash provided by operating activities-
Provision for policy losses and other claims		190,634			157,107
Depreciation and amortization		72,949			60,696
Minority interests in net income		46,107			42,139
Net realized investment gains		(5,671	)		(4,049	)
Other, net		(31,352	)		(23,045	)
Changes in assets and liabilities excluding effects of company acquisitions and noncash transactions-
Claims paid, net of recoveries		(164,030	)		(130,072	)
Net change in income tax accounts		134,791			99,692
Increase in accounts and accrued income receivable		(95,887	)		(75,241	)
Decrease in accounts payable and accrued liabilities		(24,444	)		(40,800	)
Increase in deferred revenue		18,300			42,688
Other, net		(30,112	)		(62,022	)
Cash provided by operating activities		329,940			238,575
Cash flows from investing activities:
Net cash effect of company acquisitions		(145,034	)		(186,144	)
Net decrease (increase) in deposits with banks		5,450			(1,915	)
Net decrease (increase) in loans receivable		11,029			(2,784	)
Purchases of debt and equity securities		(340,168	)		(122,515	)
Proceeds from sales of debt and equity securities		41,676			60,728
Proceeds from maturities of debt securities		67,986			18,440
Net decrease in other investments		35,099			8,461
Capital expenditures		(100,449	)		(76,603	)
Purchases of capitalized data		(11,069	)		(6,959	)
Proceeds from sale of property and equipment		6,612			1,450
Cash used for investing activities		(428,868	)		(307,841	)
Cash flows from financing activities:
Net change in demand deposits		367,197			48,599
Proceeds from issuance of debt		37,860			22,399
Repayment of debt		(57,082	)		(15,247	)
Repurchase of company stock		(26,918	)		(16,040	)
Proceeds from exercise of stock options		27,529			14,609
Proceeds from the issuance of stock to employee benefit plans		4,236			3,800
Contributions from minority shareholders		10,700			—
Distributions to minority shareholders		(28,544	)		(24,405	)
Cash dividends		(30,571	)		(25,543	)
Cash provided by financing activities		304,407			8,172
Net increase (decrease) in cash and cash equivalents		205,479			(61,094	)
Cash and cash equivalents - Beginning of year		1,336,643			1,167,799
- End of the period	$	1,542,122		$	1,106,705
Supplemental information:
Cash paid during the period for:
Interest	$	22,199		$	22,828
Premium taxes	$	31,427		$	37,202
Income taxes	$	20,593		$	50,381
Noncash investing and financing activities:
Shares issued for employee benefit plans	$	69,256		$	50,484
Shares issued in repayment of convertible debt	$	—		$	205,728
Liabilities incurred in connection with company acquisitions	$	80,411		$	140,441
Company acquisitions in exchange for common stock	$	78,006		$	14,650

See notes to condensed consolidated financial statements.

5

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statement of Stockholders’ Equity

(in thousands)

(unaudited)

	Shares		Common Stock			Additional paid-in capital			Retained earnings			Accumulated other comprehensive income (loss)			Total
Balance at December 31, 2004	90,058		$	90,058		$	757,931		$	1,696,636		$	(81,061	)	$	2,463,564
Net income for six months ended June 30, 2005										218,655						218,655
Dividends on common shares										(34,157	)					(34,157	)
Purchase of Company shares	(778	)		(778	)		(26,140	)								(26,918	)
Shares issued in connection with company acquisitions	2,129			2,129			75,877									78,006
Shares issued in connection with option, benefit and savings plans	3,570			3,570			97,451									101,021
Other comprehensive loss													(2,351	)		(2,351	)
Balance at June 30, 2005	94,979		$	94,979		$	905,119		$	1,881,134		$	(83,412	)	$	2,797,820

See notes to condensed consolidated financial statements.

6

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of Condensed Consolidated Financial Statements

The condensed consolidated financial information included in this report has been prepared in conformity with the accounting principles and practices reflected in the consolidated financial statements included in the annual report filed with the Securities and Exchange Commission for the preceding calendar year. All adjustments are of a normal recurring nature and are, in the opinion of management, necessary to a fair presentation of the consolidated results for the interim periods. Certain 2004 amounts have been reclassified to conform to the 2005 presentation. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Note 2 – Escrow Deposits

The Company administers escrow deposits as a service to its customers. Escrow deposits totaled $6.6 billion and $4.8 billion at June 30, 2005 and December 31, 2004, respectively, of which $684.8 million and $337.4 million were held at the Company’s trust and thrift division. The escrow deposits held at the Company’s trust and thrift division are included in the accompanying consolidated balance sheets, with $201.2 million and $43.3 million included in cash and cash equivalents and $483.6 million and $294.1 million included in debt securities at June 30, 2005 and December 31, 2004, respectively, with offsetting liabilities included in demand deposits. The remaining escrow deposits were held at third party financial institutions. Escrow deposits held at third party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying consolidated balance sheets. However, the Company remains contingently liable for the disposition of these assets.

Note 3 – Goodwill and Other Intangible Assets

The Company’s reporting units for purposes of the annual testing for impairment of goodwill are title insurance, home warranty, property and casualty insurance, trust and other services, mortgage origination products and services, mortgage servicing products and services, property information services, conventional credit information, sub-prime credit information, pre-employment and drug screening, tenant screening and risk mitigation.

A reconciliation of the changes in the carrying amount of net goodwill, by operating segment, for the six months ended June 30, 2005, is as follows:

(in thousands)	Balance as of December 31, 2004		Acquired During the Period		Post Acquisition Adjustments			Balance as of June 30, 2005
Financial Services:
Title Insurance	$	376,936	$	71,944	$	(3,318	)	$	445,562
Specialty Insurance		19,794		—		—			19,794
Information Technology:
Mortgage Information		583,722		3,841		—			587,563
Property Information		247,438		29,428		449			277,315
Credit Information		72,450		32,299		—			104,749
Screening Information		305,539		29,415		2,601			337,555
	$	1,605,879	$	166,927		(268	)	$	1,772,538

There have been no impairments of goodwill during the six months ending June 30, 2005. The Company had $185.3 million of intangible assets included in “Other assets” at June 30, 2005, with definite lives ranging from three to ten years.

7

Note 4 – Earnings Per Share

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share amounts)	2005		2004		2005		2004
Numerator:
Net Income - numerator for basic net income per share	$	139,493	$	116,526	$	218,655	$	171,482
Effect of dilutive securities convertible debt - interest expense (net of tax)		216		464		435		2,140
Net Income - numerator for dilutive net income per share	$	139,709	$	116,990	$	219,090	$	173,622
Denominator
Weighted average shares-denominator for basic net income per share		94,639		88,071		93,106		83,697
Effect of dilutive securities:
Employee stock options		2,688		2,097		2,784		2,588
Convertible debt		663		1,915		669		5,088
Denominator for diluted net income per share		97,990		92,083		96,559		91,373
Basic net income per share	$	1.47	$	1.32	$	2.35	$	2.05
Diluted net income per share	$	1.43	$	1.27	$	2.27	$	1.90

For the three months ended June 30, 2005, there were no antidilutive stock options that were excluded from the computation of diluted earnings per share. For the six months ended June 30, 2005, 0.4 million stock options were excluded from the computation of diluted earnings per share due to their antidilutive effect. For the three and six months ended June 30, 2004, 0.8 million and 0.5 million stock options, respectively, were excluded from the computation of diluted earnings per share due to their antidilutive effect.

Note 5 – Employee Benefit Plans

Net periodic pension cost for the Company’s defined benefit pension and supplemental benefit plans includes the following components:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands)	2005			2004			2005			2004
Expense:
Service Cost	$	3,270		$	3,364		$	8,413		$	8,034
Interest Cost		6,199			5,018			12,444			11,372
Expected return on plan assets		(4,333	)		(3,492	)		(8,525	)		(7,884	)
Amortization of net transition obligation		—			7			—			—
Amortization of prior service cost (benefit)		164			(993	)		(791	)		(2,182	)
Amortization of net loss		3,080			4,826			5,937			6,799
	$	8,380		$	8,730		$	17,478		$	16,139

The Company has contributed $11.5 million to its pension plans for the six months ended June 30, 2005 and expects to contribute an additional $14.9 million during the remainder of 2005. These contributions are both those required by funding regulations as well as discretionary contributions necessary to provide benefit payments to participants of certain of the Company’s non-qualified supplemental benefit plans.

8

Note 6 – Stock Options

Effective December 15, 2002, the Company adopted Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (SFAS 148), which amends Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). In accounting for its plans, the Company, as allowable under the provisions of SFAS 148, applies Accounting Principles Board Opinions No. 25, “Accounting for Stock issued to Employees” (APB 25). As a result of this election, the Company does not recognize compensation expense for its stock option plans. Had the Company determined compensation cost based on the fair value for its stock options at grant date, net income and earnings per share would have been reduced to the pro forma amounts as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share amounts)	2005		2004		2005		2004
Net income:
Net income, as reported	$	139,493	$	116,526	$	218,655	$	171,482
Less: stock based compensation expense, net of tax		1,949		2,101		3,810		3,260
Pro forma net income	$	137,544	$	114,425	$	214,845	$	168,222
Earnings per share:
As reported
Basic	$	1.47	$	1.32	$	2.35	$	2.05
Diluted	$	1.43	$	1.27	$	2.27	$	1.90
Pro forma
Basic	$	1.45	$	1.30	$	2.31	$	2.01
Diluted	$	1.41	$	1.25	$	2.23	$	1.86

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R, “Shared-Based Payment” (SFAS No.123R). This standard is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The standard requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. In April 2005, the Securities and Exchange Commission deferred the effective date of SFAS 123R from the first interim period beginning after June 15, 2005 to the next fiscal year beginning after June 15, 2005. The Company will adopt the standard in the first quarter of 2006. The Company has not determined the exact impact that this standard will have on its consolidated financial position or results of operations.

Note 7 – Business Combinations

During the six months ended June 30, 2005, the Company completed 24 acquisitions. These acquisitions were not material, individually or in the aggregate. Of these acquisitions 17 have been included in the Company’s title insurance segment, 2 in the Company’s credit information segment, 1 in the Company’s property information segment and 4 in the Company’s screening information segment. The aggregate purchase price for the 20 acquisitions included in the Company’s title insurance, credit information and property information segments was $70.7 million in cash, $18.8 million in notes payable and 1.8 million shares of the Company’s common stock valued at $64.8 million. The 4 acquisitions included in the Company’s screening information segment were completed by the Company’s publicly-traded subsidiary, First Advantage Corporation. The aggregate purchase price for these acquisitions was $20.8 million in cash, $8.9 million in notes payable and .5 million shares, valued at $9.5 million, of First Advantage’s Class A common stock. In accounting for the First Advantage shares issued in these acquisitions, the Company, whose ownership percentage was reduced to approximately 67.1%, recorded a pretax gain of $2.8 million. The purchase price of each acquisition was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis. As a result of the 24 acquisitions, the Company recorded approximately $149.9 million of goodwill and $37.9 million of intangible assets with definite lives. The Company is awaiting information necessary to finalize the purchase accounting adjustments for these acquisitions and the final purchase price allocations could change the recorded intangible asset and goodwill amounts.

9

In addition to the acquisitions discussed above, the Company also purchased the remaining minority interests in 4 companies already included in the Company’s consolidated financial statements and an equity interest in 9 companies. The total purchase price of these transactions was $22.1 million in cash, $14.6 million in notes payable and .4 million in shares of the Company’s common stock valued at $13.2 million. As a result of these transactions, the Company recorded $17.0 million in goodwill.

On May 25, 2005, the Company executed a definitive agreement with First Advantage Corporation whereby the Company will contribute its Credit Information Group to First Advantage. The Credit Information Group includes the Company’s mortgage, automotive, consumer and sub-prime credit businesses. The transaction will have no material impact on the Company’s operating earnings. When completed, it is anticipated that the transaction will increase the Company’s economic ownership interest in First Advantage from 67 percent to approximately 80 percent. On August 8, 2005, First Advantage Corporation filed a definitive proxy statement with the Securities and Exchange Commission. First Advantage’s shareholders will vote on the transaction on September 13, 2005. The Company expects the transaction to close soon thereafter.

10

Note 8 – Segment Information

The Company has six reporting segments that fall within two primary business groups, Financial Services and Information Technology. The Financial Services Group includes Title Insurance and Services and Specialty Insurance. The Information Technology Group includes Mortgage Information, Property Information, Credit Information and Screening Information. Selected financial information by reporting segment is as follows:

For the three months ended June 30, 2005:

(in thousands)	Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services:
Title Insurance and Services	$	1,460,457	$	180,685		$	14,285	$	27,485
Specialty Insurance		67,504		13,053			553		233
		1,527,961		193,738			14,838		27,718
Information Technology:
Mortgage Information		152,557		41,606			6,145		5,549
Property Information		136,491		41,838			7,060		8,201
Credit Information		80,545		20,571			2,603		653
Screening Information		83,377		3,349			3,686		3,046
		452,970		107,364			19,494		17,449
		1,980,931		301,102			34,332		45,167
Corporate		3,044		(35,542	)		2,870		8,927
	$	1,983,975	$	265,560		$	37,202	$	54,094

For the three months ended June 30, 2004:

(in thousands)	Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services:
Title Insurance and Services	$	1,257,070	$	140,497		$	11,006	$	19,648
Specialty Insurance		54,992		11,653			537		299
		1,312,062		152,150			11,543		19,947
Information Technology:
Mortgage Information		170,081		47,992			6,650		5,047
Property Information		106,577		32,955			5,647		5,847
Credit Information		65,867		12,022			2,461		484
Screening Information		68,916		5,537			3,145		525
		411,441		98,506			17,903		11,903
		1,723,503		250,656			29,446		31,850
Corporate		550		(31,465	)		1,880		9,196
	$	1,724,053	$	219,191		$	31,326	$	41,046

11

For the six months ended June 30, 2005:

(in thousands)	Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services:
Title Insurance and Services	$	2,698,378	$	271,941		$	28,143	$	54,179
Specialty Insurance		131,548		22,858			1,096		569
		2,829,926		294,799			29,239		54,748
Information Technology:
Mortgage Information		296,661		72,225			12,398		9,338
Property Information		254,544		77,590			13,615		13,685
Credit Information		148,972		39,431			4,731		1,170
Screening Information		155,751		8,906			7,084		5,204
		855,928		198,152			37,828		29,397
		3,685,854		492,951			67,067		84,145
Corporate		2,605		(73,689	)		5,882		16,304
	$	3,688,459	$	419,262		$	72,949	$	100,449

For the six months ended June 30, 2004:

(in thousands)	Revenues			Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services:
Title Insurance and Services	$	2,304,992		$	199,074		$	21,073	$	35,617
Specialty Insurance		105,718			24,097			1,057		945
		2,410,710			223,171			22,130		36,562
Information Technology:
Mortgage Information		326,706			78,339			12,725		15,190
Property Information		203,870			60,473			11,477		9,320
Credit Information		130,259			27,020			5,075		893
Screening Information		126,359			6,639			5,785		1,600
		787,194			172,471			35,062		27,003
		3,197,904			395,642			57,192		63,565
Corporate		(80	)		(65,321	)		3,504		13,038
	$	3,197,824		$	330,321		$	60,696	$	76,603

12

Note 9 – Litigation

A subsidiary of the Company is a defendant in a class action lawsuit that is pending in federal court in Michigan. The plaintiffs allege that in certain transactions the premium our subsidiary charged to builders for title insurance policies violated the Real Estate Settlement Procedures Act. The action seeks a refund of the title insurance premiums paid by the plaintiffs and other damages. The Company does not believe that the ultimate resolution of this action will have a material adverse affect on its financial condition or results of operations.

On January 25, 2005, a jury in the case of Chicago Title Insurance Corporation v. James A. Magnuson, et al. awarded damages in the amount of $43.2 million against a subsidiary of the Company. This matter involved claims of violation of a non-competition agreement and intentional interference with contract. The judgment comprised a compensatory award of $10.8 million and a punitive damage award of $32.4 million. The Company believes it has strong grounds to overturn this judgment and is conducting a vigorous appeal. Pending the outcome of this appeal, the Company reserved $10.0 million in connection with this matter.

The Company is involved in numerous routine legal proceedings related to its operations. While the ultimate disposition of each proceeding is not determinable, the Company does not believe that any of such proceedings will have a material adverse affect on its financial condition or results of operations.

Note 10 – Stockholders’ Equity

On May 19, 2005, the Company announced that its board of directors authorized the increase of its May 18, 2004, $100 million stock buy-back plan to $200.0 million. As of June 30, 2005, the Company had repurchased and retired 2.2 million shares of its common stock for a total purchase price of $65.9 million.

13

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

RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those policies used in the preparation of the Company’s financial statements that require management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies. A summary of these policies can be found in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

OVERVIEW

Mortgage originations decreased in the second quarter of 2005 when compared with the same period of the prior year. However, as a result of increases in market share and in the average revenues per title order closed at the Company’s title insurance operations, as well as acquisition activity and organic growth at the Company’s specialty insurance, property information, credit information and screening information segments, total operating revenues increased when compared with the second quarter of 2004. This increase in revenues, coupled with solid expense controls, resulted in record profits for the second quarter of 2005. Net income for the three and six months ended June 30, 2005, was $139.5 million, or $1.43 per diluted share, and $218.7 million, or $2.27 per diluted share, respectively. Net income for the three and six months ended June 30, 2004, was $116.5 million, or $1.27 per diluted share, and $171.5 million, or $1.90 per diluted share, respectively.

OPERATING REVENUES

Set forth below is a summary of operating revenues for each of the Company’s segments.

	Three Months Ended June 30,						Six Months Ended June 30,
	($000)						($000)
	2005		%	2004		%	2005		%	2004		%
Financial Services:
Title Insurance:
Direct operations	$	740,203	39	$	659,945	39	$	1,352,220	38	$	1,175,451	38
Agency operations		681,634	35		574,338	34		1,281,101	36		1,091,148	35
		1,421,837	74		1,234,283	73		2,633,321	74		2,266,599	73
Specialty Insurance		63,785	3		51,847	3		124,294	3		98,339	3
		1,485,622	77		1,286,130	76		2,757,615	77		2,364,938	76
Information Technology:
Mortgage Information		150,499	8		167,649	10		292,972	8		322,584	10
Property Information		127,525	7		99,525	6		238,427	7		191,502	6
Credit Information		78,350	4		62,912	4		144,695	4		125,364	4
Screening Information		82,903	4		68,882	4		154,748	4		126,243	4
		439,277	23		398,968	24		830,842	23		765,693	24
Total	$	1,924,899	100	$	1,685,098	100	$	3,588,457	100	$	3,130,631	100

Financial Services. Operating revenues from direct title operations increased 12.2% and 15.0% for the three and six months ended June 30, 2005, respectively, when compared with the same periods of the prior year. These increases were primarily due to increases in the number of title orders closed by the Company’s direct operations and increases in the average revenues per order closed. The Company’s direct operations closed 532,200 and 990,900 title orders during the current three and six month periods, respectively, increases of 2.6% and 6.7% when compared with the same periods of the prior year. These increases were primarily due to market share gains that resulted from organic growth and acquisitions. The average revenues per order closed were $1,391 and $1,365 for the three and six months ended June 30, 2005, respectively, increases of 9.3% and 7.8% when compared with the same periods of the prior year. These increases were primarily due to a decreased mix of lower-premium refinance transactions, an increase in higher-premium resale and commercial activity, and appreciating home values. Operating revenues from agency operations increased 18.7% and 17.4% for the three and six

14

months ended June 30, 2005, respectively, when compared with the same periods of the prior year. These increases were primarily due to the same factors affecting direct title operations as well as the timing of the reporting of agency remittances.

Information Technology. Mortgage information operating revenues decreased $17.2 million and $29.6 million for the three and six months ended June 30, 2005, respectively, when compared with the same periods of the prior year. Excluding $10.3 million and $22.9 million of operating revenues contributed by new acquisitions for the respective periods, mortgage information operating revenues decreased $27.5 million, or 16.4% for the three months ended June 30, 2005, and $52.5 million, or 16.3% for the six months ended June 30, 2005. These decreases were primarily due to the decline in mortgage originations, pricing pressures at the Company’s tax service and flood certification businesses and a decline in default services revenues due to a relatively low foreclosure rate. Operating revenues for the property information segment increased $28.0 million, or 28.1% and $46.9 million, or 24.5%, for the three and six months ended June 30, 2005, respectively, when compared with the same periods of the prior year. These increases were primarily due to $11.9 million and $17.6 million of operating revenues contributed by new acquisitions for the respective periods and the continued strength in this segment’s subscription-based information businesses, offset in part by the affects of the slowdown in mortgage originations. Operating revenues for the credit information segment increased $15.4 million, or 24.5% and $19.3 million, or 15.4% for the three and six months ended June 30, 2005, respectively, when compared with the same periods of the prior year. These increases were primarily due to $8.2 million of operating revenues contributed by new acquisitions for both the current three and six-month periods and increased market share. Screening information operating revenues increased $14.0 million, or 20.4% and $28.5 million, or 22.6% for the three and six months ended June 30, 2005, respectively, when compared with the same periods of the prior year. These increases were primarily due to $10.1 million and $23.0 million of operating revenues contributed by new acquisitions for the respective periods.

INVESTMENT AND OTHER INCOME

Investment and other income totaled $55.0 million and $94.3 million for the three and six months ended June 30, 2005, respectively, representing increases of $18.8 million, or 51.9%, and $31.2 million, or 49.4%, when compared with the same periods of the prior year. These increases resulted primarily from increases in interest income and earnings from unconsolidated affiliates, which are accounted for under the equity method of accounting.

NET REALIZED INVESTMENT GAINS

Net realized investment gains totaled $4.0 million and $5.7 million for the three and six months ended June 30, 2005, respectively, compared with gains totaling $2.7 million and $4.0 million for the three and six months ended June 30, 2004.

TOTAL OPERATING EXPENSES

Financial Services. Salaries and other personnel costs for the Financial Services group, which primarily reflects the title insurance segment, were $441.7 million and $834.5 million for the three and six months ended June 30, 2005, respectively, increases of $53.6 million, or 13.8%, and $117.6 million, or 16.4%, when compared with the same periods of the prior year. Excluding new acquisitions, salaries and other personnel costs increased $26.3 million, or 6.8% and $61.5 million, or 8.6% for the three and six months ended June 30, 2005, respectively. These increases were primarily due to costs incurred to service the increase in new title orders. The Company’s direct title operations opened 754,900 and 1,414,700 title orders during the current three and six-month periods, increases of 18.8% and 12.3% when compared with the same periods of the prior year. Also contributing to the overall increase in salaries and other personnel costs was an increase in the average personnel costs per new title order associated with servicing the more labor-intensive mix of resale orders.

Agents retained $539.7 million and $1,025.6 million of title premiums generated by agency operations for the three and six months ended June 30, 2005, respectively, which compares with $458.5 million and $882.7 million for the same periods of the prior year. The percentage of title premiums retained by agents ranged from 79.2% to 80.9% due to regional variances (i.e., the agency share varies from region to region and thus the geographical mix of agency revenues causes this variation).

Other operating expenses for the Financial Services group, which primarily reflect the title insurance segment, were $228.4 million and $435.4 million for the three and six months ended June 30, 2005, respectively, increases of $19.1 million, or 9.1%, and $43.5 million, or 11.1%, when compared with the same periods of the prior year. These increases were primarily due to $17.8 million and $32.7 million of other operating expenses associated with new acquisitions for the respective periods, the previously disclosed $5.0 million settlement reached with the California Department of Insurance during the second quarter 2005 and incremental costs incurred to service the increasing inventory of orders at the title insurance operations.

15

The provision for policy losses and other claims primarily represents title insurance claims, home warranty claims and property and casualty insurance claims. For the title insurance segment, the claims provision as a percentage of title insurance operating revenues was 4.1% for the current six-month period and for the same period of the prior year. For the home warranty business, the claims provision as a percentage of home warranty operating revenues was 50.0% for the current six-month period and 47.2% for the same period of the prior year. This increase in rate was primarily due to an increase in the average cost per claim as a result of recent geographical expansion into higher claim-cost states. For the property and casualty business, the claims provision as a percentage of property and casualty insurance operating revenues was 57.3% for the current six-month period and 57.8% for the same period of the prior year.

Premium taxes, which relate to the title insurance and specialty insurance segments, were $28.9 million and $25.6 million for the six months ended June 30, 2005 and 2004, respectively. Premium taxes as a percentage of title insurance and specialty insurance operating revenues were 1.0% and 1.1% for the current six-month period and for the same period of the prior year, respectively.

Information Technology.Information technology personnel and other operating expenses were $316.8 million and $600.7 million for the three and six months ended June 30, 2005, respectively, increases of $32.5 million and $37.9 million when compared with the same periods of the prior year. Excluding acquisition activity, information technology personnel and other operating expenses decreased $6.6 million, or 2.3% for the current three-month period and $30.9 million, or 5.5% for the current six-month period. These decreases were primarily related to a decrease in incremental costs at the Company’s mortgage information segment associated with their decline in business volume, offset in part by $6.0 million of costs incurred at the Company’s subsidiary, First Advantage Corporation, in connection with their planned merger with the Company’s credit segment and the relocation of their corporate offices.

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

Set forth below is a summary of income before income taxes and minority interests for each of the Company’s segments (in thousands except percentages).

	Three Months Ended June 30,								Six Months Ended June 30,
	($000)								($000)
	2005			%	2004			%	2005			%	2004			%
Financial Services:
Title Insurance	$	180,685		60	$	140,497		56	$	271,941		55	$	199,074		50
Specialty Insurance		13,053		4		11,653		5		22,858		5		24,097		6
		193,738		64		152,150		61		294,799		60		223,171		56
Information Technology:
Mortgage Information		41,606		14		47,992		19		72,225		14		78,339		20
Property Information		41,838		14		32,955		13		77,590		16		60,473		15
Credit Information		20,571		7		12,022		5		39,431		8		27,020		7
Screening Information		3,349		1		5,537		2		8,906		2		6,639		2
		107,364		36		98,506		39		198,152		40		172,471		44
Total before corporate expenses		301,102		100		250,656		100		492,951		100		395,642		100
Corporate expenses		(35,542	)			(31,465	)			(73,689	)			(65,321	)
Total	$	265,560			$	219,191			$	419,262			$	330,321

In general, the title insurance business is a lower profit margin business when compared to the Company’s other segments. The lower profit margins reflect the high cost of producing title evidence whereas the corresponding revenues are subject to regulatory and competitive pricing restraints. Due to this relatively high proportion of fixed costs, title insurance profit margins generally improve as closed order volumes increase. In addition, title insurance profit margins are affected by the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity. Profit margins from resale and new construction transactions are generally higher than from refinancing transactions because in many states there are premium discounts on, and cancellation rates are higher for, refinance transactions. Title insurance profit margins are also affected by the percentage of operating revenues 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

16

retained by the agent. Most of the businesses included in the Information Technology group are database intensive, with a relatively high proportion of fixed costs. As such, profit margins generally improve as revenues increase. Revenues for the mortgage information segment, like the title insurance segment, are primarily dependent on the level of real estate activity and the cost and availability of mortgage funds. Revenues for the property information segment are, in part, dependent on real estate activity, but are less cyclical than title insurance and mortgage information revenues as a result of a significant subscription-based revenue stream. Revenues for the credit information segment are in part impacted by real estate activity, but also by the consumer and automobile sectors. Corporate expenses totaled $35.5 million and $73.7 million for the three and six months ended June 30, 2005, respectively, increases of $4.1 million and $8.4 million when compared with the same periods of the prior year. These increases were primarily due to increased technology costs and higher general costs associated with the support effort needed to service the Company’s expanded national and international operations.

INCOME TAXES

The effective income tax rate (income tax expense as a percentage of pretax income after minority interest expense) was 41.4% for the six months ended June 30, 2005, and 40.5% for the same period of the prior year. The increase in effective rate was primarily attributable to one-time expenses totaling $9.4 million incurred during the second quarter 2005 that were not deductible for income taxes purposes. These one-time charges included the $5.0 million settlement reached with the California Department of Insurance and merger expenses totaling $4.4 million incurred by the Company and its subsidiary, First Advantage Corporation. A large portion of the Company’s minority interest expense is attributable to a limited liability company subsidiary which, for tax purposes, is treated as a partnership. Accordingly, no income taxes have been provided for that portion of the minority interest expense.

MINORITY INTERESTS

Minority interest expense was $25.4 million and $46.1 million for the three and six months ended June 30, 2005, respectively, increases of $2.0 million and $4.0 million when compared with the same periods of the prior year. These increases were primarily attributable to the increase in operating results of the Company’s joint venture with Experian.

NET INCOME

Net income for the three and six months ended June 30, 2005, was $139.5 million, or $1.43 per diluted share, and $218.7 million, or $2.27 per diluted share, respectively. Net income for the three and six months ended June 30, 2004, was $116.5 million, or $1.27 per diluted share, and $171.5 million, or $1.90 per diluted share, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Total cash and cash equivalents increased $205.5 million for the six months ended June 30, 2005, and decreased $61.1 million for the six months ended June 30, 2004. The increase for the current year period was primarily due to cash provided by operating activities and deposits at the Company’s trust and thrift divisions, offset in part by purchases of debt and equity securities, cash paid for company acquisitions, and capital expenditures. The decrease for the prior year period was due primarily to cash paid for company acquisitions and capital expenditures, offset in part by cash provided by operating activities.

Notes and contracts payable as a percentage of total capitalization decreased to 21.0% at June 30, 2005 from 22.7% at December 31, 2004. This decrease was primarily due to an increase in equity due primarily to net income for the current period and shares issued in connection with company acquisitions and employee benefit plans.

Management believes that all of its anticipated operating cash requirements for the immediate future will be met from internally generated funds.

17

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

The Company is also subject to equity price risk as related to its equity securities. Although the Company has operations in certain foreign countries, these operations, in the aggregate, are not material to the Company’s financial condition or results of operations.

There have been no material changes in the Company’s risk since filing its Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, have concluded that, as of the end of the fiscal quarter covered by this report on Form 10-Q, the Company’s disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under such Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There was no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II:Other Information

Item 1. Legal Proceedings

A subsidiary of the Company is a defendant in a class action lawsuit that is pending in federal court in Michigan. The plaintiffs allege that in certain transactions the premium our subsidiary charged to builders for title insurance policies violated the Real Estate Settlement Procedures Act. The action seeks a refund of the title insurance premiums paid by the plaintiffs and other damages. The Company does not believe that the ultimate resolution of this action will have a material adverse affect on its financial condition or results of operations.

On January 25, 2005, a jury in the case of Chicago Title Insurance Corporation v. James A. Magnuson, et al. awarded damages in the amount of $43.2 million against a subsidiary of the Company. This matter involved claims of violation of a non-competition agreement and intentional interference with contract. The judgment comprised a compensatory award of $10.8 million and a punitive damage award of $32.4 million. The Company believes it has strong grounds to overturn this judgment and is conducting a vigorous appeal. Pending the outcome of this appeal, the Company reserved $10.0 million in connection with this matter.

The Company is involved in numerous routine legal proceedings related to its operations. While the ultimate disposition of each proceeding is not determinable, the Company does not believe that any of such proceedings will have a material adverse affect on its financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table describes purchases by the Company of the Company’s Common shares which settled during each period set forth in the table. Prices in column (b) include commissions. Purchases described in column (c) were made pursuant to the share repurchase program announced by the Company on May 18, 2004. On May 19, 2005, the Company announced an amendment to this plan, which amendment increased the amount of shares that the Company may repurchase by $100 million. The amounts in column (d) reflect the effect of this amendment. Under this plan, which has no expiration date, the Company may repurchase up to $200 million of the Company’s issued and outstanding Common shares.

18

	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
Period
April 1 to April 30, 2005	406,215	$	32.58	406,215	$	142,928,785
May 1 to May 31, 2005	187,100	$	36.26	187,100	$	136,144,488
June 1 to June 30, 2005	50,000	$	40.53	50,000	$	134,117,777
Total	643,315	$	34.27	643,315	$	134,117,777

Item 4. Submission of Matters to a Vote of Security Holders

The annual meeting of shareholders of the Company was held on May 18, 2005. The names of the persons who were nominated to serve as directors of the Company for the ensuing year are listed below, together with a tabulation of the results of the voting with respect to each nominee. All nominees were elected.

Name of Nominee	Votes For	Votes Withheld
Gary J. Beban	87,596,937	1,062,499
J. David Chatham	85,407,557	3,251,879
William G. Davis	86,503,219	2,156,217
James L. Doti	86,136,392	2,523,044
Lewis W. Douglas, Jr.	86,495,262	2,164,174
Paul B. Fay, Jr.	63,221,905	25,437,531
D. P. Kennedy	86,426,645	2,232,791
Parker S. Kennedy	86,677,931	1,981,505
Frank O’Bryan	65,985,100	22,674,336
Roslyn B. Payne	86,628,223	2,031,213
D. Van Skilling	85,479,665	3,179,771
Herbert B. Tasker	86,079,514	2,579,922
Virginia Ueberroth	86,503,463	2,155,973

Item 6. Exhibits

See Exhibit Index.

19

SIGNATURES

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.

	THE FIRST AMERICAN CORPORATION (Registrant)
	/s/ Thomas A. Klemens
	Thomas A. Klemens Senior Executive Vice President, Chief Financial Officer
	/s/ Max O. Valdes
Date: August 9, 2005	Max O. Valdes Vice President, Chief Accounting Officer

20

EXHIBIT INDEX

Exhibit No.	Description
(10)(a)	Amended and Restated Omnibus Agreement, dated as of June 22, 2005, by and between The First American Corporation, Experian Information Solutions, Inc. and First American Real Estate Solutions LLC
(10)(b)	Amendment No. 2, dated as of July 18, 2005 to the Credit Agreement dated as of August 4, 2004 between The First American Corporation, JP Morgan Chase Bank, as Administrative Agent, and certain other Lenders party thereto.
(31)(a)	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
(31)(b)	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
(32)(a)	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
(32)(b)	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

21