<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------
OR
--
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ----------------
Commission file number 0-3658
------
THE FIRST AMERICAN FINANCIAL CORPORATION
-------------------------------------------
(Exact name of registrant as specified in its charter)
Incorporated in California 95-1068610
-------------------------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
114 East Fifth Street, Santa Ana, California 92701-4699
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(714)558-3211
-------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
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.
Yes X No
----------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes No
------------ ----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
$1 par value - 11,449,077 as of November 11, 1996
<PAGE>
INFORMATION INCLUDED IN REPORT
------------------------------
Part I: Financial Information
Item 1. Financial Statements
A. Condensed Consolidated Statements of Income
B. Condensed Consolidated Balance Sheets
C. Condensed Consolidated Statements of Cash Flows
D. Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II: Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Items 2-5 have been omitted because they are not applicable with
respect to the current reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FIRST AMERICAN FINANCIAL CORPORATION
-------------------------------------------
(Registrant)
/s/ Thomas A. Klemens
-----------------------------------
Thomas A. Klemens
Executive Vice President, Chief Financial
Officer (Principal Financial Officer and
Duly Authorized to Sign on Behalf of
Registrant)
Date: November 12, 1996
1
<PAGE>
Part I: Financial Information
---------------------
Item 1. Financial Statements
--------------------
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Statements of Income
-------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30 September 30
---------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------ -------------- ------------
<S> <C> <C> <C> <C>
REVENUES
Operating revenues.............................. $405,522,000 $326,355,000 $1,151,279,000 $869,391,000
Investment and other income..................... 5,782,000 4,973,000 20,775,000 16,331,000
------------ ------------ -------------- ------------
411,304,000 331,328,000 1,172,054,000 885,722,000
------------ ------------ -------------- ------------
EXPENSES
Salaries and other personnel costs.............. 132,887,000 110,860,000 385,869,000 314,597,000
Premiums retained by agents..................... 134,766,000 104,502,000 372,856,000 289,149,000
Other operating expenses........................ 82,786,000 66,031,000 240,261,000 189,297,000
Provision for title losses and other claims..... 25,025,000 23,405,000 67,488,000 67,130,000
Depreciation and amortization................... 5,879,000 4,736,000 15,886,000 13,531,000
Interest........................................ 1,273,000 1,570,000 3,783,000 4,822,000
Minority interests.............................. 667,000 863,000 2,151,000 1,406,000
------------ ------------ -------------- ------------
383,283,000 311,967,000 1,088,294,000 879,932,000
------------ ------------ -------------- ------------
Income before premium and income taxes.......... 28,021,000 19,361,000 83,760,000 5,790,000
Premium taxes................................... 4,452,000 3,841,000 12,382,000 9,942,000
------------ ------------ -------------- ------------
Income (loss) before income taxes............... 23,569,000 15,520,000 71,378,000 (4,152,000)
Income taxes.................................... 9,800,000 6,200,000 29,600,000 (1,900,000)
------------ ------------ -------------- ------------
Net income (loss)............................... $ 13,769,000 $ 9,320,000 $ 41,778,000 $ (2,252,000)
============ ============ ============== ============
Net income (loss) per share..................... $ 1.20 $ 0.81 $ 3.65 $ (0.20)
============ ============ ============== ============
Cash dividends per share........................ $ .18 $ 0.15 $ 0.51 $ 0.45
============ ============ ============== ============
WEIGHTED AVERAGE NUMBER OF SHARES............... 11,443,000 11,394,000 11,440,000 11,405,000
============ ============ ============== ============
</TABLE>
2
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Balance Sheets
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 162,355,000 $ 145,902,000
------------------ -----------------
Accounts and accrued income receivable, net...................... 97,917,000 75,069,000
------------------ -----------------
Investments:
Deposits with savings and loan associations and banks.......... 23,463,000 18,637,000
Debt securities................................................ 134,721,000 128,875,000
Equity securities.............................................. 8,020,000 21,445,000
Other long-term investments.................................... 28,886,000 25,230,000
------------------ -----------------
195,090,000 194,187,000
------------------ -----------------
Loans receivable................................................. 52,484,000 46,134,000
------------------ -----------------
Property and equipment, at cost.................................. 208,468,000 192,496,000
Less- accumulated depreciation................................... (81,525,000) (73,672,000)
------------------ -----------------
126,943,000 118,824,000
------------------ -----------------
Title plants and other indexes.................................. 91,260,000 82,454,000
------------------ -----------------
Assets acquired in connection with claim settlements
(net of valuation reserves of $11,957,000 and $11,246,000)....... 23,544,000 25,592,000
------------------ -----------------
Deferred income taxes............................................ 40,055,000 39,994,000
------------------ -----------------
Goodwill and other intangibles, net.............................. 81,568,000 71,825,000
------------------ -----------------
Deferred policy acquisition costs................................ 24,503,000 24,342,000
------------------ -----------------
Other assets..................................................... 64,460,000 49,455,000
------------------ -----------------
$ 960,179,000 $ 873,778,000
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits.................................................. $ 48,311,000 $ 43,418,000
------------------ -----------------
Accounts payable and accrued liabilities......................... 113,715,000 80,938,000
------------------ -----------------
Deferred revenue................................................. 105,199,000 104,315,000
------------------ -----------------
Reserve for known and incurred but not reported claims........... 245,679,000 238,161,000
------------------ -----------------
Income taxes payable............................................. 12,013,000 2,812,000
------------------ -----------------
Notes and contracts payable...................................... 74,786,000 77,206,000
------------------ -----------------
Minority interests in consolidated subsidiaries.................. 22,717,000 24,161,000
------------------ -----------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value
Authorized - 500,000 shares; outstanding - none
Common stock, $1 par value
Authorized - 24,000,000 shares
Outstanding - 11,467,000 and 11,411,000 shares............... 11,467,000 11,411,000
Additional paid-in capital..................................... 45,556,000 44,270,000
Retained earnings.............................................. 279,022,000 243,093,000
Net unrealized gain on securities.............................. 1,714,000 3,993,000
------------------ -----------------
337,759,000 302,767,000
------------------ -----------------
$ 960,179,000 $ 873,778,000
================== ==================
</TABLE>
3
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Condensed Consolidated Statements of Cash Flows
-----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................ $ 41,778,000 $ (2,252,000)
Adjustments to reconcile net income (loss) to cash provided by
operating activities-
Provision for title losses and other claims................................ 67,488,000 67,130,000
Depreciation and amortization.............................................. 15,886,000 13,531,000
Minority interests in net income........................................... 2,151,000 1,406,000
Other, net................................................................. (542,000) 1,444,000
Changes in assets and liabilities excluding effects of
company acquisitions and noncash transactions-
Claims paid, including assets acquired, net of recoveries.................. (57,874,000) (49,073,000)
Net change in income tax accounts.......................................... 11,606,000 1,837,000
Increase in accounts and accrued income receivable......................... (22,259,000) (18,586,000)
Increase in accounts payable and accrued liabilities....................... 21,248,000 6,058,000
Increase (decrease) in deferred revenue.................................... 640,000 (12,252,000)
Other, net................................................................. (11,897,000) (2,297,000)
------------ ------------
Cash provided by operating activities........................................ 68,225,000 6,946,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash effect of company acquisitions...................................... (6,057,000) (31,336,000)
Net (increase) decrease in deposits with banks............................... (4,826,000) 742,000
Net increase in loans receivable............................................. (6,350,000) (4,259,000)
Purchases of debt and equity securities...................................... (54,660,000) (13,203,000)
Proceeds from sales of debt and equity securities............................ 37,236,000 34,972,000
Proceeds from maturities of debt securities.................................. 21,522,000 13,038,000
Net (increase) decrease in other investments................................. (1,532,000) 524,000
Capital expenditures......................................................... (20,022,000) (16,748,000)
Proceeds from sale of property and equipment................................. 1,092,000 384,000
------------ ------------
Cash used for investing activities........................................... (33,597,000) (15,886,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand deposits ............................................... 4,893,000 2,135,000
Repayment of debt............................................................ (15,174,000) (13,099,000)
Purchase of Company shares................................................... (2,045,000) (1,858,000)
Cash dividends............................................................... (5,849,000) (5,138,000)
------------ ------------
Cash used for financing activities........................................... (18,175,000) (17,960,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents......................... 16,453,000 (26,900,000)
Cash and cash equivalents -Beginning of year............................ 145,902,000 154,234,000
------------ ------------
-End of third quarter......................... $162,355,000 $127,334,000
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the first three quarters for:
Interest................................................................... $ 4,017,000 $ 4,552,000
Premium taxes.............................................................. $ 10,449,000 $ 11,241,000
Income taxes............................................................... $ 18,635,000 $ 3,597,000
Noncash investing and financing activities:
Shares issued for stock bonus plan......................................... $ 1,287,000 $ 1,128,000
Liabilities incurred in connection with company acquisitions............... $ 20,939,000 $ 20,021,000
Net unrealized (loss) gain on securities................................... $ (2,279,000) $ 7,845,000
Company acquisitions in exchange for common stock.......................... $ 2,100,000 $ 1,108,000
</TABLE>
4
<PAGE>
THE FIRST AMERICAN FINANCIAL CORPORATION
AND SUBSIDIARY COMPANIES
------------------------
Notes to Condensed Consolidated Financial Statements
----------------------------------------------------
(Unaudited)
Note 1 - Basis of Condensed Consolidated Financial Statements
- -------------------------------------------------------------
The condensed consolidated financial information included in this report has
been prepared in conformity with the accounting principles and practices
reflected in the consolidated financial statements included in the annual report
filed with the Commission for the preceding calendar year. All adjustments are
of a normal recurring nature and are, in the opinion of management, necessary to
a fair statement of the consolidated results for the interim periods. This
report should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
Note 2 - Stock Option Plan
- --------------------------
At the Annual Meeting of Stockholders held on April 24, 1996, The First American
Financial Corporation 1996 Stock Option Plan was approved. Concurrently, The
Compensation Committee of the Board of Directors granted 670,000 options at an
exercise price of $25.625. These options had no effect on the Company's
earnings per share computations for the current reporting period. Under the
plan, the maximum number of common shares that may be subject to options is
1,250,000.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
Three and nine months ended September 30:
OVERVIEW
Beginning in the second quarter 1994, increased mortgage interest rates caused a
downward trend in new order counts and closings as refinance transactions came
to a virtual halt. Due to seasonal considerations, this condition intensified at
yearend 1994 resulting in a low inventory of new orders going into 1995. As a
result, the Company reported a first quarter 1995 loss. During the second
quarter 1995, marked improvements in the national real estate market resulted in
significant order count increases and enabled the Company to return to
profitability. Mortgage interest rates peaked in January 1995 and decreased
throughout the remainder of the year and into 1996, helped by an easing of
monetary policy by the Federal Reserve Board. This, together with an improved
real estate economy (including the beginnings of a modest recovery in
California), contributed to high order counts resulting in a strong first half
of 1996. During the third quarter 1996, continued improvements in the national
real estate market and the Company's successful integration of its diverse
businesses resulted in record revenues and strong pretax profits.
OPERATING REVENUES
Set forth below is a summary of operating revenues for each of the Company's
segments.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------- ----------------------------------
($000) ($000)
1996 % 1995 % 1996 % 1995 %
-------- --- -------- --- ---------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Title Insurance:
Direct operations $160,875 40 $143,718 44 $ 465,113 40 $374,377 43
Agency operations 166,893 41 130,707 40 461,361 40 362,129 42
-------- --- -------- --- ---------- --- -------- ---
327,768 81 274,425 84 926,474 80 736,506 85
Real Estate Information 63,685 16 39,826 12 184,344 16 98,806 11
Home Warranty 9,968 2 8,575 3 28,468 3 23,794 3
Trust and Banking 4,101 1 3,529 1 11,993 1 10,285 1
-------- --- -------- --- ---------- --- -------- ---
Total $405,522 100 $326,355 100 $1,151,279 100 $869,391 100
======== === ======== === ========== === ======== ===
</TABLE>
TITLE INSURANCE. Operating revenues from direct operations increased 11.9% and
24.2% for the three and nine months ended September 30, 1996, respectively, when
compared with the same periods of the prior year. These increases were
attributable to an increase in the number of title orders closed by the
Company's direct operations, as well as an increase in the average revenues per
order closed. The Company's direct operations closed 195,500 and 582,300 title
orders during the three and nine months ended September 30, 1996, respectively,
representing increases of 5.7% and 19.8% when compared with the same periods of
the prior year. The average revenues per order closed were $823 and $799 for
the three and nine months ended September 30, 1996, respectively, as compared
with $777 and $770 for the same periods of the prior year. These increases were
primarily due to the significant decline in refinance activity, coupled with the
improved mix of higher-margin commercial and residential resale and new home
transactions. Operating revenues from agency operations increased 27.7% and
27.4% for the three and nine months ended September 30, 1996, respectively, when
compared with the same periods of the prior year. These increases were
primarily due to the same factors affecting direct operations, as well as the
effects of the inherent delay in reporting by agents.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
-------------------------
REAL ESTATE INFORMATION. Real estate information operating revenues increased
59.9% and 86.6% for the three and nine months ended September 30, 1996,
respectively, when compared with the same periods of the prior year. These
increases were primarily attributable to the same factors affecting title
insurance, as well as market penetration, primarily by the Company's flood
determination and credit reporting divisions. The three and nine months ended
September 30, 1996, also included operating revenues of $3.2 million and $7.6
million, respectively, attributable to company acquisitions.
HOME WARRANTY. Home warranty operating revenues increased 16.2% and 19.6% for
the three and nine months ended September 30, 1996, respectively, when compared
with the same periods of the prior year. These increases were primarily
attributable to improvements in the residential resale markets in which this
business segment operates.
INVESTMENT AND OTHER INCOME
Investment and other income increased $0.8 million, or 16.3%, and $4.4 million,
or 27.2%, for the three and nine months ended September 30, 1996, respectively,
when compared with the same periods of the prior year. These increases were
primarily due to an increase in equity in earnings of affiliates as well as an
increase in fixed income securities. The increase for the current nine-month
period also benefited from an increase in realized investment gains of $2.1
million, offset in part by a 6.5% reduction in the average investment portfolio
balance.
TOTAL OPERATING EXPENSES
TITLE INSURANCE. Salaries and other personnel costs were $102.7 million and
$300.9 million for the three and nine months ended September 30, 1996,
respectively, increases of 14.0% and 17.3% when compared with the same periods
of the prior year. These increases were primarily attributable to costs
incurred processing the high number of title orders opened during the respective
periods. The increase for the third quarter 1996 was also impacted by costs
incurred servicing orders opened during the second quarter 1996 but not closed
until the current quarter. The Company's direct operations opened 255,800 and
787,400 title orders during the three and nine months ended September 30, 1996,
respectively, increases of 4.8% and 17.3% when compared with the 244,200 and
671,200 opened during the same periods of the prior year.
Agents retained $134.8 million and $372.9 million of title premiums generated by
agency operations for the three and nine months ended September 30, 1996,
respectively, which compares with $104.5 million and $289.1 million for the same
periods of the prior year. The premium split between underwriter and agents is
in accordance with their respective agency contracts and can vary from region to
region due to divergencies in real estate closing practices as well as rating
structures.
Other operating expenses were $55.9 million and $161.1 million for the three and
nine months ended September 30, 1996, respectively, increases of 17.1% and 18.3%
when compared with the same periods of the prior year. These increases were
primarily attributable to the incremental costs associated with processing the
increase in order volumes.
The provision for title losses as a percentage of title insurance operating
revenues was 5.2% for the nine months ended September 30, 1996, and 6.9% for the
same period of the prior year. This decrease was primarily due to an ongoing
improvement in the Company's loss experience.
REAL ESTATE INFORMATION. Real estate information personnel and other operating
expenses were $47.5 million and $133.5 million for the three and nine months
ended September 30, 1996, respectively, increases of 52.8% and 54.6% when
compared with the same periods of the prior year. These increases were
primarily due to costs incurred servicing the increase in business volume, as
well as approximately $4.3 million and $9.5 million of costs incurred during the
three and nine months ended September 30, 1996, respectively, attributable to
company acquisitions. Also contributing to the increases were costs incurred
expanding the flood and credit reporting divisions.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
-------------------------
HOME WARRANTY. Home warranty personnel and other operating expenses were $2.3
million and $7.8 million for the three and nine months ended September 30, 1996,
respectively, increases of 1.0% and 9.9% when compared with the same periods of
the prior year. These increases were primarily attributable to costs incurred
servicing the increased business volume, offset in part by successful cost
containment programs. The provision for home warrant losses expressed as a
percentage of home warranty operating revenues was 57.9% and 58.9% for the nine
months ended September 30, 1996 and 1995, respectively. The decrease in loss
ratio was primarily attributable to a decrease in the average number of claims
per contract.
PRETAX PROFITS
Set forth below is a summary of pretax profits for each of the Company's
segments.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------- ----------------------------------
($000) ($000)
1996 % 1995 % 1996 % 1995 %
-------- --- -------- --- ---------- --- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Title Insurance $ 17,112 50 $ 14,786 60 $ 48,852 48 $ 6,749 32
Real Estate Information 13,844 41 7,398 30 44,254 43 7,542 35
Home Warranty 1,908 6 1,528 6 6,595 6 4,700 22
Trust and Banking 982 3 861 4 2,599 3 2,332 11
-------- --- -------- --- ---------- --- -------- ---
Total before corporate 33,846 100 24,573 100 102,300 100 21,323 100
=== === === ===
Corporate (5,825) (5,212) (18,540) (15,533)
-------- -------- ---------- --------
Total $ 28,021 $ 19,361 $ 83,760 $ 5,790
======== ======== ========== ========
</TABLE>
In general, the title insurance business is a lower profit margin business when
compared to the Company's other segments. The lower profit margins reflect the
high cost of producing title evidence whereas the corresponding revenues are
subject to regulatory and competitive pricing restraints. Due to this
relatively high proportion of fixed costs, title insurance profit margins
generally improve as closed order volumes increase. In addition, title
insurance profit margins are affected by the composition (residential or
commercial) and type (resale, refinancing or new construction) of real estate
activity. Profit margins from resale and new construction transactions are
generally higher than from refinancing transactions because in many states there
are premium discounts on, and cancellation rates are higher for, refinance
transactions. Title insurance profit margins are also affected by the
percentage of operating revenues generated by agency operations. Profit 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.
Real estate information pretax profits are generally unaffected by the type of
real estate activity but increase as the volume of residential real estate loan
transactions increases.
PREMIUM TAXES
Premium taxes were $12.4 million and $9.9 million for the nine months ended
September 30, 1996 and 1995, respectively. Premium taxes as a percentage of
title insurance operating revenues remained constant at 1.3%.
INCOME TAXES
The effective income tax rate for the nine months ended September 30, 1996, and
for the comparable period of the prior year was 41.5% and 45.8%, respectively.
The decrease in effective rate was primarily attributable to changes in the
ratio of permanent differences to income before income taxes.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations (continued)
-------------------------
NET INCOME (LOSS)
Net income for the three and nine months ended September 30, 1996, was $13.8
million, or $1.20 per share, and $41.8 million, or $3.65 per share,
respectively. Net income (loss) for the three and nine months ended September
30, 1995, was $9.3 million, or $0.81 per share, and $(2.3) million, or $(0.20)
per share, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents increased $16.5 million for the nine months
ended September 30, 1996, and decreased $26.9 million for the same period of the
prior year. The increase for the current year period was primarily due to cash
provided by operating activities, offset in part by capital expenditures and
the repayment of debt. The decrease for the prior year period was primarily due
to acquisition activity, purchases of debt and equity securities, capital
expenditures and the repayment of debt, partially offset by proceeds from the
sale and maturity of certain debt and equity securities.
Notes and contracts payable as a percentage of total capitalization decreased to
17.3% at September 30, 1996, from 19.1% at December 31, 1995. The decrease was
primarily due to the net income contribution to equity as well as the reduction
of debt.
Management believes that all of its anticipated cash requirements for the
immediate future will be met from internally generated funds.
9
<PAGE>
Part II: Other Information
-----------------
Item 1. Legal Proceedings.
- ------- -----------------
Certain material developments in the civil actions entitled Brown, et
al. v. Ticor Title Insurance Co., et. al., and Segall, et al. v.
Stewart Title Guaranty Co., et. al., which have been consolidated, for
pretrial matters, in the U.S. District Court in Phoenix, Arizona,
under the title "In Re Title Search and Examination Services Antitrust
Litigation," as Case No. MDL-94-1027, are reported in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
(27) Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period
covered by this report.
10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
(27) Financial Data Schedule
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<DEBT-HELD-FOR-SALE> 134,721,000
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 8,020,000
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 195,090,000
<CASH> 162,355,000
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 24,503,000
<TOTAL-ASSETS> 960,179,000
<POLICY-LOSSES> 245,679,000
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 74,786,000
0
0
<COMMON> 11,467,000
<OTHER-SE> 326,292,000
<TOTAL-LIABILITY-AND-EQUITY> 960,179,000
1,151,279,000
<INVESTMENT-INCOME> 18,003,000
<INVESTMENT-GAINS> 2,772,000
<OTHER-INCOME> 0
<BENEFITS> 67,488,000
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 71,378,000
<INCOME-TAX> 29,600,000
<INCOME-CONTINUING> 41,778,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,778,000
<EPS-PRIMARY> 3.65
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
