First American CorporationFAF

Morningstar Rating

Stock Research and Analysis

by Jim Ryan

In early 2008, First American announced that it intended to separate into two companies--Financial Services and Information Solutions--in a transaction originally scheduled to be completed in 2008 but now planned for the first half of 2010. Financial Read more

Bulls Say

First American has nearly doubled its title insurance market share since 1991. The four major title insurers capture 90% of the market, and First American garners about 30%.

First American has the largest U.S. subprime credit database, with more than 35 million records. It also has the largest repository of title deed images, with more than 1.8 billion documents.

Information Solutions' First Advantage subsidiary provides risk-mitigation products that enjoy strong market positions. It is one of three motor vehicle record screeners and the third-largest employment screener.

First American owns the largest U.S. property database and captures data from 95% of real estate transactions. It also owns the largest title database, with more than 450 million records. Read more

Bears Say

Title insurance sales rely on mortgage volume and home sales, both of which are depressed and may have difficulty recovering from a devastated housing market.

The mortgage lenders First American serves are increasingly powerful, as mergers consolidate real estate financing sources. Lenders may try to exploit this power and capture part of the firm's profits.

Information Solutions lacks the scale and scope of some of its peers, keeping margins in check.

Unlike other information services firms, Information Solutions is too reliant on real estate, which limits its ability to capture new customers. Read more

Strategy

Financial Services aims to internally expand title insurance market share while reducing costs from automated production services. Information Solutions, primarily tied to mortgage originations and credit Read more

Management

The team at First American deserves credit for conceiving and executing a farsighted strategy to transform its business. This foresight helped First American emerge as an industry leader and also establish important first-mover advantages in information Read more

Profile

By the end of the second quarter, First American will split into two separate companies: one that provides legacy title insurance and related products and one that acquires Read more

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