©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF
FIRST AMERICAN FINANCIALSpring Investor PresentationMarch 2019
Safe Harbor Statement
CERTAIN STATEMENTS MADE IN THIS PRESENTATION AND THE RELATED MANAGEMENT COMMENTARY AND RESPONSES TO INVESTOR QUESTIONS CONTAIN 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. 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, WITHOUT LIMITATION, INTEREST RATE FLUCTUATIONS; CHANGES IN THE PERFORMANCE OF THE REAL ESTATE MARKETS; VOLATILITY IN THE CAPITAL MARKETS; UNFAVORABLE ECONOMIC CONDITIONS; FAILURES AT FINANCIAL INSTITUTIONS WHERE THE COMPANY DEPOSITS FUNDS; CHANGES IN APPLICABLE LAWS AND GOVERNMENT REGULATIONS, INCLUDING DATA PRIVACY LAWS; HEIGHTENED SCRUTINY BY LEGISLATORS AND REGULATORS OF THE COMPANY’S TITLE INSURANCE AND SERVICES SEGMENT AND CERTAIN OTHER OF THE COMPANY’S BUSINESSES; USE OF SOCIAL MEDIA BY THE COMPANY AND OTHER PARTIES; REGULATION OF TITLE INSURANCE RATES; LIMITATIONS ON ACCESS TO PUBLIC RECORDS AND OTHER DATA; CHANGES IN RELATIONSHIPS WITH LARGE MORTGAGE LENDERS AND GOVERNMENT-SPONSORED ENTERPRISES; CHANGES IN MEASURES OF THE STRENGTH OF THE COMPANY’S TITLE INSURANCE UNDERWRITERS,INCLUDING RATINGS AND STATUTORY CAPITAL AND SURPLUS; LOSSES IN THE COMPANY’S INVESTMENT PORTFOLIO; MATERIAL VARIANCE BETWEEN ACTUAL AND EXPECTED CLAIMS EXPERIENCE; DEFALCATIONS, INCREASED CLAIMS OR OTHER COSTS AND EXPENSES ATTRIBUTABLE TO THE COMPANY’S USE OF TITLE AGENTS; ANY INADEQUACY IN THE COMPANY’S RISK MANAGEMENT FRAMEWORK; SYSTEMS DAMAGE, FAILURES, INTERRUPTIONS AND INTRUSIONS, OR UNAUTHORIZED DATA DISCLOSURES; INNOVATION EFFORTS OF THE COMPANY AND OTHER INDUSTRY PARTICIPANTS AND ANY RELATED MARKET DISRUPTION; ERRORS AND FRAUD INVOLVING THE TRANSFER OF FUNDS; THE COMPANY’S USE OF A GLOBAL WORKFORCE; INABILITY OF THE COMPANY’S SUBSIDIARIES TO PAY DIVIDENDS OR REPAY FUNDS; AND OTHER FACTORS DESCRIBED IN THE COMPANY’S ANNUAL REPORT ON FORM 10-K, INCLUDING UNDER THE CAPTION “RISK FACTORS” IN ITEM 1A OF PART I OF THAT 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.
2
Use of non-GAAP Financial Measures
THIS SLIDE PRESENTATION CONTAINS CERTAIN FINANCIAL MEASURES THAT ARE NOT PRESENTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), INCLUDING ADJUSTED INVESTMENT INCOME. ADJUSTED INVESTMENT INCOME EXCLUDES AFFILIATED INVESTMENTS AND IS PRESENTED BECAUSE IT PROVIDES THE COMPANY’S MANAGEMENT AND READERS AND VIEWERS OF THIS PRESENTATION WITH A BETTER UNDERSTANDING OF THE IMPACT OF INTEREST RATES ON THE COMPANY’S INVESTMENT INCOME OVER TIME. THE COMPANY DOES NOT INTEND FOR THESE NON-GAAP FINANCIAL MEASURES TO BE A SUBSTITUTE FOR ANY GAAP FINANCIAL INFORMATION. IN THE SLIDE PRESENTATION THESE NON-GAAP FINANCIAL MEASURES HAVE BEEN PRESENTED WITH, AND RECONCILED TO, THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES. INVESTORS SHOULD USE THESE NON-GAAP FINANCIAL MEASURES ONLY IN CONJUNCTION WITH THE COMPARABLE GAAP FINANCIAL MEASURES.
MANAGEMENT COMMENTARY AND RESPONSES TO QUESTIONS MAY CONTAIN CERTAIN FINANCIAL MEASURES THAT ARE NOT PRESENTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), WHICH NON-GAAP MEASURES HAVE PREVIOUSLY BEEN DISCLOSED AND HAVE BEEN PRESENTED WITH, AND RECONCILED TO, THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES EITHER IN OUR MOST RECENT EARNINGS RELEASE OR ANNUAL REPORT ON FORM 10-K, BOTH OF WHICH ARE AVAILABLE ON OUR WEB SITE AT WWW.FIRSTAM.COM.
3
AGENDA
Strong Track Record of Results
Well Positioned in a Changing Environment
Attractive Growth Opportunities
4
Leader in the Title and Settlement Services Industry
92% of Revenue, Title Segment
8% of Revenue, Specialty Insurance Segment25.8% Title Market Share
18,300 Employees
800 Offices
Largest Title Plant and Property
Record Database
Fortune 100 Best Companies to Work For®
2016 – 2017 – 2018 – 2019
Trusted National Brand
$10.6B Total Assets
5
$5.7B Total Revenue
9 Countries
Note: Revenue and market share data for 2018. All other data as of December 31, 2018.
FORTUNE and FORTUNE 100 Best Companies to Work For are registered trademarks of Time Inc. FORTUNE and Time Inc. are not affiliated with and do not endorse products and services of First American Financial Corporation.
6
First American Strategy
Past 5 Years: Achieved Strong Financial Results
7
TOTAL REVENUE
$ in
Mill
ion
s
EARNINGS PER SHARE
CASH FROM OPERATIONS RETURN ON EQUITY
$4.7
$5.2
$5.6 $5.8 $5.7
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
2014 2015 2016 2017 2018
$ in
Bill
ion
s
$2.15 $2.62
$3.09
$3.76 $4.19
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2014 2015 2016 2017 2018
$361
$551 $489
$632
$793
$100
$200
$300
$400
$500
$600
$700
$800
$900
2014 2015 2016 2017 2018
9.3%10.8%
11.9%13.0% 13.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2014 2015 2016 2017 2018
Target
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Mortgage Originations Pretax Margin
Historical Title Insurance Margin
8
$ in
Bill
ion
s
Source: February 2019 MBA
-20
0
20
40
60
80
100
120
140
160
180
FAF US Equity SPX Index
Total Shareholder Return
9 Source: Bloomberg - Weekly as of February 28, 2019
Total Annualized Return
1 year 3 year 5 year
First American -8.4% 15.0% 17.4%
S&P 500 6.3% 15.1% 10.7%
Fidelity -4.5% 17.2% n/a
AGENDA
Well Positioned in a Changing Environment
Attractive Growth Opportunities
Strong Track Record of Results
10
Real Estateand Mortgage
Process BecomingDIGITAL
HIGHERINTEREST RATES
Affect Business Mix
EMERGING TECHNOLOGIES
Create Opportunities
Consumer Experience Faster Closing
Purchase Commercial BlockchainArtificial Intelligence
Robotic Process AutomationRefinance
Key Forces Driving Market Change
11
Rising Rates Have Changed the Business Mix
12
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
-
1,000
2,000
3,000
4,000
5,000
6,000
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Oct
-16
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
De
c-1
7
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
De
c-1
8
Jan
-19
Feb
-19
10
-Yea
r Tr
easu
ry
Dai
ly O
pen
Ord
ers
Refinance 10-Year %
0.00%
0.25%
0.50%
0.75%
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
$16
$26
$36
$46
$56
$66
$76
Q1
'13
Q2
'13
Q3
'13
Q4
'13
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
Q1
' 18
Q2
' 18
Q3
' 18
Q4
' 18
Titl
e Se
gmen
t In
vest
men
t In
com
e ($
in M
illio
ns)
Investment Income Fed Funds Rate
… and Higher Short-term Rates Benefit Investment Income
13(1) Excludes affiliated investments (See reconciliation in Appendix).(2) Company estimate.
Title Segment(1)
Fed Fu
nd
s Rate
Each 25 basis point Fed hike increases investment income by ~$15 million/year(2)
Purchase Market Slowing as Market Resets
14
First American Operations▪ 550 local offices focused on purchase
▪ Leading homebuilder business
▪ Fee per file 2.5x refinance
Purchase Market▪ Good economic backdrop with job and
wage growth
▪ Near term affordability improving as market resets
− Mortgage rates have improved− Home price appreciation slowing− Inventory increasing
GROWTH RATE vs. PRIOR YEAR
$300
$400
$500
$600
$700
$800
$900
$1,000
FY17 FY18
$ in
Mill
ion
s
PURCHASE DIRECT REVENUE
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18
Title Order Closed Average Revenue per Order
Digital Transformation of Mortgage and Closing Process Underway
▪ Quality Service▪ Proactive Communication
▪ Faster Closings▪ Reduced Costs▪ Improved Accuracy
▪ Digital Experience▪ Transparency
Lenders
Real Estate AgentsConsumers
First AmericanFinancial
15
Emerging Technologies Create Opportunities
16
EmergingTechnologies
BlockchainArtificial Intelligence
Robotic Process Automation “BOTS”
▪ Opportunity to drive process efficiencies▪ Collaborating with lenders on proof of concepts▪ Recently launched first production application▪ In our view, unlikely to disrupt title
▪ Doesn’t address many title issues (fraud, easements, special rights, etc.)
▪ Numerous legal and financial challenges
▪ Automation of standard, repeatable tasks improves productivity and reduces cost▪ Numerous opportunities being evaluated across title operations, accounting and underwriting▪ New development platform now in place to accelerate live BOTS in production in 2019
▪ High potential use case when coupled with proprietary data
▪ Enhanced data collection and predictive analytics to drive title automation and enhance risk decisioning
▪ Reduced operational costs▪ Improved productivity
AGENDA
Strong Track Record of Results
Attractive Growth Opportunities
Well Positioned in a Changing Environment
17
Strong Outlook for Title and Settlement Business
▪ Purchase slowing as market resets
▪ Commercial market fundamentals remain strong
▪ Investment income growing due primarily to higher short term rates
▪ Refinance activity has declined to 8% of direct revenue
18
Revenue Growth
▪ Disciplined cost management culture
▪ Prudent underwriting has driven claim losses lower
▪ Leveraging data and technology to improve productivity and enhance risk decisioning
Cost Efficient Operation
▪ Focus remains on margin expansion▪ Record margin in each of the past 3 years Title Margin
19
5,000
5,500
6,000
6,500
7,000
7,500
8,000
2012 2013 2014 2015 2016 2017 2018
▪ FAF has reduced number of smaller agents in recent years to focus on larger, more profitable relationships
▪ Reduced risk, audit and administrative costs by terminating smaller agents
▪ Growth with large commercial agents
▪ Continual monitoring of profitability by agent− Moved agent split to 85/15 in So. California
NUMBER OF AGENTS
13.5%
14.0%
14.5%
15.0%
15.5%
16.0%
2012 2013 2014 2015 2016 2017 2018-Q3
MARKET SHARE %
Agency Division has Maintained Market Share with Fewer Agents
20
Commercial - Current Trend and Outlook
• Most major asset classes and geographic markets remain strong
• High level of capital availability despite a decline in foreign capital
• A few overheated markets showing signs of fatigue (NYC, excluding 4Q)
• Expect strong activity level to persist, supported by continued economic growth
Commercial Market Sales Volume(1) Direct Revenues
432
582
181
72
155
261310
378
453
569
511 490 475450
415
$0
$200
$400
$600
$800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
($ in
Bill
ion
s)
465 506599 559 592
642
81 89
98 102
104 112
$-
$100
$200
$300
$400
$500
$600
$700
$800
2013 2014 2015 2016 2017 2018
NCSD Local
546595
696661
696
$ Millions
753
Commercial Business Outlook
(1) Source: Real Capital Analytics
Disciplined M&A Strategy Drives Growth
Focused Strategy▪ Title companies that expand our footprint
in key markets
▪ Companies that enhance our data capabilities or expand product and service offerings
Disciplined Process▪ Strategic and cultural fit
▪ Risk adjusted return targets
▪ Operational integration
21
Pursuing targets that support or
leverage our core title and settlement
business
Mergers & Acquisitions
22
2015
2014
TD Service Leading provider of technology and services to the mortgage banking industry; broadens and enhances our post-closing and document management capabilities.
Complementary
$115MRedVision Largest independent provider of title and real property research; expands
coverage to all 50 states and significantly improves product capabilities in the agent channel.
Complementary
Forsythe Largest independent appraisal company in the U.S.; significantly expanded valuation offering to lender customers.
Complementary
TitleVest Title/Settlement service agent with significant residential position in NYC. Title $32M
Interthinx Provides solutions to help clients minimize risk, increase operational efficiencies, and satisfy regulatory requirements; best known for FraudGUARD, a market-leading mortgage fraud analytics product.
Complementary
$163M
Universal Land Title Title/Settlement service agent primarily located in southern Florida. Title
COMPANY TYPETOTALSPEND(1)
Note: Highlights transactions of $5 million or greater. (1) Aggregate purchase price for all completed acquisitions in given year. Source: Company’s 10-K filings.
2016
2017 SIS Buyout of long standing joint venture of title information provider. Complementary
$91MNevada Title Leading title and escrow company with a strong presence in southern Nevada. Title
▪ Acquire companies strategic to our core business that:
▪ Strengthen geographic presence
▪ Enhance product breadth
▪ Analyze expected returns on a risk-adjusted basis
▪ Aggressively integrate acquisitions to realize synergies
2018
Bank America Lien Release Business
Significantly enhances the company’s post-closing services business, while continuing to provide lien release services to Bank of America.
Title
$78MFirst Funding Provides residential warehouse funding and management services to small and
mid-sized mortgage originators.Complementary
PCN Provides residential closing services including Safe Escrow software platform that enables more efficient and secure cash disbursement for title agents.
Complementary
Attractive Growth Prospects in Our Property Data Business
Property Record Database▪ Largest property record database
▪ Datatree.com and data licensing demonstrating growth
Title Plant
▪ Continued expansion into new markets
▪ Houston, Dallas, El Paso
▪ Long-term strategy to expand plant coverage to facilitate title automation
23
94
73
87
94
43
17
97
96
99
99
83
60
85
Proprietary Title Plants
Document Images
Active Real Estate Listings
Map and Parcel Boundaries
Assignments and Releases
Deeds, Mortgages, Foreclosures
Assessor/Property Ownership 1st
1st
1st
1st
1st
1st
1st
% Share of counties % Share of population
CURRENT DATA COVERAGE
100100
99
Homeowners Associations
1st
RANK
Leveraging Data Assets to Drive Title Automation and Enhanced Risk Decisioning
Offering a Wider Array of Products to Title Agents
24
Customer Benefits
First American Benefits
▪ Reduced operating costs▪ Risk mitigation▪ Process efficiency
▪ Expands “share of wallet” with agents
▪ Grows bank deposits▪ Deepens customer
relationships▪ Reduces underwriting risk
▪ Full Search▪ Limited Search
▪ Document Preparation▪ Recordings
▪ Reconciliation▪ Wires▪ Deposit Accounts
Title Insurance
Title Production
Banking Services
Closing Solutions
Back Office Services
Primary Business
Age
nt
Ad
van
tage
Pilot launched in 2017
SUMMARY
25
Strong Track Record of Results▪ 17% annualized total shareholder return past 5 years
Well Positioned in a Changing Environment▪ Financial performance remains strong despite higher interest rates ▪ Actively investing for the digital future▪ Application of emerging technologies creates opportunities
Attractive Growth Opportunities▪ Strong industry outlook▪ Active M&A pipeline▪ Data assets drive title automation and enhance risk decisioning▪ Expanding service offering for title agents
Capital Management Strategy
▪ Objective: Create long-term shareholder value
▪ Capital management priorities:
▪ Make value-creating investments in our core business
▪ Acquire businesses that fit within our strategy
▪ Return excess capital to shareholders through dividends and share repurchases
▪ Maintain “A-” financial strength ratings and adequate capital levels
▪ Manage our capital structure prudently
▪ Maintain ample financial flexibility and holding company liquidity
26
Dividends
▪ First American expects to pay a meaningful dividend given the company’s cash flow generation and investment opportunities
▪ Dividend increases are intended to be sustainable in perpetuity
▪ Dividend increases will be dependent upon expected holding company cash flows, market conditions and alternative uses of capital, among other factors
▪ The company is not committed to increasing the dividend every year
27
Dividend ConsiderationsDIVIDENDS PER SHARE
PAYOUT RATIO
$0.48
$0.84$1.00
$1.20
$1.44
$1.60
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
2013 2014 2015 2016 2017 2018
28%
39% 38% 38% 38% 38%
0%
20%
40%
60%
2013 2014 2015 2016 2017 2018
Share Repurchases
▪ Share repurchases will be dependent upon capital levels, market conditions and alternative uses of capital among other factors
▪ $160 million remaining under share repurchase authorization
28
SHARE REPURCHASE HISTORYSh
are
Bu
ybac
k Pe
rio
d
Shar
e B
uyb
ack
Per
iod
$20
$25
$30
$35
$40
$45
$50
$55
$60
$65
Jan
-13
Mar
-13
May
-13
Jul-
13
Sep
-13
No
v-1
3
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-1
4
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
No
v-1
5
Jan
-16
Mar
-16
May
-16
Jul-
16
Sep
-16
No
v-1
6
Jan
-17
Mar
-17
May
-17
Jul-
17
Sep
-17
No
v-1
7
Jan
-18
Mar
-18
May
-18
Jul-
18
Sep
-18
No
v-1
8
Jan
-19
Mar
-19
2013 Repurchase Summary
Shares purchased 3.0 Million
Total amount $64.5 million
Avg. price per share $21.87
IRR 25.9%
2018/2019 Repurchase Summary
Shares purchased 472,133
Total amount $20.9 million
Avg. price per share $44.20
IRR 59.9%
30%
21%
44%
1%4%
Uses of Free Cash Flow and Debt Proceeds
29
▪ ~44% of cash flow used for investment portfolio to strengthen the balance sheet
▪ Moving forward, portfolio strengthening not necessary as capital levels exceed current targets
▪ A greater proportion of future cash flows will be allocated to dividends given recent increases
CUMULATIVE 5 YEAR USES
Dividends
Acquisitions
Net Cash & Investments
Share RepurchasesPension Termination
$(200)
$(100)
$-
$100
$200
$300
$400
$500
$600
$700
2014 2015 2016 2017 2018
$ in
Mill
ion
s
Capital Structure
▪ Management’s target debt-to-capital ratio is 18-20%
▪ Supports target financial strength ratings
▪ $160 million drawn on $700 million revolving credit facility
▪ Revolving credit facility term ends in May 2019
▪ Significant financial flexibility to seize strategic opportunities
30
As of December 31st, 2018 ($ in Millions)
4.3% Senior Notes Due 2023 $249
4.6% Senior Notes Due 2024 $298
Trust Deed Notes $19
Other Notes $6
Revolving Credit Facility $160
Total Debt $732
Total Equity $3,745
Debt-to-Capital Ratio(1) 16.3%
Financial Covenant
DEBT-TO-CAPITAL RATIO
5%
10%
15%
20%
25%
30%
35%
2014 2015 2016 2017 2018(1) Excludes $76 million in secured financings for First Funding
US Treasury
6%
Gov't Agency
3% Municipal18%
Corporate18%
Gov't Agency
MBS14%
Bank Loans
6%
Foreign6%
Equity13%
US Treasury3%
Gov't Agency5%
Municipal17%
Corporate11%
Gov't Agency MBS53%
Bank Loans2%
Foreign3%
Equity6%
Investment Portfolio
31
CONSOLIDATED PORTFOLIO INSURANCE PORTFOLIO
BANK PORTFOLIO
Note: Debt and equity securities as of December 31, 2018
Avg. Rating : AADuration: 4.7Book Yield: 3.0%
Avg. Rating : AA-Duration: 5.1Book Yield: 3.4%
Avg. Rating : AADuration: 4.5Book Yield: 2.7%
$6.1B
$2.6B
Gov't Agency
7%Municipal
17%
Corporate6%
Gov't Agency
MBS70%
$3.4B
Ultimate Loss Ratios by Policy Year
32 Note: Ultimate loss ratios are estimates and calculated as a percentage of title premiums and escrow fees for a given policy year as of December 31, 2018
Paid
Losses b
y Calen
dar Year ($
in M
illion
s)
Ult
imat
e Lo
ss R
atio
s b
y P
olic
y Ye
ar
92%
93%90%
92%
88%
85%82%
78%
69% 60%57%
33% 17% 5%
94%91%
93%
90%
87%85% 81%
74% 67%66%
47% 30%17%
5%$0
$50
$100
$150
$200
$250
$300
$350
$400
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Paid to Date Ultimate Loss Ratio - Policy Year Paid Losses - Calendar Year
11.2%
13.2%
9.8%
6.5%
5.4%5.2%
3.4%3.7%
4.6%
3.3%
3.8% 3.9%
9.8%
4.0%
Title Insurance Margin Objective
33
Downside Base Case Upside
Pretax Margin <11% 11% - 13% >13%
Mortgage Originations <$1.4 Trillion $1.4 - $1.8 Trillion >$1.8 Trillion
% Refinance ~25% ~25% ~25%
Investment Considerations
▪ Focused strategy as “pure play” in title and settlement markets
▪ Attractive industry characteristics
▪ Strong competitive position in title and settlement services
▪ Opportunity to grow through focus on innovation and by leveraging unique assets (e.g. bank and data)
▪ Expect earnings and margin growth as mortgage originations improve
▪ Strong balance sheet and financial flexibility
▪ Commitment to return capital to shareholders
34
APPENDIX
35
SPECIALTY INSURANCE SEGMENT
U.S. Title
Direct
Agency
Commercial
International Title
Canada
United Kingdom
Mortgage & Data Solutions
Mortgage Solutions
Database Solutions
Banking & Services
Trust & Banking
Real Estate Services
Home Warranty
Property & Casualty
Australia/New Zealand
TITLE INSURANCE AND SERVICES SEGMENT
FIRST AMERICANFINANCIAL CORPORATION
ORGANIZATIONAL STRUCTURE
36
1.9 2.1 2.3 2.3 2.3
1.0 1.2
1.3 1.3 1.3 0.6
0.70.7 0.7 0.8
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
2014 2015 2016 2017 2018
Agent Direct Commercial
$ in
Bill
ion
s$
in B
illio
ns
U.S. TITLE
DIRECT AGENCY COMMERCIAL
Total Revenue Trend
$3.5
$4.0$4.2 $4.4 $4.4
U.S. Title76%
$4.4B$5.7B
$2.3BAgent40%
$1.3BDirect23%
$0.8BCommercial
13%
First American Financial Total Revenue
37
SPECIALTY INSURANCE
Total Revenue Trend
PROPERTY & CASUALTY HOME WARRANTY
38
First American Financial Total Revenue
Specialty Segment
8%$0.5B$0.5B $5.7B
237 260 299 327 344
132 134
137 139 125
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2014 2015 2016 2017 2018
Home Warranty Property & Casualty
$ in
Mill
ion
s
$394
$ in
Mill
ion
s
$369
$436$465 $469
73%Home
Warranty
27%Property &
Casualty
Agency44%
Direct26%Commercial
15%
Mortgage & Data Solutions
9%
International6%
92%Title Segment
8%Specialty Segment
2018 Revenue Breakdown
39
FIRST AMERICAN FINANCIAL
U.S. Title
$5.7B
$5.3B
TITLE SEGMENT
$0.5B
SPECIALTY SEGMENT
2018 Incurred Claims Detail
40
CLAIM CAUSE PROCESS CAUSE
49% Direct / 51% Agent
File Shortage0%
Escrow/Closing5%
GAP0%
Liens18%
Encumbrances18%
Fraud13%
Basic Risks20%
Other14%
Defective Title6%
Permit Violation6%
No Error49%
Unclassified3%
Escrow/Closing14%
Underwriting8%
Exam11%
Search13%
Other2%
Claim Severity Distribution
41
CLAIM COUNT BY SEVERITY GROUP PAID CLAIMS BY SEVERITY GROUP
Large claims: $250,000 and greater Typical claims: $1,000 to $250,000 Minor claims: Less than $1,000
Note: Data for 2018 paid claims; excludes file shortages and de minimis claims
Large Claims44%
Typical Claims
56%
Minor Claims0%
Large Claims1%
Typical Claims
66%
Minor Claims
33%
Title Segment Net Investment Income Reconciliation
42
Net Investment Income Less Affiliate Investments$ in Millions
Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4’18
Net Investment Income $21.8 $26.0 $25.4 $24.4 $24.9 $27.5 $29.0 $29.4 $26.6 $34.7 $37.9 $38.3 $41.4 $51.7 $60.9 $69.3
Less: Affiliate Investments 1.1 3.7 2.8 0.1 0.9 2.1 2.8 2.4 1.6 1.8 1.1 (0.8) (0.3) 1.0 1.5 0.5
Adjusted Net Investment Income $20.6 $22.2 $22.6 $24.3 $24.0 $25.4 $26.2 $27.0 $25.0 $32.9 $36.8 $39.0 $41.7 $50.7 $59.3 $68.8
Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
Net Investment Income $19.0 $21.6 $22.2 $13.8 $15.7 $19.3 $22.0 $2.7
Less: Affiliate Investments 2.7 4.5 4.1 (3.9) (2.0) 0.3 2.8 (17.6)
Adjusted Net Investment Income $16.3 $17.1 $18.2 $17.7 $17.7 $19.0 $19.2 $20.3