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What changed in First American Financial Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of First American Financial Corp's 2023 and 2024 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 2024 report.

+243 added−244 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-21)

Top changes in First American Financial Corp's 2024 10-K

243 paragraphs added · 244 removed · 212 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

28 edited+1 added−0 removed101 unchanged
Biggest changeFirst 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.
Biggest changeIn 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 directly to consumers. We generally sell contract renewals directly to consumers.
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.
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 the services offered to our customers.
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. These efforts include streamlining the title and closing processes by converting certain manual processes into automated ones.
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. These efforts include streamlining title and closing processes by converting certain manual processes into automated ones.
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.
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. The title insurance business is heavily dependent on data.
Title insurance policies generally are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search of one or more of public records, maps, documents and prior title policies to ascertain the existence of easements, restrictions, rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property.
Title insurance policies are issued on the basis of a preliminary title report or commitment, which is typically prepared after a search of one or more of public records, maps, documents and prior title policies to ascertain the existence of easements, restrictions, rights of way, conditions, encumbrances or other matters affecting the title to, or use of, real property.
We are currently the second largest provider of title insurance in the United States, based on the most recent American Land Title Association market share data. We believe that competition for title insurance, closing services and related products and services is based primarily on service, quality, price, relationships and the ease of access and use of our products.
We are currently the second largest provider of title insurance in the United States, based on the most recent American Land Title Association market share data. We believe that competition for title insurance, closing services and related products and services is based primarily on service, quality, price, relationships and the ease of access and use of products.
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.
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 certain corporate services that support our business operations.
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.
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 detection and prevention such as firewalls, endpoint protection and behavior analysis tools, among others.
These searches, examinations and curative efforts distinguish title insurers from other insurers, such as property and casualty insurers. Whereas title insurers generally insure against losses arising out of circumstances existing as of the date of the policy, property and casualty insurers generally insure against losses arising out of events that occur subsequent to policy issuance.
These searches, examinations and curative efforts distinguish title insurers from other insurers, such as property and casualty insurers. Title insurers generally insure against losses arising out of circumstances existing as of the date of the policy, property and casualty insurers generally insure against losses arising out of events that occur subsequent to policy issuance.
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.
However, changes in general economic conditions in the United States, 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 in the United States and the District of Columbia.
Our foreign insurance subsidiaries and branches of First American Title Insurance Company that operate in Canada, Australia, New Zealand, the United Kingdom, Malta, South Korea and Hong Kong are regulated primarily by regulatory authorities in the regions, provinces and/or countries in which they operate and may secondarily be regulated by the domestic regulator of First American Title Insurance Company as a part of the First American insurance holding company system.
Our foreign insurance subsidiaries and branches of First American Title Insurance Company that operate in Canada, Australia, New Zealand, the United Kingdom, Malta, South Korea and Hong Kong are regulated primarily by regulatory authorities in the regions, provinces and/or countries in which they operate and may secondarily be regulated by the domestic regulator of First American Title Insurance Company as a part of the First American insurance holding company group.
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.
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 nine years, the Best Workplaces™ in Canada list for the last ten years, as well as a number of similar lists in local or specialized areas.
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.
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, subject to our approval.
In addition, we regularly evaluate our pricing and agent splits, and based on competitive, market and regulatory conditions and claims history, among other factors, adjust our prices and agent splits as and where appropriate. Data and Analytics.
We regularly evaluate our pricing and agent splits, and based on competitive, market and regulatory conditions and claims history, among other factors, adjust our prices and agent splits as and where appropriate. Data and Analytics.
Residential refinance activity is not seasonal, but is generally correlated with 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 and financing availability and we typically see elevated activity towards the end of the year.
Residential refinance activity is not seasonal, but is generally correlated with changes in interest rates and, in particular, mortgage rates. Commercial real estate volumes are less sensitive to changes in interest rates and fluctuate based on local supply and demand conditions and financing availability. Commercial activity is typically elevated towards the end of the 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.
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 ninth year in a row and we earned a top score of 100 on the Human Rights Campaign Foundation’s 2023-2024 Corporate Equality Index for the sixth consecutive year.
These efforts include streamlining and enhancing the closing process, which we believe improves the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication. We are also deploying innovation solutions leveraging our bank to make the closing process more flexible.
These efforts include streamlining and enhancing the closing process, which we believe improves the customer experience by simplifying and reducing the time it takes to close a transaction, reduces risk and improves communication. We are also deploying innovation solutions that leverage our bank to make the closing process more flexible.
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 provide products and services in a number of countries outside of the United States, and our international operations accounted for approximately 7.3% of our title insurance and services segment revenues in 2024. Today we have direct operations and a physical presence in several countries, including Canada, the United Kingdom, South Korea, Australia and New Zealand.
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 bank does not originate loans. As of December 31, 2024, the bank administered fiduciary and custody assets having a market value of $4.8 billion, which includes managed assets of $2.4 billion. The bank’s balance sheet had assets of $6.1 billion, with deposits of $5.9 billion and stockholder’s equity of $253 million.
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.
As of December 31, 2024, our debt and marketable equity securities portfolio consisted of approximately 95% of debt securities. As of that date, over 71% 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.
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.
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, 2024, the Company employed 19,038 employees, with 12,135 of them located in the United States and 6,903 outside of the U.S.
In 2023, 2022 and 2021, the Company derived 95.4%, 99.2% and 90.2%, of its consolidated revenues, respectively, from this segment.
In 2024, 2023 and 2022, the Company derived 93.6%, 95.4% and 99.2%, of its consolidated revenues, respectively, from this segment.
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.
Our marketing efforts highlight the value and significance of our product and service offerings, underscoring the quality and timeliness of our services, our financial strength, our commitment to process and product innovation and our national presence.
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 educational resources on our website and through various channels to help consumers and other stakeholders gain a deeper understanding of our products, services, and the title and settlement process. 8 In our agency channel, we issue policies in accordance with agreements with authorized agents.
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.
We have implemented many professional development programs to build and strengthen the skill sets of our employees. We also believe that an inclusive workforce benefits our Company and, as a result we employ a number of programs focused on the development of employee-centered actions to enhance the recruitment, engagement, development, and retention of employees.
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.
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.
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.
Coverage and pricing typically vary by geographic region. Fees for the contracts generally are paid at the closing of the home purchase or, for contracts sold directly to consumers, are generally paid in full up front or on a monthly basis by the consumer.
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.
Regulation Many of our subsidiaries are subject to extensive regulation by applicable domestic or foreign regulatory agencies.
Added
Title insurance policies generally insure against losses arising out of circumstances that occur prior to policy issuance; however, our Company, in certain states, provides coverage for losses arising out of certain events that occur subsequent to policy issuance, such as forgery of a deed to the owner’s real estate.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+10 added−6 removed84 unchanged
Biggest changeThese 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.
Biggest changeThese attacks are prevalent, continue to increase in frequency and sophistication, and are increasingly difficult to prevent or detect. These systems also have known and unknown vulnerabilities. Once identified, the Company’s information technology and information security personnel seek to remediate these vulnerabilities based, in part, on the level of risk presented and the burden of remediation.
These regulations could hinder the Company’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect its results of operations, particularly in a rapidly declining market. FINANCIAL RISK FACTORS 20. Failures at financial institutions at which the Company deposits funds could adversely affect the Company The Company deposits substantial funds in financial institutions.
These regulations could hinder the Company’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect its results of operations, particularly in a rapidly declining market. 20 FINANCIAL RISK FACTORS 20. Failures at financial institutions at which the Company deposits funds could adversely affect the Company The Company deposits substantial funds in financial institutions.
Depending upon the ultimate severity and duration of any economic downturn and other negative economic conditions, the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and cash flows, higher claims, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt facilities and other contracts, difficulties in obtaining access to capital, challenges to the Company’s ability to pay dividends at currently anticipated levels, deterioration in the value of or return on its investments and increased credit risk from customers and others with obligations to the Company. 6.
Depending upon the ultimate severity and duration of any economic downturn and other negative economic conditions, the resulting effects on the Company could be materially adverse, including a significant reduction in revenues, earnings and cash flows, higher claims, challenges to the Company’s ability to satisfy covenants or otherwise meet its obligations under debt facilities and other contracts, difficulties in obtaining access to capital, challenges to the Company’s ability to pay dividends at currently anticipated levels, deterioration in the value of or return on its investments and increased credit risk from customers and others with obligations to the Company. 15 6.
Changes in the Company’s relationship with any of these lenders or government-sponsored enterprises, the loss of all or a portion of the business the Company derives from these parties, any refusal of these parties to accept the Company’s products and services, the modification of the government-sponsored enterprises’ requirements for title insurance or mortgage servicing in connection with mortgages they purchase or the use of alternatives to the Company’s products and services, could have a material adverse effect on the Company. 10.
Changes in the Company’s relationship with any of these lenders or government-sponsored enterprises, the loss of all or a portion of the business the Company derives from these parties, any refusal of these parties to accept the Company’s products and services, the modification of the government-sponsored enterprises’ requirements for title insurance or mortgage servicing in connection with mortgages they purchase or the use of alternatives to the Company’s products and services, could have a material adverse effect on the Company. 16 10.
The number of real estate transactions in which the Company’s products and services are purchased typically decreases in the following situations, among others: • when mortgage interest rates are high or rising; 14 • when the availability of credit, including commercial and residential mortgage funding, is limited; • when real estate affordability is declining; • when real estate inventory levels are insufficient or declining; and • when economic conditions are unfavorable, including during periods of high unemployment.
The number of real estate transactions in which the Company’s products and services are purchased typically decreases in the following situations, among others: • when mortgage interest rates are high or rising; • when the availability of credit, including commercial and residential mortgage funding, is limited; • when real estate affordability is declining; • when real estate inventory levels are insufficient or declining; and • when economic conditions are unfavorable, including during periods of high unemployment.
If the Company is unable to attract and retain qualified people, its business and operations may be impaired or disrupted. 15. The Company’s use of a global workforce involves risks that could adversely affect the Company The Company utilizes lower cost labor in countries such as India and the Philippines, among others.
If the Company is unable to attract and retain qualified people, its business and operations may be impaired or disrupted. 18 15. The Company’s use of a global workforce involves risks that could adversely affect the Company The Company utilizes lower cost labor in countries such as India and the Philippines, among others.
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 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. 21 24.
Systems damage, failures, interruptions, cyberattacks and intrusions, and unauthorized data disclosures by the Company or its service providers may disrupt the Company’s business, harm the Company’s reputation, result in material claims for damages or otherwise adversely affect the Company The Company uses computer software applications, systems and other technologies (collectively referred to as “systems”), some of which it owns and manages and some of which are owned and/or managed by third parties, including providers of distributed computing infrastructure platforms commonly known as the “cloud.” The Company and its agents, suppliers, service providers, and customers use systems to receive, process, store and transmit business information, including non-public personal information as well as data from suppliers and other information upon which the Company’s business relies.
Systems damage, failures, interruptions, cyberattacks and intrusions, and unauthorized data disclosures by the Company or its service providers may disrupt the Company’s business, harm the Company’s reputation, result in material claims for damages or otherwise adversely affect the Company The Company uses computer software applications, systems and other technologies (collectively referred to as “systems”), some of which it owns and manages and some of which are owned and/or managed by third parties, including providers of Software as a Service (SaaS) and providers of distributed computing infrastructure platforms commonly known as the “cloud.” The Company and its agents, suppliers, service providers, and customers use systems to receive, process, store and transmit business information, including non-public personal information as well as data from suppliers and other information upon which the Company’s business relies.
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.
This framework includes departments or groups dedicated to enterprise risk management, treasury management, information security, model risk management, 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.
Unfavorable economic conditions adversely affect the Company Historically, uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and a general decline in the value of real property, have created a difficult operating environment for the Company.
Unfavorable economic conditions adversely affect the Company Historically, uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and/or a general decline in the value of real property, have created a difficult operating environment for the Company.
These innovative efforts by third parties, and the manner in which the Company, its agents and other industry participants respond to them, could therefore have an adverse effect on the Company. OPERATIONAL RISK FACTORS 4.
These innovative efforts by third parties, and the manner in which the Company, its agents and other industry participants respond to them, could therefore have an adverse effect on the Company. 14 OPERATIONAL RISK FACTORS 4.
Moreover, during periods of unfavorable economic conditions, the return on these funds deposited at the Company’s bank, as well as funds the Company deposits with third party financial institutions, tends to decline.
During periods of unfavorable economic conditions, the return on these funds deposited at the Company’s bank, as well as funds the Company deposits with third party financial institutions, tends to decline.
In addition, a downgrade in the ratings or rankings for the Company’s federal savings bank subsidiary or its mortgage servicing business could have an adverse effect on that particular business. 16 11.
In addition, a downgrade in the ratings or rankings for the Company’s federal savings bank subsidiary or its mortgage servicing business could have an adverse effect on that particular business. 11.
Under these provisions: • election of the Company’s board of directors is staggered such that only one-third of the directors are elected by the stockholders each year and the directors serve three year terms prior to reelection; • stockholders may not remove directors without cause, change the size of the board of directors or, except as may be provided for in the terms of preferred stock the Company issues in the future, fill vacancies on the board of directors; • stockholders may act only at stockholder meetings and not by written consent; • stockholders must comply with advance notice provisions for nominating directors or presenting other proposals at stockholder meetings; and • the Company’s board of directors may without stockholder approval issue preferred shares and determine their rights and terms, including voting rights, or adopt a stockholder rights plan.
Under these provisions: • election of the Company’s board of directors is staggered such that only three or four of the directors are elected by the stockholders each year and the directors serve three year terms prior to reelection; • stockholders may not remove directors without cause, change the size of the board of directors or, except as may be provided for in the terms of preferred stock the Company issues in the future, fill vacancies on the board of directors; • stockholders may act only at stockholder meetings and not by written consent; • stockholders must comply with advance notice provisions for nominating directors or presenting other proposals at stockholder meetings; and • the Company’s board of directors may without stockholder approval issue preferred shares and determine their rights and terms, including voting rights, or adopt a stockholder rights plan.
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.
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.
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.
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.
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.
Moreover, to the extent severe weather conditions, health crises, terrorist attacks 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.
The Company believes these innovations will improve the customer experience by simplifying and reducing the time it takes to close a transaction, reducing risk and improving communication, and expects to continue expanding its use of these technologies.
The Company believes these innovations will improve the customer experience by simplifying and reducing the time it takes to close a transaction, reduce risk and improve communication, and expects to continue expanding its use of these technologies.
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.
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. 22 GENERAL RISK FACTORS 28.
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.
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. 29.
The frequency, severity, duration, and geographic location and scope of such health crises, catastrophe and severe weather events are inherently unpredictable, and, therefore, the Company is unable to predict the ultimate impact climate change, catastrophe events and responses to them will have on its businesses.
The frequency, severity, duration, and geographic location and scope of such health crises, catastrophe and severe weather events are inherently unpredictable, and, therefore, the Company is unable to predict the ultimate impact these events and responses to them will have on its businesses.
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.
Severe weather conditions, health crises, terrorist attacks and other catastrophe events could adversely affect the Company Severe weather conditions, global or extensive health crises, 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, including artificial intelligence, 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, data and assumptions that may be erroneous or inappropriate for the intended or actual use.
The Company’s acquisitions have involved, and are likely to continue to involve, the entry into businesses in which the Company’s management has limited prior experience, making the Company reliant on the management team of the acquired business.
The Company’s acquisitions have involved, and may continue to involve, the entry into businesses in which the Company’s management has limited prior experience, making the Company reliant on the management team of the acquired business.
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.
In the event of any such failure, the Company also could be held liable for the funds owned by third parties. Unfavorable economic conditions may lead to a heightened risk of failures of financial institutions at which the Company maintains deposits.
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.
See Item 7 – 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. 27.
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.
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.
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.
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.
Risks from these and other innovative initiatives include those associated with potential defects in the design and development of the technologies used to automate processes; misapplication of technologies; the reliance on data, rules or assumptions that may prove inadequate; information security vulnerabilities; and failure to meet customer expectations, among others.
Risks from these and other innovative initiatives include those associated with potential defects in the design and development of the technologies used to automate processes; misapplication of technologies; the reliance on data, rules or assumptions that may prove inadequate; increased costs from third parties on whose technologies we are dependent; information security vulnerabilities; and failure to meet customer expectations, among others.
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 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.
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.
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.
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.
Residential refinance activity is generally 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 remain high relative to the interest rates of outstanding mortgages.
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.
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.
Regulatory oversight and changes in government regulation could require the Company to raise capital, make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares, prohibit or limit the Company’s operations, make it more costly or burdensome to conduct such operations, result in decreased demand for the Company’s products and services or otherwise adversely affect the Company Many of the Company’s businesses, including its title insurance, property and casualty insurance, home warranty, mortgage servicing and subservicing, banking, trust and wealth management businesses, are regulated by various federal, state, local and foreign governmental agencies.
Regulatory oversight and changes in government regulation could require the Company to raise capital, make it more difficult to deploy capital, including dividends to stockholders and repurchases of the Company’s shares, prohibit or limit the Company’s operations, make it more costly or burdensome to conduct such operations, result in decreased demand for the Company’s products and services or otherwise adversely affect the Company Most of the Company’s businesses are regulated by various federal, state, local and foreign governmental agencies.
Higher interest rates also negatively impacted commercial transactions beginning in the latter half of 2022 and will likely continue to impact our volumes. 5.
Higher interest rates also negatively impacted commercial transactions beginning in the latter half of 2022 and will likely continue to impact our volumes, although activity levels have started to improve in recent quarters. 5.
In uncertain economic times, an even larger change is more likely. A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for policy years with loss ratios exceeding historical norms.
In uncertain economic times, an even larger change is more likely. A material change in expected ultimate losses and corresponding loss rates for older policy years is also possible, particularly for the ten most recent policy years.
In addition, changes in the applicable regulatory environment, statutory guidelines or interpretations of existing regulations or statutes; reform of government-sponsored enterprises such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac); enhanced governmental oversight or efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit or limit its future operations or make it more costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in its competitive position.
The Company has incurred costs to comply with these laws and to respond to inquiries about its compliance with them. 19 In addition, changes in the applicable regulatory environment, statutory guidelines or interpretations of existing regulations or statutes; reform of government-sponsored enterprises such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”); enhanced governmental oversight or efforts by governmental agencies to cause customers to refrain from using the Company’s products or services could prohibit or limit its future operations or make it more costly or burdensome to conduct such operations or result in decreased demand for the Company’s products and services or a change in its competitive position.
The venture investment portfolio is managed independent of the Company’s portfolio of debt securities and marketable equity securities, which is overseen by the Company’s investment department and an investment committee. The Company may continue to make similar venture investments. These positions are concentrated in a limited number of holdings and are high-risk, illiquid investments.
The venture investment portfolio is managed independent of the Company’s portfolio of debt securities and marketable equity securities, which is overseen by the Company’s investment department and an investment committee. The Company may continue to make similar venture investments.
The Consumer Financial Protection Bureau (“CFPB”), for example, has actively utilized its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against various participants in the mortgage and settlement industries and we expect that such enforcement activity will intensify.
The CFPB, for example, has actively utilized its regulatory authority over the mortgage and real estate markets by bringing enforcement actions against various participants in the mortgage and settlement industries.
Changes in the fair values of debt securities are recorded as a component of accumulated other comprehensive income/loss on the balance sheet. For debt securities in an unrealized loss position, where the loss is determined to be due to credit-related factors, the Company records the loss in earnings.
For debt securities in an unrealized loss position, where the loss is determined to be due to credit-related factors, the Company records the loss in earnings. Changes in the fair values of marketable equity securities are recognized in earnings.
There is no guarantee that these title agents will fulfill their contractual obligations to the Company, which contracts include limitations that are designed to limit the Company’s risk with respect to their activities.
There is no guarantee that these title agents will fulfill their fiduciary duties or contractual obligations to the Company, which are designed to limit the Company’s risk with respect to their activities. Certain activities that are not governed by fiduciary duties or contractual obligations to the Company can also create risks.
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.
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.
The risk of loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions, such as during the current environment precipitated by rapidly rising interest rates. Debt and equity securities are carried at fair value on the Company’s balance sheet.
The risk of loss associated with the portfolio is increased during periods of instability in credit markets and economic conditions. Debt and equity securities are carried at fair value on the Company’s balance sheet. Changes in the fair values of debt securities are recorded as a component of accumulated other comprehensive income/loss on the balance sheet.
Once identified, the Company’s information technology and information security personnel seek to remediate these vulnerabilities based on the level of risk presented. For a number of reasons, including the introduction of new vulnerabilities, resource constraints, competing business demands and dependence on third parties, a number of unremediated vulnerabilities will always exist.
For a number of reasons, including the introduction of new vulnerabilities, resource constraints, competing business demands and dependence on third parties, a number of unremediated vulnerabilities will always exist.
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.
The likelihood of such losses, which would generally not occur if the Company were to deposit these funds in an unaffiliated entity, increases when interest rates increase and/or when economic conditions are unfavorable.
The Company faces risks other than those listed here, including those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial.
You should carefully consider each of the following risk factors and the other information contained in this Annual Report on Form 10-K. The Company faces risks other than those listed here, including those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial.
The Company may not be able to successfully retain employees of acquired businesses or integrate them, and could lose customers, suppliers or other partners as a result of the acquisitions. For these and other reasons, including changes in market conditions, the projections used to value the acquired businesses may prove inaccurate.
The Company may not be able to successfully retain employees of acquired businesses or integrate them, and could lose customers, suppliers or other partners as a result of the acquisitions. The Company may also assume or incur unanticipated liabilities from acquisitions.
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 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.
Item 1A. Ri sk Factors The following “risk factors” could materially and adversely affect the Company’s business, operations, reputation, financial position or future financial performance. You should carefully consider each of the following risk factors and the other information contained in this Annual Report on Form 10-K.
Item 1A. Ri sk Factors The following “risk factors” could materially and adversely affect the Company’s business, operations, reputation, financial position or future financial performance.
Case law in certain states also suggests that the Company is liable for the actions or omissions of its agents in those states, regardless of contractual limitations. As a result, the Company’s use of title agents could result in increased claims on the Company’s policies issued through agents and an increase in other costs and expenses. 12.
As a result, the Company’s use of title agents could result in increased claims and loss severity on the Company’s policies issued through agents and an increase in other costs and expenses. 12.
These efforts could divert management’s focus and resources from other strategic opportunities and operational matters. 18 LEGAL AND COMPLIANCE RISK FACTORS 17.
The Company’s management also will continue to be required to dedicate substantial time and effort to the integration of its acquisitions. These efforts could divert management’s focus and resources from other strategic opportunities and operational matters. LEGAL AND COMPLIANCE RISK FACTORS 17.
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.
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. 17 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.
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.
Flawed models or uses of models, particularly those that rely on artificial intelligence, may result in, among other consequences, erroneous, biased or misleading outputs, imprudent business decisions, inadequate risk management or enhanced regulatory supervision.
In addition, the Company might incur unanticipated liabilities from acquisitions. These and other factors related to acquisitions could have a material adverse effect on the Company’s results of operations, financial condition and liquidity. The Company’s management also will continue to be required to dedicate substantial time and effort to the integration of its acquisitions.
For these and other reasons, including changes in market conditions, the projections used to value the acquired businesses may prove inaccurate. These and other factors related to acquisitions could have a material adverse effect on the Company’s results of operations, financial condition and liquidity.
Removed
Combined with the rapidly rising mortgage interest rates, beginning in 2022, that decreased demand, the number of residential purchase transactions declined year over year.
Added
Some of the factors, events and contingencies discussed below may have occurred in the past, but the disclosures below are not representations as to whether or not the factors, events or contingencies have occurred in the past, and instead reflect our beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future.
Removed
The Company has incurred costs to comply with these laws and to respond to inquiries about its compliance with them.
Added
National inventory levels for residential homes for sale remain below historical average levels, and, combined with sustained high mortgage interest rates and elevated home prices, which decreased demand, contributed to historically weak residential purchase activity.
Removed
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.
Added
Certain funds deposited at the Company’s bank are invested into investment grade fixed income securities and any realized and unrealized losses on those investments will be reflected in the Company’s consolidated financial statements.
Removed
The prospects of these companies depend on a number of factors, including the condition of the general economy, the general availability of capital, the performance of and volatility in the public markets, the regulatory and political environments, the condition of the real estate industry, the competitive environment for such companies and the operational and financial performance of such companies.
Added
Heightened regulatory supervision and an evolving regulatory landscape could hinder the pace of the Company’s innovation and may require burdensome changes to the Company’s existing governance, processes and controls. These risks and uncertainties could have a material adverse effect on the Company’s results of operations, financial condition and reputation. 7.
Removed
Even if one of these companies is successful, the Company’s ability to realize the value of its investment may take a significant amount of time and may be dependent on the occurrence of a liquidity event, such as an initial public offering or the sale of the company.
Added
The Company’s home warranty business has been and may be impacted by increases in the frequency and severity of weather events. Home warranty claims, including those pertaining to HVAC systems, tend to rise as temperatures become extreme, especially in geographies where extreme temperatures are infrequent.
Removed
Even when a liquidity event occurs, the Company may be subject to restrictions on resale or may choose to continue to hold the investment for strategic or other reasons and, as a result, the Company may not monetize the value of its investment during periods in which it could be financially advantageous to sell the investment.
Added
If, for example, funds held in trust by an independent title agent are not appropriately applied by the agent in a transaction, it may result in one or more parties to a transaction having defective title to or lien on a property, which, in turn, has led to and may continue to lead to title claims against the Company for which the Company may be liable.
Added
Case law and statutes in certain states also suggest that the Company is liable for the actions or omissions of its agents in those states, regardless of contractual limitations.
Added
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.
Added
The Company may have to provide capital to one or more of its subsidiaries, which may necessitate accessing funds from the Company’s revolving credit facility or otherwise The Company is a holding company and its subsidiaries, from time to time, may need additional capital from the Company to, for example, fund operations, meet regulatory requirements or pay liabilities.
Added
In order to provide such capital, the Company may need to draw down on its revolving credit facility or access other sources of capital, which could negatively affect its debt-to-capital ratio and liquidity position. 26.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

9 edited+3 added−4 removed5 unchanged
Biggest changeIn addition to our in-house cybersecurity capabilities, we engage assessors, consultants, auditors, and other third parties to assist with assessing, identifying, mitigating and managing cybersecurity risks, including the maintenance of a Security Operations Center that is co-managed between the Company and a managed security service provider (MSSP), which continuously reviews the Company’s network using threat intelligence from a variety of sources and reports potential incidents from users.
Biggest changeIn addition to our in-house cybersecurity capabilities, we engage assessors, consultants, auditors, and other third parties to assist with assessing, identifying, mitigating and managing cybersecurity risks, including the maintenance of a Security Operations Center that is co-managed between the Company and a managed security service provider (“MSSP”), which continuously reviews the Company’s network using threat intelligence from a variety of sources and reports potential incidents from users. 24 While the Company has experienced cybersecurity threats to its data and systems, such threats have not materially affected the Company, including our business strategy, results of operations or financial condition, with the exception of an incident in the fourth quarter of 2023, as disclosed in a Current Report filed by the Company on Form 8-K on December 22, 2023, as amended on December 29, 2023 and January 12, 2024 and followed by a Current Report on Form 8-K on May 28, 2024.
The CISO also briefs the full Board of Directors on cybersecurity matters semi-annually. The Company maintains an extensive and structured enterprise risk management (ERM) program encompassing senior executive leaders from all facets of its business, including operations, human resources, finance, accounting, treasury, information security, information technology, legal/regulatory, internal audit, compliance, underwriting, and real estate.
The Company maintains an extensive and structured enterprise risk management (“ERM”) program encompassing senior executive leaders from all facets of its business, including operations, human resources, finance, accounting, treasury, information security, information technology, legal/regulatory, internal audit, compliance, underwriting, and real estate.
The Company’s Chief Information Security Officer (“CISO”) is responsible for developing and implementing our information security program and manages a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats and regulatory compliance.
The CISO manages a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity governance, cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats and regulatory compliance.
Our approach to cybersecurity risk management is multi-layered and includes governance and risk, monitoring and incidence response, data security, application security, endpoint security, network security and perimeter security.
Our approach to cybersecurity risk management is multi-layered and includes governance and risk, monitoring and incidence response, data security, application security, endpoint security, network security and perimeter security. The Company’s Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee of the Board.
Our CISO has been with the Company for 13 years in various information security roles and has over 20 years of experience in the cybersecurity field. The Company’s Board of Directors has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee of the Board. The Audit Committee receives quarterly reports from our CISO regarding cybersecurity matters.
Our CISO has been with the Company for 14 years in various information security leadership roles and has over 20 years of experience in the cybersecurity field. The CISO provides regular reports to the ISO Committee that are shared with the Company’s Board of Directors.
The CISO provides regular reports to the ISO Committee which are shared with the Company’s Board of Directors. 23 As part of our risk management process, the Company maintains an overall risk management program that encompasses cybersecurity, conducts security audits, annual System and Organization Controls (SOC 2) testing, and ongoing risk assessments using a company-wide risk framework.
As part of our risk management process, the Company maintains an overall risk management program that encompasses cybersecurity, conducts security audits, annual System and Organization Controls (“SOC 2”) testing, and ongoing risk assessments using a company-wide risk framework. We also require employees with access to information systems to undertake data protection and cybersecurity training.
We do not believe the incident will have a material impact on the Company’s overall financial condition or its ongoing results of operations. For additional information on cybersecurity risks we face, see Item 1A. Risk Factors of this Annual Report, which should be read in conjunction with the foregoing information.
On June 21, 2024, the Company received a complaint, on a class action basis, relating to the incident in the fourth quarter of 2023. For additional information on cybersecurity risks we face, see Item 1A. Risk Factors of this Annual Report, which should be read in conjunction with the foregoing information.
The ISO Committee meets quarterly and is chaired by the Company’s Chief Risk Officer and is comprised of the Company’s Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Chief Privacy Officer and top leaders of each of the Company’s operating units.
The ISO Committee meets quarterly and is comprised of the Company’s Chief Executive Officer, Chief Financial Officer and Chief Legal Officer, whose relevant expertise and experience can be found in the Company’s Proxy Statement on Schedule 14A filed on April 1, 2024.
The Company’s CISO, Chief Information Officer and Chief Technology Officer are also participants on the ISO Committee and the Chief Audit Executive, who reports to the Company’s Audit Committee, is an observer.
The Company’s CISO and Chief Technology Officer (“CTO”) are participants on the ISO Committee. The Company’s CISO is primarily responsible for assessing and managing cybersecurity risks and threats and is responsible for developing and implementing our information security program, working closely with the ISO Committee.
Removed
We also require employees with access to information systems to undertake data protection and cybersecurity training and compliance programs. Compliance with cybersecurity training is tracked and reported to the Company’s Compliance Executive Steering Committee and the Audit Committee of the Board. In addition, the Company conducts quarterly employee phishing tests and our CISO provides those results to the Company’s executives.
Added
The Audit Committee receives quarterly reports from our Chief Information Security Officer (“CISO”) regarding cybersecurity matters. The CISO also briefs the full Board of Directors on cybersecurity matters semi-annually.
Removed
While the Company has experienced cybersecurity threats to its data and systems, such threats have not materially affected the Company, including our business strategy, results of operations or financial condition, with the exception of an incident in the fourth quarter of 2023, as disclosed in a Current Report filed by the Company on Form 8-K on December 22, as amended on December 29, 2023 and January 12, 2024.
Added
The ISO Committee also includes the Co-Presidents of First American Title Insurance Company, the Vice-Chairman of our data and analytics business and the President of our international division, who bring deep operational experience specific to our businesses; the Chief Intellectual Property and Privacy Officer, who is responsible for protecting and advising on innovation, data privacy and intellectual property; and is chaired by the Company’s Chief Risk Officer, who has over 25 years of experience in risk management.
Removed
Prior to the Company’s systems being taken offline in connection with this incident, we produced an internal forecast estimating our adjusted earnings per share to be $1.00. Our actual adjusted earnings per share was 69 cents, including a 5 cent tax benefit, implying a 36 cent shortfall relative to our internal estimate.
Added
The Company’s CTO is responsible for overseeing the Company’s overall technology strategy, including integrating security considerations into all aspects of our technology development. Our CTO has over 20 years of experience in technology management roles.
Removed
Although the Company believes that most of this difference is related to the incident, the exact impact the incident had on our fourth quarter results is unknowable. Included in this 36 cent shortfall was $11 million of direct expenses related to the incident in our corporate segment including our $5 million insurance retention.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
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
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. 25 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−0 removed5 unchanged
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.
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, 2024 to October 31, 2024 — $ — — $ 153,513,550 November 1, 2024 to November 30, 2024 50,230 66.16 50,230 150,190,463 December 1, 2024 to December 31, 2024 73,539 65.56 73,539 145,369,040 Total 123,769 $ 65.80 123,769 $ 145,369,040 Unregistered Sales of Equity Securities During the year ended December 31, 2024, the Company did not issue any unregistered common stock. 26 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.
(2) The custom peer group consists of the following companies: American Financial Group, Inc.; Assurant, Inc.; Axis Capital Holdings Limited; Cincinnati Financial Corporation; Everest Re Group, Ltd.; Fidelity National Financial, Inc.; Genworth Financial, Inc.; The Hanover Insurance Group, Inc.; Kemper Corporation; Mercury General Corporation; Old Republic International Corp.; and W.R. Berkley Corporation, each of which are in the insurance industry.
(2) The custom peer group consists of the following companies: American Financial Group, Inc.; Assurant, Inc.; Axis Capital Holdings Limited; Cincinnati Financial Corporation; Everest Group, Ltd.; Fidelity National Financial, Inc.; Genworth Financial, Inc.; The Hanover Insurance Group, Inc.; Kemper Corporation; Mercury General Corporation; Old Republic International Corp.; and W.R. Berkley Corporation, each of which are in the insurance industry.
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.
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, 2019 through December 31, 2024. The comparison assumes an investment of $100 on December 31, 2019 and reinvestment of dividends.
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]
The compensation committee of the Company utilizes the compensation practices of these companies as benchmarks in setting the compensation of its executive officers. 27 Item 6. [Reserved]
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.
In January 2025, the Company’s board of directors declared a cash dividend of $0.54 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 14, 2024, was 1,842.
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 10, 2025, was 1,762.
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.
Cumulatively, as of December 31, 2024, the Company had repurchased $254.6 million (including commissions) of its shares authorized under the share repurchase program and had the authority to repurchase an additional $145.4 million (including commissions) under that program.
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.
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, 2019 $ 100 $ 100 $ 100 December 31, 2020 $ 91 $ 92 $ 114 December 31, 2021 $ 143 $ 119 $ 142 December 31, 2022 $ 99 $ 122 $ 123 December 31, 2023 $ 126 $ 133 $ 143 December 31, 2024 $ 127 $ 169 $ 163 (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

103 edited+17 added−22 removed94 unchanged
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.
Biggest changeIn connection with its rebalancing project, the Company sold certain debt securities in an unrealized loss position, which resulted in realized losses of $345.4 million and proceeds of $2.8 billion. 35 Title Insurance and Services 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) $ Change % Change $ Change % Change Revenues Direct premiums and escrow fees $ 2,048.3 $ 1,856.4 $ 2,662.9 $ 191.9 10.3 $ (806.5 ) (30.3 ) Agent premiums 2,561.9 2,449.3 3,547.6 112.6 4.6 (1,098.3 ) (31.0 ) Information and other 938.2 917.1 1,127.1 21.1 2.3 (210.0 ) (18.6 ) Net investment income 534.3 540.2 359.1 (5.9 ) (1.1 ) 181.1 50.4 Net investment losses (345.4 ) (38.2 ) (149.8 ) (307.2 ) NM 1 111.6 74.5 5,737.3 5,724.8 7,546.9 12.5 0.2 (1,822.1 ) (24.1 ) Expenses Personnel costs 1,953.2 1,876.0 2,272.9 77.2 4.1 (396.9 ) (17.5 ) Premiums retained by agents 2,044.6 1,952.2 2,829.7 92.4 4.7 (877.5 ) (31.0 ) Other operating expenses 992.5 937.7 1,155.4 54.8 5.8 (217.7 ) (18.8 ) Provision for policy losses and other claims 138.3 139.9 248.4 (1.6 ) (1.1 ) (108.5 ) (43.7 ) Depreciation and amortization 202.2 183.6 162.3 18.6 10.1 21.3 13.1 Premium taxes 63.7 59.1 86.6 4.6 7.8 (27.5 ) (31.8 ) Interest 96.6 82.3 34.2 14.3 17.4 48.1 140.6 5,491.1 5,230.8 6,789.5 260.3 5.0 (1,558.7 ) (23.0 ) Income before income taxes $ 246.2 $ 494.0 $ 757.4 $ (247.8 ) (50.2 ) $ (263.4 ) (34.8 ) Pretax margin 4.3 % 8.6 % 10.0 % (4.3 )% (50.0 ) (1.4 )% (14.0 ) (1) Not meaningful Direct premiums and escrow fees increased $191.9 million, or 10.3%, in 2024 from 2023 and decreased $806.5 million, or 30.3%, in 2023 from 2022.
The 4.4% increase in average revenues per order closed in 2023 from 2022 was due to a shift in mix from lower premium residential refinance and default transactions to higher premium commercial transactions, partially offset by a decrease in the average revenues per order from commercial transactions.
The 4.4% increase in average revenues per order closed in 2023 from 2022 was due to a shift in the mix from lower premium residential refinance and default transactions to higher premium commercial transactions, partially offset by a decrease in the average revenues per order from commercial transactions.
Escrow deposits held at third-party financial institutions and trust assets 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.
Escrow 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.
Equity investments in which the Company does not exercise significant influence over the investee and without readily determinable fair values, or non-marketable equity securities, are accounted for at cost, less impairment, and are adjusted up or down for any observable price changes. 27 Reportable Segments The Company consists of the following reportable segments: • The title insurance and services segment issues title insurance policies on residential and commercial property in the United States and offers similar or related products and services internationally.
Equity investments in which the Company does not exercise significant influence over the investee and without readily determinable fair values, or non-marketable equity securities, are accounted for at cost, less impairment, and are adjusted up or down for any observable price changes. 28 Reportable Segments The Company consists of the following reportable segments: • The title insurance and services segment issues title insurance policies on residential and commercial property in the United States and offers similar or related products and services internationally.
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.
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. 29 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.
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.
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, 2024, see Note 3 Debt Securities to the consolidated financial statements.
The detailed inputs used to project expected future cash flows may be different depending on the nature of the individual debt security. 31 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 detailed inputs used to project expected future cash flows may be different depending on the nature of the individual debt security. 32 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.
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.
As of December 31, 2024, 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.
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.
The principal nonoperating uses of cash and cash equivalents for 2024, 2023 and 2022 were advances and repayments under secured financing agreements, purchases of debt and equity securities, dividends to common stockholders, capital expenditures and repurchases of company shares.
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.
The results from these programs are included as either income or as a reduction in expense, as appropriate, in the consolidated statements of income based on the nature of the arrangement and benefit received. 44 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.
At December 31, 2023, no amounts were outstanding under any of these facilities. • First Canadian Title Company Limited, a Canadian title insurance and services company, maintains credit facilities with certain Canadian banking institutions. At December 31, 2023, no amounts were outstanding under these facilities.
At December 31, 2024, no amounts were outstanding under any of these facilities. • First Canadian Title Company Limited, a Canadian title insurance and services company, maintains credit facilities with certain Canadian banking institutions. At December 31, 2024, no amounts were outstanding under these facilities.
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.
The results of the Company’s qualitative assessments in 2024 and 2022 for both reporting units and, in 2023, for the home warranty reporting unit, 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.
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.
As a result of the Company’s annual goodwill impairment assessments, the Company did not record any goodwill impairment losses for 2024, 2023 or 2022. 33 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.
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 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 and loans in private companies and repurchases of its common stock.
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).
For further discussion of title provision recorded in 2024, 2023 and 2022, see Results of Operations, page 38 . 31 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).
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.
As of December 31, 2024, the Company was in compliance with the financial covenants under the credit agreement. 43 In addition to amounts available under its credit facility, certain subsidiaries of the Company maintain separate financing arrangements.
In addition, the 2023 rate reflects tax credits claimed in current and prior years and a valuation allowance recorded against losses on certain equity investments. The effective tax rate for 2022 also reflects the recognition of losses and impairments on certain equity investments and benefits from the resolution of state tax matters from prior years.
In addition, the effective tax rates for 2024 and 2023 reflect tax credits claimed in current and prior years and a valuation allowance recorded against losses on certain equity investments. The effective tax rate for 2022 also reflects the benefits from the resolution of state tax matters from prior years.
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.
Eliminations The Company’s inter-segment eliminations were not material for 2024, 2023 and 2022. 40 Income Taxes The Company's actual income tax expense differs from the expense computed by applying the federal income tax rate of 21% for 2024, 2023 and 2022.
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 summary of premiums retained by agents and agent premiums is as follows: (dollars in millions) 2024 2023 2022 Premiums retained by agents $ 2,044.6 $ 1,952.2 $ 2,829.7 Agent premiums $ 2,561.9 $ 2,449.3 $ 3,547.6 % retained by agents 79.8 % 79.7 % 79.8 % 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.
Like-kind exchange funds administered by the Company totaled $1.8 billion and $2.8 billion at December 31, 2023 and 2022, respectively.
Like-kind exchange funds administered by the Company totaled $2.3 billion and $1.8 billion at December 31, 2024 and 2023, respectively.
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.
A reconciliation of these differences is as follows: Year ended December 31, 2024 2023 2022 (dollars in millions) Taxes calculated at federal rate $ 34.7 21.0 % $ 57.6 21.0 % $ 68.4 21.0 % State taxes, net of federal benefit (8.3 ) (5.0 ) (6.4 ) (2.3 ) (5.3 ) (1.5 ) Change in liability for tax positions 6.8 4.1 10.7 3.9 (0.8 ) (0.3 ) Foreign income taxed at different rates 8.6 5.2 9.5 3.5 2.1 0.6 Unremitted foreign earnings (1.4 ) (0.8 ) 1.2 0.4 — — Federal tax credits (14.6 ) (8.8 ) (17.3 ) (6.3 ) — — Valuation allowance 11.4 6.9 7.7 2.8 — — Other items, net (4.4 ) (2.8 ) (4.1 ) (1.5 ) (4.0 ) (1.1 ) $ 32.8 19.8 % $ 58.9 21.5 % $ 60.4 18.7 % The Company’s effective income tax rates (income tax expense as a percentage of income before income taxes) were 19.8% for 2024, 21.5% for 2023 and 18.7% for 2022.
The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $213.8 million remained as of December 31, 2023. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions.
The Company maintains a stock repurchase plan with authorization up to $400.0 million, of which $145.4 million remained as of December 31, 2024. Purchases may be made from time to time by the Company in the open market at prevailing market prices or in privately negotiated transactions.
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.
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, 2024, the holding company’s sources of liquidity included $196.2 million of cash and cash equivalents and $900.0 million available on the Company’s revolving credit facility.
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 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 $159.0 million, and if expected ultimate losses for those same years were to fluctuate by 100 basis points, the resulting impact would be $318.0 million.
In May 2023, the Company entered into a senior unsecured credit agreement with JPMorgan Chase Bank, N.A., in its capacity as administrative agent, and the lenders party thereto that provides for a $900.0 million revolving credit facility.
The Company maintains a senior unsecured credit agreement with JPMorgan Chase Bank, N.A., in its capacity as administrative agent, and the lenders party thereto that provides for a $900.0 million revolving credit facility.
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.
As of December 31, 2024, the IBNR claims reserve for the title insurance and services segment was $1.1 billion, which reflected management’s best estimate. The Company’s internal actuary determined a range of reasonable estimates of $965.8 million to $1.2 billion.
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.
As of December 31, 2024, 95% of the Company’s investment portfolio consisted of debt securities, of which 71% 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.
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.
Capital expenditures, which are primarily related to software development costs and purchases of property and equipment and software licenses, totaled $235.2 million, $278.7 million and $274.9 million for 2024, 2023 and 2022, respectively. Off-balance sheet arrangements. The Company administers escrow deposits as a service to customers in its direct title operations.
Net investment gains/losses totaled losses of $162.3 million and $353.4 million for 2023 and 2022, respectively, resulting from impairment charges and observable pricing changes on non-marketable equity investments within the Company’s venture investment portfolio and, for 2022, also included unrealized losses totaling $190.9 million resulting from fluctuations in the fair value of the Company’s investment in Offerpad Solutions Inc. (“Offerpad”).
Net investment losses totaled $57.5 million, $162.3 million and $353.4 million for 2024, 2023, and 2022, respectively, resulting from impairment charges and observable pricing changes on non-marketable equity investments within the Company’s venture investment portfolio and included unrealized losses and gains resulting from fluctuations in the fair value of the Company’s investment in Offerpad Solutions Inc.
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.
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. Information and other revenues increased $21.1 million, or 2.3%, in 2024 from 2023 and decreased $210.0 million, or 18.6%, in 2023 from 2022.
The 3.25% loss provision rate in the current year reflects an ultimate loss rate of 3.75% for the current policy year and a reserve release of 0.5%, or $21.6 million and for prior policy years, all based on current year title insurance premiums and escrow fees for 2023.
The 2023 loss provision rate of 3.25% reflected the ultimate loss rate for policy year 2023 of 3.75% and a reserve release of 0.5%, or $21.6 million for prior policy years, all of which are based on title insurance premiums and escrow fees for 2023.
Net Income and Net Income Attributable to the Company Net income and per share information are summarized as follows: Year ended December 31, 2023 2022 2021 (in millions, except per share amounts) Net income attributable to the Company $ 216.8 $ 263.0 $ 1,241.1 Net income per share attributable to the Company’s stockholders: Basic $ 2.08 $ 2.46 $ 11.18 Diluted $ 2.07 $ 2.45 $ 11.14 Weighted-average common shares outstanding: Basic 104.3 107.0 111.0 Diluted 104.6 107.3 111.4 See Note 15 Earnings Per Share to the consolidated financial statements for further discussion of earnings per share. 40 Liquidity and Capital Resources Cash requirements.
Net Income and Net Income Attributable to the Company Net income and per share information are summarized as follows: Year ended December 31, 2024 2023 2022 (in millions, except per share amounts) Net income attributable to the Company $ 131.1 $ 216.8 $ 263.0 Net income per share attributable to the Company’s stockholders: Basic $ 1.26 $ 2.08 $ 2.46 Diluted $ 1.26 $ 2.07 $ 2.45 Weighted-average common shares outstanding: Basic 103.9 104.3 107.0 Diluted 104.3 104.6 107.3 See Note 15 Earnings Per Share to the consolidated financial statements for further discussion of earnings per share. 41 Liquidity and Capital Resources Cash requirements.
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.
Agent premiums increased $112.6 million, or 4.6%, in 2024 from 2023 and decreased $1.1 billion, or 31.0%, in 2023 from 2022. Agent premiums are recorded when notice of issuance is received from the agent, which is generally when cash payment is received by the Company.
The Company performed qualitative assessments for both reporting units in 2022 and 2021. Based on the results of the quantitative test in 2023, the Company determined that the fair value for the title insurance reporting unit exceeded its carrying amount and no additional analysis was required.
Based on the results of the quantitative test in 2023, the Company determined that the fair value for the title insurance reporting unit exceeded its carrying amount and no additional analysis was required.
The changes in the percentage of title premiums retained by agents in 2023 from 2022 and in 2022 from 2021 were primarily due to changes in the geographic mix of agency revenues. 36 Other operating expenses decreased $217.7 million, or 18.8%, in 2023 from 2022 and $42.3 million, or 3.5%, in 2022 from 2021.
The changes in the percentage of title premiums retained by agents in 2024 from 2023 and in 2023 from 2022 were primarily due to changes in the geographic mix of agency revenues. 37 Other operating expenses increased $54.8 million, or 5.8%, in 2024 from 2023 and decreased $217.7 million, or 18.8%, in 2023 from 2022.
The Company’s debt to capitalization ratios were 28.6% and 30.0% at December 31, 2023 and 2022, respectively. The Company’s adjusted debt to capitalization ratios, excluding secured financings payable of $553.3 million and $366.3 million and accumulated other comprehensive loss of $655.8 million and $868.9 million at December 31, 2023 and 2022, were 20.2% and 22.9%, respectively. Investment portfolio.
The Company’s debt to capitalization ratios were 30.8% and 28.6% at December 31, 2024 and 2023, respectively. The Company’s adjusted debt to capitalization ratios, excluding secured financings payable of $643.8 million and $553.3 million and accumulated other comprehensive loss of $496.4 million and $655.8 million at December 31, 2024 and 2023, were 22.2% and 20.2%, respectively. Investment portfolio.
The 3.25% loss rate in the current year reflects an ultimate loss rate of 3.75% for the current policy year and a reserve release of 0.5%, or $21.6 million for prior policy years, all based on current year title insurance premiums and escrow fees for the year ended December 31, 2023.
The 3.0% loss provision rate in the current year reflects an ultimate loss rate of 3.75% for the current policy year and a reserve release of 0.75%, or $34.6 million and for prior policy years, all of which are based on title insurance premiums and escrow fees for the year ended December 31, 2024.
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.
At December 31, 2024, outstanding borrowings under these facilities totaled $643.8 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.
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.
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 2024 were $6.1 billion, which reflected an increase of $124.6 million, or 2.1%, when compared with $6.0 billion for 2023.
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.
The 2.9% increase in orders closed in 2024 from 2023 and the 34.5% decrease in orders closed in 2023 from 2022 were generally consistent with the changes in residential mortgage origination activity in the United States as reported in the MBA Forecast.
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.
Insurers generally are not subject to state income or franchise taxes. 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.
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.
In conducting its residential mortgage loan subservicing operations, the Company administers cash deposits on behalf of its clients. Cash deposits totaled $901.0 million and $830.5 million at December 31, 2024 and 2023, respectively, of which $606.5 million and $485.7 million, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions.
The 2022 and 2021 loss provision rates of 4.0% reflected the ultimate loss rates for policy years 2022 and 2021 and no change in loss reserve estimates for prior policy years. Depreciation and amortization expense increased $21.3 million, or 13.1%, in 2023 from 2022 and $9.8 million, or 6.4%, in 2022 from 2021.
The 2022 loss provision rate of 4.0% reflected the ultimate loss rate for policy year 2022 and no change in loss reserve estimates for prior policy years. Depreciation and amortization expense increased $18.6 million, or 10.1%, in 2024 from 2023 and $21.3 million, or 13.1%, in 2023 from 2022.
Financial Statements and Supplementary Data of Part II of this report. 33 Results of Operations Overview 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 $ Change % Change $ Change % Change (dollars in millions) Revenues by Segment Title insurance and services $ 5,724.8 $ 7,546.9 $ 8,321.0 $ (1,822.1 ) (24.1 ) $ (774.1 ) (9.3 ) Home warranty 417.2 419.0 421.9 (1.8 ) (0.4 ) (2.9 ) (0.7 ) Corporate and eliminations (138.5 ) (360.7 ) 477.9 222.2 61.6 (838.6 ) (175.5 ) $ 6,003.5 $ 7,605.2 $ 9,220.8 $ (1,601.7 ) (21.1 ) $ (1,615.6 ) (17.5 ) A substantial portion of the revenues for the Company’s title insurance and services segment result from sales of, and refinancings of loans on, residential and commercial real estate.
Financial Statements and Supplementary Data of Part II of this report. 34 Results of Operations Overview 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) $ Change % Change $ Change % Change Revenues by Segment Title insurance and services $ 5,737.3 $ 5,724.8 $ 7,546.9 $ 12.5 0.2 $ (1,822.1 ) (24.1 ) Home warranty 425.7 417.2 419.0 8.5 2.0 (1.8 ) (0.4 ) Corporate and eliminations (34.9 ) (138.5 ) (360.7 ) 103.6 74.8 222.2 61.6 $ 6,128.1 $ 6,003.5 $ 7,605.2 $ 124.6 2.1 $ (1,601.7 ) (21.1 ) A substantial portion of the revenues for the Company’s title insurance and services segment result from sales of, and refinancings of loans on, residential and commercial real estate.
The title insurance and services segment recorded pretax margins of 8.6%, 10.0% and 16.3% for 2023, 2022 and 2021, respectively. 37 Home Warranty 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 $ Change % Change $ Change % Change (dollars in millions) Revenues Direct premiums $ 395.6 $ 413.1 $ 399.8 $ (17.5 ) (4.2 ) $ 13.3 3.3 Information and other 21.7 13.3 10.9 8.4 63.2 2.4 22.0 Net investment income 5.9 5.1 4.1 0.8 15.7 1.0 24.4 Net investment (losses) gains (6.0 ) (12.5 ) 7.1 6.5 52.0 (19.6 ) (276.1 ) 417.2 419.0 421.9 (1.8 ) (0.4 ) (2.9 ) (0.7 ) Expenses Personnel costs 77.8 77.3 79.1 0.5 0.6 (1.8 ) (2.3 ) Other operating expenses 82.8 75.7 61.5 7.1 9.4 14.2 23.1 Provision for policy losses and other claims 193.1 211.8 218.2 (18.7 ) (8.8 ) (6.4 ) (2.9 ) Depreciation and amortization 4.8 5.1 5.8 (0.3 ) (5.9 ) (0.7 ) (12.1 ) Premium taxes 4.4 4.5 4.7 (0.1 ) (2.2 ) (0.2 ) (4.3 ) 362.9 374.4 369.3 (11.5 ) (3.1 ) 5.1 1.4 Income before income taxes $ 54.3 $ 44.6 $ 52.6 $ 9.7 21.7 $ (8.0 ) (15.2 ) Pretax margin 13.0 % 10.6 % 12.5 % 2.4 % 22.6 (1.9 )% (15.2 ) Direct premiums decreased $17.5 million, or 4.2% in 2023 from 2022 and increased $13.3 million, or 3.3% in 2022 from 2021.
The title insurance and services segment recorded pretax margins of 4.3%, 8.6% and 10.0% for 2024, 2023 and 2022, respectively. 38 Home Warranty 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) $ Change % Change $ Change % Change Revenues Direct premiums $ 397.8 $ 395.6 $ 413.1 $ 2.2 0.6 $ (17.5 ) (4.2 ) Information and other 22.5 21.7 13.3 0.8 3.7 8.4 63.2 Net investment income 4.0 5.9 5.1 (1.9 ) (32.2 ) 0.8 15.7 Net investment gains (losses) 1.4 (6.0 ) (12.5 ) 7.4 123.3 6.5 52.0 425.7 417.2 419.0 8.5 2.0 (1.8 ) (0.4 ) Expenses Personnel costs 81.2 77.8 77.3 3.4 4.4 0.5 0.6 Other operating expenses 86.0 82.8 75.7 3.2 3.9 7.1 9.4 Provision for policy losses and other claims 184.4 193.1 211.8 (8.7 ) (4.5 ) (18.7 ) (8.8 ) Depreciation and amortization 5.1 4.8 5.1 0.3 6.3 (0.3 ) (5.9 ) Premium taxes 4.6 4.4 4.5 0.2 4.5 (0.1 ) (2.2 ) 361.3 362.9 374.4 (1.6 ) (0.4 ) (11.5 ) (3.1 ) Income before income taxes $ 64.4 $ 54.3 $ 44.6 $ 10.1 18.6 $ 9.7 21.7 Pretax margin 15.1 % 13.0 % 10.6 % 2.1 % 16.2 2.4 % 22.6 Direct premiums increased $2.2 million, or 0.6%, in 2024 from 2023 and decreased $17.5 million, or 4.2% in 2023 from 2022.
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.
The increase in agent premiums in 2024 from 2023 was generally consistent with the 2.6% decrease in the Company’s direct premiums and escrow fees in the twelve months ended September 30, 2024 as compared with the twelve months ended September 30, 2023.
The provision for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, was 3.25% for 2023, and 4.0% for 2022 and 2021.
The provisions for policy losses and other claims, expressed as a percentage of title insurance premiums and escrow fees, were 3.0%, 3.25%, and 4.0% for 2024, 2023, and 2022, respectively.
Personnel costs included severance expenses of $12.6 million, $34.7 million, and $4.6 million for 2023, 2022, and 2021, respectively.
Personnel costs included severance expenses of $8.3 million, $12.6 million, and $34.7 million for 2024, 2023, and 2022, respectively.
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.
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. Personnel costs and other operating expenses increased $6.6 million, or 4.1%, in 2024 from 2023 and $7.6 million, or 5.0%, in 2023 from 2022.
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.
As of December 31, 2024, under such regulations, the maximum amount available to the holding company from its insurance subsidiaries for 2025, without prior approval from applicable regulators, was dividends of $535.0 million and loans and advances of $114.2 million.
The net effect of all activities on total cash and cash equivalents was an increase of $2.4 billion for 2023, and decreases of $4.5 million and $47.5 million for 2022 and 2021, respectively. The increases to cash and cash equivalents and deposits in 2023 related to the cybersecurity incident are further discussed below. As disclosed in Item 1C.
The net effect of all activities on total cash and cash equivalents were decreases of $1.9 billion and $4.5 million for 2024 and 2022, respectively, and an increase of $2.4 billion for 2023. The increases to cash and cash equivalents and deposits in 2023 related to the cybersecurity incident are further discussed below.
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.
Escrow deposits totaled $8.9 billion and $10.6 billion at December 31, 2024 and 2023, respectively, of which $4.0 billion and $6.3 billion, respectively, were held at FA Trust. The remaining deposits were held at third-party financial institutions.
A summary of the Company’s loss reserves is as follows: December 31, 2023 2022 (dollars in millions) Known title claims $ 55.5 4.3 % $ 62.1 4.7 % IBNR title claims 1,186.5 92.5 % 1,207.2 91.1 % Total title claims 1,242.0 96.8 % 1,269.3 95.8 % Non-title claims 40.4 3.2 % 56.0 4.2 % Total loss reserves $ 1,282.4 100.0 % $ 1,325.3 100.0 % 29 Activity in the reserve for known title claims is summarized as follows: December 31, 2023 2022 2021 (in millions) Balance at beginning of year $ 62.1 $ 66.3 $ 64.6 Provision transferred from IBNR title claims related to: Current year 24.6 28.4 30.6 Prior years 138.9 144.0 126.0 163.5 172.4 156.6 Payments, net of recoveries, related to: Current year 21.9 25.0 28.4 Prior years 147.6 152.0 126.1 169.5 177.0 154.5 Other (0.6 ) 0.4 (0.4 ) Balance at end of year $ 55.5 $ 62.1 $ 66.3 Activity in the reserve for IBNR title claims is summarized as follows: December 31, 2023 2022 2021 (in millions) Balance at beginning of year $ 1,207.2 $ 1,143.5 $ 1,025.8 Provision related to: Current year 161.5 248.4 274.4 Prior years (21.6 ) — — 139.9 248.4 274.4 Provision transferred to known title claims related to: Current year 24.6 28.4 30.6 Prior years 138.9 144.0 126.0 163.5 172.4 156.6 Other 2.9 (12.3 ) (0.1 ) Balance at end of year $ 1,186.5 $ 1,207.2 $ 1,143.5 The provision for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, was 3.25% for 2023, and 4.0% for 2022 and 2021.
A summary of the Company’s loss reserves is as follows: December 31, 2024 2023 (dollars in millions) Known title claims $ 55.3 4.6 % $ 55.5 4.3 % IBNR title claims 1,109.4 93.0 % 1,186.5 92.5 % Total title claims 1,164.7 97.6 % 1,242.0 96.8 % Non-title claims 28.7 2.4 % 40.4 3.2 % Total loss reserves $ 1,193.4 100.0 % $ 1,282.4 100.0 % 30 Activity in the reserve for known title claims is summarized as follows: December 31, 2024 2023 2022 (in millions) Balance at beginning of year $ 55.5 $ 62.1 $ 66.3 Provision transferred from IBNR title claims related to: Current year 38.6 24.6 28.4 Prior years 166.3 138.9 144.0 204.9 163.5 172.4 Payments, net of recoveries, related to: Current year 35.2 21.9 25.0 Prior years 168.8 147.6 152.0 204.0 169.5 177.0 Other (1.1 ) (0.6 ) 0.4 Balance at end of year $ 55.3 $ 55.5 $ 62.1 Activity in the reserve for IBNR title claims is summarized as follows: December 31, 2024 2023 2022 (in millions) Balance at beginning of year $ 1,186.5 $ 1,207.2 $ 1,143.5 Provision related to: Current year 172.9 161.5 248.4 Prior years (34.6 ) (21.6 ) — 138.3 139.9 248.4 Provision transferred to known title claims related to: Current year 38.6 24.6 28.4 Prior years 166.3 138.9 144.0 204.9 163.5 172.4 Other (10.5 ) 2.9 (12.3 ) Balance at end of year $ 1,109.4 $ 1,186.5 $ 1,207.2 The provisions for title insurance losses, expressed as a percentage of title insurance premiums and escrow fees, were 3.0%, 3.25% and 4.0% for the years ended December 31, 2024, 2023 and 2022, respectively.
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.
The provision for home warranty claims, expressed as a percentage of home warranty premiums, was 46.4% in 2024, 48.8% in 2023 and 51.3% in 2022. The decrease in the claims rate in 2024 from 2023 was primarily attributable to lower severity, partially offset by higher frequency.
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.
Management believes that liquidity at the holding company is sufficient to satisfy anticipated cash requirements and obligations for at least the next twelve months. Financing. On November 15, 2024, the Company repaid its $300.0 million 4.60% senior unsecured notes, upon maturity, through available cash at the holding company.
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.
Cash provided by operating activities totaled $897.5 million, $354.3 million and 777.6 million for 2024, 2023 and 2022, respectively, after claim payments, net of recoveries, of $397.8 million, $381.8 million and $434.3 million, respectively.
Proceeds from borrowings made from time to time under the credit agreement may be used for general corporate purposes. Unless terminated earlier, the credit agreement will terminate on May 17, 2028. Upon entry into the credit agreement, the previous $700.0 million senior unsecured credit agreement was terminated. At December 31, 2023, the Company had no outstanding borrowings under the facility.
Proceeds from borrowings made from time to time under the credit agreement may be used for general corporate purposes. Unless terminated earlier, the credit agreement will terminate on May 17, 2028. At December 31, 2024, the Company had no outstanding borrowings under the facility.
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.
Net investment gains/losses totaled gains of $1.4 million for 2024 and were primarily due to an increase in the fair values of marketable 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.
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 range limits are $143.6 million below and $135.7 million above management’s best estimate, respectively, and represent an estimate of the range of variation among reasonable estimates of the IBNR reserve.
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.
This volume of domestic residential mortgage origination activity contributed to an increase in direct premiums and escrow fees for the Company’s direct title operations of 6.3% from domestic residential purchase transactions and a decrease of 15.9% from domestic refinance transactions in 2024, when compared to 2023.
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 direct title operations closed 468,800, 455,500 and 695,900 domestic title orders during 2024, 2023 and 2022, respectively.
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.
During 2024, the level of domestic title orders opened per day by the Company’s direct title operations were flat when compared to 2023. Also, during 2024, residential refinance opened orders per day, residential purchase opened orders per day and commercial opened orders per day increased by 20.2%, 1.4%, and 2.7%, respectively, when compared to 2023.
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%.
According to the Mortgage Bankers Association’s January 19, 2025 Mortgage Finance Forecast (the “MBA Forecast”), based on the total dollar value of the transactions, residential mortgage originations in the United States increased 22.0%, purchase originations increased 4.0% and refinance originations increased 124.2% in 2024, when compared to 2023.
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.
This Management’s Discussion and Analysis contains the financial measure adjusted debt to capitalization ratio that is not presented in accordance with generally accepted accounting principles (“GAAP”) as it excludes the effects of secured financings payable and accumulated other comprehensive loss.
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.
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.
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.
The most significant nonoperating sources of cash and cash equivalents for 2024, 2023 and 2022 were borrowings and collections under secured financing agreements, and proceeds from the sales and maturities of debt and equity securities.
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.
The increase in direct premiums and escrow fees in 2024 from 2023 was primarily due to increases in both domestic average revenue per order and the number of domestic title orders closed by the Company’s direct title operations.
The increase in 2023 from 2022 was primarily attributable to higher advertising expense. The increase in 2022 from 2021 was primarily attributable to higher deferred policy acquisition expense, advertising expense, professional services and salary expense, partially offset by lower incentive compensation.
The increase in 2024 from 2023 was primarily attributable to higher advertising, postage, salary and employee benefits expense, partially offset by lower sales tax, technology, and deferred policy acquisition expense. The increase in 2023 from 2022 was primarily attributable to higher advertising expense.
Interest expense decreased $9.8 million, or 16.0%, in 2022 from 2021 and increased $9.4 million, or 18.1%, in 2022 from 2021. The decrease in 2023 from 2022 was primarily attributable to the repayment of the Company's $250 million 4.30% senior unsecured notes, upon maturity, in February 2023.
The decrease in 2023 from 2022 was primarily attributable to the repayment of the Company's $250 million 4.30% senior unsecured notes, upon maturity, in February 2023.
The amount charged to expense is generally determined by applying a rate (the loss provision rate) to total title insurance premiums and escrow fees.
Provision for policy losses The Company provides for title insurance losses through a charge to expense when the related premium revenue is recognized. The amount charged to expense is generally determined by applying a rate (the loss provision rate) to total title insurance premiums and escrow fees.
Principal nonoperating uses of cash and cash equivalents also included repayment of senior unsecured notes for 2023, and acquisitions for 2022 and 2021.
Principal nonoperating uses of cash and cash equivalents also included decreases in deposits at the Company’s banking operations for 2024, repayment of senior unsecured notes for 2024 and 2023, and acquisitions for 2022.
During the year ended December 31, 2023, the Company repurchased and retired 1.3 million shares of its common stock for a total purchase price of $72.7 million and, as of December 31, 2023, had cumulatively repurchased and retired 3.5 million shares of its common stock for a total purchase price of $186.2 million. 41 Holding company.
During the year ended December 31, 2024, the Company repurchased and retired 1.2 million shares of its common stock for a total purchase price of $68.5 million and, as of December 31, 2024, the Company has repurchased and retired 4.7 million shares of its common stock under the current authorization for a total purchase price of $254.6 million. 42 Holding company.
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.
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 performed qualitative assessments for both reporting units in 2024 and 2022.
The Company also offers title insurance, closing services and similar or related products and services, either directly or through third parties in other countries, including Canada, the United Kingdom, Australia, New Zealand, South Korea and various other established and emerging markets. • During 2023, the Company changed the name of its specialty insurance segment to the home warranty segment.
The Company also offers title insurance, closing services and similar or related products and services, either directly or through third parties in other countries, including Canada, the United Kingdom, South Korea, Australia, New Zealand and various other established and emerging markets. • The home warranty segment sells products including 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.
The increase in 2022 from 2021 was primarily attributable to higher short-term interest rates in the Company’s investment portfolio and escrow, like-kind exchange and subservicing deposits. Net investment gains/losses totaled losses of $38.2 million for 2023 and were primarily attributable to losses recognized on sales of debt securities, partially offset by changes in the fair values of marketable equity securities.
Net investment losses of $38.2 million for 2023 were primarily attributable to losses recognized on sales of debt securities, partially offset by changes in the fair values of marketable equity securities.
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.
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.
The home warranty segment recorded pretax margins of 13.0%, 10.6% and 12.5% for 2023, 2022 and 2021, respectively. 38 Corporate 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 $ Change % Change $ Change % Change (dollars in millions) Revenues Direct premiums and escrow fees $ — $ 8.8 $ 97.7 $ (8.8 ) (100.0 ) $ (88.9 ) (91.0 ) Information and other — 8.1 2.0 (8.1 ) (100.0 ) 6.1 305.0 Net investment income (loss) 25.1 (21.7 ) 23.5 46.8 215.7 (45.2 ) (192.3 ) Net investment (losses) gains (162.3 ) (353.4 ) 356.9 191.1 54.1 (710.3 ) (199.0 ) (137.2 ) (358.2 ) 480.1 221.0 61.7 (838.3 ) (174.6 ) Expenses Personnel costs 35.3 (10.6 ) 36.0 45.9 433.0 (46.6 ) (129.4 ) Other operating expenses 46.5 41.2 64.8 5.3 12.9 (23.6 ) (36.4 ) Provision for policy losses and other claims 3.3 26.1 96.0 (22.8 ) (87.4 ) (69.9 ) (72.8 ) Depreciation and amortization 0.1 0.1 0.1 — — — — Premium taxes — — 1.3 — — (1.3 ) (100.0 ) Interest 51.4 61.2 51.8 (9.8 ) (16.0 ) 9.4 18.1 136.6 118.0 250.0 18.6 15.8 (132.0 ) (52.8 ) (Loss) income before income taxes $ (273.8 ) $ (476.2 ) $ 230.1 $ 202.4 42.5 $ (706.3 ) (307.0 ) As previously disclosed, all current year and prior year operating results for the Company’s property and casualty insurance business, which no longer has policies in force, are now included in the corporate segment.
The home warranty segment recorded pretax margins of 15.1%, 13.0% and 10.6% for 2024, 2023 and 2022, respectively. 39 Corporate 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 (dollars in millions) $ Change % Change $ Change % Change Revenues Direct premiums and escrow fees $ — $ — $ 8.8 $ — — $ (8.8 ) (100.0 ) Information and other — — 8.1 — — (8.1 ) (100.0 ) Net investment income (loss) 24.1 25.1 (21.7 ) (1.0 ) (4.0 ) 46.8 215.7 Net investment losses (57.5 ) (162.3 ) (353.4 ) 104.8 64.6 191.1 54.1 (33.4 ) (137.2 ) (358.2 ) 103.8 75.7 221.0 61.7 Expenses Personnel costs 24.9 35.3 (10.6 ) (10.4 ) (29.5 ) 45.9 433.0 Other operating expenses 35.2 46.5 41.2 (11.3 ) (24.3 ) 5.3 12.9 Provision for policy losses and other claims (2.7 ) 3.3 26.1 (6.0 ) (181.8 ) (22.8 ) (87.4 ) Depreciation and amortization 0.1 0.1 0.1 — — — — Interest 54.3 51.4 61.2 2.9 5.6 (9.8 ) (16.0 ) 111.8 136.6 118.0 (24.8 ) (18.2 ) 18.6 15.8 Loss before income taxes $ (145.2 ) $ (273.8 ) $ (476.2 ) $ 128.6 47.0 $ 202.4 42.5 Net investment income/loss totaled income of $24.1 million and $25.1 million for 2024 and 2023, respectively, and losses of $21.7 million in 2022.
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.
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. Due to the relatively high proportion of fixed costs in the title insurance business, pretax margins generally improve as closed order volumes increase.
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 increase in direct premiums in 2024 from 2023 was primarily attributable to an increase in the average price per policy. The decrease in direct premiums in 2023 from 2022 was primarily attributable to a decline in real estate transactions.
Critical Accounting Estimates The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. The Company’s management considers the accounting policies described below to be the most dependent on the application of estimates and assumptions in preparing the Company’s consolidated financial statements.
The Company’s management considers the accounting policies described below to be the most dependent on the application of estimates and assumptions in preparing the Company’s consolidated financial statements. See Note 1 Basis of Presentation and Significant Accounting Policies to the consolidated financial statements for a more detailed description of the Company’s significant accounting policies.

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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 changeAssuming 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.
Biggest changeAssuming the full utilization of available funds under the facility of $900.0 million at December 31, 2024 and 2023, 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 2024 and 2023.
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.
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, 2024 and 2023 were $7.3 billion and $7.2 billion, respectively.
As of December 31, 2023 and 2022, the Company had no outstanding borrowings under its credit facility.
As of December 31, 2024 and 2023, the Company had no outstanding borrowings under its credit facility.
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.
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 $12.1 million and $12.4 million) was $374.7 million and $424.5 million as of December 31, 2024 and 2023, respectively.
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
For further information on the credit quality of the Company’s debt securities portfolio at December 31, 2024, see Note 3 Debt Securities to the consolidated financial statements. 46
Under 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.
Under 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, 2024 to decrease by approximately $387.2 million, or 5.3%, and $752.9 million, or 10.3%, respectively, and at December 31, 2023 to decrease by approximately $337.1 million, or 4.7%, and $675.0 million, or 9.4%, respectively. 45 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.
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 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, 2024 could decrease by $37.5 million and $74.9 million, respectively, and at December 31, 2023 could decrease by $42.5 million and $84.9 million, respectively.
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.
Assuming increases in interest rates of 25 and 50 basis points and that the deposit amounts at December 31, 2024 and 2023 were held constant for the entire year, interest expense for 2024 would be higher by $6.5 million and $13.0 million, respectively, and 2023 would be higher by $6.4 million and $12.7 million, 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.
The Company’s interest bearing escrow and mortgage loan subservicing deposit liabilities totaled $2.6 billion and $2.5 billion at December 31, 2024 and 2023, respectively. These variable-rate customer savings accounts are subject to market rate fluctuations. The weighted-average interest rates were 1.89% and 1.52% for 2024 and 2023, respectively.

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