SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2003

OR

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

For the transition period from                          to                         

Commission file number 0-3658

THE FIRST AMERICAN CORPORATION

(Exact name of registrant as specified in its charter)

Incorporated in California	95-1068610
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 First American Way, Santa Ana, California	92707-5913
(Address of principal executive offices)	(Zip Code)

(714) 800-3000

(Registrant’s telephone number, including area code)

_____________________________________________________

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

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

Yes 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 - 78,233,349 as of November 7, 2003

INFORMATION INCLUDED IN REPORT

Part I:	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		A. Condensed Consolidated Balance Sheets
		B. Condensed Consolidated Statements of Income and Comprehensive Income
		C. Condensed Consolidated Statements of Cash Flows
		D. Notes to Condensed Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	Item 4.	Controls and Procedures
Part II:	OTHER INFORMATION
	Item 6.	Exhibits and Reports on Form 8-K

Part I: Financial Information

Item 1: Financial Statements

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Balance Sheets

(in thousands, except percentage and share data)

	September 30, 2003			December 31, 2002
	($000)			($000)
	(unaudited)
Assets
Cash and cash equivalents	$	1,255,870		$	900,863
Accounts and accrued income receivable, net		385,103			299,040
Investments:
Deposits with savings and loan associations and banks		55,681			38,328
Debt securities		377,172			309,864
Equity securities		44,611			36,931
Other long-term investments		211,835			142,392
		689,299			527,515
Loans receivable, net		105,726			108,162
Property and equipment, at cost:
Land		43,291			43,185
Buildings		191,954			183,045
Furniture and equipment		290,578			270,004
Capitalized software		329,267			284,537
		855,090			780,771
Less - accumulated depreciation and amortization		(396,698	)		(347,695	)
		458,392			433,076
Title plants and other indexes		394,794			375,401
Deferred income taxes		46,672			20,951
Goodwill, net		714,993			563,991
Other assets		233,285			169,046
	$	4,284,134		$	3,398,045
Liabilities and Stockholders’ Equity
Demand deposits	$	74,266		$	84,473
Accounts payable and accrued liabilities		692,232			539,069
Deferred revenue		452,522			358,747
Reserve for known and incurred but not reported claims		404,478			360,305
Income taxes payable		73,584			1,518
Notes and contracts payable		459,387			425,705
Mandatorily redeemable preferred securities of the Company’s subsidiary trust whose sole assets are the Company’s $100,000 8.5% deferrable interest subordinated notes due 2012		100,000			100,000
Minority interests in consolidated subsidiaries		251,530			163,639
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $1 par value Authorized - 500,000 shares; outstanding - none
Common stock, $1 par value Authorized - 180,000,000 shares Outstanding - 77,843,000 and 73,636,000 shares		77,843			73,636
Additional paid-in capital		439,947			359,644
Retained earnings		1,317,647			987,768
Accumulated other comprehensive loss		(59,302	)		(56,459	)
		1,776,135			1,364,589
	$	4,284,134		$	3,398,045

See notes to condensed consolidated financial statements.

3

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Income and Comprehensive Income

(in thousands, except per share amounts)

	For the Three Months Ended September 30						For the Nine Months Ended September 30
	2003			2002			2003			2002
	(unaudited)						(unaudited)
Revenues
Operating revenues	$	1,681,446		$	1,179,116		$	4,499,863		$	3,287,037
Investment and other income		29,535			22,858			81,892			61,237
Net realized investment gains (losses)		5,761			(5,888	)		19,893			(18,456	)
		1,716,742			1,196,086			4,601,648			3,329,818
Expenses
Salaries and other personnel costs		490,152			381,074			1,337,138			1,090,317
Premiums retained by agents		477,504			322,148			1,251,997			915,281
Other operating expenses		348,528			264,458			969,719			745,645
Provision for policy losses and other claims		89,464			58,215			236,106			158,011
Depreciation and amortization		27,134			23,662			79,704			72,894
Premium taxes		14,348			8,889			36,814			24,481
Interest		8,853			8,618			26,165			25,554
		1,455,983			1,067,064			3,937,643			3,032,183
Income before income taxes and minority interests		260,759			129,022			664,005			297,635
Income taxes		92,100			42,800			231,200			100,100
Income before minority interests		168,659			86,222			432,805			197,535
Minority interests		26,812			18,863			75,902			45,980
Net income	$	141,847		$	67,359		$	356,903		$	151,555
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities		992			(313	)		4,212			(5,323	)
Minimum pension liability adjustment		(2,005	)		(875	)		(7,055	)		(3,250	)
		(1,013	)		(1,188	)		(2,843	)		(8,573	)
Comprehensive income	$	140,834		$	66,171		$	354,060		$	142,982
Net income per share (Note 2):
Basic	$	1.83		$	0.94		$	4.69		$	2.13
Diluted	$	1.62		$	0.84		$	4.15		$	1.91
Cash dividends per share	$	.10		$	.08		$	.30		$	.23
Weighted average number of shares (Note 2):
Basic		77,660			71,827			76,080			71,092
Diluted		88,395			82,679			87,155			82,112

See notes to condensed consolidated financial statements.

4

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Condensed Consolidated Statements of Cash Flows

(in thousands)

	For the Nine Months Ended September 30
	2003			2002
	(unaudited)
Cash flows from operating activities:
Net income	$	356,903		$	151,555
Adjustments to reconcile net income to cash provided by operating activities-
Provision for policy losses and other claims		236,106			158,011
Depreciation and amortization		79,704			72,894
Minority interests in net income		75,902			45,980
Net investment (gains) losses		(19,893	)		18,456
Other, net		(47,724	)		(28,475	)
Changes in assets and liabilities excluding effects of company acquisitions and noncash transactions-
Claims paid, net of recoveries		(196,499	)		(141,968	)
Net change in income tax accounts		50,768			(2,776	)
Increase in accounts and accrued income receivable		(74,128	)		(42,862	)
Increase in accounts payable and accrued liabilities		134,558			73,074
Increase in deferred revenue		93,600			50,366
Other, net		(30,072	)		(23,737	)
Cash provided by operating activities		659,225			330,518
Cash flows from investing activities:
Net cash effect of company acquisitions/dispositions		(111,540	)		(31,767	)
Net increase in deposits with banks		(16,856	)		(13,132	)
Net decrease (increase) in loans receivable		2,436			(4,768	)
Purchases of debt and equity securities		(242,885	)		(250,568	)
Proceeds from sales of debt and equity securities		138,099			60,811
Proceeds from maturities of debt securities		41,466			111,388
Net decrease in other investments		45,468			15,913
Capital expenditures		(81,387	)		(70,997	)
Purchases of capitalized data		(14,794	)		(13,472	)
Proceeds from sale of property and equipment		3,067			2,934
Cash used for investing activities		(236,926	)		(193,658	)
Cash flows from financing activities:
Net change in demand deposits		(10,207	)		(3,149	)
Proceeds from issuance of debt		19,398			6,543
Repayment of debt		(38,342	)		(19,096	)
Proceeds from exercise of stock options		14,978			7,521
Proceeds from the issuance of stock to employee benefit plans		4,676			3,113
Distributions to minority shareholders		(35,467	)		(24,063	)
Cash dividends		(22,328	)		(17,205	)
Cash used for financing activities		(67,292	)		(46,336	)
Net increase in cash and cash equivalents		355,007			90,524
Cash and cash equivalents - Beginning of year		900,863			645,240
- End of third quarter	$	1,255,870		$	735,764
Supplemental information:
Cash paid during the first nine months for:
Interest	$	23,327		$	18,641
Premium taxes	$	37,477		$	24,563
Income taxes	$	183,909		$	101,992
Noncash investing and financing activities:
Shares issued for employee benefit plans	$	42,376		$	17,491
Liabilities incurred in connection with company acquisitions	$	109,490		$	46,927
Company acquisitions in exchange for common stock	$	22,480		$	34,880

See notes to condensed consolidated financial statements.

5

THE FIRST AMERICAN CORPORATION

AND SUBSIDIARY COMPANIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Condensed Consolidated Financial Statements

The condensed consolidated financial information included in this report has been prepared in conformity with the accounting principles and practices reflected in the consolidated financial statements included in the annual report filed with the Securities and Exchange Commission for the preceding calendar year. All adjustments are of a normal recurring nature and are, in the opinion of management, necessary to a fair statement of the consolidated results for the interim periods. Certain 2002 amounts have been reclassified to conform to the 2003 presentation. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

Note 2 – Earnings Per Share

	For the Three Months Ended September 30				For the Nine Months Ended September 30
(in thousands, except per share amounts)	2003		2002		2003		2002
Numerator:
Net Income-numerator for basic net income per share	$	141,847	$	67,359	$	356,903	$	151,555
Effect of dilutive securities
Add: Convertible debt – interest expense (net of tax)		1,700		1,748		5,134		5,282
Net Income–numerator for dilutive net income per share	$	143,547	$	69,107	$	362,037	$	156,837
Denominator:
Weighted average shares-denominator For basic net income per share		77,660		71,827		76,080		71,092
Effect of dilutive securities:
Employee stock options		2,365		2,333		2,650		2,464
Convertible debt		8,370		8,519		8,425		8,556
Denominator for diluted net income per share		88,395		82,679		87,155		82,112
Basic net income per share	$	1.83	$	0.94	$	4.69	$	2.13
Diluted net income per share	$	1.62	$	0.84	$	4.15	$	1.91
Antidilutive stock options		320		2,549		1,346		3,624

6

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:

	For the Three Months Ended September 30						For the Nine Months Ended September 30
(in thousands, except per share amounts)	2003			2002			2003			2002
Net Income:
As reported	$	141,847		$	67,359		$	356,903		$	151,555
Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of tax		(1,960	)		(1,418	)		(4,916	)		(3,190	)
Pro forma	$	139,887		$	65,941		$	351,987		$	148,365
Net income per share:
As reported:
Basic	$	1.83		$	0.94		$	4.69		$	2.13
Diluted	$	1.62		$	0.84		$	4.15		$	1.91
Pro forma:
Basic	$	1.80		$	0.92		$	4.63		$	2.09
Diluted	$	1.60		$	0.82		$	4.10		$	1.87

Note 4 – Business Combinations

On June 5, 2003, the Company formed First Advantage Corporation, which was created through the merger of First American Corporation’s screening information businesses with the operations of US SEARCH.com Inc. Under the terms of the agreement, the former stockholders of US SEARCH received 0.04 of a Class A common share of First Advantage for each share of US SEARCH owned prior to the merger. The former stockholders of US SEARCH hold approximately 20 percent of the total shares of First Advantage. The First American Corporation received Class B common stock, entitling 10 votes for each share, representing approximately 80 percent of the total shares of First Advantage. Approximately $3.0 million of intangible assets with definite lives and $54.4 million of goodwill was recorded by First Advantage as part of this transaction. The new public company trades Class A common stock as “FADV” on the NASDAQ National Market System.

First Advantage Corporation completed 5 acquisitions during the current year. The aggregate purchase price of these acquisition was $8.5 million in cash, $9.2 million in notes payable and .7 million shares, valued at $13.0 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 these acquisitions, First Advantage recorded approximately $4.1 million of intangible assets with definite lives and $25.5 million of goodwill. In accounting for the First Advantage shares issued in these acquisitions, the Company, whose ownership interest was reduced to approximately 77 percent, recorded a pretax gain of $1.6 million.

In addition to the acquisitions discussed above, the Company acquired 26 companies during the nine months ended September 30, 2003. These acquisitions were not material individually or in the aggregate. Of these acquisitions, 23 have been included in the Company’s title insurance segment and three are in the Company’s property information segment. The aggregate purchase price was $91.9 million in cash, $31.8 million in notes payable and .9 million shares, valued at $22.5 million, of the Company’s common stock. The purchase price for each was allocated to the assets acquired and liabilities assumed using a variety of valuation techniques including discounted cash flow analysis. As a result of these acquisitions, the Company has preliminarily recorded approximately $11.4 million of intangible assets with definite lives and $70.5 million of goodwill. 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.

7

Note 5 – Segment Information

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

For the three months ended September 30, 2003:

(in thousands)	Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services
Title Insurance and Services	$	1,262,666	$	167,478		$	9,357	$	12,862
Specialty Insurance		58,524		8,741			505		261
Trust and Other Services		10,529		2,960			190		121
		1,331,719		179,179			10,052		13,244
Information Technology
Mortgage Information		166,624		64,733			3,464		3,140
Property Information		105,001		26,976			6,075		10,720
Credit Information		64,354		14,987			2,787		72
Screening Information		47,644		2,525			2,395		1,890
		383,623		109,221			14,721		15,822
		1,715,342		288,400			24,773		29,066
Corporate		1,400		(27,641	)		2,361		1,421
	$	1,716,742	$	260,759		$	27,134	$	30,487

For the three months ended September 30, 2002:

(in thousands)	Revenues			Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services
Title Insurance and Services	$	868,298		$	80,026		$	10,218	$	11,296
Specialty Insurance		40,156			6,014			496		565
Trust and Other Services		9,635			2,443			259		143
		918,089			88,483			10,973		12,004
Information Technology
Mortgage Information		120,759			39,188			2,666		2,645
Property Information		76,058			21,405			5,262		2,757
Credit Information		56,213			10,943			2,178		2,614
Screening Information		26,786			1,120			679		1,148
		279,816			72,656			10,785		9,164
		1,197,905			161,139			21,758		21,168
Corporate		(1,819	)		(32,117	)		1,904		2,845
	$	1,196,086		$	129,022		$	23,662	$	24,013

8

For the nine months ended September 30, 2003:

(in thousands)	Revenues		Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services
Title Insurance and Services	$	3,307,986	$	394,279		$	27,940	$	35,381
Specialty Insurance		161,170		22,821			1,417		1,061
Trust and Other Services		30,637		8,403			634		145
		3,499,793		425,503			29,991		36,587
Information Technology
Mortgage Information		469,437		173,183			10,986		11,067
Property Information		297,599		82,809			17,054		15,636
Credit Information		214,181		59,565			8,797		4,572
Screening Information		116,636		6,258			5,965		4,647
		1,097,853		321,815			42,802		35,922
		4,597,646		747,318			72,793		72,509
Corporate		4,002		(83,313	)		6,911		8,878
	$	4,601,648	$	664,005		$	79,704	$	81,387

For the nine months ended September 30, 2002:

(in thousands)	Revenues			Income (loss) before income taxes and minority interests			Depreciation and amortization		Capital expenditures
Financial Services
Title Insurance and Services	$	2,427,531		$	169,788		$	33,361	$	37,297
Specialty Insurance		107,843			17,855			1,442		1,604
Trust and Other Services		32,421			11,255			821		209
		2,567,795			198,898			35,624		39,110
Information Technology
Mortgage Information		339,808			100,245			7,047		7,043
Property Information		196,814			48,070			14,274		8,527
Credit Information		164,968			30,827			8,083		7,782
Screening Information		74,240			3,868			1,963		2,823
		775,830			183,010			31,367		26,175
		3,343,625			381,908			66,991		65,285
Corporate		(13,807	)		(84,273	)		5,903		5,712
	$	3,329,818		$	297,635		$	72,894	$	70,997

9

Note 6 – Goodwill and Other Intangible Assets

A reconciliation of the changes in the carrying amount of net goodwill, by operating segment, for the nine months ended September 30, 2003, is as follows (in thousands):

	Balance as of December 31, 2002		Acquired (Disposed of) During the Period			Impairment Losses		Balance as of September 30, 2003
Financial Services
Title Insurance and Services	$	149,013	$	47,394		$	—	$	196,407
Specialty Insurances		19,794		—			—		19,794
Trust and Other Services		—		—			—		—
Information Technology
Mortgage Information		72,423		297			—		72,720
Property Information		124,678		24,583			—		149,261
Credit Information		86,900		(10,562	)		—		76,338
Screening Information		111,183		89,290			—		200,473
	$	563,991	$	151,002		$	—	$	714,993

The Company had $44.9 million of intangible assets included in “Other assets” at September 30, 2003, 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 – Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial instruments with Characteristics of both Liabilities and Equity. This statement is effective for interim periods beginning after June 15, 2003 and establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The implementation of this statement required the Company to reclassify its “Mandatorily redeemable preferred securities of the Company’s subsidiary trust whose sole assets are the Company’s $100,000,000 8.5% deferrable interest subordinated notes due 2012” as debt. As a result of the change in classification, the Company’s debt-to-total capitalization ratio was increased. This change has not had any other impact on the Company’s financial condition or results of operations.

Note 8 – Subsequent Events

On October 1, 2003, the Company completed the previously announced acquisition of the real estate tax service and flood hazard certification businesses of Transamerica Finance Corporation for a net cash purchase price of $375 million. The Company will combine the new companies with its existing tax service and flood certification businesses, which are included in the Company’s mortgage information and services segment.

The Company is in the process of analyzing the fair value of the assets acquired and liabilities assumed utilizing a variety of valuation techniques including third party valuation advisors. This process should be substantially completed by the end of 2003 and is expected to result in the Company recording goodwill and other intangible assets of approximately $400 million.

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). The purpose of FIN 46 is to establish guidance for consolidation of variable interest entities that function to support the activities of the primary beneficiary. In October 2003, the FASB issued FIN 46-6, “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities” deferring the effective date for applying the FIN 46 provisions until periods that end after December 15, 2003. The adoption of FIN 46 will have not have a material impact on the Company’s financial condition or results of operations.

10

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

Certain statements made in this 10-Q, including those relating to anticipated cash requirements, are forward looking. Risks and uncertainties exist which may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include: interest rate fluctuations; changes in the performance of the real estate markets; general volatility in the capital markets; changes in applicable government regulations; consolidation among the Company’s significant customers and competitors; the Company’s continued ability to identify businesses to be acquired; changes in the Company’s ability to integrate businesses which it acquires; and other factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002, 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

The preparation of the Company’s financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosure of contingencies. A summary of the significant critical accounting policies of the Company can be found in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

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

OVERVIEW

Record-setting levels of mortgage applications in the second quarter of 2003 produced record-breaking order closings for the Company in the third quarter of 2003. This, coupled with operating efficiencies resulting from technology enhancements and related infrastructure cost-cutting initiatives, as well as other expense reductions in reaction to the slowdown in new refinance transactions, resulted in record-breaking quarterly results for the Company for the three months ended September 30, 2003. Mortgage application levels remained seasonally strong in the third quarter of 2003, although down from the record levels of the second quarter of 2003. The decrease from the second quarter was due to a slowdown in refinance transactions as a result of increasing mortgage interest rates. The Company began to reduce expenses in the third quarter of 2003 in reaction to the slowdown in refinance transactions and will continue to monitor expenses and personnel in relation to new incoming orders. Net income for the three months ended September 30, 2003, was $141.8 million, or $1.62 per diluted share, compared with net income of $67.4 million, or $0.84 per diluted share for the three months ended September 30, 2002. Net income for the nine months ended September 30, 2003, was $356.9 million, or $4.15 per diluted share, compared with net income of $151.6 million, or $1.91 per diluted share for the nine months ended September 30, 2002.

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OPERATING REVENUES

Set forth below is a summary of operating revenues for each of the Company’s segments (in thousands, except percentages).

	Three Months Ended September 30						Nine Months Ended September 30
	2003		%	2002		%	2003		%	2002		%
Financial Services:
Title Insurance:
Direct operations	$	654,861	39	$	464,893	40	$	1,721,134	38	$	1,271,670	39
Agency operations		589,632	35		393,034	33		1,547,386	35		1,128,453	34
		1,244,493	74		857,927	73		3,268,520	73		2,400,123	73
Specialty Insurance		55,180	3		37,426	3		152,213	3		100,318	3
Trust and Other Services		10,523	1		9,647	1		30,630	1		32,341	1
		1,310,196	78		905,000	77		3,451,363	77		2,532,782	77
Information Technology:
Mortgage Information		163,473	10		119,718	10		459,837	10		336,378	10
Property Information		97,952	6		71,024	6		278,254	6		183,587	6
Credit Information		62,200	3		56,642	5		193,844	4		160,189	5
Screening Information		47,625	3		26,732	2		116,565	3		74,101	2
		371,250	22		274,116	23		1,048,500	23		754,255	23
Total Operating Revenues	$	1,681,446	100	$	1,179,116	100	$	4,499,863	100	$	3,287,037	100

Financial Services. Operating revenues from direct title operations increased 40.9% and 35.3% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily due to an increase in the number of title orders closed by the Company’s direct operations. The Company’s direct operations closed 589,300 and 1,578,100 title orders during the current three and nine month periods, respectively, increases of 38.7% and 31.6% when compared with 425,000 and 1,199,500 closed during the same periods of the prior year. These increases were primarily due to the factors mentioned above in the Overview section. Operating revenues from agency operations increased 50.0% and 37.1% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These fluctuations were primarily due to the same factors affecting direct title operations and to the timing of the reporting of agency remittances. Specialty insurance operating revenues increased 47.4% and 51.7% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily due to geographic expansion at the Company’s home warranty division and market share growth at the property and casualty insurance division.

Information Technology. Mortgage information operating revenues increased 36.6% and 36.7% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily due to market share gains and to the increase in real estate activity. Property information operating revenues increased 37.9% and 51.6% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily attributable to market share gains, the increase in real estate activity, and $15.1 million and $44.5 million of operating revenues contributed by new acquisitions. Credit information operating revenues increased 9.8% and 21.0% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily due to an increase in the demand for mortgage credit information offset in part by a $6.2 million reduction in operating revenues for the nine months ended September 30, 2003, due to the previously announced sale of the Company’s subsidiary, FASTRAC Systems, Inc., in the latter part of the third quarter of 2002. Screening information operating revenues increased 78.2% and 57.3% for the three and nine months ended September 30, 2003, respectively, when compared with the same periods of the prior year. These increases were primarily attributable to $19.9 million and $37.3 million of operating revenues contributed by new acquisitions for the respective periods.

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INVESTMENT AND OTHER INCOME

Investment and other income totaled $29.5 million and $81.9 million for the three and nine months ended September 30, 2003, respectively, representing increases of $6.7 million, or 29.2%, and $20.7 million, or 33.7%, when compared with the same periods of the prior year. These increases resulted primarily from an increase in earnings from unconsolidated affiliates, which are accounted for under the equity method of accounting.

NET REALIZED INVESTMENT GAINS (LOSSES)

Net realized investment gains totaled $5.8 million and $19.9 million for the three and nine months ended September 30, 2003, respectively, compared with losses totaling $5.9 million and 18.5 million for the three and nine months ended September 30, 2002, respectively. The current nine-month period included a $13.1 million realized investment gain associated with the merger of the Company’s Credit Online business with DealerTrack Holdings, Inc. Included in both prior year periods was a $2.6 million loss associated with the sale of the Company’s subsidiary, FASTRAC Systems, Inc., and in the prior year nine-month period, $13.6 million of investment losses resulting from the write-down of WorldCom bonds.

TOTAL OPERATING EXPENSES

Financial Services. Salaries and other personnel costs for the Financial Services group, which primarily reflects the title insurance segment, were $362.6 million and $976.9 million for the three and nine months ended September 30, 2003, respectively, increases of $80.6 million, or 28.6%, and $168.3 million, or 20.8%, when compared with the same periods of the prior year. These increases were primarily attributable to incremental labor costs incurred to service the increase in business volume, offset in part by operational efficiencies in the title insurance segment which resulted from the Company’s FAST technology and related cost-cutting initiatives. Salaries and other personnel costs as a percentage of operating revenues for the Financial Services group were 27.7% and 28.3% for the three and nine months ended September 30, 2003, respectively, and 31.2% and 31.9% for the respective periods of the prior year.

Agents retained $477.5 million and $1.25 billion of title premiums generated by agency operations for the three and nine months ended September 30, 2003, respectively, which compares with $322.1 million and $915.3 million for the same periods of the prior year. The percentage of title premiums retained by agents ranged from 80.9% to 82.0% due to regional variances (i.e., the agency share varies from region to region and thus the geographical mix of agency revenues causes this variation).

Other operating expenses for the Financial Services group, which primarily reflect the title insurance segment, were $205.2 million and $554.9 million for the three and nine months ended September 30, 2003, respectively, increases of $56.5 million, or 38.0%, and $124.3 million, or 29.0%, when compared with the same periods of the prior year. These increases were primarily the result of incremental costs incurred to service the increase in business volume. Other operating expenses as a percentage of operating revenues for the Financial Services group were 15.7% and 16.1% for the three and nine months ended September 30, 2003, and 16.4% and 17.0% for the respective periods 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 nine-month period and 4.0% for the same period of the prior year. This increase in rate reflects marginal adverse claims development experience for certain prior policy years. For the home warranty business, the claims provision as a percentage of home warranty operating revenues was 49.5% for the current nine-month period and 50.4% for the same period of the prior year. This decrease in rate was primarily due to a reduction in the average cost per claim, which was primarily attributable to the elimination of higher-cost vendor contractors that were servicing claims in new geographic areas. For the property and casualty business, the claims provision as a percentage of property and casualty insurance operating revenues was 66.6% for the current nine-month period and 64.6% for the same period of the prior year. This increase in rate was due to high claims activity experienced primarily during the first quarter of 2003 resulting from insured property damaged in Southern California as a result of extraordinarily high wind conditions.

Premium taxes, which relate to the title insurance and specialty insurance segments, were $36.8 million and $24.5 million for the nine months ended September 30, 2003 and 2002, respectively. Premium taxes as a percentage of title insurance and specialty insurance operating revenues were 1.1% for the current nine-month period and 1.0% for the same period of the prior year. The slight variation in rate was primarily due to the composition and geographical mix of the operating revenues (i.e., tax rates and bases vary from state to state).

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Information Technology. Information technology personnel and other operating expenses were $251.3 million and $715.6 million for the three and nine months ended September 30, 2003, respectively, increases of $58.3 million, or 30.2%, and $163.2 million, or 29.6%, when compared with the same periods of the prior year. Excluding acquisition activity, the increases were $25.9 million, or 13.4% for the current three-month period, and $98.4 million, or 17.8% for the current nine-month period. These increases were primarily due to costs incurred to service the increase in business volume and increased technology costs. Personnel and other operating expenses as a percentage of operating revenues for the information technology group were 67.7% and 68.3% for the three and nine months ended September 30, 2003, respectively, down from 70.4% and 73.2% for the same periods 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 thousands except percentages).

	Three Months Ended September 30								Nine Months Ended September 30
	2003			%	2002			%	2003			%	2002			%
Financial Services
Title Insurance and Services	$	167,478		58	$	80,026		50	$	394,279		53	$	169,788		44
Speciality Insurance		8,741		3		6,014		4		22,821		3		17,855		5
Trust and Other Services		2,960		1		2,443		1		8,403		1		11,255		3
		179,179		62		88,483		55		425,503		57		198,898		52
Information Technology
Mortgage Information		64,733		23		39,188		24		173,183		23		100,245		26
Property Information		26,976		9		21,405		13		82,809		11		48,070		13
Credit Information		14,987		5		10,943		7		59,565		8		30,827		8
Screening Information		2,525		1		1,120		1		6,258		1		3,868		1
		109,221		38		72,656		45		321,815		43		183,010		48
Total before corporate		288,400		100		161,139		100		747,318		100		381,908		100
Corporate		(27,641	)			(32,117	)			(83,313	)			(84,273	)
Total	$	260,759			$	129,022			$	664,005			$	297,635

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.

INCOME TAXES

The effective income tax rate (income tax expense as a percentage of pretax income after minority interest expense) was 39.3% for the nine months ended September 30, 2003, and 39.8% for the same period of the prior year. The decrease in effective rate was primarily attributable to changes in the ratio of permanent differences to pretax profits. A large portion of the Company’s minority interest expense is attributable to a limited liability company subsidiary which, for tax purposes, is treated as a partnership. Accordingly, no income taxes have been provided for that portion of the minority interest expense.

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MINORITY INTERESTS

Minority interest expense was $26.8 million and $75.9 million for the three and nine months ended September 30, 2003, respectively, increases of $7.9 million and $29.9 million when compared with the same periods of the prior year. These increases were primarily attributable to the increase in operating results of the Company’s joint venture with Experian.

NET INCOME

Net income for the three and nine months ended September 30, 2003, was $141.8 million, or $1.62 per diluted share, and $356.9 million, or $4.15 per diluted share, respectively. Net income for the three and nine months ended September 30, 2002, was $67.4 million, or $0.84 per diluted share, and $151.6 million, or $1.91 per diluted share, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Total cash and cash equivalents increased $355.0 million and $90.5 million for the nine months ended September 30, 2003 and 2002, respectively. The increase for the current year period as well as for the prior year period was primarily due to cash generated by operating activities, offset in part by capital expenditures, purchases of debt and equity securities, the cash effect of company acquisitions, the repayment of debt, distributions to minority shareholders and cash dividends.

Notes and contracts payable as a percentage of total capitalization decreased to 21.6% at September 30, 2003 from 25.6% at December 31, 2002. This decrease was primarily due to net income for the nine months ended September 30, 2003 and debt repayments. In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial instruments with Characteristics of both Liabilities and Equity. This statement became effective for the current quarter and establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The implementation of this statement required the Company to reclassify its “Mandatorily redeemable preferred securities of the Company’s subsidiary trust whose sole assets are the Company’s $100,000,000 8.5% deferrable interest subordinated notes due 2012” as debt.

On October 1, 2003, the Company completed the previously announced acquisition of Transamerica Finance Corporation’s real estate tax service and flood hazard certification businesses for a net purchase price of $375.0 million. The acquisition was made through the Company’s 80% owned joint venture with Experian. There was no debt assumed in the transaction and the purchase price was funded with $125.0 million of existing cash at the joint venture, a $200.0 million contribution from the Company and a $50.0 million contribution from Experian.

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

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in the Company’s risk since filing its Form 10K for the year ended December 31, 2002.

Item 4.    Controls and Procedures

The Company’s President and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, have concluded that, as of the end of the fiscal quarter covered by this report on Form 10-Q, the Company’s disclosure controls and procedures were effective to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under such Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There was no change in the Company’s internal control over financial reporting during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

15

PART II: Other Information

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

(a) Exhibits

(10	)(a)	Amendment No. 1, dated June 30, 2003, to Contribution and Joint Venture Agreement By and Among The First American Financial Corporation and Experian Information Solutions, Inc., et al, dated November 30, 1997.
(10	)(b)	Amendment No. 2, dated September 23, 2003, to Contribution and Joint Venture Agreement By and Among The First American Financial Corporation and Experian Information Solutions, Inc., et al., dated November 30, 1997.
(31	)(a)	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
(31	)(b)	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
(32	)(a)	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
(32	)(b)	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

(b) Reports on Form 8-K

During the quarterly period covered by this report, the Company filed a report on Form 8-K dated September 4, 2003 (announcing the Company’s intent to acquire Transamerica Finance Corporation’s tax and flood companies). Subsequent to such quarterly period, the Company filed a report on Form 8-K dated October 1, 2003 (announcing the completion of the acquisition of Transamerica Finance Corporation’s tax and flood companies) and furnished a report on Form 8-K dated October 22, 2003 (reporting on third quarter 2003 earnings).

SIGNATURES

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

THE FIRST AMERICAN CORPORATION

(Registrant)

/s/    THOMAS A. KLEMENS        

Thomas A. Klemens
Executive Vice President
Chief Financial Officer

/s/    MAX O. VALDES        

Max O. Valdes
Vice President
Chief Accounting Officer

Date: November 14, 2003

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EXHIBIT INDEX

Exhibit No.	Description	Sequentially Numbered Page
(10)(a)	Amendment No. 1, dated June 30, 2003, to Contribution and Joint Venture Agreement By and Among The First American Financial Corporation and Experian Information Solutions, Inc., et al, dated November 30, 1997.
(10)(b)	Amendment No. 2, dated September 23, 2003, to Contribution and Joint Venture Agreement By and Among The First American Financial Corporation and Experian Information Solutions, Inc., et al., dated November 30, 1997.
(31)(a)	Certification by Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
(31)(b)	Certification by Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
(32)(a)	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
(32)(b)	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.