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What changed in First American Financial Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of First American Financial Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+256 added−266 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-15)

Top changes in First American Financial Corp's 2023 10-K

256 paragraphs added · 266 removed · 223 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

45 edited+4 added−5 removed80 unchanged
Biggest changeThe specialty insurance segment sells home warranty products and contains the remaining operations of our property and casualty insurance business, which is in the final stages of its wind-down. In addition, our corporate segment consists of certain financing facilities, our venture investment portfolio and the corporate services that support our business operations.
Biggest changeOur corporate segment consists of certain financing facilities, our venture investment portfolio, operating results related to our property and casualty insurance business, which no longer sells policies or has policies in force, and certain corporate services that support our business operations. The substantial majority of our business is dependent upon activity in the real estate and mortgage markets.
This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust and wealth management services.
This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides document generation services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust and wealth management services.
Our venture investment portfolio consists primarily of investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and a 10 similar investment that is trading publicly.
Our venture investment portfolio consists primarily of investments in the equity of private venture-stage companies that operate in the real-estate industry and related industries (many of which offer technology-enabled products and services), investments in funds that typically invest in these same types of companies, and a similar investment that is trading publicly.
Our underwritten title companies, agencies and property and casualty insurance agencies are also subject to certain regulation by insurance regulatory or banking authorities, including, but not limited to, minimum net worth requirements, licensing requirements, statistical reporting requirements, rate filing requirements and marketing restrictions. Certain laws and regulations require the Company to maintain certain information security standards and practices.
Our underwritten title companies and agencies are also subject to certain regulation by insurance regulatory or banking authorities, including, but not limited to, minimum net worth requirements, licensing requirements, statistical reporting requirements, rate filing requirements and marketing restrictions. Certain laws and regulations require the Company to maintain certain information security standards and practices.
For refinance and default-related business for customers with centrally managed platforms, we market to mortgage originators, servicers and government-sponsored enterprises. For the commercial business, we market primarily to principals, developers, and investors; real estate investment trusts; law firms; commercial lenders; life insurance companies; commercial brokers and mortgage brokers.
For refinance and default-related business, we market directly to mortgage originators and servicers with centrally managed platforms and government-sponsored enterprises. For the commercial business, we market primarily to principals, developers, and investors; real estate investment trusts; law firms; commercial lenders; life insurance companies; commercial brokers and mortgage brokers.
Our marketing efforts emphasize our product offerings, the quality and timeliness of our services, our financial strength, process and product innovation and our national presence.
Our marketing efforts emphasize our product and service offerings, the quality and timeliness of our services, our financial strength, process and product innovation and our national presence.
The success of our efforts is demonstrated through our inclusion on the Fortune 100 Best Companies to Work For® list in the United States for the last seven years, the Best Workplaces™ in Canada list for the last eight years, as well as a number of similar lists in local or specialized areas.
The success of our efforts is demonstrated through our inclusion on the Fortune 100 Best Companies to Work For® list in the United States for the last eight years, the Best Workplaces™ in Canada list for the last nine years, as well as a number of similar lists in local or specialized areas.
In addition, our home warranty and settlement services businesses are subject to regulation in some states by insurance authorities or other applicable regulatory entities. Our federal savings bank is regulated and supervised by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
Our home warranty and settlement services businesses are also subject to regulation in some states by insurance authorities or other applicable regulatory entities. Our federal savings bank is regulated and supervised by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
The manner in which rates are established or changed ranges from states which promulgate rates, to states where individual companies or associations of companies prepare rate filings which are submitted for approval, to a few states in which rate changes do not need to be filed for approval.
The manner in which rates are established or changed ranges from states that promulgate rates, to states in which individual companies or associations of companies prepare rate filings that are submitted for approval, to a few states in which rate changes do not need to be filed for approval.
Our data and analytics business offers analytic solutions for title underwriting automation, fraud risk management, identity verification, compliance and valuation that are powered by our extensive collection of property information, ownership data and recorded documents.
Our data and analytics business offers property information and analytic solutions for title underwriting automation, fraud risk management, identity verification, compliance and valuation that are powered by our extensive collection of real estate property data, ownership data and recorded documents.
However, changes in general economic conditions in the United States and abroad, can cause fluctuations in this traditional pattern of activity, and changes in the general economic conditions in a geography can cause fluctuations in the traditional patterns of activity in that geography. Our home warranty business currently operates in 35 states and the District of Columbia.
However, changes in general economic conditions in the United States and abroad, can cause fluctuations in this traditional pattern of activity, and changes in the general economic conditions in a geography can cause fluctuations in the traditional patterns of activity in that geography. Our home warranty business currently operates in 36 states and the District of Columbia.
We also provide educational information on our website and through other means to help consumers and others better understand our services, the homebuying/settlement process in general, and real estate market economic trends. 8 In our agency channel, we issue policies in accordance with agreements with authorized agents.
We also provide educational information on our website and through other means to help consumers and others better understand our products, services, the title and settlement process in general, and real estate market economic trends. 8 In our agency channel, we issue policies in accordance with agreements with authorized agents.
We provide products and services in a number of countries outside of the United States, and our international operations accounted for approximately 5.5% of our title insurance and services segment revenues in 2022. Today we have direct operations and a physical presence in several countries, including Canada, the United Kingdom, South Korea, Australia and New Zealand.
We provide products and services in a number of countries outside of the United States, and our international operations accounted for approximately 6.5% of our title insurance and services segment revenues in 2023. Today we have direct operations and a physical presence in several countries, including Canada, the United Kingdom, South Korea, Australia and New Zealand.
We have implemented many professional development programs to build and strengthen the skill sets of our employees. Reflecting our perspective on the benefits of a diverse workforce, we have a Diversity, Equity and Inclusion (DEI) Council, which is focused on the development of employee-centered actions to enhance the recruitment, engagement, development, and retention of diverse employees.
We have implemented many professional development programs to build and strengthen the skill sets of our employees. Reflecting our perspective on the benefits of a diverse workforce, we have a Diversity, Equity and Inclusion (DE&I) Council, which is focused on the development of employee-centered actions to enhance the recruitment, engagement, development, and retention of diverse employees.
The DEI Council has also formed and continues to form employee resource groups that are organized around particular interests, affiliations or affinities. Regulation Many of our subsidiaries are subject to extensive regulation by applicable domestic or foreign regulatory agencies.
The DE&I Council has also formed and continues to form employee resource groups that are organized around particular interests, affiliations or affinities. Regulation Many of our subsidiaries are subject to extensive regulation by applicable domestic or foreign regulatory agencies.
Many of these products, services and solutions involve the use of real property-related data, including data derived from the Company’s proprietary databases. In addition, the segment provides banking, trust, warehouse lending, mortgage subservicing and wealth management services.
Many of these products, services and solutions involve the use of real property-related data, including data derived from the Company’s proprietary databases. In addition, the segment provides banking, trust, warehouse lending, mortgage subservicing and wealth management services. The home warranty segment sells home warranty products.
Each of our insurers is also subject to periodic examination by regulatory authorities both within its jurisdiction of organization as well as the other jurisdictions where it is licensed to conduct business.
Each of our insurers is also subject to periodic examination by regulatory authorities both within such insurer’s jurisdiction of organization as well as by the other jurisdictions where it is licensed to conduct business.
General The Company, through its subsidiaries, is engaged in the business of providing title insurance, settlement services and other financial services and risk solutions through its title insurance and services segment and its specialty insurance segment.
General The Company, through its subsidiaries, is engaged in the business of providing title insurance, settlement services and other financial services and risk solutions through its title insurance and services segment and its home warranty segment.
In addition, we have been recognized on the Fortune® Best Workplaces for Women™ and Great Place to Work® list for Best Workplaces for Women for the seventh year in a row and we earned a top score of 100 on the Human Rights Campaign Foundation’s 2023 Corporate Equality Index for the fifth consecutive year.
In addition, we have been recognized on the Fortune® Best Workplaces for Women™ (United States) and Great Place to Work® list for Best Workplaces for Women (Canada) for the eighth year in a row and we earned a top score of 100 on the Human Rights Campaign Foundation’s 2024 Corporate Equality Index for the fifth consecutive year.
Our international operations present risks that may not exist to the same extent in our domestic operations, including those associated with differences in the nature of the products provided, the scope of coverage provided by those products and the manner in which risk is underwritten.
Our international operations present risks that may not exist to the same extent in our domestic operations, including those associated with differences in the nature of the products provided, the scope of coverage provided by those products and the manner in which risk is underwritten. Data and Title Plants. Our title insurance business is heavily dependent on data.
The bank does not originate loans. As of December 31, 2022, the bank administered fiduciary and custody assets having a market value of $4.1 billion, which includes managed assets of $2.0 billion. The bank’s balance sheet had assets of $6.7 billion, with deposits of $6.6 billion and stockholder’s equity of $28 million.
The bank does not originate loans. As of December 31, 2023, the bank administered fiduciary and custody assets having a market value of $4.4 billion, which includes managed assets of $2.2 billion. The bank’s balance sheet had assets of $8.1 billion, with deposits of $7.9 billion and stockholder’s equity of $196.5 million.
The Company’s investment portfolio policies further provide that these investments are to be managed to maximize long-term returns consistent with liquidity, regulatory and risk objectives, and that these investments should not expose the Company to excessive levels of credit, liquidity, and interest rate risks. As of December 31, 2022, 97% of our investment portfolio consisted of debt securities.
The Company’s investment portfolio policies further provide that these investments are to be managed to maximize long-term returns consistent with liquidity, regulatory and risk objectives, and that these investments should not expose the Company to excessive levels of credit, liquidity, and interest rate risks.
In 2022, 2021 and 2020, the Company derived 99.2%, 90.2% and 92.2%, of its consolidated revenues, respectively, from this segment.
In 2023, 2022 and 2021, the Company derived 95.4%, 99.2% and 90.2%, of its consolidated revenues, respectively, from this segment.
We are focused on continued improvement of our customers’ experiences with our products, services and solutions, including through digital transformations, and on enhancing our services offered to our customers.
We are focused on continued improvement of our customers’ experience with our products, services and solutions, including through the digital transformation of our offerings, and on enhancing our services offered to our customers.
Because of this difference, title plant data and records generally may be searched more efficiently. Many of our title plants also index prior title insurance policies, adding to searching efficiency. These title plants support not only our title insurance operations, but we also license this data to third parties, including competing title companies and agents. Reserves for Claims and Losses.
Many of our title plants also index prior title insurance policies, adding to searching efficiency. These title plants support not only our title insurance operations, but we also license this data to third parties, including competing title companies and agents. Reserves for Claims and Losses.
Investment Policies The vast majority of our investments are held within a debt securities and marketable equity securities portfolio overseen by our investment department and an investment committee made up of certain senior executives.
Cybersecurity for additional details regarding cybersecurity and data protection. 12 Investment Policies The vast majority of our investments are held within a debt securities and marketable equity securities portfolio overseen by our investment department and an investment committee made up of certain senior executives.
The substantial majority of our business is dependent upon activity in the real estate and mortgage markets. Our strategy is to profitably grow our core title insurance and settlement services business, expand our data advantage to strengthen our core business and pursue growth opportunities, and manage and actively invest in complementary businesses where the Company has a strategic advantage.
Our strategy is to profitably grow our core title insurance and settlement services business, expand our data advantage to strengthen our core business and pursue growth opportunities, and manage and actively invest in complementary businesses where the Company has a strategic advantage.
In addition, our insurers are subject to the laws of other jurisdictions in which they transact business, which laws typically establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business; regulating trade practices; licensing agents; approving policy forms, accounting practices and financial practices; establishing requirements pertaining to reserves and capital and surplus as regards policyholders; requiring the deferral of a portion of all premiums in a reserve for the protection of policyholders and the segregation of investments in a corresponding amount; establishing parameters regarding suitable investments for reserves, capital and surplus; and approving rate schedules.
They also may require approval of the insurance commissioner prior to a third party directly or indirectly acquiring control of the insurer, which may make it difficult or prohibitive for a third party to acquire our Company. 11 In addition, our insurers are subject to the laws of other jurisdictions in which they transact business, which laws typically establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business; regulating trade practices; licensing agents; approving policy forms, accounting practices and financial practices; establishing requirements pertaining to reserves and capital and surplus as regards policyholders; requiring the deferral of a portion of all premiums in a reserve for the protection of policyholders and the segregation of investments in a corresponding amount; establishing parameters regarding suitable investments for reserves, capital and surplus; and approving rate schedules.
In addition, we have developed a number of proprietary trade secrets that we believe provide us with a competitive advantage. Human Capital Resources As of December 31, 2022, the Company employed 21,153 employees, with 13,821 of them located in the United States and 7,332 outside of the U.S.
In addition, we have developed a number of proprietary trade secrets that we believe provide us with a competitive advantage. Human Capital Resources As of December 31, 2023, the Company employed 19,210 employees, with 12,244 of them located in the United States and 6,966 outside of the U.S.
If a security was rated differently among the rating agencies, the lowest rating was selected. Independent of this investment portfolio and its management, we maintain our venture capital portfolio, certain money-market and other short-term investments, and other strategic equity investments in companies engaged in our businesses or similar or related businesses.
Independent of this investment portfolio and its management, we maintain our venture capital portfolio, certain money-market and other short-term investments, and other strategic equity investments in companies engaged in our businesses or similar or related businesses.
Each of our underwriters, or insurers, is regulated primarily by the insurance department or equivalent governmental body within the jurisdiction of its organization, which oversees compliance with the laws and regulations pertaining to such insurer.
Our domestic subsidiaries that operate in the title insurance industry or the property and casualty insurance industry are subject to regulation by state insurance regulators. Each of our underwriters, or insurers, is regulated primarily by the insurance department or equivalent governmental body within the jurisdiction of its organization, which oversees compliance with the laws and regulations pertaining to such insurer.
In addition, the Company is subject to regulation as an insurance holding company, a savings and loan holding company, a publicly-traded company, a Delaware corporation and a corporation that has its principal executive offices in California. 11 Our domestic subsidiaries that operate in the title insurance industry or the property and casualty insurance industry are subject to regulation by state insurance regulators.
In addition, the Company is subject to regulation as an insurance holding company, a savings and loan holding company, a publicly-traded company, a Delaware corporation and a corporation that has its principal executive offices in California.
Federal banking laws and regulations require third parties to obtain prior approval to acquire control of our federal savings bank or our Company, which may make such an acquisition of our Company by a third party more difficult or prohibitive. 12 Cybersecurity and Data Protection The Company dedicates significant resources to securing its systems and to protecting non-public personal information and other confidential information.
Federal banking laws and regulations require third parties to obtain prior approval to acquire control of our federal savings bank or our Company, which may make such an acquisition of our Company by a third party more difficult or prohibitive.
The bank’s deposits consist almost entirely of funds deposited by its affiliates, the majority of which are from third parties to be held in trust pending the closing of real estate transactions, but an increasing proportion of which are custodial funds held on behalf of clients of our mortgage loan subservicer subsidiary.
The majority of such deposits are from third parties to be held in trust pending the closing of real estate transactions, but there is also a portion of which are custodial funds held on behalf of clients of our residential mortgage subservicer subsidiary. The bank also maintains other deposits, including operating funds deposited by its affiliates.
Innovation and Intellectual Property In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the customer experience and decrease risk, we are utilizing innovative technologies, processes and techniques in the production and delivery of our products and services.
While we hope to realize financial benefits from these venture investments, we make and hold these investments primarily for strategic reasons. 10 Innovation and Intellectual Property In an effort to speed the delivery of our products, increase efficiency, improve quality, improve the customer experience and decrease risk, we are utilizing innovative technologies, processes and techniques, including artificial intelligence, in the production and delivery of our products and services.
As discussed further in the Innovation and Intellectual Property section below, our ability to automate underwriting decisions has accelerated as we have improved the breadth and quality of our data assets and our analytic tools. Our title plants constitute one of our principal assets.
Underwriting decisions require comprehensive and accurate data. In an attempt to enhance efficiency and reduce risk, certain underwriting functions are increasingly being automated. As discussed further in the Innovation and Intellectual Property section below, our ability to automate underwriting decisions has accelerated as we have improved the breadth and quality of our data assets and our analytic tools.
Coverage is typically for one year and is renewable annually at the option of the contract holder and upon our approval. Coverage and pricing typically vary by geographic region. Fees for the warranties generally are paid at the closing of the home purchase or directly by the consumer.
Coverage and pricing typically vary by geographic region. Fees for the warranties generally are paid at the closing of the home purchase or directly by the consumer. In addition, under the contract, the holder is responsible for a service fee for each trade call.
Revenues associated with home warranties sold at the time of a home purchase are dependent upon activity in the residential purchase market, which is cyclical and seasonal. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months and is sensitive to interest rate fluctuations.
Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months and is sensitive to interest rate fluctuations.
A title search is typically conducted by searching the abstracted information from public records or utilizing a title plant holding information abstracted from public records. While public title records generally are indexed by reference to the names of the parties to a given recorded document, our title plants primarily arrange their records on a geographic basis.
While public title records generally are indexed by reference to the names of the parties to a given recorded document, our title plants primarily arrange their records on a geographic basis. Because of this difference, title plant data and records generally may be searched more efficiently.
Corporate Segment Our corporate segment consists primarily of certain financing facilities, our venture investment portfolio and the corporate services that support our business operations.
Corporate Segment Our corporate segment consists primarily of certain financing facilities, our venture investment portfolio, operating results related to our property and casualty insurance business, which no longer sells policies or has policies in force, and the corporate services that support our business operations.
These include resources dedicated to intrusion prevention such as firewalls, endpoint protection and behavior analysis tools, among others. They also include resources dedicated toward vulnerability identification through the performance of vulnerability scans and penetration tests, among other methods.
They also include resources dedicated toward vulnerability identification through the performance of vulnerability scans and penetration tests, among other methods. See Item 1C.
The bank also maintains other deposits, including operating funds deposited by its affiliates. Specialty Insurance Segment Home Warranty. Our home warranty business provides residential service contracts that cover residential systems, such as heating and air conditioning systems, and certain appliances against failures that occur as the result of normal usage during the coverage period.
Home Warranty Segment Our home warranty segment provides residential service contracts that cover residential systems, such as heating and air conditioning systems, and certain appliances against failures that occur as the result of normal usage during the coverage period. Coverage is typically for one year and is renewable annually at the option of the contract holder and upon our approval.
In addition, under the contract, the holder is responsible for a service fee for each trade call. First year warranties are marketed through real estate brokers and agents, and we also market directly to consumers. We generally sell renewals directly to consumers.
First year warranties are marketed through real estate brokers and agents, and we also market directly to consumers. We generally sell renewals directly to consumers. Revenues associated with home warranties sold at the time of a home purchase are dependent upon activity in the residential purchase market, which is cyclical and seasonal.
As of that date, 67% of our debt securities portfolio was either United States government-backed or rated AAA, and 98% was either rated or classified as investment grade. Percentages are based on the estimated fair values of the securities. Credit ratings reflect published ratings obtained from globally recognized securities rating agencies.
Percentages are based on the estimated fair values of the securities. Credit ratings reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected.
Part of our growth strategy involves acquiring companies that expand our market share, enhance our data capabilities, provide us with technological capabilities or complement our businesses. Our growth strategy also involves making venture investments in companies within the real-estate industry and related industries, many of which offer technology-enabled products and services.
Part of our growth strategy involves acquiring companies that expand our market share, enhance our data capabilities, provide us with technological capabilities or complement our businesses. We remain committed to efficiently managing our business to market conditions throughout business cycles and to deploying our capital to maximize stockholder returns.
Removed
In addition to potential financial benefits, these venture investments are typically made to give us insight into potentially high-growth, innovative companies and to facilitate strategic partnerships. We remain committed to efficiently managing our business to market conditions throughout business cycles and to deploying our capital to maximize stockholder returns.
Added
Our title plants constitute one of our principal assets. A title search is typically conducted by searching the abstracted information from public records or utilizing a title plant holding information abstracted from public records.
Removed
In jurisdictions where we have limited claims experience, it is more difficult to set prices and reserve rates. Data and Title Plants. Our title insurance business is heavily dependent on data. Underwriting decisions require comprehensive and accurate data. In an attempt to enhance efficiency and reduce risk, certain underwriting functions are increasingly being automated.
Added
The bank’s deposits consist primarily of funds deposited by its affiliates and, in some instances, by non-affiliated title agents.
Removed
Property and Casualty Insurance. Our property and casualty insurance business provided automobile, homeowners and renters coverage for liability losses and typical hazards such as fire, theft, vandalism and other types of property damage. This business was substantially wound down in the third quarter of 2022. Four renters policies remained in force as of December 31, 2022.
Added
Cybersecurity and Data Protection The Company dedicates significant resources to securing its systems and to protecting non-public personal information and other confidential information. These include resources dedicated to intrusion prevention such as firewalls, endpoint protection and behavior analysis tools, among others.
Removed
While we hope to realize financial benefits from these venture investments, we make and hold these investments primarily for strategic reasons.
Added
As of December 31, 2023, our debt and marketable equity securities portfolio consisted of approximately 94% of debt securities. As of that date, over 65% of our debt securities were held in securities that are United States government-backed or rated AAA/Aaa and approximately 97% of the debt securities portfolio was rated or classified as investment grade or better.
Removed
They also may require approval of the insurance commissioner prior to a third party directly or indirectly acquiring control of the insurer, which may make it difficult or prohibitive for a third party to acquire our Company.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

36 edited+9 added−12 removed99 unchanged
Biggest changeAs a holding company, the Company depends on distributions from its subsidiaries, and if distributions from its subsidiaries are materially impaired, the Company’s ability to declare and pay dividends may be adversely affected; in addition, insurance and other regulations limit the amount of dividends, loans and advances available from the Company’s insurance subsidiaries The Company is a holding company whose primary assets are investments in its operating subsidiaries.
Biggest changeIf the Company’s operating subsidiaries are not able to pay dividends or repay funds, the Company may not be able to fulfill parent company obligations and/or declare and pay dividends. Moreover, pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available is limited.
In certain circumstances, such as when one of these companies raises capital, merges with another company or sells itself at a valuation that is less than the valuation at which the Company made its investment or 20 when one of these companies fails and/or liquidates itself, the Company has been and could be required to impair all or part of its investment in that company or write down the value of an investment if future growth prospects deteriorate.
In certain circumstances, such as when one of these companies raises capital, merges with another company or sells itself at a valuation that is less than the valuation at which the Company made its investment or when one of these companies fails and/or liquidates itself, the Company has been and could be required to impair all or part of its investment in that company or write down the value of an investment if future growth prospects deteriorate.
Flawed models or uses of models may result in, among other consequences, erroneous or misleading outputs, inappropriate business decisions, inadequate risk management or enhanced regulatory supervision, which could have a material adverse effect on the Company’s results of operations, financial condition and reputation. 7.
Flawed models or uses of models may result in, among other consequences, erroneous, biased or misleading outputs, inappropriate business decisions, inadequate risk management or enhanced regulatory supervision, which could have a material adverse effect on the Company’s results of operations, financial condition and reputation. 7.
These types of inquiries or proceedings have from 19 time to time resulted, and may in the future result, in findings of a violation of the law or other wrongful conduct and the payment of fines or damages or the imposition of restrictions on the Company’s conduct. This could impact the Company’s operations and financial condition.
These types of inquiries or proceedings have from time to time resulted, and may in the future result, in findings of a violation of the law or other wrongful conduct and the payment of fines or damages or the imposition of restrictions on the Company’s conduct. This could impact the Company’s operations and financial condition.
Changes in the fair values of marketable equity securities are recognized in earnings. Changes in the fair values of securities in the Company’s investment portfolio have had an adverse impact on the Company and could have a material adverse effect on the Company’s results of operations, statutory surplus, financial condition and cash flow. 23.
Changes in the fair values of marketable equity securities are recognized in earnings. Changes in the fair values of securities in the Company’s investment portfolio have had an adverse impact on the Company and could have a material adverse effect on the Company’s results of operations, statutory surplus, financial condition and cash flow. 20 23.
This framework includes departments or groups dedicated to enterprise risk management, information security, disaster recovery and other information technology-related risks, business continuity, legal and compliance, compensation structures and other human resources matters, vendor management and internal audit, among others.
This framework includes departments or groups dedicated to enterprise risk management, treasury management, information security, disaster recovery and other information technology-related risks, business continuity, legal and compliance, compensation structures and other human resources matters, vendor management and internal audit, among others.
The issuance of the Company’s title insurance policies and related activities by title agents, which operate with substantial independence from the Company, could adversely affect the Company The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that usually operate independent of the Company.
The issuance of the Company’s title insurance policies and related activities by independent title agents could adversely affect the Company The Company’s title insurance subsidiaries issue a significant portion of their policies through title agents that usually operate with substantial independence from the Company.
Funds transferred to a fraudulent recipient are often not recoverable. In certain instances the Company may be liable for those unrecovered funds. The controls and procedures used by the Company to prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or other adverse consequences which could be material to the Company. 14.
Funds transferred to a fraudulent recipient may not be recoverable. In certain instances the Company may be liable for those unrecovered funds. The controls and procedures used by the Company to prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or other adverse consequences which could be material to the Company. 14.
Certain of these circumstances, particularly when combined with declining real estate values and the increase in foreclosures that often results therefrom, also tend to adversely impact the Company’s title claims experience. National inventory levels for residential have been declining over the past several years and remain below historical average levels.
Certain of these circumstances, particularly when combined with declining real estate values and the increase in foreclosures that often results therefrom, also tend to adversely impact the Company’s title claims experience. National inventory levels for residential homes for sale have been declining over the past several years and remain below historical average levels.
Moreover, to the extent climate change, health crises, severe weather conditions and other catastrophe events impact companies or municipalities whose securities the Company invests in, the value of its investments may also decrease due to these factors.
Moreover, to the extent climate change, health crises, terrorist attacks, severe weather conditions and other catastrophe events impact companies or municipalities whose securities the Company invests in, the value of its investments may also decrease due to these factors.
Residential refinance activity is also strongly correlated with changes in mortgage interest rates and rising mortgage rates during 2022 have, expectedly, had an adverse impact on the Company’s refinance business that is expected to continue for so long as mortgage rates continue to rise or if they subsequently remain high relative to the interest rates of outstanding mortgages.
Residential refinance activity is also strongly correlated with changes in mortgage interest rates and rising mortgage rates, beginning in 2022, expectedly, had an adverse impact on the Company’s refinance business that is expected to continue for so long as mortgage rates continue to rise or if they subsequently remain high relative to the interest rates of outstanding mortgages.
The Company is pursuing various innovative initiatives, which could result in increased title claims or otherwise adversely affect the Company In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk, the Company is utilizing innovative technologies, processes and techniques in the production and delivery of its products and services.
The Company is pursuing various innovative initiatives, which could result in increased title claims or otherwise adversely affect the Company In an effort to speed the delivery of its products, increase efficiency, improve quality, improve the customer experience and decrease risk, the Company is utilizing innovative technologies, processes and techniques, including artificial intelligence, in the production and delivery of its products and services.
These conditions also tend to negatively impact the amount of funds the Company receives from third parties held in trust pending the closing of commercial and residential real estate transactions. The Company deposits a substantial portion of these funds, as well as its own funds, with the federal savings bank it owns.
These conditions also tend to negatively impact, and recently have impacted, the amount of funds the Company receives from third parties held in trust pending the closing of commercial and residential real estate transactions. The Company deposits a substantial portion of these funds, as well as its own funds, with the federal savings bank it owns.
Higher interest rates also negatively impacted commercial transactions in the latter half of 2022 and will likely continue to impact our volumes in 2023. 5.
Higher interest rates also negatively impacted commercial transactions beginning in the latter half of 2022 and will likely continue to impact our volumes. 5.
Climate change, severe weather conditions, health crises and other catastrophe events could adversely affect the Company Climate change, global or extensive health crises, severe weather and other catastrophe events and responses to these events could adversely affect the Company.
Climate change, severe weather conditions, health crises, terrorist attacks and other catastrophe events could adversely affect the Company Climate change, global or extensive health crises, severe weather, terrorist attacks and other catastrophe events and responses to these events could adversely affect the Company.
Models are, by their nature, inherently limited due to their reliance on statistical, economic, financial or mathematical theories, techniques, data and assumptions that may be erroneous or inappropriate for the intended or actual use.
Models are, by their nature, inherently limited due to their reliance on statistical, economic, financial or mathematical theories, techniques, including artificial intelligence, data and assumptions that may be erroneous or inappropriate for the intended or actual use.
The Company’s failure to recruit and retain qualified personnel may adversely affect the business The Company’s continued success depends, in large part, on its ability to hire and retain qualified people. Competition for highly qualified people is intense, and there is no assurance that the Company will be successful in attracting, training or retaining people.
The Company’s failure to recruit and retain qualified employees may adversely affect the business The Company’s continued success depends, in large part, on its ability to hire and retain qualified people. Competition for highly qualified people is significant, and there is no assurance that the Company will be successful in attracting, training or retaining people.
Changes in the composition of deposits at the Company’s federal savings bank subsidiary could require the Company to borrow funds to maintain liquidity The deposits of the Company’s federal savings bank subsidiary consist almost entirely of funds deposited by its affiliates, the majority of which are from third parties to be held in trust pending the closing of real estate transactions.
A reduction in the deposits at the Company’s federal savings bank subsidiary could require the Company to borrow funds to maintain liquidity The deposits of the Company’s federal savings bank subsidiary consist almost entirely of funds deposited by its affiliates, the majority of which are from third parties to be held in trust pending the closing of real estate transactions.
Generally, 70% to 80% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves.
Generally, 65% to 75% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years. Changes in expected ultimate losses and corresponding loss rates for recent policy years are considered likely and could result in a material adjustment to the IBNR reserves.
The Company’s bank invests those funds and any realized losses incurred on those investments will be reflected in the Company’s consolidated results. The likelihood of such losses, which generally would not occur if the Company were to deposit these funds in an unaffiliated entity, increases when economic conditions are unfavorable.
The Company’s bank invests those funds and any realized and unrealized losses on those investments will be reflected in the Company’s consolidated financial statements. The likelihood of such losses, which generally would not occur if the Company were to deposit these funds in an unaffiliated entity, increases when economic conditions are unfavorable.
Departments of insurance in the various states, the CFPB and other federal regulators and applicable regulators in international jurisdictions, either separately or together, also periodically conduct targeted inquiries into the practices of title insurance companies, other settlement services providers and mortgage servicers in their respective jurisdictions. Currently, the Company is the subject of regulatory inquiries.
Departments of insurance in the various states, the CFPB and other federal regulators and applicable regulators in international jurisdictions, either separately or together, also periodically conduct targeted inquiries into the practices of title insurance companies, other settlement services providers and mortgage servicers in their respective jurisdictions.
Further, certain other potential causes of system damage or other negative system-related events are wholly or partially beyond the Company’s control, such as natural disasters, vendor failures to satisfy service level requirements and power or telecommunications failures.
Further, certain other potential causes of system damage or other negative system-related events are wholly or partially beyond the Company’s control, such as natural disasters, vendor failures to satisfy service level requirements, third party negligence or intentional acts, and power or telecommunications failures.
Further, from time to time plaintiffs’ lawyers have targeted, and are expected to continue to target, the Company and other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct. These lawsuits often involve large groups of plaintiffs and claims for substantial damages.
Currently, the Company is the subject of regulatory inquiries. 19 Further, from time to time plaintiffs’ lawyers have targeted, and are expected to continue to target, the Company and other members of the Company’s industry with lawsuits claiming legal violations or other wrongful conduct. These lawsuits often involve large groups of plaintiffs and claims for substantial damages.
The extent to which these catastrophe events and responses to them impact the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able to accurately predict, including: the duration and scope of the catastrophe event and restrictions and responses to it; the impact of 15 the catastrophe event on economic activity and actions taken in response, including the efficacy of governmental and other relief efforts or countermeasures; the effect on participants in real estate transactions and the demand for the Company’s products and services.
The extent to which these catastrophe events and responses to them impact the Company’s business, operations and financial results will depend on numerous factors that the Company may not be able to accurately predict, including: the duration and scope of the catastrophe event and restrictions and responses to it; the impact of the catastrophe event on economic activity and actions taken in response, including the efficacy of governmental and other relief efforts or countermeasures; the effect on participants in real estate transactions and the demand for the Company’s products and services. 15 The Company’s home warranty business has been and may be impacted by increases in the frequency and severity of weather events.
The likelihood of clients causing funds to be moved 21 increases as interest rates rise, which could result in a marked decline in the bank’s deposits. When the bank’s deposits decline, the Company may be required to borrow funds to maintain the bank’s liquidity. GENERAL RISK FACTORS 27.
The likelihood of these clients causing funds to be moved increases as interest rates rise, which could result in a marked decline in the bank’s deposits. When there is a reduction in the bank’s deposits, the Company could be required to borrow funds to maintain the bank’s liquidity. GENERAL RISK FACTORS 27.
Combined with the rapidly rising mortgage interest rates in 2022 that have decreased demand, the number of residential purchase transactions have declined.
Combined with the rapidly rising mortgage interest rates, beginning in 2022, that decreased demand, the number of residential purchase transactions declined year over year.
These investments have caused, and are expected from time to time to cause, material fluctuations in the Company’s quarterly results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, subsequent equity sales, or price changes in investments that begin trading publicly, which changes can be volatile.
These investments may cause material fluctuations in the Company’s quarterly results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, impairments, subsequent equity sales, or price changes in investments that begin trading publicly, which changes can be volatile. 24.
These provisions and regulatory requirements could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a change of control transaction that might involve a premium price or otherwise be considered favorably by the Company’s stockholders. Item 1B. Un resolved Staff Comments Not applicable.
These provisions and regulatory requirements could have the effect of discouraging an unsolicited acquisition proposal or delaying, deferring or preventing a change of control transaction that might involve a premium price or otherwise be considered favorably by the Company’s stockholders. 22 28.
Any inability of the Company or its service providers to prevent or adequately respond to the issues described above could disrupt the Company’s business, delay the delivery of its products and services, inhibit its ability to retain existing customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences that could be material to the Company. 13.
If the Company or its service providers fail to comply with applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences. 17 Any inability of the Company or its service providers to prevent or adequately respond to the issues described above could disrupt the Company’s business, delay the delivery of its products and services, inhibit its ability to retain existing customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences that could be material to the Company. 13.
In conducting its business and delivering its products and services, the Company also utilizes service providers. These service providers and the systems they utilize are typically subject to similar types of system- and information security-related risks that the Company faces. The Company provides certain of these service providers with data, including nonpublic personal information.
These service providers and the systems they utilize are typically subject to similar types of system- and information security-related risks that the Company faces. The Company provides certain of these service providers with data, including nonpublic personal information.
This client and others may cause their custodial funds to be moved out of the Company’s bank subsidiary in connection with the transfer of ownership of MSRs or loans, termination of subservicing contracts or otherwise.
Such clients may cause their custodial funds to be moved out of the Company’s bank subsidiary in connection with the transfer of ownership of mortgage servicing rights or loans, termination of subservicing contracts or otherwise.
The Company’s ability to pay dividends is dependent on the ability of its subsidiaries to pay dividends or repay funds. If the Company’s operating subsidiaries are not able to pay dividends or repay funds, the Company may not be able to fulfill parent company obligations and/or declare and pay dividends to its stockholders.
The Company's ability to fulfill parent company obligations and/or pay dividends may be limited The Company is a holding company whose primary assets are investments in its operating subsidiaries. The Company’s ability to fulfill parent company obligations and/or declare and pay dividends is dependent on the ability of its subsidiaries to pay dividends or repay funds.
These circumstances could expose the Company to system-related damages, failures, interruptions, cyberattacks and other negative events or could otherwise disrupt the Company’s business and could also result in the loss or unauthorized release, gathering, monitoring or destruction of confidential, proprietary and other information pertaining to the Company, its customers, employees, agents or suppliers.
Cybersecurity), and other negative events or could otherwise disrupt the Company’s business and could also result in the loss or unauthorized release, gathering, monitoring or destruction of confidential, proprietary and other information pertaining to the Company, its customers, employees, agents or suppliers. In conducting its business and delivering its products and services, the Company also utilizes service providers.
Accordingly, for a variety of reasons, the integrity of these systems and the protection of the information that resides thereon are critically important to the Company’s successful operation. These systems have been subject to, and are likely to continue to be the target of, computer viruses, cyberattacks, ransomware attacks, phishing attacks and other malicious activity.
Accordingly, for a variety of reasons, the integrity of these systems and the protection of the information that resides thereon are critically important to the Company’s successful operation.
In addition, the Company manages its financial exposure for losses in its title insurance business with third-party reinsurance. Catastrophe events could adversely affect the cost and availability of that reinsurance.
Home warranty claims, including those pertaining to HVAC systems, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent. In addition, the Company manages its financial exposure for losses in its title insurance business with third-party reinsurance. Catastrophe events could adversely affect the cost and availability of that reinsurance.
In the event of any such failure, the Company also could be held liable for the funds owned by third parties. 21.
In the event of any such failure, the Company also could be held liable for the funds owned by third parties. Unfavorable economic conditions, like those experienced in 2023, may lead to a heightened risk of failures of financial institutions at which the Company maintains deposits.
Removed
The Company may not be able to accurately predict the effects of periods or expectations of high or rapidly rising inflation rates, and governmental responses thereto, and may not respond in a timely or adequate manner to mitigate the negative effects of such inflation, such as decreases in the demand for the Company’s products and services, higher labor and other expenses, and, as experienced during 2021 and 2022 due to inflation and supply shortages, higher home warranty claims severity.
Added
These systems have been subject to, and are likely to continue to be the target of, malware, cyberattacks and cyberterrorism, ransomware attacks, phishing attacks, unauthorized access, online and offline fraud and other malicious activity. These attacks are prevalent, continue to increase in frequency and sophistication, and are increasingly difficult to detect. These systems also have known and unknown vulnerabilities.
Removed
The Company’s home warranty business has been and may be impacted by increases in the frequency of severe weather events. Home warranty claims, including those pertaining to climate control units, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent.
Added
These circumstances could expose the Company to system-related damages, failures, interruptions, cyberattacks, as the Company experienced in December 2023 (as described further in Item 1C.
Removed
In response to the coronavirus pandemic, the Company made changes to the way it conducted business, including by altering certain underwriting practices, production processes, employee working arrangements and employee engagement efforts.
Added
Such failures may be difficult to predict and the Company may not be able to react in a sufficiently timely manner to avoid adverse effects on the Company. 21.
Removed
Some of these changes have altered employee, client and other expectations and are expected to alter the way the Company conducts business and engages with its employees over an extended period of time, and, in some cases, permanently. Certain of these changes could result in increased claims and expose the Company to other risks.
Added
See Item 2 – MD&A – Liquidity and Capital Resources for details on dividend restrictions. The Company may also be required to invest capital in its subsidiaries which could further limit its ability to fulfill parent company obligations and/or declare and pay dividends. 21 26.
Removed
These attacks continue to increase in frequency and sophistication. Moreover, the Company’s employees working remotely are more susceptible to social engineering attacks, intrusions and other malicious activity, and this risk has increased given that a substantial number of the Company’s employees are working from home following the onset of the coronavirus pandemic. These systems also have known and unknown vulnerabilities.
Added
When real estate transactions decline, aggregate deposits held in trust at the Company’s bank tend to decline. There is also a portion of the bank’s deposits that are custodial funds held on behalf of clients of the Company’s residential mortgage subservicer subsidiary.
Removed
The Company had an information security incident that occurred during the second quarter of 2019 involving unauthorized access to non-public personal information as a result of a vulnerability in one of the Company’s applications. The risk associated with any subsequent incidents, particularly the risk of damage to the Company’s reputation, is heightened as a result of the 2019 incident.
Added
The Company may be susceptible to claims of infringement and may not be able to adequately protect its intellectual property The Company relies on a combination of patents, trademarks, copyrights, trade secret laws, non-disclosure agreements, contractual provisions and systems of internal safeguards to protect its intellectual property.
Removed
If the Company or its service providers fail to comply with 17 applicable regulations and contractual requirements, the Company could be exposed to lawsuits, governmental proceedings or the imposition of fines, among other consequences.
Added
As the Company expands its utilization of innovative technologies, processes and techniques in the production and delivery of its products and services, the Company may increasingly have to litigate to enforce and protect its intellectual property rights, which may divert Company resources, cause reputational harm to the Company or result in other adverse consequences, including a loss of competitive advantage, and there is no guarantee that such protection and enforcement efforts would be successful.
Removed
Policies adopted during the coronavirus pandemic may allow Company employees to work remotely or in hybrid situations. Over the long-term, the Company may not successfully adapt to this new work environment in a manner that maintains a healthy and vibrant Company culture or that results in the Company being viewed as an employer of choice.
Added
In addition, third parties may allege that the Company’s operations or activities infringe on their intellectual property rights, including through the Company’s use of software containing open source code, which may expose the Company to third-party claims of ownership of, or demands for the release of, the source code, the open source software and/or derivative works that were developed using such software, or otherwise seeking to enforce the terms of the applicable open source license.
Removed
These impairments and fluctuations may have a material adverse effect on the Company’s results of operations. 24.
Added
Many of the risks associated with usage of open source cannot be eliminated, and could, if not properly addressed, adversely affect the Company’s business. Infringement claims may give rise to litigation, which could result in damages, injunctions prohibiting the Company from providing certain products or services, entry into costly licensing arrangements or other adverse consequences. Item 1B.
Removed
Moreover, pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available is limited. See Note 2 Statutory Restrictions on Investments and Stockholders' Equity to the consolidated financial statements included in “Item 8.
Removed
Financial Statements and Supplementary Data” of Part II of this report and Item 7 – MD&A – Liquidity and Capital Resources for details on dividend restrictions. 26.
Removed
Following the Company’s acquisition of ServiceMac, LLC, a residential mortgage subservicer, an increasing proportion of the bank’s deposits are custodial funds held on behalf of clients of ServiceMac that are owners of loans or mortgage servicing rights (MSRs), and a substantial portion of such deposits are currently associated with a single client of ServiceMac.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties Each of our business segments uses our executive offices in Santa Ana, California. This office campus consists of five office buildings, a technology center and a two-story parking structure, totaling approximately 490,000 square feet.
Biggest changeItem 2. Pr operties Each of our business segments uses our executive offices in Santa Ana, California. This office campus consists of five office buildings, a technology center and a two-story parking structure, totaling approximately 490,000 square feet. The office facilities we occupy are, in all material respects, in good condition and adequate for their intended use.
Removed
Three office buildings, totaling approximately 210,000 square feet, and the fixtures thereto and underlying land, are subject to a deed of trust and security agreement securing payment of a promissory note evidencing a loan made in October 2003, to our principal title insurance subsidiary in the original sum of $55 million.
Removed
This loan is payable in monthly installments of principal and interest, is fully amortizing and matures November 1, 2023. The outstanding principal balance of this loan was $4 million as of December 31, 2022. The office facilities we occupy are, in all material respects, in good condition and adequate for their intended use.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Le gal Proceedings See Note 21 Litigation and Regulatory Contingencies to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of Part II of this report, which is incorporated by reference into this Item 3 of Part I. Item 4. Mi ne Safety Disclosures Not applicable. 22 PART II
Biggest changeItem 3. Le gal Proceedings See Note 21 Litigation and Regulatory Contingencies to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of Part II of this report, which is incorporated by reference into this Item 3 of Part I. Item 4. Mi ne Safety Disclosures Not applicable. 24 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2022 to October 31, 2022 380,308 $ 46.75 380,308 $ 302,829,367 November 1, 2022 to November 30, 2022 71,888 53.55 71,888 298,979,806 December 1, 2022 to December 31, 2022 235,654 52.62 235,654 286,578,830 Total 687,850 $ 49.47 687,850 $ 286,578,830 Unregistered Sales of Equity Securities During the year ended December 31, 2022, the Company did not issue any unregistered common stock. 23 Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that it is specifically incorporated by reference into such filing.
Biggest changePeriod (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 to October 31, 2023 168,406 $ 52.90 168,406 $ 222,636,293 November 1, 2023 to November 30, 2023 151,657 54.59 151,657 214,357,955 December 1, 2023 to December 31, 2023 8,800 59.45 8,800 213,834,761 Total 328,863 $ 53.85 328,863 213,834,761 Unregistered Sales of Equity Securities During the year ended December 31, 2023, the Company did not issue any unregistered common stock. 25 Stock Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent that it is specifically incorporated by reference into such filing.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Pursuant to the share repurchase program approved by the Company’s board of directors in June 2022, which program has no expiration date, the Company may repurchase up to $400 million of the Company’s issued and outstanding common stock.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Pursuant to the share repurchase program approved by the Company’s board of directors in June 2022, which program has no expiration date, the Company may repurchase up to $400.0 million of the Company’s issued and outstanding common stock.
The following graph compares the cumulative total stockholder return on the Company’s common stock with the corresponding cumulative total returns of the S&P 400 Mid Cap Index and an industry peer group for the period from December 31, 2017 through December 31, 2022. The comparison assumes an investment of $100 on December 31, 2017 and reinvestment of dividends.
The following graph compares the cumulative total stockholder return on the Company’s common stock with the corresponding cumulative total returns of the S&P 400 Mid Cap Index and an industry peer group for the period from December 31, 2018 through December 31, 2023. The comparison assumes an investment of $100 on December 31, 2018 and reinvestment of dividends.
In addition, the ability to pay dividends also is potentially affected by the restrictions described in Note 2 Statutory Restrictions on Investments and Stockholders’ Equity to the consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” of Part II of this report.
In addition, the ability to pay dividends also is potentially affected by the restrictions described in Note 2 Statutory Restrictions on Investments and Stockholders’ Equity to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of Part II of this report.
In January 2023, the Company’s board of directors declared a cash dividend of $0.52 per share. We expect that the Company will continue to pay quarterly cash dividends at or above the current level.
In January 2024, the Company’s board of directors declared a cash dividend of $0.53 per share. We expect that the Company will continue to pay quarterly cash dividends at or above the current level.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Prices and Dividends The Company’s common stock trades on the New York Stock Exchange (ticker symbol FAF). The approximate number of record holders of common stock on February 8, 2023, was 1,946.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Market Prices and Dividends The Company’s common stock trades on the New York Stock Exchange (ticker symbol FAF). The approximate number of record holders of common stock on February 14, 2024, was 1,842.
Cumulatively, as of December 31, 2022, the Company had repurchased $113 million (including commissions) of its shares authorized under the share repurchase program and had the authority to repurchase an additional $287 million (including commissions) under that program.
Cumulatively, as of December 31, 2023, the Company had repurchased $186.2 million (including commissions) of its shares authorized under the share repurchase program and had the authority to repurchase an additional $213.8 million (including commissions) under that program.
The compensation committee of the Company utilizes the compensation practices of these companies as benchmarks in setting the compensation of its executive officers. 24 Item 6. Selected Financial Data Not applicable.
The compensation committee of the Company utilizes the compensation practices of these companies as benchmarks in setting the compensation of its executive officers. 26 Item 6. [Reserved]
Comparison of Cumulative Total Return First American Financial Corporation (FAF) (1) Custom Peer Group (1)(2) S&P 400 Mid Cap Index (1) December 31, 2017 $ 100 $ 100 $ 100 December 31, 2018 $ 82 $ 99 $ 89 December 31, 2019 $ 111 $ 131 $ 112 December 31, 2020 $ 101 $ 120 $ 127 December 31, 2021 $ 158 $ 120 $ 159 December 31, 2022 $ 110 $ 120 $ 138 (1) As calculated by Bloomberg Financial Services including reinvestment of dividends.
Comparison of Cumulative Total Return First American Financial Corporation (FAF) (1) Custom Peer Group (1)(2) S&P 400 Mid Cap Index (1) December 31, 2018 $ 100 $ 100 $ 100 December 31, 2019 $ 135 $ 132 $ 126 December 31, 2020 $ 123 $ 120 $ 143 December 31, 2021 $ 192 $ 156 $ 179 December 31, 2022 $ 133 $ 160 $ 155 December 31, 2023 $ 170 $ 176 $ 181 (1) As calculated by Bloomberg Financial Services including reinvestment of dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

122 edited+20 added−24 removed77 unchanged
Biggest changeInvestments within the Company’s venture portfolio are expected from time to time to cause material fluctuations in the Company’s results of operations due to the recognition of gains or losses in connection with observable price changes, such as from liquidity events, equity sales, price changes in investments that trade publicly, or from impairment charges, which changes can be volatile. 31 Title Insurance and Services 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 $ Change % Change $ Change % Change (dollars in millions) Revenues Direct premiums and escrow fees $ 2,663 $ 3,100 $ 2,490 $ (437 ) (14.1 ) $ 610 24.5 Agent premiums 3,548 3,757 2,759 (209 ) (5.6 ) 998 36.2 Information and other 1,127 1,203 1,001 (76 ) (6.3 ) 202 20.2 Net investment income 359 188 199 171 91.0 (11 ) (5.5 ) Net investment (losses) gains (150 ) 72 86 (222 ) (308.3 ) (14 ) (16.3 ) 7,547 8,320 6,535 (773 ) (9.3 ) 1,785 27.3 Expenses Personnel costs 2,273 2,235 1,834 38 1.7 401 21.9 Premiums retained by agents 2,830 2,987 2,184 (157 ) (5.3 ) 803 36.8 Other operating expenses 1,155 1,198 1,000 (43 ) (3.6 ) 198 19.8 Provision for policy losses and other claims 248 275 263 (27 ) (9.8 ) 12 4.6 Depreciation and amortization 162 152 141 10 6.6 11 7.8 Premium taxes 87 94 70 (7 ) (7.4 ) 24 34.3 Interest 34 21 17 13 61.9 4 23.5 6,789 6,962 5,509 (173 ) (2.5 ) 1,453 26.4 Income before income taxes $ 758 $ 1,358 $ 1,026 $ (600 ) (44.2 ) $ 332 32.4 Pretax margin 10.0 % 16.3 % 15.7 % (6.3 )% (38.7 ) 0.6 % 3.8 Direct premiums and escrow fees decreased $437 million, or 14.1%, in 2022 from 2021 and increased $610 million, or 24.5%, in 2021 from 2020.
Biggest changeIn connection with this change, the Company reclassified all current year and prior year operating results related to the Company’s property and casualty insurance business, which no longer has policies in force, to the corporate segment. 34 Title Insurance and Services 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 $ Change % Change $ Change % Change (dollars in millions) Revenues Direct premiums and escrow fees $ 1,856.4 $ 2,662.9 $ 3,100.9 $ (806.5 ) (30.3 ) $ (438.0 ) (14.1 ) Agent premiums 2,449.3 3,547.6 3,757.1 (1,098.3 ) (31.0 ) (209.5 ) (5.6 ) Information and other 917.1 1,127.1 1,203.1 (210.0 ) (18.6 ) (76.0 ) (6.3 ) Net investment income 540.2 359.1 188.3 181.1 50.4 170.8 90.7 Net investment (losses) gains (38.2 ) (149.8 ) 71.6 111.6 74.5 (221.4 ) (309.2 ) 5,724.8 7,546.9 8,321.0 (1,822.1 ) (24.1 ) (774.1 ) (9.3 ) Expenses Personnel costs 1,876.0 2,272.9 2,235.1 (396.9 ) (17.5 ) 37.8 1.7 Premiums retained by agents 1,952.2 2,829.7 2,986.6 (877.5 ) (31.0 ) (156.9 ) (5.3 ) Other operating expenses 937.7 1,155.4 1,197.7 (217.7 ) (18.8 ) (42.3 ) (3.5 ) Provision for policy losses and other claims 139.9 248.4 274.4 (108.5 ) (43.7 ) (26.0 ) (9.5 ) Depreciation and amortization 183.6 162.3 152.5 21.3 13.1 9.8 6.4 Premium taxes 59.1 86.6 94.2 (27.5 ) (31.8 ) (7.6 ) (8.1 ) Interest 82.3 34.2 21.8 48.1 140.6 12.4 56.9 5,230.8 6,789.5 6,962.3 (1,558.7 ) (23.0 ) (172.8 ) (2.5 ) Income before income taxes $ 494.0 $ 757.4 $ 1,358.7 $ (263.4 ) (34.8 ) $ (601.3 ) (44.3 ) Pretax margin 8.6 % 10.0 % 16.3 % (1.4 )% (14.0 ) (6.3 )% (38.7 ) Direct premiums and escrow fees decreased $806.5 million, or 30.3%, in 2023 from 2022 and $438.0 million, or 14.1%, in 2022 from 2021.
This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust and wealth management services.
This segment also provides closing and/or escrow services; accommodates tax-deferred exchanges of real estate; provides products, services and solutions designed to mitigate risk or otherwise facilitate real estate transactions; maintains, manages and provides access to title plant data and records; provides appraisals and other valuation-related products and services; provides lien release, document custodial and default-related products and services; provides document generation services; provides warehouse lending services; subservices mortgage loans; and provides banking, trust and wealth management services.
The 28.7% increase in average revenues per order closed in 2022 from 2021 was primarily due to a shift in mix from lower premium residential refinance transactions to higher premium commercial transactions, home price appreciation and, to a lesser extent, higher average revenues per order from residential purchase transactions due primarily to recent acquisitions of escrow companies, which have contributed escrow revenue to the numerator when determining average revenues per order without a corresponding title order included in the denominator.
The 28.7% increase in average revenues per order closed in 2022 from 2021 was primarily due to a shift in mix from lower premium residential refinance transactions to higher premium commercial transactions, home price appreciation and, to a lesser extent, higher average revenues per order from residential purchase transactions due primarily to recent acquisitions of escrow companies, which contributed escrow revenue to the numerator when determining average revenues per order without a corresponding title order included in the denominator.
For mortgage-backed securities, inputs 28 and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment speeds. Credit losses on debt securities When the fair value of an available-for-sale debt security falls below its amortized cost, the Company must determine whether the decline in fair value is due to credit-related factors or noncredit-related factors.
For mortgage-backed securities, inputs and assumptions may also include the structure of issuance, characteristics of the issuer, collateral attributes and prepayment speeds. Credit losses on debt securities When the fair value of an available-for-sale debt security falls below its amortized cost, the Company must determine whether the decline in fair value is due to credit-related factors or noncredit-related factors.
Results from the analysis include, but are not limited to, a range of IBNR reserve estimates and a single point estimate for IBNR as of the balance sheet date. For recent policy years at early stages of development (generally the last three years), IBNR is generally estimated using a combination of expected loss rate and multiplicative loss development factor calculations.
Results from the analysis include, but are not limited to, a range of IBNR reserve estimates and a single point estimate for IBNR as of the balance sheet date. 28 For recent policy years at early stages of development (generally the last three years), IBNR is generally estimated using a combination of expected loss rate and multiplicative loss development factor calculations.
The Company’s management uses the IBNR point estimate from the in-house actuary’s analysis and other relevant information concerning claims to determine what it considers to be the best estimate of the total amount required for the IBNR reserve. 26 The volume and timing of title insurance claims are subject to cyclical influences from both the real estate and mortgage markets.
The Company’s management uses the IBNR point estimate from the in-house actuary’s analysis and other relevant information concerning claims to determine what it considers to be the best estimate of the total amount required for the IBNR reserve. The volume and timing of title insurance claims are subject to cyclical influences from both the real estate and mortgage markets.
The results from these programs are included as income or a reduction in expense, as appropriate, in the consolidated statements of income based on the nature of the arrangement and benefit received. The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37.
The results from these programs are included as income or a reduction in expense, as appropriate, in the consolidated statements of income based on the nature of the arrangement and benefit received. 43 The Company facilitates tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code and tax-deferred reverse exchanges pursuant to Revenue Procedure 2000-37.
Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months. On February 1, 2023, the Company repaid its $250 million 4.30% senior unsecured notes, upon maturity, through available cash at the holding company. Financing.
Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months. On February 1, 2023, the Company repaid its $250 million 4.30% senior unsecured notes, upon maturity, through available cash at the holding company.
Residential refinance activity is typically more volatile than purchase activity and is highly impacted by changes in interest rates. Commercial real estate volumes are less sensitive to changes in interest rates but fluctuate based on local supply and demand conditions for space and mortgage financing availability.
Residential refinance activity is typically more volatile than purchase activity and is highly impacted by changes in interest rates. Commercial real estate volumes are less sensitive to changes in interest rates but fluctuate based on local supply and demand conditions for space and financing availability.
In assessing the fair value, the Company utilizes the results of the valuations 29 (including the market approach to the extent comparables are available) and considers the range of fair values determined under all methods and the extent to which the fair value exceeds the carrying amount of the reporting unit.
In assessing the fair value, the Company utilizes the results of the valuations (including the market approach to the extent comparables are available) and considers the range of fair values determined under all methods and the extent to which the fair value exceeds the carrying amount of the reporting unit.
Pretax margins are also impacted by (1) net investment income and net investment gains and losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity and (3) the percentage of title insurance premiums generated by agency operations as 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.
Pretax margins for the segment are also impacted by (1) net investment income and net investment gains or losses, which may not move in the same direction as closed order volumes, (2) the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity and (3) the percentage of title insurance premiums generated by agency operations as 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.
Changes in recognition or measurement of uncertain tax positions are reflected in the period in which a change in judgment occurs. The Company recognizes interest and penalties, related to uncertain tax positions in income tax expense. Pending Accounting Pronouncements See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in “Item 8.
Changes in recognition or measurement of uncertain tax positions are reflected in the period in which a change in judgment occurs. The Company recognizes interest and penalties, related to uncertain tax positions in income tax expense. Pending Accounting Pronouncements See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements included in Item 8.
The substantial majority of the Company’s business is dependent upon activity in the real estate and mortgage markets, which are cyclical and seasonal. Periods of increasing interest rates and reduced mortgage financing availability generally have an adverse effect on residential real estate activity and therefore typically decrease the Company’s revenues.
The substantial majority of the Company’s business is dependent upon activity in the real estate and mortgage markets, which are cyclical and seasonal. Periods of increasing interest rates and reduced affordability, supply and mortgage financing availability generally have an adverse effect on residential real estate activity and, therefore, typically decrease the Company’s revenues.
In contrast, periods of declining interest rates and increased mortgage financing availability generally have a positive effect on residential real estate activity, which typically increases the Company’s revenues. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months.
In contrast, periods of declining interest rates and increased affordability, supply and mortgage financing availability generally have a positive effect on residential real estate activity, which typically increases the Company’s revenues. Residential purchase activity is typically slower in the winter months with increased volumes in the spring and summer months.
As of December 31, 2022, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.
As of December 31, 2023, the Company did not intend to sell any debt securities in an unrealized loss position and it is not more likely than not that the Company will be required to sell any debt securities before recovery of their amortized cost basis.
This Management’s Discussion and Analysis contains certain financial measures that are not presented in accordance with generally accepted accounting principles (“GAAP”), including adjusted information and other revenues, adjusted personnel costs, and adjusted other operating expenses, in each case excluding the effects of recent acquisitions, and adjusted debt to capitalization ratio as it excludes the effect of secured financings payable.
This Management’s Discussion and Analysis contains certain financial measures that are not presented in accordance with generally accepted accounting principles (“GAAP”), including adjusted information and other revenues, adjusted personnel costs and adjusted other operating expenses, in each case excluding the effects of recent acquisitions, and adjusted debt to capitalization ratio as it excludes the effects of secured financings payable and accumulated other comprehensive loss.
The principal nonoperating uses of cash and cash equivalents for 2022, 2021 and 2020 were advances and repayments under secured financing agreements, purchases of debt and equity securities, repurchases of company shares, acquisitions, capital expenditures and dividends to common stockholders.
The principal nonoperating uses of cash and cash equivalents for 2023, 2022 and 2021 were advances and repayments under secured financing agreements, purchases of debt and equity securities, capital expenditures, dividends to common stockholders and repurchases of company shares.
Accordingly, pretax margins (before policy losses) are relatively constant, although as a result of some fixed expenses, profit margins (before policy losses) should nominally improve as premium revenues increase. Pretax margins are also impacted by net investment income and net investment gains and losses, which may not move in the same direction as premium revenues.
Accordingly, pretax margins (before loss expense) are relatively constant, although, as a result of some fixed expenses, profit margins (before loss expense) should nominally improve as premium revenues increase. Pretax margins are also impacted by net investment income and net investment gains or losses, which may not move in the same direction as premium revenues.
Title insurance policies are long-duration contracts with the majority of the claims reported to the Company within the first few years following the issuance of the policy. Generally, 70% to 80% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years.
Title insurance policies are long-duration contracts with the majority of the claims reported to the Company within the first few years following the issuance of the policy. Generally, 65% to 75% of claim amounts become known in the first six years of the policy life, and the majority of IBNR reserves relate to the six most recent policy years.
As of December 31, 2022, the Company was in compliance with the financial covenants under the credit agreement. In addition to amounts available under its credit facility, certain subsidiaries of the Company maintain separate financing arrangements.
As of December 31, 2023, the Company was in compliance with the financial covenants under the credit agreement. 42 In addition to amounts available under its credit facility, certain subsidiaries of the Company maintain separate financing arrangements.
Accordingly, the Company’s total tax burden at the state level for the title insurance and services segment is composed of a combination of premium taxes and state income taxes. Premium taxes as a percentage of title insurance premiums and escrow fees were 1.4%, 1.4% and 1.3% for 2022, 2021 and 2020, respectively.
Accordingly, the Company’s total tax burden at the state level for the title insurance and services segment is composed of a combination of premium taxes and state income taxes. Premium taxes as a percentage of title insurance premiums and escrow fees were 1.4% for 2023, 2022 and 2021.
In the Company’s specialty insurance segment, revenues associated with the initial year of coverage in the home warranty operations are impacted by volatility in residential purchase transactions. Traditionally, the greatest volume of real estate activity, particularly residential purchase activity, has occurred in the spring and summer months.
In the home warranty segment, revenues associated with the initial year of coverage are impacted by volatility in residential purchase transactions. Traditionally, the greatest volume of real estate activity, particularly residential purchase activity, has occurred in the spring and summer months.
Escrow deposits totaled $10.0 billion and $10.8 billion at December 31, 2022 and 2021, respectively, of which $4.6 billion and $4.8 billion, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Trust assets held or managed by FA Trust totaled $4.1 billion and $4.6 billion at December 31, 2022 and 2021, respectively.
Escrow deposits totaled $10.6 billion and $10.0 billion at December 31, 2023 and 2022, respectively, of which $6.3 billion and $4.6 billion, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions. Trust assets held or managed by FA Trust totaled $4.4 billion and $4.1 billion at December 31, 2023 and 2022, respectively.
In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $1.1 billion at December 31, 2022, of which $0.7 billion were held at FA Trust. The remaining deposits were held at third-party financial institutions.
In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $0.8 billion and $1.1 billion at December 31, 2023 and 2022, respectively, of which $0.5 billion and $0.7 billion, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions.
As examples, if the expected ultimate losses for each of the last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be an increase or decrease, as the case may be, of $158 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $316 million.
As examples, if the expected ultimate losses for each of the last six policy years increased or decreased by 50 basis points, the resulting impact on the Company’s IBNR reserve would be an increase or decrease, as the case may be, of $157.6 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $315.2 million.
As of December 31, 2022, the IBNR claims reserve for the title insurance and services segment was $1.2 billion, which reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of $995 million to $1.2 billion.
As of December 31, 2023, the IBNR claims reserve for the title insurance and services segment was $1.2 billion, which reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of $926.5 million to $1.2 billion.
Eliminations The Company’s inter-segment eliminations were not material for 2022, 2021 and 2020. 36 Income Taxes The Company's actual income tax expense differs from the expense computed by applying the federal income tax rate of 21% for 2022, 2021 and 2020.
Eliminations The Company’s inter-segment eliminations were not material for 2023, 2022 and 2021. 39 Income Taxes The Company's actual income tax expense differs from the expense computed by applying the federal income tax rate of 21% for 2023, 2022 and 2021.
The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In August 2022, the quarterly cash dividend was increased to 52 cents per common share, representing an 2% increase. The dividend increase was effective beginning with the September 2022 dividend.
The Company continually assesses its capital allocation strategy, including decisions relating to dividends, stock repurchases, capital expenditures, acquisitions and investments. In August 2023, the quarterly cash dividend was increased to 53 cents per common share, representing a 2% increase. The dividend increase was effective beginning with the September 2023 dividend.
The decrease in direct premiums and escrow fees in 2022 from 2021 was primarily due to reductions in the number of domestic title orders closed by the Company’s direct title operations, partially offset increases in domestic average revenues per order.
The decreases in direct premiums and escrow fees in 2023 from 2022 and 2022 from 2021 were primarily due to reductions in the number of domestic title orders closed by the Company’s direct title operations, partially offset by increases in domestic average revenues per order.
Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amounts of dividends, loans and advances available to the holding company are limited, principally for the protection of policyholders.
Pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available to the holding company is limited, principally for the protection of policyholders.
Net investment losses of $150 million for 2022 were primarily attributable to losses recognized on sales of debt securities and changes in the fair values of marketable equity securities, partially offset by a $52 million gain realized on the sale of an investment in a title insurance business.
Net investment losses of $149.8 million for 2022 were primarily attributable to losses recognized on sales of debt securities and changes in the fair values of marketable equity securities, partially offset by a $51.1 million gain realized on the sale of an investment in a title insurance business.
However, changes in interest rates, as well as other changes in general economic conditions in the United States and abroad, can cause fluctuations in the traditional pattern of real estate activity. The Company’s total revenues for 2022 were $7.6 billion, which reflected a decrease of $1.6 billion, or 17.5%, when compared with $9.2 billion for 2021.
However, changes in interest rates, as well as other changes in general economic conditions in the United States and abroad, can cause fluctuations in the traditional pattern of real estate activity. The Company’s total revenues for 2023 were $6.0 billion, which reflected a decrease of $1.6 billion, or 21.1%, when compared with $7.6 billion for 2022.
The results of the Company’s qualitative assessments in 2022 and 2021 supported the conclusion that the reporting unit fair values were not more likely than not less than their carrying amounts and, therefore, a quantitative impairment test was not considered necessary.
The results of the Company’s qualitative assessment in 2023 for the home warranty reporting unit and the results of the qualitative assessments in 2022 and 2021 for both reporting units supported the conclusion that the reporting unit fair values were not more likely than not less than their carrying amounts and, therefore, a quantitative impairment test was not considered necessary.
Such restrictions have not had, nor are they expected to have, an impact on the holding company’s ability to meet its cash obligations. As of December 31, 2022, the holding company’s sources of liquidity included $597 million of cash and cash equivalents and $700 million available on the Company’s revolving credit facility.
Such restrictions have not had, nor are they expected to have, an impact on the holding company’s ability to meet its cash obligations. As of December 31, 2023, the holding company’s sources of liquidity included $179.3 million of cash and cash equivalents and $900.0 million available on the Company’s revolving credit facility.
A large part of the revenues for the specialty insurance segment are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of policy losses, the majority of the expenses for this segment are variable in nature and, therefore, generally fluctuate with revenue.
A large part of the revenues for the home warranty segment are generated by renewals and are not dependent on the level of real estate activity in the year of renewal. With the exception of loss expense, the majority of the expenses for this segment are variable in nature and, therefore, generally fluctuate with revenue.
The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments in private companies (primarily those in the venture-stage) and repurchases of its common stock.
The Company generates cash primarily from sales of its products and services and from investment income. The Company’s current cash requirements include operating expenses, taxes, payments of principal and interest on its debt, capital expenditures, dividends on its common stock, and may include business acquisitions, investments in private companies (primarily those in the venture-stage) and repurchases of its common stock.
The 33.8% decrease in orders closed in 2022 from 2021 and the 0.7% increase in orders closed in 2021 from 2020 were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast.
The 34.5% decrease in orders closed in 2023 from 2022 and the 33.8% decrease in orders closed in 2022 from 2021 were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast.
If a security was rated differently among the rating agencies, the lowest rating was selected. For further information on the credit quality of the Company’s debt securities portfolio at December 31, 2022, see Note 3 Debt Securities to the consolidated financial statements.
Credit ratings reflect published ratings obtained from globally recognized securities rating agencies. If a security was rated differently among the rating agencies, the lowest rating was selected. For further information on the credit quality of the Company’s debt securities portfolio at December 31, 2023, see Note 3 Debt Securities to the consolidated financial statements.
Like-kind exchange funds administered by the Company totaled $2.8 billion and $6.0 billion at December 31, 2022 and 2021, respectively.
Like-kind exchange funds administered by the Company totaled $1.8 billion and $2.8 billion at December 31, 2023 and 2022, respectively.
The increases in 2022 and 2021 were due to the additional interest accrued on the $650 million of 2.4% senior unsecured notes issued by the Company in August 2021 and the increase in 2021 was also due to the $450 million of 4.00% senior unsecured notes issued by the Company in May 2020.
The increases in 2022 and 2021 were due to the additional interest accrued on the $650 million of 2.4% senior unsecured notes issued by the Company in August 2021.
These revenues generally trend with direct premiums and escrow fees but are typically less volatile since a portion of the revenues are subscription based and do not fluctuate with transaction volumes. 32 Information and other revenues decreased $76 million, or 6.3%, in 2022 from 2021 and increased $202 million, or 20.2%, in 2021 from 2020.
These revenues generally trend with direct premiums and escrow fees but are typically less volatile since a portion of the revenues are subscription based and do not fluctuate with transaction volumes. 35 Information and other revenues decreased $210.0 million, or 18.6%, in 2023 from 2022 and $76.0 million, or 6.3%, in 2022 from 2021.
The range limits are $212 million below and $36 million above management’s best estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve.
The range limits are $260.0 million below and $43.2 million above management’s best estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve.
The most significant nonoperating sources of cash and cash equivalents for 2022, 2021 and 2020 were borrowings and collections under secured financing agreements, proceeds from the sales and maturities of debt and equity securities, and for 2021 and 2020, proceeds from issuance of unsecured senior notes.
The most significant nonoperating sources of cash and cash equivalents for 2023, 2022 and 2021 were borrowings and collections under secured financing agreements, proceeds from the sales and maturities of debt and equity securities, increases in deposits at the Company’s banking operations, and for 2021, proceeds from issuance of unsecured senior notes.
Capital expenditures, which are primarily related to software development costs and purchases of property and equipment and software licenses, totaled $275 million, $172 million and $121 million for 2022, 2021 and 2020, respectively. Off-balance sheet arrangements. The Company administers escrow deposits and trust assets as a service to its direct customers.
Capital expenditures, which are primarily related to software development costs and purchases of property and equipment and software licenses, totaled $278.7 million, $274.9 million and $172.1 million for 2023, 2022 and 2021, respectively. Off-balance sheet arrangements. The Company administers escrow deposits and trust assets as a service to customers in its direct title operations.
At the Company’s election, borrowings of revolving loans under the credit agreement bear interest at (a) the Alternate Base Rate plus the applicable spread or (b) until LIBOR is discontinued, the Adjusted LIBOR rate plus the applicable spread (in each case as defined in the credit agreement).
At the Company’s election, borrowings of revolving loans under the credit agreement bear interest at (a) the Alternate Base Rate plus the applicable spread, (b) the Adjusted Term SOFR Rate plus the applicable spread, or (c) the Adjusted Daily Simple SOFR plus the applicable spread (in each case as defined in the credit agreement).
Fair value of debt securities The Company categorizes the fair values of its debt securities using a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and the Company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
For further discussion of title provision recorded in 2023, 2022 and 2021, see Results of Operations, page 37 . 30 Fair value of debt securities The Company categorizes the fair values of its debt securities using a three-level hierarchy for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and the Company’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).
A summary of premiums retained by agents and agent premiums is as follows: 2022 2021 2020 (dollars in millions) Premiums retained by agents $ 2,830 $ 2,987 $ 2,184 Agent premiums $ 3,548 $ 3,757 $ 2,759 % retained by agents 79.8 % 79.5 % 79.2 % The premium split between underwriter and agents is in accordance with the respective agency contracts and can vary from region to region due to divergences in real estate closing practices and state regulations.
A summary of premiums retained by agents and agent premiums is as follows: 2023 2022 2021 (dollars in millions) Premiums retained by agents $ 1,952.2 $ 2,829.7 $ 2,986.6 Agent premiums $ 2,449.3 $ 3,547.6 $ 3,757.1 % retained by agents 79.7 % 79.8 % 79.5 % The premium split between underwriter and agents is in accordance with the respective agency contracts and can vary from region to region due to divergences in real estate closing practices and state regulations.
A reconciliation of these differences is as follows: Year ended December 31, 2022 2021 2020 (dollars in millions) Taxes calculated at federal rate $ 68 21.0 % $ 345 21.0 % $ 194 21.0 % State taxes, net of federal benefit (5 ) (1.5 ) 48 2.9 22 2.4 Change in liability for tax positions (1 ) (0.3 ) — — — — Foreign income taxed at different rates 2 0.6 1 0.1 5 0.6 Unremitted foreign earnings — — 1 0.1 (2 ) (0.2 ) Other items, net (3 ) (1.1 ) (2 ) (0.2 ) 4 0.3 $ 61 18.7 % $ 393 23.9 % $ 223 24.1 % The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 18.7% for 2022, 23.9% for 2021 and 24.1% for 2020.
A reconciliation of these differences is as follows: Year ended December 31, 2023 2022 2021 (dollars in millions) Taxes calculated at federal rate $ 57.6 21.0 % $ 68.4 21.0 % $ 344.7 21.0 % State taxes, net of federal benefit (6.4 ) (2.3 ) (5.3 ) (1.5 ) 48.0 2.9 Change in liability for tax positions 10.7 3.9 (0.8 ) (0.3 ) — — Foreign income taxed at different rates 9.5 3.5 2.1 0.6 1.8 0.1 Unremitted foreign earnings 1.2 0.4 — — 1.0 0.1 Federal tax credits (17.3 ) (6.3 ) — — — — Valuation allowance 7.7 2.8 — — — — Other items, net (4.1 ) (1.5 ) (4.0 ) (1.1 ) (3.3 ) (0.2 ) $ 58.9 21.5 % $ 60.4 18.7 % $ 392.2 23.9 % The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 21.5% for 2023, 18.7% for 2022 and 23.9% for 2021.
The Company’s direct title operations closed 695,900, 1,050,700 and 1,043,800 domestic title orders during 2022, 2021 and 2020, respectively.
The Company’s direct title operations closed 455,500, 695,900 and 1,050,700 domestic title orders during 2023, 2022 and 2021, respectively.
The Company’s target is to maintain a cash balance at the holding company equal to at least twelve months of estimated cash requirements. At certain points in time, the actual cash balance at the holding company may vary from this target due to, among other factors, the timing and amount of cash payments made and dividend payments received.
At certain points in time, the actual cash balance at the holding company may vary from this target due to, among other factors, the timing and amount of cash payments made and dividend payments received.
Agent premiums decreased $209 million, or 5.6%, in 2022 from 2021 and increased $998 million, or 36.2%, in 2021 from 2020. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company.
Agent premiums decreased $1.1 billion, or 31.0%, in 2023 from 2022 and $209.5 million, or 5.6%, in 2022 from 2021. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company.
Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security, including the probability of default and the estimated timing and amount of recovery. The detailed inputs used to project expected future cash flows may be different depending on the nature of the individual debt security.
Expected future cash flows for debt securities are based on qualitative and quantitative factors specific to each security, including the probability of default and the estimated timing and amount of recovery.
However, if actual results are not consistent with the Company’s estimates and assumptions, the Company may be exposed to future impairment losses that could be material. The Company chose to perform qualitative assessments for its title insurance and home warranty reporting units for 2022 and 2021, and performed quantitative impairment tests for 2020.
However, if actual results are not consistent with the Company’s estimates and assumptions, the Company may be exposed to future impairment losses that could be material. In 2023, the Company chose to perform a quantitative impairment test for its title insurance reporting unit and a qualitative assessment for its home warranty reporting unit.
According to the Mortgage Bankers Association’s January 19, 2023 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) decreased 49.4% in 2022 when compared with 2021. According to the MBA Forecast, the dollar amount of purchase originations decreased 15.3% and refinance originations decreased 74.1%.
According to the Mortgage Bankers Association’s January 19, 2024 Mortgage Finance Forecast (the “MBA Forecast”), residential mortgage originations in the United States (based on the total dollar value of the transactions) decreased 28.9% in 2023 when compared with 2022. According to the MBA Forecast, the dollar amount of purchase originations decreased 18.2% and refinance originations decreased 54.2%.
As a result, the percentage of title premiums retained by agents can vary due to the geographic mix of revenues from agency operations. The changes in the percentage of title premiums retained by agents in 2022 from 2021 and in 2021 from 2020 were primarily due to changes in the geographic mix of agency revenues.
As a result, the percentage of title premiums retained by agents can vary due to the geographic mix of revenues from agency operations.
Tax rates and bases vary from state to state; accordingly, the total premium tax burden is dependent upon the geographical mix of operating revenues. The Company’s noninsurance subsidiaries are subject to state income tax and do not pay premium tax.
However, in lieu thereof, a premium tax is imposed on certain operating revenues, as defined by statute. Tax rates and bases vary from state to state; accordingly, the total premium tax burden is dependent upon the geographical mix of operating revenues. The Company’s noninsurance subsidiaries are subject to state income tax and do not pay premium tax.
The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 51.3% in 2022, 54.5% in 2021 and 53.0% in 2020. The decrease in the claims rate in 2022 from 2021 was primarily attributable to lower claims frequency, partially offset by higher claims severity.
The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 48.8% in 2023, 51.3% in 2022 and 54.6% in 2021. The decreases in the claims rate in 2023 from 2022 and 2022 from 2021 were primarily attributable to lower claims volume, partially offset by higher claims severity.
Cash provided by operating activities totaled $780 million, $1.2 billion and $1.1 billion for 2022, 2021 and 2020, respectively, after claim payments, net of recoveries, of $434 million, $482 million and $471 million, respectively.
Cash provided by operating activities totaled $354.3 million, $777.6 million and $1.2 billion for 2023, 2022 and 2021, respectively, after claim payments, net of recoveries, of $381.8 million, $434.3 million and $482.3 million, respectively.
Personnel costs increased $38 million, or 1.7%, in 2022 from 2021 and $401 million, or 21.9%, in 2021 from 2020. Excluding the $205 million impact from recent acquisitions for year ended December 31, 2022, personnel expenses decreased $167 million, or 7.5% in 2022 compared to 2021.
Excluding the $205.2 million impact from recent acquisitions for the year ended December 31, 2022, personnel expenses decreased $167.4 million, or 7.5% in 2022 compared to 2021.
This volume of domestic residential mortgage origination activity contributed to decreases in direct premiums and escrow fees for the Company’s direct title operations of 9.0% from domestic residential purchase transactions and 63.6% from domestic refinance transactions in 2022 when compared to 2021.
This volume of domestic residential mortgage origination activity contributed to a decrease in direct premiums and escrow fees for the Company’s direct title operations of 22.8% from domestic residential purchase transactions and a decrease of 58.1% from domestic refinance transactions in 2023 when compared to 2022.
The increase in agent premiums in 2021 from 2020 was generally consistent with the 28.9% increase in the Company’s direct premiums and escrow fees in the twelve months ended September 30, 2021 as compared with the twelve months ended September 30, 2020.
The decrease in agent premiums in 2023 from 2022 was generally consistent with the 34.0% decrease in the Company’s direct premiums and escrow fees in the twelve months ended September 30, 2023 as compared with the twelve months ended September 30, 2022.
This business currently operates in 35 states and the District of Columbia. The Company's property and casualty insurance business, which is in the final stages of its wind-down. • The Company’s corporate segment includes its investments in venture-stage companies, certain financing facilities and corporate services that support the Company’s business operations.
This business currently operates in 36 states and the District of Columbia. • The corporate segment includes investments in venture-stage companies, operating results of the property and casualty insurance business (as noted above), certain financing facilities and corporate services that support the Company’s business operations.
As of December 31, 2022, under such regulations, the maximum amounts available to the holding company from its insurance subsidiaries in 2023, without prior approval from applicable regulators, were dividends of $689 million and loans and advances of $113 million.
As of December 31, 2023, under such regulations, the maximum amount available to the holding company from its insurance subsidiaries for 2024, without prior approval from applicable regulators, was dividends of $614.7 million and loans and advances of $108.3 million.
Impairment assessment for goodwill The Company is required to perform an annual goodwill impairment assessment for each reporting unit for which goodwill has been allocated. The reporting units that have been allocated goodwill include title insurance and home warranty. The Company’s trust and other services reporting unit has no allocated goodwill and is, therefore, not assessed for impairment.
The reporting units that have been allocated goodwill include title insurance and home warranty. The Company’s trust and other services reporting unit has no allocated goodwill and is, therefore, not assessed for impairment. The Company has elected to perform this annual assessment in the fourth quarter of each fiscal year or sooner if circumstances indicate possible impairment.
Net investment gains were $12 million for 2020 and were primarily from increases in the fair values of marketable equity securities of $7 million and also from the sale of real estate. Personnel costs and other operating expenses decreased $16 million, or 8.9%, in 2022 from 2021 and increased $10 million, or 5.9%, in 2021 from 2020.
Net investment gains were $7.1 million for 2021 and were primarily from sales of debt securities and increases in the fair values of marketable equity securities. Personnel costs and other operating expenses increased $7.6 million, or 5.0%, in 2023 from 2022 and $12.4 million, or 8.8%, in 2022 from 2021.
Direct premiums and escrow fees from domestic commercial transactions in the title insurance and services segment increased $16 million, or 1.6%, in 2022 when compared to 2021.
Direct premiums and escrow fees from domestic commercial transactions in the title insurance and services segment decreased $384.7 million, or 36.9%, in 2023 when compared to 2022.
As of December 31, 2022, 97% of the Company’s investment portfolio consisted of debt securities, of which 67% were either United States government-backed or rated AAA and 98% were either rated or classified as investment grade. Percentages are based on the estimated fair values of the securities. Credit ratings reflect published ratings obtained from globally recognized securities rating agencies.
As of December 31, 2023, 94% of the Company’s investment portfolio consisted of debt securities, of which 65% were either United States government-backed or rated AAA/Aaa and 97% were either rated or classified as investment grade or better. Percentages are based on the estimated fair values of the securities.
The Company’s total revenues for 2022 also included $516 million of net investment losses compared to $436 million of net investment gains for the prior year. The decrease in direct premiums and escrow fees attributable to the title insurance and services segment was $437 million, or 14.1%.
The Company’s total revenues for 2023 also included $206.4 million of net investment losses compared to $515.8 million of net investment losses for the prior year. The decrease in direct premiums and escrow fees attributable to the title insurance and services segment was $806.5 million, or 30.3%.
The holding company’s current cash requirements include payments of principal and interest on its debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses. The holding company is dependent upon dividends and other payments from its operating subsidiaries to meet its cash requirements.
First American Financial Corporation is a holding company that conducts all of its operations through its subsidiaries. The holding company’s current cash requirements include payments of principal and interest on its debt, taxes, payments in connection with employee benefit plans, dividends on its common stock and other expenses.
Income taxes The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
As a result of the Company’s annual goodwill impairment assessments, the Company did not record any goodwill impairment losses for 2023, 2022 or 2021. 32 Income taxes The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Excluding the $142 million impact from recent acquisitions for the year ended December 31, 2022, information and other revenues decreased $218 million, or 18.2% in 2022 compared to 2021.
The decrease in information and other revenues in 2023 from 2022 was primarily attributable to decreases in the demand for the Company’s information products, post-close services and document generation services. Excluding the $142.4 million impact from recent acquisitions for the year ended December 31, 2022, information and other revenues decreased $218.4 million, or 18.2% in 2022 compared to 2021.
The decrease in information and other revenues in 2022 from 2021, adjusted for the impact of recent acquisitions, was primarily due to decreased demand for the Company’s information products, post-close services and document generation services.
The decrease in information and other revenues in 2022 from 2021, adjusted for the impact of acquisitions, was primarily due to decreased demand for the Company’s information products, post-close services and document generation services. Net investment income increased $181.1 million, or 50.4%, in 2023 from 2022 and $170.8 million, or 90.7%, in 2022 from 2021.
The increase in 2021 from 2020 was primarily attributable to an increase in interest paid on secured financings payable due to higher average balances outstanding. Pretax margins for the title insurance business reflect the high cost of performing the essential services required before insuring title, whereas the corresponding revenues are subject to regulatory and competitive pricing restraints.
The increase in 2023 from 2022 was also attributable to higher interest expense in the company’s warehouse lending business. Pretax margins for the title insurance business reflect the high cost of performing the essential services required before insuring title, whereas the corresponding revenues are subject to regulatory and competitive pricing restraints.
All such amounts are placed 40 in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets.
Cash deposits held at third-party financial institutions are not considered assets of the Company and, therefore, are not included in the accompanying consolidated balance sheets. All such amounts are placed in deposit accounts insured, up to applicable limits, by the Federal Deposit Insurance Corporation. The Company could be held contingently liable for the disposition of these assets.
Direct premiums in the home warranty business increased $13 million in 2022 from 2021 and was primarily driven by an increase in the average price charged per contract, increases in renewals within the direct-to-consumer channel and from a shift in expected claims experience resulting from a return to pre-pandemic levels.
The decrease in direct premiums in 2023 from 2022 was primarily attributable to a decline in real estate transactions. The increase in direct premiums in 2022 from 2021 was primarily attributable to an increase in the average price charged per contract, increases in renewals and from a shift in expected claims experience resulting from a return to pre-pandemic levels.
The changes in net investment income for all three years were primarily attributable to fluctuations in earnings and losses on investments associated with the Company’s deferred compensation plan.
Net investment income/loss totaled income of $25.1 million in 2023, loss of $21.7 million in 2022, and income of $23.5 million in 2021, respectively. The changes in net investment income/loss for all years were primarily attributable to fluctuations in earnings and losses on investments associated with the Company’s deferred compensation plan.
At December 31, 2022, outstanding borrowings under these facilities totaled $366 million. • First American Trust, FSB (“FA Trust”), a federal savings bank, maintains a secured line of credit with the Federal Home Loan Bank and federal funds lines of credit with certain correspondent institutions.
At December 31, 2023, outstanding borrowings under these facilities totaled $553.3 million. • First American Trust, FSB (“FA Trust”), a federal savings bank, maintains a secured line of credit with the Federal Home Loan Bank and maintains access to the Federal Reserve's Discount Window and Bank Term Funding Program.
During 2022, the level of domestic title orders opened per day by the Company’s direct title operations decreased by 30.0% when compared to 2021. Also, during 2022, residential refinance opened orders per day, residential purchase opened orders per day and commercial opened orders per day decreased by 65.3%, 18.9%, and 8.8% when compared to 2021.
During 2023, the level of domestic title orders opened per day by the Company’s direct title operations decreased by 29.5% when compared to 2022. Also, during 2023, residential refinance opened orders per day, residential purchase opened orders per day and commercial opened orders per day decreased by 46.7%, 20.4%, and 22.0%, respectively, when compared to 2022.
Personnel costs included severance expenses of $35 million, $5 million, and $6 million for 2022, 2021, and 2020, respectively.
Personnel costs included severance expenses of $12.6 million, $34.7 million, and $4.6 million for 2023, 2022, and 2021, respectively.
Net investment losses were $13 million for 2022 primarily due to losses recognized on sales of debt securities and from decreases in the fair values of marketable equity securities. Net investment gains were $23 million for 2021 and were primarily from the sale of the Company’s property and casualty insurance agency operations and from sales of debt and equity securities.
Net investment gains/losses totaled losses of $6.0 million for 2023 and were primarily due to losses recognized on sales of debt securities. Net investment gains/losses totaled losses of $12.5 million for 2022 and were primarily due to losses recognized on sales of debt securities and from decreases in the fair values of marketable equity securities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeUnder this model, with all other factors held constant, the Company estimates that increases in interest rates of 100 and 200 basis points could cause the fair value of its debt securities portfolio (including investments in preferred stock) at December 31, 2022 to decrease by approximately $392 million, or 4.8%, and $782 million, or 9.6%, respectively, and at December 31, 2021 to decrease by approximately $387 million, or 4.1%, and $817 million, or 8.7%.
Biggest changeUnder this model, with all other factors held constant, the Company estimates that increases in interest rates of 100 and 200 basis points could cause the fair value of its debt securities portfolio (including investments in preferred stock) at December 31, 2023 to decrease by approximately $337.1 million, or 4.7%, and $675.0 million, or 9.4%, respectively, and at December 31, 2022 to decrease by approximately $391.9 million, or 4.8%, and $782.1 million, or 9.6%, respectively. 44 With respect to adjustable-rate debt, the Company is primarily exposed to the effects of changes in prevailing interest rates through its variable-rate credit facility and its interest bearing escrow deposit liabilities.
The Company also considers its investments in preferred stock to be exposed to interest rate risk. The fair values of the Company’s debt securities portfolio at December 31, 2022 and 2021 were $8.2 billion and $9.4 billion, respectively.
The Company also considers its investments in preferred stock to be exposed to interest rate risk. The fair values of the Company’s debt securities portfolio at December 31, 2023 and 2022 were $7.2 billion and $8.2 billion, respectively.
For further information on the credit quality of the Company’s debt securities portfolio at December 31, 2022, see Note 3 Debt Securities to the consolidated financial statements. 42
For further information on the credit quality of the Company’s debt securities portfolio at December 31, 2023, see Note 3 Debt Securities to the consolidated financial statements. 45
The Company’s interest bearing escrow and mortgage subservicing deposit liabilities totaled $3.3 billion and $2.8 billion at December 31, 2022 and 2021, respectively. These variable-rate customer savings accounts are subject to market rate fluctuations. The weighted-average interest rates were 0.50% and 0.10% for 2022 and 2021, respectively.
The Company’s interest bearing escrow and mortgage loan subservicing deposit liabilities totaled $2.5 billion and $3.3 billion at December 31, 2023 and 2022, respectively. These variable-rate customer savings accounts are subject to market rate fluctuations. The weighted-average interest rates were 2.08% and 0.50% for 2023 and 2022, respectively.
Assuming the full utilization of available funds under the facility of $700 million at December 31, 2021 and 2020, and assuming that the borrowings were outstanding for the entire year, increases of 50 and 100 basis points in the prevailing interest rate on the Company’s credit facility would result in increases in interest expense of $4 million and $7 million for 2022 and 2021.
Assuming the full utilization of available funds under the facility of $900.0 million and $700.0 million at December 31, 2023 and 2022, respectively, and assuming that the borrowings were outstanding for the entire year, increases of 50 and 100 basis points in the prevailing interest rate on the Company’s credit facility would result in increases in interest expense of $4.5 million and $9.0 million, respectively, for 2023 and increases of $3.5 million and $7.0 million, respectively, for 2022.
Assuming broad-based declines in equity market prices of 10% and 20%, with all other factors held constant, the fair value of the Company’s marketable equity securities portfolio at December 31, 2022 could decrease by $27 million and $54 million, respectively, and at December 31, 2021 could decrease by $64 million and $128 million, respectively.
Assuming broad-based declines in equity market prices of 10% and 20%, with all other factors held constant, the fair value of the Company’s marketable equity securities portfolio at December 31, 2023 could decrease by $42.5 million and $84.9 million, respectively, and at December 31, 2022 could decrease by $26.8 million and $53.6 million, respectively.
Assuming increases in interest rates of 25 and 50 basis points and that the deposit amounts at December 31, 2022 and 2021 were held constant for the entire year, interest expense for 2022 would be higher by $8 million and $16 million, respectively, and 2021 would be higher by $7 million and $14 million, respectively. 41 Equity Price Risk The Company is also subject to equity price risk related to its marketable equity securities portfolio.
Assuming increases in interest rates of 25 and 50 basis points and that the deposit amounts at December 31, 2023 and 2022 were held constant for the entire year, interest expense for 2023 would be higher by $6.4 million and $12.7 million, respectively, and 2022 would be higher by $8.1 million and $16.3 million, respectively.
The fair value of the Company’s marketable equity securities portfolio (excluding preferred stock of $11 million and $17 million) was $269 million and $640 million as of December 31, 2022 and 2021, respectively.
Equity Price Risk The Company is also subject to equity price risk related to its marketable equity securities portfolio. The fair value of the Company’s marketable equity securities portfolio (excluding preferred stock of $12.4 million and $11.4 million) was $424.5 million and $268.1 million as of December 31, 2023 and 2022, respectively.
With respect to adjustable-rate debt, the Company is primarily exposed to the effects of changes in prevailing interest rates through its variable-rate credit facility and its interest bearing escrow deposit liabilities. As of December 31, 2022 and 2021, the Company had no outstanding borrowings under the facility.
As of December 31, 2023 and 2022, the Company had no outstanding borrowings under its credit facility.

Other FAF 10-K year-over-year comparisons