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First American Financial Corp. – ‘10-K’ for 12/31/21

On:  Thursday, 2/17/22, at 3:46pm ET   ·   For:  12/31/21   ·   Accession #:  1564590-22-5550   ·   File #:  1-34580

Previous ‘10-K’:  ‘10-K’ on 2/17/21 for 12/31/20   ·   Next:  ‘10-K’ on 2/15/23 for 12/31/22   ·   Latest:  ‘10-K’ on 2/21/24 for 12/31/23   ·   22 References:   By:  First American Financial Corp. – Latest ‘10-K’ on 2/21/24 for 12/31/23 By:  First American Financial Corp. – Next ‘10-K’ on 2/15/23 for 12/31/22 By:  First American Financial Corp. – ‘S-3ASR’ on 3/1/22 To:  First American Financial Corp. – ‘8-K’ on 1/21/22 for 1/19/22 To:  First American Financial Corp. – ‘8-K’ on / for 8/3/21 To:  First American Financial Corp. – Previous ‘10-K’ on 2/17/21 for 12/31/20 To:  First American Financial Corp. – ‘8-K’ on / for 5/15/20 To:  First American Financial Corp. – ‘DEF 14A’ on 3/31/20 for 5/5/20 To:  First American Financial Corp. – ‘10-K’ on 2/18/20 for 12/31/19 To:  First American Financial Corp. – ‘10-Q’ on 7/25/19 for 6/30/19 To:  First American Financial Corp. – ‘10-K’ on 2/20/19 for 12/31/18 To:  First American Financial Corp. – ‘10-K’ on 2/16/18 for 12/31/17 To:  First American Financial Corp. – ‘10-Q’ on 7/27/17 for 6/30/17 To:  First American Financial Corp. – ‘10-Q’ on 7/23/15 for 6/30/15 To:  First American Financial Corp. – ‘10-K’ on 2/23/15 for 12/31/14 To:  First American Financial Corp. – ‘8-K’ on 11/10/14 for 11/5/14 To:  First American Financial Corp. – ‘8-K’ on / for 1/29/13 To:  First American Financial Corp. – ‘S-3ASR’ on 1/24/13 To:  First American Financial Corp. – ‘10-K’ on 2/27/12 for 12/31/11 To:  First American Financial Corp. – ‘10-K’ on 3/1/11 for 12/31/10 To:  First American Financial Corp. – ‘10-Q’ on 11/1/10 for 9/30/10 To:  First American Financial Corp. – ‘8-K’ on 6/1/10 for 5/27/10 

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/17/22  First American Financial Corp.    10-K       12/31/21  159:26M                                    ActiveDisclosure/FA

Document/Exhibit                   Description                      Pages   Size 

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 8: EX-10.10    Material Contract                                   HTML     89K 
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10: EX-23       Consent of Expert or Counsel                        HTML     41K 
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14: EX-32.B     Certification -- §906 - SOA'02                      HTML     44K 
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21: R2          Consolidated Balance Sheets                         HTML    172K 
22: R3          Consolidated Balance Sheets (Parenthetical)         HTML     62K 
23: R4          Consolidated Statements of Income                   HTML    144K 
24: R5          Consolidated Statements of Income (Parenthetical)   HTML     44K 
25: R6          Consolidated Statements of Comprehensive Income     HTML     80K 
26: R7          Consolidated Statements of Equity                   HTML    108K 
27: R8          Consolidated Statements of Cash Flows               HTML    172K 
28: R9          Consolidated Statements of Cash Flows               HTML     43K 
                (Parenthetical)                                                  
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                Policies                                                         
30: R11         Exit of Property and Casualty Insurance Business    HTML     45K 
31: R12         Statutory Restrictions on Investments and           HTML     47K 
                Stockholders' Equity                                             
32: R13         Debt Securities                                     HTML    512K 
33: R14         Equity Securities                                   HTML    105K 
34: R15         Allowance for Credit Losses - Accounts Receivable   HTML     57K 
35: R16         Property and Equipment                              HTML     62K 
36: R17         Leases                                              HTML    147K 
37: R18         Goodwill                                            HTML     93K 
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39: R20         Deposits                                            HTML     63K 
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                Claims                                                           
41: R22         Notes and Contracts Payable                         HTML     79K 
42: R23         Net Investment Income                               HTML     73K 
43: R24         Income Taxes                                        HTML    187K 
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45: R26         Employee Benefit Plans                              HTML    145K 
46: R27         Fair Value Measurements                             HTML    302K 
47: R28         Share-Based Compensation Plans                      HTML     70K 
48: R29         Stockholders' Equity                                HTML     48K 
49: R30         Accumulated Other Comprehensive Income (Loss)       HTML    281K 
                ("Aoci")                                                         
50: R31         Litigation and Regulatory Contingencies             HTML     49K 
51: R32         Business Combinations                               HTML     45K 
52: R33         Segment Financial Information                       HTML    233K 
53: R34         Subsequent Events                                   HTML     44K 
54: R35         Summary Of Investments-Other Than Investments In    HTML    108K 
                Related Parties                                                  
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56: R37         Supplementary Insurance Information                 HTML    182K 
57: R38         Reinsurance                                         HTML     86K 
58: R39         Valuation And Qualifying Accounts                   HTML    161K 
59: R40         Basis of Presentation and Significant Accounting    HTML    193K 
                Policies (Policies)                                              
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61: R42         Equity Securities (Tables)                          HTML    106K 
62: R43         Allowance for Credit Losses - Accounts Receivable   HTML     56K 
                (Tables)                                                         
63: R44         Property and Equipment (Tables)                     HTML     61K 
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65: R46         Goodwill (Tables)                                   HTML     93K 
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68: R49         Reserve for Known and Incurred But Not Reported     HTML    324K 
                Claims (Tables)                                                  
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70: R51         Net Investment Income (Tables)                      HTML     74K 
71: R52         Income Taxes (Tables)                               HTML    184K 
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73: R54         Employee Benefit Plans (Tables)                     HTML    147K 
74: R55         Fair Value Measurements (Tables)                    HTML    289K 
75: R56         Share-Based Compensation Plans (Tables)             HTML     70K 
76: R57         Accumulated Other Comprehensive Income (Loss)       HTML    284K 
                ("Aoci") (Tables)                                                
77: R58         Segment Financial Information (Tables)              HTML    233K 
78: R59         Basis of Presentation and Significant Accounting    HTML    144K 
                Policies (Narrative) (Detail)                                    
79: R60         Exit of Property and Casualty Insurance Business -  HTML     50K 
                (Narrative) (Details)                                            
80: R61         Statutory Restrictions on Investments and           HTML     57K 
                Stockholders' Equity (Narrative) (Detail)                        
81: R62         Debt Securities (Investments in Debt Securities,    HTML     75K 
                Classified as Available-For-Sale) (Detail)                       
82: R63         Debt Securities (Sales of Debt Securities)          HTML     49K 
                (Narrative) (Detail)                                             
83: R64         Debt Securities (Gross Unrealized Losses on         HTML     88K 
                Investments in Debt Securities) (Detail)                         
84: R65         Debt Securities (Investments in Debt Securities by  HTML    114K 
                Contractual Maturity) (Detail)                                   
85: R66         Debt Securities (Composition of Debt Securities     HTML    103K 
                Portfolio by Credit Rating Agencies) (Detail)                    
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                Portfolio) (Narrative) (Detail)                                  
87: R68         Debt Securities (Composition of Debt Securities     HTML    104K 
                Portfolio in Unrealized Loss Position by Credit                  
                Rating Agencies) (Detail)                                        
88: R69         Debt Securities (Debt Securities in Unrealized      HTML     56K 
                Loss Position) (Narrative) (Detail)                              
89: R70         Equity Securities - (Summary of Investments in      HTML     50K 
                Equity Securities, by Classification) (Detail)                   
90: R71         Equity Securities - (Summary of Investments in      HTML     53K 
                Marketable Equity Securities) (Detail)                           
91: R72         Equity Securities (Narrative) (Detail)              HTML     65K 
92: R73         Equity Securities - (Summary of Investments in Non  HTML     50K 
                Marketable Equity Securities) (Detail)                           
93: R74         Allowance for Credit Losses - Summary of Allowance  HTML     49K 
                for Credit Losses on Accounts Receivables                        
                (Details)                                                        
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                Equipment) (Detail)                                              
95: R76         Leases - Summary of Lease Assets and Liabilities    HTML     59K 
                (Detail)                                                         
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                (Detail)                                                         
97: R78         Leases - Schedule of Future Minimum Lease Payments  HTML    100K 
                Under Operating and Finance Lease with                           
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98: R79         Leases - Schedule of Information Related to Lease   HTML     53K 
                Terms and Discount Rate (Detail)                                 
99: R80         Leases - Schedule of Cash Flow Information Related  HTML     51K 
                to Lease Liabilities (Detail)                                    
100: R81         Goodwill (Carrying Amount of Goodwill by            HTML     71K  
                Reportable Segment) (Detail)                                     
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                Intangible Assets (Detail)                                       
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103: R84         Other Intangible Assets - Estimated Amortization    HTML     53K  
                Expense for Finite-Lived Intangible Assets                       
                (Detail)                                                         
104: R85         Deposits (Escrow, Savings and Investment            HTML     54K  
                Certificate Accounts) (Detail)                                   
105: R86         Reserve for Known and Incurred but Not Reported     HTML     61K  
                Claims (Activity in Reserve for Known and Incurred               
                but Not Reported Claims) (Detail)                                
106: R87         Reserve for Known and Incurred but Not Reported     HTML     62K  
                Claims (Narrative) (Detail)                                      
107: R88         Reserve for Known and Incurred but Not Reported     HTML     63K  
                Claims (Summary of Loss Reserves) (Detail)                       
108: R89         Reserve for Known and Incurred but Not Reported     HTML    118K  
                Claims - Summary of Incurred and Paid Claims                     
                Development Net of Reinsurance (Detail)                          
109: R90         Reserve for Known and Incurred but Not Reported     HTML     53K  
                Claims - Reconciliation of the Net Incurred and                  
                Paid Claims Development Tables to the Liability                  
                for Claims and Claim Adjustment Expense (Detail)                 
110: R91         Reserve for Known and Incurred but Not Reported     HTML     64K  
                Claims - Schedule of Supplementary Information                   
                about Average Historical Claims (Detail)                         
111: R92         Notes and Contracts Payable (Schedule of Notes and  HTML     65K  
                Contracts Payable) (Detail)                                      
112: R93         Notes and Contracts Payable (Schedule of Notes and  HTML     73K  
                Contracts Payable) (Parenthetical) (Detail)                      
113: R94         Notes and Contracts Payable (Narrative) (Detail)    HTML     86K  
114: R95         Notes and Contracts Payable (Aggregate Annual       HTML     61K  
                Maturities of Notes and Contracts Payable)                       
                (Detail)                                                         
115: R96         Net Investment Income (Schedule of Net Investment   HTML     62K  
                Income) (Detail)                                                 
116: R97         Income Taxes (Narrative) (Detail)                   HTML     95K  
117: R98         Income Taxes - Summary of Tax Expenses (Detail)     HTML     68K  
118: R99         Income Taxes - Schedule of Effective Income Tax     HTML     77K  
                Rate Reconciliation (Detail)                                     
119: R100        Income Taxes - Net Deferred Tax Liability (Detail)  HTML     87K  
120: R101        Income Taxes - Changes In Unrecognized Tax          HTML     53K  
                Benefits (Detail)                                                
121: R102        Earnings Per Share (Schedule of Earnings Per        HTML     75K  
                Share) (Detail)                                                  
122: R103        Earnings Per Share (Narrative) (Detail)             HTML     46K  
123: R104        Employee Benefit Plans (Narrative) (Detail)         HTML     72K  
124: R105        Employee Benefit Plans (Principal Components of     HTML     55K  
                Employee Benefit Costs) (Detail)                                 
125: R106        Employee Benefit Plans (Company's Benefit           HTML     83K  
                Obligations and Funded Status) (Detail)                          
126: R107        Employee Benefit Plans (Net Periodic Benefit        HTML     54K  
                Costs) (Detail)                                                  
127: R108        Employee Benefit Plans (The Weighted-Average        HTML     49K  
                Discount Rate Assumptions Used to Determine Net                  
                Periodic Benefit Costs) (Detail)                                 
128: R109        Employee Benefit Plans (The Weighted-Average        HTML     45K  
                Discount Rate Assumptions Used to Determine the                  
                Projected Benefit Obligations) (Detail)                          
129: R110        Employee Benefit Plans (Benefit Payments) (Detail)  HTML     54K  
130: R111        Fair Value Measurements - Fair Value of Assets And  HTML    119K  
                Liabilities Measured on Recurring Basis (Details)                
131: R112        Fair Value Measurements (Narrative) (Details)       HTML     62K  
132: R113        Fair Value Measurements - Carrying Amounts and      HTML     84K  
                Estimated Fair Values of Financial Instruments Not               
                Measured at Fair Value (Details)                                 
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                (Detail)                                                         
134: R115        Share-Based Compensation (Costs Associated with     HTML     49K  
                Share-Based Compensation Plans) (Detail)                         
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                (Detail) - RSUs                                                  
136: R117        Stockholders' Equity (Narrative) (Detail)           HTML     53K  
137: R118        Accumulated Other Comprehensive Income (Loss)       HTML     94K  
                (AOCI) - Components of Accumulated Other                         
                Comprehensive Income (Loss) (Detail)                             
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                Other Comprehensive Income (Loss) Reclassification               
                Adjustments (Detail)                                             
139: R120        Accumulated Other Comprehensive Income (Loss) -     HTML     68K  
                Reclassifications Out of AOCI) (Detail)                          
140: R121        Business Combinations (Narrative) (Detail)          HTML     66K  
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                Selected Financial Information) (Detail)                         
142: R123        Segment Financial Information (Schedule of Total    HTML     59K  
                Revenues From External Customers And Long-Lived                  
                Assets) (Detail)                                                 
143: R124        Subsequent Events (Narrative) (Detail)              HTML     46K  
144: R125        Schedule I - Summary Of Investments - Other Than    HTML     82K  
                Investments In Related Parties (Detail)                          
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                Company (Detail)                                                 
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                Company (Parenthetical) (Detail)                                 
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                Parent Company (Detail)                                          
148: R129        Schedule II - Condensed Statements of               HTML     86K  
                Comprehensive Income Parent Company (Detail)                     
149: R130        Schedule II - Condensed Statements of Cash Flows    HTML     89K  
                Parent Company (Detail)                                          
150: R131        Schedule II - Notes to Condensed Financial          HTML     44K  
                Statements Parent Company (Detail)                               
151: R132        Schedule III - Balance Sheet Captions (Detail)      HTML     54K  
152: R133        Schedule III - Income Statement Captions (Detail)   HTML     76K  
153: R134        Schedule IV - Reinsurance (Detail)                  HTML     62K  
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oksee

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM  i 10-K

For the fiscal year ended  i December 31,  i 2021 / 

OR

For the transition period from              to             

Commission file number  i 001-34580

(Exact name of registrant as specified in its charter)

 i 1 First American Way,  i Santa Ana,  i California  i 92707-5913

(Address of principal executive offices) (Zip Code)

 i (714)  i 250-3000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     i Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐     i No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     i Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     i Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  i ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   i ☐    No  ☒

The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2021 was $ i 6,620,544,646.

On February 10, 2022, there were  i 109,336,889 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

 i Portions of the registrant’s definitive proxy statement with respect to the 2022 annual meeting of the stockholders are incorporated by reference in Part III of this report.  The definitive proxy statement or an amendment to this Form 10-K will be filed no later than 120 days after the close of registrant’s fiscal year.

FIRST AMERICAN FINANCIAL CORPORATION

AND SUBSIDIARY COMPANIES

INFORMATION INCLUDED IN REPORT

3

THIS ANNUAL REPORT ON FORM 10-K CONTAINS 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:

4

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.

5

PART I

The Company

First American Financial Corporation traces its heritage back to 1889. On June 1, 2010, its common stock was listed on the New York Stock Exchange under the ticker symbol “FAF.”  First American’s executive offices are located at 1 First American Way, Santa Ana, California 92707-5913 and its telephone number is (714) 250-3000.  

Unless otherwise indicated or otherwise required by the context, the terms “we,” “our,” “it,” “its,” “Company” and “First American” refer to First American Financial Corporation and its subsidiaries.

General

The Company, through its subsidiaries, is engaged in the business of providing title insurance, settlement services and other financial services and risk solutions through its title insurance and services segment and its specialty insurance segment.  The title insurance and services segment provides title insurance, closing and/or escrow services and similar or related services domestically and internationally in connection with residential and commercial real estate transactions.  The segment also provides products, services and solutions that are designed to mitigate risk in, or otherwise facilitate, real estate transactions.  Many of these products, services and solutions involve the use of real property-related data, including data derived from the Company’s proprietary databases.  In addition, the segment provides banking, trust, warehouse lending, mortgage subservicing and wealth management services.  The specialty insurance segment sells home warranty products and contains the remaining operations of our property and casualty insurance business that is being wound down.  In addition, our corporate segment consists of certain financing facilities, our venture investment portfolio and the corporate services that support our business operations.  The substantial majority of our business is dependent upon activity in the real estate and mortgage markets, which are cyclical and seasonal.  

Our strategy is to profitably grow our core title insurance and settlement services business, strengthen our enterprise through data and process advantage and manage and actively invest in complementary businesses where the Company has a strategic advantage.  We are focused on continued improvement of our customers’ experiences with our products, services and solutions, including through digital transformations, and on enhancing our services offered to our customers.  In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the customer experience and decrease risk, we are utilizing innovative technologies, processes and techniques in the creation of our products and services.  These efforts include streamlining the title and closing processes by converting certain manual processes into automated ones.  Part of our growth strategy involves acquiring companies that expand our market share, enhance our data capabilities, provide us with technological capabilities or complement our businesses.  Our growth strategy also involves making venture investments in companies within the real-estate industry and related industries, many of which offer technology-enabled products and services.  In addition to potential financial benefits, these venture investments are typically made to give us insight into potentially high-growth, innovative companies and to facilitate strategic partnerships.  We remain committed to efficiently managing our business to market conditions throughout business cycles and to deploying our capital to maximize stockholder returns.

Title Insurance and Services Segment

Our title insurance and services segment issues title insurance policies on residential and commercial property in the United States and offers similar or related products and services internationally.  This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust and wealth management services.  In 2021, 2020, and 2019, the Company derived 90.2%, 92.2% and 91.5%, of its consolidated revenues, respectively, from this segment.

Overview of Title Insurance Industry

In most instances in the United States, and in certain instances internationally, mortgage lenders and purchasers of real estate desire to be protected from loss or damage in the event of defects in the title of the subject property.  Title insurance is a means of providing such protection.

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Title Policies.    Title insurance policies insure the interests of owners or lenders against defects in the title to real property.  These defects include adverse ownership claims, liens, encumbrances or other matters affecting title.  Title insurance policies generally are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search of one or more of public records, maps, documents and prior title policies to ascertain the existence of easements, restrictions, rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property.  In certain limited instances, a visual inspection of the property is also made.  To facilitate the preparation of preliminary title reports and commitments, copies and/or abstracts of public records, maps, documents and prior title policies may be compiled and indexed to specific properties in an area.  This compilation is known as a “title plant.”

The beneficiaries of title insurance policies generally are real estate buyers and mortgage lenders.  A title insurance policy indemnifies the named insured and certain successors in interest against certain title defects, liens and encumbrances existing as of the date of the policy and not specifically excepted from its provisions.  The policy typically provides coverage for the real property mortgage lender in the amount of its outstanding mortgage loan balance and for the buyer in the amount of the purchase price of the property.  In some cases, the policy might provide insurance in a greater amount, or for automatic increases in coverage over time.  The potential for claims under a title insurance policy issued to a mortgage lender generally ceases upon repayment of the mortgage loan.  The potential for claims under a title insurance policy issued to a buyer generally ceases upon the sale or transfer of the insured property.

Before issuing title policies, title insurers typically seek to limit their risk of loss by accurately performing title searches and examinations and, in many instances, curing identified title defects.  Increasingly, title insurance policies are being underwritten utilizing automated decisioning tools based, in whole or in part, on alternative information sources.  These searches, examinations and curative efforts distinguish title insurers from other insurers, such as property and casualty insurers.  Whereas title insurers generally insure against losses arising out of circumstances existing as of the date of the policy, property and casualty insurers generally insure against losses arising out of events that occur subsequent to policy issuance.  As a result of these differences, title insurers typically experience relatively low claims, as a percentage of premiums, when compared to property and casualty insurers, but have relatively high expenses.  The primary expenses incurred by a title insurer pertain to sales, underwriting (including the costs associated with searching and examining title and with the curative process), information technology and administrative costs. Where the policy is issued by an agent, the premium retained by the agent is the primary expense for the insurer.

The Closing Process.    In the United States, title insurance is essential to the real estate closing process in most transactions involving real property mortgage lenders.  In a typical residential real estate sale transaction where title insurance is issued, a third party, such as a real estate broker or agent, lawyer or closer, orders the title insurance on behalf of an insured or in certain instances, such as with respect to a lender, the insured orders on its own behalf.  Once the order has been placed and a title insurance company or an agent has determined the current status of the title to the property to its satisfaction, the title insurer or agent prepares, issues and circulates a commitment or preliminary report.  The commitment or preliminary report identifies the conditions, exceptions and/or limitations that the title insurer intends to attach to the policy and identifies items appearing on the title that must be eliminated prior to closing.

In the United States, the closing or settlement function, sometimes called an escrow in the western states, is, depending on the local custom in the region, performed by a lawyer, an escrow company or a title insurance company or agent, generally referred to as a “closer.”  Once documentation has been prepared and signed, and any required mortgage lender payoff demands are obtained, the transaction closes.  The closer typically records the appropriate title documents and arranges the transfer of funds to pay off prior loans and extinguish the liens securing such loans.  Title policies are then issued, typically insuring the priority of the mortgage of the real property mortgage lender in the amount of its mortgage loan and the buyer in the amount of the purchase price.  Before a closing takes place, however, the title insurer or agent typically provides an update to the commitment to discover any adverse matters affecting title and, if any are found, works with the seller to eliminate them so that the title insurer or agent issues the title policy subject only to those exceptions to coverage which are acceptable to the title insurer, the buyer and the buyer’s lender.

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Issuing the Policy: Direct vs. Agency.    A title insurance policy can be issued directly by a title insurer or indirectly on behalf of a title insurer through agents, which usually operate independently of the title insurer and typically issue policies for more than one insurer.  Where the policy is issued by a title insurer, the search is performed by or on behalf of the title insurer, and the premium is collected and retained by the title insurer.  Where the policy is issued by an agent, the search is typically performed by or on behalf of the agent, and the agent collects, and retains a portion of, the premium.  The agent remits the remainder of the premium to the title insurer as compensation for the insurer bearing the risk of loss in the event a claim is made under the policy and for other services the insurer may provide.  The percentage of the premium retained by an agent varies by geography and from agent to agent.  A title insurer is obligated to pay title claims in accordance with the terms of its policies, regardless of whether it issues its policy directly or indirectly through an agent.  In addition, when a title insurer has issued a commitment to insure a particular transaction, it may be requested to issue a closing protection letter that protects a lender or borrower, or in some states also a seller, from a loss of funds, under certain conditions, caused by the actions of the title insurer or its agent.  When a loss to the title insurer occurs under a policy issued through an agent or a closing protection letter, under certain circumstances the title insurer may seek recovery of all or a portion of the loss from the agent or the agent’s errors and omissions insurance carrier.

Premiums.    The premium for title insurance is typically due and earned in full when the real estate transaction is closed.  Premiums generally are calculated with reference to the policy amount.  The premium charged by a title insurer or an agent is subject to regulation in most areas.  Such regulations vary from jurisdiction to jurisdiction.

Our Title Insurance Operations

Overview.    We conduct our title insurance and closing business through a network of direct operations and agents.  Through this network, we issue policies in the 49 states that permit the issuance of title insurance policies, the District of Columbia and certain United States territories. We also offer title insurance, closing services and similar or related products and services, either directly or through third parties in other countries, including Canada, the United Kingdom, Australia, South Korea and various other established and emerging markets as described in the “International Operations” section below.  

The substantial majority of our title insurance and closing business is dependent upon activity in the real estate and mortgage markets, which are cyclical and seasonal.  Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months and is sensitive to interest rates.  Residential refinance activity is not seasonal, but is generally correlated with changes in interest rates.  Commercial real estate volumes are less sensitive to changes in interest rates, but fluctuate based on local supply and demand conditions and financing availability and we typically see elevated activity towards the end of the year.  However, changes in general economic conditions in the United States and abroad, can cause fluctuations in these traditional patterns of real estate activity, and changes in the general economic conditions in a geography can cause fluctuations in these traditional patterns of real estate activity in that geography.

Distribution, Sales and Marketing.    We distribute our title insurance policies and related products and services through our direct and agent channels.  In our direct channel, the distribution of our policies and related products and services occurs through sales representatives located throughout the United States.  Title insurance policies issued, and other products and services delivered through, this channel are primarily delivered in connection with sales and refinances of residential and commercial real property.

Within the direct channel, our sales and marketing efforts are focused on the primary sources of business referrals.  For residential business, we generally market to real estate agents and brokers, mortgage brokers, real estate attorneys, mortgage originators, homebuilders and escrow service providers.  We also market directly to firms that purchase and sell residential real estate on a large-scale basis.  For refinance and default-related business for customers with centrally managed platforms, we market to mortgage originators, servicers and government-sponsored enterprises.  For the commercial business, we market primarily to commercial real estate principals, developers, and investors; real estate investment trusts; law firms; commercial lenders; life insurance companies; commercial brokers and mortgage brokers.  Our marketing efforts emphasize our product offerings, the quality and timeliness of our services, our financial strength, process and product innovation and our national presence.  We also provide educational information on our website and through other means to help consumers and others better understand our services, the homebuying/settlement process in general, and real estate market economic trends.

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In our agency channel, we issue policies in accordance with agreements with authorized agents.  These agreements typically state the conditions under which the agent is authorized to issue our title insurance policies.  The agency agreement also typically prescribes the circumstances under which the agent may be liable to us if a policy loss occurs, as well as the services we provide to the agent and the price for those services.  Those services vary by geography and from agent to agent.  We are continuing to seek to provide additional services to our agents, including banking services and closing-related services, in an effort to reduce risk and enhance relationships with our agents.  As is standard in our industry, our agents typically operate with a substantial degree of independence from us and typically act as agents for other title insurers.

Within the agency channel, our sales and marketing efforts are directed at the agents themselves and emphasize the quality and timeliness of our underwriting support, our financial strength and our agency-based product and service offerings, including product innovations.  Premium splits also are of importance in attracting and retaining agents.

International Operations.    We provide products and services in a number of countries outside of the United States, and our international operations accounted for approximately 5.4% of our title insurance and services segment revenues in 2021.  Today we have direct operations and a physical presence in several countries, including Canada, the United Kingdom, South Korea and Australia. While reliable data are not available, we believe that we have the largest market share for title insurance outside of the United States.  Our range of international products and services is designed to lower our clients’ risk profiles and reduce their operating costs through enhanced operational efficiencies.  In certain established markets, primarily British Commonwealth countries, we have combined title insurance with customized processing offerings to enhance the speed and efficiency of the mortgage and conveyancing processes.  In these markets we also offer products designed to mitigate risk and otherwise facilitate real estate transactions.

Our international operations present risks that may not exist to the same extent in our domestic operations, including those associated with differences in the nature of the products provided, the scope of coverage provided by those products and the manner in which risk is underwritten.  In jurisdictions where we have limited claims experience, it is more difficult to set prices and reserve rates.

Data and Title Plants.    Our title insurance business is heavily dependent on data.  Underwriting decisions require comprehensive and accurate data.  In an attempt to enhance efficiency and reduce risk, certain underwriting functions are increasingly being automated.  As discussed further in the Innovation and Intellectual Property section below, our ability to automate underwriting decisions has accelerated as we have improved the breadth and quality of our data assets and our analytic tools.  

Our title plants constitute one of our principal assets.  A title search is typically conducted by searching the abstracted information from public records or utilizing a title plant holding information abstracted from public records.  While public title records generally are indexed by reference to the names of the parties to a given recorded document, our title plants primarily arrange their records on a geographic basis.  Because of this difference, title plant data and records generally may be searched more efficiently.  Many of our title plants also index prior title insurance policies, adding to searching efficiency.  These title plants support not only our title insurance operations, but we also license this data to third parties, including competing title companies and agents.

Reserves for Claims and Losses.    We provide for losses associated with title insurance policies, closing protection letters and other risk-based products based upon our historical experience and other factors by a charge to expense when the related premium revenue is recognized.  The resulting reserve for incurred but not reported claims, together with the reserve for known claims, reflects management’s best estimate of the total costs required to settle all claims reported to us and claims incurred but not reported, and are considered to be adequate for such purpose.  Each period the reasonableness of the estimated reserves is assessed; if the estimate requires adjustment, such an adjustment is recorded.

Reinsurance and Coinsurance.    In certain circumstances we assume and cede title insurance risks through reinsurance. In reinsurance arrangements, the primary insurer retains a certain amount of risk under a policy and cedes the remainder of the risk under the policy to the reinsurer.  The primary insurer pays the reinsurer a premium in exchange for accepting this risk of loss.  The primary insurer generally remains liable to its insured for the total risk, but is reinsured for a portion of the total risk under the terms of the reinsurance agreement.  In addition to reinsurance arrangements involving other industry participants, we maintain a global treaty reinsurance program provided by a syndicate of highly rated reinsurers.  Subject to the treaty limits and certain other limitations, the program generally covers claims that arose while the program is in effect.

We also serve as a coinsurer in connection with certain commercial transactions.  In a coinsurance scenario, two or more insurers are selected by the insured and each coinsurer is liable for its specified percentage share of the total liability.

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Competition.    The business of providing title insurance and related products and services is highly competitive.  The number of competing companies and the size of such companies vary in the different areas in which we conduct business.  Generally, in areas of major real estate activity, such as metropolitan and suburban localities, we compete with many other title insurers and agents.  Our major nationwide competitors in our principal markets include Fidelity National Financial, Inc., Stewart Title Guaranty Company, Old Republic International Corporation and their affiliates.  In addition to these national competitors, other nationwide, regional and local competitors aggressively compete and collectively they have been gaining market share in certain markets in recent periods, including from the Company and other competitors.  Numerous agency operations throughout the country also provide aggressive competition.  We are currently the second largest provider of title insurance in the United States, based on the most recent American Land Title Association market share data.

We believe that competition for title insurance, closing services and related products and services is based primarily on service, quality, price, customer relationships and the ease of access and use of our products.  Customer service is an important competitive factor because parties to real estate transactions are usually concerned with time schedules and costs associated with delays in closing transactions.  In certain transactions, such as those involving commercial properties, financial strength and scope of coverage are also important.  In addition, we regularly evaluate our pricing and agent splits, and based on competitive, market and regulatory conditions and claims history, among other factors, adjust our prices and agent splits as and where appropriate.

Data and Analytics.    Our data and analytics business offers analytic solutions for title underwriting automation, fraud risk management, identity verification, compliance and valuation that are powered by our extensive collection of property information, ownership data and recorded documents.  These solutions enable our title insurance operations, lenders, other title companies and other real estate industry participants to make informed, and increasingly automated, decisions to manage workflow and auditing and compliance operations.

Trust, Wealth Management and Banking Services.    Our federal savings bank subsidiary offers trust, wealth management and deposit products and related services, including fund transfer services.  The bank does not originate loans.  As of December 31, 2021, the bank administered fiduciary and custody assets having a market value of $4.6 billion, which includes managed assets of $2.3 billion.  The bank’s balance sheet had assets of $7.4 billion, with deposits of $6.9 billion and stockholder’s equity of $490 million.  The bank’s deposits have traditionally consisted almost entirely of funds deposited by its affiliates, but increasingly the bank is seeking deposits from title agents that are not affiliates.  While the majority of the bank’s deposited funds are from third parties to be held in trust pending the closing of commercial and residential real estate transactions, the bank also maintains other deposits, including operating funds deposited by its affiliates.

Specialty Insurance Segment

Home Warranty.    Our home warranty business provides residential service contracts that cover residential systems, such as heating and air conditioning systems, and certain appliances against failures that occur as the result of normal usage during the coverage period.  Coverage is typically for one year and is renewable annually at the option of the contract holder and upon our approval.  Coverage and pricing typically vary by geographic region.  Fees for the warranties generally are paid at the closing of the home purchase or directly by the consumer.  In addition, under the contract, the holder is responsible for a service fee for each trade call.  First year warranties are marketed through real estate brokers and agents, and we also market directly to consumers.  We generally sell renewals directly to consumers.  Revenues associated with home warranties sold at the time of a home purchase are dependent upon activity in the residential purchase market, which is cyclical and seasonal.  Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months and is sensitive to interest rate fluctuations.  However, changes in general economic conditions in the United States and abroad, can cause fluctuations in this traditional pattern of activity, and changes in the general economic conditions in a geography can cause fluctuations in the traditional patterns of activity in that geography.  Our home warranty business currently operates in 35 states and the District of Columbia.

Property and Casualty Insurance.    Our property and casualty insurance business provides insurance coverage to residential homeowners and renters for liability losses and typical hazards such as fire, theft, vandalism and other types of property damage.  We initiated a plan in October 2020 to exit our property and casualty business. In January 2021, our property and casualty insurance subsidiaries entered into book transfer agreements with two third-party insurers and are seeking to non-renew policies that are not transferred.  Policies in force had declined by approximately 71% as of December 31, 2021 and we expect the transfer to be completed by the end of the third quarter of 2022.  We purchase reinsurance to limit risk associated with large losses from single events.

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Corporate Segment

Our corporate segment consists primarily of certain financing facilities, our venture investment portfolio and the corporate services that support our business operations.  Our venture investment portfolio consists primarily of investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and a similar investment that has begun trading publicly.  While we hope to realize financial benefits from these venture investments, we make and hold these investments primarily for strategic reasons.

Innovation and Intellectual Property

In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the customer experience and decrease risk, we are increasingly utilizing innovative technologies, processes and techniques in the creation of our products and services.  These efforts include streamlining and enhancing the closing process, which we believe improves the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication.  We are also deploying innovation solutions leveraging our bank to make the closing process more flexible.  We increasingly are employing advanced technologies to automate various internal processes, including processes related to the building, maintaining and updating of title plants and other data assets, as well as the search and examination of information in connection with the issuance of title insurance policies.

We strive to align our intellectual property strategy with our business strategy and our technology development efforts.  We rely on a combination of patents, trademarks, copyright and trade secret laws, non-disclosure agreements, contractual provisions and a system of internal safeguards to protect our intellectual property rights and proprietary information.  We have a number of patents issued and additional patent applications pending in the United States and internationally, including patents for title automation, loan risk assessment, online platforms, optical character recognition and data extraction.  We also believe that many of our brands have accumulated substantial goodwill in the marketplace.  In addition, we have developed a number of proprietary trade secrets that we believe provide us with a competitive advantage.

Human Capital Resources

As of December 31, 2021, the Company employed 22,233 employees, with 14,716 of them located in the United States and 7,517 outside of the U.S.  We strive to have a positive, collaborative culture that engages employees, as we believe engaged employees serve our customers well.  We believe this combination, along with the efficient operation of our business, ultimately benefits our stockholders.  As part of this effort, we participate in competitions that recognize the quality of our workplace, which competitions we believe provide a framework for improving, and insights for evaluating, our employee engagement efforts.  Moreover, receipt of awards in connection with those competitions facilitates our efforts to retain desired talent.  The success of our efforts is demonstrated through our inclusion on the Fortune 100 Best Companies to Work For® list in the United States for the last six years, the Best Workplaces™ in Canada list for the last seven years, as well as a number of similar lists in local or specialized areas.  In addition, we have been recognized on the Fortune® and Great Place to Work® list for Best Workplaces for Women for the sixth year in a row and we earned a top score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index for the fifth consecutive year.  We also have implemented many professional development programs to build and strengthen the skill set of our employees.  And, reflecting our perspective on the benefits of a diverse workforce, we have formed a Diversity, Equity and Inclusion Council, which is focused on the development of employee-centered actions to enhance the recruitment, engagement, development, and retention of diverse employees.

Regulation

Many of our subsidiaries are subject to extensive regulation by applicable domestic or foreign regulatory agencies.  The extent of such regulation varies based on the industry involved, the nature of the business conducted by the subsidiary (for example, licensed title insurers are subject to a heightened level of regulation compared to underwritten title companies or agencies), the subsidiary’s jurisdiction of organization and the jurisdictions in which it operates.  In addition, the Company is subject to regulation as an insurance holding company, a savings and loan holding company, a publicly-traded company, a Delaware corporation and a corporation that has its principal executive offices in California.

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Our domestic subsidiaries that operate in the title insurance industry or the property and casualty insurance industry are subject to regulation by state insurance regulators.  Each of our underwriters, or insurers, is regulated primarily by the insurance department or equivalent governmental body within the jurisdiction of its organization, which oversees compliance with the laws and regulations pertaining to such insurer.  For example, our primary title insurance underwriter, First American Title Insurance Company, is a Nebraska corporation and, accordingly, is primarily regulated by the Nebraska Department of Insurance.  Insurance regulations typically place limits on, among other matters, the ability of the insurer to pay dividends to its parent company or to enter into transactions with affiliates.  They also may require approval of the insurance commissioner prior to a third party directly or indirectly acquiring control of the insurer, which may make it difficult or prohibitive for a third party to acquire our Company.

In addition, our insurers are subject to the laws of other jurisdictions in which they transact business, which laws typically establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business; regulating trade practices; licensing agents; approving policy forms, accounting practices and financial practices; establishing requirements pertaining to reserves and capital and surplus as regards policyholders; requiring the deferral of a portion of all premiums in a reserve for the protection of policyholders and the segregation of investments in a corresponding amount; establishing parameters regarding suitable investments for reserves, capital and surplus; and approving rate schedules.  The manner in which rates are established or changed ranges from states which promulgate rates, to states where individual companies or associations of companies prepare rate filings which are submitted for approval, to a few states in which rate changes do not need to be filed for approval.  In addition, each of our insurers is subject to periodic examination by regulatory authorities both within its jurisdiction of organization as well as the other jurisdictions where it is licensed to conduct business.

Our foreign insurance subsidiaries are regulated primarily by regulatory authorities in the regions, provinces and/or countries in which they operate and may secondarily be regulated by the domestic regulator of First American Title Insurance Company as a part of the First American insurance holding company system.  Each of these regions, provinces and countries has established a regulatory framework with respect to the oversight of compliance with its laws and regulations.  Therefore, our foreign insurance subsidiaries generally are subject to regulatory review, examination, investigation and enforcement in a similar manner as our domestic insurance subsidiaries, subject to local variations.

Our underwritten title companies, agencies and property and casualty insurance agencies are also subject to certain regulation by insurance regulatory or banking authorities, including, but not limited to, minimum net worth requirements, licensing requirements, statistical reporting requirements, rate filing requirements and marketing restrictions.

Certain laws and regulations, such as the cyber security requirements of the New York Department of Financial Services, require the Company to maintain certain information security standards and practices.  Other laws and regulations, such as the California Consumer Privacy Act, the Virginia Consumer Data Protection Act and the European Union General Data Protection Regulation, regulate the manner in which the Company collects, uses, retains, protects, discloses, transfers, and processes personal data.

In addition to state-level regulation, our domestic subsidiaries that operate in the insurance business, as well as our home warranty, mortgage servicing and subservicing, banking and certain other subsidiaries, are subject to regulation by federal agencies, including the Consumer Financial Protection Bureau (“CFPB”).  The CFPB has broad authority to regulate, among other areas, the mortgage and real estate markets, including our domestic subsidiaries, in matters which impact consumers.  This authority includes the enforcement of federal consumer financial laws, including the Real Estate Settlement Procedures Act and the Truth in Lending Act.  Regulations issued by the CFPB, or the manner in which it interprets and enforces existing consumer protection laws, have impacted and could continue to impact the way in which we conduct our businesses and the profitability of those businesses.

In addition, our home warranty and settlement services businesses are subject to regulation in some states by insurance authorities or other applicable regulatory entities.

Our federal savings bank is regulated and supervised by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.  The Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) regulates and supervises the Company, as a savings and loan holding company, including its non-banking subsidiaries that are part of the holding company system.  Federal banking laws and regulations require third parties to obtain prior approval to acquire control of our federal savings bank or our Company, which may make such an acquisition of our Company by a third party more difficult or prohibitive.

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Cybersecurity and Data Protection

The Company dedicates significant resources to securing its systems and to protecting non-public personal information and other confidential information.  These include resources dedicated to intrusion prevention such as firewalls, endpoint protection and behavior analysis tools, among others.  They also include resources dedicated toward vulnerability identification through the performance of vulnerability scans and penetration tests, among other methods.

Investment Policies

The vast majority of our investments are held within a debt securities and marketable equity securities portfolio overseen by our investment department and an investment committee made up of certain senior executives.  Members of that investment committee sometimes function in a dual capacity to also provide oversight for certain of our regulated subsidiaries that have their own designated investment committees for their investments within this investment portfolio.  The investment committee oversees investment portfolio activities, such as policy setting, compliance reporting, portfolio reviews, and strategy.  The Company’s investment portfolio policies are designed to comply with regulatory requirements and to align the investment portfolio asset allocation with strategic objectives.  For example, our federal savings bank is required to maintain at least 65% of its asset portfolio in loans or securities that are secured by real estate.  Our federal savings bank currently does not make real estate loans, and therefore fulfills this regulatory requirement through investments in mortgage-backed securities.  In addition, applicable law imposes certain restrictions upon the types and amounts of investments that may be made by our regulated insurance subsidiaries. The Company’s investment portfolio policies further provide that these investments are to be managed to maximize long-term returns consistent with liquidity, regulatory and risk objectives, and that these investments should not expose the Company to excessive levels of credit, liquidity, and interest rate risks.

As of December 31, 2021, 93% of our investment portfolio consisted of debt securities.  As of that date, 67% of our debt securities portfolio was either United States government-backed or rated AAA, and 97% was either rated or classified as investment grade.  Percentages are based on the estimated fair values of the securities.  Credit ratings reflect published ratings obtained from globally recognized securities rating agencies.  If a security was rated differently among the rating agencies, the lowest rating was selected.

Independent of this investment portfolio and its management, we maintain our venture capital portfolio, certain money-market and other short-term investments, and other strategic equity investments in companies engaged in our businesses or similar or related businesses.

Available Information

The Company maintains a website, www.firstam.com, which includes financial information and other information for investors, including open and closed title insurance orders (which typically are posted approximately 10 to 12 days after the end of each calendar month).  The Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the “Investors” page of the website as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission. The Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K, or any other filing with the Securities and Exchange Commission unless the Company expressly incorporates such materials.

The following “risk factors” could materially and adversely affect the Company’s business, operations, reputation, financial position or future financial performance. You should carefully consider each of the following risk factors and the other information contained in this Annual Report on Form 10-K.  The Company faces risks other than those listed here, including those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial.  Because of the following factors, as well as other variables affecting the Company’s operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

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STRATEGIC RISK FACTORS

1.The Company’s risk management framework could prove inadequate, which could adversely affect the Company

The Company’s risk management framework is designed to identify, monitor and mitigate risks that could have a negative impact on the Company’s financial condition or reputation.  This framework includes departments or groups dedicated to enterprise risk management, information security, disaster recovery and other information technology-related risks, business continuity, legal and compliance, compensation structures and other human resources matters, vendor management and internal audit, among others.  Many of the processes overseen by these departments function at the enterprise level, but many also function through, or rely to a certain degree upon, risk mitigation efforts in local operating groups.  This is especially the case with respect to the Company’s operations outside of the United States and recently acquired businesses.  Similarly, with respect to the risks the Company assumes in the ordinary course of its business through the issuance of title insurance policies and the provision of related products and services, the Company employs localized,  as well as centralized risk mitigation efforts.  These efforts include the implementation of underwriting policies and procedures, automated underwriting and other risk-decisioning tools and other mechanisms for assessing and managing risk.  Underwriting title insurance policies and making other risk-assumption decisions frequently involves a substantial degree of individual judgment and, accordingly, underwriters are maintained at the state, regional, divisional, and corporate levels with varying degrees of underwriting authority.  These individuals may be encouraged by customers or others to assume risks or to expeditiously make risk determinations.  If the Company’s risk mitigation efforts prove inadequate, the Company could be adversely affected.

2.The Company is pursuing various innovative initiatives, which could result in increased title claims or otherwise adversely affect the Company

In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk, the Company is increasingly utilizing innovative technologies, processes and techniques in the creation of its products and services.  These efforts include streamlining the closing process by converting certain manual processes into automated ones, which the Company believes will improve the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication.  The Company increasingly is employing advanced technologies to automate various processes, including various processes related to the building, maintaining and updating of title plants and other data assets, as well as searches, examinations, and other underwriting functions in connection with the issuance of title insurance policies.  In connection with the increase in orders beginning in 2020, the Company expanded the use of certain of these advanced technologies in order to facilitate the processing of those orders and expects to continue the expanded use of these technologies.  Risks from these and other innovative initiatives include those associated with potential defects in the design and development of the technologies used to automate processes; misapplication of technologies; the reliance on data, rules or assumptions that may prove inadequate; information security vulnerabilities; and failure to meet customer expectations, among others.  As a result of these risks, the Company could experience increased claims, reputational damage or other adverse effects, which could be material to the Company.  

3.Potentially disruptive innovation in the real estate industry and/or the Company’s participation in these efforts could adversely affect the Company

In addition to the Company’s innovative activities, other participants in the real estate industry are seeking to innovate in ways that could adversely impact the Company’s businesses.  These participants include certain of the Company’s sources of business, competitors, investments and ultimate customers.  Innovations by these participants may change the demand for the Company’s products and services, the manner in which the Company’s products and services are ordered or fulfilled and the revenue or profitability derived from the Company’s products and services.  The Company’s investments in some of these participants could also facilitate efforts that ultimately disrupt the Company’s business or enable competitors.  Accordingly, the Company’s efforts to anticipate and participate in these transformations could require significant additional investment and management attention and may not succeed.  These innovative efforts by third parties, and the manner in which the Company, its agents and other industry participants respond to them, could therefore have an adverse effect on the Company.

OPERATIONAL RISK FACTORS

4.Conditions in the real estate market generally impact the demand for a substantial portion of the Company’s products and services and the Company’s claims experience

Demand for a substantial portion of the Company’s products and services generally decreases as the number of real estate transactions in which its products and services are purchased decreases.  The number of real estate transactions in which the Company’s products and services are purchased decreases in the following situations, among others:

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These circumstances, particularly when combined with declining real estate values and the increase in foreclosures that often results therefrom, also tend to adversely impact the Company’s title claims experience.  Residential refinance activity is strongly correlated with changes in mortgage interest rates and rising mortgage rates during 2021 had an adverse impact on the Company’s refinance business that is expected to continue for so long as mortgage rates continue to rise or if they subsequently remain high relative to the interest rates of outstanding mortgages.

5.Unfavorable economic conditions adversely affect the Company

Historically, uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and a general decline in the value of real property, have created a difficult operating environment for the Company.  These conditions also tend to negatively impact the amount of funds the Company receives from third parties to be held in trust pending the closing of commercial and residential real estate transactions.  The Company deposits a substantial portion of these funds, as well as its own funds, with the federal savings bank it owns.  The Company’s bank invests those funds and any realized losses incurred on those investments will be reflected in the Company’s consolidated results.  The likelihood of such losses, which generally would not occur if the Company were to deposit these funds in an unaffiliated entity, increases when economic conditions are unfavorable.  Moreover, during periods of unfavorable economic conditions, the return on these funds deposited at the Company’s bank, as well as funds the Company deposits with third party financial institutions, tends to decline.  In addition, the Company holds investments in entities, such as title agencies, settlement service providers and venture-stage companies, some of which have been negatively impacted by these conditions, as well as other securities in its investment portfolio, which also may be, and recently have been, negatively impacted by these conditions.  

The Company may not be able to accurately predict the effects of periods or expectations of high or rapidly rising inflation rates, and governmental responses thereto, and may not respond in a timely or adequate manner to mitigate the negative effects of such inflation, such as decreases in the demand for the Company’s products and services, higher labor and other expenses, and, as recently experienced due to inflation and supply shortages, higher home warranty claims severity.

Depending upon the ultimate severity and duration of any economic downturn and other negative economic conditions, the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and cash flows, higher claims, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt facilities and other contracts, difficulties in obtaining access to capital, challenges to the Company’s ability to pay dividends at currently anticipated levels, deterioration in the value of or return on its investments and increased credit risk from customers and others with obligations to the Company.  

6.The Company’s use of models involves risks and uncertainties that could adversely affect the Company

The Company utilizes models to support decisions related to risk management, capital and liquidity planning, financial accounting and other business purposes. Models are, by their nature, inherently limited due to their reliance on statistical, economic, financial or mathematical theories, techniques, data and assumptions that may be erroneous or inappropriate for the intended or actual use. Flawed models or uses of models may result in, among other consequences, erroneous or misleading outputs, inappropriate business decisions, inadequate risk management or enhanced regulatory supervision, which could have a material adverse effect on the Company’s results of operations, financial condition and reputation.

7.Climate change, severe weather conditions, health crises and other catastrophe events could adversely affect the Company

Climate change, global or extensive health crises, severe weather and other catastrophe events and responses to these events could adversely affect the Company.  The extent to which these catastrophe events and responses to them impact the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able to accurately predict, including: the duration and scope of the catastrophe event and restrictions and responses to it; the impact of the catastrophe event on economic activity and actions taken in response, including the efficacy of governmental and other relief efforts or countermeasures; the effect on participants in real estate transactions and the demand for the Company’s products and services.  

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The Company’s property and casualty insurance business has been and may be impacted by increases in the frequency and severity of wildfires, hurricanes, floods, earthquakes or other catastrophe or severe weather events, as well as increased claims in the Company’s home warranty business.  Home warranty claims, including those pertaining to climate control units, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent, and as people spend more time at home, such as during the coronavirus pandemic.  In response to the coronavirus pandemic, the Company made changes to the way it conducted business, including by altering certain underwriting practices, production processes, employee working arrangements and employee engagement efforts.  Some of these changes have altered employee, client and other expectations and are expected to alter the way the Company conducts business and engages with its employees over an extended period of time, and, in some cases, permanently.  Certain of these changes could result in increased claims and expose the Company to other risks.  In addition, the Company manages its financial exposure for losses in its title insurance business and in its property and casualty insurance business with third-party reinsurance.  Catastrophe events could adversely affect the cost and availability of that reinsurance.  Moreover, to the extent climate change, health crises, severe weather conditions and other catastrophe events impact companies or municipalities whose securities the Company invests in, the value of its investments may also decrease due to these factors.

The frequency, severity, duration, and geographic location and scope of such health crises, catastrophe and severe whether events are inherently unpredictable, and, therefore, the Company is unable to predict the ultimate impact climate change, catastrophe events and responses to them will have on its businesses.  The impacts of catastrophe events and responses to them may also exacerbate the risks discussed elsewhere in Part I, Item 1A of this Annual Report.

8.The Company may find it difficult to acquire necessary data

Certain data used and supplied by the Company are subject to regulation by various federal, state and local regulatory authorities.  Compliance with existing federal, state and local laws and regulations with respect to such data has not had a material adverse effect on the Company’s results of operations to date.  Nonetheless, federal, state and local laws and regulations in the United States designed to protect the public from the misuse of personal information in the marketplace and adverse publicity or potential litigation concerning the commercial use of such information may affect the Company’s operations and could result in substantial regulatory compliance expense, litigation expense and a loss of revenue.  The suppliers of data to the Company face similar burdens.  As a result of these and other factors, the Company may find it financially burdensome to acquire necessary data.

9.Changes in the Company’s relationships with large mortgage lenders or government–sponsored enterprises could adversely affect the Company

Large mortgage lenders and government-sponsored enterprises, because of their significant role in the mortgage process, have significant influence over the Company and other service providers.  Changes in the Company’s relationship with any of these lenders or government-sponsored enterprises, the loss of all or a portion of the business the Company derives from these parties, any refusal of these parties to accept the Company’s products and services, the modification of the government-sponsored enterprises’ requirements for title insurance or mortgage servicing in connection with mortgages they purchase or the use of alternatives to the Company’s products and services, could have a material adverse effect on the Company.  

10.A downgrade by ratings agencies, reductions in statutory capital and surplus maintained by the Company’s title insurance underwriters or a deterioration in other measures of financial strength could adversely affect the Company

Certain of the Company’s customers use measurements of the financial strength of the Company’s title insurance underwriters, including, among others, ratings provided by ratings agencies and levels of statutory capital and surplus maintained by those underwriters, in determining the amount of a policy they will accept and the amount of reinsurance required.  Each of the major ratings agencies currently rates the Company’s title insurance operations. The Company’s principal title insurance underwriter’s financial strength ratings are “A2” by Moody’s Investor Services, Inc., “A” by Fitch Ratings, Inc., “A-” by Standard & Poor’s Ratings Services and “A” by A.M. Best Company, Inc. These ratings provide the agencies’ perspectives on the financial strength, operating performance and cash generating ability of those operations.  These agencies continually review these ratings and the ratings are subject to change.  Statutory capital and surplus, or the amount by which statutory assets exceed statutory liabilities, is also a measure of financial strength.  The Company’s principal title insurance underwriter maintained $1.7 billion of total statutory capital and surplus as of December 31, 2021.  Accordingly, if the ratings or statutory capital and surplus of these title insurance underwriters are reduced from their current levels, or if there is a deterioration in other measures of financial strength, the Company’s results of operations, competitive position and liquidity could be adversely affected.  In addition, a downgrade in the ratings or rankings for the Company’s federal savings bank subsidiary or its mortgage servicing business could have an adverse effect on that particular business.

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11.The issuance of the Company’s title insurance policies and related activities by title agents, which operate with substantial independence from the Company, could adversely affect the Company

The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that usually operate independent of the Company.  There is no guarantee that these title agents will fulfill their contractual obligations to the Company, which contracts include limitations that are designed to limit the Company’s risk with respect to their activities.  In addition, regulators are increasingly seeking to hold the Company responsible for the actions of these title agents and, under certain circumstances, the Company may be held liable directly to third parties for actions (including defalcations) or omissions of these agents.  Case law in certain states also suggests that the Company is liable for the actions or omissions of its agents in those states, regardless of contractual limitations.  As a result, the Company’s use of title agents could result in increased claims on the Company’s policies issued through agents and an increase in other costs and expenses.

12.Systems damage, failures, interruptions, cyberattacks and intrusions, and unauthorized data disclosures by the Company or its service providers may disrupt the Company’s business, harm the Company’s reputation, result in material claims for damages or otherwise adversely affect the Company

The Company uses computer software applications, systems and other technologies (collectively referred to as “systems”), some of which it owns and manages and some of which are owned and/or managed by third parties, including providers of distributed computing infrastructure platforms commonly known as the “cloud.”  The Company and its agents, suppliers, service providers, and customers use systems to receive, process, store and transmit business information, including non-public personal information as well as data from suppliers and other information upon which the Company’s business relies.  The Company also uses these systems to manage substantial cash, investment assets, bank deposits, trust assets and escrow account balances on behalf of itself and its customers, among other activities.  Many of the Company’s products, services and solutions involving the use of real property related data are fully reliant on these systems and are only available electronically.  Accordingly, for a variety of reasons, the integrity of these systems and the protection of the information that resides thereon are critically important to the Company’s successful operation.

These systems have been subject to, and are likely to continue to be the target of, computer viruses, cyberattacks, ransomware attacks, phishing attacks and other malicious activity.  These attacks have increased in frequency and sophistication.  The Company’s employees working remotely are more susceptible to social engineering attacks, intrusions and other malicious activity, and this risk has increased given that a substantial number of the Company’s employees are working from home following the onset of the coronavirus pandemic.  These systems also have known and unknown vulnerabilities.  Once identified, the Company’s information technology and information security personnel seek to remediate these vulnerabilities based on the level of risk presented.  For a number of reasons, including the introduction of new vulnerabilities, resource constraints, competing business demands and dependence on third parties, a number of unremediated vulnerabilities will always exist.  Remediation of some vulnerabilities are outside of the control of the Company and third-party remediation efforts may not be timely provided or implemented or otherwise adequate, even when the level of risk is critical or high.  Further, certain other potential causes of system damage or other negative system-related events are wholly or partially beyond the Company’s control, such as natural disasters, vendor failures to satisfy service level requirements and power or telecommunications failures.  These circumstances could expose the Company to system-related damages, failures, interruptions, cyberattacks and other negative events or could otherwise disrupt the Company’s business and could also result in the loss or unauthorized release, gathering, monitoring or destruction of confidential, proprietary and other information pertaining to the Company, its customers, employees, agents or suppliers.  The Company had an information security incident that occurred during the second quarter of 2019 involving unauthorized access to non-public personal information as a result of a vulnerability in one of the Company’s applications.  The risk associated with any future incidents, particularly the risk of damage to the Company’s reputation, is heightened as a result of the 2019 incident.

In conducting its business and delivering its products and services, the Company also utilizes service providers.  These service providers and the systems they utilize are typically subject to similar types of system- and information security-related risks that the Company faces.  The Company provides certain of these service providers with data, including nonpublic personal information.  There is no guarantee that the Company’s due diligence or ongoing vendor oversight will be sufficient to ensure the integrity and security of the systems utilized by these service providers or the protection of the information that resides thereon.

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Certain laws and contracts the Company has entered into require it to comply with certain information security requirements and to notify various parties, including consumers or customers, in the event of certain actual or potential data breaches or systems failures, including those of the Company’s service providers.  Further, the Company’s financial institution customers have obligations to safeguard their systems and sensitive information and the Company may be bound contractually and/or by regulation to comply with the same requirements.  If the Company or its service providers fail to comply with applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences.

Any inability of the Company or its service providers to prevent or adequately respond to the issues described above could disrupt the Company’s business, delay the delivery of its products and services, inhibit its ability to retain existing customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences that could be material to the Company.

13.Errors and fraud involving the transfer of funds may adversely affect the Company

The Company relies on its systems, employees and domestic and international banks to transfer its own funds and the funds of third parties.  In addition to relying on third-party banks to transfer these funds, the Company’s federal savings bank subsidiary transfers funds on behalf of the Company as well as title agents that are not affiliates of the Company.  These transfers are susceptible to user input error, fraud, system interruptions, incorrect processing and similar errors that from time to time result in lost funds or delayed transactions.  The Company’s email and computer systems and systems used by its agents, customers and other parties involved in a transaction have been subject to, and are likely to continue to be the target of, fraudulent attacks, including attempts to cause the Company or its agents to improperly transfer funds.  These attacks have increased in frequency and sophistication.  Funds transferred to a fraudulent recipient are often not recoverable.  In certain instances the Company may be liable for those unrecovered funds.  The controls and procedures used by the Company to prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or other adverse consequences which could be material to the Company.

The Company’s continued success depends, in large part, on its ability to hire and retain qualified people.  Competition for highly qualified people is intense, and there is no assurance that the Company will be successful in attracting, training or retaining people to fill vacant or new positions.  Policies adopted during the coronavirus pandemic may allow Company employees to work remotely or in hybrid situations.  Over the long-term, the Company may not successfully adapt to this new work environment in a manner that maintains a healthy and vibrant Company culture or that results in the Company being viewed as an employer of choice.  If the Company is unable to attract and retain qualified people, its business and operations may be impaired or disrupted.  

15.The Company’s use of a global workforce involves risks that could adversely affect the Company

The Company utilizes lower cost labor in countries such as India and the Philippines, among others.  These countries are subject to relatively high degrees of political and social instability and may lack the infrastructure to withstand natural disasters, health crises and other catastrophe events.  Such disruptions could decrease efficiency and increase the Company’s costs, which the Company has experienced during the coronavirus pandemic.  Weakness of the United States dollar in relation to the currencies used in these countries may also reduce the savings achievable through this strategy.  Laws, regulations, business requirements or social or political pressures may require the Company to use labor based in the United States or may otherwise effectively increase the Company’s labor costs abroad.  The Company may not be able to pass on these increased costs to its customers.

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16.Acquisitions may have an adverse effect on our business

The Company has in the past acquired, and is expected to acquire in the future, other businesses, including its recently announced plans to acquire Mother Lode Holding Company. When businesses are acquired, the Company may not be able to integrate or manage these businesses in such a manner as to realize the anticipated synergies or otherwise produce returns that justify the investment. Acquired businesses, such as the Company’s recent acquisition of ServiceMac, LLC, may subject the Company to increased regulatory or compliance requirements.  The Company’s acquisitions have involved, and are likely to continue to involve, the entry into businesses in which the Company’s management has limited prior experience, making the Company reliant on the management team of the acquired business. The Company may not be able to successfully retain employees of acquired businesses or integrate them, and could lose customers, suppliers or other partners as a result of the acquisitions. For these and other reasons, including changes in market conditions, the projections used to value the acquired businesses may prove inaccurate. In addition, the Company might incur unanticipated liabilities from acquisitions. These and other factors related to acquisitions could have a material adverse effect on the Company’s results of operations, financial condition and liquidity. The Company’s management also will continue to be required to dedicate substantial time and effort to the integration of its acquisitions. These efforts could divert management’s focus and resources from other strategic opportunities and operational matters.

LEGAL AND COMPLIANCE RISK FACTORS

17.Regulatory oversight and changes in government regulation could require the Company to raise capital, make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares, prohibit or limit the Company’s operations, make it more costly or burdensome to conduct such operations, result in decreased demand for the Company’s products and services or otherwise adversely affect the Company

Many of the Company’s businesses, including its title insurance, property and casualty insurance, home warranty, mortgage servicing and subservicing, banking, trust and wealth management businesses, are regulated by various federal, state, local and foreign governmental agencies.  These and other of the Company’s businesses also operate within statutory guidelines, which can include requirements to maintain certain licenses at the federal, state and/or local levels.  The industry in which the Company operates and the markets into which it sells its products are also regulated and subject to statutory guidelines.  In general, in recent years, the Company experienced increasing regulatory oversight and became subject to increasingly complex statutory guidelines.

Regulatory oversight could require the Company to raise capital, and/or make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares.  For example, regulatory capital requirements for the Company have historically applied only at the subsidiary level, specifically to the Company’s federal savings bank subsidiary and the Company’s insurance underwriter subsidiaries.  However, both the National Association of Insurance Commissioners and the Board of Governors of the Federal Reserve System have issued proposals for group capital calculations.  These proposals, if finalized and adopted in their current forms, would apply to the Company at the group level and would be in addition to existing subsidiary-level capital requirements.  It is possible that the group capital calculations, particularly in an economic downturn, could have the effect of requiring the Company to raise capital and/or making it more difficult to otherwise deploy capital, including dividends to stockholders and repurchases of the Company’s shares.

An increasing number of federal, state, and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data, including, among others, the California Consumer Privacy Act, the Virginia Consumer Data Protection Act and the European Union General Data Protection Regulation.  The effects of these privacy and data protection laws, including the cost of compliance and required changes in the manner in which the Company conducts its business, are not fully known and are potentially significant, and the failure to comply could adversely affect the Company.  The Company has incurred costs to comply with these laws and to respond to inquiries about its compliance with them.

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In addition, changes in the applicable regulatory environment, statutory guidelines or interpretations of existing regulations or statutes; reform of government-sponsored enterprises such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); enhanced governmental oversight or efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit or limit its future operations or make it more costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in its competitive position.  The impact of these changes would be more significant if they involve jurisdictions in which the Company generates a greater portion of its title premiums, such as the states of Arizona, California, Florida, Michigan, New York, Ohio, Pennsylvania, and Texas.  These changes may compel the Company to reduce its prices, may restrict its ability to implement price increases or acquire assets or businesses, may limit the manner in which the Company conducts its business or otherwise may have a negative impact on its ability to generate revenues, earnings and cash flows.

18.Scrutiny of the Company’s businesses and the industries in which it operates by governmental entities and others could adversely affect the Company

The real estate settlement services industry, an industry in which the Company generates a substantial portion of its revenue and earnings, and the mortgage servicing and subservicing industry are subject to continuous scrutiny by regulators, legislators, the media and plaintiffs’ attorneys.  Though often directed at these industries generally, these groups also focus their attention directly on the Company’s businesses from time to time.  In either case, this scrutiny may result in changes which could adversely affect the Company’s operations and, therefore, its financial condition and liquidity.

Governmental entities have routinely inquired into certain practices in the real estate settlement services industry and the mortgage servicing and subservicing industry to determine whether certain of the Company’s businesses or its competitors have violated applicable laws, which include, among others, the insurance codes of the various jurisdictions, the Real Estate Settlement Procedures Act, the Truth in Lending Act and similar state, federal and foreign laws.  The Consumer Financial Protection Bureau (“CFPB”), for example, has actively utilized its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against various participants in the mortgage and settlement industries and we expect that such enforcement activity will intensify.  Departments of insurance in the various states, the CFPB and other federal regulators and applicable regulators in international jurisdictions, either separately or together, also periodically conduct targeted inquiries into the practices of title insurance companies, other settlement services providers and mortgage servicers in their respective jurisdictions.  Currently, the Company is the subject of regulatory inquiries.

Further, from time to time plaintiffs’ lawyers have targeted, and are expected to continue to target, the Company and other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct.  These lawsuits often involve large groups of plaintiffs and claims for substantial damages.  These types of inquiries or proceedings have from time to time resulted, and may in the future result, in findings of a violation of the law or other wrongful conduct and the payment of fines or damages or the imposition of restrictions on the Company’s conduct.  This could impact the Company’s operations and financial condition.  Moreover, these laws and standards of conduct often are ambiguous and, thus, it may be difficult to ensure compliance.  This ambiguity may force the Company to mitigate its risk by settling claims or by ending practices that generate revenues, earnings and cash flows.  Currently the Company is a party to class action lawsuits.

19.Regulation of title insurance rates could adversely affect the Company

Title insurance rates are subject to extensive regulation, which varies from state to state.  In many states the approval of the applicable state insurance regulator is required prior to implementing a rate change.  These regulations could hinder the Company’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect its results of operations, particularly in a rapidly declining market.

FINANCIAL RISK FACTORS

20.Failures at financial institutions at which the Company deposits funds could adversely affect the Company

The Company deposits substantial funds in financial institutions.  These funds include amounts owned by third parties, such as escrow deposits, like-kind exchange deposits and investor, mortgagor and subservicer deposits.  Should one or more of the financial institutions at which deposits are maintained fail, there is no guarantee that the Company would recover the funds deposited, whether through Federal Deposit Insurance Corporation coverage or otherwise.  In the event of any such failure, the Company also could be held liable for the funds owned by third parties.

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21.Unfavorable economic or other conditions could cause the Company to write off a portion of its goodwill and other intangible assets

The Company performs an impairment test of the carrying value of goodwill and other indefinite-lived intangible assets annually in the fourth quarter, or sooner if circumstances indicate a possible impairment.  Finite-lived intangible assets are subject to impairment tests on a periodic basis.  Factors that may be considered in connection with this review include, without limitation, underperformance relative to historical or projected future operating results, reductions in the Company’s stock price and market capitalization, increased cost of capital and negative macroeconomic, industry and company-specific trends.  These and other factors could lead to a conclusion that goodwill or other intangible assets are impaired, in which case the Company would be required to write off the portion believed to be impaired.  Total goodwill and other intangible assets reflected on the Company’s consolidated balance sheet as of December 31, 2021 are $1.8 billion.  Any substantial goodwill and other intangible asset impairments that may be required could have a material adverse effect on the Company’s results of operations and financial condition.

22.The Company’s investment portfolio is subject to certain risks and could experience losses

The Company maintains a substantial investment portfolio, primarily consisting of fixed income debt securities.  The investment portfolio also includes adjustable-rate debt securities, common and preferred stock, as well as money-market and other short-term investments.  Securities in the Company’s investment portfolio are subject to certain economic and financial market risks, such as credit risk, interest rate (including call, prepayment and extension) risk and/or liquidity risk.  The risk of loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions, such as during the coronavirus pandemic.  Debt and equity securities are carried at fair value on the Company’s balance sheet.  Changes in the fair value of debt securities is recorded as a component of accumulated other comprehensive income/loss on the balance sheet.  For debt securities in an unrealized loss position, where the loss is determined to be due to credit-related factors, the Company records the loss in earnings.  Changes in the fair value of equity securities are recognized in earnings.  Changes in the fair values of securities in the Company’s investment portfolio have had an adverse impact on the Company and could have a material adverse effect on the Company’s results of operations, statutory surplus, financial condition and cash flow.

23.The Company’s venture investment portfolio is volatile and subject to certain risks and could experience losses

Investments in non-marketable equity securities reflected on the Company’s consolidated balance sheet as of December 31, 2021 totaled $441 million, a substantial majority of which makes up the Company’s venture investment portfolio.  This venture investment portfolio is primarily comprised of investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and a similar investment that has begun trading publicly.  The venture investment portfolio is managed independent of the Company’s portfolio of debt securities and marketable equity securities, which is overseen by the Company’s investment department and an investment committee.  The Company is likely to continue to make similar venture investments.  These positions are concentrated in a small number of holdings and are high-risk, illiquid investments.  In certain circumstances, such as when one of these companies raises capital, merges with another company or sells itself at a valuation that is less than the valuation at which the Company made its investment or when one of these companies fails and/or liquidates itself, the Company could be required to impair all or part of its investment in that company.  The prospects of these companies depend on a number of factors, including the condition of the general economy, the general availability of capital, the performance of and volatility in the public markets, the regulatory and political environments, the condition of the real estate industry, the competitive environment for such companies and the operational and financial performance of such companies.  Even if one of these companies is successful, the Company’s ability to realize the value of its investment may take a significant amount of time and may be dependent on the occurrence of a liquidity event, such as an initial public offering or the sale of the company.  Even when a liquidity event occurs, the Company may be subject to restrictions on resale, such as with its holdings in Offerpad Solutions Inc., or may choose to continue to hold the investment for strategic or other reasons and, as a result, the Company may not monetize the value of its investment during periods in which it could be financially advantageous to sell the investment.  These investments are expected from time to time to cause material fluctuations in the Company’s quarterly results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, subsequent equity sales, or price changes in investments that begin trading publicly, which changes can be volatile.  These impairments and fluctuations may have a material adverse effect on the Company’s results of operations.

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Offerpad Solutions Inc., one of the Company’s investments, began trading publicly during the third quarter of 2021 and, subsequently, the fair value of Offerpad’s equity securities recognized in the Company’s earnings has and will fluctuate as Offerpad’s trading price changes, such as the loss of $75 million that the Company recorded in the fourth quarter of 2021 in connection with a decrease in the trading price of Offerpad securities.  The Company holds a large position in Offerpad and significant fluctuations in the fair value of Offerpad’s securities could be material to the Company’s earnings in any given quarter.

24.Actual claims experience could materially vary from the expected claims experience reflected in the Company’s reserve for incurred but not reported claims

The Company maintains a reserve for incurred but not reported (“IBNR”) claims pertaining to its title, escrow and other insurance and guarantee products.  The majority of this reserve pertains to title insurance policies, which are long-duration contracts with the majority of the claims reported within the first few years following the issuance of the policy.  Generally, 70% to 80% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years.  Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves.  Based on historical experience, management believes a 50 basis point change to the loss rates for recent policy years, positive or negative, is reasonably likely given the long duration nature of a title insurance policy.  In uncertain economic times, an even larger change is more likely.  As examples, if the expected ultimate losses for each of the last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be an increase or decrease, as the case may be, of $148 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $297 million.  A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical norms.  The estimates made by management in determining the appropriate level of IBNR reserves could ultimately prove to be materially different from actual claims experience.

Changes in laws or regulations impacting real estate, particularly when applied retroactively, may cause a material change in expected ultimate losses and corresponding loss rates for recent and/or older policy years.  For example, the 2020 United States Supreme Court decision in McGirt v. Oklahoma calls into question the governing authority for certain real estate-related matters in Native American reservations once thought to have been disestablished.  To the extent the Company, in those areas, underwrote title insurance policies or closed real estate transactions in conformity with authority that ultimately proves inapplicable, expected ultimate losses arising from those policies and transactions could change materially and could result in a material change to loss rates.

25.As a holding company, the Company depends on distributions from its subsidiaries, and if distributions from its subsidiaries are materially impaired, the Company’s ability to declare and pay dividends may be adversely affected; in addition, insurance and other regulations limit the amount of dividends, loans and advances available from the Company’s insurance subsidiaries

The Company is a holding company whose primary assets are investments in its operating subsidiaries.  The Company’s ability to pay dividends is dependent on the ability of its subsidiaries to pay dividends or repay funds.  If the Company’s operating subsidiaries are not able to pay dividends or repay funds, the Company may not be able to fulfill parent company obligations and/or declare and pay dividends to its stockholders.  Moreover, pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available is limited.  As of December 31, 2021, under such regulations, the maximum amount available in 2021 from these insurance subsidiaries, without prior approval from applicable regulators, was dividends of $681 million and loans and advances of $126 million.

GENERAL RISK FACTORS

26.Certain provisions of the Company’s bylaws and certificate of incorporation, as well as regulatory hurdles, may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that the Company’s stockholders might consider favorable

The Company’s bylaws and certificate of incorporation contain provisions that could be considered “anti-takeover” provisions because they make it harder for a third-party to acquire the Company without the consent of the Company’s incumbent board of directors.  Under these provisions:

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While the Company believes that they are appropriate, these provisions, which may only be amended by the affirmative vote of the holders of approximately 67% of the Company’s issued voting shares.  In addition, federal banking laws and regulations and state insurance laws and regulations require third parties to obtain prior approval to acquire control of the Company due to its status as a savings and loan holding company and an insurance holding company.  These provisions and regulatory requirements could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a change of control transaction that might involve a premium price or otherwise be considered favorably by the Company’s stockholders.

Not applicable.

Each of our business segments uses our executive offices in Santa Ana, California.  This office campus consists of five office buildings, a technology center and a two-story parking structure, totaling approximately 490,000 square feet.  Three office buildings, totaling approximately 210,000 square feet, and the fixtures thereto and underlying land, are subject to a deed of trust and security agreement securing payment of a promissory note evidencing a loan made in October 2003, to our principal title insurance subsidiary in the original sum of $55 million.  This loan is payable in monthly installments of principal and interest, is fully amortizing and matures November 1, 2023.  The outstanding principal balance of this loan was $8 million as of December 31, 2021.

The office facilities we occupy are, in all material respects, in good condition and adequate for their intended use.

See Note 22 Litigation and Regulatory Contingencies to the consolidated financial statements included in “Item 8.  Financial Statements and Supplementary Data” of Part II of this report, which is incorporated by reference into this Item 3 of Part I.

Not applicable.

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PART II

Common Stock Market Prices and Dividends

The Company’s common stock trades on the New York Stock Exchange (ticker symbol FAF).  The approximate number of record holders of common stock on February 10, 2022, was 2,049.

In January 2022, the Company’s board of directors declared a cash dividend of $0.51 per share.  We expect 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 our businesses, restrictions imposed by applicable law and any other factors the board of directors deems relevant from time to time. In addition, the ability to pay dividends also is potentially affected by the restrictions described in Note 3 Statutory Restrictions on Investments and Stockholders’ Equity to the consolidated financial statements included in “Item 8.  Financial Statements and Supplementary Data” of Part II of this report.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Pursuant to the share repurchase program initially announced by the Company on November 4, 2020 and expanded on August 24, 2021, which program has no expiration date, the Company may repurchase up to $600 million of the Company’s issued and outstanding common stock.  The following table describes purchases by the Company under the share repurchase program that settled during each period set forth in the table.  Prices in column (b) include commissions.  Cumulatively, as of December 31, 2021, the Company had repurchased $157 million (including commissions) of its shares authorized under the program and had the authority to repurchase an additional $443 million (including commissions) under that program.

Unregistered Sales of Equity Securities

During the year ended December 31, 2021, the Company did not issue any unregistered common stock.

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Stock Performance Graph

The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that it is specifically incorporated by reference into such filing.

The following graph compares the cumulative total stockholder return on the Company’s common stock with the corresponding cumulative total returns of the S&P 400 Mid Cap Index, Russell 1000 Index and an industry peer group for the period from December 31, 2016 through December 31, 2021.  In past years, the Company used the Russell 1000 Index for purposes of the stock performance graph below. However, in connection with the implementation of a new performance-based equity compensation program for executive officers, the Company’s Compensation Committee has begun using the S&P 400 Mid Cap Index as a performance benchmark. In connection with that change, the Company determined that the S&P 400 Mid Cap Index would be a more appropriate broad equity market index to include in the stock performance graph. Accordingly, while both the Russell 1000 Index and the S&P 400 Mid Cap Index have been included for this transitional year, the Company does not expect to include the Russell 1000 Index in future years.  The comparison assumes an investment of $100 on December 31, 2016 and reinvestment of dividends. This historical performance is not indicative of future performance.

Comparison of Cumulative Total Return

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Not applicable.

CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K ARE 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 MAY CONTAIN THE WORDS “BELIEVE,” “ANTICIPATE,” “EXPECT,” “PLAN,” “PREDICT,” “ESTIMATE,” “PROJECT,” “WILL BE,” “WILL CONTINUE,” “WILL LIKELY RESULT,” OR OTHER SIMILAR WORDS AND PHRASES.

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 THE FACTORS SET FORTH ON PAGES 3-4 OF THIS ANNUAL 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.

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 effect of secured financings payable.  The Company is presenting this non-GAAP financial measure because it provides the Company’s management and readers of this Annual Report on Form 10-K 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 Annual Report on Form 10-K, this non-GAAP financial measure has been presented with, and reconciled to, the most directly comparable GAAP financial measure.  Readers of this Annual Report on Form 10-K 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.

Principles of Consolidation

The consolidated financial statements have been prepared in accordance with GAAP and reflect the consolidated operations of the Company.  The consolidated financial statements include the accounts of First American Financial Corporation and all controlled subsidiaries.  All significant intercompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not control and is not the primary beneficiary, are accounted for using the equity method of accounting.  Equity investments in which the Company does not exercise significant influence over the investee and without readily determinable fair values, or non-marketable equity securities, are accounted for at cost, less impairment, and are adjusted up or down for any observable price changes.

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Reportable Segments

The Company consists of the following reportable segments:

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment.  The Company’s management considers the accounting policies described below to be the most dependent on the application of estimates and assumptions in preparing the Company’s consolidated financial statements.  See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements for a more detailed description of the Company’s significant accounting policies.

Provision for policy losses

The Company provides for title insurance losses through a charge to expense when the related premium revenue is recognized.  The amount charged to expense is generally determined by applying a rate (the loss provision rate) to total title insurance premiums and escrow fees.  The Company’s management estimates the loss provision rate at the beginning of each year and reassesses the rate quarterly to ensure that the resulting incurred but not reported (“IBNR”) loss reserve and known claims reserve included in the Company’s consolidated balance sheets together reflect management’s best estimate of the total costs required to settle all IBNR and known claims.  If the ending IBNR reserve is not considered adequate, an adjustment is recorded.

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The process of assessing the loss provision rate and the resulting IBNR reserve involves an evaluation of the results of an in-house actuarial review.  The Company’s in-house actuary performs a reserve analysis utilizing generally accepted actuarial methods that incorporate cumulative historical claims experience and information provided by in-house claims and operations personnel.  Current economic and business trends are also contemplated as part of the reserve analysis.  These include conditions in the real estate and mortgage markets, changes in residential and commercial real estate values, and changes in the levels of defaults and foreclosures that may affect claims levels and patterns of emergence, as well as any company-specific factors that may be relevant to past and future claims experience.  Results from the analysis include, but are not limited to, a range of IBNR reserve estimates and a single point estimate for IBNR as of the balance sheet date.

For recent policy years at early stages of development (generally the last three years), IBNR is generally estimated using a combination of expected loss rate and multiplicative loss development factor calculations.  For more mature policy years, IBNR generally is estimated using multiplicative loss development factor calculations.  The expected loss rate method estimates IBNR by applying an expected loss rate to total title insurance premiums and escrow fees and by adjusting for policy year maturity using estimated loss development patterns.  Multiplicative loss development factor calculations estimate IBNR by applying factors derived from loss development patterns to losses realized to date.  The expected loss rate and loss development patterns are based on historical experience and the relationship of the history to the applicable policy years.

The Company’s management uses the IBNR point estimate from the in-house actuary’s analysis and other relevant information concerning claims to determine what it considers to be the best estimate of the total amount required for the IBNR reserve.

The volume and timing of title insurance claims are subject to cyclical influences from both the real estate and mortgage markets.  Title policies issued to lenders constitute a large portion of the Company’s title insurance volume.  These policies insure lenders against losses on mortgage loans due to title defects in the collateral property.  Even if an underlying title defect exists that could result in a claim, often the lender must realize an actual loss, or at least be likely to realize an actual loss, for a title insurance liability to exist.  As a result, title insurance claims exposure is sensitive to lenders’ losses on mortgage loans and is affected in turn by external factors that affect mortgage loan losses, particularly macroeconomic factors.

A general decline in real estate prices can expose lenders to greater risk of losses on mortgage loans, as loan-to-value ratios increase and defaults and foreclosures increase.  Title insurance claims exposure for a given policy year is also affected by the quality of mortgage loan underwriting during the corresponding origination year.  The Company believes that the sensitivity of claims to external conditions in the real estate and mortgage markets is an inherent feature of title insurance’s business economics that applies broadly to the title insurance industry.

Title insurance policies are long-duration contracts with the majority of the claims reported to the Company within the first few years following the issuance of the policy.  Generally, 70% to 80% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years.  Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves.  Based on historical experience, management believes a 50 basis point change to the loss rates for recent policy years, positive or negative, is reasonably likely given the long duration nature of a title insurance policy.  In uncertain economic times an even larger change is more likely.  As examples, if the expected ultimate losses for each of the last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be an increase or decrease, as the case may be, of $148 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $297 million.  A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical norms.  The estimates made by management in determining the appropriate level of IBNR reserves could ultimately prove to be materially different from actual claims experience.

The reserve for property and casualty insurance losses reflects management’s best estimate of the amount necessary to settle all reported and unreported claims for the ultimate cost of insured losses based upon the facts of each case and the Company’s experience with similar cases.  Because the establishment of appropriate reserves, including reserves for catastrophes, is an inherently uncertain and complex process, the ultimate cost of insured losses may be more or less than the reserve amount.  Reserve estimates are regularly analyzed and updated to reflect the most current information available.  

The Company provides for claims losses relating to its home warranty business based on the average cost per claim and historical loss experience as applied to the total of current claims incurred.  The average cost per home warranty claim is calculated using the average of the most recent 12 months of claims experience adjusted for estimated future increases in costs.

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A summary of the Company’s loss reserves is as follows:

Activity in the reserve for known title claims is summarized as follows:

The provision transferred from IBNR title claims related to current year increased by $11 million in 2021 from 2020 and no change in 2020 from 2019 and payments, net of recoveries, related to current year increased by $10 million in 2021 from 2020 and $2 million in 2020 from 2019, reflecting variability in claims volumes characteristic of a policy year during its first year of development.

The provision transferred from IBNR title claims related to prior years increased by $1 million, or 0.8%, in 2021 from 2020 and decreased $18 million, or 12.6%, in 2020 from 2019.  Payments, net of recoveries, related to prior years decreased by $20 million, or 13.7%, in 2021 from 2020 and did not change in 2020 from 2019.

Activity in the reserve for IBNR title claims is summarized as follows:

The provision for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, was 4.0%, 5.0% and 4.0% for the years ended December 31, 2021, 2020 and 2019, respectively.  The current year loss rate of 4.0% reflects the ultimate loss rate for the current policy year and no change in the loss reserve estimates for prior policy years.  

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The provision related to current year increased by $38 million, or 16.0%, in 2021 from 2020, as a result of increases in title premiums and escrow fees in 2021 from 2020.  The provision related to current year increased by $55 million, or 30.2%, in 2020 from 2019 as a result of a higher current year provision of 4.5% in 2020 compared to 4.0% in 2019 and increases in title premiums and escrow fees in 2020 from 2019.  

For further discussion of title provision recorded in 2021, 2020 and 2019, see Results of Operations, page 36.

Fair value of debt securities

The Company categorizes the fair values of its debt securities using a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and the Company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).  The hierarchy for inputs used in determining fair value maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available.  The hierarchy level assigned to each security was based on management’s assessment of the transparency and reliability of the inputs used to estimate the fair values at the measurement date.  See Note 18 Fair Value Measurements to the consolidated financial statements for a more detailed description of the three-level hierarchy and a description for each level.

The fair values of debt securities were based on the market values obtained from independent pricing services that were evaluated using pricing models that vary by asset class and incorporate available trade, bid and other market information and price quotes from well-established, independent broker-dealers.  The independent pricing services monitor market indicators, industry and economic events, and for broker-quoted only securities, obtain quotes from market makers or broker-dealers that they recognize to be market participants.  The pricing services utilize the market approach in determining the fair values of the debt securities held by the Company.  The Company obtains an understanding of the valuation models and assumptions utilized by the services and has controls in place to determine that the values provided represent fair values.  The Company’s validation procedures include comparing prices received from the pricing services to quotes received from other third-party sources for certain securities with market prices that are readily verifiable.  If the price comparison results in differences over a predefined threshold, the Company will assess the reasonableness of the changes relative to prior periods given the prevailing market conditions and assess changes in the issuers’ credit worthiness, performance of any underlying collateral and prices of the instrument relative to similar issuances.  To date, the Company has not made any material adjustments to the fair value measurements provided by the pricing services.

Typical inputs and assumptions to pricing models used to value the Company’s debt securities include, but are not limited to, benchmark yields, reported trades, broker-dealer quotes, credit spreads, credit ratings, bond insurance (if applicable), benchmark securities, bids, offers, reference data and industry and economic events.  For mortgage-backed securities, inputs and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment speeds.

Credit losses on debt securities

When the fair value of an available-for-sale debt security falls below its amortized cost, the Company must determine whether the decline in fair value is due to credit-related factors or noncredit-related factors.  Declines in fair value that are credit-related are recorded on the balance sheet through an allowance for credit losses with a corresponding adjustment to earnings and declines that are noncredit-related are recognized through other comprehensive income/loss.

If the Company intends to sell a debt security in an unrealized loss position or determines that it is more likely than not that the Company will be required to sell a debt security before it recovers its amortized cost basis, the debt security is impaired and it is written down to fair value with all losses recognized in earnings.  As of December 31, 2021, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.

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For debt securities in an unrealized loss position for which the Company does not intend to sell the debt security and it is not more likely than not that the Company will be required to sell the debt security, the Company determines whether the loss is due to credit-related factors or noncredit-related factors.  For debt securities in an unrealized loss position for which the losses are primarily due to credit-related factors, the Company’s policy is to recognize the entire loss in earnings.  For debt securities in an unrealized loss position for which the losses are determined to be the result of both credit-related and noncredit-related factors, the credit loss is determined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis of the debt security.  The cash flows expected to be collected are discounted using the effective interest rate (i.e., purchase yield) and for variable rate securities the interest rate is fixed at the rate in effect at the credit loss measurement date.

Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security, including the probability of default and the estimated timing and amount of recovery.  The detailed inputs used to project expected future cash flows may be different depending on the nature of the individual debt security.

Impairment assessment for goodwill

The Company is required to perform an annual goodwill impairment assessment for each reporting unit for which goodwill has been allocated.  The reporting units that have been allocated goodwill include title insurance and home warranty.  All goodwill previously allocated to the property and casualty insurance reporting unit was written off in 2020.  The Company’s trust and other services reporting unit has no allocated goodwill and is, therefore, not assessed for impairment.  The Company has elected to perform this annual assessment in the fourth quarter of each fiscal year or sooner if circumstances indicate possible impairment.  Based on accounting guidance, the Company has the option to perform a qualitative assessment to determine if the fair value is more likely than not (i.e., a likelihood of greater than 50%) less than the carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test, or may choose to forego a qualitative assessment and perform a quantitative impairment test.  The qualitative factors considered in this assessment may include macroeconomic conditions, industry and market considerations, overall financial performance as well as other relevant events and circumstances as determined by the Company.  The Company evaluates the weight of each factor to determine whether it is more likely than not that impairment may exist.  If the results of a qualitative assessment indicate the more likely than not threshold was not met, the Company may choose not to perform a quantitative impairment test.  If, however, the more likely than not threshold is met, the Company will perform a quantitative test as required and discussed below.

Management’s quantitative impairment testing compares the fair value of each reporting unit to its carrying amount.  The fair value of each reporting unit is determined by using discounted cash flow analysis and, where appropriate, market approach valuations.  If the fair value of the reporting unit exceeds its carrying amount, the goodwill is not considered impaired and no additional analysis is required.  However, if the carrying amount is greater than the fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the loss recognized limited to the total amount of goodwill allocated to that reporting unit.

The quantitative impairment test for goodwill utilizes a variety of valuation techniques, all of which require the Company to make estimates and judgments.  Fair value is determined by employing an expected present value technique, which utilizes expected cash flows and an appropriate discount rate.  The use of comparative market multiples (the “market approach”) compares the reporting unit to other comparable companies (if such comparables are present in the marketplace) based on valuation multiples to arrive at a fair value.  In assessing the fair value, the Company utilizes the results of the valuations (including the market approach to the extent comparables are available) and considers the range of fair values determined under all methods and the extent to which the fair value exceeds the carrying amount of the reporting unit.

31

The valuation of each reporting unit includes the use of assumptions and estimates of many critical factors, including revenue growth rates and operating margins, discount rates and future market conditions, determination of market multiples and the establishment of a control premium, among others.  Forecasts of future operations are based, in part, on operating results and the Company’s expectations as to future market conditions.  These types of analyses contain uncertainties because they require the Company to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies.  However, if actual results are not consistent with the Company’s estimates and assumptions, the Company may be exposed to future impairment losses that could be material.

In 2020, the Company initiated a plan to exit its property and casualty insurance business, which triggered a goodwill impairment test for the property and casualty insurance reporting unit.  Based on the results of the goodwill impairment test, the Company determined that the fair value of the property and casualty insurance reporting unit was less than its carrying amount.  As a result, the Company recorded an impairment loss to goodwill of $34 million in 2020, and as of December 31, 2020, no goodwill remained on the reporting unit’s balance sheet. See Note 2 Exit of Property and Casualty Insurance Business to the consolidated financial statements for further information on the exit of the business.  

The Company chose to perform qualitative assessments for its title insurance and home warranty reporting units for 2021 and 2019, and performed quantitative impairment tests for 2020.  The results of the Company’s qualitative assessments in 2021 and 2019 supported the conclusion that the reporting unit fair values were not more likely than not less than their carrying amounts and, therefore, a quantitative impairment test was not considered necessary.  Based on the results of the quantitative tests in 2020, the Company determined that the fair values for both reporting units exceeded their carrying amounts and no additional analysis was required.  As a result of the Company’s annual goodwill impairment assessments for the title insurance and home warranty reporting units, the Company did not record any goodwill impairment losses for 2021, 2020 or 2019.

Income taxes

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  The Company evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered and expected levels of taxable income.  A valuation allowance to reduce deferred tax assets is established when it is considered more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes the effect of income tax positions only if sustaining those positions is considered more likely than not.  Changes in recognition or measurement of uncertain tax positions are reflected in the period in which a change in judgment occurs.  The Company recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense.

Recently Adopted Accounting Pronouncements

See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in “Item 8.  Financial Statements and Supplementary Data” of Part II of this report.

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Results of Operations

Overview

A substantial portion of the revenues for the Company’s title insurance and services segment results from the sale and refinancing of residential and commercial real estate.  In the Company’s specialty insurance segment, revenues associated with the initial year of coverage in the home warranty operations are impacted by volatility in residential purchase transactions.  Traditionally, the greatest volume of real estate activity, particularly residential purchase activity, has occurred in the spring and summer months.  However, changes in interest rates, as well as other changes in general economic conditions in the United States and abroad, can cause fluctuations in the traditional pattern of real estate activity.

The Company’s total revenues for 2021 were $9.2 billion, which reflected an increase of $2.1 billion, or 30.1%, when compared with $7.1 billion for 2020.  This increase was primarily attributable to increases in direct premiums and escrow fees of $610 million, or 20.4%, agent premiums of $998 million, or 36.2%, and information and other revenue of $202 million, or 19.9%.  The Company’s total revenues for 2021 also included $436 million of net investment gains compared to $105 million for the prior year.  The increase in direct premiums and escrow fees attributable to the title insurance and services segment was $610 million, or 24.5%.  Direct premiums and escrow fees in the title insurance and services segment from domestic commercial and residential purchase transactions increased $388 million, or 60.8%, and $235 million, or 22.5%, respectively, in 2021 when compared to 2020.  Direct premiums and escrow fees in the title insurance and services segment from residential refinance transactions decreased $107 million, or 16.7%, in 2021 when compared to 2020.

According to the Mortgage Bankers Association’s January 21, 2022 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) decreased 2.8% in 2021 when compared with 2020.  According to the MBA Forecast, the dollar amount of purchase originations increased 11.1% and refinance originations decreased 10.7%.  This volume of domestic residential mortgage origination activity contributed to an increase in direct premiums and escrow fees for the Company’s direct title operations of 22.5% from domestic residential purchase transactions and a 16.7% decrease in direct premiums and escrow fees from domestic refinance transactions in 2021 when compared to 2020.

During 2021, the level of domestic title orders opened per day by the Company’s direct title operations decreased by 12.6% when compared to 2020.  Residential refinance opened orders per day decreased 36.8%, residential purchase opened orders per day increased by 5.7%, and commercial opened orders per day increased 17.7% in 2021 when compared to 2020.

The Company recorded net investment gains of $436 million in 2021, including unrealized gains of $121 million related to the Company’s investment in Offerpad Solutions Inc., a leading tech-enabled real estate company, which began trading publicly in September 2021.  A substantial majority of the Company’s investments in non-marketable equity securities are held in the Company’s venture investment portfolio.  The venture investment portfolio consists primarily of investments in the equity of private venture-stage companies that operate in the real estate and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and the Company’s investment in Offerpad Solutions, Inc.  These investments are expected from time to time to cause material fluctuations in the Company’s results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, subsequent equity sales, or price changes in investments that trade publicly, which changes can be volatile. 

In 2020, the Company initiated a plan to exit its property and casualty insurance business, which resulted in the recognition of impairment losses to certain assets totaling $55 million.  In January 2021, the Company entered into book transfer agreements with two third-party insurers and will seek to non-renew policies that are not transferred.  The Company expects the transfers to be completed by the end of the third quarter of 2022.  

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Title Insurance and Services

Direct premiums and escrow fees increased $610 million, or 24.5%, in 2021 from 2020 and $302 million, or 13.8%, in 2020 from 2019.  The increase in direct premiums and escrow fees in 2021 from 2020 was primarily due to an increase in the average domestic revenues per order closed.  The increase in direct premiums and escrow fees in 2020 from 2019 was primarily due to increases in the number of domestic title orders closed by the Company’s direct title operations, partially offset by decreases in the average domestic revenues per order closed.  The domestic average revenues per order closed were $2,718, $2,232 and $2,558 for 2021, 2020 and 2019, respectively.  The 21.8% increase in average revenues per order closed in 2021 from 2020 was primarily due to higher average revenues per order from commercial transactions, higher average revenues per order from residential purchase products due to higher residential real estate values and, to a lesser extent, a shift in the mix of direct revenues generated from higher premium commercial products from lower premium residential refinance products.  The 12.7% decrease in average revenues per order closed in 2020 from 2019 was primarily due to a shift in the mix of direct revenues generated from higher premium commercial products to lower premium residential refinance products.  The Company’s direct title operations closed 1,050,700, 1,043,800 and 795,800 domestic title orders during 2021, 2020 and 2019, respectively.  The 0.7% increase in orders closed in 2021 from 2020 and the 31.2% increase in orders closed in 2020 from 2019 were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast.

Agent premiums increased $998 million, or 36.2%, in 2021 from 2020 and $386 million, or 16.3%, in 2020 from 2019.  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, full year agent premiums typically reflect mortgage origination activity from the fourth quarter of the prior year through the third quarter of the current year. The increase in agent premiums in 2021 from 2020 was generally consistent with the 28.9% increase in the Company’s direct premiums and escrow fees in the twelve months ended September 30, 2021 as compared with the twelve months ended September 30, 2020.  The increase in agent premiums in 2020 from 2019 was generally consistent with the 11.4% increase in the Company’s direct premiums and escrow fees in the twelve months ended September 30, 2020 as compared with the twelve months ended September 30, 2019.  

Information and other revenues primarily consist of revenues generated from fees associated with title search and related reports, title and other real property records and images, other non-insured settlement services, and risk mitigation products and services.  These revenues generally trend with direct premiums and escrow fees but are typically less volatile since a portion of the revenues are subscription based and do not fluctuate with transaction volumes.

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Information and other revenues increased $202 million, or 20.2%, in 2021 from 2020 and $225 million, or 29.0%, in 2020 from 2019.  The increase in information and other revenues in 2021 from 2020 was primarily attributable to continued strength in the purchase and commercial markets that led to higher demand for the Company’s information products, the impact of recent acquisitions totaling $35 million for 2021, an increase in demand for the Company’s post-close services, and an increase in demand for the Company’s default information products as a result of an increase in loss mitigation activities.  The increase in information and other revenues in 2020 from 2019 was primarily attributable to revenues from recent acquisitions of $80 million for 2020; growth in mortgage origination activity that led to higher demand for the Company’s title information products; and revenues from services provided to support a temporary government program related to the coronavirus pandemic in Canada.  

Net investment income decreased $11 million, or 5.5%, in 2021 from 2020 and $85 million, or 29.9%, in 2020 from 2019.  The decrease in 2021 from 2020 was primarily attributable to lower short-term interest rates which drove lower income from the Company’s cash balances, escrow balances, and tax-deferred property exchange business, partially offset by increases in interest income from the Company’s warehouse lending business and investment portfolio due to higher balances.  The decrease in 2020 from 2019 was primarily attributable to lower short-term interest rates, which drove lower income from the Company’s cash and investment portfolio, escrow balances and tax-deferred property exchange business.  

Net investment gains were $72 million for 2021 and were primarily from increases in the fair values of equity securities totaling $57 million and from sales of debt securities totaling $15 million.  Net investment gains totaled $86 million for 2020 and were primarily from increases in the fair values of equity securities of $39 million and gains from the sales of debt securities.  Net investment gains for 2020 also included gains recognized on certain non-marketable equity securities.  Net investment gains were $55 million for 2019 and were primarily from an increase in the fair values of equity securities.  Net investment gains for 2021, 2020 and 2019 included impairment losses of $5 million, $1 million and $8 million, respectively.  The impairment losses in 2021, 2020 and 2019 primarily related to internally developed software.

The title insurance and services segment (primarily direct operations) is labor intensive; accordingly, a major expense component is personnel costs.  This expense component is affected by two primary factors: the need to monitor personnel changes to match the level of corresponding or anticipated new orders and the need to provide quality service.  The Company continues to closely monitor order volumes and related staffing levels and intends to adjust staffing levels as considered necessary.  The Company’s direct title operations opened 1,275,000, 1,470,900 and 1,093,000 domestic title orders in 2021, 2020 and 2019, respectively, representing a decrease of 13.3% in 2021 from 2020 and an increase of 34.6% in 2020 from 2019.

Personnel costs increased $401 million, or 21.9%, in 2021 from 2020 and $132 million, or 7.8%, in 2020 from 2019. The increase in personnel costs in 2021 from 2020 was primarily attributable to higher incentive compensation, salaries, employee benefits, and payroll taxes resulting from the higher headcount and costs associated with the increase in revenues and profitability.  The increase in incentive compensation expense was due to higher revenues and profitability.  The increases in salaries and payroll taxes were driven by higher headcount.  The increase in employee benefit expense was primarily due to an increase in the Company’s 401(k) saving plan match and higher medical claims.  The increase in personnel costs in 2020 from 2019 was primarily attributable to the impact of new acquisitions, which totaled $37 million for 2020, and higher incentive compensation, salaries, overtime and temporary labor expenses, partially offset by lower employee benefits expense.  The increase in incentive compensation expense was due to higher revenue and profitability. The increase in salaries expense was due to higher average salaries and higher headcount.  The increase in overtime and temporary labor expenses were driven by higher volumes.  The decrease in employee benefits expense was primarily due to a reduction in the Company’s expected 401(k) saving plan match.  The increase in personnel costs was also partially attributable to increased share-based compensation expense due to a higher dollar value of restricted stock units granted in the first quarter of 2020 related to 2019 performance.  Personnel costs included severance expenses of $5 million for 2021 and $6 million for 2020 and 2019, respectively.

A summary of premiums retained by agents and agent premiums is as follows:

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The premium split between underwriter and agents is in accordance with the respective agency contracts and can vary from region to region due to divergences in real estate closing practices and state regulations.  As a result, the percentage of title premiums retained by agents can vary due to the geographic mix of revenues from agency operations.  The changes in the percentage of title premiums retained by agents in 2021 from 2020 and in 2020 from 2019 were primarily due to changes in the geographic mix of agency revenues.

Other operating expenses (principally related to direct operations) increased $198 million, or 19.8%, in 2021 from 2020 and $195 million, or 24.2%, in 2020 from 2019.  The increase in 2021 from 2020 in other operating expenses was primarily attributable to higher production related costs due to higher transaction volumes in the Company’s commercial, default, and international businesses, higher software expense, and higher professional services.  The increase in 2020 from 2019 in other operating expenses was primarily attributable to higher production related costs due to increased transaction volumes; the impact of new acquisitions, which totaled $33 million for 2020; and increases in professional services expense, software expense, and computer hardware related costs, partially offset by lower travel and entertainment expenses.

The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was 4.0%, 5.0% and 4.0% for the years ended December 31, 2021, 2020 and 2019, respectively.

The current year rate of 4.0% reflects the ultimate loss rate for the current policy year and no change in the loss reserve estimates for prior policy years.

As of December 31, 2021, the IBNR claims reserve for the title insurance and services segment was $1.1 billion, which reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of $882 million to $1.1 billion. The range limits are $261 million below and $5 million above management’s best estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve. Actuarial estimates are sensitive to assumptions used in models, as well as the structures of the models themselves, and to changes in claims payment and incurral patterns, which can vary materially due to economic conditions, among other factors.

The 2020 rate of 5.0% reflected the ultimate loss rate of 4.5% for policy year 2020 and a net increase in the loss reserve estimates for prior policy years of 0.5%, or $26 million.

The 2019 rate of 4.0% reflected the ultimate loss rate for policy year 2019 and no change in the loss reserve estimates for prior policy years.

Depreciation and amortization expense increased $11 million, or 7.8%, in 2021 from 2020 and $19 million, or 15.6%, in 2020 from 2019.  The increase in depreciation and amortization expense in 2021 from 2020 was primarily attributable to higher amortization of software and other intangible assets related to recent acquisitions.  The increase in depreciation and amortization expense in 2020 from 2019 was primarily attributable to amortization of software and amortization of other intangible assets from new acquisitions of $22 million for 2020.

Insurers generally are not subject to state income or franchise taxes.  However, in lieu thereof, a premium tax is imposed on certain operating revenues, as defined by statute.  Tax rates and bases vary from state to state; accordingly, the total premium tax burden is dependent upon the geographical mix of operating revenues.  The Company’s noninsurance subsidiaries are subject to state income tax and do not pay premium tax.  Accordingly, the Company’s total tax burden at the state level for the title insurance and services segment is composed of a combination of premium taxes and state income taxes.  Premium taxes as a percentage of title insurance premiums and escrow fees were 1.4%, 1.3% and 1.4% for 2021, 2020 and 2019, respectively.

Interest expense increased $4 million, or 23.5%, in 2021 from 2020 and $1 million, or 6.3%, in 2020 from 2019.  The increase in 2021 from 2020 was primarily attributable to higher interest paid on secured financings payable due to higher average balances outstanding.  The increase in 2020 from 2019 was primarily attributable to higher interest paid on secured financings payable due to higher average balances outstanding, partially offset by lower interest paid on customer deposits at the Company’s banking subsidiary due to lower interest rates.

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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) by 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 16.3%, 15.7% and 16.1% for 2021, 2020 and 2019, respectively.

Specialty Insurance

Direct premiums were flat in 2021 compared to 2020 and increased $27 million, or 5.7%, in 2020 from 2019.  Direct premiums in the home warranty business increased by $29 million, or 7.7%, in 2021 from 2020 driven by an increase in the number of home warranty residential service contracts issued and an increase in the average price charged per contract, which was offset by a $29 million decline in direct premiums in the property and casualty insurance business due to lower policy volumes resulting from the decision in 2020 to exit the business.  The increase in 2020 from 2019 was primarily due to higher premiums earned in the home warranty business driven by an increase in the number of home warranty residential service contracts issued and an increase in the average price charged per contract.

Net investment gains were $23 million for 2021 and were primarily from the sale of the Company’s property and casualty insurance agency operations and the sale of debt and equity securities.  Net investment gains for the specialty insurance segment were $12 million for 2020 and were primarily from increases in the fair values of equity securities of $7 million and also included a gain recognized from the sale of real estate.  Net investment gains for the specialty insurance segment were $11 million for 2019 and were primarily from increases in the fair values of equity securities of $10 million.

Personnel costs and other operating expenses increased $10 million, or 5.9%, in 2021 from 2020 and $9 million, or 5.6%, in 2020 from 2019.  The increase in 2021 from 2020 was primarily attributable to an increase in deferred policy acquisition costs in the property and casualty insurance business, higher offshore vendor expense due to higher volumes in the home warranty business, higher incentive compensation, higher employee benefits expense due to an increase in the Company’s 401(k) saving plan match, and higher advertising expense, offset by lower agent commissions.  The increase in 2020 from 2019 was primarily attributable to increased salaries expense, due to higher average headcount, and higher advertising expense related to the home warranty business.

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The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 54.5% in 2021, 53.0% in 2020 and 50.0% in 2019.  The increase in the claims rate in 2021 from 2020 was primarily attributable to higher claims severity driven by increases in the costs of equipment and parts and an increase in the use of out of network contractors.  The increase in the claims rate in 2020 from 2019 was primarily attributable to higher claims frequency driven by claims in the appliance and plumbing trades likely due to the coronavirus pandemic.  

The provision for property and casualty insurance claims, expressed as a percentage of property and casualty insurance premiums, was 98.0% in 2021, 95.2% in 2020 and 73.6% in 2019.  The increase in rate in 2021 from 2020 was primarily attributable to higher claims frequency.  The increase in rate in 2020 from 2019 was primarily attributable to higher claim severity.

In connection with the Company’s decision to exit its property and casualty insurance business it recorded impairment losses to certain assets totaling $55 million in 2020.  In January 2021, the Company entered into book transfer agreements with two third-party insurers related to its property and casualty insurance business and will seek to non-renew policies that are not transferred.  The Company’s policies in force had declined by approximately 71% as of December 31, 2021 and the Company expects decreasing revenues over time.  The Company expects the transfers to be completed by the end of the third quarter of 2022.  

The property and casualty insurance business recorded revenues of $119 million, $138 million and $136 million for the years ended December 31, 2021, 2020, and 2019, respectively.  Loss before income taxes for the year ended December 31, 2021, which was partially offset by a gain of $12 million from the sale of the agency operations during 2021, was $17 million.  Losses before income taxes for the years ended December 31, 2020 and 2019 were $86 million and $2 million, respectively.

Premium taxes, expressed as a percentage of specialty insurance direct premiums, were 1.2% in 2021, 1.6% in 2020 and 1.7% in 2019.

A large part of the revenues for the specialty insurance businesses are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of loss expense, the majority of the expenses for this segment are variable in nature and therefore generally fluctuate consistent with revenue fluctuations.  Accordingly, pretax margins for this segment (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.  Specialty insurance pretax margins are also impacted by the segment’s net investment income and net investment gains or losses, which may not move in the same direction as premium revenues.  The specialty insurance segment recorded pretax margins for 2021 and 2019 of 6.7% and 13.2%, respectively, and for 2020, recorded a pretax margin loss of (4.7)%.

Corporate