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©2018 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF
FIRST AMERICAN FINANCIALBarclays Global Financial Services Conference
September 10, 2019
Safe Harbor Statement
CERTAIN STATEMENTS MADE IN THIS PRESS RELEASE AND THE RELATED MANAGEMENT COMMENTARY CONTAIN, AND RESPONSES TO INVESTOR QUESTIONS MAY CONTAIN, FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE FACT THAT THEY DO NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS AND MAY CONTAIN THE WORDS “BELIEVE,” “ANTICIPATE,” “EXPECT,” “INTEND,” “PLAN,” “PREDICT,” “ESTIMATE,” “PROJECT,” “WILL BE,” “WILL CONTINUE,” “WILL LIKELY RESULT,” OR OTHER SIMILAR WORDS AND PHRASES OR FUTURE OR CONDITIONAL VERBS SUCH AS “WILL,” “MAY,” “MIGHT,” “SHOULD,” “WOULD,” OR “COULD.” THESE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS REGARDING FUTURE OPERATIONS, PERFORMANCE, FINANCIAL CONDITION, PROSPECTS, PLANS AND STRATEGIES. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ASSUMPTIONS THAT MAY PROVE TO BE INCORRECT. RISKS AND UNCERTAINTIES EXIST THAT MAY CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE THE ANTICIPATED RESULTS TO DIFFER FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION: INTEREST RATE FLUCTUATIONS; CHANGES IN THE PERFORMANCE OF THE REAL ESTATE MARKETS; VOLATILITY IN THE CAPITAL MARKETS; UNFAVORABLE ECONOMIC CONDITIONS; FAILURES AT FINANCIAL INSTITUTIONS WHERE THE COMPANY DEPOSITS FUNDS; CHANGES IN APPLICABLE LAWSAND GOVERNMENT REGULATIONS, INCLUDING DATA PRIVACY LAWS; HEIGHTENED SCRUTINY BY LEGISLATORS AND REGULATORS OF THE COMPANY’S TITLE INSURANCE AND SERVICES SEGMENT AND CERTAIN OTHER OF THE COMPANY’S BUSINESSES; USE OF SOCIAL MEDIA BY THE COMPANY AND OTHERPARTIES; REGULATION OF TITLE INSURANCE RATES; LIMITATIONS ON ACCESS TO PUBLIC RECORDS AND OTHER DATA; CHANGES IN RELATIONSHIPS WITH LARGE MORTGAGE LENDERS AND GOVERNMENT-SPONSORED ENTERPRISES; CHANGES IN MEASURES OF THE STRENGTH OF THE COMPANY’S TITLE INSURANCE UNDERWRITERS, INCLUDING RATINGS AND STATUTORY CAPITAL AND SURPLUS; LOSSES IN THE COMPANY’S INVESTMENT PORTFOLIO; MATERIAL VARIANCE BETWEEN ACTUAL AND EXPECTED CLAIMS EXPERIENCE; DEFALCATIONS, INCREASED CLAIMS OR OTHER COSTS AND EXPENSES ATTRIBUTABLE TO THE COMPANY’S USE OF TITLE AGENTS; ANY INADEQUACY IN THE COMPANY’S RISK MANAGEMENT FRAMEWORK; SYSTEMS DAMAGE,FAILURES, INTERRUPTIONS AND INTRUSIONS OR UNAUTHORIZED DATA DISCLOSURES; INNOVATION EFFORTS OF THE COMPANY AND OTHER INDUSTRYPARTICIPANTS AND ANY RELATED MARKET DISRUPTION; ERRORS AND FRAUD INVOLVING THE TRANSFER OF FUNDS; THE COMPANY’S USE OF A GLOBAL WORKFORCE; INABILITY OF THE COMPANY’S SUBSIDIARIES TO PAY DIVIDENDS OR REPAY FUNDS; AND OTHER FACTORS DESCRIBED IN THE COMPANY’SQUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2019, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE TO UPDATE FORWARD-LOOKING STATEMENTS TO REFLECT CIRCUMSTANCES OR EVENTS THAT OCCUR AFTER THE DATE THE FORWARD-LOOKING STATEMENTS ARE MADE.
2
Use of non-GAAP Financial Measures
THIS SLIDE PRESENTATION AND RELATED MANAGEMENT COMMENTARY CONTAIN CERTAIN FINANCIAL MEASURES THAT ARE NOT PRESENTED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), INCLUDING PERSONNEL AND OTHER OPERATING EXPENSE RATIOS, SUCCESSRATIOS, ADJUSTED REVENUES, ADJUSTED PRETAX INCOME, ADJUSTED EARNINGS PER SHARE, NET OPERATING REVENUES, AND ADJUSTED PRETAX MARGINS FOR THE COMPANY, ITS TITLE INSURANCE AND SERVICES SEGMENT AND ITS SPECIALTY INSURANCE SEGMENT. THE COMPANY IS PRESENTINGTHESE NON-GAAP FINANCIAL MEASURES BECAUSE THEY PROVIDE THE COMPANY’S MANAGEMENT AND INVESTORS WITH ADDITIONAL INSIGHT INTO THE OPERATIONAL EFFICIENCY AND PERFORMANCE OF THE COMPANY RELATIVE TO EARLIER PERIODS AND RELATIVE TO THE COMPANY’S COMPETITORS. THECOMPANY DOES NOT INTEND FOR THESE NON-GAAP FINANCIAL MEASURES TO BE A SUBSTITUTE FOR ANY GAAP FINANCIAL INFORMATION. IN THIS SLIDE PRESENTATION THE ADJUSTED INVESTMENT INCOME NON-GAAP FINANCIAL MEASURE HAS BEEN PRESENTED WITH, AND RECONCILED TO, THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES. THE OTHER NON-GAAP FINANCIAL MEASURES ARE PRESENTED WITH, AND RECONCILED TO, THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURES IN OUR MOST RECENT EARNINGS RELEASE FILED AS AN EXHIBIT TO THE COMPANY’S CURRENT REPORT ON FORM-8K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 25, 2019. INVESTORS SHOULD USE THESE NON-GAAP FINANCIAL MEASURES ONLY IN CONJUNCTION WITH THE COMPARABLE GAAP FINANCIAL MEASURES.
3
AGENDA
Strong Track Record of Results
Favorable Market Conditions
Consistent Strategy and Capital Management Priorities
4
Leader in the Title and Settlement Services Industry
92% of Revenue, Title Segment
8% of Revenue, Specialty Insurance Segment25.8% Title Market Share
18,300 Employees
800 Offices
Largest Title Plant and Property
Record Database
Fortune 100 Best Companies to Work For®
2016 – 2017 – 2018 – 2019
Trusted National Brand
$10.6B Total Assets
5
$5.7B Total Revenue
9 Countries
Note: Revenue and market share data for 2018. All other data as of December 31, 2018.
FORTUNE and FORTUNE 100 Best Companies to Work For are registered trademarks of Time Inc. FORTUNE and Time Inc. are not affiliated with and do not endorse products and services of First American Financial Corporation.
Past 5 Years: Achieved Strong Financial Results
6
TOTAL REVENUE
$ in
Mill
ion
s
EARNINGS PER SHARE
CASH FROM OPERATIONS RETURN ON EQUITY
$4.7
$5.2
$5.6 $5.8 $5.7
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
2014 2015 2016 2017 2018
$ in
Bill
ion
s
$2.15 $2.62
$3.09
$3.76 $4.19
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2014 2015 2016 2017 2018
$361
$551 $489
$632
$793
$100
$200
$300
$400
$500
$600
$700
$800
$900
2014 2015 2016 2017 2018
9.3%10.8%
11.9%13.0% 13.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2014 2015 2016 2017 2018
Target
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Mortgage Originations Pretax Margin
Historical Title Insurance Margin
7
$ in
Bill
ion
s
Source: August 2019 MBA
Total Shareholder Return
8 Source: Bloomberg – Weekly as of August 31, 2019
-20
0
20
40
60
80
100
120
140
160
180
9/3
0/2
01
4
10
/31
/20
14
11
/30
/20
14
12
/31
/20
14
1/3
1/2
01
5
2/2
8/2
01
5
3/3
1/2
01
5
4/3
0/2
01
5
5/3
1/2
01
5
6/3
0/2
01
5
7/3
1/2
01
5
8/3
1/2
01
5
9/3
0/2
01
5
10
/31
/20
15
11
/30
/20
15
12
/31
/20
15
1/3
1/2
01
6
2/2
9/2
01
6
3/3
1/2
01
6
4/3
0/2
01
6
5/3
1/2
01
6
6/3
0/2
01
6
7/3
1/2
01
6
8/3
1/2
01
6
9/3
0/2
01
6
10
/31
/20
16
11
/30
/20
16
12
/31
/20
16
1/3
1/2
01
7
2/2
8/2
01
7
3/3
1/2
01
7
4/3
0/2
01
7
5/3
1/2
01
7
6/3
0/2
01
7
7/3
1/2
01
7
8/3
1/2
01
7
9/3
0/2
01
7
10
/31
/20
17
11
/30
/20
17
12
/31
/20
17
1/3
1/2
01
8
2/2
8/2
01
8
3/3
1/2
01
8
4/3
0/2
01
8
5/3
1/2
01
8
6/3
0/2
01
8
7/3
1/2
01
8
8/3
1/2
01
8
9/3
0/2
01
8
10
/31
/20
18
11
/30
/20
18
12
/31
/20
18
1/3
1/2
01
9
2/2
8/2
01
9
3/3
1/2
01
9
4/3
0/2
01
9
5/3
1/2
01
9
6/3
0/2
01
9
7/3
1/2
01
9
8/3
1/2
01
9
FAF US Equity SPX Index
Total Annualized Return
1 year 3 year 5 year
First American 6.4% 14.2% 19.4%
S&P 500 2.4% 12.5% 10.1%
AGENDA
Favorable Market Conditions
Consistent Strategy and Capital Management Priorities
Strong Track Record of Results
9
Declining Rates Once Again Driving Higher Refinance Activity
10
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
-
1,000
2,000
3,000
4,000
5,000
6,000
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Oct
-16
No
v-1
6
De
c-1
6
Jan
-17
Feb
-17
Mar
-17
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
De
c-1
7
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
May
-18
Jun
-18
Jul-
18
Au
g-1
8
Sep
-18
Oct
-18
No
v-1
8
De
c-1
8
Jan
-19
Feb
-19
Mar
-19
Ap
r-1
9
May
-19
Jun
-19
Jul-
19
Au
g-1
9
10
-Yea
r Tr
easu
ry
Dai
ly O
pen
Ord
ers
Refinance 10-Year %
Purchase Activity Improving as Market Resets
11
First American Operations▪ 550 local offices focused on purchase
▪ Leading homebuilder business
▪ Fee per file ~2.5x refinance
Purchase Market▪ Good economic backdrop with job and
wage growth
▪ Near term affordability improving as market resets
− Mortgage rates have declined− Home price appreciation slowing− Inventory increasing but remains a
constraint particularly at entry level
GROWTH RATE vs. PRIOR YEAR
$300
$400
$500
$600
$700
$800
$900
$1,000
FY17 FY18
$ in
Mill
ion
s
PURCHASE DIRECT REVENUE
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19
Title Order Closed Average Revenue per Order
12
Commercial - Current Trend and Outlook
• Most major asset classes and geographic markets remain strong
• High level of capital availability despite a decline in foreign capital
• A few overheated markets showing signs of fatigue
• Expect strong activity level to persist, supported by continued economic growth
Commercial Market Sales Volume(1) Direct Revenues
465 506599 559 592
642
81 89
98 102
104 112
$-
$100
$200
$300
$400
$500
$600
$700
$800
2013 2014 2015 2016 2017 2018
NCSD Local
546595
696661
696
$ Millions
753
Commercial Outlook Remains Favorable
(1) Source: Real Capital Analytics
432
580
181
72
155
261310
378
453
570
512489
562
535500
480
$0
$200
$400
$600
$800
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Billions
Declining Short-term Rates a Headwind to Investment Income
13(1) Excludes affiliated investments (See reconciliation in Appendix).(2) Company estimate.
0.00%
0.25%
0.50%
0.75%
1.00%
1.25%
1.50%
1.75%
2.00%
2.25%
2.50%
2.75%
$16
$26
$36
$46
$56
$66
$76
Q1
'14
Q2
'14
Q3
'14
Q4
'14
Q1
'15
Q2
'15
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
Q1
' 18
Q2
' 18
Q3
' 18
Q4
' 18
Q1
' 19
Q2
' 19
Titl
e Se
gmen
t In
vest
men
t In
com
e ($
in M
illio
ns)
Investment Income Fed Funds RateFed
Fun
ds R
ate
Title Segment(1)
Each 25 basis point Fed move impacts investment income by ~$12 - $15 million/year(2)
AGENDA
Strong Track Record of Results
Consistent Strategy and Capital Management Priorities
14
Favorable Market Conditions
First American Strategy
15
Deploy Our Capital to Maximize Long-Term Shareholder Returns
People and Culture
Compliance and Risk Management
Innovation
To Be the Premier Title Insurance and Settlement Services Company
Profitably Grow OurCore Title
andSettlement
Business
Strengthen the Enterprise Through Data and Process Advantage
Manageand Actively
Invest in Complementary
Businesses Where First
American has a Strategic
Advantage
VISION:
16
Profitably Grow our Core Title and Settlement Business
Pillar 1Strategic priorities
▪ Sustain leadership in Title – focusing on top 10 states
▪ Maintain and grow profitable market share
▪ Drive digital transformation
▪ Develop value-added services that strengthen customer relationships
▪ Win with emerging customers
Be the preferred title company for next-generation real estate
companies
▪ Grow interest income
Provide banking services to our agents to improve their risk
profile and improve our returns
17
Strengthen the Enterprise through Data and Process Advantage
Pillar 2Strategic priorities
▪ Further develop data advantage
▪ Expand coverage of property data elements and geographies
▪ Achieve market-leading title automation
Leverage data advantage together with data science capability
▪ Find new businesses that can leverage our data
Determine innovative and meaningful ways to monetize our
data
▪ Grow licensing and online data visualization organically
Leverage position in market to meet the growing data needs
from customers
FAF has Strongest Data Foundation in the Industry
No. of counties Population (%) Market position
Assessor/property ownership 3,144 100 1st
Proprietary title plants 546 60 1st
Deeds, Mortgages, Foreclosures 2,947 99 1st
Assignments and releases 2,308 96 1st
Parcel Boundaries 2,984 99 1st
Homeowner associations 2,719 99 1st
Active real estate listings 1.8M 85 1st
Document images (6.7B total) 1,434 84 1st
18
19
Manage and Actively Invest in Complementary Businesses where First American has a Strategic Advantage
Pillar 3Strategic priorities
▪ Grow Home Warranty
Accelerate direct-to-consumer growth while maintaining strong
operating margins
▪ Grow international business in core geographies
Invest for long-term growth in Canada, Europe, and Australia
▪ Stabilize Property & Casualty (P&C) business
Improve risk profile and stabilize loss ratio
▪ Seek out new opportunities
Enter adjacent businesses where First American has a strategic
advantage
Capital Management Strategy
▪ Objective: Create long-term shareholder value
▪ Capital management priorities:
▪ Make value-creating investments in our core business
▪ Acquire businesses that fit within our strategy
▪ Return excess capital to shareholders through dividends and share repurchases
▪ Maintain “A-” financial strength ratings and adequate capital levels
▪ Manage our capital structure prudently
▪ Maintain ample financial flexibility and holding company liquidity
20
Disciplined M&A Strategy Drives Growth
Focused Strategy▪ Title companies that expand our footprint
in key markets
▪ Data and information companies that enhance our data capabilities or advance title automation
▪ Opportunities complementary to title
Disciplined Process▪ Strategic and cultural fit
▪ Risk adjusted return targets
▪ Operational integration
21
Pursuing targets that support or
leverage our core title and settlement
business
Dividends
▪ First American expects to pay a meaningful dividend given the company’s cash flow generation and investment opportunities
▪ Dividend increases are intended to be sustainable in perpetuity
▪ Dividend increases will be dependent upon expected holding company cash flows, market conditions and alternative uses of capital, among other factors
▪ The company is not committed to increasing the dividend every year
22
Dividend ConsiderationsDIVIDENDS PER SHARE
PAYOUT RATIO
$0.48
$0.84$1.00
$1.20
$1.44
$1.60
$0.25
$0.50
$0.75
$1.00
$1.25
$1.50
$1.75
2013 2014 2015 2016 2017 2018
28%
39% 38% 38% 38% 38%
0%
20%
40%
60%
2013 2014 2015 2016 2017 2018
Investment Considerations
▪ Focused strategy as “pure play” in title and settlement markets
▪ Attractive industry characteristics
▪ Strong competitive position in title and settlement services
▪ Opportunity to grow through focus on innovation and by leveraging unique assets (e.g. bank and data)
▪ Expect earnings and margin growth as mortgage originations improve
▪ Strong balance sheet and financial flexibility
▪ Commitment to return capital to shareholders
23
APPENDIX
24
Title Segment Net Investment Income Reconciliation
25
Net Investment Income Less Affiliate Investments$ in Millions
Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4’18 Q1’19 Q2’19
Net Investment Income $24.9 $27.5 $29.0 $29.4 $26.6 $34.7 $37.9 $38.3 $41.4 $51.7 $60.9 $69.3 $70.1 $71
Less: Affiliate Investments 0.9 2.1 2.8 2.4 1.6 1.8 1.1 (0.8) (0.3) 1.0 1.5 0.5 (0.2) 0.3
Adjusted Net Investment Income $24.0 $25.4 $26.2 $27.0 $25.0 $32.9 $36.8 $39.0 $41.7 $50.7 $59.3 $68.8 $70.2 $70.6
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15
Net Investment Income $15.7 $19.3 $22.0 $2.7 $21.8 $26.0 $25.4 $24.4
Less: Affiliate Investments (2.0) 0.3 2.8 (17.6) 1.1 3.7 2.8 0.1
Adjusted Net Investment Income $17.7 $19.0 $19.2 $20.3 $20.6 $22.2 $22.6 $24.3
SPECIALTY INSURANCE SEGMENT
U.S. Title
Direct
Agency
Commercial
International Title
Canada
United Kingdom
Mortgage & Data Solutions
Mortgage Solutions
Database Solutions
Banking & Services
Trust & Banking
Real Estate Services
Home Warranty
Property & Casualty
Australia/New Zealand
TITLE INSURANCE AND SERVICES SEGMENT
FIRST AMERICANFINANCIAL CORPORATION
ORGANIZATIONAL STRUCTURE
26
1.9 2.1 2.3 2.3 2.3
1.0 1.2
1.3 1.3 1.3 0.6
0.70.7 0.7 0.8
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
2014 2015 2016 2017 2018
Agent Direct Commercial
$ in
Bill
ion
s$
in B
illio
ns
U.S. TITLE
DIRECT AGENCY COMMERCIAL
Total Revenue Trend
$3.5
$4.0$4.2 $4.4 $4.4
U.S. Title76%
$4.4B$5.7B
$2.3BAgent40%
$1.3BDirect23%
$0.8BCommercial
13%
First American Financial Total Revenue
27
SPECIALTY INSURANCE
Total Revenue Trend
PROPERTY & CASUALTY HOME WARRANTY
28
First American Financial Total Revenue
Specialty Segment
8%$0.5B$0.5B $5.7B
237 260 299 327 344
132 134
137 139 125
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
2014 2015 2016 2017 2018
Home Warranty Property & Casualty
$ in
Mill
ion
s
$394
$ in
Mill
ion
s
$369
$436$465 $469
73%Home
Warranty
27%Property &
Casualty
Agency44%
Direct26%Commercial
15%
Mortgage & Data Solutions
9%
International6%
92%Title Segment
8%Specialty Segment
2018 Revenue Breakdown
29
FIRST AMERICAN FINANCIAL
U.S. Title
$5.7B
$5.3B
TITLE SEGMENT
$0.5B
SPECIALTY SEGMENT
Ultimate Loss Ratios by Policy Year
30 Note: Ultimate loss ratios are estimates and calculated as a percentage of title premiums and escrow fees for a given policy year as of December 31, 2018
Paid
Losses b
y Calen
dar Year ($
in M
illion
s)
Ult
imat
e Lo
ss R
atio
s b
y P
olic
y Ye
ar
95%
94%
94%91%
93%
90%
87%
85% 81%
74% 67%66%
47% 30%17% 5%
$0
$50
$100
$150
$200
$250
$300
$350
$400
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Paid to Date Ultimate Loss Ratio - Policy Year Paid Losses - Calendar Year
11.2%
13.2%
9.8%
6.5%
5.4%5.2%
3.4%3.7%
4.6%
3.3%
3.8% 3.9%
9.8%
4.0%
5.3%
7.6%
2018 Incurred Claims Detail
31
CLAIM CAUSE PROCESS CAUSE
49% Direct / 51% Agent
File Shortage0%
Escrow/Closing5%
GAP0%
Liens18%
Encumbrances18%
Fraud13%
Basic Risks20%
Other14%
Defective Title6%
Permit Violation6%
No Error49%
Unclassified3%
Escrow/Closing14%
Underwriting8%
Exam11%
Search13%
Other2%
Claim Severity Distribution
32
CLAIM COUNT BY SEVERITY GROUP PAID CLAIMS BY SEVERITY GROUP
Large claims: $250,000 and greater Typical claims: $1,000 to $250,000 Minor claims: Less than $1,000
Note: Data for 2018 paid claims; excludes file shortages and de minimis claims
Large Claims44%
Typical Claims
56%
Minor Claims0%
Large Claims1%
Typical Claims
66%
Minor Claims
33%
Title Insurance Margin Objective
33
Downside Base Case Upside
Pretax Margin <11% 11% - 13% >13%
Mortgage Originations <$1.4 Trillion $1.4 - $1.8 Trillion >$1.8 Trillion
% Refinance ~25% ~25% ~25%
Shar
e B
uyb
ack
Per
iod
$20
$25
$30
$35
$40
$45
$50
$55
$60
$65
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
Oct
-18
Jan
-19
Ap
r-1
9
Jul-
19
Shar
e B
uyb
ack
Per
iod
Share Repurchases
▪ Share repurchases will be dependent upon capital levels, market conditions and alternative uses of capital among other factors
▪ $160 million remaining under share repurchase authorization
34
SHARE REPURCHASE HISTORY
2013 Repurchase Summary
Shares purchased 3.0 Million
Total amount $64.5 million
Avg. price per share $21.87
IRR 25.9%
2018/2019 Repurchase Summary
Shares purchased 472,133
Total amount $20.9 million
Avg. price per share $44.20
IRR 25.7%
30%
21%
44%
1%4%
Uses of Free Cash Flow and Debt Proceeds
35
▪ ~44% of cash flow used for investment portfolio to strengthen the balance sheet
▪ Moving forward, portfolio strengthening not necessary as capital levels exceed current targets
CUMULATIVE 5 YEAR USES
Dividends
Acquisitions
Net Cash & Investments
Share RepurchasesPension Termination
$(200)
$(100)
$-
$100
$200
$300
$400
$500
$600
$700
2014 2015 2016 2017 2018
$ in
Mill
ion
s
Capital Structure
▪ Management’s target debt-to-capital ratio is 18-20%
▪ Supports target financial strength ratings
▪ $160 million drawn on $700 million revolving credit facility
▪ Revolving credit facility term ends in May 2019
▪ Significant financial flexibility to seize strategic opportunities
36
As of June 30, 2019 ($ in Millions)
4.3% Senior Notes Due 2023 $249
4.6% Senior Notes Due 2024 $298
Trust Deed Notes $18
Other Notes $5
Revolving Credit Facility $160
Total Debt $730
Secured Financings Payable $190
Total Equity $4,088
Debt-to-Capital Ratio 18.4%
DEBT-TO-CAPITAL RATIO
5%
10%
15%
20%
25%
30%
35%
2014 2015 2016 2017 2018 2019-Q1
Gov't Agency
8%
Municipal17%
Corporate7%
Gov't Agency
MBS68%
US Treasury
9%
Gov't Agency
4%Municipal
17%
Corporate17%
Gov't Agency
MBS31%
Bank Loans3%
Foreign5%
Equity14%
US Treasury4%
Gov't Agency
6%
Municipal17%
Corporate12%
Gov't Agency MBS52%
Bank Loans1%
Foreign2%
Equity6%
Investment Portfolio
37
CONSOLIDATED PORTFOLIO INSURANCE PORTFOLIO
BANK PORTFOLIO
Note: Debt and equity securities as of June 30, 2019
Avg. Rating : AADuration: 3.1Book Yield: 3.0%
Avg. Rating : AA-Duration: 4.0Book Yield: 3.3%
Avg. Rating : AA+Duration: 2.6Book Yield: 2.7%
$6.4B
$2.9B
$3.5B
