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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended March 31, 2004

OR

For the transition period from                      to                     

Commission file number 0-3658

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

(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 x No ¨

Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes x No ¨

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 ¨ No ¨

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 - 88,960,577 shares as of April 28, 2004

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INFORMATION INCLUDED IN REPORT

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THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

(in thousands, except percentage and share data)

See notes to condensed consolidated financial statements.

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THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

See notes to condensed consolidated financial statements.

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THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

See notes to condensed consolidated financial statements.

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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. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

Note 2 – Earnings Per Share

For the three months ended March 31, 2004 and 2003, respectively, 0.3 million and 3.4 million stock options were excluded from the computation of diluted earnings per share due to their antidilutive effect.

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Note 3 – Stock Options

Effective December 15, 2002, the Company adopted Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, which amends Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation” (SFAS 148). In accounting for its plans, the Company, as allowable under the provisions of SFAS 148, applies Accounting Principles Board Opinions No. 25, “Accounting for Stock issued to Employees.” As a result of this election, the Company does not recognize compensation expense for its stock option plans. Had the Company determined compensation cost based on the fair value for its stock options at grant date, net income and earnings per share would have been reduced to the pro forma amounts as follows:

Note 4 – Business Combinations

During the three months ended March 31, 2004, the Company completed 16 acquisitions. These acquisitions were not material, individually or in the aggregate. Nine of the acquisitions have been included in the Company’s title insurance segment, one in the Company’s mortgage information segment and six in the Company’s screening information segment. The aggregate purchase price for the ten acquisitions included in the Company’s title insurance and mortgage information segments was $20.9 million in cash and $6.2 million in notes payable. The six acquisitions included in the Company’s screening information segment were completed by the Company’s publicly-traded subsidiary, First Advantage Corporation. The aggregate purchase price for these acquisitions was $7.0 million in cash, $6.5 million in notes payable and .5 million shares, valued at $9.7 million, of First Advantage’s Class A common stock. The purchase price of each acquisition was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis. As a result of the 16 acquisitions, the Company recorded approximately $37.8 million of goodwill and $4.3 million of intangible assets with definite lives. The Company is awaiting information necessary to finalize the purchase accounting adjustments for these acquisitions and the final purchase price allocations could change the recorded intangible asset and goodwill amounts. In accounting for the First Advantage shares issued for the acquisitions in the screening information segment, the Company, whose ownership interest was reduced to approximately 75 percent, recorded a pretax gain of $.7 million.

In April 2004, the Company’s subsidiary, First American Real Estate Solutions LLC, purchased from Transamerica Corporation its 20% interest in the Company’s property data business, First American Real Estate Solutions LP, for a purchase price of $42 million in cash. The Company and Transamerica formed this limited partnership in 2000. This acquisition will increase goodwill by $21.2 million at the Company’s property information segment.

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Note 5 – Segment Information

In January 2004, the Company combined its Title Insurance and Services and Trust and Other Services into one segment to better reflect the interaction within these businesses. This presentation is consistent with the way the operations of these businesses are evaluated. The prior year results have been reclassified to reflect the combination of these businesses. After the change, the Company has six reporting segments that fall within two primary business groups, Financial Services and Information Technology. The Financial Services Group includes Title Insurance and Services and Specialty Insurance. The Information Technology Group includes Mortgage Information, Property Information, Credit Information and Screening Information. Selected financial information by reporting segment is as follows:

For the three months ended March 31, 2004

For the three months ended March 31, 2003

Note 6 – Goodwill and Other Intangible Assets

The Company’s reporting units for purposes of the annual testing for impairment of goodwill 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, tenant screening and motor vehicle reporting.

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A reconciliation of the changes in the carrying amount of net goodwill, by operating segment, for the three months ended March 31, 2004, is as follows:

There have been no impairments of goodwill during the three months ending March 31, 2004. The Company had $114.3 million of intangible assets including in “Other assets” at March 31, 2004, with definite lives ranging from three to seven years. These assets, comprised primarily of customer lists and noncompete agreements, are being amortized in a manner consistent with periods prior to the adoption of SFAS 142.

Note 7 – Employee Benefit Plans

In December 2003, the Financial Accounting Standards Board revised Statement of Financial Accounting Standards No. 132, “Employers Disclosures About Pensions and Other Post Retirement Benefits” to require additional interim disclosures. The Company has implemented the revised disclosures in these financial statements.

Net periodic pension cost for the Company’s defined benefit pension and supplemental benefit plans includes the following components:

The Company has contributed $3.9 million to its pension plans for the three months ended March 31, 2004 and expects to contribute an additional $42.3 million during the remainder of 2004. These contributions are both those required by funding regulations as well as discretionary contributions necessary to provide benefit payments to participants of certain of the Company’s non-qualified supplemental benefit plans.

Note 8 – Subsequent Event

On April 15, 2004, the Company redeemed for cash $1,176,000 of the $210,000,000 aggregate principal outstanding on its 4.5% Senior Convertible Debentures Due 2008. Prior to the redemption date, holders had converted an aggregate principal amount of $208,824,000 of debentures into 7,457,938 common shares of the Company at the fixed conversion price of $28 per share.

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Certain statements made in this 10-Q, including those relating to second quarter 2004 revenues and 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, 2003, 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.

RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those policies used in the preparation of the Company’s financial statements that require management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies. A summary of these policies 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, 2003.

OVERVIEW

Decreases in mortgage originations during November and December of 2003, coupled with adverse weather conditions affecting home sales in December 2003, as well as in January and February of 2004, provided a typical seasonal pattern of real estate activity for the first quarter of 2004 not seen in the past few years. March new order counts for the Company’s direct title operations and the Company’s other real estate-related businesses improved significantly and should result in relatively strong revenues for the second quarter of 2004. Net income for the three months ended March 31, 2004, was $55.0 million, or $0.62 per diluted share. Net income for the three months ended March 31, 2003, was $87.6 million, or $1.05 per diluted share, and included a realized pretax gain on the merger of the Company’s Credit Online business with DealerTrack Holdings, Inc., of $13.1 million, $8.0 million on an after-tax basis, or $0.09 per diluted share. During the current quarter, the Company combined its Trust and Other Services segment with its Title Insurance segment. Prior year numbers have been reclassified to conform with the current year presentation.

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OPERATING REVENUES

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

Financial Services. Operating revenues from direct title operations increased 6.4% for the current quarter when compared with the same period of the prior year. This increase was primarily due to an increase in the average revenues per order closed, offset in part by a decrease in the number of title orders closed by the Company’s direct operations. The average revenues per order closed were $1,256 for the three months ended March 31, 2004, an increase of 18.2% when compared with $1,063 for the three months ended March 31, 2003. This increase was primarily attributable to a decreased mix of lower-margin refinance transactions, an increase in higher-margin commercial activity and appreciating home values. The Company’s direct operations closed 410,300 title orders during the current three month period, a decrease of 10.0% when compared with 455,700 title orders closed during the same period of the prior year. This decrease was primarily due to the more typical seasonal pattern of real estate activity experienced during the quarter. Operating revenues from agency operations increased 15.1% for the current quarter when compared with the same period of the prior year. This increase primarily reflected the strong closings experienced by the Company’s agents during the fourth quarter of 2003 and the subsequent lag in the reporting of agency remittances.

Information Technology. Operating revenues for the mortgage information segment, excluding $39.3 million of operating revenues contributed by new acquisitions, decreased 16.9% for the current quarter when compared with the same period of the prior year. This decrease primarily reflected the slowdown in real estate activity due to the re-emergence of seasonal patterns. Operating revenues for the property information segment, excluding $6.9 million of operating revenues contributed by new acquisitions, increased 3.4% when compared with the same period of the prior year. This increase reflected the continued strength in the property information segment’s subscription-based information businesses, offset in part by the affects of the slowdown in real estate activity. The property information segment’s subscription-based information businesses are less cyclical and not as dependent on mortgage originations as the Company’s other real estate-related businesses. Operating revenues for the credit information segment, excluding from the prior year’s quarter $2.4 million of operating revenues due to the previously announced merger of the Company’s Credit Online business with DealerTrack Holdings, Inc. in the latter part of the first quarter of 2003, increased 3.6% when compared with the same period of the prior year. This increase was primarily due to the growth in this segment’s non-mortgage related credit information businesses. Screening information operating revenues increased 81.6% for the three months ended March 31, 2004, when compared with the same period of the prior year. This increase was primarily attributable to $17.1 million of operating revenues contributed by new acquisitions.

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INVESTMENT AND OTHER INCOME

Investment and other income, which now includes the revenues from the Company’s trust and financial services businesses, totaled $26.9 million for the three months ended March 31, 2004, a decrease of $7.6 million, or 21.9%, when compared with the same period of the prior year. This decrease primarily reflected a $5.3 million reduction in earnings from affiliated companies, which are accounted for under the equity method of accounting, and lower yields on the Company’s cash equivalents and investment portfolio.

NET REALIZED INVESTMENT GAINS

Net realized investment gains totaled $1.3 million and $12.5 million for the three months ended March 31, 2004, and 2003, respectively. The prior year quarter included a $13.1 million realized investment gain associated with the merger of the Company’s Credit Online business with DealerTrack Holdings, Inc.

TOTAL OPERATING EXPENSES

Financial Services. Salaries and other personnel costs for the Financial Services group, which primarily reflects the title insurance segment, were $328.9 million for the three months ended March 31, 2004, an increase of $34.2 million when compared with the same period of the prior year. Excluding the affect of new acquisitions, the increase was $9.3 million, or 3.2%.

Although order counts were lower this quarter compared with the same period of the prior year, the Company experienced a significant increase in order counts in the latter part of the current quarter, and the increase in personnel costs was primarily attributable to labor costs associated with processing this increasing inventory of orders at the title insurance operations. Salaries and other personnel costs as a percentage of operating revenues for the Financial Services group were 30.5% for the three months ended March 31, 2004, and 30.1% for the same period of the prior year.

Agents retained $424.2 million, or 82.1% of title premiums generated by agency operations for the three months ended March 31, 2004, which compares with $365.7 million, or 81.5% for the same period of the prior year. The change in the percentage of title premiums retained by agents was 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 $182.6 million for the three months ended March 31, 2004, an increase of $20.8 million when compared with the same period of the prior year. Excluding the affects of company acquisitions, the increase was $5.1 million, or 3.2%, and was primarily the result of incremental costs incurred to service the increasing inventory of orders at the title insurance operations. Other operating expenses as a percentage of operating revenues for the Financial Services group were 16.9% for the three months ended March 31, 2004, and 16.5% for the same period of the prior year.

The provision for policy losses and other claims primarily represents title insurance claims, home warranty claims and property and casualty insurance claims. For the title insurance segment, the claims provision as a percentage of title insurance operating revenues was 4.1% for the current quarter and 4.0% for the same period of the prior year. For the home warranty segment, the claims provision as a percentage of home warranty operating revenues was 48.6% for the current quarter, up from 44.2% for the same period of the prior year. This increase was primarily due to an increase in the average cost per claim, attributable to geographic expansion. In the property and casualty insurance segment, the provision for losses as a percentage of property and casualty insurance operating revenues was 58.5% for the current quarter, down from 78.9% for the same quarter of the prior year. The relatively high rate for the prior year quarter reflected high claims activity, which resulted primarily from insured property damaged in Southern California as a result of extraordinarily high winds, experienced during the beginning of the first quarter of 2003.

Premium taxes, which relate to the title insurance and specialty insurance segments, were $12.5 million and $10.5 million for the three months ended March 31, 2004 and 2003, respectively. This increase was primarily due to the relative increase in title insurance premiums. Premium taxes as a percentage of title insurance and specialty insurance operating revenues were 1.2% for the three months ended March 31, 2004 and 1.1% for the three months ended March 31, 2003. 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. Information technology personnel and other operating expenses were $278.6 million for the three months ended March 31, 2004, an increase of $53.9 million when compared with the same period of the prior year. Excluding acquisitions, the increase was $3.0 million, or 1.3%. This increase was primarily due to costs incurred at the Company’s tax service division to integrate new customers, costs incurred to service the

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increase in non-real estate related business volume, costs incurred to integrate new acquisitions and increased technology costs. Personnel and other operating expenses as a percentage of operating revenues for the Information Technology group were 76.0% for the three months ended March 31, 2004 and 71.2% for the same period of the prior year.

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.

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 $33.9 million for the current quarter, an increase of $5.9 million when compared with the same period of the prior year. This increase was primarily due to increased technology costs and higher general costs associated with the support effort needed to service the Company’s expanded national and international operations

INCOME TAXES

The effective income tax rate (income tax expense as a percentage of pretax income after minority interest expense) was 40.5% for the three months ended March 31, 2004, and 39.0% for the same period of the prior year. The increase 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 is attributable to a limited liability company subsidiary, that for tax purposes, is treated as a partnership; and accordingly, no income taxes have been provided.

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MINORITY INTERESTS

Minority interest expense was $18.8 million for the three months ended March 31, 2004, a decrease of $1.1 million when compared with the same period of the prior year. This decrease was primarily attributable to the decrease in operating results of the Company’s joint venture with Experian.