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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2004

OR

For the transition period from                                  to                                 

Commission file number 001-13585

(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  ¨

The aggregate market value of voting stock held by non-affiliates of the Registrant as of June 30, 2004 was $2,208,646,893.

On March 14, 2005, there were 92,850,176 shares of Common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement with respect to the 2005 annual meeting of the shareholders 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.

Table of Contents

PART I

CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING THOSE RELATING TO INCREASES IN THE COMPANY’S SHARE OF THE TITLE INSURANCE MARKET, THE COMPANY’S COMMERCIAL SALES PROGRAM, INTERNATIONAL SALES EFFORTS, ADEQUACY OF ALLOWANCE FOR LOAN LOSSES, CORPORATE OFFICE EXPANSION, LITIGATION, DIVIDENDS, FUNDING FOR CORPORATE OFFICE EXPANSION, REGULATORY RESTRICTIONS ON DIVIDENDS, LOANS AND ADVANCES AVAILABLE TO THE COMPANY, CASH REQUIREMENTS AND FUNDING FOR NON-QUALIFIED SUPPLEMENTAL BENEFIT PLANS ARE FORWARD LOOKING. RISKS AND UNCERTAINTIES EXIST THAT 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; LIMITATIONS ON ACCESS TO PUBLIC RECORDS AND OTHER DATA; 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 THIS ANNUAL REPORT ON FORM 10-K. 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.

Item 1.    Business

The Company

The First American Corporation was founded 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 began issuing title insurance policies. In 1986, the Company began a diversification program which involved the acquisition and development of business information companies closely related to the real estate transfer and closing process. Twelve years later, the Company expanded its diversification program to include business information products and services 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 telephone number is (714) 800-3000.

General

The First American Corporation, through its subsidiaries, is engaged in the business of providing business information and related products and services. The Company has six reporting segments that fall within two primary business groups, financial services and information technology. The financial services group includes the Company’s title insurance and services segment and its specialty insurance segment. The title insurance and services segment issues residential and commercial title insurance policies, accommodates tax-deferred exchanges and provides escrow, equity loan, investment advisory, trust, thrift and other related products and services. The specialty insurance segment issues property and casualty insurance policies and sells home warranty products. The Company’s mortgage information, property information, credit information and screening information segments comprise its information technology group. The mortgage information segment offers tax monitoring, flood zone certification, default management services, document preparation and other real estate related services. The property information segment sells data relating to real property, database management services and appraisal services. In addition to providing specialty credit reports to the mortgage lending and automotive lending industries, the credit information segment includes a credit reporting agency which offers credit reports on sub-prime borrowers. The screening information segment provides employment

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background screening, drug-free workplace programs and other occupational health services, employee assistance programs, corporate tax and incentive services, resident screening, motor vehicle records, transportation business credit services, investigative services, computer forensics and electronic discovery services, supply chain security and consumer location services. 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 flood zone determinations, based on the number of flood zone certification reports issued; tax monitoring services, based on the number of loans under service; credit reporting services to the mortgage industry, based on the number of credit reports issued; credit reporting services to the automotive lending industry, based on the number of credit reports issued; property data services, based on the number of inquiries; automated appraisals, based on the number of reports sold; 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; home warranty services, based on the number of home warranty contracts in effect; default management services, based on the number of foreclosure/bankruptcy cases reported; and drug testing administration, based on the number of reports issued.

Substantially all of the revenues for the Company’s title insurance and services and mortgage information segments result 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 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 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 and Services Segment

The title insurance and services segment’s principal product is policies of title insurance on residential and commercial property. This segment also provides tax-deferred exchange, escrow, equity loan, investment advisory, trust, thrift and other related products and services.

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 desire 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 lenders against defects in the title to real property. These defects include adverse ownership claims, liens, encumbrances or other matters affecting such title which existed at the time a title insurance policy was issued and which were not excluded from coverage. 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

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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. In some cases the policy might provide insurance in 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 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, a real estate broker, lawyer, developer, lender or closer involved in the transaction orders title insurance on behalf of an insured. 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 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.

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, generally referred to as a “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 of loss 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 exclude 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 agent remits the remainder of the premium to the title insurer as compensation for bearing 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.

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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 affiliates, transacts the business of title insurance through a network of 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 by law. The Company also offers title services in Guam, Puerto Rico, the U.S. Virgin Islands, the Bahamas, Australia, Canada, Hong Kong, Ireland, Mexico, New Zealand, South Korea, the United Kingdom and other territories and countries.

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 continues to focus on expanding its share of the higher margin title insurance business conducted in connection with commercial transactions. 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 referrals from persons in the real estate community, such as independent escrow companies, real estate agents and 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 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 60 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 multi-state 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 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

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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 also maintains a large number of agent representatives and agent auditors. 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 title plant records generally are easier to search. Most title plants also index prior policies, adding to searching efficiency. Many title plants are computerized. Certain offices of the Company 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 joint venture with Experian Information Solutions on January 1, 1998. Experian contributed to the joint venture its real estate information division. In June 1998 the Company acquired Data Tree Corporation, which owns the largest database of real estate document images. In July 2000 the Company and LandAmerica Financial Group formed Data Trace Information Services, LLC. This business, which is 80% owned by the Company and 20% owned by LandAmerica, 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 and other factors 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.

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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 $40.1 million at December 31, 2004, 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 exchange 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 $40.0 million of primary risk on any single policy, though the Company may retain primary risk above $40.0 million on a case-by-case basis. 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 vary 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. Thirty-four title insurance underwriters, for example, 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, LandAmerica, 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.

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.

Trust, Thrift and Investment Advisory 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, 2004, the trust operation was administering fiduciary and custodial assets having a market value in excess of $2.9 billion. The trust operation also offers investment advisory services.

During 1988, the Company, through a majority-owned subsidiary, acquired an industrial bank, 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, 2004, this Thrift had approximately $62.5 million of demand deposits and $101.3 million of loans outstanding.

Loans made or acquired during the current year by the Thrift ranged in amount from $15 thousand to $3.1 million. The average loan balance outstanding at December 31, 2004, was $0.5 million. 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, 2004, was 7.04%. 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 primary competitors in the Southern California commercial market

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are local community banks, other thrift and loan companies and, to a lesser extent, commercial banks. The Thrift’s average loan is approximately 14.0 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 non-accrual status when two payments become past due. When a loan is placed on non-accrual 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.

The following table sets forth the amount of the Thrift’s non-performing assets as of the dates indicated:

Based on a variety of factors concerning the creditworthiness of its borrowers, the Thrift determined that it had no potential problem loans in existence as of December 31, 2004.

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.

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

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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.

Prior to January 2004 the Company’s trust, thrift and investment advisory companies made up its Trust and Other Services segment. In January 2004, the Company combined this segment with its Title Insurance and Services segment to better reflect the interaction within these businesses. This presentation is consistent with the way the operations of these businesses are evaluated by the Company’s management.

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’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 per year. 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 primarily are marketed through real estate brokers and agents. This business has continually expanded nationally and is currently doing business in 45 states.

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 primarily 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.

The Information Technology Group

Mortgage Information Segment

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

Tax Monitoring.    The Company’s tax monitoring service, established in 1987, advises real property mortgage lenders of the status of property tax payments due on real estate securing their loans. With the acquisition of Transamerica Finance Corporation’s tax monitoring business in October 2003, the Company believes that it became the largest provider of tax monitoring services in the United States.

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Under a typical contract the Company, on behalf of a mortgage lender, monitors 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, the Company 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 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 Zone Certification.    In January 1995, the Company entered the flood zone certification business with the acquisition of Flood Data Services, Inc In October 2003 the Company substantially expanded this business with the acquisition of Transamerica Flood Hazard Certification, Inc., one of the Company’s primary competitors in this business. This business furnishes to mortgage lenders a report as to whether a subject property lies within a governmentally delineated 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.

Default Services.    The Company’s default management business sells software and services which help mortgage servicing companies and financial institutions mitigate losses on mortgages that are in default as well as manage foreclosures, maintain and sell real estate owned properties and process claims.

Property Information Segment

The Company’s property information segment provides data and database services to various businesses, in particular to businesses operating in the real estate industry, such as mortgage lenders and brokers, real estate agents, property and casualty insurance companies and title insurance companies. The data offered by this segment include property characteristic information, such as the square footage of a piece of property or the number of rooms in a residence, and images of publicly recorded documents relating to real property. The Company delivers such data to its customers almost exclusively through electronic means, including the Internet. This segment also owns and manages databases of title and tax records, known as title plants, which are used primarily by title insurance companies in the issuance of title insurance policies.

This segment also provides appraisal services to mortgage lenders, real estate agents, investors and other businesses requiring valuations of real property. These services include traditional appraisals, which require physical inspection and human analysis, broker price opinion services, which value real property based on the opinions of real estate brokers and agents, and automated valuation models which use data and sophisticated mathematical models to arrive at a valuation.

The property information segment was created in the Company’s joint venture with Experian in January 1998. Since that time this segment has grown through a number of significant acquisitions. In June 1998 the Company entered the imaged document business with the acquisition of Data Tree Corporation. In July 2000 the Company combined its title plant business with a competing business owned by the Company’s competitor, LandAmerica. The combined entity, Data Trace Information Services, LLC, is owned 80% by the Company and 20% by LandAmerica. In August 2000, the Company combined its property data business with Transamerica Corporation’s competing business. At the time the Company owned 80% of the resulting entity. During 2004 the Company purchased the remaining 20%. In September 2002, the Company added broker price opinions (BPO) to its appraisal operations with the acquisition of SourceOne Services, Corp. The Company believes that SourceOne is the largest provider of BPO services to the default market and the second largest provider of BPO services in the United States.

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Credit Information Segment

The Company’s mortgage credit reporting business provides credit information reports for mortgage lenders throughout the United States. In preparing its reports for mortgage lenders the Company obtains credit reports from at least two of the three United States primary credit bureaus, merges and summarizes the credit reports and delivers its report in a standard format 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. The Company believes that it is now the largest provider of credit reports to the United States mortgage lending industry, based on the number of credit reports issued.

The credit information segment also provides specialized credit reports to non-mortgage lenders, such as auto lenders, and direct to consumers. These reports may be derived from credit reports obtained from one or more of the three United States credit bureaus and may be specially formatted for ease of use by the creditor or to facilitate interpretation by a consumer. The Company also owns Teletrack, Inc., which it acquired in 1999. The Company believes Teletrack is the largest provider of credit reports specializing in sub-prime borrowers in the United States, based on the number of reports issued. Teletrack’s credit reports are derived from its proprietary database. Its primary customers include pay-day loan and check-advance stores, rent-to-own retailers and similar types of creditors.

Screening Information Segment

The Company’s screening information segment is comprised entirely of First Advantage Corporation, a public company whose shares of Class A common stock trade on the Nasdaq National Market System under the ticker symbol FADV. First Advantage was formed in the 2003 merger of the Company’s screening information segment with US SEARCH.com, Inc., a provider of people location services. Since that time First Advantage has grown substantially through acquisition. In late 2003 it entered the investigative services business with the acquisition of Omega Insurance Services, Inc., which it augmented with the acquisition of Corefacts, LLC in early 2004. In May 2004, with the acquisition of CIC Enterprises, Inc., First Advantage began offering services which help businesses identify and utilize tax incentive programs. As of December 31, 2004, the Company owned all of First Advantage’s outstanding Class B common stock, which constitutes approximately 69% of the economic interest and 95% of the voting interest of First Advantage.

First Advantage’s business is organized into three business segments: Enterprise Screening, Risk Mitigation and Consumer Direct. First Advantage’s Enterprise Screening segment offers employment screening services, such as criminal records and credit checks; occupational health services, such as drug testing administration and employee assistance programs; resident screening services, such as eviction record, credit and criminal records checks; and tax incentive and consulting services such as identification of employment-related tax incentive programs available under both federal and state legislation, and processing the paperwork required to capture such tax incentives and credits. First Advantage’s Risk Management segment provides automated access to motor vehicle records from all 50 states and the District of Columbia and investigative services. The investigative services are designed to detect and expose worker’s compensation, disability and liability insurance fraud and assist customers in business, legal and financial matters, including investigations and litigation arising from trade secret theft, software infringement, financial fraud, employee malfeasance and unfair competition. This segment also provides customers with access to a database of payment practice records on more than 60,000 transportation brokers and shippers in North America. First Advantage, through its Consumer Direct segment, also provides location, verification and screening services directly to consumers through the Internet.

The Company’s screening information segment serves a wide variety of clients throughout the United States, including nearly a quarter of those businesses comprising the Fortune 1000, many major real estate investment trusts and property management companies, a number of the top providers of transportation services,

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insurance companies, governmental agencies, non-profit organizations and health care providers. Insurance carriers and agents purchase a substantial proportion of the segment’s risk mitigation products. Larger employers and transportation companies are major consumers of the segment’s employment screening and occupational health services. Multifamily housing property management companies and landlords of all sizes are represented in the resident screening business’ customer base.

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 heavily regulated by state insurance regulatory 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 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’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 the 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 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 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.

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Employees

As of December 31, 2004 the Company employed 30,994 people.

Risk Factors

You should carefully consider each of the following risk factors and the other information contained in this Annual Report on Form 10-K. The Company faces risks other than those listed here, including those that are unknown to the Company and others of which the Company may be aware but, at present, considers immaterial. Because of the following factors, as well as other variables affecting the Company’s operating results, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods.

Certain recurring trends generally result in a decrease in the demand for the Company’s products

Demand for the Company’s products generally decreases as the number of real estate transactions in which the Company’s products are purchased decreases. The Company has found that the number of real estate transactions in which the Company’s products are purchased decreases in the following situations:

The Company believes that this trend will recur.

Changes in government regulation could prohibit or limit the Company’s operations

The Company’s title insurance, property and casualty insurance, home warranty, thrift, trust and investment businesses are regulated by various federal, state and local governmental agencies. Many of the Company’s other businesses operate within statutory guidelines. Changes in the applicable regulatory environment or statutory guidelines or changes in interpretations of existing regulations or statutes could prohibit or restrict the Company’s existing or future operations. Such restrictions may restrict the Company’s ability to implement rate increases, acquire assets or businesses or otherwise have a negative impact on the Company’s ability to generate revenue and earnings.

The Company may be subject to increased regulation regarding the use of personal information

Certain data and services the Company provides are subject to regulation by various federal, state and local regulatory authorities. Compliance with existing federal, state and local laws and regulations has not had a material adverse effect on the Company’s results of operations or financial condition to date. Nonetheless, federal, state and local laws and regulations in the United States designed to protect the public from the misuse of personal information in the marketplace and adverse publicity or potential litigation concerning the commercial use of such information may affect the Company’s operations and could result in substantial regulatory compliance expense, litigation expense and a loss of revenue.

The Company may not be able to pursue its acquisition strategy

The Company intends to continue to grow through acquisitions. The Company may not be able to identify suitable acquisition candidates or complete acquisitions on satisfactory terms. A number of the Company’s competitors also have adopted the strategy of expanding and diversifying through acquisitions. The Company will continue to experience competition in its effort to execute on its acquisition strategy. As a result, the Company may be unable to continue to make acquisitions or may be forced to pay more for the acquired companies.

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The integration of Company acquisitions may be difficult and may result in a failure to realize some of the anticipated potential benefits of acquisitions

When companies are acquired, the Company may not be able to integrate or manage these businesses so as to produce returns that justify the investment. Any difficulty in successfully integrating or managing the operations of the businesses could have a material adverse effect on the Company’s business, financial condition, results of operations or liquidity, and could lead to a failure to realize any anticipated synergies. The Company’s management also will be required to dedicate substantial time and effort to the integration of its acquisitions. These efforts could divert management’s focus and resources from other strategic opportunities and operational matters.

The Company’s earnings may be reduced if acquisition projections are inaccurate

The Company’s earnings have improved since 1991 in large part because of the Company’s acquisition and integration of non-title insurance businesses. These businesses generally have higher margins than the title insurance businesses. For example, pre-tax margins for the title insurance and services segment were 8.2% in 2004, while pre-tax margins for the segments in the Company’s information technology group in the same year were 23.3%. The success or failure of acquisitions in this group has depended in large measure upon the accuracy of the Company’s projections. These projections are not always accurate. Inaccurate projections have historically led to lower than expected earnings.

As a holding company, the Company depends on distributions from the Company’s subsidiaries, and if distributions from the Company’s subsidiaries are materially impaired, the Company’s ability to declare and pay dividends may be adversely affected

First American is a holding company whose primary assets are the securities of its operating subsidiaries. The Company’s ability to pay dividends is dependent on the ability of the Company’s subsidiaries to pay dividends or repay funds. If the Company’s operating subsidiaries are not able to pay dividends or repay funds, the Company may not be able to declare and pay dividends to its shareholders. Moreover, pursuant to insurance and other regulations under which the Company’s insurance subsidiaries operate, the amount of dividends, loans and advances available is limited. Under such regulations, the maximum amount of dividends, loans and advances available from the Company’s insurance subsidiaries in 2005 is $210.2 million.

Certain provisions of the Company’s charter and rights plan may make a takeover of our company difficult even if such takeover could be beneficial to some of the Company’s shareholders

The Company’s restated articles of incorporation authorize the issuance of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by the Company’s board of directors. Accordingly, the Company’s board is empowered, without further shareholder action, to issue shares or series of preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights, including the ability to receive dividends, of the Company’s common shareholders. The issuance of such preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control. In conjunction with the rights plan discussed in the paragraph immediately below, the Company has authorized the issuance of the Company’s Series A Junior Participating Preferred Shares. Although the Company has no present intention of issuing any additional shares or series of preferred stock, the Company cannot guarantee that it will not make such an issuance in the future.

The Company has adopted a rights plan which could, alone or in combination with the Company’s restated articles of incorporation, discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to the Company’s shareholders for their common shares.

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Available Information

The Company maintains a website, www.firstam.com, which includes financial and other information for investors. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available through the “Investors” page of our website as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission. The Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this annual report on Form 10-K, or any other filing with the Securities and Exchange Commission unless the Company expressly incorporates such materials.

Item 2.    Properties

In September 1999, the Company moved its executive offices to one of three newly constructed office buildings at MacArthur Place in Santa Ana, California. Later that same year, the Orange County branch and certain other operations of the Company’s title insurance segment moved into the two other buildings constructed on the site. The three buildings total approximately 210,000 square feet and are situated in a campus environment comprising 32 acres. In the first quarter of 2004, the Company began the expansion of its office campus. This expansion will add two 4-story office buildings totaling approximately 226,000 square feet, a two-story, free standing, 52,000 square foot technology center and a two-story parking structure. The construction is estimated to be completed by the fourth quarter of 2005. This property, including the land, buildings and fixtures, is subject to a deed of trust and security agreement securing payment of a promissory note evidencing a loan made in October 2003, to the Company’s subsidiary, First American Title Insurance Company, in the original sum of $55.0 million. This loan is payable in monthly installments of principal and interest, is fully amortizing and matures November 1, 2023. The outstanding principal balance of this loan was $53.3 million as of December 31, 2004.

The Company’s mortgage information segment 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. These two buildings, which primarily house the Company’s credit reporting segment, total approximately 152,000 square feet and are located on a 17 acre parcel of land.

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

Item 3.    Legal Proceedings

In December 2004 a subsidiary of the Company settled a class action lawsuit that was pending in New York state court. The lawsuit involved allegations that the Company’s subsidiary, directly and through its agents, charged improper rates for title insurance policies issued in connection with refinance transactions.

A subsidiary of the Company is a defendant in a class action lawsuit that is pending in federal court in Michigan. The plaintiffs allege that in certain transactions the premium our subsidiary charged to builders and developers for title insurance policies violated the Real Estate Settlement Procedures Act and similar state laws. The action seeks a refund of the title insurance premiums paid by the plaintiffs and other damages. Pending the outcome of this lawsuit, the Company has taken a charge to fourth quarter 2004 earnings of $3.3 million. The Company does not believe that the ultimate resolution of this action will have a material adverse affect on its financial condition or results of operations.

On January 25, 2005, a jury in the case of Chicago Title Insurance Corporation v. James A. Magnuson, et al. awarded damages in the amount of $43.2 million against a subsidiary of the Company. This matter involved claims of violation of a non-competition agreement and intentional interference with contract. The judgment

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comprised a compensatory award of $10.8 million and a punitive damage award of $32.4 million. The Company believes it has strong grounds to overturn this judgment and will conduct a vigorous appeal. Pending the outcome of this appeal, the Company has taken a charge to fourth quarter 2004 earnings of $10.0 million.

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 affect 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

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 4, 2005 was 3,485.

High and low stock prices and dividends declared 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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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table describes purchases of the Company’s Common shares which settled during each period set forth in the table. Prices in column (b) include commissions. Purchases described in column (c) were made pursuant to the share repurchase program announced by the Company on May 18, 2004. Under this plan, which has no expiration date, the Company may repurchase up to $100 million of the Company’s issued and outstanding Common shares.

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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, 2004, 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—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.

Note B—Title order volumes are those processed by the direct title operations of the Company and do not include orders processed by agents.

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

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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 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 recognized at the time of delivery, as the Company has no significant ongoing obligation after delivery.

Provision for title losses.    The Company provides for estimated 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, but not limited to, 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” (SFAS 142), the Company is required to perform an annual impairment test for goodwill and other indefinite-lived intangible assets by reporting unit. This annual test, which the Company has elected to perform every September 30, utilizes 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. The Company’s reporting units, for purposes of applying the provisions of SFAS 142, are title insurance, home warranty, property and casualty insurance, trust and other services, mortgage origination products and services, mortgage servicing products and services, property information services, conventional credit information, sub-prime credit information, pre-employment and drug screening, resident screening and risk mitigation. In accordance with the provisions of SFAS 142, the Company completed the required annual impairment testing for goodwill and other intangible assets for the years ended December 31, 2004 and 2003, and determined that there was no impairment of value.

Income taxes.    The Company estimates its 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.

Stock-based compensation.    In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123R, “Shared-Based Payment” (SFAS No.123R). This standard is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The standard requires a public entity to measure the cost of employee services received in exchange for an award of equity

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instruments based on the grant-date fair value of the award (with limited exceptions). The cost will be recognized over the period during which an employee is required to provide services in exchange for the award. This standard is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company will adopt the standard in the third quarter of 2005. The Company has not determined the impact, if any, that this standard will have on its consolidated financial position or results of operations.

Results of Operations

Overview—The majority of the revenues for 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 the revenues for 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 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.

The continuation of relatively low interest rates, coupled with the high demand for residential resale and new home sales, resulted in an exceptionally strong 2002. Mortgage originations reached $2.46 trillion, with refinance activity comprising 58% of the total. Mortgage interest rates remained low through the first three quarters of 2003, fueling new record-setting refinance activity, but began to rise during the fourth quarter of the year. Existing and new-home-sale activity also reached new record levels. Mortgage originations, based on Mortgage Bankers Association statistics totaled $3.81 trillion in 2003, with refinance activity comprising 66% of the total. The increase in mortgage interest rates that began in the fourth quarter of 2003 resulted in a low inventory of open orders going into 2004. This, together with an increasing mortgage interest rate environment during the first half of 2004, resulted in a decline in mortgage originations and a return to more traditional, seasonal real estate pattern, where the greatest volume of real estate activity occurs in the spring and summer months. However, as a result of new acquisitions and an increase in the average revenues per title order closed, operating revenues increased in 2004 when compared with 2003. Mortgage originations totaled $2.86 trillion in 2004, with refinance transactions comprising only 44% of the total.

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

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Financial Services.    In January 2004, the Company combined its Title Insurance segment and its Trust and Other Services segment into one segment to better reflect the interaction within these businesses. This presentation is consistent with the way management evaluates the operations of these businesses. The prior year results have been reclassified to reflect the combination of these businesses.

Operating revenues from direct title operations increased 9.8% in 2004 over 2003 and 25.6% in 2003 over 2002. The increase in 2004 over 2003 was primarily due to an increase in the average revenues per order closed, offset in part by a decrease in the number of orders closed. The increase in 2003 over 2002 was primarily due to increases in both the average revenues per order closed and the number of title orders closed. The average revenues per order closed were $1,303, $1,121 and $1,063 for 2004, 2003 and 2002, respectively. The increase in average revenues per order closed of 16.2% in 2004 over 2003 was primarily due to a decrease in the mix of lower-premium refinance transactions, an increase in higher-premium resale and commercial transactions, and appreciating real estate values. The increase in average revenues per order closed of 5.5% in 2003 over 2002 primarily reflected appreciating real estate values. The Company’s direct title operations closed 1,908,600, 2,021,000 and 1,696,100 title orders during 2004, 2003 and 2002, respectively, a decrease of 5.6% in 2004 from 2003 and an increase of 19.2% in 2003 over 2002. The fluctuations in closings primarily reflected changes in mortgage origination activity, market share gains and acquisition activity. Operating revenues from agency title operations increased 7.6% in 2004 over 2003 and 34.5% in 2003 over 2002. 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. In 2005 the Company’s title insurance company plans to reduce its title insurance premium on mortgage refinance transactions in California. Assuming that real estate values and the volume of activity, including the mix between refinance, resale and commercial transactions, remain unchanged from 2004 levels, this would result in a decrease in operating revenues in 2005 and in subsequent years. However, any decrease in operating revenues could be offset by factors such as anticipated market share gains, operating efficiencies and growth in the Company’s bundling program.

Specialty insurance operating revenues increased 6.3% in 2004 over 2003 and 44.7% in 2003 over 2002. The increase in 2004 over 2003 reflected continued geographic expansion at the Company’s home warranty division, offset in part by a reduction in revenues at the Company’s property and casualty insurance division due to an increase in reinsurance ceded. The increase in 2003 over 2002 was primarily attributable to geographic expansion at the Company’s home warranty division and market share growth at the property and casualty insurance division.

Information Technology.    Mortgage information operating revenues increased 1.7% in 2004 over 2003 and 34.1% in 2003 over 2002. The increase in 2004 over 2003 was primarily attributable to $166.4 million of operating revenues contributed by new acquisitions, offset in part by the decline in mortgage originations and a $10.2 million decrease in operating revenues as a result of an increase in estimated servicing life of the tax service loan portfolio due to a slowdown in prepayment speeds. The increase in 2003 over 2002 primarily reflected the increase in mortgage originations, $48.0 million of operating revenues contributed by new acquisitions and a $9.4 million increase in operating revenues as a result of a decrease in estimated servicing life of the tax service loan portfolio due an acceleration in prepayment speeds.

Property information operating revenues increased 9.7% in 2004 over 2003 and 41.3% in 2003 over 2002. The increase in 2004 over 2003 primarily reflected $21.6 million of operating revenues contributed by new acquisitions and the continued growth in this segment’s less cyclical subscription-based information businesses, offset in part by the reduction in mortgage originations. The increase in 2003 over 2002 was primarily due to $52.4 million of operating revenues contributed by new acquisitions and the increase in mortgage originations.

Credit information operating revenues decreased 1.7% in 2004 from 2003 and increased 14.7% in 2003 over 2002. The decrease in 2004 from 2003 primarily reflected a decline in operating revenues from mortgage related credit products as a result of the decrease in mortgage originations. The increase in 2003 over 2002 was primarily due to the growth in demand for credit information in the housing sector, offset in part by a $6.2 million reduction in revenues as a result of the sale of the Company’s subsidiary, FASTRAC Systems, Inc., in August 2002.

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Screening information operating revenues increased 60.0% in 2004 over 2003 and 65.3% in 2003 over 2002. These increases were primarily attributable to $68.5 million and $56.0 million of operating revenues contributed by new acquisitions for the respective periods.

Investment and other income—Investment and other income totaled $141.8 million, $145.4 million and $131.6 million in 2004, 2003 and 2002, respectively, a decrease of $3.6 million, or 2.5% in 2004 from 2003, and an increase of $13.8 million, or 10.5% in 2003 over 2002. These fluctuations primarily reflected the relative changes in equity in earnings of unconsolidated affiliates, which are accounted for under the equity method of accounting. See Note 11 to the consolidated financial statements for additional information.

Net realized investment gains/losses—Net realized investment gains totaled $9.8 million in 2004 and $35.7 million in 2003. Net realized investment losses totaled $18.9 million in 2002. The 2004 total included realized gains totaling $8.5 million relating to the issuance of shares by the Company’s publicly traded subsidiary, First Advantage Corporation. The 2003 total included the recognition of a previously deferred gain totaling $14.2 million relating to the sale of the Company’s Contour Software, Inc. subsidiary in the first quarter of 2001. Also included in the 2003 total was a $13.1 million realized gain associated with the merger of the Company’s Credit Online business with DealerTrack Holdings, Inc. The 2002 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.

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 97.0% 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 title business has created ongoing fixed costs required to service accounts.

Title insurance personnel expenses increased 16.2% in 2004 over 2003 and 15.6% in 2003 over 2002. The increase in 2004 over 2003 was primarily due to $139.9 million of personnel costs associated with new acquisitions, incremental costs incurred to service the more labor intensive higher mix of resale and commercial

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title orders processed during the year and $25.8 million of increased employee benefit costs. The increase in 2003 over 2002 was primarily attributable to $29.3 million of personnel costs associated with new acquisitions, incremental labor costs incurred to service the increase in refinance transactions, increased commissions associated with the increase in closed orders and $12.0 million of increased employee benefit costs. The increases in employee benefit costs were primarily the result of increases in health care costs of $16.7 million in 2004 over 2003 and $6.2 million in 2003 over 2002. Also contributing to the overall increase in employee benefit costs were increases in the Company’s discretionary match related to the 401(k) plan, which is profit driven and increases as profits escalate. This match can also increase when profits decrease if the number of participants in the plan increases or if the total amount of employee deferral increases. The match increased $8.2 million in 2004 over 2003 and $5.8 million in 2003 over 2002. The Company’s direct title operations opened 2,518,600, 2,511,000 and 2,184,200 orders in 2004, 2003 and 2002, respectively, representing an increase of 0.3% in 2004 over 2003 and 15.0% in 2003 over 2002. The fluctuation in orders year over year reflected relative changes in mortgage originations, market share fluctuations and acquisition activity.

Information Technology.    Personnel expenses in total for the Information Technology group increased 18.0% in 2004 over 2003 and 27.6% in 2003 over 2002. Excluding $101.6 million and $51.1 million of personnel costs associated with new acquisitions, personnel expenses for the information technology group decreased 4.4% in 2004 from 2003 and increased 13.2% in 2003 over 2002. The decrease in 2004 from 2003 reflects a decline in incremental costs associated with the decrease in business volume, offset in part by a $4.2 million increase in employee benefit costs and costs incurred at the Company’s tax service division to integrate new customers. The increase in 2003 over 2002 was primarily due to costs incurred to service the increase in business volume and $9.8 million of increased employee benefit costs.

Corporate.    Corporate personnel expenses increased 40.7% in 2004 over 2003 and 7.2% in 2003 over 2002. These increases were primarily attributable to an increase 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 2004 over 2003 also reflected additional costs associated with the implementation of the provisions of Section 404 of the Sarbanes Oxley Act, primarily internal audit costs.

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.

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

Financial Services.    The Company’s title insurance segment comprised 98.1% of total other operating expenses for the Financial Services group. Title insurance other operating expenses (principally direct operations) increased 15.3% in 2004 over 2003 and 22.0% in 2003 over 2002. The increase in 2004 over 2003 was primarily due to $79.9 million of other operating expenses associated with new acquisitions and a voluntary $24.0 million charge taken in the fourth quarter of 2004 associated with captive reinsurance agreements with residential homebuilders. This charge, which was previously disclosed by the Company on February 18, 2005, represents a commitment by the Company to pay to the affected policy-holders the allocated portion of the reinsurance premium paid to the captive reinsurance participants. The increase in 2004 over 2003 also reflected $13.3 million of litigation charges taken in the fourth quarter of 2004. These charges included $10.0 million for a litigation matter disclosed by the Company on January 26, 2005. Excluding acquisition activity and the one-time items, title insurance other operating expenses decreased $5.3 million, or 0.7% in 2004 from 2003, primarily as a result of cost containment programs. The increase in other operating expenses in 2003 over 2002 was primarily due to incremental costs (i.e., messenger costs, reproduction costs, title plant maintenance costs, etc.) associated with servicing the increases in total order volume and $19.6 million of costs associated with new acquisitions.

Information Technology.    Other operating expenses for the Information Technology group increased 10.2% in 2004 over 2003 and 29.3% in 2003 over 2002. Excluding other operating expenses of $84.8 million and $66.2 million associated with new acquisitions for the respective periods, other operating expenses for the Information Technology group decreased 5.6% in 2004 from 2003 and increased 13.3% in 2003 over 2002. The decrease in 2004 from 2003 reflected a decline in incremental costs associated with the decline in mortgage origination volume. The increase in 2003 over 2002 was primarily due to costs associated with servicing the increase in business volume, primarily refinance transactions.

Corporate.    Corporate other operating expenses increased 28.6% in 2004 over 2003 and 22.5% in 2003 over 2002. The increase in 2004 over 2003 was primarily due to additional costs associated with the implementation of the provisions of Section 404 of the Sarbanes Oxley Act, which included increased costs associated with the Company’s independent registered public accounting firm and outside consultants. The increase in 2003 over 2002 was primarily due to $15.0 million of technology expenses, primarily consulting and outsourcing costs, required to expand the Company’s e-commerce capabilities. The increases for both 2004 and 2003 also reflected higher general costs associated with the support effort needed to service the Company’s expanded national and international operations.

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Provision for title losses and other claims—A summary by segment of the Company’s provision for title losses and other claims is as follows:

The provision for title insurance losses, expressed as a percentage of title insurance operating revenues, was 4.1% in 2004, 4.1% in 2003 and 4.0% in 2002.

The provision for home warranty claims, expressed as a percentage of home warranty operating revenues, was 49.0% in 2004, 48.9% in 2003 and 49.8% in 2002. The rate decrease in 2003 from 2002 was primarily due to a decrease in the average cost per claim, which was primarily due to the elimination of higher-cost contractors that were servicing claims in new geographic areas.

The provision for property and casualty insurance claims, expressed as a percentage of property and casualty insurance operating revenues, was 68.4% in 2004, 63.6% in 2003 and 63.8% in 2002. The rate for 2003 excludes $5.0 million of catastrophe losses related to the Southern California wildfires, which represents the Company’s deductible on its reinsurance treaty. The rate increase in 2004 over 2003 was primarily due to $6.2 million of claims expense in the third quarter of 2004 associated with the Florida hurricanes.

Depreciation and amortization—Depreciation and amortization increased 12.7% in 2004 over 2003 and 18.2% in 2003 over 2002. These increases were primarily due to an increase in the amortization of intangibles as a result of acquisition activity and an increase in the amortization of capitalized data and software as a result of new capital expenditures. Depreciation and amortization, as well as capital expenditures for each of the Company’s segments, are summarized in Note 21 to the consolidated financial statements.

Premium taxes—A summary by pertinent segment of the Company’s premium taxes is as follows:

Insurers are generally not subject to state income or franchise taxes. However, in lieu thereof, a “premium” tax is imposed on certain operating revenues, as defined by statute. Tax rates and bases vary from state to state; accordingly, the total premium tax burden is dependent upon the geographical mix of operating revenues. The Company’s underwritten title company (noninsurance) subsidiaries are subject to state income tax and do not pay premium tax. Accordingly, the Company’s total tax burden at the state level for the title insurance segment is composed of a combination of premium taxes and state income taxes. Premium taxes as a percentage of title insurance operating revenues remained relatively constant at approximately 1.0%.

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Interest—Interest expense increased $7.7 million, or 21.4%, in 2004 over 2003, and $2.5 million, or 7.4%, in 2003 over 2002. These increases were primarily due to an increase in acquisition-related indebtedness.

Income before income taxes and minority interests—A summary by segment is as follows: