FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 0-3658

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

Incorporated in California		95-1068610

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 First American Way, Santa Ana, California		92707-5913

(Address of principal executive offices)		(Zip Code)

(714) 800-3000

(Registrant’s telephone number, including area code)



(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. $1 par value - 72,199,753 shares as of November 6, 2002

INFORMATION INCLUDED IN REPORT

Part I:	Financial Information
Item 1.	Financial Statements
	A. Condensed Consolidated Balance Sheets
	B. Condensed Consolidated Statements of Income and Comprehensive Income
	C. Condensed Consolidated Statements of Cash Flows
	D. Notes to Condensed Consolidated Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
Part II:	Other Information
Item 1.	Legal Proceedings
Item 6.	Exhibits and Reports on Form 8-K
	Items 2 – 5 have been omitted because they are not applicable with respect to the current reporting period.

Part I: Financial Information
Item 1: Financial Statements

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

					September 30, 2002			December 31, 2001

					(Unaudited)
Assets
	Cash and cash equivalents				$	735,764,000		$	645,240,000

	Accounts and accrued income receivable, net					323,735,000			273,090,000

	Investments:
			Deposits with savings and loan associations and banks			40,999,000			27,597,000
			Debt securities			339,173,000			257,045,000
			Equity securities			38,119,000			52,014,000
			Other long-term investments			134,060,000			113,995,000

						552,351,000			450,651,000

	Loans receivable, net					109,032,000			104,264,000

	Property and equipment, at cost:
			Land			43,188,000			43,018,000
			Buildings			180,332,000			173,878,000
			Furniture and equipment			256,735,000			237,354,000
			Capitalized software			293,597,000			246,452,000

						773,852,000			700,702,000
	Less- accumulated depreciation and amortization					(339,196,000	)		(269,237,000	)

						434,656,000			431,465,000

	Title plants and other indexes					373,453,000			354,187,000

	Deferred income taxes					17,997,000			22,221,000

	Goodwill, net					497,778,000			418,649,000

	Other assets					182,938,000			137,496,000

					$	3,227,704,000		$	2,837,263,000

Liabilities and Stockholders’ Equity
	Demand deposits				$	88,136,000		$	91,285,000

	Accounts payable and accrued liabilities					452,949,000			373,170,000

	Deferred revenue					343,536,000			294,227,000

	Reserve for known and incurred but not reported claims					346,240,000			314,777,000

	Income taxes payable					5,252,000			13,342,000

	Notes and contracts payable					438,541,000			415,341,000

	Minority interests in consolidated subsidiaries					159,816,000			130,669,000

	Mandatorily redeemable preferred securities of the Company’s subsidiary trust whose sole assets are the Company’s $100,000,000 8.5% deferrable interest subordinated notes due 2012					100,000,000			100,000,000

	Stockholders’ equity:
		Preferred stock, $1 par value
				Authorized - 500,000 shares; outstanding - none
		Common stock, $1 par value
				Authorized - 180,000,000 shares
				Outstanding - 72,172,000 and 68,694,000 shares		72,172,000			68,694,000
		Additional paid-in capital				330,930,000			271,403,000
		Retained earnings				912,321,000			777,971,000
		Accumulated other comprehensive loss				(22,189,000	)		(13,616,000	)

						1,293,234,000			1,104,452,000

					$	3,227,704,000		$	2,837,263,000

See notes to condensed consolidated financial statements.

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)

			For the Three Months Ended September 30						For the Nine Months Ended September 30

			2002			2001			2002			2001

Revenues
	Operating revenues		$	1,180,114,000		$	952,776,000		$	3,289,704,000		$	2,610,969,000
	Investment and other income			22,858,000			22,132,000			61,237,000			58,889,000
	Net realized investment (losses) gains			(5,888,000	)		8,100,000			(18,456,000	)		7,933,000

				1,197,084,000			983,008,000			3,332,485,000			2,677,791,000

Expenses
	Salaries and other personnel costs			381,074,000			331,727,000			1,090,317,000			917,942,000
	Premiums retained by agents			322,148,000			255,384,000			915,281,000			661,206,000
	Other operating expenses			265,456,000			216,854,000			748,312,000			622,373,000
	Provision for policy losses and other claims			58,215,000			52,661,000			158,011,000			129,676,000
	Depreciation and amortization			23,662,000			27,820,000			72,894,000			77,925,000
	Premium taxes			8,889,000			6,758,000			24,481,000			17,470,000
	Interest			8,618,000			8,449,000			25,554,000			22,314,000

				1,068,062,000			899,653,000			3,034,850,000			2,448,906,000

Income before income taxes and minority interests				129,022,000			83,355,000			297,635,000			228,885,000
Income taxes				42,800,000			30,500,000			100,100,000			83,200,000

Income before minority interests				86,222,000			52,855,000			197,535,000			145,685,000
Minority interests				18,863,000			11,160,000			45,980,000			30,697,000

Net income				67,359,000			41,695,000			151,555,000			114,988,000

Other comprehensive loss, net of tax
		Unrealized loss on securities		(313,000	)		(4,152,000	)		(5,323,000	)		(5,071,000	)
		Minimum pension liability adjustment		(875,000	)		(75,000	)		(3,250,000	)		(190,000	)

				(1,188,000	)		(4,227,000	)		(8,573,000	)		(5,261,000	)

Comprehensive income			$	66,171,000		$	37,468,000		$	142,982,000		$	109,727,000

Net income per share (Note 2):
		Basic	$	.94		$	.61		$	2.13		$	1.75

		Diluted	$	.84		$	.55		$	1.91		$	1.59

Cash dividends per share			$	.08		$	.07		$	.23		$	.20

Weighted average number of shares (Note 2):
		Basic		71,827,000			67,844,000			71,092,000			65,877,000

		Diluted		82,679,000			78,872,000			82,112,000			74,529,000

See notes to condensed consolidated financial statements.

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)

						For the Nine Months Ended September 30

						2002			2001

Cash flows from operating activities:
		Net income				$	151,555,000		$	114,988,000
		Adjustments to reconcile net income to cash provided by operating activities-
				Provision for policy losses and other claims			158,011,000			129,676,000
				Depreciation and amortization			72,894,000			77,925,000
				Minority interests in net income			45,980,000			30,697,000
				Net investment losses (gains)			18,456,000			(7,933,000	)
				Other, net			(28,475,000	)		(14,189,000	)
		Changes in assets and liabilities excluding effects of company acquisitions and noncash transactions-
				Claims paid, net of recoveries			(141,968,000	)		(113,069,000	)
				Net change in income tax accounts			(2,776,000	)		75,253,000
				Increase in accounts and accrued income receivable			(42,862,000	)		(71,788,000	)
				Increase in accounts payable and accrued liabilities			73,074,000			56,561,000
				Increase in deferred revenue			50,366,000			15,269,000
				Other, net			(23,737,000	)		(11,182,000	)

		Cash provided by operating activities					330,518,000			282,208,000

Cash flows from investing activities:
		Net cash effect of company acquisitions/dispositions					(31,767,000	)		(15,407,000	)
		Net increase in deposits with banks					(13,132,000	)		(1,063,000	)
		Net increase in loans receivable					(4,768,000	)		(10,637,000	)
		Purchases of debt and equity securities					(250,568,000	)		(154,974,000	)
		Proceeds from sales of debt and equity securities					60,811,000			53,397,000
		Proceeds from maturities of debt securities					111,388,000			55,537,000
		Net decrease in other investments					15,913,000			4,560,000
		Capital expenditures					(70,997,000	)		(86,874,000	)
		Purchases of capitalized data					(13,472,000	)		(9,437,000	)
		Proceeds from sale of property and equipment					2,934,000			1,766,000

		Cash used for investing activities					(193,658,000	)		(163,132,000	)

Cash flows from financing activities:
		Net change in demand deposits					(3,149,000	)		10,729,000
		Proceeds from issuance of debt					6,543,000			210,000,000
		Repayment of debt					(19,096,000	)		(22,357,000	)
		Proceeds from exercise of stock options					7,521,000			9,173,000
		Proceeds from the issuance of stock to employee benefit plans					3,113,000
		Distributions to minority shareholders					(24,063,000	)		(17,392,000	)
		Cash dividends					(17,205,000	)		(13,401,000	)

	Cash (used for) provided by financing activities						(46,336,000	)		176,752,000

Net increase in cash and cash equivalents							90,524,000			295,828,000
Cash and cash equivalents					- Beginning of year		645,240,000			300,905,000

					- End of third quarter	$	735,764,000		$	596,733,000

Supplemental information:
	Cash paid during the nine months for:
			Interest			$	18,641,000		$	18,525,000
			Premium taxes			$	24,563,000		$	14,353,000
			Income taxes			$	101,992,000		$	22,622,000
	Noncash investing and financing activities:
			Shares issued for employee benefits plans			$	17,491,000		$	8,508,000
			Liabilities incurred in connection with company acquisitions			$	46,927,000		$	36,750,000
			Purchase of minority interest						$	1,203,000
			Company acquisitions in exchange for common stock			$	34,880,000		$	78,376,000

See notes to condensed consolidated financial statements.

THE FIRST AMERICAN CORPORATION
AND SUBSIDIARY COMPANIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1 - Basis of Condensed Consolidated Financial Statements

The condensed consolidated financial information included in this report has been prepared in conformity with the accounting principles and practices reflected in the consolidated financial statements included in the annual report filed with the Securities and Exchange Commission for the preceding calendar year. All adjustments are of a normal recurring nature and are, in the opinion of management, necessary to a fair statement of the consolidated results for the interim periods. Certain 2001 amounts have been reclassified to conform to the 2002 presentation. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Note 2 – Earnings Per Share

			For the Three Months Ended September 30				For the Nine Months Ended September 30

			2002		2001		2002		2001

Numerator:
Net Income-numerator for basic net income per share			$	67,359,000	$	41,695,000	$	151,555,000	$	114,988,000
Effect of dilutive securities
Add: Convertible debt - interest expense (net of tax)				1,748,000		1,783,000		5,282,000		3,441,000

Net Income–numerator for dilutive net income per share			$	69,107,000	$	43,478,000	$	156,837,000	$	118,429,000

Denominator
	Weighted average shares-denominator
		For basic net income per share		71,827,000		67,844,000		71,092,000		65,877,000
Effect of dilutive securities:
	Employee stock options			2,333,000		2,418,000		2,464,000		3,320,000
	Convertible debt			8,519,000		8,610,000		8,556,000		5,332,000

Denominator for diluted net income per share				82,679,000		78,872,000		82,112,000		74,529,000

Basic net income per share			$	0.94	$	0.61	$	2.13	$	1.75

Diluted net income per share			$	0.84	$	0.55	$	1.91	$	1.59

Antidilutive stock options				3,549,000		4,000,000		3,624,000		2,564,000

Note 3 – Business Combinations

During the nine months ended September 30, 2002, the Company acquired 17 companies. These acquisitions were individually not material and 13 have been included in the Company’s title insurance segment, three in the property information segment and one in the Company’s screening information segment. The aggregate purchase price was $34.9 million in stock, $28.5 million in cash and $24.5 million in notes payable. The purchase price for each acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values and approximately $79.1 million of goodwill was recorded. Allocations to other intangible and identifiable assets were not material.

Note 4 – Segment Information

In order to expand the disclosure of the Company’s business segments and to report financial results in a manner consistent with the reporting responsibilities of the Company’s management, the Company established seven reporting segments that fall within two primary business groups, Financial Services and Information Technology. The Financial Services Group includes Title Insurance and Services, Specialty Insurance and Trust and Other Services. The Information Technology Group includes Mortgage Information, Property Information, Credit Information and Screening Information.

For the three months ended September 30, 2002:

		Revenues			Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures

Financial Services
	Title Insurance and Services	$	868,298,000		$	80,026,000		$	10,218,000	$	11,296,000
	Specialty Insurances		40,156,000			6,014,000			496,000		565,000
	Trust and Other Services		9,635,000			2,443,000			259,000		143,000

			918,089,000			88,483,000			10,973,000		12,004,000

Information Technology
	Mortgage Information		120,759,000			39,188,000			2,666,000		2,645,000
	Property Information		76,058,000			21,405,000			5,262,000		2,757,000
	Credit Information		56,213,000			10,943,000			2,178,000		2,614,000
	Screening Information		27,784,000			1,120,000			679,000		1,148,000

			280,814,000			72,656,000			10,785,000		9,164,000

			1,198,903,000			161,139,000			21,758,000		21,168,000

Corporate			(1,819,000	)		(32,117,000	)		1,904,000		2,845,000

		$	1,197,084,000		$	129,022,000		$	23,662,000	$	24,013,000

For the three months ended September 30, 2001:

		Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures

Financial Services
	Title Insurance and Services	$	704,467,000	$	39,102,000		$	12,670,000	$	10,762,000
	Specialty Insurances		31,518,000		4,638,000			670,000		—
	Trust and Other Services		10,289,000		3,421,000			301,000		351,000

			746,274,000		47,161,000			13,641,000		11,113,000

Information Technology
	Mortgage Information		114,820,000		38,420,000			3,428,000		3,863,000
	Property Information		55,871,000		7,491,000			5,572,000		14,306,000
	Credit Information		50,518,000		6,559,000			3,437,000		6,452,000
	Screening Information		14,389,000		729,000			481,000		440,000

			235,598,000		53,199,000			12,918,000		25,061,000

			981,872,000		100,360,000			26,559,000		36,174,000

Corporate			1,136,000		(17,005,000	)		1,261,000		323,000

		$	983,008,000	$	83,355,000		$	27,820,000	$	36,497,000

For the nine months ended September 30, 2002:

		Revenues			Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures

Financial Services
	Title Insurance and Services	$	2,427,531,000		$	169,788,000		$	33,361,000	$	37,297,000
	Specialty Insurances		107,843,000			17,855,000			1,442,000		1,604,000
	Trust and Other Services		32,421,000			11,255,000			821,000		209,000

			2,567,795,000			198,898,000			35,624,000		39,110,000

Information Technology
	Mortgage Information		339,808,000			100,245,000			7,047,000		7,043,000
	Property Information		196,814,000			48,070,000			14,274,000		8,527,000
	Credit Information		164,968,000			30,827,000			8,083,000		7,782,000
	Screening Information		76,907,000			3,868,000			1,963,000		2,823,000

			778,497,000			183,010,000			31,367,000		26,175,000

			3,346,292,000			381,908,000			66,991,000		65,285,000

Corporate			(13,807,000	)		(84,273,000	)		5,903,000		5,712,000

		$	3,332,485,000		$	297,635,000		$	72,894,000	$	70,997,000

For the nine months ended September 30, 2001:

		Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures

Financial Services
	Title Insurance and Services	$	1,900,077,000	$	121,263,000		$	35,213,000	$	31,308,000
	Specialty Insurances		90,952,000		7,755,000			2,020,000		1,421,000
	Trust and Other Services		29,141,000		8,423,000			888,000		467,000

			2,020,170,000		137,441,000			38,121,000		33,196,000

Information Technology
	Mortgage Information		306,679,000		90,143,000			9,049,000		12,412,000
	Property Information		166,421,000		23,803,000			16,642,000		21,025,000
	Credit Information		146,525,000		21,181,000			8,581,000		13,600,000
	Screening Information		35,782,000		869,000			1,262,000		2,180,000

			655,407,000		135,996,000			35,534,000		49,217,000

			2,675,577,000		273,437,000			73,655,000		82,413,000

Corporate			2,214,000		(44,552,000	)		4,270,000		4,461,000

		$	2,677,791,000	$	228,885,000		$	77,925,000	$	86,874,000

Note 5 - New Accounting Pronouncements

On January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS 141). This statement addresses financial accounting and reporting for business combinations and supercedes Accounting Principles Board (APB) Opinion No. 16, “Business Combinations.” SFAS 141 requires that all business combinations be accounted for under the purchase method of accounting. The adoption of SFAS 141 did not have a material effect on the Company’s financial condition or results of operations.

On January 1, 2002, the Company also adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). This statement addresses financial accounting and reporting for goodwill and other intangibles and supercedes APB Opinion No. 17, “Intangible Assets.” SFAS 142 addresses how goodwill and other intangible assets should be accounted for in the financial statements. Pursuant to SFAS 142, the Company’s goodwill and intangible assets that have indefinite lives will not be amortized but rather will be tested at least annually for impairment. SFAS 142 requires that goodwill and other intangible assets be allocated to various reporting units, which are either operating segments or one reporting unit below the operating segment. The Company’s reporting units for purposes of applying the provisions of SFAS 142 are title insurance, home warranty, property and casualty insurance, trust and other services, mortgage origination products and services, mortgage servicing products and services, property information services, conventional credit information, sub-prime credit information, pre-employment and drug screening, and tenant screening.

The SFAS 142 impairment testing process includes two phases. The first phase (Test 1) compares the fair value of each reporting unit to its book value. The fair value of each reporting unit is determined by using discounted cash flow analysis, market approach valuations and third party valuation advisors. If the fair value of the reporting unit exceeds its book value, the goodwill is not considered impaired and no additional analysis is required. However, if the book value is greater than the fair value, a second test (Test 2) must be completed to determine if the fair value of the goodwill exceeds the book value of the goodwill. The fair value of the goodwill is determined by discounted cash flow analysis and appraised values. If the fair value is less than the book value, an impairment is considered to exist and, in the initial year of adoption, will be recorded as a cumulative effect of a change in accounting principle.

In accordance with SFAS 142, the Company completed Test 1 by June 30, 2002 and all but the tenant screening reporting unit passed. The Company is required to perform Test 2 for this reporting unit to determine how much, if any, of the $4.5 million of goodwill allocated to this reporting unit is considered impaired. Management will complete this test no later than December 31, 2002, as required by SFAS 142.

The Company has determined that it has no intangible assets with indefinite lives and therefore has continued to amortize its other intangible assets in a manner consistent with periods prior to the adoption of SFAS 142.

A reconciliation of the changes in the carrying amount of net goodwill, by operating segment, for the nine months ended September 30, 2002 is as follows:

		Balance as of January 1, 2002		Acquired During the Year		Impairment Losses		Balance as of September 30, 2002

Financial Services
	Title Insurance and Services	$	126,855,000	$	14,636,000	$	—	$	141,491,000
	Specialty Insurances		18,194,000		1,600,000		—		19,794,000
	Trust and Other Services		—		—		—		—
Information Technology
	Mortgage Information		69,917,000		1,346,000		—		71,263,000
	Property Information		80,129,000		28,111,000		—		108,240,000
	Credit Information		86,117,000				—		86,117,000
	Screening Information		37,437,000		33,436,000		—		70,873,000

		$	418,649,000	$	79,129,000	$	—	$	497,778,000

A reconciliation of net income and earnings per share is as follows:

		For the Three Months Ended September 30				For the Nine Months Ended September 30

		2002		2001		2002		2001

	Reported Net Income	$	67,359,000	$	41,695,000	$	151,555,000	$	114,988,000
	Add back: Goodwill amortization		—		4,060,000		—		11,083,000

	Adjusted Net Income	$	67,359,000	$	45,755,000	$	151,555,000	$	126,071,000

	Basic Earnings per Share:
	Reported Net Income	$	0.94	$	0.61	$	2.13	$	1.75
	Goodwill amortization		—		0.06		—		0.16

	Adjusted Net Income	$	0.94	$	0.67	$	2.13	$	1.91

Diluted Earnings Per Share:
	Reported Net Income	$	0.84	$	0.55	$	1.91	$	1.59
	Goodwill amortization		—		0.05		—		0.15

	Adjusted Net Income	$	0.84	$	0.60	$	1.91	$	1.74

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this 10-Q, including those relating to anticipated cash requirements, are forward looking. Risks and uncertainties exist which may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: interest rate fluctuations; changes in the performance of the real estate markets; general volatility in the capital markets; changes in applicable government regulations; consolidation among the Company’s significant customers and competitors; the Company’s continued ability to identify businesses to be acquired; changes in the Company’s ability to integrate businesses which it acquires; and other factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

CRITICAL ACCOUNTING POLICIES

The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies. The significant critical accounting policies of the Company can be found in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Additionally, pursuant to SFAS 142, the Company is now required to perform an annual impairment test for goodwill and other intangible assets. This impairment test is performed utilizing a variety of valuation techniques, all which require management to make estimates and judgments, and include discounted cash flow analysis, market approach valuations and the use of third party valuation advisors. Certain of these valuation techniques are also utilized by the Company in accounting for business combinations, primarily in the determination of the fair value of acquired assets and liabilities.

RESULTS OF OPERATIONS

Three and nine months ended September 30:

OVERVIEW

During the third quarter of 2002, refinance activity increased to record levels. This, coupled with continued strength in the existing and new home sale markets, resulted in record breaking quarterly results for the Company. Net income for the three months ended September 30, 2002, was $67.4 million, or $0.84 per diluted share. Net income for the three months ended September 30, 2001 was $41.7 million, or $0.55 per diluted share.

OPERATING REVENUES

Set forth below is a summary of operating revenues for each of the Company’s segments.

					Three Months Ended September 30								Nine Months Ended September 30

					($000)								($000)
					2002		%		2001		%		2002		%		2001		%

Financial Services:
			Title Insurance:
				Direct operations	$	464,893		40	$	375,342		40	$	1,271,670		39	$	1,050,715		40
				Agency operations		393,034		33		317,893		33		1,128,453		34		819,330		32

						857,927		73		693,235		73		2,400,123		73		1,870,045		72
		Specialty Insurance				37,426		3		29,156		3		100,318		3		84,248		3
		Trust and Other Services				9,647		1		10,419		1		32,341		1		29,305		1

						905,000		77		732,810		77		2,532,782		77		1,983,598		76

Information Technology:
		Mortgage Information				119,718		10		104,818		11		336,378		10		295,553		11
		Property Information				71,024		6		51,834		5		183,587		6		154,106		6
		Credit Information				56,642		5		48,990		5		160,189		5		142,125		6
	Screening Information					27,730		2		14,324		2		76,768		2		35,587		1

						275,114		23		219,966		23		756,922		23		627,371		24

	Total				$	1,180,114		100	$	952,776		100	$	3,289,704		100	$	2,610,969		100

Financial Services. Operating revenues from direct title operations increased 23.9% and 21.0% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily due to a significant increase in the number of title orders closed by the Company’s direct operations and acquisition activity. The Company’s direct operations closed 425,000 and 1,199,500 title orders during the current three and nine month periods, respectively, increases of 20.0% and 21.9% when compared with 354,200 and 984,300 title orders closed during the same periods of the prior year. These increases were primarily due to the factors mentioned above in the Overview section. Operating revenues from agency operations increased 23.6% and 37.7% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily due to the same factors affecting direct operations, as well as the timing of the reporting of agency remittances. Specialty insurance operating revenues increased 28.4% and 19.1% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily due to geographic expansion at the Company’s home warranty division and market share growth at the property and casualty insurance division. Trust and other services operating revenues decreased 7.4% for the three months ended September 30, 2002, and increased 10.4% for the nine months ended September 30, 2002, when compared with the respective periods of the prior year. The decrease for the current three-month period was primarily attributable to a reduction in fees earned do to the declining values of the investment portfolios managed by this segment.

Information Technology. Mortgage information operating revenues increased 14.2% and 13.8% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily due to the favorable real estate conditions present during the respective periods, and for the current nine-month period, $14.9 million of operating revenues contributed by new acquisitions. Property information operating revenues increased 37.0% and 19.1% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily attributable to market share gains as well as acquisition activity. Credit information operating revenues increased 15.6% and 12.7% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily due to the growth in

demand for credit information in the housing sector, and for the current nine-month period, $9.2 million of operating revenues contributed by new acquisitions. Screening information operating revenues increased 93.6% and 115.7% for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. These increases were primarily attributable to $10.8 million and $37.6 million of operating revenues contributed by new acquisitions for the respective periods.

INVESTMENT AND OTHER INCOME

Investment and other income totaled $22.9 million and $61.2 million for the three and nine months ended September 30, 2002, respectively, representing increases of $0.7 million, or 3.3%, and $2.3 million, or 4.0%, when compared with the same periods of the prior year. These increases primarily reflect increased earnings from our affiliated companies, which are accounted for under the equity method of accounting, offset in part by lower yields on cash equivalents and the Company’s investment portfolio due to the current lower rate environment.

NET REALIZED INVESTMENT LOSSES

Net realized investment losses totaled $5.9 million and $18.5 million for the three and nine months ended September 30, 2002, respectively, compared with net realized investment gains of $8.1 million and $7.9 million for the same periods of the prior year. The current year quarter included a $2.6 million loss associated with the sale of the Company’s subsidiary, FASTRAC Systems Inc., and $2.3 million of losses due to the restructuring of the 1031 tax-deferred exchange investment portfolio, which is managed by the Company’s Capital Management division. The prior year quarter included $8.9 million of non-recurring capital gains. The net losses for the nine-month period also included previously disclosed $13.6 million realized investment losses recorded in the second quarter of the current year resulting from the write-down of WorldCom bonds.

TOTAL OPERATING EXPENSES

Financial Services. Salaries and other personnel costs for the Financial Services group, which primarily reflects the title insurance segment were $282.1 million and $808.5 million for the three and nine months ended September 30, 2002, respectively, increases of $36.5 million, or 14.9%, and $132.1 million, or 19.5%, when compared with the same periods of the prior year. Excluding acquisitions, these increases were $28.7 million, or 11.7%, and $112.7 million, or 16.7%, respectively. These increases were primarily attributable to $4.7 million and $14.3 million of increased employee benefit plan costs, as well as $6.5 million and $20.5 million in expenses related to the implementation of the Company’s title production system for the three and nine months ended September 30, 2002, respectively, when compared with the same periods of the prior year. Also contributing to the overall increase in salaries and other personnel expenses were incremental labor costs incurred to service the increase in business volume, particularly at the title insurance operations, where the Company experienced a 30.5% and 18.9% increase in total order volume for the three and nine months ended September 30, 2002, when compared with the same periods of the prior year. Salaries and other personnel costs as a percentage of operating revenues for the Financial Services group were 31.2% and 31.9% for the three and nine months ended September 30, 2002, respectively, and 33.5% and 34.1% for the respective periods of the prior year.

Agents retained $322.1 million and $915.3 million of title premiums generated by agency operations for the three and nine months ended September 30, 2002, respectively, which compares with $255.4 million and $661.2 million for the same periods of the prior year. The percentage of title premiums retained by agents ranged from 80.3% to 82.0% due to regional variances (i.e., the agency share varies from region to region and thus the geographical mix of agency revenues causes this variation).

Other operating expenses for the Financial Services group, which primarily reflect the title insurance segment, were $148.8 million and $430.6 million for the three and nine months ended September 30, 2002, respectively, increases of $22.8 million, or 18.1%, and $67.7 million, or 18.6%, when compared with the same periods of the prior year. Excluding acquisitions, these increases were $20.2 million, or 16.1%, and $61.3 million, or 16.9%, respectively. These increases were primarily the result of incremental costs incurred to service the increase in business volume. Other operating expenses as a percentage of operating revenues for the Financial Services group were 16.4% and 17.0% for the three and nine months ended September 30, 2002, respectively, and 17.2% and 18.3% for the respective periods of the prior year.

The provision for policy losses and other claims primarily represents title insurance claims and home warranty claims. For the title insurance segment, the claims provision as a percentage of title insurance operating revenues was 4.0% for the current quarter and 5.1% for the same period of the prior year. Included in the prior year quarter was a $7.9 million revision to a previous estimate for loss reserves at one of the Company’s title insurance subsidiaries purchased in 1998. Excluding this revision, the claims provision as a percentage of title insurance operating revenues was 4.0% for the third quarter of 2001. For the home warranty segment, the claims provision as a percentage of home warranty operating revenues was 50.7% for the current quarter and 53.8% for the same period of the prior year. This decrease was primarily due to a reduction in the average

number of claims per contract, which was primarily attributable to the elimination of higher-cost vendor contractors that were servicing claims in new geographic areas.

Premium taxes, which relate to the title insurance and specialty insurance segments, were $8.9 million and $24.5 million for the three and nine months ended September 30, 2002, respectively, and $6.8 million and $17.5 million for the respective periods of the prior year. Premium taxes as a percentage of title insurance and specialty insurance operating revenues ranged from 0.9% to 1.0%. This slight variation was primarily due to the composition and geographical mix of the operating revenues (i.e., tax rates and bases vary from state to state).

Information Technology. Mortgage information personnel and other operating expenses were $76.2 million and $224.7 million for the three and nine months ended September 30, 2002, respectively, increases of $6.6 million, or 9.5%, and $25.3 million, or 12.7% when compared with the same periods of the prior year. Excluding acquisitions, the increase for the nine-month period was $10.3 million, or 5.2%. There was no acquisition activity for this segment during the current quarter. The increases in mortgage information personnel and other operating expenses were primarily attributable to increased employee benefit plan costs of $1.0 million for the current quarter and $2.7 million for the nine-month period, costs incurred to integrate new acquisitions, increased technology costs and costs incurred to service the increase in business volume. Property information personnel and other operating expenses were $49.1 million and $133.9 million for the three and nine months ended September 30, 2002, respectively, increases of $5.5 million, or 12.5%, and $7.6 million, or 6.0%, when compared with the same periods of the prior year. Excluding acquisitions, these increases were $3.6 million, or 8.2% and $5.8 million, or 4.6%, and were primarily due to incremental costs incurred to service the increase in business volume. Credit information personnel and other operating expenses were $43.1 million and $126.4 million for the three and nine months ended September 30, 2002, respectively, increases of $2.4 million, or 5.8%, and $9.8 million, or 8.4% when compared with the same periods of the prior year. Excluding new acquisitions, the increase for the nine-month period was $1.4 million, or 1.2%. There was no acquisition activity for this segment during the current quarter. Personnel and other operating expenses for the Company’s screening information segment were $25.6 million and $70.1 million for the three and nine months ended September 30, 2002, respectively, increases of $12.6 million, or 97.1% and $36.7 million, or 110.0% when compared with the same periods of the prior year. Excluding acquisitions, screening information personnel and other operating expenses increased $3.4 million, or 26.2%, and $4.5 million, or 43.4%, respectively.

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

Set forth below is a summary of income before income taxes and minority interests for each of the Company’s segments.

				Three Months Ended September 30										Nine Months Ended September 30

				($000)										($000)
				2002			%		2001			%		2002			%		2001			%

Financial Services:
			Title Insurance	$	80,026			50	$	39,102			39	$	169,788			44	$	121,263			44
			Specialty Insurance		6,014			4		4,638			5		17,855			5		7,755			3
			Trust and Other Services		2,443			1		3,421			3		11,255			3		8,423			3

					88,483			55		47,161			47		198,898			52		137,441			50
Information Technology:
			Mortgage Information		39,188			24		38,420			38		100,245			26		90,143			33
			Property Information		21,405			13		7,491			7		48,070			13		23,803			9
			Credit Information		10,943			7		6,559			7		30,827			8		21,181			8
			Screening Information		1,120			1		729			1		3,868			1		869			—

					72,656			45		53,199			53		183,010			48		135,996			50

		Total before corporate expenses			161,139			100		100,360			100		381,908			100		273,437			100

Corporate expenses					(32,117	)				(17,005	)				(84,273	)				(44,552	)

	Total			$	129,022				$	83,355				$	297,635				$	228,885

In general, the title insurance business is a lower profit margin business when compared to the Company’s other segments. The lower profit margins reflect the high cost of producing title evidence whereas the corresponding revenues are subject to regulatory and competitive pricing restraints. Due to this relatively high proportion of fixed costs, title insurance profit margins generally improve as closed order volumes increase. In addition, title insurance profit margins are affected by the composition (residential or commercial) and type (resale, refinancing or new construction) of real estate activity. Profit margins from resale and new construction transactions are generally higher than from refinancing transactions because in many

states there are premium discounts on, and cancellation rates are higher for, refinance transactions. Title insurance profit margins are also affected by the percentage of operating revenues generated by agency operations. Profit margins from direct operations are generally higher than from agency operations due primarily to the large portion of the premium that is retained by the agent. Most of the businesses included in the Information Technology group are database intensive, with a relatively high proportion of fixed costs. As such, profit margins generally improve as revenues increase. Revenues for the mortgage and property information segments, like the title insurance segment, are primarily dependent on the level of real estate activity and the cost and availability of mortgage funds. Revenues for the credit information segment are in part impacted by real estate activity, but also by the consumer and automobile sectors. Corporate expenses totaled $32.1 million and $84.3 million for the three and nine months ended September 30, 2002, respectively, increases of $15.1 million and $39.7 million when compared with the same periods of the prior year. These increases were primarily due to a $6.6 million increase in employee benefit costs and a $2.3 million increase in realized investment losses for the three months ended September 30, 2002. Impacting corporate expenses for both the three and nine month periods were increased technology costs and higher general costs associated with the support effort needed to service the Company’s expanded operations. Included in corporate expenses for the nine months ended September 30, 2002, were the previously disclosed $13.6 million realized investment losses resulting from the write down of WorldCom bonds.

INCOME TAXES

The effective income tax rate (income tax expense as a percentage of pretax income after minority interest expense) was 39.8% for the nine months ended September 30 2002, and 42.0% for the same period of the prior year. The decrease in effective rate was primarily attributable to changes in the ratio of permanent differences to pretax profits. A large portion of the Company’s minority interest expense is attributable to a limited liability company subsidiary, which for tax purposes, is treated as a partnership. Accordingly, no income taxes have been provided for that portion of the minority interest expense.

MINORITY INTERESTS

Minority interest expense was $18.9 million and $46.0 million for the three and nine months ended September 30, 2002, respectively, increases of $7.7 million and $15.3 million when compared with the same periods of the prior year. These increases were primarily attributable to the increase in operating results of the Company’s joint venture with Experian.

NET INCOME

Net income for the three and nine months ended September 30, 2002, was $67.4 million, or $0.84 per diluted share, and $151.6 million, or $1.91 per diluted share, respectively. Net income for the three and nine months ended September 30, 2001, was $41.7 million, or $0.55 per diluted share, and $115.0 million, or $1.59 per diluted share, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Total cash and cash equivalents increased $90.5 million and $295.8 million for the nine months ended September 30, 2002 and 2001, respectively. The increase for the current period was due primarily to cash provided by operating activities, offset in part by capital expenditures, cash paid for company acquisitions, purchases of debt and equity securities, and payments to minority shareholders. The increase for the prior-year period was primarily due to cash provided by operating activities and the proceeds received from the issuance of the Company’s $210.0 million senior convertible debentures, offset in part by capital expenditures and purchases of debt and equity securities.

Notes and contracts payable as a percentage of total capitalization decreased to 22.0% at September 30, 2002 from 23.7% at December 31, 2001. This decrease was primarily due to an increase in equity due primarily to the net income for the current nine-month period.

Management believes that all of its anticipated operating cash requirements for the immediate future will be met from internally generated funds.

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary exposure to market risk relates to interest rate risk associated with certain financial instruments. Although the Company monitors its risk associated with fluctuations in interest rates, it does not currently use derivative financial instruments to hedge these risks.

The Company is also subject to equity price risk as related to its equity securities. Although the Company has operations in certain foreign countries, these operations, in the aggregate, are not material to the Company’s financial condition or results of operations.

There have been no material changes in the Company’s risk since filing its Form 10K for the year ended December 31, 2001.

Item 4 – Controls and Procedures

	(a)		Based upon an evaluation by the Company’s President and Chief Financial Officer within 90 days prior to the filing date of this Quarterly Report on Form 10-Q, they have concluded that the Company’s disclosure controls and procedures as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended, are effective for gathering, analyzing and disclosing the information the Company is required to disclose in its reports filed under such Act.

	(b)		There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above.

PART II: Other Information

Item 1.	Legal Proceedings

	The Company and certain of its subsidiaries on October 2, 2002 settled the lawsuit filed against certain of the Company's subsidiaries by the State of California in the California state court in Sacramento, California. On or about September 18, 2002, the Company and certain of its subsidiaries settled a related class action lawsuit filed in the state court in the County of Los Angeles, California. The settlement of the class action lawsuit remains subject to court approvals and other procedural matters.

	These lawsuits involved allegations that certain subsidiaries of the Company and certain of their competitors failed to turn over unclaimed property to the State of California on a timely basis, charged California home buyers and other escrow customers fees for services that were never performed or which cost less than the amount charged and devised and carried out programs, known as earnings credits, with financial institutions to receive interest on escrow funds placed in demand deposits.

	Under the terms of the settlements, the Company will pay up to $5.5 million to certain customers in the form of cash refunds and discounts against future title insurance and escrow services. The settlements further require the Company to pay up to approximately $2.5 million to specified governmental agencies, counsel to the class action plaintiffs and the Consumer Protection Prosecution Trust Fund, a trust fund established to assist consumers in protecting their rights.

	The settlements provide that they do not constitute an admission of liability or wrongdoing by the Company or any of its subsidiaries.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

(99)(a) Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

(99)(b) Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

(b) Reports on Form 8-K

During the quarterly period covered by this report, the Company filed a report on Form 8-K dated August 13, 2002 (reporting on filing of sworn statements required pursuant to Securities and Exchange Commission Order No. 4-460). Subsequent to such quarterly period, the Company filed reports on Form 8-K dated October 9, 2002 (announcing the Company’s subsidiary’s settlement of its lawsuit with the state of California and County of San Francisco and parallel class action lawsuit) and October 23, 2002 (reporting on third quarter earnings).

15

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE FIRST AMERICAN CORPORATION (Registrant)
	/s/ Thomas A. Klemens____________________ Thomas A. Klemens Senior Executive Vice President, Chief Financial Officer
	/s/ Max O. Valdes________________________ Max O. Valdes Vice President, Chief Accounting Officer
Date: November 14, 2002

CERTIFICATIONS

I, Parker S. Kennedy, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The First American Corporation (“registrant”);

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

/s/ Parker S. Kennedy
Parker S. Kennedy
President
(Principal Executive Officer)

I, Thomas A. Klemens, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The First American Corporation (“ registrant”);

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 14, 2002

/s/ Thomas A. Klemens_____
Thomas A. Klemens
Senior Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)

EXHIBIT INDEX

Exhibit No.	Description	Sequentially Numbered Page
(99)(a)	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

(99)(b)	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

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SIGNATURES

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