Market Overview

First American Financial Reports Second Quarter 2019 Results

Share:

Reports Earnings of $1.64 per Diluted Share or $1.58 per Diluted Share Excluding Net Realized Investment Gains

First American Financial Corporation (NYSE:FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today announced financial results for the second quarter ended June 30, 2019.

Current Quarter Highlights

  • Total revenue of $1.5 billion, up 1 percent compared with last year
  • Title Insurance and Services segment pretax margin of 17.0 percent
    • 16.5 percent excluding net realized investment gains
  • Commercial revenues of $180.4 million, down 2 percent compared with last year
  • Title Insurance and Services segment investment income of $71.0 million, up 37 percent compared with last year
  • Specialty Insurance segment pretax margin of 12.8 percent
    • 11.8 percent excluding net realized investment gains
  • Debt-to-capital ratio of 18.4 percent
  • Cash flow from operations of $266.7 million, compared with $210.9 million last year

Selected Financial Information

($ in millions, except per share data)

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Total revenue

 

$

1,498.6

 

 

$

1,491.2

 

Income before taxes

229.5

 

 

 

202.0

 

 

 

 

 

 

 

 

 

Net income

 

$

186.7

 

 

$

155.1

 

Net income per diluted share

 

 

1.64

 

 

1.37

 

Total revenue for the second quarter of 2019 was $1.5 billion, an increase of 1 percent relative to the second quarter of 2018. Net income in the current quarter was $186.7 million, or $1.64 per diluted share, compared with net income of $155.1 million, or $1.37 per diluted share, in the second quarter of 2018. Net realized investment gains in the current quarter were $8.4 million, or 6 cents per diluted share, compared with net realized investment gains of $5.5 million, or 4 cents per diluted share, last year. The current quarter's effective tax rate of 18.4 percent includes a benefit of $12.0 million, or 11 cents per diluted share, primarily due to the resolution of state tax matters from prior years. During the quarter, expenses totaling $1.7 million related to the previously disclosed information security incident were recorded in the corporate segment.

"The company delivered outstanding financial results in the second quarter, including a record 17.0 percent pretax title margin," said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. "Low interest rates continue to strengthen the purchase market, drive substantial growth in refinance activity and sustain a healthy commercial market. This quarter's performance again benefited from effective expense management and higher investment income.

"Looking to the second half of 2019, we are optimistic in light of current market trends. So far in July, refinance activity continues its robust growth and purchase open orders are trending positively. Moreover, we expect to see continued strength in our commercial business. Although the anticipated reduction of the Fed funds rate will impact our investment income, given current business conditions and the efficiency of our operations, we expect to deliver strong financial results in the second half of the year."

Title Insurance and Services

($ in millions, except average revenue per order)

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Total revenues

 

$

1,371.9

 

 

$

1,369.0

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

232.8

 

 

$

209.6

 

Pretax margin

 

 

17.0

%

 

 

15.3

%

 

 

 

 

 

 

 

 

 

Title open orders(1)

 

 

296,200

 

 

 

276,800

 

Title closed orders(1)

 

 

196,600

 

 

 

196,200

 

 

 

 

 

 

 

 

 

 

U.S. Commercial

 

 

 

 

 

 

 

 

Total revenues

 

$

180.4

 

 

$

184.8

 

Open orders

 

 

33,000

 

 

 

36,000

 

Closed orders

 

 

19,300

 

 

 

19,900

 

Average revenue per order

 

$

9,400

 

 

$

9,300

 

(1) U.S. direct title insurance orders only.

 

 

 

 

 

 

 

 

Total revenues for the Title Insurance and Services segment during the second quarter were $1.4 billion, flat compared with the same quarter of 2018. Direct premiums and escrow fees were higher by 1 percent compared with the second quarter of 2018, driven by a 1 percent increase in the average revenue per direct title order and closed orders that were essentially flat compared with last year. The growth in the average revenue per direct title order to $2,620 was primarily due to higher residential real estate values, partially offset by a shift in the mix of direct revenues to lower premium refinance transactions. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were down 3 percent in the current quarter as compared with last year.

Information and other revenues were $197.8 million this quarter, down $8.3 million, or 4 percent, compared with the same quarter of last year. The decline was primarily due to lower revenues from the company's centralized lender businesses and international operations.

Investment income was $71.0 million in the second quarter, up $19.2 million, or 37 percent, benefiting from both an increase in average balances and rising short-term interest rates that drove higher interest income in the company's investment portfolio and cash balances. Net realized investment gains totaled $6.9 million in the current quarter, compared with gains of $3.6 million in the second quarter of 2018.

Personnel costs were $422.7 million in the second quarter, down $4.4 million, or 1 percent, compared with the same quarter of 2018. This decline was primarily attributable to lower salary expense driven by lower average headcount, partially offset by higher incentive compensation expense.

Other operating expenses were $194.1 million in the second quarter, down $8.3 million, or 4 percent, compared with the second quarter of 2018. The reduction was driven by a number of expense categories, including lower production-related costs and a decline in office-related purchases, partially offset by higher software expense.

The provision for policy losses and other claims was $43.8 million in the second quarter, or 4.0 percent of title premiums and escrow fees, compared with a 4.0 percent loss provision rate in the second quarter of 2018. The current quarter rate reflects an ultimate loss rate of 4.0 percent for the current policy year and no change in the loss reserve estimates for prior policy years.

Depreciation and amortization expense was $31.1 million in the second quarter, an increase of $1.7 million, or 6 percent, compared with the same period last year. The increase was primarily attributable to higher amortization expense associated with software development.

Pretax income for the Title Insurance and Services segment was $232.8 million in the second quarter, compared with $209.6 million in the second quarter of 2018. Pretax margin was 17.0 percent in the current quarter, compared with 15.3 percent last year. Excluding the impact of net realized investment gains and losses, the pretax margin was 16.5 percent this year, compared with 15.1 percent last year.

Specialty Insurance

($ in millions)

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2019

 

 

2018

 

Total revenues

 

$

123.0

 

 

$

120.2

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

15.7

 

 

$

10.1

 

Pretax margin

 

 

12.8

%

 

 

8.4

%

Total revenues for the Specialty Insurance segment were $123.0 million in the second quarter, an increase of 2 percent compared with the second quarter of 2018. The home warranty business benefited from lower claim losses driven by both lower claim frequency and severity, due in part to milder weather and improvements in claim cost management. The loss ratio for the segment improved to 56.4 percent this quarter, compared with 61.4 percent in the prior year. Pretax margin for the segment was 12.8 percent in the current quarter, compared with 8.4 percent in the second quarter of last year. Excluding the impact of net realized gains and losses, the segment's current quarter pretax margin was 11.8 percent, compared with 7.0 percent last year.

Teleconference/Webcast

First American's second-quarter 2019 results will be discussed in more detail on Thursday, July 25, 2019, at 11 a.m. EDT, via teleconference. The toll-free dial-in number is 877-407-8293. Callers from outside the United States may dial +1-201-689-8349.

The live audio webcast of the call will be available on First American's website at www.firstam.com/investor. An audio replay of the conference call will be available through August 8, 2019, by dialing 201-612-7415 and using the conference ID 13692064. An audio archive of the call will also be available on First American's investor website.

About First American

First American Financial Corporation (NYSE:FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; banking, trust and wealth management services; and other related products and services. With total revenue of $5.7 billion in 2018, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2019, First American was named to the Fortune 100 Best Companies to Work For® list for the fourth consecutive year. More information about the company can be found at www.firstam.com.

Website 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 U.S. direct title insurance operations, which are posted approximately 10 to 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary contain, and responses to investor questions may contain, 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 can be identified by the fact that they do not relate strictly to historical or current facts and may contain the words "believe," "anticipate," "expect," "intend," "plan," "predict," "estimate," "project," "will be," "will continue," "will likely result," or other similar words and phrases or future or conditional verbs such as "will," "may," "might," "should," "would," or "could." These forward-looking statements include, without limitation, statements regarding future operations, performance, financial condition, prospects, plans and strategies. These forward-looking statements are based on current expectations and assumptions that may prove to be incorrect. 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, without limitation: interest rate fluctuations; changes in the performance of the real estate markets; volatility in the capital markets; unfavorable economic conditions; failures at financial institutions where the company deposits funds; changes in applicable laws and government regulations, including data privacy laws; heightened scrutiny by legislators and regulators of the company's title insurance and services segment and certain other of the company's businesses; use of social media by the company and other parties; regulation of title insurance rates; limitations on access to public records and other data; changes in relationships with large mortgage lenders and government-sponsored enterprises; changes in measures of the strength of the company's title insurance underwriters, including ratings and statutory capital and surplus; losses in the company's investment portfolio; material variance between actual and expected claims experience; defalcations, increased claims or other costs and expenses attributable to the company's use of title agents; any inadequacy in the company's risk management framework; systems damage, failures, interruptions and intrusions or unauthorized data disclosures; innovation efforts of the company and other industry participants and any related market disruption; errors and fraud involving the transfer of funds; the company's use of a global workforce; inability of the company's subsidiaries to pay dividends or repay funds; and other factors described in the company's quarterly report on Form 10-Q for the quarter ended March 31, 2019, 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 and related management commentary contain certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including personnel and other operating expense ratios, success ratios, adjusted revenues, adjusted pretax income, adjusted earnings per share, net operating revenues, and adjusted pretax margins for the company, its title insurance and services segment and its specialty insurance segment. The company is presenting these non-GAAP financial measures because they provide the company's management and investors with additional insight into the operational efficiency and 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.

First American Financial Corporation

 

Summary of Consolidated Financial Results and Selected Information

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total revenues

 

$

1,498,620

 

 

$

1,491,157

 

 

$

2,802,201

 

 

$

2,788,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

229,497

 

 

$

201,968

 

 

$

371,167

 

 

$

295,033

 

Income tax expense

 

 

42,226

 

 

 

46,877

 

 

 

74,092

 

 

 

63,770

 

Net income

 

 

187,271

 

 

 

155,091

 

 

 

297,075

 

 

 

231,263

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

616

 

 

 

(49

)

 

 

845

 

 

 

(104

)

Net income attributable to the Company

 

$

186,655

 

 

$

155,140

 

 

$

296,230

 

 

$

231,367

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.65

 

 

$

1.38

 

 

$

2.62

 

 

$

2.06

 

Diluted

 

$

1.64

 

 

$

1.37

 

 

$

2.61

 

 

$

2.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.42

 

 

$

0.38

 

 

$

0.84

 

 

$

0.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

113,050

 

 

 

112,556

 

 

 

112,881

 

 

 

112,406

 

Diluted

 

 

113,498

 

 

 

113,117

 

 

 

113,366

 

 

 

113,093

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Title Insurance Segment Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title orders opened(1)

 

 

296,200

 

 

 

276,800

 

 

 

524,000

 

 

 

530,300

 

Title orders closed(1)

 

 

196,600

 

 

 

196,200

 

 

 

347,500

 

 

 

369,800

 

Paid title claims

 

$

40,518

 

 

$

44,731

 

 

$

81,287

 

 

$

81,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) U.S. direct title insurance orders only.

 

 

 

 

 

 

 

 

 

First American Financial Corporation

 

Selected Consolidated Balance Sheet Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Cash and cash equivalents

 

$

1,411,965

 

 

$

1,467,129

 

Investments

 

 

6,631,871

 

 

 

6,225,520

 

Goodwill and other intangible assets, net

 

 

1,246,690

 

 

 

1,253,538

 

Total assets

 

 

11,443,178

 

 

 

10,630,635

 

Reserve for claim losses

 

 

1,042,208

 

 

 

1,042,679

 

Notes and contracts payable

 

 

729,614

 

 

 

732,019

 

Total stockholders' equity

 

$

4,084,889

 

 

$

3,741,881

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

June 30, 2019

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

668,018

 

 

$

552,358

 

 

$

115,660

 

 

$

 

Agent premiums

 

 

543,847

 

 

 

543,847

 

 

 

 

 

 

 

Information and other

 

 

200,669

 

 

 

197,779

 

 

 

3,153

 

 

 

(263

)

Net investment income

 

 

77,711

 

 

 

70,970

 

 

 

2,700

 

 

 

4,041

 

Net realized investment gains

 

 

8,375

 

 

 

6,920

 

 

 

1,455

 

 

 

 

 

 

 

1,498,620

 

 

 

1,371,874

 

 

 

122,968

 

 

 

3,778

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

447,027

 

 

 

422,664

 

 

 

19,884

 

 

 

4,479

 

Premiums retained by agents

 

 

429,086

 

 

 

429,086

 

 

 

 

 

 

 

Other operating expenses

 

 

222,348

 

 

 

194,129

 

 

 

18,236

 

 

 

9,983

 

Provision for policy losses and other claims

 

 

109,130

 

 

 

43,848

 

 

 

65,282

 

 

 

 

Depreciation and amortization

 

 

32,884

 

 

 

31,061

 

 

 

1,785

 

 

 

38

 

Premium taxes

 

 

16,740

 

 

 

14,699

 

 

 

2,041

 

 

 

 

Interest

 

 

11,908

 

 

 

3,574

 

 

 

 

 

 

8,334

 

 

 

 

1,269,123

 

 

 

1,139,061

 

 

 

107,228

 

 

 

22,834

 

Income (loss) before income taxes

 

$

229,497

 

 

$

232,813

 

 

$

15,740

 

 

$

(19,056

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

June 30, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

661,582

 

 

$

548,616

 

 

$

112,966

 

 

$

 

Agent premiums

 

 

559,004

 

 

 

559,004

 

 

 

 

 

 

 

Information and other

 

 

208,752

 

 

 

206,095

 

 

 

2,924

 

 

 

(267

)

Net investment income

 

 

56,334

 

 

 

51,737

 

 

 

2,401

 

 

 

2,196

 

Net realized investment gains

 

 

5,485

 

 

 

3,588

 

 

 

1,897

 

 

 

 

 

 

 

1,491,157

 

 

 

1,369,040

 

 

 

120,188

 

 

 

1,929

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

448,974

 

 

 

427,049

 

 

 

19,066

 

 

 

2,859

 

Premiums retained by agents

 

 

439,550

 

 

 

439,550

 

 

 

 

 

 

 

Other operating expenses

 

 

228,935

 

 

 

202,383

 

 

 

18,062

 

 

 

8,490

 

Provision for policy losses and other claims

 

 

113,619

 

 

 

44,304

 

 

 

69,315

 

 

 

 

Depreciation and amortization

 

 

31,058

 

 

 

29,343

 

 

 

1,677

 

 

 

38

 

Premium taxes

 

 

17,049

 

 

 

15,102

 

 

 

1,947

 

 

 

 

Interest

 

 

10,004

 

 

 

1,667

 

 

 

 

 

 

8,337

 

 

 

 

1,289,189

 

 

 

1,159,398

 

 

 

110,067

 

 

 

19,724

 

Income (loss) before income taxes

$

201,968

$

209,642

$

10,121

$

(17,795

)

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

June 30, 2019

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

1,182,220

 

 

$

955,114

 

 

$

227,106

 

 

$

 

Agent premiums

 

 

1,045,384

 

 

 

1,045,384

 

 

 

 

 

 

 

Information and other

 

 

373,561

 

 

 

367,870

 

 

 

6,219

 

 

 

(528

)

Net investment income

 

 

159,979

 

 

 

141,023

 

 

 

5,432

 

 

 

13,524

 

Net realized investment gains

 

 

41,057

 

 

 

34,665

 

 

 

6,392

 

 

 

 

 

 

 

2,802,201

 

 

 

2,544,056

 

 

 

245,149

 

 

 

12,996

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

858,639

 

 

 

803,795

 

 

 

39,504

 

 

 

15,340

 

Premiums retained by agents

 

 

825,693

 

 

 

825,693

 

 

 

 

 

 

 

Other operating expenses

 

 

418,795

 

 

 

362,770

 

 

 

38,054

 

 

 

17,971

 

Provision for policy losses and other claims

 

 

206,842

 

 

 

80,020

 

 

 

126,822

 

 

 

 

Depreciation and amortization

 

 

65,818

 

 

 

62,223

 

 

 

3,519

 

 

 

76

 

Premium taxes

 

 

31,403

 

 

 

27,678

 

 

 

3,725

 

 

 

 

Interest

 

 

23,844

 

 

 

7,057

 

 

 

 

 

 

16,787

 

 

 

 

2,431,034

 

 

 

2,169,236

 

 

 

211,624

 

 

 

50,174

 

Income (loss) before income taxes

 

$

371,167

 

 

$

374,820

 

 

$

33,525

 

 

$

(37,178

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

June 30, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

1,205,460

 

 

$

982,768

 

 

$

222,692

 

 

$

 

Agent premiums

 

 

1,086,718

 

 

 

1,086,718

 

 

 

 

 

 

 

Information and other

 

 

397,410

 

 

 

392,116

 

 

 

5,826

 

 

 

(532

)

Net investment income

 

 

99,126

 

 

 

93,137

 

 

 

4,989

 

 

 

1,000

 

Net realized investment (losses) gains

 

 

(169

)

 

 

(234

)

 

 

65

 

 

 

 

 

 

 

2,788,545

 

 

 

2,554,505

 

 

 

233,572

 

 

 

468

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

862,616

 

 

 

820,675

 

 

 

37,818

 

 

 

4,123

 

Premiums retained by agents

 

 

856,187

 

 

 

856,187

 

 

 

 

 

 

 

Other operating expenses

 

 

447,415

 

 

 

393,232

 

 

 

37,479

 

 

 

16,704

 

Provision for policy losses and other claims

 

 

214,199

 

 

 

82,785

 

 

 

131,414

 

 

 

 

Depreciation and amortization

 

 

60,805

 

 

 

57,460

 

 

 

3,269

 

 

 

76

 

Premium taxes

 

 

33,063

 

 

 

29,492

 

 

 

3,571

 

 

 

 

Interest

 

 

19,227

 

 

 

2,651

 

 

 

 

 

 

16,576

 

 

 

 

2,493,512

 

 

 

2,242,482

 

 

 

213,551

 

 

 

37,479

 

Income (loss) before income taxes

 

$

295,033

 

 

$

312,023

 

 

$

20,021

 

 

$

(37,011

)

First American Financial Corporation

 

Reconciliation of Pretax Margins and Earnings per Diluted Share

 

Excluding Net Realized Investment Gains and Losses ("NRIG(L)")

 

(in thousands, except margin and per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,498,620

 

 

$

1,491,157

 

 

$

2,802,201

 

 

$

2,788,545

 

Less: NRIG(L)

 

 

8,375

 

 

 

5,485

 

 

 

41,057

 

 

 

(169

)

Total revenues excluding NRIG(L)

 

$

1,490,245

 

 

$

1,485,672

 

 

$

2,761,144

 

 

$

2,788,714

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

229,497

 

 

$

201,968

 

 

$

371,167

 

 

$

295,033

 

Less: NRIG(L)

 

 

8,375

 

 

 

5,485

 

 

 

41,057

 

 

 

(169

)

Pretax income excluding NRIG(L)

 

$

221,122

 

 

$

196,483

 

 

$

330,110

 

 

$

295,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

15.3

%

 

 

13.5

%

 

 

13.2

%

 

 

10.6

%

Less: Pretax margin impact of NRIG(L)

 

 

0.5

%

 

 

0.3

%

 

 

1.2

%

 

 

---

%

Pretax margin excluding NRIG(L)

 

 

14.8

%

 

 

13.2

%

 

 

12.0

%

 

 

10.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share (EPS)

 

$

1.64

 

 

$

1.37

 

 

$

2.61

 

 

$

2.05

 

Less: EPS impact of NRIG(L)

 

 

0.06

 

 

 

0.04

 

 

 

0.29

 

 

 

---

 

EPS excluding NRIG(L)

 

$

1.58

 

 

$

1.33

 

 

$

2.32

 

 

$

2.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title Insurance and Services Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,371,874

 

 

$

1,369,040

 

 

$

2,544,056

 

 

$

2,554,505

 

Less: NRIG(L)

 

 

6,920

 

 

 

3,588

 

 

 

34,665

 

 

 

(234

)

Total revenues excluding NRIG(L)

 

$

1,364,954

 

 

$

1,365,452

 

 

$

2,509,391

 

 

$

2,554,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

232,813

 

 

$

209,642

 

 

$

374,820

 

 

$

312,023

 

Less: NRIG(L)

 

 

6,920

 

 

 

3,588

 

 

 

34,665

 

 

 

(234

)

Pretax income excluding NRIG(L)

 

$

225,893

 

 

$

206,054

 

 

$

340,155

 

 

$

312,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

17.0

%

 

 

15.3

%

 

 

14.7

%

 

 

12.2

%

Less: Pretax margin impact of NRIG(L)

 

 

0.5

%

 

 

0.2

%

 

 

1.1

%

 

 

---

%

Pretax margin excluding NRIG(L)

 

 

16.5

%

 

 

15.1

%

 

 

13.6

%

 

 

12.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Insurance Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

122,968

 

 

$

120,188

 

 

$

245,149

 

 

$

233,572

 

Less: NRIG(L)

 

 

1,455

 

 

 

1,897

 

 

 

6,392

 

 

 

65

 

Total revenues excluding NRIG(L)

 

$

121,513

 

 

$

118,291

 

 

$

238,757

 

 

$

233,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

15,740

 

 

$

10,121

 

 

$

33,525

 

 

$

20,021

 

Less: NRIG(L)

 

 

1,455

 

 

 

1,897

 

 

 

6,392

 

 

 

65

 

Pretax income excluding NRIG(L)

 

$

14,285

 

 

$

8,224

 

 

$

27,133

 

 

$

19,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

12.8

%

 

 

8.4

%

 

 

13.7

%

 

 

8.6

%

Less: Pretax margin impact of NRIG(L)

 

 

1.0

%

 

 

1.4

%

 

 

2.3

%

 

 

0.1

%

Pretax margin excluding NRIG(L)

 

 

11.8

%

 

 

7.0

%

 

 

11.4

%

 

 

8.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: Beginning in the first quarter of 2018, the company adopted new accounting guidance, which requires investments in equity securities to be measured at fair value, with changes in fair value recognized through net income rather than through the balance sheet as previously required. Totals may not sum due to rounding.

 

 

 

First American Financial Corporation

 

Expense and Success Ratio Reconciliation

 

Title Insurance and Services Segment

 

($ in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total revenues

 

$

1,371,874

 

 

$

1,369,040

 

 

$

2,544,056

 

 

$

2,554,505

 

Less: Net realized investment gains (losses)

 

 

6,920

 

 

 

3,588

 

 

 

34,665

 

 

 

(234

)

Net investment income

 

 

70,970

 

 

 

51,737

 

 

 

141,023

 

 

 

93,137

 

Premiums retained by agents

 

 

429,086

 

 

 

439,550

 

 

 

825,693

 

 

 

856,187

 

Net operating revenues

 

$

864,898

 

 

$

874,165

 

 

$

1,542,675

 

 

$

1,605,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel and other operating expenses

 

$

616,793

 

 

$

629,432

 

 

$

1,166,565

 

 

$

1,213,907

 

Ratio (% net operating revenues)

 

 

71.3

%

 

 

72.0

%

 

 

75.6

%

 

 

75.6

%

Ratio (% total revenues)

 

 

45.0

%

 

 

46.0

%

 

 

45.9

%

 

 

47.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net operating revenues

 

$

(9,267

)

 

 

 

 

 

$

(62,740

)

 

 

 

 

Change in personnel and other operating expenses

 

 

(12,639

)

 

 

 

 

 

 

(47,342

)

 

 

 

 

Success Ratio(1)

 

 

136

%

 

 

 

 

 

 

75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Change in personnel and other operating expenses divided by change in net operating revenues.

First American Financial Corporation

 

Supplemental Direct Title Insurance Order Information(1)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q219

 

 

Q119

 

 

Q418

 

 

Q318

 

 

Q218

 

Open Orders per Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

2,251

 

 

 

1,907

 

 

 

1,611

 

 

 

2,067

 

 

 

2,315

 

Refinance

 

 

1,408

 

 

 

1,001

 

 

 

763

 

 

 

937

 

 

 

998

 

Refinance as % of residential orders

 

 

38

%

 

 

34

%

 

 

32

%

 

 

31

%

 

 

30

%

Commercial

 

 

515

 

 

 

491

 

 

 

471

 

 

 

509

 

 

 

562

 

Default and other

 

 

454

 

 

 

335

 

 

 

368

 

 

 

441

 

 

 

450

 

Total open orders per day

 

 

4,628

 

 

 

3,734

 

 

 

3,213

 

 

 

3,954

 

 

 

4,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closed Orders per Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

1,626

 

 

 

1,205

 

 

 

1,413

 

 

 

1,647

 

 

 

1,718

 

Refinance

 

 

854

 

 

 

605

 

 

 

603

 

 

 

674

 

 

 

729

 

Refinance as % of residential orders

 

 

34

%

 

 

33

%

 

 

30

%

 

 

29

%

 

 

30

%

Commercial

 

 

301

 

 

 

271

 

 

 

330

 

 

 

295

 

 

 

311

 

Default and other

 

 

291

 

 

 

392

 

 

 

456

 

 

 

313

 

 

 

308

 

Total closed orders per day

 

 

3,072

 

 

 

2,474

 

 

 

2,802

 

 

 

2,929

 

 

 

3,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Revenue per Order (ARPO)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

$

2,560

 

 

$

2,430

 

 

$

2,446

 

 

$

2,473

 

 

$

2,483

 

Refinance

 

 

1,128

 

 

 

1,119

 

 

 

1,093

 

 

 

1,045

 

 

 

985

 

Commercial

 

 

9,356

 

 

 

8,960

 

 

 

11,153

 

 

 

9,886

 

 

 

9,277

 

Default and other

 

 

358

 

 

 

223

 

 

 

245

 

 

 

389

 

 

 

314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ARPO

 

$

2,620

 

 

$

2,475

 

 

$

2,824

 

 

$

2,667

 

 

$

2,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Days

 

64

 

 

61

 

 

63

 

 

63

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) U.S. operations only.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals may not sum due to rounding.

 

 

View Comments and Join the Discussion!