EXHIBIT 99
[The First American Financial Corporation Logo]
THE FIRST AMERICAN FINANCIAL CORPORATION
1 First American Way o Santa Ana, California o (714) 800-3000 o (800) 854-3643
Contact:
Tom Klemens NEWS FOR IMMEDIATE RELEASE
Executive Vice President
& Chief Financial Officer
(714) 800-4402
FIRST AMERICAN FINANCIAL TO ADOPT NEW ACCOUNTING TRANSITION RULES FOR TAX
SERVICE CONTRACTS
SANTA ANA, Calif., - Jan. 18, 2000 - The First American Financial
Corporation (NYSE: FAF), the nation's leading provider of business information
and related products and services, today announced that its tax service division
will adopt the new transition provisions of Staff Accounting Bulletin No. 101
(SAB) "Revenue Recognition in Financial Statements," which was finalized by the
Securities and Exchange Commission (SEC) in December 1999. In conformity with
the SAB, the company will restate and increase its operating earnings for 1999.
This adjustment finalizes a series of changes instituted by the SEC concerning
the way in which the tax service industry accounts for its revenue recognition.
The company is the nation's second largest tax service provider with tax
service contracts in place covering 15 million mortgage loans. The tax service
division processes the payment of real estate taxes for mortgage lenders and
monitors delinquent property taxes on behalf of those lenders. Because
delinquent property taxes can lead to a tax lien and a possible forced sale of
the property, thereby jeopardizing the lender's security, most mortgage lenders
contract with tax service companies to process tax payments and to monitor
delinquencies. Tax service contracts are created when the loan is funded. At
that time, the lender pays a one-time fee, which obligates the tax service
provider to monitor tax delinquencies and process tax payments during the life
of the loan.
Because tax monitoring and payment services are provided during the life of
the loan, accounting principles require a deferral of the recognition of the tax
service fee and the amortization of that fee over the expected service period.
Effective Jan. 1, 1999, the SEC mandated a change in the industry standard
deferral formula to decrease the recognition of tax service revenues in the
early years of the contract. In December of 1999, the SEC clarified in the SAB
its position and allowed the industry to take a one-time charge in order to
increase deferred revenues on previously issued contracts. Thus, the new
accounting treatment is applied to all contracts, including those issued before
the accounting change.
Accordingly, the company will restate its previously reported 1999
quarterly results and take a one-time first quarter 1999 after-tax charge of
$55.6 million as a cumulative effect of an accounting change. The effect of the
new accounting treatment will be to increase earnings per share, before the
one-time charge, by 25 cents for the first nine months of 1999.
"We are extremely pleased with the final outcome as determined by the SEC,"
stated Parker S. Kennedy, president of First American Financial. "The new
accounting treatment will reflect more closely the true overall operational
results of the tax service business, and will make the reported earnings of this
division less cyclical in future years."
The First American Financial Corporation, based in Santa Ana, Calif., is
the nation's leading provider of business information and related products and
services. The corporation's three primary business segments include: title
insurance; real estate information and services, which includes mortgage
origination, mortgage servicing and database products and services; and consumer
information and services, which provides home warranties; automotive, subprime
and direct-to-consumer credit reporting; property and casualty insurance;
property and automotive insurance tracking services; resident screening;
pre-employment screening; lender-placed flood and hazard insurance; investment
advisory; and trust and banking services. Information about the company and an
archive of its press releases can be found on the Internet at www.firstam.com.
Any statements in this document that look forward in time involve risks and
uncertainties, including but not limited to the following: the effect of
interest rate fluctuations; changes in the performance of the real estate
markets; the effect of changing economic conditions; general volatility in
the capital markets; the demand for and the acceptance of the company's
products; changes in applicable government regulations; continued
consolidation among the company's significant customers; consolidation
among significant competitors: the impact of the legal proceedings
commenced by the California attorney general and related litigation; the
continued ability to identify businesses to be acquired; and changes in the
company's ability to integrate businesses which its acquires. The company's
actual results, performance or achievement could differ materially from
those expressed in, or implied by, any forward-looking statements, and,
accordingly, no assurances can be given that any of the events anticipated
by the forward-looking statements will transpire or occur or, if any of
them do, what impact they will have on the results of operations or
financial condition of the company.
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