EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

LOGO

THE FIRST AMERICAN CORPORATION REPORTS FINANCIAL RESULTS

FOR THE FOURTH QUARTER AND FULL YEAR 2009

—Reports Earnings Per Diluted Share of 38 cents for the Fourth Quarter—

—Making Progress Toward Spin-Off—

SANTA ANA, Calif., Feb. 25, 2010 – The First American Corporation (NYSE: FAF), America’s largest provider of business information, today announced financial results for the fourth quarter and year ended Dec. 31, 2009.

Total revenue for the fourth quarter of 2009 was $1.5 billion, an increase of 11 percent relative to the fourth quarter of 2008. Net income attributable to the company was $38.0 million, or 38 cents per diluted share, compared with a net loss of $66.9 million, or 72 cents per diluted share, in the fourth quarter of 2008. The current quarter results include, on an after-tax basis, restructuring and other charges of $8.7 million, primarily related to the First Advantage buy-in; employee separation costs of $7.3 million; net realized investment losses of $8.7 million; spin-off-related costs of $3.4 million; and a claim recovery of $3.1 million; which collectively reduced net income by $25 million, or 25 cents per diluted share.

Total revenue for the full year 2009 was $6.0 billion, a 4 percent decline relative to the prior year. Net income attributable to the company was $199.7 million, or $2.09 per diluted share, compared with a prior year loss of $26.3 million, or 28 cents per diluted share.

Current Quarter Highlights

 

   

Earnings per diluted share of 38 cents, up from a loss of 72 cents per diluted share in the fourth quarter of 2008

 

   

Title Insurance and Services segment generated year-over-year operating revenue growth for the first time since the second quarter of 2006

 

   

Increased pretax income and pretax margins for both the Financial Services and Information Solutions Groups relative to the fourth quarter of 2008

 

   

Cash flow from operations of $177.1 million in the fourth quarter, versus $44.5 million in the fourth quarter of 2008

 

   

Debt-to-capital ratio of 19.7 percent at Dec. 31, 2009, down from 22.2 percent at Dec. 31, 2008

“We are pleased with our improved 2009 financial results,” stated Parker S. Kennedy, chairman and chief executive officer of The First American Corporation. “During the quarter, the company grew revenue and pretax earnings in both our Financial Services and Information Solutions Groups compared with the fourth quarter of 2008. Concurrent with our efforts to complete the spin-off, we are executing on a prudent strategy for 2010, which includes cost-structure vigilance and further strengthening of our balance sheet.”

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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Spin-Off Update

 

   

Completed buy-in of publicly held shares of First Advantage Corporation

 

   

Finalized amendment to Experian joint venture agreement to facilitate purchase of remaining noncontrolling interest in 2010

 

   

Filed Form 10 Registration Statement and Amendment No. 1 with the SEC

 

   

Filed request for IRS Private Letter Ruling

 

   

Secured new credit facility commitments for both companies

The company continues to make substantial progress toward the completion of the spin-off. In addition to filing a Form 10 and subsequent amendment with the Securities and Exchange Commission, the company has submitted all regulatory filings that are required to consummate the transaction and has received a number of approvals. While the company still expects to complete the spin-off in the first half of 2010, because of outstanding approvals, it has revised its spin-off target date to June 1, 2010.

FINANCIAL SERVICES GROUP

“In 2009, we continued to generate efficiencies by centralizing, standardizing and simplifying our business,” said Dennis J. Gilmore, chief executive officer of the company’s Financial Services Group. “These efforts have translated into solid profitability in 2009 despite a market-driven decline in revenue. We are proud of the operational and financial achievements we have made. For 2010, despite expected challenges in the marketplace, we will continue our focus on margin improvement.”

Current Quarter Highlights:

 

   

Title Insurance and Services segment generated year-over-year operating revenue growth for the first time since the second quarter of 2006

 

   

Title Insurance and Services segment pretax income was $44.5 million, compared with pretax loss of $97.1 million in the fourth quarter of 2008

 

   

Title Insurance and Services segment adjusted pretax margin of 5.7 percent (GAAP pretax margin of 4.7 percent)

 

   

Specialty Insurance segment pretax income was $11.9 million, compared with $0.4 million in the fourth quarter of 2008

Title Insurance and Services. During the fourth quarter of 2009, total revenue in the Title Insurance and Services segment was $948.0 million, a 15 percent increase from the same quarter of 2008. The increase reflected higher direct order counts and an increase in remittances received from agents during the current quarter, offset slightly by lower investment income. The company’s direct operations closed 333,800 title orders for the fourth quarter of 2009, an increase of 17 percent, when compared with 284,800 title orders closed in the fourth quarter of 2008. Average revenue per direct title order was $1,453, down 2 percent, when compared with the fourth quarter of 2008.

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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Salary and other personnel costs were $280.2 million, a 7 percent increase compared with the fourth quarter of 2008, while other operating expenses were $189.4 million, a decrease of 7 percent compared with the fourth quarter of 2008. The increase in salary and other personnel costs was primarily driven by an increase to employee benefit costs, offset by lower salary expense.

The loss provision rate for title claims during the fourth quarter of 2009 was 5.3 percent of operating revenues, compared with 17.3 percent in the fourth quarter of 2008. The current rate reflects the ultimate loss rate for the policy year 2009 of 6.0 percent, with no reserve estimate adjustments required for prior policy years. The current quarter reflects the benefit from a $5 million claim recovery.

Pretax income for the Title Insurance and Services segment was $44.5 million, a 4.7 percent pretax margin, in the fourth quarter of 2009, compared with a pretax loss of $97.1 million in the fourth quarter of 2008. Results for the current quarter include net realized investment losses of $9.9 million, and employee separation and lease termination costs of $4.9 million, partly offset by the claim recovery of $5 million. These items collectively reduced the pretax margin by 1.0 percentage points.

Specialty Insurance. Total revenues at First American’s Specialty Insurance segment were $71.8 million in the fourth quarter of 2009, a 1 percent decrease relative to the fourth quarter of 2008. Pretax income was $11.9 million in the fourth quarter of 2009, compared with $0.4 million in the fourth quarter of 2008. The significant improvement in profitability reflects a lower claims provision that declined to 51 percent of operating revenues and other operating improvements in the home warranty business. Results for the fourth quarter of 2009 also include a net realized investment gain of $1.7 million, as compared with a net realized investment loss of $1.4 million for the fourth quarter of 2008.

INFORMATION SOLUTIONS GROUP

“Given the economic environment, we were pleased that the Information Solutions Group improved results for the fourth quarter and full year 2009,” said Anand K. Nallathambi, president and chief operating officer of the company’s Information Solutions Group. “We increased revenue and pretax earnings relative to the fourth quarter of 2008, and our full-year results reflect similar trends. The Information and Outsourcing Solutions segment produced particularly positive results, with total revenue up 36 percent, compared with the fourth quarter of 2008, and pretax income up 68 percent during the same period.

“Heading into 2010, our goal is to maintain our momentum despite the expected challenges in the marketplace. Key strategic themes for the Information Solutions Group in 2010 will include the successful launch of our new brand, organizational realignment and new product development.”

Current Quarter Highlights:

 

   

Information Solutions Group generated total revenue of $503.0 million, a 3 percent increase relative to the prior year fourth quarter

 

   

Information Solutions Group pretax income was $56.0 million, a 23 percent increase relative to the fourth quarter of 2008

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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Completed buy-in of publicly held shares of First Advantage Corporation

 

   

Finalized amendment to Experian joint venture agreement

Information and Outsourcing Solutions. Total revenue at the Information and Outsourcing Solutions segment was $218.2 million in the fourth quarter of 2009, a 36 percent increase from the prior year. The increase in revenues reflected increased loan originations, primarily refinancings, improved volumes of appraisal and default-related businesses and market share growth driven by key customers. Pretax income during the quarter was $38.0 million, up 68 percent from the fourth quarter of 2008. Pretax margin increased to 17.4 percent, compared with 14.0 percent in the prior year period.

Data and Analytic Solutions. Total revenue at the Data and Analytic Solutions segment was $129.8 million in the fourth quarter of 2009, a 3 percent decrease relative to the fourth quarter of 2008. This decrease reflected declines in revenues from sales of property information and Multiple Listing Service software products, which in turn were associated with consolidation in the mortgage industry and with current real estate market conditions. These decreases were offset in part by increased demand for title and document products due to improved loan origination activity, primarily refinancings. Pretax income was $23.2 million in the fourth quarter of 2009, down 5 percent relative to the fourth quarter of 2008.

Risk Mitigation and Business Solutions. Total revenue at the Risk Mitigation and Business Solutions segment was $155.0 million in the fourth quarter of 2009, a 20 percent decrease relative to the fourth quarter of 2008. The overall decrease in revenue is directly related to the downturn in many key economic areas, including employment and the credit markets, and the continued overall economic slowdown, which led to declines in revenues in many of the segment’s lines of business. These declines were offset to an extent by increased revenues in the segment’s lead generation business. Pretax loss was $5.1 million in the fourth quarter of 2009, which included $14.4 million of nonrecurring expenses primarily associated with the buy-in of the publicly held shares of First Advantage Corporation. Excluding these nonrecurring expenses, adjusted pretax income for the segment was $9.3 million for the fourth quarter of 2009.

Teleconference/Webcast

First American’s fourth quarter and year-end results will be discussed in more detail on Thursday, Feb. 25, 2010, at 11 a.m. ET, via teleconference. The toll-free dial-in number is (888) 989-9722. Callers from outside the United States may dial (517) 308-9331. The pass code for the event is FIRST AMERICAN.

The live audio webcast of the call and the accompanying slide presentation will be available on First American’s Web site at www.firstam.com/investor. An audio replay of the conference call will be available through March 5, 2010, by dialing (203) 369-3594. An audio archive of the call and the accompanying financial presentation will also be available for replay on First American’s investor Web site.

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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About First American

The First American Corporation (NYSE: FAF) is a FORTUNE 500® company that traces its history to 1889. With total revenues of approximately $6.0 billion in 2009, it is America’s largest provider of business information. First American combines advanced analytics with its vast data resources to supply businesses and consumers with valuable information products to support the major economic events of people’s lives, such as getting a job, renting an apartment, buying a car or house, securing a mortgage and opening or buying a business. The First American Family of Companies, many of which command leading market share positions in their respective industries, operate within five primary business segments, including: Title Insurance and Services, Specialty Insurance, Information and Outsourcing Solutions, Data and Analytic Solutions, and Risk Mitigation and Business Solutions. More information about the company and an archive of its press releases can be found at www.firstam.com.

Web Site Disclosure

First American posts information of interest to investors at www.firstam.com/investor. This includes opened and closed title insurance order counts for its direct title insurance operations, which are posted approximately 20 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release, including but not limited to those related to the company’s strategy for 2010, including with respect to its cost structure and strengthening of its balance sheet; the company’s potential acquisition of the noncontrolling interest in its joint venture with Experian; the consummation and timing of the company’s previously announced spin-off; the Financial Services Group’s continued focus on margin improvement; and the goals and key strategic themes of the Information Solutions Group, including with respect to its new brand, organizational realignment and new product development; are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may contain the words “believe,” “anticipate,” “expect,” “plan,” “predict,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases. 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; heightened scrutiny by legislators and regulators of the company’s Title Insurance and Services segment and certain other of the company’s businesses; the inability to consummate the spin-off transaction or to consummate it in the form originally proposed as a result of, among other factors, the inability to obtain necessary regulatory approvals, the failure to obtain the final approval of the company’s board of directors, the inability to obtain third-party consents or undesirable concessions or accommodations required to be made to obtain such consents, the landscape of the real estate and mortgage credit markets, market conditions, the inability to transfer assets into the entity being spun-off or unfavorable reactions from customers, ratings agencies, investors or other interested persons; the inability to realize the benefits of the proposed spin-off transaction as a result of the factors described immediately above, as well as, among other factors, increased borrowing costs, competition between the resulting companies, unfavorable reactions from employees, the inability of the Financial Services company to pay the anticipated level of dividends, the triggering of rights and obligations by the transaction or any litigation arising out of or related to the separation, consolidation among the company’s significant customers and competitors, changes in the company’s ability to integrate businesses which it acquires, unfavorable economic conditions, impairments in the company’s goodwill or other intangible assets, losses in the company’s investment portfolio, expenses of and funding obligations to the company’s pension plan,

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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weakness in the commercial real estate market and increases in the amount or severity of commercial real estate transaction claims, regulation of title insurance rates and other factors described in Part I, Item 1A of the company’s annual report on Form 10-K for the year ended Dec. 31, 2008, as updated in Part II, Item 1A of the company’s quarterly reports on Form 10-Q for the quarters ended March 31, June 30 and Sept. 30, 2009, in each case as 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.

Use of Non-GAAP Financial Measures

This news release contains certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including adjusted pretax margin, which is adjusted to exclude net realized investment losses, employee separation costs and lease termination costs. Although these exclusions represent actual losses or expenses to the company, they may mask the periodic income and financial and operating trends associated with the company’s business. To compensate for the inherent limitations of these non-GAAP measures, the company uses them in conjunction with the corresponding GAAP measures.

The company is presenting these non-GAAP financial measures because they provide the company’s management and investors with additional insight into the operational performance of the company relative to earlier periods and relative to the company’s competitors. The company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. In this news release, these non-GAAP financial measures have been presented with, and reconciled to, the most directly comparable GAAP financial measures. Investors should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures.

 

Media Contact:   Investor Contacts:

Carrie Gaska

Corporate Communications

The First American Corporation

(714) 250-3298 cgaska@firstam.com

 

Craig Barberio

Investor Relations (Financial Services Group)

The First American Corporation

(714) 250-5214 cbarberio@firstam.com

 
 
 

David Bigelow

 

Investor Relations (Information Solutions Group)

 

The First American Corporation

 

(714) 250-3504 dabigelow@firstam.com

(Additional Financial Data Follows)

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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The First American Corporation

Summary of Financial Results and Selected Information

(in thousands, except per share amounts and title orders)

(unaudited)

 

     For the Three Months Ended
December 31
    For the Twelve Months Ended
December 31
 
     2009    2008     2009    2008  

Total revenues

   $ 1,492,101    $ 1,350,612      $ 5,972,777    $ 6,213,758   

Income before income taxes

   $ 75,370    $ (89,795   $ 423,797    $ 44,211   

Income taxes provision (benefit)

   $ 26,369    $ (32,114   $ 154,621    $ 15,846   

Net income (loss)

   $ 49,001    $ (57,681   $ 269,176    $ 28,365   

Less: Net income attributable to noncontrolling interests

     11,009      9,222        69,525      54,685   
                              

Net income (loss) attributable to The First American Corporation (FAC)

   $ 37,992    $ (66,903   $ 199,651    $ (26,320
                              

Net income (loss) attributable to FAC stockholders:

          

Basic

   $ 0.39    $ (0.72   $ 2.11    $ (0.28

Diluted

   $ 0.38    $ (0.72   $ 2.09    $ (0.28

Weighted average common shares outstanding:

          

Basic

     98,474      92,900        94,551      92,516   

Diluted

     99,734      92,900        95,478      92,516   

Title orders opened

     415,200      394,600        1,991,300      1,960,800   

Title orders closed

     333,800      284,800        1,503,300      1,398,700   

Paid title claims

     79,219      92,573        306,536      310,750   

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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The First American Corporation

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(unaudited)

 

     December 31,
2009
    December 31,
2008
 

Assets

    

Cash and cash equivalents

   $ 982,448      $ 934,945   
                

Accounts and accrued income receivable, net

     491,539        558,946   
                

Income tax receivable

     97,989        61,678   
                

Investments:

    

Deposits with savings and loan associations and banks

     124,553        182,117   

Debt securities

     1,868,413        1,718,320   

Equity securities

     99,167        110,126   

Other long-term investments

     374,862        371,157   
                
     2,466,995        2,381,720   
                

Loans receivable, net

     161,897        151,692   
                

Property and equipment, net

     591,782        665,305   
                

Title plants and other indexes

     692,359        685,090   
                

Deferred income taxes

     13,255        149,473   
                

Goodwill

     2,617,577        2,594,738   
                

Other intangible assets, net

     257,526        298,411   
                

Other assets

     349,730        326,072   
                
   $ 8,723,097      $ 8,808,070   
                

Liabilities and Stockholders’ Equity

    

Demand deposits

   $ 1,153,574      $ 1,298,221   

Accounts payable and accrued liabilities

     1,085,031        1,072,108   

Deferred revenue

     710,217        728,844   

Reserve for known and incurred but not reported claims

     1,255,088        1,355,392   

Notes and contracts payable

     791,083        868,274   

Deferrable interest subordinated notes

     100,000        100,000   
                
     5,094,993        5,422,839   
                

Commitments and contingencies

    

Redeemable noncontrolling interests

     458,847        —     
                

Stockholders’ equity:

    

Preferred stock, $1 par value Authorized - 500,000 shares; outstanding - none

    

Common stock, $1 par value Authorized - 180,000,000 shares Outstanding - 103,283,000 and 92,963,000 shares

     103,283        92,963   

Additional paid-in capital

     1,001,305        801,228   

Retained earnings

     2,217,505        2,099,654   

Accumulated other comprehensive loss

     (167,798     (296,195
                

Total FAC stockholders’ equity

     3,154,295        2,697,650   
                

Noncontrolling interests

     14,962        687,581   
                

Total equity

     3,169,257        3,385,231   
                
   $ 8,723,097      $ 8,808,070   
                

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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The First American Corporation

Condensed Consolidated Statement of Income and Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

 

     For the Three Months Ended
December 31
    For the Twelve Months Ended
December 31
 
     2009     2008     2009     2008  

Revenues

        

Operating revenues

   $ 1,458,155      $ 1,303,758      $ 5,791,304      $ 6,080,648   

Investment and other income

     48,416        49,935        211,566        232,281   

Gain on stock issued by subsidiary

     —          —          —          1,325   

Net realized investment gains (losses)

     (5,215     (3,081     11,644        (64,325

Net other-than-temporary impairment (OTTI)

        

Losses recognized in earnings:

        

Total OTTI losses on equity securities

     —          —          (21,992     (35,412

Total OTTI losses on debt securities

     (5,019     —          (50,639     (759

Portion of OTTI losses on debt securities recognized in other comprehensive loss

     (4,236     —          30,894        —     
                                
     (9,255     —          (41,737     (36,171
                                
     1,492,101        1,350,612        5,972,777        6,213,758   
                                

Expenses

        

Salaries and other personnel costs

     482,943        446,532        1,888,066        2,100,756   

Premiums retained by agents

     355,995        285,960        1,237,566        1,374,452   

Other operating expenses

     410,361        406,858        1,726,728        1,780,580   

Provision for policy losses and other claims

     92,264        189,439        383,452        533,324   

Depreciation and amortization

     54,128        85,726        219,922        262,945   

Premium taxes

     9,718        9,593        36,484        46,366   

Interest

     11,322        16,299        56,762        71,124   
                                
     1,416,731        1,440,407        5,548,980        6,169,547   
                                

Income before income taxes

     75,370        (89,795     423,797        44,211   

Income taxes provision (benefit)

     26,369        (32,114     154,621        15,846   
                                

Net income

     49,001        (57,681     269,176        28,365   

Less: Net income attributable to noncontrolling interests

     11,009        9,222        69,525        54,685   
                                

Net income (loss) attributable to FAC

     37,992        (66,903     199,651        (26,320
                                

Net income (loss) attributable to FAC stockholders:

        

Basic

   $ 0.39      $ (0.72   $ 2.11      $ (0.28
                                

Diluted

   $ 0.38      $ (0.72   $ 2.09      $ (0.28
                                

Cash dividends per share

   $ 0.22      $ 0.22      $ 0.88      $ 0.88   
                                

Weighted average number of shares:

        

Basic

     98,474        92,900        94,551        92,516   
                                

Diluted

     99,734        92,900        95,478        92,516   
                                

Net Income (loss)

   $ 49,001      $ (57,681   $ 269,176      $ 28,365   
                                

Other comprehensive income (loss), net of tax

        

Unrealized gain (loss) on securities

     5,873        (35,134     62,283        (113,885

Unrealized gain on securities for which credit-related portion was recognized in net realized investment gains

     2,369        —          12,111        —     

Foreign currency translation adjustments

     5,452        (35,355     36,886        (54,676

Minimum pension liability adjustment

     9,948        (63,890     21,016        (57,675
                                

Total other comprehensive income (loss), net of tax

     23,642        (134,379     132,296        (226,236
                                

Comprehensive income

     72,643        (192,060     401,472        (197,871

Less: Comprehensive income attributable to noncontrolling interests

     8,673        5,143        73,424        39,484   
                                

Comprehensive income (loss) attributable to FAC

   $ 63,970      $ (197,203   $ 328,048      $ (237,355
                                

 

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First American Reports Financial Results for the Fourth Quarter and Full Year 2009

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The First American Corporation

Segment Information

(in thousands, except percentages)

(unaudited)

 

     For the Three Months Ended December 31  
     Total revenues    Pretax (A)     Margins  
     2009    2008    2009     2008     2009     2008  

Financial Services

              

Title Insurance and Services

   $ 948,023    $ 823,294    $ 44,537      $ (97,124   4.7   -11.8

Specialty Insurance

     71,834      72,441      11,931        368      16.6   0.5
                                          
   $ 1,019,857    $ 895,735    $ 56,468      $ (96,756   5.5   -10.8
                                          

Information Solutions

              

Information and Outsourcing Solutions

   $ 218,181    $ 161,017    $ 37,951      $ 22,546      17.4   14.0

Data and Analytic Solutions

     129,811      133,634      23,241        24,416      17.9   18.3

Risk Mitigation and Business Solutions

     154,973      193,947      (5,148     (1,461   -3.3   -0.8
                                          
   $ 502,965    $ 488,598    $ 56,044      $ 45,501      11.1   9.3
                                          
     For the Twelve Months Ended December 31  
     Total revenues    Pretax (A)     Margins  
     2009    2008    2009     2008     2009     2008  

Financial Services

              

Title Insurance and Services

   $ 3,672,359    $ 3,982,525    $ 165,415      $ (124,644   4.5   -3.1

Specialty Insurance

     277,539      297,817      28,793        17,859      10.4   6.0
                                          
   $ 3,949,898    $ 4,280,342    $ 194,208      $ (106,785   4.9   -2.5
                                          

Information Solutions

              

Information and Outsourcing Solutions

   $ 904,225    $ 727,712    $ 202,983      $ 151,415      22.4   20.8

Data and Analytic Solutions

     532,442      545,027      100,416        80,250      18.9   14.7

Risk Mitigation and Business Solutions

     705,437      782,274      53,541        62,992      7.6   8.1
                                          
   $ 2,142,104    $ 2,055,013    $ 356,940      $ 294,657      16.7   14.3
                                          

 

(A)- Income (loss) before income tax, noncontrolling interests and corporate expenses

    

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