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First American Corp. (The) - Title
Insurance - Category Directory
(714)
800-3000
1
First American Way
Santa
Ana, CA 92707
www.firstam.com
Sales
$6
billion
Business Description
The First American Corporation (the Company), through its subsidiaries, is
engaged in the business of providing business information and related
products and services. The Company has seven reporting segments that fall
within two primary business groups, financial services and information
technology. The financial services group includes title insurance, specialty
insurance and trust and other services. The title insurance segment issues
residential and commercial title insurance policies, provides escrow
services, equity loan services, tax-deferred exchanges and other related
products. The specialty insurance segment issues property and casualty
insurance policies and provides home warranties. The trust and other
services segment provides investment advisory and trust and thrift services.
The information technology group includes mortgage information, property
information, credit information, and screening information. The mortgage
information segment provides tax monitoring, flood zone certification,
default management services, document preparation and other real estate
related services. The property information segment provides property
database services and appraisal services. The credit information segment
provides mortgage credit and specialized credit reporting services. The
screening information segment provides resident screening, pre-employment
screening, substance abuse management and testing, consumer direct location
services and motor vehicle reporting. Financial information regarding each
of the Company’s business segments is included in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
and “Item 8. Financial Statements and Supplementary Data” of Part II of this
report.
The Company believes that it holds the number one market share position for
many of its products and services, including but not limited to, flood zone
determinations, based on the number of flood zone certification reports
issued; tax monitoring services, based on the number of loans under service;
mortgage credit reporting services, based on the number of credit reports
issued; automotive credit reporting services, based on the number of credit
reports issued; default management services, based on the number of
foreclosure/bankruptcy cases reported; property database services, based on
the number of inquiries; and resident screening, based on the number of
reports issued. The Company also believes that it holds the number two
market share position for title insurance, based on operating revenues; home
warranty services, based on the number of home protection contracts under
service; and drug testing, based on the number of reports issued.
Substantially all of the revenues for the Company’s title insurance and
mortgage information segments result from resales and refinancings of
residential real estate and, to a lesser extent, from commercial
transactions and the construction and sale of new housing. Over one-half of
the revenues in the Company’s property information and credit information
segments also depend on real estate activity. The remaining portion of the
property information and credit information revenues, as well as the
revenues for the Company’s specialty insurance, trust and other services,
and screening information segments are isolated from the volatility of real
estate transactions. Real estate activity is cyclical in nature and is
affected greatly by the cost and availability of long-term mortgage funds.
Real estate activity and, in turn, a large portion of the Company’s revenue
base, can be adversely affected during periods of high interest rates and/or
limited money supply. However, this adverse effect is mitigated in part by
the continuing diversification of the Company’s operations into areas
outside of the traditional real estate transfer and closing process.
The Financial Services Group
Title Insurance Segment
Overview of Title Insurance Industry
Title to, and the priority of interests in, real estate are determined in
accordance with applicable laws. In most real estate transactions, mortgage
lenders and purchasers of real estate want to be protected from loss or
damage in the event that title is not as represented. In most parts of the
United States, title insurance has become accepted as the most efficient
means of providing such protection.
Title Policies. Title insurance policies insure the interests of owners and
their lenders in the title to real property against loss by reason of
adverse claims to ownership of, or to defects, liens, encumbrances or other
matters affecting such title which exist at the time a title insurance
policy is issued and which were not excluded from the coverage of a title
insurance policy. Title insurance policies are issued on the basis of a
title report, which is prepared after a search of the public records, maps,
documents and prior title policies to ascertain the existence of easements,
restrictions, rights of way, conditions, encumbrances or other matters
affecting the title to, or use of, real property. In certain instances, a
visual inspection of the property is also made. To facilitate the
preparation of title reports, copies of public records, maps, documents and
prior title policies may be compiled and indexed to specific properties in
an area. This compilation is known as a “title plant.”
The beneficiaries of title insurance policies are generally real estate
buyers and mortgage lenders. A title insurance policy indemnifies the named
insured and certain successors in interest against title defects, liens and
encumbrances existing as of the date of the policy and not specifically
excepted from its provisions. The policy typically provides coverage for the
real property mortgage lender in the amount of its outstanding mortgage loan
balance and for the buyer in the amount of the purchase price of the
property, but in some cases might insure for a greater amount where the
buyer anticipates constructing improvements on the property. Coverage under
a title insurance policy issued to a real property mortgage lender generally
terminates upon the sale of the insured property unless the owner carries
back a mortgage or makes certain warranties as to the title.
Before issuing title policies, title insurers seek to limit their risk of
loss by accurately performing title searches and examinations. The major
expenses of a title company relate to such searches and examinations, the
preparation of preliminary reports or commitments and the maintenance of
title plants, and not from claim losses as in the case of property and
casualty insurers.
The Closing Process. Title insurance is essential to the real estate closing
process in most transactions involving real property mortgage lenders. In a
typical residential real estate sale transaction, title insurance is
generally ordered on behalf of an insured by a real estate broker, lawyer,
developer, lender or closer involved in the transaction. Once the order has
been placed, a title insurance company or an agent conducts a title search
to determine the current status of the title to the property. When the
search is complete, the title company or agent prepares, issues and
circulates a commitment or preliminary title report (“commitment”) to the
parties to the transaction. The commitment summarizes the current status of
the title to the property, identifies the conditions, exceptions and/or
limitations that the title insurer intends to attach to the policy and
identifies items appearing on the title that must be eliminated prior to
closing.
The closing function, sometimes called an escrow in western states, is often
performed by a lawyer, an escrow company or a title insurance company or
agent (such person or entity, the “closer”). Once documentation has been
prepared and signed, and mortgage lender payoff demands are in hand, the
transaction is “closed.” The closer records the appropriate title documents
and arranges the transfer of funds to pay off prior loans and extinguish the
liens securing such loans. Title policies are then issued insuring the
priority of the mortgage of the real property mortgage lender in the amount
of its mortgage loan and the buyer in the amount of the purchase price. The
time lag between the opening of the title order and the issuance of the
title policy is usually between 30 and 90 days. The seller and the buyer
bear the risk during this time lag. Any matter affecting title which is
discovered during this period would have to be dealt with to the title
insurers’ satisfaction or the insurer would except the matter from the
coverage afforded by the title policy. Before a closing takes place,
however, the closer would request that the title insurer provide an update
to the commitment to discover any adverse matters affecting title and, if
any are found, would work with the seller to eliminate them so that the
title insurer would issue the title policy subject only to those exceptions
to coverage which are acceptable to the buyer and the buyer’s lender.
Issuing the Policy: Direct vs. Agency. A title policy can be issued directly
by a title insurer or indirectly on behalf of a title insurer through agents
which are not themselves licensed as insurers. Where the policy is issued by
a title insurer, the search is performed by or at the direction of the title
insurer, and the premium is collected and retained by the title insurer.
Where the policy is issued by an agent, the agent performs the search,
examines the title, collects the premium and retains a portion of the
premium. The remainder of the premium is remitted to the title insurer as
compensation for bearing the risk of loss in the event a claim is made under
the policy. The percentage of the premium retained by an agent varies from
region to region. A title insurer is obligated to pay title claims in
accordance with the terms of its policies, regardless of whether it issues
its policy directly or indirectly through an agent.
Premiums. The premium for title insurance is due and earned in full when the
real estate transaction is closed. Premiums are generally calculated with
reference to the policy amount. The premium charged by a title insurer or an
agent is subject to regulation in most areas. Such regulations vary from
state to state.
The Company’s Title Insurance Operations
Overview. The Company, through First American Title Insurance Company and
its subsidiaries, transacts the business of title insurance through a
network of both direct operations and agents. Through this network, the
Company issues policies in all states (except Iowa) and the District of
Columbia. In Iowa, the Company provides abstracts of title only, because
title insurance is not permitted. The Company also offers title services in
Australia, the Bahama Islands, Canada, Guam, Hong Kong, Ireland, Mexico, New
Zealand, Puerto Rico, South Korea, the United Kingdom, the U.S. Virgin
Islands and other countries abroad.
Based on industry statistics showing premiums written in 2002, the Company
had the largest or second largest share of the title insurance market in 30
states and in the District of Columbia, and had a national market share of
22.6%. Industry statistics for 2003 are not currently available.
The Company plans to continue increasing its share of the title insurance
market through strategic acquisitions and further development of its
existing branch office and agency operations. The Company also will continue
to focus on expanding its share of the higher margin, title insurance
business conducted on behalf of commercial clients. The Company believes its
national commercial market share has grown through programs directed at
major developers, lenders and law firms.
Sales and Marketing. The Company markets its title insurance services to a
broad range of customers. The Company believes that its primary source of
business is from referrals from persons in the real estate community, such
as independent escrow companies, real estate brokers, developers, mortgage
brokers, mortgage bankers, financial institutions and attorneys. In addition
to the referral market, the Company markets its title insurance services
directly to large corporate customers and mortgage lenders. As title agents
contribute a large portion of the 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 90 salespeople in its national commercial services division.
One of the responsibilities of the sales personnel of this division is the
coordination of marketing efforts directed at large real estate lenders and
companies developing, selling, buying or brokering properties on a
multistate basis. The Company also supplements the efforts of its sales
force through general advertising in various trade and professional
journals.
The Company’s increased commercial sales effort during the past decade has
enabled the Company to expand its commercial business base. Because
commercial transactions involve higher coverage amounts and yield higher
premiums, commercial title insurance business generates greater profit
margins than does residential title insurance business. Accordingly, the
Company plans to continue to emphasize its commercial sales program.
Although sales outside of the United States account for a small percentage
of the Company’s revenues, the Company believes that the acceptance of title
insurance in foreign markets has increased in recent years. Accordingly, the
Company plans to continue its international sales efforts, particularly in
Canada, the United Kingdom and Australia.
Underwriting. Before a title insurance policy is issued, a number of
underwriting decisions are made. For example, matters of record revealed
during the title search may require a determination as to whether an
exception should be taken in the policy. The Company believes that it is
important for the underwriting function to operate efficiently and
effectively at all decision making levels so that transactions may proceed
in a timely manner. To perform this function, the Company has underwriters
at the branch level, the regional level and the national level.
Agency Operations. The relationship between the Company and each agent is
governed by an agency agreement which states the conditions under which the
agent is authorized to issue title insurance policies on behalf of the
Company. The agency agreement also prescribes the circumstances under which
the agent may be liable to the Company if a policy loss is attributable to
error of the agent. Such agency agreements typically have a term of one to
five years and are terminable immediately for cause.
Due to the high incidence of agency fraud in the title insurance industry
during the late 1980s, the Company instituted measures to strengthen its
agent selection and audit programs. In determining whether to engage an
independent agent, the Company investigates the agent’s experience,
background, financial condition and past performance. The Company maintains
loss experience records for each agent and conducts periodic audits of its
agents. The Company has also increased the number of agent representatives
and agent auditors that it employs. Agent representatives periodically visit
agents and examine their books and records. In addition to periodic audits,
a full agent audit will be triggered if certain “warning signs” are evident.
Warning signs that can trigger an audit include the failure to implement
Company-required accounting controls, shortages of escrow funds and failure
to remit underwriting fees on a timely basis.
Title Plants. The Company’s network of title plants constitutes one of its
principal assets. A title search is conducted by searching the public
records or utilizing a title plant. While public records are indexed by
reference to the names of the parties to a given recorded document, most
title plants arrange their records on a geographic basis. Because of this
difference, records of a title plant are generally easier to search. Most
title plants also index prior policies, adding to searching efficiency. Many
title plants are computerized. Certain offices of the Company utilize
jointly owned plants or utilize a plant under a joint user agreement with
other title companies. The Company believes its title plants, whether wholly
or partially owned or utilized under a joint user agreement, are among the
best in the industry.
The Company has significantly enhanced its investment in title plants
through three business combinations. The first was the formation of a
limited liability corporation (“LLC”) with Experian Group on January 1,
1998. Experian Group contributed to the LLC its real estate information
division, which the Company believes is the nation’s leading operator of
title plants. The second business combination was the acquisition of Data
Tree in June 1998. Data Tree is a supplier of database management and
document imaging systems. The third business combination was the formation
of Data Trace Information Services. This business is 80.0% owned by the
Company’s subsidiary, FARES, and 20.0% owned by LandAmerica. Data Trace
Information Services is a provider of comprehensive title information
delivery systems.
The Company’s title plants are carried on its balance sheet at original
cost, which includes the cost of producing or acquiring interests in title
plants or the appraised value of subsidiaries’ title plants at dates of
acquisition for companies accounted for as purchases. Thereafter, the cost
of daily maintenance of these plants is charged to expense as incurred. A
properly maintained title plant has an indefinite life and does not diminish
in value with the passage of time. Therefore, in accordance with generally
accepted accounting principles, no provision is made for depreciation of
these plants. Since each document must be reviewed and indexed into the
title plant, such maintenance activities constitute a significant item of
expense. The Company is able to offset title plant maintenance costs at its
plants through joint ownership and access agreements with other title
insurers and title agents.
Reserves for Claims and Losses. The Company provides for title insurance
losses based upon its historical experience by a charge to expense when the
related premium revenue is recognized. The resulting reserve for known
claims and incurred but not reported claims reflects management’s best
estimate of the total costs required to settle all claims reported to the
Company and claims incurred but not reported, and is considered by the
Company to be adequate for such purpose.
In settling claims, the Company occasionally purchases and ultimately sells
the interest of the insured in the real property or the interest of the
claimant adverse to the insured. These assets, which totaled $42.7 million
at December 31, 2003, are carried at the lower of cost or fair value, less
costs to sell, and are included in “Other assets” in the Company’s
consolidated balance sheets.
Reinsurance and Coinsurance. The Company assumes and distributes large title
insurance risks through mechanisms of reinsurance and coinsurance. In
reinsurance agreements, in consideration for a portion of the premium, the
reinsurer accepts that part of the risk which the primary insurer cedes to
the reinsurer over and above the portion retained by the primary insurer.
The primary insurer, however, remains liable for the total risk in the event
that the reinsurer does not meet its obligation. As a general rule, the
Company does not retain more than $40.0 million of primary risk on any
single policy. Under coinsurance agreements, each coinsurer is jointly and
severally liable for the risk insured, or for so much thereof as is agreed
to by the parties. The Company’s reinsurance activities account for less
than 1.0% of its total title insurance operating revenues.
Competition. The title insurance business is highly competitive. The number
of competing companies and the size of such companies varies in the
different areas in which the Company conducts business. Generally, in areas
of major real estate activity, such as metropolitan and suburban localities,
the Company competes with many other title insurers. Approximately 75 title
insurance underwriters are members of the American Land Title Association,
the title insurance industry’s national trade association. The Company’s
major nationwide competitors in its principal markets include Fidelity
National Title Insurance Company (which also includes Chicago Title, Ticor
Title Insurance Company and Security Union Title Insurance Company)
Landamerica (which includes Lawyers Title Insurance Company, Commonwealth
Land Title Insurance Company and Transnation Title Insurance Company,
Stewart Title Guaranty Company and Old Republic Title Insurance Group. In
addition to these nationwide competitors, numerous agency operations
throughout the country provide aggressive competition on the local level.
The Company believes that competition for title insurance business is based
primarily on the quality and timeliness of service, because parties to real
estate transactions are usually concerned with time schedules and costs
associated with delays in closing transactions. In those states where prices
are not established by regulatory authorities, the price of title insurance
policies is also an important competitive factor. The Company believes that
it provides quality service in a timely manner at competitive prices.
Specialty Insurance Segment
Home Warranties. The Company’s home warranty business commenced operations
in 1984, in part with the proceeds of a $1.5 million loan from the Company
which was, in 1986, converted to a majority equity interest. The Company
currently owns 92.3% of its home warranty business, which is operated as a
second tier subsidiary, with the balance owned by management of that
subsidiary. The Company’s home warranty business issues one-year warranties
that protect homeowners against defects in household systems and appliances,
such as plumbing, water heaters and furnaces. The Company’s home warranty
subsidiary currently charges approximately $245 to $420 for its basic home
warranty contract. Optional coverage is available for air conditioners,
pools, spas, washers, dryers, refrigerators and other items for charges
ranging from approximately $25 to $160. For an additional charge, coverage
is renewable annually at the option of the homeowner upon approval by the
home warranty subsidiary. Fees for the warranties are paid at the closing of
the home purchase and are recognized monthly over a 12-month period. Home
warranties are marketed through real estate brokers and agents. This
business has continually expanded nationally and is currently licensed in 40
states. The principal competitor of the Company’s home warranty business is
American Home Shield, a subsidiary of Service Master L.P.
Property and Casualty Insurance. The Company offers property and casualty
insurance through its subsidiaries First American Property and Casualty
Insurance Company and First American Specialty Insurance Company. First
American Property and Casualty Insurance Company conducts its business
utilizing the Company’s distribution channels, allowing for cross selling
through existing closing-service activities. First American Specialty
Insurance Company conducts its business utilizing a network of brokers in
California.
Trust and Other Services Segment
Investment Advisory and Trust and Thrift Services. The Company offers
investment advisory services through its SEC registered investment
management firm that manages equity and fixed-income securities.
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, 2003, the trust operation was administering fiduciary and
custodial assets having a market value in excess of $2.3 billion.
During 1988, the Company, through a majority-owned subsidiary, acquired an
industrial bank (the Thrift), formerly known as an industrial loan
corporation, that accepts thrift deposits and uses deposited funds to
originate and purchase loans secured by commercial properties primarily in
Southern California. As of December 31, 2003, the Thrift had approximately
$76.6 million of demand deposits and $105.2 million of loans outstanding.
Loans made or acquired during the current year, by the Thrift, ranged in
amount from $15,050 to $2,887,500. The average loan balance outstanding at
December 31, 2003, was $430,471. 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, 2003, was 7.77%. 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 real
estate lending market are local community banks, other thrift and loan
companies and, to a lesser extent, commercial banks. The Thrift’s average
loan is approximately 12.5 years in duration.
The performance of the Thrift’s loan portfolio is evaluated on an ongoing
basis by management of the Thrift. The Thrift places a loan on 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. Interest income on non-accrual loans that would have
been recognized during the year ended December 31, 2003, if all of such
loans had been current in accordance with their original terms, totaled
$8,094.
The
Information Technology Group
Mortgage Information Segment
The mortgage information segment provides tax monitoring, flood zone
certification, default management services, and other real estate related
services.
Tax Monitoring. The tax monitoring service, established by the Company in
1987, advises real property mortgage lenders of the status of property tax
payments due on real estate securing their loans. With the acquisition of
Transamerica’s tax monitoring business in October 2003, the Company believes
that it is the largest provider of tax monitoring services in the United
States.
Under a typical contract, a tax service provider monitors, on behalf of a
mortgage lender, the real estate taxes owing on properties securing such
lender’s mortgage loans for the life of such loans. In general, providers of
tax monitoring services, such as the Company’s tax service, indemnify
mortgage lenders against losses resulting from a failure to monitor
delinquent taxes. Where a mortgage lender requires that tax payments be
impounded on behalf of borrowers, providers of tax monitoring services, such
as the Company’s tax service, may be required to monitor and oversee the
transfer of these monies to the taxing authorities and provide confirmation
to lenders that such taxes have been paid.
The fee charged to service each mortgage loan varies from region to region,
but generally falls within the $45 to $130 price range and is paid in full
at the time the contract is executed. The Company recognizes revenues from
tax service contracts over the estimated duration of the contracts. However,
income taxes are paid on the entire fee in the year the fee is received.
Historically, the Company has maintained minimal reserves for losses
relating to its tax monitoring service because its losses have been
negligible.
Flood Zone Certification. In January 1995, the Company acquired Flood Data
Services, Inc. (now a subsidiary of First American Real Estate Solutions
LLC). This business furnishes to mortgage lenders flood zone determination
reports, which provide information on whether or not property securing a
loan is in a governmentally delineated special flood hazard area. Federal
legislation passed in 1994 requires that most mortgage lenders obtain a
determination of the current flood zone status at the time each loan is
originated and obtain updates during the life of the loan. In October 2003,
the Company acquired Transamerica’s flood zone determination business. This
acquisition enhanced the Company’s number one market share position for
flood zone determinations in the United States, based on the number of flood
zone determination reports issued.
Default Management Services. The default management business supports
mortgage servicers and financial institutions in the handling of loss
mitigation, foreclosure, REO and claims processing. With the acquisition in
2001 of LFC Nationwide, a leading provider of property preservation and
field inspections, the Company believes it is now the nation’s leading
provider of default management services, based on the number of
foreclosure/bankruptcy cases reported.
Property Information Segment
This business was established in January 1998 when the Company and its real
estate information service subsidiaries (the “Real Estate Information
Subsidiaries”) consummated a business transaction with Experian Group (“Experian”),
pursuant to which First American Real Estate Solutions LLC (“FARES”) was
established. Under the transaction, the Real Estate Information subsidiaries
contributed substantially all of their assets and liabilities to FARES in
exchange for an 80.0% ownership interest and Experian transferred
substantially all of the assets and liabilities of its Real Estate Solutions
division (“RES”) to FARES in exchange for a 20.0% ownership interest. RES is
believed to be the nation’s foremost supplier of core real estate data,
providing, among other things, property valuation information, title
information, tax information and imaged title documents.
Adding to this business, in June 1998, the Company acquired Data Tree
Corporation. Data Tree is a supplier of database management and document
imaging systems to county recorders, other governmental agencies and the
title industry.
In July 2000, the Company combined its Smart Title Solutions division with
the Datatrace division of LandAmerica Financial Group, Inc (“LandAmerica”).
The combined entity, Data Trace Information Services, is 80.0% owned by the
Company’s subsidiary, FARES, and 20.0% owned by LandAmerica. The Company
believes that Data Trace Information Services is the nation’s most advanced
and comprehensive title information delivery system.
In August 2000, the Company combined its RES division with the Intellitech
real estate information business of Transamerica Corporation to form a new
entity, First American Real Estate Solutions, L.P. This joint venture is
80.0% owned by the Company’s subsidiary, FARES, and 20.0% by Transamerica
Corporation. The Company believes that this joint venture is the nation’s
largest database of property characteristic information, supplying data and
decision-support products to the real estate and mortgage finance industry.
In June 2002, the Company acquired Tri County Tax Research, Inc., a provider
of tax searches for title companies in the Detroit, Michigan metropolitan
area. In July of 2002, the Company acquired Current Status, Inc., a provider
of property tax searches for customers in the New Jersey and Western
Pennsylvania markets. These acquisitions strengthened the Company’s existing
tax information business.
In September 2002, the Company added to its property valuation information
business by acquiring SourceOne Services, Corp., a provider of real estate
valuation services in the form of Broker Price Opinions (BPO). The Company
believes that SourceOne Services Corp. is the largest provider of BPO
services to the default market and the second largest provider of BPO
services in the United States.
In February 2003, the Company acquired Infinity Information Solutions, Inc.,
a provider of lien release information. This strategic acquisition enhances
the Company’s offering of products and services to mortgage lenders.
In June 2003, the Company added to its title information business with the
acquisition of Abstracter’s Information Services, Inc., (AIS). AIS is one of
the leading title abstracting companies in New York. This acquisition
strengthens the Company’s title information services presence in the
Northeast region.
Credit Information Segment
The Company’s mortgage credit reporting service provides credit information
reports for mortgage lenders throughout the United States. These reports are
derived from two or more credit bureau sources and are summarized and
prepared in a standard form acceptable to mortgage loan originators and
secondary mortgage purchasers. The Company’s credit reporting service has
grown primarily through acquisitions. In 1994, the Company acquired all of
the minority interests in its lower tier subsidiaries Metropolitan Credit
Reporting Services, Inc., and Metropolitan Property Reporting Services, Inc.
In 1994, the Company also acquired California Credit Data, Inc., and Prime
Credit Reports, Inc., and in 1995, the Company acquired CREDCO, Inc. (now a
division of First American Real Estate Solutions LLC). With the acquisition
of First American CREDCO, Inc., the Company believes that it is now the
largest mortgage credit reporting service in the United States, based on the
number of credit reports issued. The credit information segment also
provides specialized credit reports. This service provides credit
information reports to non-mortgage lenders, such as auto lenders, as well
as direct to consumers. The specialized reports are derived from two or more
credit bureau sources and are summarized and prepared in an acceptable form.
This service also provides subprime-consumer information and includes a
database of credit records on consumers with flawed credit histories. This
information is used to provide data to credit grantors such as furniture and
appliance retailers, pay-day loan and check-advance stores, rent-to-own
retailers and others.
Screening Information
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. As
of December 31, 2003, the Company owned all of First Advantage’s outstanding
Class B common stock, which constitutes approximately 76.7% of the economic
interest and 97.4% 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 and employee assistance programs; and resident screening
services, such as eviction record, credit and criminal records checks. 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 designed to detect and expose worker’s compensation,
disability and liability insurance fraud. 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, 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.
Tile Insurance Companies in the Directory
Fidelity National Financial
First American
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