First American Corporation (new) · NYSE:FAF

First American Corporation (new) — First American Financial — Investor Day (May 2018)

91 slides from First American Corporation (new)'s investor day presentation, May 18, 2018

1. Slide 1: First American Financial Investor Day

   FIRST AMERICAN FINANCIAL Investor Day May 18, 2018 ©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

2. Slide 2: Safe Harbor Statement

   Safe Harbor Statement CERTAIN STATEMENTS MADE IN THIS PRESENTATION AND THE RELATED MANAGEMENT COMMENTARY AND RESPONSES TO INVESTOR QUESTIONS CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT

3. Slide 3: Use of non-GAAP Financial Measures

   Use of non-GAAP Financial Measures THIS SLIDE PRESENTATION CONTAINS CERTAIN FINANCIAL MEASURES THAT ARE NOT PRESENTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), INCLUDING ADJUSTED INVESTMENT INCOME. ADJUSTED INVESTMENT INCOME EXCLUDES AFFILIATED INVESTMENTS AND IS PRESENTED

4. Slide 4: Agenda

   AGENDA 9:00 a.m. Welcome Craig Barberio, VP Investor Relations 9:05 a.m. Strategy & Business Review Dennis Gilmore, Chief Executive Officer 9:45 a.m. Title Operations Chris Leavell, COO, Title Insurance and Services 10:15 a.m. Q&A/Break 10:50 a.m. Specialty Insurance Larry Davidson, COO, Specialty I

5. Slide 5: Strategy & Business Review

   STRATEGY & BUSINESS REVIEW Dennis Gilmore Chief Executive Officer 5

6. Slide 6: Presentation Agenda

   PRESENTATION AGENDA Strong Track Record of Results Well Positioned in a Changing Environment Attractive Growth Opportunities 6

7. Slide 7: Presentation Agenda

   PRESENTATION AGENDA Strong Track Record of Results Well Positioned in a Changing Environment Attractive Growth Opportunities 7

8. Slide 8: Leader in the Title and Settlement Services Industry

   Leader in the Title and Settlement Services Industry $5.8B Total Revenue 18,700 Employees % 92 of Revenue, Title Segment % 26.2 Title Market Share 800 Offices % 8 Insurance Segment of Revenue, Specialty $9.6B Total Assets 9 Countries Trusted National Brand Largest Title Plant and Property Fortune 10

9. Slide 9: Established Reputation as Efficient Operator Dedicated to Long-Term Value Creation

   Established Reputation as Efficient Operator Dedicated to Long-Term Value Creation $60 TOTAL SHAREHOLDER RETURN Standalone company formed June 1, 2010 Purchase originations bottom after 6 22.5% ANNUALIZED $56 years of decline $50 Completed expansion of title plant footprint to over 500 counties $40

10. Slide 10: Seasoned Leadership Team

    Seasoned Leadership Team Dennis Gilmore Chief Executive Officer 25 Years Ken DeGiorgio Executive Vice President 19 Years Years with First American Chris Leavell COO, Title insurance and Services 21 Years George Livermore EVP and President, Data and Mortgage Solutions 20 Years Larry Davidson COO, Spe

11. Slide 11: First American Strategy

    FIRST AMERICAN STRATEGY VISION: To Be the Premier Title Insurance and Settlement Services Company Manage Profitably Strengthen and Actively Grow Our the Enterprise Invest in Core Title Complementary and Through Data Businesses that Settlement and Process Support or Business Advantage Expand the Core

12. Slide 12: Past 5 Years: Achieved Strong Financial Results

    Past 5 Years: Achieved Strong Financial Results TOTAL REVENUE EARNINGS PER SHARE $6.0 $5.8 $4.00 $3.76 $5.6 $3.50 $5.5 $5.2 $3.09 $5.0 $3.00 $2.62 $ in Billions $5.0 $4.7 $2.50 $2.15 $4.5 $2.00 $1.71 $4.0 $1.50 $1.00 $3.5 $0.50 $3.0 $0.00 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 CASH FROM O

13. Slide 13: Past 5 Years: Growing Pretax Title Margin

    Past 5 Years: Growing Pretax Title Margin $2,500 14% Key Drivers of Margin Improvement 12%  Favorable market conditions $2,000  Purchase 10%  Commercial $1,500 8%  Operating efficiencies 6%  Favorable claims experience $1,000  Rising investment income 4% $500 2013 2014 2015 2016 2017 2% $- 0%

14. Slide 14: Total Shareholder Return

    Total Shareholder Return 200% FAF 150% S&P 500 100% 50% 0% 57.9% 1 Year 21.6% 21.8% 3 Year 21.7% 11.3% 5 Year 15.8% -50% 1/2/2013 1/2/2014 1/2/2015 1/2/2016 1/1/2017 12/30/2017 14 Source: Bloomberg

15. Slide 15: Presentation Agenda

    PRESENTATION AGENDA Strong Track Record of Results Well Positioned in a Changing Environment Attractive Growth Opportunities 15

16. Slide 16: Key Forces Driving Market Change

    Key Forces Driving Market Change Real Estate and Mortgage Consumer Experience Process Becoming Faster Closing DIGITAL Purchase Commercial Artificial Intelligence Blockchain HIGHER EMERGING INTEREST RATES TECHNOLOGIES Affect Business Create Mix Opportunities Refinance Robotic Process Automation 16

17. Slide 17: Rising Mortgage Rates Result in Lower Refinance Volumes

    Rising Mortgage Rates Result in Lower Refinance Volumes 3,750 4.75% 3,250 4.50% 30 Yr. Fixed Mortgage Rate 2,750 4.25% Open Orders Per Day 2,250 4.00% 1,750 3.75% 1,250 3.50% Refinance Open Orders 750 3.25% Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 May-13 May-14 May-15 May-16 May-17 Mar-13 Nov-13 Mar-14 No

18. Slide 18: But Refinance Revenue Remains at Multi Year Lows

    …But Refinance Revenue Remains at Multi Year Lows $400 25% 21% $350 17% 20% 15% $300 15% 13% $ in Millions 11% $250 10% $200 5% $150 0% 2013 2014 2015 2016 2017 Refinance % of Direct Premiums & Escrow Refinance –Revenue Direct Premiums & Escrows 18

19. Slide 19: Higher Short-term Rates Benefit Investment Income

    … and Higher Short-term Rates Benefit Investment Income $46 1.50% Title Segment Investment Income(1) Fed Funds Rate $41 1.25% Title Segment Investment Income ($ in Millions) $36 1.00% Each 25 basis point Fed hike Fed Funds Rate $31 increases investment income 0.75% by ~$12 million/year(2) $26 0.50%

20. Slide 20: Strong Purchase Market Continues

    Strong Purchase Market Continues $1,000 DIRECT PURCHASE REVENUE Purchase Market  Strong economy and job growth $900  Low inventory continues to drive home price appreciation $800  Expect home sales growth to continue $ in Millions given gradual increase in mortgage rates $700 $600 First American

21. Slide 21: Digital Transformation of Mortgage and Closing Process Underway

    Digital Transformation of Mortgage and Closing Process Underway  Digital Experience  Quality Service  Transparency  Proactive Communication Real Estate Consumers Agents First American Financial Lenders  Faster Closings  Reduced Costs  Improved Accuracy 21

22. Slide 22: Closing Timelines Will Compress

    Closing Timelines Will Compress  Lenders progressing toward faster mortgage timelines  Closing timeline currently averaging 50-55 days  First American is developing automated title solutions to meet this growing demand  Title automation requires: 1. Title and property record information First Am

23. Slide 23: Consumers Increasingly Expect a Digital Closing Experience

    Consumers Increasingly Expect a Digital Closing Experience Digital Experience  Consumers want digital experience, with more transparency  Real estate agents want to deliver a better customer experience and improve productivity  Wire fraud a major risk related to real estate transaction First Amer

24. Slide 24: Emerging Technologies Create Opportunities

    Emerging Technologies Create Opportunities Artificial Intelligence Blockchain  High potential use case when coupled  Opportunity to drive process efficiencies with proprietary data Emerging  Collaborating with lenders on proof of concepts Technologies  Enhanced data collection and predictive  A

25. Slide 25: Presentation Agenda

    PRESENTATION AGENDA Strong Track Record of Results Well Positioned in a Changing Environment Attractive Growth Opportunities 25

26. Slide 26: Strong Outlook for Title and Settlement Business

    Strong Outlook for Title and Settlement Business  Favorable purchase market trends continue Revenue Growth  Commercial fundamentals remain strong  Investment income improves as short term rates rise  Refinance activity approaching a floor  Disciplined cost management culture Cost Efficient Oper

27. Slide 27: Disciplined M&A Strategy Drives Growth

    Disciplined M&A Strategy Drives Growth Focused Strategy  Title companies that expand our footprint in key markets  Companies that enhance our data capabilities or expand product and service offerings Pursuing targets that support or Disciplined Process leverage our core title and settlement busine

28. Slide 28: Attractive Growth Prospects in Our Property Data Business

    Attractive Growth Prospects in Our Property Data Business Leveraging Data Assets to Drive Title Automation and Enhanced Risk Decisioning CURRENT DATA COVERAGE RANK Assessor/Property Ownership 100 100 1st Property Record Database 94  Largest property record database Deeds, Mortgages, Foreclosures 99

29. Slide 29: Agent Advantage

    First American is Expanding its Scope with Title Agents Title Insurance Primary Business First American Trust Title Production  Became Federal Savings Bank in 1999 Agent Advantage  $3.4 billion in assets  8.4% Tier 1 leverage ratio Closing Solutions Back Office Services  Provides banking & wealt

30. Slide 30: First American Objectives

    First American Objectives  Remain focused on growing profitable market share in Operational title segment  Strengthen data capabilities to drive title automation and reduce transaction time, cost, and risk  Manage complementary businesses that leverage or support the core  Title Segment Pretax M

31. Slide 31: Summary

    SUMMARY Strong Track Record of Results  21.7% annualized total shareholder return past 5 years Well Positioned in a Changing Environment  Financial performance remains strong despite higher interest rates  Actively investing for the digital future  Application of emerging technologies creates op

32. Slide 32: Title Operations

    TITLE OPERATIONS Chris Leavell Chief Operating Officer Title Insurance and Services 32

33. Slide 33: U.S. Title Revenue Overview

    U.S. TITLE DIRECT AGENCY COMMERCIAL First American Financial Total Revenue Total Revenue Trend $4.5 $4.2 $4.4 $4.0 $4.0 0.7 $1.3B $3.7 0.7 $3.5 $3.5 0.7 Direct 0.5 23% 0.6 $ in Billions $3.0 1.3 1.3 $2.5 1.0 1.2 1.0 $4.4B $2.0 $5.8B $2.3B Agent U.S. Title 76% $1.5 41% $1.0 2.1 2.1 2.3 2.3 1.9 $0.5 $

34. Slide 34: Strong Market Position

    Strong Market Position  26.2% market share  Leader in all key markets  Commercial – Purchase – Refinance – Homebuilders – International  Industry-leading title plants and property record database  National presence  Trusted brand  Long-standing customer relationships  High employee engagemen

35. Slide 35: Key Areas of Focus

    Key Areas of Focus 1 Continue to expand title margins 2 Extending market leadership through operating fundamentals 3 Growth by leveraging unique assets (e.g. bank and data) 4 Developing digital closing solutions 35

36. Slide 36: Commercial Operations Overview

    Commercial Operations Overview Operations 2017 Total Revenue Mix 1 Investment Income 1 1 1 1 1 2% 1 1 2 1 Information 2 1 & Other 1 13% 2 3 1 1 1 1 1 1 8 49 States 1 1 45 Offices 1 1,280 1 Employees $0.7B 1 Title Premiums 3 85% 3 2017 Market Share (1) Sales Channels & Customers  Insurance companies

37. Slide 37: Commercial Business Outlook Remains Favorable

    Commercial Business Outlook Remains Favorable $800 $696 $696 Market Outlook $700 $661 $595 98 102 104  Most major asset classes and $600 $546 89 geographic markets remain strong $500 81  High level of capital availability despite $ in Millions $400 a decline in foreign capital $300 599 506 559 592

38. Slide 38: Direct Division Overview

    Direct Division Overview Operations 2017 Total Revenue Mix Info & Other 7% Other 7% Commercial 7% 26 States 550 Offices 5,100 Employees Refinance 11% $1.3B Purchase 68% 2017 Market Share (1) Sales Channels & Customers % Total 10.8%  Realtors  Lenders % Direct 28.5%  Escrow Companies  Homebuilder

39. Slide 39: Purchase Transaction Closing Process Today

    Purchase Transaction Closing Process Today MORTGAGE PROCESS Application Loan Estimate Underwriting Approval SELLER + R.E. AGENT OTHER CONTINGENCIES Property & Termite Disclosure Reports All Contingencies Inspection Removed BUYER’S OFFER ESCROW OR ACCEPTED BY CLOSING OPENED TITLE PROCESS SELLER  Ear

40. Slide 40: First American is Investing for the Digital Future

    First American is Investing for the Digital Future Developed secure portal to streamline the closing process MORTGAGE PROCESS • Launched in AZ, FL and WA with full Application Loan Estimate rollout by yearApproval Underwriting end SELLER + R.E. AGENT • Digital consumer experience • Secure communicat

41. Slide 41: First American is Investing for the Digital Future

    First American is Investing for the Digital Future Developed secure portal to streamline the closing process MORTGAGE PROCESS • Launched in AZ, FL and WA with full Application Loan Estimate rollout by yearApproval Underwriting end SELLER + R.E. AGENT • Digital consumer experience • Secure communicat

42. Slide 42: First American is Investing for the Digital Future

    First American is Investing for the Digital Future Developed secure portal to streamline the closing process MORTGAGE PROCESS • Launched in AZ, FL and WA with full Application Loan Estimate rollout by yearApproval Underwriting end SELLER + R.E. AGENT • Digital consumer experience Developing integrat

43. Slide 43: Agency Division Overview

    Agency Division Overview Operations 2017 Total Revenue Mix Information & Other 2% Commercial 14% 49 States 65 Offices 800 Employees Refinance 19% $2.3B Purchase 65% 2017 Market Share (1) Sales Channels & Customers % Total 15.4%  Attorneys  Lenders % Agency 24.8%  Local Agents  Homebuyers  Regio

44. Slide 44: Agency Division has Grown by Focusing on Larger Agents

    Agency Division has Grown by Focusing on Larger Agents NUMBER OF AGENTS 8,000  First American has reduced smaller agents 7,500 in recent years to focus on larger, more 7,000 profitable relationships 6,500  Reduced risk and administrative costs 6,000 5,500  Growth with large commercial agents 5,00

45. Slide 45: Offering a Wider Array of Products to Title Agents

    Offering a Wider Array of Products to Title Agents Title Insurance Primary Business Customer Benefits  Reduced operating costs Title Production  Risk mitigation  Full Search  Limited Search  Process efficiency Agent Advantage Closing Solutions First American Benefits  Document Preparation Back

46. Slide 46: Expense Management Remains a Key Priority

    Expense Management Remains a Key Priority  Manage personnel costs to order volumes  Implemented seasonal workforce program  Leverage well-developed offshore platform  Strong underwriting controls  Keen focus on agent profitability  Margin expansion requires innovation:  Emerging technologies

47. Slide 47: Key Takeaways

    Key Takeaways  Strong franchise in an attractive industry  Keen focus on expense management  Investing in a digital future to respond to an evolving real estate and mortgage industry landscape  Pursuing growth opportunities by leveraging unique assets 45

48. Slide 48: Q&A

    Q&A 46

49. Slide 49: Break

    BREAK FIRST AMERICAN FINANCIAL Investor Day 2018 ©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

50. Slide 50: Specialty Insurance Segment

    SPECIALTY INSURANCE SEGMENT Larry Davidson Chief Operating Officer Specialty Insurance 47

51. Slide 51: Specialty Insurance Overview

    SPECIALTY INSURANCE PROPERTY & CASUALTY HOME WARRANTY First American Financial Total Revenue Total Revenue Trend $500 $465 $450 $436 $394 $400 $369 139 $350 $340 137 134 $ in Millions Specialty $300 132 120 Segment $250 $0.5B 8% $5.8B $200 $150 260 299 327 $100 220 237 $50 $0 2013 2014 2015 2016 201

52. Slide 52: Property & Casualty Overview

    Property & Casualty Overview Operations 2017 Premium Mix WA Others OR 6% Renters 11% NV UT CA 6 States(1) 2 Offices 200 Employees $127M AZ Homeowners 83% Policies in Force (PIF) Homeowners 149,700 59% Renters 97,600 39% Others 5,900 2% 100% 49 (1) Homeowners policies only (active states)

53. Slide 53: Property & Casualty Loss Trend

    Property & Casualty Loss Trend Core CAT Events Loss Ratio $120 90%  CAT losses in 2017 primarily driven by California wildfires $100 75%  Two events exceeded $5 million reinsurance retention limit  Conservative underwriting held $80 60% losses below level implied by market share $ in Millions $60

54. Slide 54: Property & Casualty Strategy

    Property & Casualty Strategy  Improve Profitability  Comprehensive renewal underwriting program  Restructured homeowners policy in key California market  Raising rates where appropriate  Continued focus on risk management  Conservative underwriting standards  Robust reinsurance program 51

55. Slide 55: Home Warranty Overview

    Home Warranty Overview Operations 2017 Market Share Other 13% First American Fidelity 14% 5% 2/10 and 35 States(1) 7 Offices 700 Employees Cross Country 13% $2.2B Old Republic 10% American Home Shield 45% Top 5 States % Total Premiums CA 36.4% TX 16.0% Operations Sales Channels & Customers TN 5.7% 

56. Slide 56: Home Warranty Distribution Channels

    Home Warranty Distribution Channels 2017 Premiums Channel 2017 Retention Rate Sales driven by home Real Estate Real Estate purchases/sales 21% 36% Direct-to- Consumer 8% Sales through direct Direct-to- $312M Consumer marketing to consumer (direct mail, internet, TV) 73% Renewals 56% All contracts in

57. Slide 57: Home Warranty Premium Growth Trend

    Home Warranty Premium Growth Trend $350 $300 75 $250 65 55 49 $ in Millions $200 45 $150 237 219 $100 200 171 183 $50 $0 2013 2014 2015 2016 2017 Real Estate Direct-to-Customer 54

58. Slide 58: Direct-to-Consumer Channel Adds to Growth

    Direct-to-Consumer (DTC) Channel Adds to Growth DTC Channel Benefits from: Marketing Plan  Low market penetration  Media Campaign  Direct Response TV & Radio  Growth driven by marketing spend not real estate market  Web Marketing  Search engine optimization DTC  Search engine marketing First

59. Slide 59: Consumers Increasingly Expect an Integrated, Digital Platform

    Consumers Increasingly Expect an Integrated, Digital Platform  Account access  Submit claims Customer  Claim status Integrated Digital Platform  Work order acceptance  Enhanced contractor  Open job status dispatch platform  “On my way” tracking  Enables real-time work assignment and approval

60. Slide 60: Home Warranty Strategy

    Home Warranty Strategy  Deploy technology to enhance customer experience and improve contractor productivity  Remain focused on quality of customer service delivery  Continue to strengthen contractor network  Maintain market leadership in the real estate channel  Grow direct-to-consumer busines

61. Slide 61: Financial Review

    FINANCIAL REVIEW Mark Seaton EVP and Chief Financial Officer 58

62. Slide 62: Capital Management Strategy

    Capital Management Strategy  Objective: Create long-term shareholder value  Capital management priorities:  Make value-creating investments in our core business  Acquire businesses that fit within our strategy  Return excess capital to shareholders through dividends and share repurchases  Main

63. Slide 63: Capital Expenditures

    Capital Expenditures  Fixed Assets $160  ~$40 million annually  Migration to cloud will reduce future $140 expenditures $120  Software  Customer-facing technology $100  Production system (FAST) enhancements $ in Millions $80  Title Plant $60  Geographic expansion $40  Capitalized Data  Pro

64. Slide 64: Mergers & Acquisitions

    Mergers & Acquisitions TOTAL COMPANY TYPE SPEND(1) 2017 SIS Buyout of long standing joint venture of title information provider. Complementary $91M Nevada Title Leading title and escrow company with a strong presence in southern Nevada. Title  Acquire companies strategic to our core business that:

65. Slide 65: Dividends

    Dividends DIVIDENDS PER SHARE $1.75 Dividend Considerations $1.50 $1.44 $1.20  First American expects to pay a meaningful dividend $1.25 $1.00 given the company’s cash flow generation and $1.00 $0.84 investment opportunities $0.75 $0.48  Dividend increases are intended to be sustainable $0.50 in p

66. Slide 66: Share Repurchases

    Share Repurchases SHARE REPURCHASE HISTORY $70  Share repurchases will be $60 Share Buyback Period dependent upon capital levels, $50 market conditions and alternative uses of capital, $40 among other factors $30  $182 million remaining under $20 share repurchase authorization $10 $0 Nov-13 Nov-14

67. Slide 67: Uses of Free Cash Flow and Debt Proceeds

    Uses of Free Cash Flow and Debt Proceeds CUMULATIVE 5 YEAR USES Pension Termination Share Repurchases  ~43% of cash flow used for investment 3% 4% Dividends portfolio to strengthen the balance sheet 29%  Moving forward, portfolio strengthening not necessary as capital levels exceed current targets

68. Slide 68: Excess Capital

    Excess Capital $ in Millions Q1 '18 Q4 '17 Q3 '17 Q2 '17 Q1 '17 Holding Company Cash $181.4 $233.9 $259.3 $255.0 $269.1 Tax & Benefit Accounts (33.5) (28.7) (99.1) (110.4) (98.6) Target Cash(1) (195.0) (190.0) (180.0) (160.0) (160.0) (A) Potential Excess Cash at Holding Company ($47.0) $15.2 ($19.9)

69. Slide 69: Credit Ratings

    Credit Ratings First American’s objective is to maintain at least A-/A3 financial strength ratings through the cycle Financial Strength Senior Debt S&P A- (stable) BBB- (stable) Moody’s A3 (positive) Baa3 (stable) Fitch A (stable) BBB (stable) A.M. Best A (stable) BBB (stable) 66

70. Slide 70: Capital Structure

    Capital Structure As of December 31, 2017 ($ in Millions) 4.3% Senior Notes Due 2023 $250  Management’s target debt-to-capital ratio 4.6% Senior Notes Due 2024 300 is 18-20% Trust Deed Notes 23  Supports target financial strength ratings Other Notes 4  $160 million drawn on $700 million revolving

71. Slide 71: Statutory Surplus Trend

    Statutory Surplus Trend First American has improved the quality of capital by reducing the amount of affiliated investments within the title underwriter $1,400 120% $1,200 100% $1,000 Surplus ($ in Millions) 80% $800 % Affiliates 60% $600 40% $400 20% $200 $0 0% 2010 2011 2012 2013 2014 2015 2016 20

72. Slide 72: Statutory Marketable Securities vs Reserves

    Statutory Marketable Securities vs Reserves $2,000 $1,800 $1,600 $1,400 $ in Millions $1,200 $1,000 $800 $600 $400 $200 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Reserves Marketable Securities 69

73. Slide 73: Investment Portfolio

    Investment Portfolio CONSOLIDATED PORTFOLIO INSURANCE PORTFOLIO Gov't Agency 3% Municipal US 18% Treasury Municipal 7% Corporate Gov't Agency 20% Avg. Rating : A 24% 4% $2.5B Duration: 4.7 Corporate Equity Book Yield: 3.0% US Treasury 14% 19% Gov't Agency 3% MBS Foreign 12% 17% Equity 9% $5.2B Avg.

74. Slide 74: Paid Losses and Ultimate Loss Ratios

    Ultimate Loss Ratios by Policy Year 14.0% $400 13.1% $350 12.0% 11.1% Paid Losses by Calendar Year ($ in Millions) 9.8% $300 9.8% Ultimate Loss Ratios by Policy Year 10.0% $250 8.0% 7.6% 6.4% $200 92% 6.0% 92% 5.4% 5.1% 90% 4.7% $150 93% 88% 4.2% 4.0% 4.0% 3.8% 3.8% 3.4% $100 85% 82% 2.0% 78% $50 69

75. Slide 75: Incremental Incurred Losses by Development Period

    Incremental Incurred Losses by Development Period $120 $100 $80 $ in Millions $60 $40 2014 2016 2007 $20 2013 2015 2009 2008 2017 2012 2011 2010 $0 0 12 24 36 48 60 72 84 96 108 120 Age of Policy Year (Months) 72

76. Slide 76: Cumulative Loss Ratio

    Cumulative Losses by Policy Year 11.0% 10.0% 9.0% 2007 8.0% 7.0% Cumulative Loss Ratio 2008 6.0% 5.0% (1) Long Term Average 4.0% 2009 2011 2010 3.0% 2014 2013 2012 2.0% 2015 1.0% 2016 2017 0.0% 0 12 24 36 48 60 72 84 Age of Policy Year (Months) 73 (1) Includes policy years 1998–2017, excluding 2005-

77. Slide 77: Impact of Fed Funds Rate on Investment Income

    Impact of Fed Funds Rate on Investment Income $46 1.50% Title Segment Investment Income(1) Fed Funds Rate Title Segment Investment Income ($ in Millions) $41 1.25% $36 1.00% Fed Funds Rate Each 25 basis point Fed hike $31 0.75% increases investment income by ~$12 million/year(2) $26 0.50% $21 0.25%

78. Slide 78: Corporate Segment Investment Income – Deferred Compensation Plan

    Corporate Segment Investment Income – Deferred Compensation Plan $ in Millions Q1 '18 Q4 '17 Q3 '17 Q2 '17 Q1 '17 Deferred Compensation Plan Investment income  Investment gains and losses Deferred compensation ($1.5) $3.8 $3.6 $2.5 $4.0 recorded in investment income Other 0.4 0.7 0.5 0.1 0.2 Total

79. Slide 79: Tax Reform Impact

    Tax Reform Impact Pre-reform Post-reform  Lower federal rate partially offset by: Federal 35.0% 21.0%  Higher foreign tax rates State 1.5% 1.5%  Elimination of certain tax benefits (M&E, 162(m)) International -1.0% 1.5%  Shift to territorial tax system reduces cost to repatriate foreign earnings

80. Slide 80: Historical Title Insurance Margin

    Historical Title Insurance Margin $4,500 14% $4,000 12% $3,500 10% $3,000 8% $ in Billions $2,500 6% $2,000 4% $1,500 2% $1,000 0% $500 -2% $0 -4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Mortgage Originations Pretax Margin 77 Source: MBA

81. Slide 81: Title Insurance Margin Objective

    Title Insurance Margin Objective Downside Base Case Upside Pretax Margin <11% 11% - 13% >13% Mortgage Originations <$1.4 Trillion $1.4 - $1.8 Trillion >$1.8 Trillion % Refinance ~25% ~25% ~25% 78

82. Slide 82: Investment Considerations

    Investment Considerations  Focused strategy as “pure play” in title and settlement markets  Attractive industry characteristics  Strong competitive position in title and settlement services  Opportunity to grow by leveraging unique assets (e.g. bank and data)  Expect earnings and margin growth

83. Slide 83: Q&A

    Q&A 80

84. Slide 84: Thank You

    THANK YOU FIRST AMERICAN FINANCIAL Investor Day 2018 ©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF

85. Slide 85: Appendix

    APPENDIX 81

86. Slide 86: Organizational Structure

    ORGANIZATIONAL STRUCTURE FIRST AMERICAN FINANCIAL CORPORATION TITLE INSURANCE AND SERVICES SEGMENT SPECIALTY INSURANCE SEGMENT U.S. Title International Title Mortgage & Data Banking & Solutions Services Direct Canada Mortgage Solutions Trust & Banking Home Warranty Agency United Kingdom Database Sol

87. Slide 87: 2017 Revenue Breakdown

    2017 Revenue Breakdown FIRST AMERICAN FINANCIAL 8% 92% Specialty Segment $5.8B Title Segment SPECIALTY SEGMENT TITLE SEGMENT 45% Agency 6% 70% International U.S. Title $0.5B Home Warranty 78% $5.3B U.S. Title 10% Mortgage & Data 30% Solutions Property & Casualty 13% 26% Direct Commercial 83

88. Slide 88: 2017 Incurred Claims Detail

    2017 Incurred Claims Detail CLAIM CAUSE PROCESS CAUSE Underwriting Unclassified 6% Basic Risks 3% Escrow/Closing Other 14% 20% 14% Exam 9% Defective Title Search Fraud 6% 11% 13% Permit Violation 6% File Shortage Other 0% 2% Encumbrances Escrow/Closing 18% No Error Liens 5% 55% 18% GAP 0% 59% Direct

89. Slide 89: Claim Severity Distribution

    Claim Severity Distribution CLAIM COUNT BY SEVERITY GROUP PAID CLAIMS BY SEVERITY GROUP Large Claims Minor Claims 2% 0% Minor Claims Typical Claims 33% 54% Typical Claims Large Claims 65% 46% Large claims: $250,000 and greater Typical claims: $1,000 to $250,000 Minor claims: Less than $1,000 85 Note

90. Slide 90: Specialty Insurance Financial Summary

    Specialty Insurance Financial Summary ($ in Millions) 2013 2014 2015 2016 2017 Total Revenues $340 $369 $394 $436 $465 Pretax Income $42 $53 $40 $40 $37 Pretax Margin 12.4% 14.4% 10.0% 9.2% 7.9% Loss Ratio 56.8% 55.7% 59.8% 61.5% 62.6% Expense Ratio 32.6% 32.7% 32.2% 34.4% 34.2% Combined Ratio 89.4%

91. Slide 91: Title Segment Net Investment Income Reconciliation

    Title Segment Net Investment Income Reconciliation Net Investment Income Less Affiliate Investments $ in Millions Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Net Investment Income $21.8 $26.0 $25.4 $24.4 $24.9 $27.5 $29.0 $29.4 $26.6 $34.7 $37.9 $38.3 Less: Af

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