REGISTRATION NO. 333-74073
FILED PURSUANT TO RULE 424(B)(3)
PROSPECTUS
769,584 COMMON SHARES
THE FIRST AMERICAN FINANCIAL CORPORATION
Offer by the Selling Shareholders.
o We have prepared this prospectus so that the shareholders listed on the
table on page 4 may sell their shares.
Share Price
o The sale price of the shares offered with this prospectus may be determined
in any of the following ways.
o By negotiation.
o By a formula.
o By the market price of the shares at the time of sale.
An Investment in Our Company Entails Risk
o Before making an investment in our shares, you should consider carefully
the "Risk Factors" set forth beginning on page 1.
Our Business
o We provide real estate-related financial and informational services to real
property buyers and mortgage lenders.
Listing
o The shares offered by this prospectus will be listed for trading on the New
York Stock Exchange.
o The trading symbol for our shares on the New York Stock Exchange is "FAF."
o On March 15 , 1999, the closing price of our shares on the New York Stock
Exchange was $24.3125.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 16, 1999.
<PAGE>
(inside cover page)
WHERE YOU CAN FIND MORE INFORMATION;
INCORPORATION BY REFERENCE
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy,
upon payment of a fee set by the SEC, any document that we file with the SEC at
any of its public reference rooms in the following locations.
450 Fifth Street, N.W.
Washington, D.C. 20549
Seven World Trade Center
13th Floor, Suite 1300
New York, New York 10048
Citicorp Center
500 West Madison Street
14th Floor, Suite 1400
Chicago, Illinois 60661
You may also call the SEC at 1-800-432-0330 for more information on the
public reference rooms. Our filings are also available to the public on the
internet through the SEC's EDGAR database. You may access the EDGAR database at
the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
company, including information concerning its financial performance.
o Our Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
o Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 1998, June 30, 1998 and September 30, 1998.
o Our Current Reports on Form 8-K dated January 23, 1998, January 27,
1998, March 18, 1998, March 31, 1998, April 7, 1998, June 26, 1998,
October 22, 1998 and February 10, 1999.
o The description of our common shares, $1.00 par value, contained in
our Registration Statement on Form 8-A, dated November 19, 1993, which
registers the shares under Section 12(b) of the Exchange Act.
o The description of Rights to Purchase Series A Junior Participating
Preferred Shares, which may be transferred with our common shares,
contained in our Registration Statement on Form 8-A, dated November 7,
1997, which registers the rights under Section 12(b) of the Exchange
Act.
o Any additional documents that we file with the SEC between the date of
this prospectus and the earlier of the following dates.
o The date on which all of the shares offered by this prospectus
are resold by the persons or entities who or which acquire them
from us.
o The date that is one year after the last date on which shares
offered by this prospectus are issued by us.
This prospectus is part of a registration statement on Form S-3 which we
have filed with the SEC. As permitted by SEC rules, this prospectus does not
contain all of the information contained in the registration statement and
accompanying exhibits and schedules filed with the SEC. You may refer to the
registration statement, the exhibits and schedules for more information about us
and our shares. The registration statement, exhibits and schedules are also
available at the SEC's public reference rooms or through its EDGAR database on
the internet.
You may obtain a copy of these filings at no cost by writing to us at The
First American Financial Corporation, 114 East Fifth Street, Santa Ana,
California 92701-4642, Attention: Mark R Arnesen, or by telephoning us at (714)
558-3211.
<PAGE>
RISK FACTORS
In addition to the other information contained in this prospectus, you
should carefully consider the following risk factors before investing in our
company.
Revenues may decline during periods when the demand for our products decreases
Our revenues decrease as the number of real estate transactions in which
our products are purchased decreases. We have found that the number of real
estate transactions in which our products are purchased decreases in the
following situations.
o When mortgage rates are high.
o When the mortgage fund supply is limited.
o When the United States economy is weak.
We believe that this trend will recur.
Earnings may be reduced if acquisition projections are inaccurate
Our earnings have improved since 1991 in large part because of our
acquisition and integration of non-title insurance businesses. These businesses
generally have higher margins than our title insurance businesses. The success
or failure of each of these acquisitions has depended in large measure upon the
accuracy of our projections. Our projections are not always accurate. Inaccurate
projections have historically led to lower than expected earnings.
Business interruption, shutdown and liability because of Year 2000 problems
The following situations could occur as a result of the Year 2000 problem.
o Our information suppliers may be unable to provide us accurate data in
a timely manner.
o We may be unable to process information in an accurate and timely
manner.
o Our customers may be unable to receive and use our products and
services.
Each of these situations could result in the interruption or shutdown of
one or more of our businesses. Additionally, a disruption of telecommunications
and utilities as a result of the Year 2000 problem would most likely result in
the interruption or shutdown of one or more of our businesses. A business
interruption and/or shutdown, if prolonged, would most likely result in
financial loss, potential regulatory action, harm to our reputation and
potential legal liability.
To the extent we package or use erroneous information resulting from the
Year 2000 problem in our products and services, we may incur liability to
others. The degree of liability will depend in large measure upon the harm
caused and the particular product or service involved. For example, an error in
monitoring tax payments for a property under a tax service contract could result
in the imposition of a tax lien. That could lead to a foreclosure proceeding
against the property, which in turn could result in harm to the property owner
and mortgage lender. By way of contrast, in our credit reporting business, we
act as a consumer reporting agency when we use data provided by credit bureaus.
As such, under the Fair Credit Reporting Act, we have no liability for
inaccuracies in information contained in credit reports so long as we use
reasonable procedures to assure the accuracy of such information.
Changes in government regulation could prohibit or limit our operations
Our title insurance, home warranty, thrift, trust and investment businesses
are regulated by various governmental agencies. Many of our other businesses
operate within statutory guidelines. Changes in the applicable regulatory
environment or statutory guidelines could prohibit or restrict our existing or
future operations. Such restrictions may adversely affect our financial
performance.
RECENT DEVELOPMENTS
Effective January 1, 1999, we implemented a change to our revenue
recognition accounting policy for tax service contracts. The new accounting
policy was adopted prospectively and applies to all new loans serviced beginning
January 1, 1999. Prior to January 1, 1999, we recognized revenues from tax
service contracts over the estimated duration of the contracts as the related
servicing costs were estimated to occur. The majority of the servicing costs,
approximately 70%, are incurred in the year the contract is executed, with the
remaining 30% incurred over the remaining service life of the contract. The new
policy provides for a more ratable recognition of revenues, reducing the amount
recognized at the inception of the contract and recognizing it over the expected
service period. The amortization rates applied to recognize the revenues assume
a 10-year contract life and are adjusted to reflect prepayments. The resulting
rates by year (starting with year one) are 32%, 24%, 14%, 9%, 7%, 5%, 4%, 2%, 2%
and 1%. We periodically review our tax service contract portfolio to determine
if there have been changes in contract lives and/or changes in the number and/or
timing of prepayments; accordingly, we may adjust the rates to reflect current
trends. We estimate that adoption of this new policy will result in a decrease
in diluted earnings per share for 1999 of $0.25 to $0.35. This estimate is
heavily dependent on the volume of tax service contracts entered into in 1999.
Assuming the new accounting policy had been consistently applied in prior years,
we would have reported diluted earnings per share of $1.12, $0.42, $0.17, $0.90
and $1.02 for the years ended December 31, 1993, 1994, 1995, 1996 and 1997,
respectively. Actual reported earnings per share for the years ended December
31, 1993, 1994, 1995, 1996 and 1997, respectively, were $1.26, $0.37, $0.16,
$1.00 and $1.16.
SPECIAL NOTE OF CAUTION REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus, any applicable supplement
to this prospectus and the documents incorporated by reference into this
prospectus, may constitute "forward-looking statements" within the meaning of
the federal securities laws. The following or similar words are intended to
identify forward-looking statements in our documents.
o "anticipate"
o "believe"
o "estimate"
o "expect"
o "objective"
o "projection"
o "forecast"
o "goal"
Forward-looking statements are based on our management's expectations
regarding our future economic performance and take into account only the
information currently available. These statements are not statements of
historical fact. Various factors could cause our actual results, performance or
financial condition to differ materially from the expectations expressed or
implied in any forward-looking statements. Some of these factors are listed
below.
o General volatility of the capital markets and the market price of our
shares.
o Changes in the real estate market, interest rates or the general
economy.
o Our ability to identify and complete acquisitions and successfully
integrate businesses we acquire.
o Our ability to employ and retain qualified employees.
o Our ability, and the ability of our significant vendors, suppliers and
customers, to achieve Year 2000 compliance.
o Changes in government regulations that are applicable to our regulated
businesses.
o Changes in the demand for our products.
o Degree and nature of our competition.
o An increase in our expenses.
o An increase in the loss ratio of our title insurance business.
o Consolidation among our customers.
We qualify all forward-looking statements contained in our documents by
these cautionary factors.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered
pursuant to this prospectus; all proceeds from the sale of the shares will be
for the account of the selling shareholders.
SELLING SHAREHOLDERS
The following table sets forth, as of the date of this prospectus, the
following information.
o The name of each holder of shares that may be sold pursuant to this
prospectus.
o The number of our common shares that each selling shareholder owns as
of such date.
o The number of our common shares owned by each selling shareholder that
may be offered for sale from time to time pursuant to this prospectus.
o The number of our common shares to be held by each selling shareholder
assuming the sale of all the shares offered hereby.
o By footnote, any position or office held or material relationship with
The First American Financial Corporation or any of its affiliates
within the past three years, other than that of being a shareholder.
We may amend or supplement this prospectus from time to time to update the
disclosure set forth herein.
[The rest of this page has been intentionally left blank.]
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of Shares
to be Offered Shares Owned of Record
Shares Owned of Record for the Selling After Completion of the
Prior to the Offering Shareholder's Offering
Name of Selling Shareholder<F1> Number % Account Number %
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
The Ohio State Bar Foundation 0 0 700,000 0 0
- --------------------------------------------------------------------------------------------------------------------
Gary L. Bates 4,000 <1 605 4,000 <1
- --------------------------------------------------------------------------------------------------------------------
Allicia Beach 0 0 293 0 0
- --------------------------------------------------------------------------------------------------------------------
Laura Beach 0 0 293 0 0
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Ray M. Beach, Richard M. Beach and 0 0 18,307 0 0
Susan Beach
- --------------------------------------------------------------------------------------------------------------------
Ray M. Beach, Trustee 0 0 3,026 0 0
Beach Family Trust
- --------------------------------------------------------------------------------------------------------------------
Richard M. Beach and Susan J. Beach 0 0 907 0 0
- --------------------------------------------------------------------------------------------------------------------
Ryan Beach 0 0 290 0 0
- --------------------------------------------------------------------------------------------------------------------
Ronald Douglas Bogner and Martha 0 0 151 0 0
Janeane Bogner
- --------------------------------------------------------------------------------------------------------------------
Ginger Bowes 0 0 3,026 0 0
- --------------------------------------------------------------------------------------------------------------------
Jennie B. Brown 0 0 302 0 0
- --------------------------------------------------------------------------------------------------------------------
John C. Brumett and Florence I. 0 0 756 0 0
Brumett
- --------------------------------------------------------------------------------------------------------------------
Carolyn F. Cleland 0 0 3,026 0 0
- --------------------------------------------------------------------------------------------------------------------
Jack L. Cox and Raynette Cox 0 0 266 0 0
- --------------------------------------------------------------------------------------------------------------------
Janet A. Ford and Donald P. Ford<F2> 4,400 <1 151 4,400 <1
- --------------------------------------------------------------------------------------------------------------------
G&O Mortgage Co. 0 0 4,539 0 0
- --------------------------------------------------------------------------------------------------------------------
Herbert H. Giese and Lois L. Giese 0 0 3,026 0 0
- --------------------------------------------------------------------------------------------------------------------
Cheryel Jacomella 0 0 1,513 0 0
- --------------------------------------------------------------------------------------------------------------------
Frederick R. Jensen, Sr. And Louise 0 0 3,026 0 0
C. Jensen
- --------------------------------------------------------------------------------------------------------------------
Michael G. Kostanecki and Joanna E. 7,429 <1 302 7,429 <1
Kostanecki<F3>
- --------------------------------------------------------------------------------------------------------------------
Albert J. Lagomarsino and Helen M. 108,747 <1 605 108,747 <1
Lagomarsino<F4>
- --------------------------------------------------------------------------------------------------------------------
Robert D. Levy 0 0 7,943 0 0
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Josephine Lippert 441 <1 302 441 <1
- --------------------------------------------------------------------------------------------------------------------
Ronald Luzzi and Cindy Luzzi 0 0 30 0 0
- --------------------------------------------------------------------------------------------------------------------
Dorothy Lynch<F5> 11,345 <1 151 11,345 <1
- --------------------------------------------------------------------------------------------------------------------
Sulo Matalamaki and Ila M. 0 0 3,026 0 0
Matalamaki
- --------------------------------------------------------------------------------------------------------------------
Wayne Miller and Donna Miller 0 0 302 0 0
- --------------------------------------------------------------------------------------------------------------------
James C. Monroe 0 0 605 0 0
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Robert D. Musante<F6> 50,000 <1 605 50,000 <1
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Debra Niesen and Fred Niesen<F7> 0 0 302 0 0
- --------------------------------------------------------------------------------------------------------------------
Gary L. Nix and John A. Bogner 0 0 151 0 0
- --------------------------------------------------------------------------------------------------------------------
Lee F. Persico and Evelyn D. Persico 0 0 378 0 0
- --------------------------------------------------------------------------------------------------------------------
Sandra Phillips, Trustee 0 0 263 0 0
Sandra Phillips 1998 Revocable Trust
dated July 31, 1998
- --------------------------------------------------------------------------------------------------------------------
Mary A. Ralphs 0 0 605 0 0
- --------------------------------------------------------------------------------------------------------------------
Leslie E. Ryan and Pricilla Ryan 0 0 1,513 0 0
- --------------------------------------------------------------------------------------------------------------------
Edith M. Saxon, Trustee 0 0 1,210 0 0
The Herbert E. Saxon and Edith Saxon
Family Trust
- --------------------------------------------------------------------------------------------------------------------
James L. Silver and Alfreida M. 0 0 302 0 0
Silver
- --------------------------------------------------------------------------------------------------------------------
Arnold B. Slotte and Judith Slotte<F8> 1,000 <1 302 1,000 <1
--------------------------------------------------------------------------------------------------------------------
Terry D. Strickland and Bernice C. 7,287 <1 4,765 7,287 <1
Strickland, Trustees
The Strickland Family 1997 Trust<F9>
- --------------------------------------------------------------------------------------------------------------------
Lloyd J. Venturi 0 0 302 0 0
- --------------------------------------------------------------------------------------------------------------------
Don R. Wangberg and Bonnie Wangberg<F10> 109,608 <1 302 109,308 <1
- --------------------------------------------------------------------------------------------------------------------
Anna S. Wong 0 0 1,815 0 0
- --------------------------------------------------------------------------------------------------------------------
<FN>
- ---------------------
<F1> This prospectus may also be used by the donees and pledgees of each named
selling shareholder for selling shares received from the named selling
shareholder after the date of this prospectus.
<F2> Ms. Ford is an Assistant Vice President of our company or one of its
subsidiaries.
<F3> Ms. Kostanecki is an employee of our company or one of its subsidiaries.
<F4> Mr. Lagomarsino is a Regulatory Vice President of our company or one of
its subsidiaries.
<F5> Ms. Lynch is an Assistant Vice President of our company or one of its
subsidiaries.
<F6> Mr. Musante is a Vice President of our company or one of its
subsidiaries.
<F7> Ms. Niesen is an employee of our company or one of its subsidiaries.
<F8> Mr. Slotte is a Vice President of our company or one of its subsidiaries.
<F9> Mr. Stickland is a Vice President of our company or one of its
subsidiaries.
<F10> Mr. Wangberg is a Regulatory Vice President of our company or one of its
subsidiaries.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time to
time by the selling shareholders. The selling shareholders will act
independently of us in making decisions with respect to the timing, manner and
price of each sale. The selling shareholders may sell the shares being offered
hereby on the New York Stock Exchange, or otherwise. The sale price may be the
then prevailing market price or a price related thereto, a price set by formula,
which may be subject to change or a negotiated price. The shares may be sold,
without limitation, by one or more of the following means of distribution.
o A block trade in which the broker-dealer so engaged will attempt to
sell shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction.
o Purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus.
o A distribution in accordance with the rules of the New York Stock
Exchange.
o Ordinary brokerage transactions and transactions in which the broker
solicits purchasers.
o In privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution.
In connection with distributions of the shares or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers or other
financial institutions. In connection with a hedging transactions,
broker-dealers or other financial institutions may engage in short sales of the
shares in the course of hedging the positions they assume with selling
shareholders. The selling shareholders may also sell the shares short and
deliver the shares offered hereby to close out such short positions. The selling
shareholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of shares offered hereby,
which shares such broker-dealer or other financial institution may resell
pursuant to this prospectus, as supplemented or amended to reflect such
transaction. The selling shareholders may also pledge shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution may effect sales of the pledged shares pursuant to this
prospectus, as supplemented or amended to reflect such transaction. In addition,
any shares that qualify for sale pursuant to Rule 144 may, at the option of the
holder thereof, be sold under Rule 144 rather than pursuant to this prospectus.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling shareholders and/or purchasers of the shares
offered hereby. Usual and customary brokerage fees will be paid by the selling
shareholders. Broker-dealers may agree with the selling shareholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
such a broker-dealer is unable to do so acting as agent for the selling
shareholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer commitment to the selling shareholders.
Broker-dealers who acquire shares as principal may thereafter resell the shares
from time to time in transactions, which may involve cross and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above, in the market, in
negotiated transactions or otherwise at market prices prevailing at the time of
sale or at negotiated prices, and in connection with such resales may pay to, or
receive from, the purchasers of such shares, commissions computed as described
above.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only though registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
shareholders and have informed them of the need for delivery of copies of this
prospectus to purchasers at or prior to the time of any sale of the shares
offered hereby. The selling shareholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against
liabilities resulting therefrom. Among these liabilities for which
indemnification may be provided are those arising under the Securities Act of
1933.
At the time a particular offer of shares offered pursuant to this
prospectus is made, if required, a supplement to this prospectus will be
distributed that will set forth the number of shares being offered and the terms
of the offering, including the name of any underwriter, dealer or agent, the
purchase price paid by any underwriter, any discount, commission and other item
constituting compensation, any discount, commission or concession allowed or re-
allowed or paid to any dealer, and the proposed selling price to the public.
We have agreed to keep the registration statement of which this prospectus
constitutes a part effective in respect of shares issued pursuant thereto until
the first to occur of the following dates.
o The date one year from the date of issuance of such shares.
o Such date as all of the shares offered by the selling shareholders
listed above have been sold.
We intend to de-register any of the shares not sold by the selling
shareholders after such time.
LEGAL MATTERS
The validity of our common shares offered hereby will be passed upon for us
by White & Case LLP, Los Angeles, California.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1997, have been
so included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
***
<PAGE>
(outside back cover page)
o We have not authorized anyone to give you any information that differs from
the information in this prospectus. If you receive any different
information, you should not rely on it.
o The delivery of this prospectus shall not, under any circumstances, create
an implication that The First American Financial Corporation is operating
under the same conditions that it was operating under when this prospectus
was written. Do not assume that the information contained in this
prospectus is correct at any time past the date indicated.
o This prospectus does not constitute an offer to sell, or the solicitation
of an offer to buy, any securities other than the securities to which it
relates.
o This prospectus does not constitute an offer to sell, or the solicitation
of an offer to buy, the securities to which it relates in any circumstances
in which such offer or solicitation is unlawful.
--------------------------
Table of Contents
Where You Can Find More Information; Incorporation by Reference..............(i)
Risk Factors...................................................................1
Recent Developments............................................................2
Special Note of Caution Regarding Forward-Looking Statements...................2
Use of Proceeds................................................................3
Selling Shareholders...........................................................3
Plan of Distribution...........................................................7
Legal Matters..................................................................9
Experts........................................................................9
Prospectus
769,584 Common Shares
THE FIRST AMERICAN
FINANCIAL CORPORATION
Dated March 16, 1999
