Form DEFA14A First American Financial

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

☐

Preliminary Proxy Statement

☐

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

☐

Definitive Proxy Statement

☒

Definitive Additional Materials

☐

Soliciting Material Under §240.14a-12

☒

No fee required

☐

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

(1)

Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)

Proposed maximum aggregate value of transaction:

(5)

Total fee paid:

☐

Fee paid previously with preliminary materials.

☐

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1)

Amount Previously Paid:

(2)

Form, Schedule or Registration Statement No.:

(3)

Filing Party:

(4)

Date Filed:

•

The leading proxy advisory firm failed to consider that 2019 was a record year for First American – in that year we posted the highest pretax margin and return on equity in our 10-year history as a separate public company;

•

2020 was the second-best year for First American – second only to 2019;

•

Our CEO’s compensation for 2020 decreased 15% relative to 2019;

•

The leading proxy advisory firm’s suggestion that annual incentive targets should be set above the prior year’s result ignores the cyclical nature of our business;

•

Given the cyclical nature of our business, annual incentive targets are derived from the annual financial plan, which is approved by our Board of Directors and is the result of a rigorous process that contemplates difficult to forecast levels of real estate activity, mortgage originations and interest rates, among other factors;

o

For example, at the time our Board of Directors approved the 2020 financial plan the Mortgage Bankers Association had forecast that mortgage originations in 2020 would be down 7.2% over 2019; and

•

We believe that setting rigorous targets in light of the expected business climate – as opposed to the business climate in earlier periods, as implied by the leading proxy advisory firm – incentivizes performance and, thereby, maximizes value to our stockholders and to do otherwise would demotivate our employees, especially since the annual incentive targets cascade throughout the organization.

•

The “performance-based equity awards” about which the leading proxy advisory firm expresses concern are actually a component of our annual incentive bonus program; prior to the introduction of the “annual equity bonus” (as it is referred to in our proxy – see page 35) the annual incentive bonus was paid entirely in cash;

o

Payment of a portion of the annual incentive bonus in equity is a central feature of our broader compensation program as most participants in our annual incentive plan – not just named executive officers – receive a portion of their annual incentive bonus in equity;

•

Payment of a portion of the annual incentive bonus in equity (which vests over four years for our named executive officers and over three years for all others) reflects our desire to increase alignment between participating employees and our stockholders, to discourage participating employees from taking excessive risk for short-term gains and to focus our employees on increasing long-term stockholder value;

•

Our Compensation Committee has investigated the use of multi-year financial metrics in setting goals for “long-term equity incentives awards” (i.e. the portion of our annual equity awards that are distinct from the “annual equity bonus” described above) and given the highly cyclical nature of our business and, relatedly, the impact on our results of real estate activity, mortgage originations, interest rates and other difficult to predict factors beyond the company’s control, the Compensation Committee determined that its own assessment of performance (which for 2020 included qualitative factors such as the pandemic response, efforts to advance the company’s strategic goals and support for ESG efforts), together with peer group and market data, represents the most effective way to determine the amount of long-term equity incentive awards;

•

The design of our compensation program has been consistent through our entire 10-year history as a separate public company;

•

Until now, the leading proxy advisory firm has supported our say-on-pay proposal throughout our entire 10-year history as a separate public company; and

•

On average over 96% of stockholder votes cast (including abstentions) over our 10-year history as a separate public company have voted to approve our say-on-pay resolution.