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2002 marked the beginning of a new era for First
American. First, our Company now consists of seven
segments, each with its own challenges and strategies.
Second, we took a very big step toward transforming
our title insurance operations from a manual processing
enterprise to an electronic, database-oriented business.
Along the way, we posted record revenues, record
earnings, and record operating earnings per share.
SEVEN REPORTING SEGMENTS
Prior to 1985, First American operated as a title
company only. That year, however, we began a steady
process of diversification when we entered the home
warranty and tax service businesses. By the first quarter
of 2002, we had established enough successful, distinct
businesses to group them into seven segments and
report earnings separately for each. The segments fall
into two groups: Financial Services and Information
Technology. The seven reporting segments are:
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FINANCIAL SERVICES
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1. |
Title Insurance and Services
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2. |
Specialty Insurance
- Home Warranty
- Homeowner's Insurance
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3. |
Trust and Other Services
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INFORMATION TECHNOLOGY
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4. |
Mortgage Information
- Tax Service
- Flood Certification
- Default Products, Services, and Systems
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5. |
Property Information
- Property Characteristics Information
- Title Records
- Imaged Recorded Property Documents
- Electronic and Manual Appraisals
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6. |
Credit Information
- Mortgage Credit Information
- Auto Credit Information
- Subprime Credit Information
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7. |
Screening Information
- Pre-Employment Screening
- Drug-Test Analysis
- Driving Record Information
- Tenant Screening
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In 2002, the Financial Services businesses accounted
for 54 percent of our earnings and our Information
Technology companies accounted for 46 percent.
These businesses, at first blush, may seem unconnected.
What does driving records information have to do with
title insurance? The fact is, all of our businesses involve
business information or services, and each is connected
to the major economic events in a consumer's life.
These events include getting a job, buying a car, renting
an apartment, and buying or mortgaging a house.
Each of our businesses is an outgrowth of another.
Many of the businesses were natural additions to our
Company because they include a component of credit
information (such as mortgage credit information,
pre-employment screening, tenant screening, and
several others).
We are gratified that these diverse business strategies
are so substantial and important to our Company that
separate segment status is justified. The 2002 earnings
for each segment were higher than 2001 earnings.
Three segments deserve special mention. First, our
Property Information segment, headed by Dennis
Gilmore, had an especially strong year. In 2001, Dennis
and his team produced earnings of $35 million, before
taxes and minority interests, on revenues of $228 million.
In 2002, that segment earned $71 million on revenues
of $280 million. The earnings more than doubled and
margins went from 15 to 25 percent.
Second, our Credit Information team announced
the combination of our Credit Online division with
DealerTrack, Inc., which will further solidify First American's
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