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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities and Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-3658
A. Full title of the Plan and the address of the Plan, if different from
that of the issuer named below:
The First American Financial Corporation
401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
The First American Corporation
1 First American Way
Santa Ana, California 92707
Page 1 of 14
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The First American Financial Corporation
401(k) Savings Plan
Index Page
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Exhibit 23.1 Consent of Independent Accountants 3
Signature 4
Report of Independent Accountants 6
Financial Statements
Statements of Net Assets Available for Benefits, as of
December 31, 1999 and 1998 7
Statements of Changes in Net Assets Available for Benefits,
for the years ended December 31, 1999 and 1998 8
Notes to Financial Statements 9
Supplemental Schedule:
Line27a - Schedule of Assets held for Investment Purposes
as of December 31, 1999 14
Supplemental schedules required by the Employee Retirement Income Security Act
of 1974 that are omitted are not applicable to The First American Financial
Corporation 401(k) Savings Plan.
Page 2 of 14
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (Nos. 333-32871 and 333-80179) of The First American
Corporation of our report dated June 23, 2000, relating to the financial
statements of The First American Financial Corporation 401(k) Savings Plan,
which appears in this Form 11-K.
PricewaterhouseCoopers LLP
Newport Beach, California
June 27, 2000
Page 3 of 14
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SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Committee administering the Plan has duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
The First American Financial Corporation
401(k) Savings Plan
Date: June 27, 2000 By: /s/ Thomas A. Klemens
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Page 4 of 14
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The First American
Financial Corporation
401(k) Savings Plan
Report on Audited Financial Statements and
Supplemental Schedules
As of December 31, 1999 and 1998, and
for the Years Ended December 31, 1999 and 1998
Page 5 of 14
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Report of Independent Accountants
To the Participants and Administrator of
The First American Financial Corporation 401(k) Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The First American Financial Corporation 401(k) Savings Plan (the "Plan") at
December 31, 1999 and 1998, and the changes in the net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial of statements taken as a whole. The supplemental schedule, assets held
for investment purposes, is presented for the purpose of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plan's management.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
PricewaterhouseCoopers LLP
Newport Beach, California
June 23, 2000
Page 6 of 14
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The First American Financial Corporation
401(k) Savings Plan
Statements of Net Assets Available for Benefits
As of December 31, 1999 and 1998
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1999 1998
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Assets:
Investments, at fair value $140,800,296 $119,380,810
Cash 71,521 73,974
Receivables:
Interest 69,605 40,787
Dividends 147,575 121,006
Participant contributions 250,538 119,291
Employer contributions 9,835,896 11,871,963
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Total receivables 10,303,614 12,153,047
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Total assets 151,175,431 131,607,831
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Liabilities:
Administrative expenses payable 183,037 80,656
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Total liabilities 183,037 80,656
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Net assets available for benefits $150,992,394 $131,527,175
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The accompanying notes are an integral part of these financial statements.
Page 7 of 14
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The First American Financial Corporation
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 1999 and 1998
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<TABLE>
<CAPTION>
<S> <C> <C>
Additions:
Net appreciation (depreciation) in fair value of instruments $(23,051,972) $ 22,152,669
Interest income 614,445 451,386
Dividend income 1,666,708 3,014,722
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Total investment income (loss) (20,770,819) 25,618,777
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Contributions:
Participants 55,101,115 26,154,571
Employer 20,541,812 22,388,920
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Total contributions 75,642,927 48,543,491
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Total additions 54,872,108 74,162,268
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Deductions:
Benefits paid to participants (34,007,732) (8,545,848)
Administrative expenses (1,399,157) (562,998)
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Total deductions (35,406,889) (9,108,846)
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Increase in net assets 19,465,219 65,053,422
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Net assets available for benefits:
Beginning of year 131,527,175 66,473,753
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End of year $150,992,394 $131,527,175
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</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 8 of 14
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The First American Financial Corporation
401(k) Savings Plan
Notes to Financial Statements
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1. Description of the Plan
The following description of The First American Financial Corporation 401(k)
Savings Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the
Plan's provisions.
General
The Plan is a defined contribution profit sharing plan covering all U.S.
employees of The First American Corporation (the "Company"). An employee is
eligible to participate in the Plan if the employee is at least 21 years of
age and has been employed by the Company for at least 90 days. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 ("ERISA").
Upon enrollment in the Plan a participant may direct contributions in 5%
increments in any of six investment options, one of which is the option to
invest in shares of the Company. Participants may change their investment
options as of the first day of each calendar month, depending upon the
completion of an appropriate form by a specified date.
Contributions
Participants may contribute from 1% to 12% of pretax annual compensation, as
defined by the Plan. Contributions are subject to certain limitations. The
Company matches 50% of the first $500 of a participant's contribution.
Additional amounts may be contributed by the Company at the option of the
Company's Board of Directors and are based on the pretax profitability of the
Company for the year. Discretionary profit sharing contributions were
$9,817,498 and $11,827,985 for the years ending December 31, 1999 and 1998,
respectively. Participants may also contribute amounts representing
distributions from other qualified defined benefit or contribution plans.
Participant accounts
Each participant's account is credited with the participant's contributions
and allocations of (a) the Company's contributions and (b) the earnings or
losses, and charged with an allocation of administrative expenses.
Allocations are based on participant earnings or account balances, as
defined. The benefit to which a participant is entitle to the benefit is the
benefit that can be provided from the participant's vested account.
Vesting
Participants are immediately vested in their contributions, the Company's
contributions plus actual earnings thereon.
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The First American Financial Corporation
401(k) Savings Plan
Notes to Financial Statements
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Payment of benefits
The plan allows for participant withdrawals in lump sum upon retirement,
death, disability, termination or attainment of the eligible age as defined
by the Plan. Participants may also withdraw up to 70% of their account
balances, as defined by the Plan in the event of financial hardship, which is
determined pursuant to the provisions of the Internal Revenue Code ("IRC").
2. Summary of Significant Accounting Policies
Basis of accounting
The accompanying financial statements have been prepared under the accrual
method of accounting.
Investment valuation and income recognition
Investments in mutual funds and common stock are stated at quoted market
prices (except for the Money Market Fund, which is recorded at amortized cost
which approximates market value). Security transactions are accounted for on
the date securities are purchased or sold (trade date). Dividend income is
recorded on the ex-dividend date. Interest income is recognized on an
accrual basis as earned. Gains or losses from securities' transactions are
computed based on average cost.
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation (depreciation) in the fair value of its
investments which consists of the realized gains or losses and the unrealized
appreciation (depreciation) on those investments.
Payment of benefits
Benefits are recorded when paid.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts in the statement of changes in net assets
available for benefits during the reporting period. Actual results could
differ from those estimates.
Page 10 of 14
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The First American Financial Corporation
401(k) Savings Plan
Notes to Financial Statements
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Risks and uncertainties
The Plan provides for various investment options in any combination of
stocks, mutual funds and other investment securities. Investment securities
are exposed to various risks such as interest rate, market and credit. Due to
the level of risk associated with certain investment securities and the level
of uncertainty related to changes in the value of investment securities, it
is at least reasonably possible that changes in risk in the near term would
materially affect participants' account balances and the amounts reported in
the statements of net assets available for benefits and the statement of
changes in net assets available for benefits.
Investments
The following presents investments that represent 5% or more of the Plan's
net assets available for benefits:
<TABLE>
<CAPTION>
December 31,
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1999 1998
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<S> <C> <C>
Mutual funds
Templeton Foreign Fund $ 18,398,383 $ 10,126,922
Schroder U.S. Smaller Companies Fund 21,474,883 13,206,834
Performance Equity Fund Institutional Class 45,000,929 28,981,835
T. Rowe Price U.S. Treasury Intermediate Fund 9,661,493 7,063,240
First Choice Cash Reserve Fund Institutional Class 15,670,175 10,109,284
Common Stock
The First American Corporation 30,594,433 49,892,695
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$140,800,296 $119,380,810
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During 1999 and 1998, the Plan's investments (including gains and losses on
investments sold as held during the year) (depreciated) appreciated in value
by $(23,051,972) and $22,152,669, respectively, as follows:
1999 1998
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Mutual funds $ 11,399,035 $ 1,622,881
Company common stock (34,451,007) 20,529,788
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$(23,051,972) $ 22,152,669
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</TABLE>
Page 11 of 14
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The First American Financial Corporation
401(k) Savings Plan
Notes to Financial Statements
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3. Related Party Transactions
Certain plan investments are shares of mutual funds managed by First American
Trust Company, a wholly-owned subsidiary of the Company. First American
Trust Company is the trustee of the Plan and, therefore, these transactions
qualify as party-in-interest transactions for which a statutory exemption
exists. Fees paid by the Plan for the investment management services were
$1,399,157 and $562,998 for the years ended December 31, 1999 and 1998,
respectively.
The Company, which also qualifies as a party-in-interest, absorbs certain
administrative expenses of the Plan. Such transactions qualify for a
statutory exemption. Total expenses paid by the Company were $620,385 and
$76,562 for the years ended December 31, 1999 and 1998, respectively.
2. Plan Termination
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
the net assets of the Plan will be distributed to the participants in
accordance with the provisions of ERISA.
5. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated February 11, 1997, that the Plan is designated in accordance
with applicable section s of the IRC and is, therefore, exempt from federal
income taxes. The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
Page 12 of 14
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SUPPLEMENTAL SCHEDULE
Page 13 of 14
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The First American Financial Corporation
401(k) Savings Plan
Line 27a - Schedule of Assets Held for Investment Purposes
As of December 31, 1999
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Identity of Issue Current Value
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The First American Corporation Common Stock $ 30,594,433
Templeton Foreign Fund 18,398,383
Schroder U.S. Small Companies Fund 21,474,883
Performance Equity Fund Institutional Class 45,000,929
T. Rowe Price U.S. Treasury Intermediate Bond Fund 9,661,493
First Choice Cash Reserve Fund Institutional Class 15,670,175
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$140,800,296
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Page 14 of 14
