THE FIRST AMERICAN CORPORATION REPORTS
RECORD-BREAKING THIRD QUARTER RESULTS
--Third Quarter Revenues, Net Income and EPS Highest in
Company's 114-Year History--
SANTA ANA, Calif., Oct. 22, 2003 - The First American Corporation (NYSE: FAF),
the nation's leading diversified provider of business information and related
products and services, today announced record-breaking results for the third
quarter ended Sept. 30, 2003:
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------- ----------------------------------
2003 2002 2003 2002
-------------------------------- ----------------------------------
Total revenues $ 1.72 billion $ 1.20 billion $ 4.60 billion $ 3.33 billion
Income before income taxes
and minority interests $260.8 million $129.0 million $664.0 million $297.6 million
Net income $141.8 million $67.4 million $356.9 million $151.6 million
Net income per diluted share $1.62 $0.84 $4.15 $1.91
Summary of Operations
"We again achieved a company milestone with record third quarter
results," stated Parker S. Kennedy, president of The First American Corporation.
"Our 2003 third quarter revenues, net income and earnings per share were the
highest quarterly results in the company's 114-year history, exceeding our
record-breaking 2003 second quarter. The third quarter produced relatively
strong but declining mortgage applications. Interest rates have increased over
the past two months and new order counts have slowed from the record pace of the
second quarter. We began to reduce expenses in the third quarter in reaction to
the slowdown in refinance activity and will continue to monitor expenses and
personnel in relation to new incoming orders."
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First American Reports Record-Breaking Third Quarter Results
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Quarterly Financial Highlights
Financial Services Group:
o Record revenues for the third quarter 2003 were $1.33 billion, an
increase of 45.1 percent when compared with $918.1 million for the third
quarter of 2002.
o Pretax income was a record $179.2 million, an increase of 102.5 percent
when compared with $88.5 million in the prior year quarter.
o Pretax margins improved to 13.5 percent compared with 9.6 percent for
the third quarter 2002.
Information Technology Group:
o Record revenues for the third quarter 2003 were $383.6 million, an
increase of 37.1 percent compared with $279.8 million for the third
quarter of 2002.
o Pretax income was a record $109.2 million, an increase of 50.3 percent
when compared with $72.7 million in the prior year quarter.
o Pretax margins improved to 28.5 percent compared with 26.0 percent for
the third quarter 2002.
2003 Strategic Focus and Outlook
Kennedy continued: "Although refinance activity has slowed, purchase
activity remains strong. As a result of our continued cost-cutting initiatives,
production efficiencies in our Title segment from our FAST technology and
benefits from our recently announced transaction with Transamerica, we expect
solid results in 2003, despite slowing mortgage activity in the third and fourth
quarters.
"The Oct. 1 closing of Transamerica's flood certification and tax
services will be immediately accretive to fourth quarter earnings. By
integrating these businesses, First American expects to benefit from significant
cost synergies that will result in additional pretax profits in excess of $50
million on an annualized basis. These synergies will be realized over the next
18 months as integration is completed."
Teleconference/Webcast
First American's third quarter results will be discussed in more
detail on Wednesday, Oct. 22, 2003, at 10 a.m. EDT, via teleconference. The
dial-in number is (888) 809-8965 and the pass code is FIRST AMERICAN. The live
audio webcast of the call will be available on First American's Web site at
www.firstam.com/investor. An audio replay of the conference call will be
available through Oct. 26, 2003, by dialing (402) 998-0851. An audio archive of
the call will also be available for replay on First American's Web site.
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First American Reports Record-Breaking Third Quarter Results
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About First American
The First American Corporation is a Fortune 500 company that traces
its history to 1889. As the nation's leading diversified provider of business
information, the company supplies businesses and consumers with information
resources in connection with the major economic events of people's lives, such
as getting a job; renting an apartment; buying a car, house, boat or airplane;
securing a mortgage; opening or buying a business; and planning for retirement.
The First American Family of Companies, many of which command leading market
share positions in their respective industries, operate within seven primary
business segments including: Title Insurance and Services, Specialty Insurance,
Trust and Other Services, Mortgage Information, Property Information, Credit
Information and Screening Information. With revenues of $4.70 billion in 2002,
First American has nearly 25,000 employees in approximately 1,400 offices
throughout the United States and abroad. More information about the company and
an archive of its press releases can be found at www.firstam.com.
Forward Looking Statements
Certain statements made in this press release, including those related
to 2003 results, and earnings accretion and synergies from the
Transamerica transaction 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; 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 Dec. 31, 2002, as filed with the
Securities and Exchange Commission. The forward-looking statements
speak only as of the date they are made. The company does not
undertake to update forward-looking statements to reflect
circumstances or events that occur after the date the forward-looking
statements are made.
(Additional Financial Data Follows)
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First American Reports Record-Breaking Third Quarter Results
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Summary of Earnings
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ -------------------------------
2003 2002 2003 2002
------------------------------ -------------------------------
Total revenues $1,716,742 $1,196,086 $4,601,648 $3,329,818
Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635
Income taxes $ 92,100 $ 42,800 $ 231,200 $ 100,100
Minority interests $ 26,812 $ 18,863 $ 75,902 $ 45,980
Net income $ 141,847 $ 67,359 $ 356,903 $ 151,555
Net income per share:
Basic $1.83 $0.94 $4.69 $2.13
Diluted $1.62 $0.84 $4.15 $1.91
Weighted average shares outstanding:
Basic 77,660 71,827 76,080 71,092
Diluted 88,395 82,679 87,155 82,112
Cash Provided by Operating Activities
(in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------------ -------------------------------
2003 2002 2003 2002
------------------------------ -------------------------------
Cash provided by operating activities $ 297,013 $ 134,578 $ 659,225 $ 330,518
Summary Balance Sheet Information
(in thousands, except per share amounts)
September 30 December 31
---------------- ----------------
2003 2002
---------------- ----------------
Total stockholders' equity $1,776,135 $1,364,589
Book value per share $22.82 $18.53
Summary Title Insurance Order Counts
From Direct Operations
Three Months Ended
September 30
------------------------------------
2003 2002
------------------------------------
Title orders opened:
July 263,800 190,500
August 188,700 222,200
September 173,600 216,700
--------------- ---------------
Third quarter total 626,100 629,400
=============== ===============
Title orders closed:
July 217,900 131,700
August 197,900 146,000
September 173,500 147,300
--------------- ---------------
Third quarter total 589,300 425,000
=============== ===============
(Additional Financial Data Follows)
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First American Reports Record-Breaking Third Quarter Results
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Selected Financial Data
(in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------------- -----------------------------------
2003 2002 2003 2002
----------------------------------- -----------------------------------
RESULTS OF OPERATIONS
Revenues
Operating revenues $ 1,681,446 $ 1,179,116 $ 4,499,863 $ 3,287,037
Investment and other income 29,535 22,858 81,892 61,237
Net realized investment gains (losses) 5,761 (5,888) 19,893 (18,456)
---------------- ----------------- ---------------- -----------------
1,716,742 1,196,086 4,601,648 3,329,818
---------------- ----------------- ---------------- -----------------
Expenses
Salaries and other personnel costs 490,152 381,074 1,337,138 1,090,317
Premiums retained by agents 477,504 322,148 1,251,997 915,281
Other operating expenses 348,528 264,458 969,719 745,645
Provision for title losses and other claims 89,464 58,215 236,106 158,011
Depreciation and amortization 27,134 23,662 79,704 72,894
Premium taxes 14,348 8,889 36,814 24,481
Interest 8,853 8,618 26,165 25,554
---------------- ----------------- ---------------- -----------------
1,455,983 1,067,064 3,937,643 3,032,183
---------------- ----------------- ---------------- -----------------
Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635
================ ================= ================ =================
OPERATING REVENUES
Financial Services
Title Insurance and Services:
Direct operations $ 654,861 $ 464,893 $ 1,721,134 $ 1,271,670
Agency operations 589,632 393,034 1,547,386 1,128,453
---------------- ----------------- ---------------- -----------------
1,244,493 857,927 3,268,520 2,400,123
Specialty Insurance 55,180 37,426 152,213 100,318
Trust and Other Services 10,523 9,647 30,630 32,341
---------------- ----------------- ---------------- -----------------
1,310,196 905,000 3,451,363 2,532,782
---------------- ----------------- ---------------- -----------------
Information Technology
Mortgage Information 163,473 119,718 459,837 336,378
Property Information 97,952 71,024 278,254 183,587
Credit Information 62,200 56,642 193,844 160,189
Screening Information 47,625 26,732 116,565 74,101
---------------- ----------------- ---------------- -----------------
371,250 274,116 1,048,500 754,255
---------------- ----------------- ---------------- -----------------
Total operating revenues $ 1,681,446 $ 1,179,116 $ 4,499,863 $ 3,287,037
================ ================= ================ =================
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS
Financial Services
Title Insurance and Services $ 167,478 $ 80,026 $ 394,279 $ 169,788
Specialty Insurance 8,741 6,014 22,821 17,855
Trust and Other Services 2,960 2,443 8,403 11,255
---------------- ----------------- ---------------- -----------------
179,179 88,483 425,503 198,898
---------------- ----------------- ---------------- -----------------
Information Technology
Mortgage Information 64,733 39,188 173,183 100,245
Property Information 26,976 21,405 82,809 48,070
Credit Information 14,987 10,943 59,565 30,827
Screening Information 2,525 1,120 6,258 3,868
---------------- ----------------- ---------------- -----------------
109,221 72,656 321,815 183,010
---------------- ----------------- ---------------- -----------------
Total before corporate expenses and
minority interest 288,400 161,139 747,318 381,908
Corporate expense 27,641 32,117 83,313 84,273
---------------- ----------------- ---------------- -----------------
Income before income taxes and minority interests $ 260,759 $ 129,022 $ 664,005 $ 297,635
================ ================= ================ =================
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First American Reports Record-Breaking Third Quarter Results
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Segment Margins
(in thousands, except percentages)
Three Months Ended September 30
----------------------------------------------------------------------------------------
Total revenues Pretax (A) Margins
----------------------------- ------------------------------- ------------------------
2003 2002 2003 2002 2003 2002
-------------- -------------- --------------- --------------- ------------ -----------
Financial Services
Title Insurance and Services $ 1,262,666 $ 868,298 $ 167,478 $ 80,026 13.3% 9.2%
Specialty Insurance 58,524 40,156 8,741 6,013 14.9% 15.0%
Trust and Other Services 10,529 9,635 2,960 2,444 28.1% 25.4%
-------------- -------------- --------------- --------------- ------------ -----------
$ 1,331,719 $ 918,089 $ 179,179 $ 88,483 13.5% 9.6%
============== ============== =============== =============== ============ ===========
Information Technology
Mortgage Information $ 166,624 $ 120,759 $ 64,733 $ 39,188 38.8% 32.5%
Property Information 105,001 76,058 26,976 21,405 25.7% 28.1%
Credit Information 64,354 56,214 14,987 10,943 23.3% 19.5%
Screening Information 47,644 26,786 2,525 1,120 5.3% 4.2%
-------------- -------------- --------------- --------------- ------------ -----------
$ 383,623 $ 279,817 $ 109,221 $ 72,656 28.5% 26.0%
============== ============== =============== =============== ============ ===========
Nine Months Ended September 30
----------------------------------------------------------------------------------------
Total revenues Pretax (A) Margins
----------------------------- ------------------------------- ------------------------
2003 2002 2003 2002 2003 2002
-------------- -------------- --------------- --------------- ------------ -----------
Financial Services
Title Insurance and Services $ 3,307,986 $ 2,427,531 $ 394,279 $ 169,788 11.9% 7.0%
Specialty Insurance 161,170 107,843 22,821 17,855 14.2% 16.6%
Trust and Other Services 30,637 32,421 8,403 11,255 27.4% 34.7%
-------------- -------------- --------------- --------------- ------------ -----------
$ 3,499,793 $ 2,567,795 $ 425,503 $ 198,898 12.2% 7.7%
============== ============== =============== =============== ============ ===========
Information Technology
Mortgage Information $ 469,438 $ 339,808 $ 173,183 $ 100,245 36.9% 29.5%
Property Information 297,599 196,814 82,809 48,070 27.8% 24.4%
Credit Information 214,181 164,968 59,565 30,827 27.8% 18.7%
Screening Information 116,636 74,240 6,258 3,868 5.4% 5.2%
-------------- -------------- --------------- --------------- ------------ -----------
$ 1,097,854 $ 775,830 $ 321,815 $ 183,010 29.3% 23.6%
============== ============== =============== =============== ============ ===========
(A) - Income before income tax, minority interest and corporate expenses
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