Oct. 29, 2009 (PR Newswire) -- SANTA ANA, Calif., Oct. 29 /PRNewswire-FirstCall/ -- The First American Corporation (NYSE: FAF), America's largest provider of business information, today announced financial results for the third quarter ended Sept. 30, 2009.

Total revenues for the third quarter of 2009 were $1.6 billion, an increase of 3 percent relative to the third quarter of 2008. Net income was $55.4 million, or 59 cents per diluted share, compared with a net loss of $8.3 million, or 9 cents per diluted share, in the third quarter of 2008. Adjusted net income was $60.2 million, or 64 cents per diluted share, compared with adjusted net income of $17.6 million, or 19 cents per diluted share, in the third quarter of 2008. The current quarter results include, on an after-tax basis, intangible impairments of $6.5 million, or 7 cents per diluted share; employee separation and lease termination costs of $4.0 million, or 4 cents per diluted share; and spin-off-related costs of $2.4 million, or 2 cents per diluted share; offset in part by net realized investment gains of $3.1 million, or 3 cents per diluted share; and a reduction in the reserve for policy year 2009 claims losses of $5.0 million, or 5 cents per diluted share. Results for the third quarter of 2008 included net realized investment losses, employee separation and other restructuring costs, a reduction in employee benefit costs and a reduction in the reserve for estimated tax exposures totaling $26.3 million, or 28 cents per diluted share, net of tax.

Amendment to Joint Venture Agreement with Experian Information Solutions, Inc.

First American has executed a letter of intent with Experian Information Solutions, Inc. that would facilitate the purchase of Experian's interest in the First American Real Estate Solutions LLC (FARES) joint venture by, among other matters, fixing the exercise price for 2010. The letter of intent provides for:

--  The buy-out of Experian's indirect interest in FARES' plant management
and imaged document business for $48.0 million in cash (which is
anticipated to occur in the fourth quarter);
--  Amending the buy-out arrangement to provide that, if exercised by either
party in 2010, the exercise price will be $313.8 million in cash and
would close on Dec. 31, 2010; and

--  The ability to substantially eliminate Experian's veto rights if the
buy-out option is exercised by either party.

The arrangement remains subject to customary closing conditions, including the execution of definitive agreements. For the nine months ended Sept. 30, 2009, the noncontrolling interest expense related to Experian's interest in the joint venture was approximately $43.8 million before taxes.

Current Quarter Highlights

--  Adjusted earnings per diluted share of 64 cents, or 59 cents before
adjusting for intangible impairments, employee separation costs and
lease termination costs, spin-off-related costs, net realized investment
gains, and a reduction in the reserve for claim losses described above
--  Financial Services and Information Solutions Groups experienced pretax
margin improvement relative to the third quarter of 2008
--  Cash flow from operations was $158.1 million in the third quarter,
versus $115.4 million in the prior year
--  Debt-to-capital ratio was 20.1 percent as of Sept. 30, 2009
--  Letter of intent signed with Experian to amend joint venture agreement

--  Exchange offer commenced to acquire minority interest in First Advantage
Corporation

"The company has made significant progress in our efforts to improve the flexibility of the organization and to effect our spin-off transaction," stated Parker S. Kennedy, chairman and chief executive officer of The First American Corporation. "We have substantially finalized the capital structures of both companies, commenced an exchange offer to acquire the minority interest in First Advantage and signed a letter of intent with Experian to fix the exercise price of the buy-out option for 2010. We are on track to meet our previously announced spin-off target of the first half of 2010 and, if all regulatory approvals come in timely, we expect to close on April 1."

FINANCIAL SERVICES GROUP

"Throughout the year we made significant progress restructuring our company and we remain committed to continued improvement in our pretax operating margin," said Dennis J. Gilmore, chief executive officer of the company's Financial Services Group. "Our strategic plan calls for us to focus in 2010 on a number of concrete value creation opportunities, including agency profitability, increasing market share in under-penetrated markets, continued leveraging of our unique offshore capabilities, optimization of our investment portfolio, rationalizing our domestic footprint and capitalizing on a gradual recovery in commercial and international markets."

Current Quarter Highlights:

--  Title Insurance and Services segment pretax income was $58.5 million,
compared with pretax loss of $33.7 million in the prior year
--  Specialty Insurance segment pretax income was $7.4 million, compared
with $0.3 million in the prior year

--  Title Insurance and Services ultimate loss ratio for policy year 2009
reduced from 6.5 percent to 6.0 percent due to improved claims
experience in policy year 2009

Title Insurance and Services. During the third quarter of 2009, total revenues in the Title Insurance and Services segment were $997.0 million, a 2 percent increase from the same quarter of 2008. The increase reflected the relatively high number of remittances received from agents during the current quarter and an increase in investment income, offset by lower direct revenue. The company's direct operations closed 362,200 title orders for the third quarter of 2009, an increase of 12 percent, when compared with 323,200 title orders closed in the third quarter of 2008. Average revenue per direct title order continued to increase throughout the year, rising to $1,423 in the third quarter of 2009.

Salary and other personnel costs were $276.7 million, an 11 percent decrease, compared with the third quarter of 2008, primarily due to a reduction in base salary expense and bonus expense resulting from staff reductions. Other operating expenses were $220.7 million, a decrease of 9 percent, compared with the third quarter of 2008. The decrease was primarily due to lower occupancy costs as a result of the consolidation of certain title branches and other cost-containment programs.

The loss provision for title claims during the third quarter of 2009 was 5.1 percent of operating revenues, compared with 7.4 percent in the third quarter of 2008. The current quarter rate reflects the ultimate loss ratio for policy year 2009, which was reduced from 6.5 percent to 6.0 percent, with no reserve estimate adjustments required for prior policy years. Management lowered the expected claims rate for 2009 to 6.0 percent as a result of better than anticipated claims experience for the 2009 policy year.

Pretax income for the Title Insurance and Services segment was $58.5 million in the third quarter of 2009, compared with a pretax loss of $33.7 million in the third quarter of 2008. Results for the current quarter include net realized investment gains of $5.5 million and a reduction in reserve for claim losses of $8.4 million offset by employee separation costs of $1.5 million and lease termination costs of $2.5 million. Results for the third quarter of 2008 include net realized investment losses, employee separation costs and lease termination costs totaling $58.9 million.

Specialty Insurance. Total revenues at First American's Specialty Insurance segment were $71.1 million in the third quarter of 2009, a 2 percent decrease relative to the third quarter of 2008, reflecting a decline in business volume at both the property and casualty insurance business and the home warranty business. Pretax income was $7.4 million in the third quarter of 2009, compared with $0.3 million in the third quarter of 2008. Results for the third quarter of 2008 include net realized investment losses of $3.1 million.

INFORMATION SOLUTIONS GROUP

"The Information Solutions Group increased revenue, pretax earnings and pretax margins relative to the third quarter of 2008," said Frank V. McMahon, chief executive officer of the company's Information Solutions Group. "Additionally, the amendment of our joint venture with Experian and our exchange offer to First Advantage shareholders are expected to provide enhanced operating and financial flexibility going forward. Our strong year-to-date sales and marketing activity contributed to our third quarter results, and we expect our ongoing investment in new product development to generate top-line growth in future periods."

Current Quarter Highlights:

--  Information Solutions Group generated revenues of $526.3 million, a 5.1
percent increase relative to the prior year
--  Information Solutions Group pretax income was $83.5 million, a 23.0
percent increase relative to the prior year
--  Letter of intent signed with Experian to amend joint venture agreement

--  Exchange offer commenced to acquire minority interest in First Advantage
Corporation

Information and Outsourcing Solutions. Total revenues at the Information and Outsourcing Solutions segment were $227.7 million in the third quarter of 2009, a 25 percent increase from the prior year. The increase primarily reflected market share gains in many lines of business and an increase in volume of appraisal and the default-related businesses due to the higher level of loan loss mitigation and foreclosure-related activity in the market. Pretax income during the quarter was $43.9 million, a 40 percent increase from the prior year.

Data and Analytic Solutions. Total revenues at the Data and Analytic Solutions segment were $129.3 million in the third quarter of 2009, a 1 percent decrease relative to the third quarter of 2008. Revenues associated with sales of property information (including custom fulfillment projects) and Multiple Listing Service (MLS) software products were down relative to the same period in the prior year. These decreases were primarily due to the impact of market conditions on mortgage banking and real estate clients. In addition, the segment's revenues were impacted by the consolidation of several large clients.