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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

OR

Commission file number 0-3658

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether 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  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 C.F.R. § 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  x    No  ¨

On March 25, 2003, the aggregate market value of voting stock held by non-affiliates was $1,663,201,235.

On March 25, 2003, there were 75,919,821 shares of Common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement are incorporated by reference in Part III of this report. The definitive proxy statement will be filed no later than 120 days after the close of Registrant’s fiscal year.

This report includes 78 pages.

PART I

Item 1.    Business.

The Company

The First American Corporation (the Company) was organized in 1894 as Orange County Title Company, succeeding to the business of two title abstract companies founded in 1889 and operating in Orange County, California. In 1924, the Company commenced issuing title insurance policies. In 1986, the Company began a diversification program by acquiring and developing business information companies closely related to the real estate transfer and closing process. In 1998, the Company expanded its diversification program to include business information companies outside of the real estate transfer and closing process. The Company is a California corporation and has its executive offices at 1 First American Way, Santa Ana, California 92707-5913. The Company’s website address is www. firstam.com and includes our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, shareholder proxy statements, and any amendments to those reports. Each of these reports is available free of charge on our website as soon as reasonably practicable. The Company’s telephone number is (714) 800-3000. Unless the context otherwise indicates, the “Company,” as used herein, refers to The First American Corporation and its subsidiaries.

General

The First American Corporation (the Company), through its subsidiaries, is engaged in the business of providing business information and related products and services. The Company has seven reporting segments that fall within two primary business groups, financial services and information technology. The financial services group includes title insurance, specialty insurance and trust and other services. The title insurance segment issues residential and commercial title insurance policies, provides escrow services, equity loan services, tax-deferred exchanges and other related products. The specialty insurance segment issues property and casualty insurance policies and provides home warranties. The trust and other services segment provides investment advisory and trust and thrift services. The information technology group includes mortgage information, property information, credit information, and screening information. The mortgage information segment provides tax monitoring, flood certification, default management services, mortgage loan servicing systems, mortgage document preparation and other real estate related services. The property information segment provides property database services and appraisal services. The credit information segment provides mortgage credit and specialized credit reporting services. The screening information segment provides tenant screening, employee background screening, occupational health services and motor vehicle reporting. Financial information regarding each of the Company’s business segments is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” of Part II of this report.

The Company believes that it holds the number one market share position for many of its products and services, including but not limited to, flood zone determinations, based on the number of flood zone determination reports issued; mortgage credit reporting services, based on the number of credit reports issued; automotive credit reporting services, based on the number of credit reports issued; default management services, based on the number of foreclosure/bankruptcy cases reported; property database services, based on the number of inquiries; and resident screening, based on the number of reports issued. The Company also believes that it holds the number two market share position for title insurance, based on operating revenues; tax monitoring services, based on the number of loans under service; home warranty services, based on the number of home protection contracts under service; and occupational health services, based on the number of drug test reports issued.

Substantially all of the revenues for the Company’s title insurance and mortgage information segments result from resales and refinancings of residential real estate and, to a lesser extent, from commercial transactions

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and the construction and sale of new housing. Over one-half of the revenues in the Company’s property information and credit information segments also depend on real estate activity. The remaining portion of the property information and credit information revenues, as well as the revenues for the Company’s specialty insurance, trust and other services, and screening information segments are isolated from the volatility of real estate transactions. Real estate activity is cyclical in nature and is affected greatly by the cost and availability of long-term mortgage funds. Real estate activity and, in turn, a large portion of the Company’s revenue base, can be adversely affected during periods of high interest rates and/or limited money supply. However, this adverse effect is mitigated in part by the continuing diversification of the Company’s operations into areas outside of the traditional real estate transfer and closing process.

The Financial Services Group

Title Insurance Segment

Overview of Title Insurance Industry

Title to, and the priority of interests in, real estate are determined in accordance with applicable laws. In most real estate transactions, mortgage lenders and purchasers of real estate want to be protected from loss or damage in the event that title is not as represented. In most parts of the United States, title insurance has become accepted as the most efficient means of providing such protection.

Title Policies.    Title insurance policies insure the interests of owners and their lenders in the title to real property against loss by reason of adverse claims to ownership of, or to defects, liens, encumbrances or other matters affecting such title which exist at the time a title insurance policy is issued and which were not excluded from the coverage of a title insurance policy. Title insurance policies are issued on the basis of a title report, which is prepared after a search of the 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. In certain instances, a visual inspection of the property is also made. To facilitate the preparation of title reports, copies of public records, maps, documents and prior title policies may be compiled and indexed to specific properties in an area. This compilation is known as a “title plant.”

The beneficiaries of title insurance policies are generally real estate buyers and mortgage lenders. A title insurance policy indemnifies the named insured and certain successors in interest against title defects, liens and encumbrances existing as of the date of the policy and not specifically excepted from its provisions. The policy typically provides coverage for the real property mortgage lender in the amount of its outstanding mortgage loan balance and for the buyer in the amount of the purchase price of the property, but in some cases might insure for a greater amount where the buyer anticipates constructing improvements on the property. Coverage under a title insurance policy issued to a real property mortgage lender generally terminates upon the refinance or sale of the insured property unless the owner carries back a mortgage or makes certain warranties as to the title.

Before issuing title policies, title insurers seek to limit their risk of loss by accurately performing title searches and examinations. The major expenses of a title company relate to such searches and examinations, the preparation of preliminary reports or commitments and the maintenance of title plants, and not from claim losses as in the case of property and casualty insurers.

The Closing Process.    Title insurance is essential to the real estate closing process in most transactions involving real property mortgage lenders. In a typical residential real estate sale transaction, title insurance is generally ordered on behalf of an insured by a real estate broker, lawyer, developer, lender or closer involved in the transaction. Once the order has been placed, a title insurance company or an agent conducts a title search to determine the current status of the title to the property. When the search is complete, the title company or agent prepares, issues and circulates a commitment or preliminary title report (“commitment”) to the parties to the transaction. The commitment summarizes the current status of the title to the property, identifies the conditions, exceptions and/or limitations that the title insurer intends to attach to the policy and identifies items appearing on the title that must be eliminated prior to closing.

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The closing function, sometimes called an escrow in western states, is often performed by a lawyer, an escrow company or a title insurance company or agent (such person or entity, the “closer”). Once documentation has been prepared and signed, and mortgage lender payoff demands are in hand, the transaction is “closed.” The closer records the appropriate title documents and arranges the transfer of funds to pay off prior loans and extinguish the liens securing such loans. Title policies are then issued insuring the priority of the mortgage of the real property mortgage lender in the amount of its mortgage loan and the buyer in the amount of the purchase price. The time lag between the opening of the title order and the issuance of the title policy is usually between 30 and 90 days. The seller and the buyer bear the risk during this time lag. Any matter affecting title which is discovered during this period would have to be dealt with to the title insurers’ satisfaction or the insurer would except the matter from the coverage afforded by the title policy. Before a closing takes place, however, the closer would request that the title insurer provide an update to the commitment to discover any adverse matters affecting title and, if any are found, would work with the seller to eliminate them so that the title insurer would issue the title policy subject only to those exceptions to coverage which are acceptable to the buyer and the buyer’s lender.

Issuing the Policy: Direct vs. Agency.    A title policy can be issued directly by a title insurer or indirectly on behalf of a title insurer through agents which are not themselves licensed as insurers. Where the policy is issued by a title insurer, the search is performed by or at the direction of the title insurer, and the premium is collected and retained by the title insurer. Where the policy is issued by an agent, the agent performs the search, examines the title, collects the premium and retains a portion of the premium. The remainder of the premium is remitted to the title insurer as compensation for bearing the risk of loss in the event a claim is made under the policy. The percentage of the premium retained by an agent varies from region to region. A title insurer is obligated to pay title claims in accordance with the terms of its policies, regardless of whether it issues its policy directly or indirectly through an agent.

Premiums.    The premium for title insurance is due and earned in full when the real estate transaction is closed. Premiums are generally calculated with reference to the policy amount. The premium charged by a title insurer or an agent is subject to regulation in most areas. Such regulations vary from state to state.

The Company’s Title Insurance Operations

Overview.    The Company, through First American Title Insurance Company and its subsidiaries, transacts the business of title insurance through a network of both direct operations and agents. Through this network, the Company issues policies in all states (except Iowa) and the District of Columbia. In Iowa, the Company provides abstracts of title only, because title insurance is not permitted. The Company also offers title services in Australia, the Bahama Islands, Canada, England, Guam, Ireland, Mexico, Puerto Rico, Scotland, South Korea, the U.S. Virgin Islands and other countries abroad.

Based on industry statistics showing premiums written in 2001, the Company had the largest or second largest share of the title insurance market in 27 states and in the District of Columbia, and had a national market share of 22.9%. Industry statistics for 2002 are not currently available.

The Company plans to continue increasing its share of the title insurance market through strategic acquisitions and further development of its existing branch office and agency operations. The Company also will continue to focus on expanding its share of the higher margin, title insurance business conducted on behalf of commercial clients. The Company believes its national commercial market share has grown through programs directed at major developers, lenders and law firms.

Sales and Marketing.    The Company markets its title insurance services to a broad range of customers. The Company believes that its primary source of business is from referrals from persons in the real estate community, such as independent escrow companies, real estate brokers, developers, mortgage brokers, mortgage bankers, financial institutions and attorneys. In addition to the referral market, the Company markets its title insurance services directly to large corporate customers and mortgage lenders. As title agents contribute a large portion of the

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Company’s revenues, the Company also markets its title insurance services to independent agents. The Company’s marketing efforts emphasize the quality and timeliness of its services, process innovation and its national presence.

While virtually all personnel in the Company’s title insurance business assist in marketing efforts, the Company maintains a sales force of more than 1,000 persons dedicated solely to marketing. This sales force, which is located throughout the Company’s branch office network, not only markets the Company’s title insurance services, but also certain of the Company’s other products. The Company provides its sales personnel with training in selling techniques, and each branch manager is responsible for hiring the sales staff and ensuring that sales personnel under his or her supervision are properly trained. In addition to this sales force, the Company has approximately 50 salespeople in its national commercial services division. One of the responsibilities of the sales personnel of this division is the coordination of marketing efforts directed at large real estate lenders and companies developing, selling, buying or brokering properties on a multistate basis. The Company also supplements the efforts of its sales force through general advertising in various trade and professional journals.

The Company’s increased commercial sales effort during the past decade has enabled the Company to expand its commercial business base. Because commercial transactions involve higher coverage amounts and yield higher premiums, commercial title insurance business generates greater profit margins than does residential title insurance business. Accordingly, the Company plans to continue to emphasize its commercial sales program.

Although sales outside of the United States account for a small percentage of the Company’s revenues, the Company believes that the acceptance of title insurance in foreign markets has increased in recent years. Accordingly, the Company plans to continue its international sales efforts, particularly in Canada, the United Kingdom and Australia.

Underwriting.    Before a title insurance policy is issued, a number of underwriting decisions are made. For example, matters of record revealed during the title search may require a determination as to whether an exception should be taken in the policy. The Company believes that it is important for the underwriting function to operate efficiently and effectively at all decision making levels so that transactions may proceed in a timely manner. To perform this function, the Company has underwriters at the branch level, the regional level and the national level.

Agency Operations.    The relationship between the Company and each agent is governed by an agency agreement which states the conditions under which the agent is authorized to issue title insurance policies on behalf of the Company. The agency agreement also prescribes the circumstances under which the agent may be liable to the Company if a policy loss is attributable to error of the agent. Such agency agreements typically have a term of one to five years and are terminable immediately for cause.

Due to the high incidence of agency fraud in the title insurance industry during the late 1980s, the Company instituted measures to strengthen its agent selection and audit programs. In determining whether to engage an independent agent, the Company investigates the agent’s experience, background, financial condition and past performance. The Company maintains loss experience records for each agent and conducts periodic audits of its agents. The Company has also increased the number of agent representatives and agent auditors that it employs. Agent representatives periodically visit agents and examine their books and records. In addition to periodic audits, a full agent audit will be triggered if certain “warning signs” are evident. Warning signs that can trigger an audit include the failure to implement Company-required accounting controls, shortages of escrow funds and failure to remit underwriting fees on a timely basis.

Title Plants.    The Company’s network of title plants constitutes one of its principal assets. A title search is conducted by searching the public records or utilizing a title plant. While public records are indexed by reference to the names of the parties to a given recorded document, most title plants arrange their records on a geographic basis. Because of this difference, records of a title plant are generally easier to search. Most title plants also index prior policies, adding to searching efficiency. Many title plants are computerized. Certain offices of the Company

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utilize jointly owned plants or utilize a plant under a joint user agreement with other title companies. The Company believes its title plants, whether wholly or partially owned or utilized under a joint user agreement, are among the best in the industry.

The Company has significantly enhanced its investment in title plants through three business combinations. The first was the formation of a limited liability corporation (“LLC”) with Experian Information Solutions on January 1, 1998. Experian Information Solutions contributed to the LLC its real estate information division, which the Company believes is the nation’s leading operator of title plants. The second business combination was the acquisition of Data Tree in June 1998. Data Tree is a supplier of database management and document imaging systems. The third business combination was the formation of Data Trace Information Services. This business is 80% owned by a subsisdiary of the Company and 20% owned by a subsidiary of LandAmerica. Data Trace Information Services is a provider of comprehensive title information delivery systems.

The Company’s title plants are carried on its balance sheet at original cost, which includes the cost of producing or acquiring interests in title plants or the appraised value of subsidiaries’ title plants at dates of acquisition for companies accounted for as purchases. Thereafter, the cost of daily maintenance of these plants is charged to expense as incurred. A properly maintained title plant has an indefinite life and does not diminish in value with the passage of time. Therefore, in accordance with generally accepted accounting principles, no provision is made for depreciation of these plants. Since each document must be reviewed and indexed into the title plant, such maintenance activities constitute a significant item of expense. The Company is able to offset title plant maintenance costs at its plants through joint ownership and access agreements with other title insurers and title agents.

Reserves for Claims and Losses.    The Company provides for title insurance losses based upon its historical experience by a charge to expense when the related premium revenue is recognized. The resulting reserve for known claims and incurred but not reported claims reflects management’s best estimate of the total costs required to settle all claims reported to the Company and claims incurred but not reported, and is considered by the Company to be adequate for such purpose.

In settling claims, the Company occasionally purchases and ultimately sells the interest of the insured in the real property or the interest of the claimant adverse to the insured. These assets, which totaled $41.6 million at December 31, 2002, are carried at the lower of cost or fair value, less costs to sell, and are included in “Other assets” in the Company’s consolidated balance sheets.

Reinsurance and Coinsurance.    The Company assumes and distributes large title insurance risks through mechanisms of reinsurance and coinsurance. In reinsurance agreements, in consideration for a portion of the premium, the reinsurer accepts that part of the risk which the primary insurer cedes to the reinsurer over and above the portion retained by the primary insurer. The primary insurer, however, remains liable for the total risk in the event that the reinsurer does not meet its obligation. As a general rule, the Company does not retain more than $40 million of primary risk on any single policy. Under coinsurance agreements, each coinsurer is jointly and severally liable for the risk insured, or for so much thereof as is agreed to by the parties. The Company’s reinsurance activities account for less than 1.0% of its total title insurance operating revenues.

Competition.    The title insurance business is highly competitive. The number of competing companies and the size of such companies varies in the different areas in which the Company conducts business. Generally, in areas of major real estate activity, such as metropolitan and suburban localities, the Company competes with many other title insurers. Approximately 75 title insurance underwriters are members of the American Land Title Association, the title insurance industry’s national trade association. The Company’s major nationwide competitors in its principal markets include Fidelity National Title Insurance Company (which also includes Chicago Title, Ticor Title Insurance Company and Security Union Title Insurance Company) LandAmerica Title Insurance Company, Stewart Title Guaranty Company and Old Republic Title Insurance Group. In addition to these nationwide competitors, numerous agency operations throughout the country provide aggressive competition on the local level.

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The Company believes that competition for title insurance business is based primarily on the quality and timeliness of service, because parties to real estate transactions are usually concerned with time schedules and costs associated with delays in closing transactions. In those states where prices are not established by regulatory authorities, the price of title insurance policies is also an important competitive factor. The Company believes that it provides quality service in a timely manner at competitive prices.

Specialty Insurance Segment

Home Warranties.    The Company’s home warranty business commenced operations in 1984, in part with the proceeds of a $1.5 million loan from the Company which was, in 1986, converted to a majority equity interest. The Company currently owns 92% of its home warranty business, with the balance owned by management of that subsidiary. The Company’s home warranty business issues one-year warranties that protect homeowners against defects in household systems and appliances, such as plumbing, water heaters and furnaces. The Company’s home warranty subsidiary currently charges approximately $245 to $420 for its basic home warranty contract. Optional coverage is available for air conditioners, pools, spas, washers, dryers, refrigerators and other items for charges ranging from approximately $25 to $160. For an additional charge, coverage is renewable annually at the option of the homeowner upon approval by the home warranty subsidiary. Fees for the warranties are paid at the closing of the home purchase and are recognized monthly over a 12-month period. Home warranties are marketed through real estate brokers and agents. This business is conducted in certain counties of Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Kansas, Louisiana, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah and Washington. The principal competitor of the Company’s home warranty business is American Home Shield, a subsidiary of Service Master L.P.

Property and Casualty Insurance.    The Company offers property and casualty insurance through its subsidiaries First American Property and Casualty Insurance Company and First American Specialty Insurance Company. First American Property and Casualty Insurance Company conducts its business utilizing the Company’s distribution channels, allowing for cross selling through existing closing-service activities. First American Specialty Insurance Company conducts its business utilizing a network of brokers in California.

Trust and Other Services Segment

Trust, Investment Advisory and Thrift Services.     Since 1960, the Company has conducted a general trust business in California, acting as trustee when so appointed pursuant to court order or private agreement. In 1985, the Company formed a banking subsidiary into which its subsidiary trust operation was merged. During August 1999, this subsidiary converted from a state-chartered bank to a federal savings bank. As of December 31, 2002, the trust operation was administering fiduciary and custodial assets having a market value in excess of $1.9 billion. The Company offers investment advisory services through its SEC registered investment management firm that manages equity and fixed-income securities.

During 1988, the Company, through a majority owned subsidiary, acquired an industrial bank (the Thrift), formerly known as an industrial loan corporation, that accepts thrift deposits and uses deposited funds to originate and purchase loans secured by commercial properties primarily in Southern California. As of December 31, 2002, the Thrift had $84.5 million of demand deposits and $108.2 million of loans outstanding.

Loans made or acquired during the current year, by the Thrift, ranged in amount from $95,300 to $3,900,000. The average loan balance outstanding at December 31, 2002, was $389,954. Loans are made only on a secured basis, at loan-to-value percentages no greater than 75.0%. The Thrift specializes in making commercial real estate loans. In excess of 99.5% of the Thrift’s loans are made on a variable rate basis. The average yield on the Thrift’s loan portfolio as of December 31, 2002, was 8.54%. A number of factors are included in the determination of average yield, principal among which are loan fees and closing points amortized to income, prepayment penalties recorded as income, and amortization of discounts on purchased loans. The Thrift’s

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primary competitors in the Southern California commercial real estate lending market are local community banks, other thrift and loan companies and, to a lesser extent, commercial banks. The Thrift’s average loan is 12.5 years in duration.

The performance of the Thrift’s loan portfolio is evaluated on an ongoing basis by management of the Thrift. The Thrift places a loan on nonaccrual status when two payments become past due. When a loan is placed on nonaccrual status, the Thrift’s general policy is to reverse from income previously accrued but unpaid interest. Income on such loans is subsequently recognized only to the extent that cash is received and future collection of principal is probable. Interest income on nonaccrual loans which would have been recognized during the year ended December 31, 2002, if all of such loans had been current in accordance with their original terms, totaled $8,428.

The following table sets forth the amount of the Thrift’s nonperforming loans as of the dates indicated.

Based on a variety of factors concerning the creditworthiness of its borrowers, the Thrift determined that it had $65,148 of potential problem loans in existence as of December 31, 2002.

The Thrift’s allowance for loan losses is established through charges to earnings in the form of provision for loan losses. Loan losses are charged to, and recoveries are credited to, the allowance for loan losses. The provision for loan losses is determined after considering various factors, such as loan loss experience, maturity of the portfolio, size of the portfolio, borrower credit history, the existing allowance for loan losses, current charges and recoveries to the allowance for loan losses, the overall quality of the loan portfolio, and current economic conditions, as determined by management of the Thrift, regulatory agencies and independent credit review specialists. While many of these factors are essentially a matter of judgment and may not be reduced to a mathematical formula, the Company believes that, in light of the collateral securing its loan portfolio, the Thrift’s current allowance for loan losses is an adequate allowance against foreseeable losses.

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The following table provides certain information with respect to the Thrift’s allowance for loan losses as well as charge-off and recovery activity.

The adequacy of the Thrift’s allowance for loan losses is based on formula allocations and specific allocations. Formula allocations are made on a percentage basis, which is dependent on the underlying collateral, the type of loan and general economic conditions. Specific allocations are made as problem or potential problem loans are identified and are based upon an evaluation by the Thrift’s management of the status of such loans. Specific allocations may be revised from time to time as the status of problem or potential problem loans changes.

The following table shows the allocation of the Thrift’s allowance for loan losses and the percent of loans in each category to total loans at the dates indicated.

The Information Technology Group

Mortgage Information Segment

The mortgage information segment provides tax monitoring, flood certification, default management services, and other real estate related services.

Tax Monitoring.    The tax monitoring service, established by the Company in 1987, advises real property mortgage lenders of the status of property tax payments due on real estate securing their loans. With the

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acquisition of TRTS Data Services, Inc., in November 1991, the Company believes that it is the second largest provider of tax monitoring services in the United States.

Under a typical contract, a tax service provider monitors, on behalf of a mortgage lender, the real estate taxes owing on properties securing such lender’s mortgage loans for the life of such loans. In general, providers of tax monitoring services, such as the Company’s tax service, indemnify mortgage lenders against losses resulting from a failure to monitor delinquent taxes. Where a mortgage lender requires that tax payments be impounded on behalf of borrowers, providers of tax monitoring services, such as the Company’s tax service, may be required to monitor and oversee the transfer of these monies to the taxing authorities and provide confirmation to lenders that such taxes have been paid.

The Company’s primary source of tax service business is from large multistate mortgage lenders. The Company’s only major nationwide competitor in the tax service business is Transamerica Real Estate Tax Service. Because of its broad geographic coverage and the large number of mortgage loans not being serviced by a third party tax service provider, the Company believes that it is well positioned to increase its market share in the tax service market.

The fee charged to service each mortgage loan varies from region to region, but generally falls within the $45 to $105 price range and is paid in full at the time the contract is executed. The Company recognizes revenues from tax service contracts over the estimated duration of the contracts. However, income taxes are paid on the entire fee in the year the fee is received. Historically, the Company has maintained minimal reserves for losses relating to its tax monitoring service because its losses have been negligible.

Flood Determination.    In January 1995, the Company acquired Flood Data Services, Inc. (now a division of First American Real Estate Solutions LLC). This business furnishes to mortgage lenders flood zone determination reports, which provide information on whether or not property securing a loan is in a governmentally delineated special flood hazard area. Federal legislation passed in 1994 requires that most mortgage lenders obtain a determination of the current flood zone status at the time each loan is originated and obtain updates during the life of the loan. The Company believes it is the largest provider of flood zone determinations in the United States, based on the number of flood zone determination reports issued.

Default Management Services.    The default management business supports mortgage servicers and financial institutions in the handling of loss mitigation, foreclosure, REO and claims processing. With the acquisition in 2001 of LFC Nationwide, a leading provider of property preservation and field inspections, the Company believes it is now the nation’s leading provider of default management services, based on the number of foreclosure/bankruptcy cases reported.

Other Real Estate Related Services.    In April 1996, the Company acquired the Excelis Mortgage Loan Servicing System (MLS), now known as Excelis, Inc. Excelis MLS is the only commercially available real-time, online servicing system that has been developed since 1990 to meet increasingly sophisticated market demands. The software employs rules-based technology which enables the user to customize the system to fit its individual servicing criteria and policies.

In July 1998, the Company acquired ShadowNet Mortgage Technologies, LLC. ShadowNet is a provider of electronic mortgage preparation and delivery systems and now conducts business under the First American Nationwide Documents brand-name.

Property Information Segment

This business was established in January 1998 when the Company and certain of its real estate information service subsidiaries (the “Real Estate Information Subsidiaries”) consummated a joint venture with Experian in which First American Real Estate Solutions LLC (“FARES”) was established. Under the transaction, the

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Real Estate Information subsidiaries contributed substantially all of their assets and liabilities to FARES in exchange for an 80% ownership interest and Experian transferred substantially all of the assets and liabilities of its Real Estate Solutions division (RES) to FARES in exchange for a 20% ownership interest. FARES is believed to be the nation’s foremost supplier of core real estate data, providing, among other things, property valuation information, title information, tax information and imaged title documents.

Adding to this business, in June 1998, the Company acquired Data Tree Corporation. Data Tree is a supplier of database management and document imaging systems to county recorders, other governmental agencies and the title industry.

In July 2000, FARES combined its Smart Title Solutions division with the Datatrace division of LandAmerica Financial Group, Inc (“LandAmerica”). The combined entity, Data Trace Information Services, is 80% owned by FARES and 20% owned by LandAmerica. The Company believes that Data Trace Information Services is the nation’s most advanced and comprehensive title information delivery system.

In August 2000, FARES combined its RES division with the Intellitech real estate information business of Transamerica Corporation to form a new entity, First American Real Estate Solutions, L.P. This joint venture is 80% owned by the Company’s subsidiary, FARES, and 20% by Transamerica Corporation. The Company believes that this joint venture owns the nation’s largest database of property characteristic information, supplying data and decision-support products to the real estate and mortgage finance industry.

In June 2002, the Company acquired Tri County Tax Research, Inc., a provider of tax searches for title companies in the Detroit, Michigan metropolitan area. In July of 2002, the Company acquired Current Status, Inc., a provider of property tax searches for customers in the New Jersey and Western Pennsylvania markets. These acquisitions strengthened the Company’s existing tax information business.

In September 2002, the Company added to its property valuation information business by acquiring SourceOne Services, Corp., a provider of real estate valuation services in the form of broker price opinions (BPO). The Company believes that SourceOne Services is the largest provider of BPO services to the default market and the second largest provider of BPO services in the United States.

Credit Information Segment

The Company’s credit information segment provides credit reports to mortgage lenders throughout the United States. These reports are derived from two or more credit bureau sources and are summarized and prepared in a standard form acceptable to mortgage loan originators and secondary mortgage purchasers. The Company’s credit reporting service has grown primarily through acquisitions. In 1994, the Company acquired all of the minority interests in its lower tier subsidiaries Metropolitan Credit Reporting Services, Inc., and Metropolitan Property Reporting Services, Inc. In 1994, the Company also acquired California Credit Data, Inc., and Prime Credit Reports, Inc., and in 1995, the Company acquired CREDCO, Inc. (now a division of First American Real Estate Solutions LLC). With the acquisition of First American CREDCO, Inc., the Company believes that it is now the largest mortgage credit reporting service in the United States, based on the number of credit reports issued.

The credit information segment also provides specialized credit reports to non-mortgage lenders and directly to consumers. The specialized reports are derived from one or more credit bureau sources and are summarized and prepared in an acceptable form. This segment also provides credit reporting services to businesses marketing products to sub-prime consumers.

Screening Information

The Company’s screening information segment is a leading provider of background screening and verification services in the United States. These services include motor vehicle reports, tenant screening, employee background screening and occupational health.

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Motor Vehicle Reports.     The Company provides automated access to driving records from all 50 states and the District of Columbia. Insurance companies represent the core of the customer base for this product, which they use for underwriting purposes. Employers also utilize the product to manage risk associated with employees that require the use of a vehicle in the performance of their duties. For most customers, the Company receives and fulfills orders through its proprietary software known as Comprise/ZapApp software, which allows the customer to integrate the process of obtaining motor vehicles reports with other processes utilized by the customer. Generally, demand for this product decreases in November and December as a result of seasonal reductions in the insurance and employment markets.

Tenant Screening.     The Company provides tenant screening services to landlords and managers of multifamily residential properties. These services include reports containing information derived from the Company’s database of eviction records, major credit bureaus, provided references and criminal records. Depending on a customer’s needs, reports can draw on any combination of these sources. One of the Company’s products, for example, provides customers with a comprehensive report of rental history and eviction filings drawn on the Company’s proprietary database. Customers also can order products which assess risk of default by a potential tenant based on a statistical model. Customers generally order and receive the Company’s tenant screening products through a secure Internet connection or through software. In these services the Company experiences moderate seasonality, with a slightly disproportionate share of revenue being generated from March through October.

Employee Background Screening.     The Company provides employee background screening services to thousands of companies in the United States. These services include reports about a prospective employee’s criminal record, motor vehicle violations, credit standing and involvement in civil litigation. The Company also makes inquiries of provided references and former employers, verifies educational credentials and licenses and checks industry specific records. A customer can order any of these and other related services individually or as a package. Depending on a customer’s preference, orders may be placed and fulfilled directly from the Company, through a secure Internet connection, via facsimile or through third party vendors. Because of the diverse clientele for the employee background screening products, seasonality is minimal. Generally, the Company experiences any lull in the demand for its screening products near year end and during the summer, when employers typically slow their hiring pace.

Occupational Health.     The Company also provides its customers with a comprehensive set of occupational health services, which helps employers manage occupational health issues with respect to both prospective and existing employees. Generally, these products involve first the design and implementation of a drug testing program, including provision for the collection and testing of specimens. Through its staff of doctors, the Company then interprets the results. Ultimately, a report is delivered to customers through a secure Internet connection or through other direct means.

The Company also develops and manages employee assistance programs, which provide troubled employees with access to confidential counseling services. These programs cover a wide range of personal and workplace issues, including alcohol and drug abuse, marital problems, family matters, bereavement management, depression, stress, retirement and downsizing. The Company’s employee assistance programs also provide employers with a number of corporate-focused services, including critical incident stress management programs, organizational change consulting and intensive specialty training on issues such as violence in the workplace.

Approximately 75% of the Company’s occupational health business is derived from employment screening, with the balance attributable to ongoing drug testing programs and employee assistance programs.

As with its employee background screening products, any seasonality in the demand for the Company’s occupational health products generally is attributable to decreases in hiring which occur near year end and during the summer.

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Subsequent Event Business Combination.    In December 2002, the Company and US SEARCH.com Inc., a provider of location, verification and screening services, signed a definitive agreement to merge the Company’s screening information business with US SEARCH to create a new publicly held company that will be named First Advantage Corporation. This new entity will be approximately 80% owned by the Company, with the remainder owned by the shareholders of US SEARCH. The Company expects this transaction to close during the second quarter of 2003.

Acquisitions

Commencing in the 1960s, the Company initiated a growth program with a view to becoming a nationwide provider of title insurance. This program included expansion into new geographic markets through internal growth and selective acquisitions. In 1986 the Company began expanding into other real estate business information services. In 1998, the Company expanded its diversification program to include business information companies outside of the real estate transfer and closing process. To date, the Company has made numerous strategic acquisitions designed to expand not only its direct title operations, but also the range of services it can provide to its customers.

Regulation

The title insurance business is regulated by state insurance authorities. These authorities generally possess broad powers with respect to the licensing of title insurers, the types and amounts of investments that title insurers may make, insurance rates, forms of policies and the form and content of required annual statements, as well as the power to audit and examine title insurers. Under state laws, certain levels of capital and surplus must be maintained and certain amounts of securities must be segregated or deposited with appropriate state officials. Various state statutes require title insurers to defer a portion of all premiums in a reserve for the protection of policyholders and to segregate investments in a corresponding amount. Further, most states restrict the amount of dividends and distributions a title insurer may make to its shareholders.

In 1999, the Company entered into the property casualty insurance business through the acquisitions of Great Pacific Insurance Company (included in the acquisition of National Information Group) and Five Star Holdings, Inc. The property and casualty business is subject to regulation by government agencies in the states in which they transact business. The nature and extent of such regulation may vary from jurisdiction to jurisdiction, but typically involves prior approval of the acquisition of “control” of an insurance company, regulation of certain transactions entered into by an insurance company with any of its affiliates, the payment of dividends by an insurance company, approval of premium rates and policy forms for many lines of insurance, standards of solvency and minimum amounts of capital and surplus which must be maintained. In order to issue policies on a direct basis in a state, the property and casualty insurer must generally be licensed by such state. In certain circumstances, such as dealings initiated directly by citizens or placements through licensed surplus lines brokers, it may conduct business without being admitted and without being subject to rate and/or policy forms approval. The Company is currently licensed to write property and casualty insurance in 46 states and the District of Columbia.

The Company’s home warranty business also is subject to regulation by insurance authorities in the states in which it conducts such business. The Company’s trust company and industrial loan company (Thrift) are both subject to regulation by the Federal Deposit Insurance Corporation. In addition, as a federal savings bank, the Company’s trust company is regulated by the United States Department of the Treasury’s Office of Thrift Supervision, and the Company’s industrial loan company (Thrift) is regulated by the California Commissioner of Corporations.

Investment Policies

The Company invests primarily in cash equivalents, federal and municipal governmental securities, mortgage loans and investment grade debt and equity securities. The largely fixed income portfolio is classified

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in the Company’s financial statements as “available for sale.” In addition to the Company’s investment strategy, state laws impose certain restrictions upon the types and amounts of investments that may be made by the Company’s regulated subsidiaries.

Employees

The following table provides a summary of the total number of employees as of December 31, 2002:

Item 2.    Properties.

In September 1999, the Company moved its executive offices to one of the newly constructed office buildings at MacArthur Place in Santa Ana, California. The Orange County branch and certain other operations of the Company’s title insurance segment moved into two other buildings constructed on the site later in 1999. The three new buildings are in a campus environment and total approximately 210,000 square feet. The Company continues to own the two adjacent buildings in Santa Ana, California, which previously housed its executive offices. That location, comprising approximately 105,000 square feet of floor space, houses the headquarters of the Company’s trust and banking division and the Company’s property and casualty insurance division. The Company also owns an 18,000 square foot building located across the street from that complex. This building is currently used primarily for storage.

The Company’s title insurance subsidiary, First American, and its subsidiaries, own or lease buildings or office space in more than 900 locations throughout the United States and abroad, principally for their respective title operations.

The Company’s real estate information subsidiary, First American Real Estate Information Services, Inc. (“FAREISI”), houses its national operations in a leased 231,000 square foot office building in Dallas, Texas. In 1999, the Company completed the construction of two office buildings in Poway, California. The two buildings total approximately 152,000 square feet and are located on a 17 acre parcel of land. The buildings are occupied by various divisions of FAREISI. In addition, FAREISI and its subsidiaries lease office space in more than 75 locations throughout the United States, principally for their respective operations.

The Company’s home warranty subsidiary owns 1.7 acres of land in Van Nuys, California, which contains a 20,000-square-foot office building, a 7,000-square-foot warehouse and a parking lot.

Each of the office facilities occupied by the Company or its subsidiaries is in good condition and adequate for its intended use.

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Item 3.    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.

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 that 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 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.

The Company is involved in numerous routine legal proceedings related to its operations. While the ultimate disposition of each proceeding is not determinable, the Company does not believe that any of such proceedings will have a material adverse effect on its financial condition or results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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PART II

Item 5.    Market for Registrant’s Common Stock and Related Stockholder Matters.

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 March 3, 2003 was 3,623.

High and low stock prices and dividends for the last two years were as follows:

While the Company expects to continue its policy of paying regular quarterly cash dividends, future dividends will be dependent on future earnings, financial condition and capital requirements. The payment of dividends is subject to the restrictions described in Note 2 to the consolidated financial statements. included in “Item 8. Financial Statements and Supplementary Data” of Part II of this report.

Recent Sales of Unregistered Securities

In the last three years, the Company has not issued unregistered shares of its common stock.

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Item 6.    Selected Financial Data.

The selected consolidated financial data for the Company for the five-year period ended December 31, 2002, has been derived from the audited Consolidated Financial Statements. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and Notes thereto, “Item 1—Business—Acquisitions,” and “Item 7—Management’s Discussion and Analysis—Results of Operations.”

The First American Corporation and Subsidiary Companies

Note A—Resulted from the adoption of Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” which became effective January 1, 1999, and applied to the Company’s tax service operations.

Note B—Return on average stockholders’ equity for 1999 excludes the cumulative effect of a change in accounting for tax service contracts from both net income and stockholders’ equity.

Note C—Per share information relating to net income is based on weighted-average number of shares outstanding for the years presented. Per share information relating to stockholders’ equity is based on shares outstanding at the end of each year.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Critical Accounting Policies—The Company’s management considers the accounting policies described below to be critical in preparing the Company’s consolidated financial statements. These policies require management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures of contingencies. See Note 1 to the consolidated financial statements for a more detailed description of the Company’s accounting policies.

Revenue recognition.    Title premiums on policies issued directly by the Company are recognized on the effective date of the title policy, and for policies issued by independent agents, when notice of issuance is received from the agent. Revenues from home warranty contracts are recognized ratably over the 12-month duration of the contracts. Revenues from property and casualty insurance policies are recognized ratably over the 12-month duration of the policies. The Company’s tax service division, which is included in the mortgage information segment, defers its tax service fee and recognizes that fee as revenue ratably over the expected service period. The amortization rates applied to recognize the revenues assume a 10-year contract life and are adjusted to reflect prepayments. The Company reviews its tax service contract portfolio on a quarterly basis to determine if there have been changes in contract lives and/or changes in the number and/or timing of prepayments and adjusts the rates accordingly to reflect current trends. For all other products, revenues are generated at the time of delivery, as the Company has no significant ongoing obligation after delivery.

Provision for title losses.    The Company provides for title insurance losses by a charge to expense when the related premium revenue is recognized. The amount charged to expense (the loss rate), as well as the adequacy of the ending reserves, is determined by the Company based on historical experience and other factors, including changes and trends in the type of title insurance policies issued, the real estate market and the interest rate environment. Management monitors the adequacy of the estimated loss reserves on a quarterly basis using a variety of techniques, including actuarial models, and adjusts the loss rate as necessary.

Purchase accounting and impairment testing for goodwill and other intangible assets.    Pursuant to Statement of Financial Standards No. 142, “Goodwill and Other Intangible Assets”, the Company is now required to perform an annual impairment test for goodwill and other intangible assets. This test is performed utilizing a variety of valuation techniques, all of which require management to make estimates and judgments, and includes 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.

Income taxes.    The Company estimates its quarterly effective income tax rate based upon a variety of factors, including but not limited to, the expected revenues and resulting pretax income for the year, the composition and geographic mix of the pretax income and the ratio of permanent differences to pretax income. Any changes to the estimated rate are made prospectively in accordance with Accounting Principles Board Opinions No. 28, “Interim Financial Reporting.” Additionally, management makes estimates as to the amount of reserves, if any, that are necessary for known and potential tax exposures.

Depreciation and amortization lives for assets.    Management is required to estimate the useful lives of several asset classes, including capitalized data, internally developed software and other intangible assets. The estimation of useful lives requires a significant amount of judgment related to matters such as future changes in technology, legal issues related to allowable uses of data and other matters.

Overview—The majority of the revenues in the Company’s title insurance and mortgage information segments depend, in large part, upon the level of real estate activity and the cost and availability of mortgage funds. Revenues for these segments result primarily from resales and refinancings of residential real estate and, to a lesser extent, from commercial transactions and the construction and sale of new housing. Over one-half of

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the revenues in the Company’s property information and credit information segments also depend on real estate activity. The remaining portion of the property information and credit information revenues, as well as the revenues for the Company’s specialty insurance, trust and other services, and screening information segments, are isolated from the volatility of real estate transactions. Traditionally, the greatest volume of real estate activity, particularly residential resale, has occurred in the spring and summer months. However, changes in interest rates, as well as other economic factors, can cause fluctuations in the traditional pattern of real estate activity.

Mortgage interest rates, which had been decreasing throughout 1997 and 1998, began to increase in the second quarter of 1999, causing a significant decline in refinance activity and residential resale orders. This, coupled with fourth quarter seasonal factors and Y2K concerns, resulted in a low inventory of open orders going into the first quarter of 2000. As a result of the low inventory of open orders going into the first quarter of 2000, and the relatively weak real estate economy present during the first half of 2000, revenues and profits during this period decreased significantly when compared with the same period of 1999. During the second half of 2000, real estate activity began to increase as a result of declining mortgage interest rates. New order counts in the latter part of the third quarter began to show favorable comparisons with the same period of 1999. This trend continued into the fourth quarter of 2000 and resulted in a significant increase in revenues and profits in the second half of 2000 when compared with the same period of 1999.

In 2001 mortgage interest rates decreased to levels comparable to rates experienced in 1998. Refinance activity reached record levels and the demand for residential resale and new home sales continued to be very strong. All four quarters of 2001 compared favorably with the respective quarters of 2000.

The favorable trends present during 2001 continued into 2002. Refinance activity continued at high levels, reaching record levels during the third quarter of the year. Existing- and new-home-sale activity surpassed 2001 levels. Closed order counts reached all-time record levels resulting in record-setting operating results for the Company in 2002.

Operating revenues—A summary by segment of the Company’s operating revenues is as follows:

Financial Services.    Operating revenues from direct title operations increased 23.3% in 2002 over 2001 and 35.1% in 2001 over 2000. The increase in 2002 over 2001 was due to a 20.8% increase in the number of title orders closed by the Company’s direct operations, coupled with a 2.0% increase in the average revenues per order closed. The increase in 2001 over 2000 was attributable to a 44.1% increase in the number of title orders

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closed by the Company’s direct operations, offset in part by a 6.2% decrease in the average revenues per order closed. The Company’s direct title operations closed 1,696,100, 1,404,600 and 975,000 title orders during 2002, 2001 and 2000, respectively. The average revenues per order closed were $1,063, $1,042 and $1,111 for 2002, 2001 and 2000, respectively. The fluctuations noted in closed orders and average revenues per order closed were primarily attributable to the relative changes in real estate activity year-over-year, as mentioned above. Operating revenues from agency title operations increased 34.1% in 2002 over 2001 and 20.5% in 2001 over 2000. These increases were primarily attributable to the same factors affecting direct title operations compounded by the inherent delay in the reporting of transactions by agents.

Specialty insurance operating revenues increased 27.9% in 2002 over 2001 and decreased 2.7% in 2001 from 2000. The increase in 2002 over 2001 was primarily attributable to geographic expansion at the Company’s home warranty division and market share growth at the property and casualty insurance division. The decrease in 2001 from 2000 was primarily due to a $13.4 million reduction in revenues at the property and casualty insurance division as a result of the previously announced exit of the lender-placed homeowner’s insurance business.

Information Technology.    Mortgage information operating revenues increased 17.8% in 2002 over 2001 and 32.2% in 2001 over 2000. These increases were primarily attributable to the same factors affecting title insurance mentioned above, as well as acquisition activity. Operating revenues of $14.9 million and $14.2 million were contributed by new acquisitions in 2002 and 2001, respectively. In addition, during the current year, the Company’s tax service division accelerated its amortization rates to reflect the increase in refinance activity, resulting in a $6.5 million increase in operating revenues.

Property information operating revenues increased 22.9% in 2002 over 2001 and 31.0% in 2001 over 2000. These increases were primarily due to the same favorable real estate conditions that benefited the title insurance and mortgage information segments, as well as market share growth and acquisition activity. Operating revenues of $15.5 million and $16.4 million were contributed by new acquisitions in 2002 and 2001, respectively.

Credit information operating revenues increased 10.4% in 2002 over 2001 and 26.3% in 2001 over 2000. These increases were primarily due to growth in demand for credit information in the housing sector, as well as acquisition activity. Operating revenues of $9.2 million and $12.5 million were contributed by new acquisitions in 2002 and 2001, respectively.

Screening information operating revenues increased 105.1% in 2002 over 2001 and 27.6% in 2001 over 2000. These increases were primarily attributable to $49.8 million and $9.7 million of operating revenues contributed by new acquisitions for the respective periods.

Investment and other income—Investment and other income totaled $89.8 million, $81.1 million and $54.8 million in 2002, 2001 and 2000, respectively, an increase of $8.7 million, or 10.8% in 2002 over 2001, and $26.3 million, or 47.9% in 2001 over 2000. The increase in 2002 over 2001 was primarily due to an $18.3 million increase in equity in earnings of unconsolidated affiliates, offset, in part, by a $9.6 million decrease in net interest and other income, primarily as a result of lower yields on cash equivalents and the Company’s investment portfolio due to the lower interest rate environment. The increase in 2001 over 2000 was primarily attributable to a $23.4 million increase in equity in earnings of unconsolidated affiliates and a $2.9 million increase in net interest and other income. See Note 9 to the consolidated financial statements for additional information.

Net realized investment gains/losses—Net realized investment losses totaled $18.9 million in 2002, compared with gains of $6.6 million in 2001 and $1.9 million in 2000. The current year investment losses included a $13.6 million loss resulting from the write-down of WorldCom bonds; 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.

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Salaries and other personnel costs—A summary by segment of the Company’s salaries and other personnel costs is as follows:

Financial Services.    The Company’s title insurance segment comprised 95.8% of total salaries and other personnel costs for the Financial Services group. The title insurance segment (primarily direct operations) is labor intensive; accordingly, a major variable expense component is salaries and other personnel costs. This expense component is affected by two competing factors: the need to monitor personnel changes to match corresponding or anticipated new orders, and the need to provide quality service. In addition, this segment’s growth in operations that specialize in builder and lender business has created ongoing fixed costs required to service accounts.

Title insurance personnel expenses increased 20.5% in 2002 over 2001 and 23.9% in 2001 over 2000. The increase in 2002 over 2001 was primarily due to $36.1 million of increased employee benefit costs, $28.2 million of personnel costs associated with new acquisitions, $26.5 million in expenses related to the implementation of the Company’s FAST title production system, incremental labor costs incurred to service the increase in business volume and increased commissions associated with the increase in closed orders. The increase in employee benefit costs was primarily due to a $16.9 million increase in the Company match related to the 401(k) plan, which is profit driven and increases as profits escalate; and a $11.5 million increase in health care costs. The increase in 2001 over 2000 was primarily due to an increase in staff in the production area required to service the increase in total order volume, increased commissions associated with the increase in closed orders, $15.6 million of personnel expenses associated with new acquisitions and $3.0 million in severance related to the consolidation of certain back-office functions. The Company’s direct title operations opened 2,184,200, 1,930,300 and 1,240,700 orders in 2002, 2001 and 2000, respectively, representing an increase of 13.2% in 2002 over 2001 and 55.6% in 2001 over 2000. From an efficiency standpoint, title insurance personnel costs as a percentage of title insurance operating revenues (net of agent retention) were 51.2% in 2002, 52.9% in 2001 and 56.6% in 2000.

Information Technology.    Personnel expenses in total for the Information Technology group increased 17.2% in 2002 over 2001 and 17.0% in 2001 over 2000. These increases were primarily due to personnel expenses associated with new acquisitions, costs incurred to service the increase in business volume and, in 2002, a $12.6 million increase in employee benefit costs. Personnel costs associated with new acquisitions totaled $19.1 million in 2002 and $13.3 million in 2001. From an efficiency standpoint, personnel costs for the Information Technology group as a percentage of operating revenues were 33.7% in 2002, 35.2% in 2001 and 39.2% in 2000.

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Corporate.    Corporate personnel expenses increased $17.9 million in 2002 over 2001 and $30.1 million in 2001 over 2000. The increase in 2002 over 2001 was primarily attributable to an increase of $13.3 million in employee benefit costs, increased technology personnel costs and higher general costs associated with the support effort needed to service the Company’s expanded national and international operations. The increase in 2001 over 2000 was primarily due to a reduction of $23.7 million in 2000 resulting from the restructuring of the Company’s pension plan.

Premiums retained by agents—A summary of agent retention and agent revenues is as follows:

The premium split between underwriter and agents is in accordance with their respective agency contracts and can vary from region to region due to divergencies in real estate closing practices, as well as rating structures. As a result, the percentage of title premiums retained by agents varies due to the geographical mix of revenues from agency operations.

Other operating expenses—A summary by segment of the Company’s other operating expenses is as follows: