First American Financial Corp

Previous wording

This Management’s Discussion and Analysis contains the financial measure adjusted debt to capitalization ratio that is not presented in accordance with generally accepted accounting principles (“GAAP”), as it excludes the effects of secured financings payable and accumulated other comprehensive loss. The Company is presenting this non-GAAP financial measure because it provides the Company’s management and readers of this Quarterly Report on Form 10-Q with additional insight into the financial leverage of the Company. The Company does not intend for this non-GAAP financial measure to be a substitute for any GAAP financial information. In this Quarterly Report on Form 10-Q, this non-GAAP financial measure has been presented with, and reconciled to, the most directly comparable GAAP financial measure. Readers of this Quarterly Report on Form 10-Q should use this non-GAAP financial measure only in conjunction with the comparable GAAP financial measure. Because not all companies use identical calculations, the presentation of adjusted debt to capitalization ratio may not be comparable to other similarly titled measures of other companies.

Current wording

This Management’s Discussion and Analysis contains the financial measure adjusted debt to capitalization ratio that is not presented in accordance with generally accepted accounting principles (“GAAP”), as it excludes the effects of secured financings payable. The Company is presenting this non-GAAP financial measure because it provides the Company’s management and readers of this Quarterly Report on Form 10-Q with additional insight into the financial leverage of the Company. The Company does not intend for this non-GAAP financial measure to be a substitute for any GAAP financial information. In this Quarterly Report on Form 10-Q, this non-GAAP financial measure has been presented with, and reconciled to, the most directly comparable GAAP financial measure. Readers of this Quarterly Report on Form 10-Q should use this non-GAAP financial measure only in conjunction with the comparable GAAP financial measure. Because not all companies use identical calculations, the presentation of adjusted debt to capitalization ratio may not be comparable to other similarly titled measures of other companies.

Previous wording

The Company’s total revenues for the first quarter of 2025 were $1.6 billion, which reflected an increase of $157.7 million, or 11.1%, when compared with $1.4 billion for the first quarter of 2024. This increase was primarily attributable to increases in agent premiums of $90.8 million, or 16.1%, and direct premiums and escrow fees in the title insurance business of $56.4 million, or 14.0%. In the title insurance and services segment, direct premiums and escrow fees from domestic commercial, purchase and residential refinance transactions increased $40.9 million, or 28.7%, $2.8 million, or 1.4%, and $6.9 million, or 40.2%, respectively, in the first quarter of 2025 when compared to the first quarter of 2024.

Current wording

The Company’s total revenues for the second quarter of 2025 were $1.8 billion, which reflected an increase of $229.0 million, or 14.2%, when compared with $1.6 billion for the second quarter of 2024. This increase was primarily attributable to increases in agent premiums of $100.2 million, or 16.3%, and direct premiums and escrow fees in the title insurance business of $67.4 million, or 12.6%. In the title insurance and services segment, direct premiums and escrow fees from domestic commercial transactions and residential refinance transactions increased $57.6 million, or 32.6% and $11.1 million, or 54.0%, respectively, in the second quarter of 2025 when compared to the second quarter of 2024. Direct premiums and escrow fees from domestic residential purchase transactions decreased $9.2 million, or 3.4%, in the second quarter of 2025 when compared to the second quarter of 2024.

Previous wording

According to the Mortgage Bankers Association’s April 11, 2025 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) are forecasted to increase 1.9% in the first quarter of 2025 when compared to the first quarter of 2024. According to the MBA Forecast, the dollar amount of purchase originations are forecasted to decrease 6.5% and refinance originations are forecasted to increase 30.2%. This volume of domestic residential mortgage origination activity contributed to an increase of 1.4% in direct premiums and escrow fees for the Company’s direct title operations from domestic residential purchase transactions and an increase of 40.2% from domestic refinance transactions in the first quarter of 2025 when compared to the first quarter of 2024.

Current wording

According to the Mortgage Bankers Association’s July 17, 2025 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) are forecasted to increase 28.0% in the second quarter of 2025 when compared to the second quarter of 2024. Also, according to the MBA Forecast, the dollar amount of purchase originations are forecasted to increase 9.2% and refinance originations are forecasted to increase 95.7%. This volume of domestic residential mortgage origination activity contributed to an increase of 54.0% in direct premiums and escrow fees for the Company’s direct title operations from domestic refinance transactions and a decrease of 3.4% from domestic residential purchase transactions in the second quarter of 2025 when compared to the second quarter of 2024.

Previous wording

During the first quarter of 2025, the level of domestic title orders opened per day by the Company’s direct title operations increased 7.1% when compared with the first quarter of 2024. Refinance and commercial opened orders per day increased 45.7% and 4.8%, respectively, while residential purchase opened orders per day decreased 0.5% in the first quarter of 2025 when compared with the first quarter of 2024.

Current wording

During the second quarter of 2025, the level of domestic title orders opened per day by the Company’s direct title operations increased 5.8% when compared with the second quarter of 2024. Refinance and commercial opened orders per day increased 34.2% and 10.6%, respectively, while residential purchase opened orders per day decreased 2.4% in the second quarter of 2025 when compared with the second quarter of 2024.

Previous wording

Direct premiums and escrow fees were $459.6 million for the three months ended March 31, 2025, an increase of $56.4 million, or 14.0%, when compared with the same period of the prior year. The increase was due to increases in domestic average revenues per order and in the number of domestic title orders closed by the Company’s direct title operations. Domestic average revenues per order closed was $3,920 for the three months ended March 31, 2025, an increase of 11.5% when compared with $3,516 for the three months ended March 31, 2024, which was primarily due to an increase in average revenues per order on commercial transactions. The Company’s direct title operations closed 105,400 domestic title orders during the three months ended March 31, 2025, an increase of 2.6% when compared with 102,700 domestic title orders closed during the same period of the prior year, which were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast. Domestic residential purchase and refinance orders closed per day decreased by 4.9% and increased by 30.6%, respectively, for the three months ended March 31, 2025 when compared to the same period of the prior year.

Current wording

Direct premiums and escrow fees were $600.4 million and $1.1 billion for the three and six months ended June 30, 2025, respectively, increases of $67.4 million, or 12.6%, and $123.8 million, or 13.2%, when compared with the respective periods of the prior year. The increases were due to increases in domestic average revenues per order and in the number of domestic title orders closed by the Company’s direct title operations. Domestic average revenues per order closed were $4,112 and $4,026 for the three and six months ended June 30, 2025, respectively, increases of 7.7% and 9.3% when compared with $3,818 and $3,682 for the respective periods of the prior year. The increases in the average revenue per order closed were due to an increase in average revenues per order on commercial and purchase transactions, partially offset by a shift in mix from higher premium commercial transactions to lower premium refinance and default transactions. The Company’s direct title operations closed 131,100 and 236,500 domestic title orders during the three and six months ended June 30, 2025, respectively, increases of 5.1% and 4.0% when compared with 124,700 and 227,400 domestic title orders closed during the respective periods of the prior year, which were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast. Domestic residential refinance orders closed per day increased by 43.7% and 37.7% and domestic residential purchase orders closed per day decreased by 5.7% and 5.3% for the three and six months ended June 30, 2025, respectively, when compared to the respective periods of the prior year.

Previous wording

Agent premiums were $654.6 million for the three months ended March 31, 2025, an increase of $90.8 million, or 16.1%, when compared with the same period of the prior year. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company. As a result, there is generally a delay between the agent’s issuance of a title policy and the Company’s recognition of agent premiums. Therefore, current quarter agent premiums typically reflect prior quarter mortgage origination activity. The increase in agent premiums for the three months ended March 31, 2025 is generally consistent with the 30.8% increase in the Company’s direct premiums and escrow fees in the fourth quarter of 2024 as compared with the fourth quarter of 2023.

Current wording

Agent premiums were $716.5 million and $1.4 billion for the three and six months ended June 30, 2025, respectively, increases of $100.2 million, or 16.3%, and $191.0 million, or 16.2%, when compared with the respective periods of the prior year. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company. As a result, there is generally a delay between the agent’s issuance of a title policy and the Company’s recognition of agent premiums. Therefore, current quarter agent premiums typically reflect prior quarter mortgage origination activity. The increase in agent premiums for the three months ended June 30, 2025 is generally consistent with the 14.0% increase in the Company’s direct premiums and escrow fees in the first quarter of 2025 when compared with the first quarter of 2024.

Previous wording

Information and other revenues were $236.0 million for the three months ended March 31, 2025, an increase of $18.8 million, or 8.7%, when compared with the same period of the prior year. The increase was primarily due to an increase in demand for uninsured products and services in the Company's Canadian operations and demand for the Company’s information products.

Current wording

Information and other revenues were $264.3 million and $500.3 million for the three and six months ended June 30, 2025, respectively, increases of $23.4 million, or 9.7%, and $42.2 million, or 9.2%, when compared with the respective periods of the prior year. The increases were primarily due to an increase in demand for uninsured products and services in the Company's Canadian operations and demand for the Company’s information products.

Previous wording

Net investment income totaled $137.7 million for the three months ended March 31, 2025, an increase of $21.0 million, or 18.0%, when compared with the same period of the prior year. The increase in investment income was primarily driven by an increase in interest income from the Company’s investment portfolio.

Current wording

Net investment income totaled $147.1 million and $284.8 million for the three and six months ended June 30, 2025, respectively, increases of $21.4 million, or 17.0%, and $42.4 million, or 17.5%, when compared with the respective periods of the prior year. The increases were primarily driven by increases in interest income from the Company’s investment portfolio.

Previous wording

Net investment gains/losses totaled losses of $3.5 million and gains of $18.9 million for the three months ended March 31, 2025 and 2024, respectively. The losses for the three months ended March 31, 2025 were primarily attributable to asset impairments. The gains for the three months ended March 31, 2024 were primarily attributable to changes in the fair values of marketable equity securities, partially offset by losses recognized on sales of debt securities.

Current wording

Net investment losses of $5.4 million and $8.9 million for the three and six months ended June 30, 2025, respectively, were primarily attributable to asset impairments totaling $35.5 million, which were partially offset by changes in the fair values of marketable equity securities. Net investment gains of $6.0 million and $24.9 million for the three and six months ended June 30, 2024, respectively, were primarily attributable to changes in the fair values of marketable equity securities, partially offset by losses recognized on sales of debt securities.

Previous wording

Personnel costs were $484.8 million for the three months ended March 31, 2025, an increase of $32.3 million, or 7.1%, when compared with the same period of the prior year. The increase was primarily attributable to higher incentive compensation expense due to higher revenue and profitability, and higher share-based compensation, salary and severance expenses.

Current wording

Personnel costs were $523.0 million and $1.0 billion for the three and six months ended June 30, 2025, respectively, increases of $37.4 million, or 7.7%, and $69.7 million, or 7.4%, when compared with the respective periods of the prior year. The increases were primarily attributable to higher incentive compensation expense due to higher revenue and profitability, and higher salary, employee benefits, payroll tax, severance and share-based compensation expense.

Previous wording

Agents retained $525.5 million of title premiums generated by agency operations for the three months ended March 31, 2025, which compares with $447.8 million for the same period of the prior year. The percentage of title premiums retained by agents was 80.3% and 79.4% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Agents retained $573.5 million and $1.1 billion of title premiums generated by agency operations for the three and six months ended June 30, 2025, respectively, which compares with $492.2 million and $940.0 million for the respective periods of the prior year. The percentage of title premiums retained by agents was 80.0% and 80.2% for the three and six months ended June 30, 2025, respectively, compared to 79.9% and 79.7% for the respective periods of the prior year.

Previous wording

Other operating expenses were $246.4 million for the three months ended March 31, 2025, an increase of $12.7 million, or 5.4%, when compared with the same period of the prior year. The increase was primarily due to higher production expenses on higher volumes, increases in software expense, legal expense, travel expense and increases across various other operating expenses. These increases were partially offset by a credit related to the release of a $5.7 million acquisition-related incentive obligation in the current year and the non-recurrence of a prior year out-of-period adjustment that totaled $6.2 million.

Current wording

Other operating expenses were $277.8 million and $524.2 million for the three and six months ended June 30, 2025, respectively, increases of $34.2 million, or 14.0%, and $46.9 million, or 9.8%, when compared with the respective periods of the prior year. The increases were primarily due to higher production expenses on higher volumes and increases in software, travel, professional services and other operating expenses. The increase for the six months ended June 30, 2025 was partially offset by a credit related to the release of a $5.7 million acquisition-related incentive obligation in the current year and also reflects the non-recurrence of a prior year out-of-period adjustment that totaled $6.2 million.

Previous wording

The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was 3.0% for the three months ended March 31, 2025 and 2024. The 3.0% loss provision rate for the three months ended March 31, 2025 reflects an ultimate loss rate of 3.75% for the 2025 policy year and reserve releases of 0.75%, or $8.4 million for prior policy years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2025. The 3.0% loss provision rate for the three months ended March 31, 2024 reflected an ultimate loss rate of 3.75% for the 2024 policy year and reserve releases of 0.75%, or $7.3 million for prior policy years, all based on title insurance premiums and escrow fees for the three months ended March 31, 2024.

Current wording

The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was 3.0% for the three and six months ended June 30, 2025 and 2024. The 3.0% loss provision rate for the three and six months ended June 30, 2025 reflects an ultimate loss rate of 3.75% for the 2025 policy year and reserve releases of 0.75%, or $9.9 million and $18.3 million, respectively, for prior policy years, all based on title insurance premiums and escrow fees for the three and six months ended June 30, 2025. The 3.0% loss provision rate for the three and six months ended June 30, 2024 reflected an ultimate loss rate of 3.75% for the 2024 policy year and reserve releases of 0.75%, or $8.6 million and $15.9 million, respectively, for prior policy years, all based on title insurance premiums and escrow fees for the three and six months ended June 30, 2024.

Previous wording

Depreciation and amortization expense was $51.2 million for the three months ended March 31, 2025, an increase of $2.4 million, or 4.9%, when compared with the same period of the prior year. The increase was primarily due to higher amortization of capitalized software from recently deployed digital settlement products.

Current wording

Depreciation and amortization expense was $51.6 million and $102.8 million for the three and six months ended June 30, 2025, respectively, increases of $0.7 million, or 1.4%, and $3.1 million, or 3.1%, when compared with the respective periods of the prior year. The increases were primarily due to higher amortization of capitalized software from recently deployed digital settlement products.

Previous wording

Premium taxes were $16.3 million for the three months ended March 31, 2025, an increase of $3.4 million, or 26.4%, when compared with the same period of the prior year. Premium taxes as a percentage of title insurance premiums and escrow fees were 1.5% and 1.3% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Premium taxes were $18.0 million and $34.3 million for the three and six months ended June 30, 2025, respectively, increases of $3.7 million, or 25.9%, and $7.1 million, or 26.1%, when compared with the respective periods of the prior year. Premium taxes as a percentage of title insurance premiums and escrow fees were 1.4% for the three and six months ended June 30, 2025 and 1.2% and 1.3% for the three and six months ended June 30, 2024, respectively.

Previous wording

Interest expense was $20.0 million for the three months ended March 31, 2025, a decrease of $2.4 million, or 10.7%, when compared with the same period of the prior year. The decrease was primarily attributable to lower interest expense in the Company’s warehouse lending business.

Current wording

Interest expense was $22.8 million and $42.8 million for the three and six months ended June 30, 2025, respectively, decreases of $0.6 million, or 2.6%, and $3.0 million, or 6.6%, when compared with the respective periods of the prior year. The decreases were primarily attributable to lower interest expense in the Company’s warehouse lending business.

Previous wording

Pretax margins for the title insurance business reflect the high cost of performing the essential services required before insuring title, whereas the corresponding revenues are subject to regulatory and competitive pricing restraints. Due to the relatively high proportion of fixed costs in the title insurance business, pretax margins generally improve as closed order volumes increase. Pretax margins for the segment are also impacted by (1) net investment income and net investment gains or losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity and (3) the percentage of title insurance premiums generated by agency operations as margins from direct operations are generally higher than from agency operations due primarily to the large portion of the premium that is retained by the agent. The title insurance and services segment recorded pretax margins of 7.2% and 5.5% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Pretax margins for the segment are also impacted by (1) net investment income and net investment gains or losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity and (3) the percentage of title insurance premiums generated by agency operations as margins from direct operations are generally higher than from agency operations due primarily to the large portion of the premium that is retained by the agent. The title insurance and services segment recorded pretax margins of 12.6% and 10.1% for the three and six months ended June 30, 2025, respectively, compared with 11.7% and 8.8% in the respective periods of the prior year.

Previous wording

Direct premiums were $101.6 million for the three months ended March 31, 2025, an increase of $3.9 million, or 4.0%, when compared with the same period of the prior year. The increase was primarily attributable to an increase in the average price per policy.

Current wording

Direct premiums were $103.7 million and $205.3 million for the three and six months ended June 30, 2025, respectively, increases of $4.1 million, or 4.1%, and $8.0 million, or 4.1%, when compared with the respective periods of the prior year. The increases were primarily attributable to increases in the average price per policy.

Previous wording

Personnel costs and other operating expenses totaled $43.0 million for the three months ended March 31, 2025, an increase of $1.1 million, or 2.6%, when compared with the same period of the prior year. The increase was primarily attributable to higher marketing and incentive compensation expense.

Current wording

Personnel costs and other operating expenses totaled $42.6 million and $85.6 million for the three and six months ended June 30, 2025, respectively, increases of $0.2 million, or 0.5%, and $1.3 million, or 1.5%, when compared with the respective periods of the prior year. The increases were primarily attributable to higher salary and marketing expenses.

Previous wording

The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 37.1% and 41.7% for the three months ended March 31, 2025 and 2024, respectively. The decrease in the claims rate was primarily attributable to lower claims severity and volume.

Current wording

The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 41.3% and 39.2% for the three and six months ended June 30, 2025, respectively, compared with 45.8% and 43.7% for the respective periods of the prior year. The decrease in the claims rate for three months ended June 30, 2025 was primarily attributable to lower claims frequency while the decrease in the claims rate for the six months ended June 30, 2025 was attributable to lower claims frequency and severity.

Previous wording

A large part of the revenues for the home warranty segment are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of the provision for losses, the majority of the expenses for this segment are variable in nature and, therefore, generally fluctuate with revenue. Accordingly, pretax margins (before loss expense) are relatively constant, although, as a result of some fixed expenses, profit margins (before loss expense) should nominally improve as premium revenues increase. Pretax margins are also impacted by net investment income and net investment gains or losses, which may not move in the same direction as premium revenues. The home warranty segment recorded pretax margins of 22.9% and 19.3% for the three months ended March 31, 2025 and 2024, respectively.

Current wording

A large portion of the revenues for the home warranty segment are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of the provision for losses, the majority of the expenses for this segment are variable in nature and, therefore, generally fluctuate with revenue. Accordingly, pretax margins (before loss expense) are relatively constant, although, as a result of some fixed expenses, profit margins (before loss expense) should nominally improve as premium revenues increase. Pretax margins are also impacted by net investment income and net investment gains or losses, which may not move in the same direction as premium revenues. The home warranty segment recorded pretax margins of 20.2% and 21.6% for the three and six months ended June 30, 2025, respectively, compared with 15.4% and 17.4% in the respective periods of the prior year.

Previous wording

Net investment income/loss totaled losses of $3.4 million and income of $10.7 million for the three months ended March 31, 2025 and 2024, respectively. The change in net investment income/loss was primarily attributable to fluctuations in earnings on investments associated with the Company’s deferred compensation plan.

Current wording

Net investment income totaled $12.0 million and $8.6 million for the three and six months ended June 30, 2025, respectively, compared with $3.7 million and $14.4 million in the respective periods of the prior year. The changes in net investment income/loss were primarily attributable to fluctuations in earnings on investments associated with the Company’s deferred compensation plan.

Previous wording

Personnel costs and other operating expenses totaled $10.9 million and $22.5 million for the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily attributable to lower returns on participant investments within the Company’s deferred compensation plan in the current year.

Current wording

Personnel costs and other operating expenses totaled $37.0 million and $47.9 million for the three and six months ended June 30, 2025, respectively, compared with $14.6 million and $37.1 million for the respective periods of the prior year. The increases for the three and six months ended June 30, 2025 were primarily attributable to higher severance and share-based compensation expense and, for the three months ended June 30, 2025, also due to higher returns on participant investments within the Company’s deferred compensation plan.

Previous wording

Interest expense totaled $15.2 million and $12.5 million for the three months ended March 31, 2025 and 2024, respectively. The increase was primarily attributable to additional interest on the Company's $450.0 million 5.45% senior unsecured notes issued in September 2024, partially offset by a reduction in interest on the Company's $300.0 million 4.60% senior unsecured notes, repaid upon maturity, in November 2024.

Current wording

Interest expense totaled $15.2 million and $30.4 million for the three and six months ended June 30, 2025, respectively, increases of $2.8 million, or 22.6%, and $5.5 million, or 22.1%, when compared with the respective periods of the prior year. The increases were primarily attributable to additional interest on the Company's $450.0 million 5.45% senior unsecured notes issued in September 2024, partially offset by a reduction in interest on the Company's $300.0 million 4.60% senior unsecured notes, repaid upon maturity, in November 2024.

Previous wording

The Company’s inter-segment eliminations were not material for the three months ended March 31, 2025 and 2024.

Current wording

The Company’s inter-segment eliminations were not material for the three and six months ended June 30, 2025 and 2024.

Previous wording

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 22.6% and 19.9% for the three months ended March 31, 2025 and 2024, respectively. The differences in the effective tax rates are primarily due to the impact on state income taxes resulting from the relative proportion of income derived from the Company’s insurance and non-insurance businesses. In addition, the effective income tax rate for 2024 reflects tax benefits related to a state tax matter from prior years.

Current wording

The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 24.6% and 24.0% for the three and six months ended June 30, 2025, respectively, compared with 23.2% and 22.3% for the respective periods of the prior year. The differences in the effective tax rates are primarily due to the impact on state income taxes resulting from the relative proportion of income derived from the Company’s insurance and non-insurance businesses as well as permanent differences between amounts reported for financial statement purposes and amounts reported for income tax purposes. In addition, the effective income tax rates for 2024 reflect tax benefits related to a state tax matter from prior years.

Previous wording

Cash requirements. The Company generates cash primarily from sales of its products and services and from investment income. The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments and loans in private companies and repurchases of its common stock. Management forecasts the cash needs of the holding company and its primary subsidiaries and regularly reviews their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts. Based on the Company’s ability to generate cash flows from operations, its liquid-asset position and amounts available on its revolving credit facility, management believes that its resources are sufficient to satisfy its anticipated operational cash requirements and obligations for at least the next twelve months.

Current wording

Cash requirements. The Company generates cash primarily from sales of its products and services and from investment income. The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments in and loans to private companies and repurchases of its common stock. Management forecasts the cash needs of the holding company and its primary subsidiaries and regularly reviews their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying such forecasts. Based on the Company’s ability to generate cash flows from operations, its liquid-asset position and amounts available on its revolving credit facility, management believes that its resources are sufficient to satisfy its anticipated operational cash requirements and obligations for at least the next twelve months.

Previous wording

Cash used for operating activities totaled $52.8 million and cash provided by operating activities totaled $69.3 million after claim payments, net of recoveries, of $76.3 million and $91.6 million for the three months ended March 31, 2025 and 2024, respectively. The principal nonoperating uses of cash and cash equivalents for the three months ended March 31, 2025 and 2024 were advances and repayments related to secured financing transactions, purchases of debt and equity securities, dividends to common stockholders and capital expenditures. Principal nonoperating uses of cash and cash equivalents also included repurchases of company common shares for the three months ended March 31, 2025 and decreases in deposits at the Company's banking operations for the three months ended March 31, 2024. The principal nonoperating sources of cash and cash equivalents for the three months ended March 31, 2025 and 2024 were borrowings and collections related to secured financing transactions, proceeds from the sales and maturities of debt and equity securities and, for the three months ended March 31, 2025, increases in the deposit balances at the Company’s banking operations. The net effect of all activities on cash and cash equivalents was an increase of $327.0 million and a decrease of $2.1 billion for the three months ended March 31, 2025 and 2024, respectively.

Current wording

Cash provided by operating activities totaled $309.0 million and $336.0 million for the six months ended June 30, 2025 and 2024, respectively, after claim payments, net of recoveries, of $164.5 million and $179.4 million, respectively. The principal nonoperating uses of cash and cash equivalents for the six months ended June 30, 2025 and 2024 were advances and repayments related to secured financing transactions, purchases of debt and equity securities, dividends to common stockholders, capital expenditures and repurchases of company common shares. Principal nonoperating uses of cash and cash equivalents also included decreases in deposits at the Company's banking operations for the six months ended June 30, 2024. The principal nonoperating sources of cash and cash equivalents for the six months ended June 30, 2025 and 2024 were borrowings and collections related to secured financing transactions, proceeds from the sales and maturities of debt and equity securities and, for the six months ended June 30, 2025, increases in the deposit balances at the Company’s banking operations. The net effect of all activities on cash and cash equivalents was an increase of $313.1 million and a decrease of $1.6 billion for the six months ended June 30, 2025 and 2024, respectively.

Previous wording

The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In March 2025, the Company paid a first quarter cash dividend of 54 cents per common share. Management expects that the Company will continue to pay quarterly cash dividends at or above the current level. The timing, declaration and payment of future dividends, however, falls within the discretion of the Company’s board of directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of the Company’s businesses, restrictions imposed by applicable law and any other factors the board of directors deems relevant from time to time.

Current wording

The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In June 2025, the Company paid a second quarter cash dividend of 54 cents per common share. Management expects that the Company will continue to pay quarterly cash dividends at or above the current level. The timing, declaration and payment of future dividends, however, falls within the discretion of the Company’s board of directors and will depend upon many factors, including the Company’s financial condition and earnings, the capital requirements of the Company’s businesses, restrictions imposed by applicable law and any other factors the board of directors deems relevant from time to time.

Previous wording

The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $117.2 million remained as of March 31, 2025. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2025, the Company repurchased and retired 0.4 million shares of its common stock for a total purchase price of $28.2 million and, as of March 31, 2025, the Company has repurchased and retired 5.2 million shares of its common stock under the current authorization for a total purchase price of $282.8 million.

Current wording

In July 2025, the Company’s board of directors approved a new share repurchase plan which authorizes the repurchase of up to $300 million of the Company’s common stock and terminated its prior share repurchase plan. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions. During the six months ended June 30, 2025, the Company repurchased and retired 1.5 million shares of its common stock for a total purchase price of $88.7 million and, as of June 30, 2025, the Company has repurchased and retired 6.2 million shares of its common stock under the previous authorization for a total purchase price of $343.3 million.

Previous wording

Holding Company. First American Financial Corporation is a holding company that conducts all of its operations through its subsidiaries. The holding company’s current cash requirements include payments of principal and interest on its debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses. The holding company is dependent upon dividends and other payments from its operating subsidiaries to meet its cash requirements. The Company’s target is to maintain a cash balance at the holding company equal to at least twelve months of estimated cash requirements. At certain points in time, the actual cash balance at the holding company may vary from this target due to, among other factors, the timing and amount of cash payments made and dividend payments received. Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available to the holding company is limited, principally for the protection of policyholders. As of March 31, 2025, under such regulations, the maximum amount available to the holding company from its insurance subsidiaries for the remainder of 2025, without prior approval from applicable regulators, was dividends of $535.0 million and loans and advances of $114.2 million. However, the timing and amount of dividends paid by the Company’s insurance subsidiaries to the holding company falls within the discretion of each insurance subsidiary’s board of directors and will depend upon many factors, including the level of total statutory capital and surplus required to support minimum financial strength ratings by certain rating agencies. Such restrictions have not had, nor are they expected to have, an impact on the holding company’s ability to meet its cash obligations.

Current wording

Holding Company. First American Financial Corporation is a holding company that conducts all of its operations through its subsidiaries. The holding company’s current cash requirements include payments of principal and interest on its debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses. The holding company is dependent upon dividends and other payments from its operating subsidiaries to meet its cash requirements. The Company’s target is to maintain a cash balance at the holding company equal to at least twelve months of estimated cash requirements. At certain points in time, the actual cash balance at the holding company may vary from this target due to, among other factors, the timing and amount of cash payments made and dividend payments received. Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available to the holding company is limited, principally for the protection of policyholders. As of June 30, 2025, under such regulations, the maximum amount available to the holding company from its insurance subsidiaries for the remainder of 2025, without prior approval from applicable regulators, was dividends of $435.0 million and loans and advances of $114.2 million. However, the timing and amount of dividends paid by the Company’s insurance subsidiaries to the holding company falls within the discretion of each insurance subsidiary’s board of directors and will depend upon many factors, including the level of total statutory capital and surplus required to support minimum financial strength ratings by certain rating agencies. Such restrictions have not had, nor are they expected to have, an impact on the holding company’s ability to meet its cash obligations.

Previous wording

As of March 31, 2025, the holding company’s sources of liquidity included $101.1 million of cash and cash equivalents and $900.0 million available on the Company’s revolving credit facility. Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months.

Current wording

As of June 30, 2025, the holding company’s sources of liquidity included $114.2 million of cash and cash equivalents and $900.0 million available on the Company’s revolving credit facility. Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months.

Previous wording

FirstFunding, Inc., a specialized warehouse lender to correspondent mortgage lenders, maintains secured warehouse lending facilities with several banking institutions. At March 31, 2025, outstanding borrowings under these facilities totaled $735.8 million.

Current wording

FirstFunding, Inc., a specialized warehouse lender to correspondent mortgage lenders, maintains secured warehouse lending facilities with several banking institutions. At June 30, 2025, outstanding borrowings under these facilities totaled $883.8 million.

Previous wording

The Company’s debt to capitalization ratios were 31.2% and 30.8% at March 31, 2025 and December 31, 2024, respectively. The Company’s adjusted debt to capitalization ratio, excluding secured financings payable of $735.8 million and $643.8 million and accumulated other comprehensive loss of $399.8 million and $496.4 million at March 31, 2025 and December 31, 2024, was 22.1% and 22.2%, respectively.

Current wording

The Company’s debt to capitalization ratios were 32.1% and 30.8% at June 30, 2025 and December 31, 2024, respectively. The Company’s adjusted debt to capitalization ratio, excluding secured financings payable of $883.8 million and $643.8 million at June 30, 2025 and December 31, 2024, was 23.1% and 23.9%, respectively.

Previous wording

Off-balance sheet arrangements. The Company administers escrow deposits as a service to customers in its direct title operations. Escrow deposits totaled $9.8 billion and $8.9 billion at March 31, 2025 and December 31, 2024, respectively, of which $4.3 billion and $4.0 billion, respectively, were held at FA Trust. The remaining 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 condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets.

Current wording

Off-balance sheet arrangements. The Company administers escrow deposits as a service to customers in its direct title operations. Escrow deposits totaled $10.7 billion and $8.9 billion at June 30, 2025 and December 31, 2024, respectively, of which $4.5 billion and $4.0 billion, respectively, were held at FA Trust. The remaining 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 condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets.

Previous wording

Trust assets administered by FA Trust totaled $4.9 billion and $4.8 billion at March 31, 2025 and December 31, 2024, respectively, of which $193.2 million and $169.4 million, respectively, were held at FA Trust. The remaining trust assets were held at third-party financial institutions. Trust assets administered by FA Trust and held at third-party institutions are fiduciary client assets. As such, these trust assets are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. The Company could be held contingently liable if FA Trust were to breach any of its fiduciary duties.

Current wording

Trust assets administered by FA Trust totaled $4.9 billion and $4.8 billion at June 30, 2025 and December 31, 2024, respectively, of which $150.3 million and $169.4 million, respectively, were held at FA Trust. The remaining trust assets were held at third-party financial institutions. Trust assets administered by FA Trust and held at third-party institutions are fiduciary client assets. Trust assets held at third-party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. The Company could be held contingently liable if FA Trust were to breach any of its fiduciary duties.

Previous wording

The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37. As a facilitator and intermediary, the Company holds the proceeds from sales transactions and takes temporary title to property identified by the customer to be acquired with such proceeds. Upon the completion of each such exchange, the identified property is transferred to the customer or, if the exchange does not take place, an amount equal to the sales proceeds or, in the case of a reverse exchange, title to the property held by the Company is transferred to the customer. Like-kind exchange funds administered by the Company totaled $1.8 billion and $2.3 billion at March 31, 2025 and December 31, 2024, respectively. The like-kind exchange deposits are held at third-party financial institutions and, due to the structure utilized to facilitate these transactions, the proceeds and property are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable to the customer for the transfers of property, disbursements of proceeds and the returns on such proceeds.

Current wording

The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37. As a facilitator and intermediary, the Company holds the proceeds from sales transactions and takes temporary title to property identified by the customer to be acquired with such proceeds. Upon the completion of each such exchange, the identified property is transferred to the customer or, if the exchange does not take place, an amount equal to the sales proceeds or, in the case of a reverse exchange, title to the property held by the Company is transferred to the customer. Like-kind exchange funds administered by the Company totaled $2.3 billion at June 30, 2025 and December 31, 2024. The like-kind exchange deposits are held at third-party financial institutions and, due to the structure utilized to facilitate these transactions, the proceeds and property are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable to the customer for the transfers of property, disbursements of proceeds and the returns on such proceeds.

Previous wording

In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $1.1 billion and $901.0 million at March 31, 2025 and December 31, 2024, respectively, of which $764.7 million and $606.5 million, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets. In connection with certain accounts, the Company has ongoing programs for realizing economic benefits with various financial institutions whereby it earns economic benefits either as income or as a reduction in expense.

Current wording

In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $1.3 billion and $901.0 million at June 30, 2025 and December 31, 2024, respectively, of which $908.6 million and $606.5 million, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Cash deposits held at third-party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying condensed consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets. In connection with certain accounts, the Company has ongoing programs for realizing economic benefits with various financial institutions whereby it earns economic benefits either as income or as a reduction in expense.