FAF First American Corp

—Reports Earnings of $1.65 per Diluted Share—

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 third quarter ended Sept. 30, 2019.

Current Quarter Highlights

• Total revenue of $1.7 billion, up 8 percent compared with last year
  • Closed orders up 21 percent, driven by an 89 percent increase in refinance orders
  • Average revenue per order down 6 percent, driven by a shift in the mix to lower-premium refinance transactions
• Title Insurance and Services segment pretax margin of 16.5 percent
  • 16.4 percent excluding net realized investment gains
• Commercial revenues of $199.6 million, up 9 percent compared with last year
• Title Insurance and Services segment investment income of $72.0 million, up 18 percent compared with last year
• Specialty Insurance segment pretax margin of 8.5 percent
  • 7.8 percent excluding net realized investment gains
• Debt-to-capital ratio of 18.5 percent
• Cash flow from operations of $310.6 million, compared with $230.8 million last year

Selected Financial Information ($ in millions, except per share data)

 

 

Three Months Ended

 

 

September 30,

 

 

2019

 

 

2018

Total revenue

 

$

1,671.2

 

 

$

1,542.2

Income before taxes

 

 

245.3

 

 

 

195.6

 

 

 

 

 

 

 

 

Net income

 

$

187.2

 

 

$

151.5

Net income per diluted share

 

 

1.65

 

 

1.34

Total revenue for the third quarter of 2019 was $1.7 billion, an increase of 8 percent compared with the third quarter of 2018. Net income in the current quarter was $187.2 million, or $1.65 per diluted share, compared with net income of $151.5 million, or $1.34 per diluted share, in the third quarter of 2018. Net realized investment gains in the current quarter were $1.5 million, or 1 cent per diluted share, compared with net realized investment gains of $11.1 million, or 8 cents per diluted share, last year.

“The company delivered another good quarter, as increased transactions across our businesses drove strong growth in revenue and earnings,” said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. “In the purchase market, open order growth turned positive for the first time since early 2018, and our commercial business continued its strong performance. Lower interest rates drove substantial growth in our refinance business. Effective expense management and higher investment income, coupled with the broad-based revenue growth across key markets, propelled the company’s strong financial performance this quarter.

“We are optimistic heading into the fourth quarter given current purchase and refinance order trends as well as a robust commercial pipeline. Although recent Fed funds rate reductions will impact our investment income, we expect that current business conditions and the efficiency of our operations will enable us to deliver strong financial results in the final quarter of 2019.”

Title Insurance and Services ($ in millions, except average revenue per order)

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

Total revenues

 

$

1,540.7

 

 

$

1,413.8

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

253.6

 

 

$

206.5

 

Pretax margin

 

 

16.5

%

 

 

14.6

%

 

 

 

 

 

 

 

 

 

Title open orders(1)

 

 

317,300

 

 

 

249,100

 

Title closed orders(1)

 

 

224,100

 

 

 

184,500

 

 

 

 

 

 

 

 

 

 

U.S. Commercial

 

 

 

 

 

 

 

 

Total revenues

 

$

199.6

 

 

$

183.5

 

Open orders

 

 

33,500

 

 

 

32,100

 

Closed orders

 

 

18,500

 

 

 

18,600

 

Average revenue per order

 

$

10,800

 

 

$

9,900

 

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

Total revenues for the Title Insurance and Services segment during the third quarter were $1.5 billion, up 9 percent compared with the same quarter of 2018. Direct premiums and escrow fees were higher by 14 percent compared with the third quarter of 2018, driven by a 21 percent increase in closed orders and partly offset by a 6 percent decrease in the average revenue per direct title order. The decline in the average revenue per direct title order to $2,513 was due to a shift in the mix of direct orders closed to lower-premium refinance transactions, partially offset by an increase in the average revenue per direct title order from commercial transactions and higher residential real estate values. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were up 7 percent in the current quarter as compared with last year.

Information and other revenues were $205.3 million this quarter, up $9.3 million, or 5 percent, compared with the third quarter of 2018. The increase was primarily due to growth in real estate transactions that led to higher demand for our title information products.

Investment income was $72.0 million in the third quarter, up $11.2 million, or 18 percent, benefiting from both an increase in average balances and higher short-term interest rates that led to an increase in interest income from the company’s investment portfolio and cash balances. Net realized investment gains totaled $0.5 million in the current quarter, compared with gains of $9.1 million in the third quarter of 2018.

Personnel costs were $447.8 million in the third quarter, up $22.2 million, or 5 percent, compared with the same quarter of 2018. This increase was primarily attributable to higher incentive compensation expense driven by improved financial results.

Other operating expenses were $218.7 million in the third quarter, an increase of $17.8 million, or 9 percent, compared with the third quarter of 2018. The increase was largely attributable to higher production-related costs driven by growth in transaction activity, and to $7.0 million in lease impairments that were primarily due to consolidation of office locations related to a previous acquisition.

The provision for policy losses and other claims was $50.5 million in the third quarter, or 4.0 percent of title premiums and escrow fees, compared with a 4.0 percent loss provision rate in the third 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 $29.8 million in the third quarter, down $0.2 million compared with the same period last year.

Pretax income for the Title Insurance and Services segment was $253.6 million in the third quarter, compared with $206.5 million in the third quarter of 2018. Pretax margin was 16.5 percent in the current quarter, compared with 14.6 percent last year. Excluding the impact of net realized investment gains, the pretax margin was 16.4 percent this year, compared with 14.1 percent last year.

Specialty Insurance ($ in millions)

 

 

Three Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

Total revenues

 

$

129.2

 

 

$

124.2

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

11.0

 

 

$

6.2

 

Pretax margin

 

 

8.5

%

 

 

5.0

%

Total revenues for the Specialty Insurance segment were $129.2 million in the third quarter, an increase of 4 percent compared with the third quarter of 2018. The home warranty business continued to grow revenues, while holding claims expense flat. The loss ratio in both our home warranty and property and casualty businesses declined, resulting in an improved loss ratio for the segment to 60.9 percent this quarter, compared with 65.4 percent in the prior year. Pretax margin for the segment was 8.5 percent in the current quarter, compared with 5.0 percent in the third quarter of last year. Excluding the impact of net realized investment gains, the segment’s current quarter pretax margin was 7.8 percent, compared with 3.4 percent last year.

Teleconference/Webcast

First American’s third-quarter 2019 results will be discussed in more detail on Thursday, Oct. 24, 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 Nov. 7, 2019, by dialing 201-612-7415 and using the conference ID 13695499. 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; regulatory oversight and 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 June 30, 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; net operating revenues; and adjusted revenues, adjusted pretax income, adjusted earnings per share, 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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total revenues

 

$

1,671,196

 

 

$

1,542,186

 

 

$

4,473,397

 

 

$

4,330,731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

245,338

 

 

$

195,587

 

 

$

616,505

 

 

$

490,620

 

Income tax expense

 

 

57,171

 

 

 

44,126

 

 

 

131,263

 

 

 

107,896

 

Net income

 

 

188,167

 

 

 

151,461

 

 

 

485,242

 

 

 

382,724

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

985

 

 

 

(19

)

 

 

1,830

 

 

 

(123

)

Net income attributable to the Company

 

$

187,182

 

 

$

151,480

 

 

$

483,412

 

 

$

382,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.65

 

 

$

1.34

 

 

$

4.28

 

 

$

3.40

 

Diluted

 

$

1.65

 

 

$

1.34

 

 

$

4.26

 

 

$

3.38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.42

 

 

$

0.42

 

 

$

1.26

 

 

$

1.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

113,163

 

 

 

112,722

 

 

 

112,983

 

 

 

112,541

 

Diluted

 

 

113,741

 

 

 

113,365

 

 

 

113,509

 

 

 

113,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Title Insurance Segment Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title orders opened(1)

 

 

317,300

 

 

 

249,100

 

 

 

841,300

 

 

 

779,400

 

Title orders closed(1)

 

 

224,100

 

 

 

184,500

 

 

 

571,600

 

 

 

554,300

 

Paid title claims

 

$

38,451

 

 

$

41,073

 

 

$

119,738

 

 

$

122,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

First American Financial Corporation

Selected Consolidated Balance Sheet Information

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

2019

 

 

2018

Cash and cash equivalents

 

$

1,710,999

 

 

$

1,467,129

Investments

 

 

6,553,134

 

 

 

6,225,520

Goodwill and other intangible assets, net

 

 

1,242,620

 

 

 

1,253,538

Total assets

 

 

11,804,092

 

 

 

10,630,635

Reserve for claim losses

 

 

1,054,724

 

 

 

1,042,679

Notes and contracts payable

 

 

728,332

 

 

 

732,019

Total stockholders’ equity

 

$

4,242,141

 

 

$

3,741,881

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

September 30, 2019

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

728,610

 

 

$

606,812

 

 

$

121,798

 

 

$

—

 

Agent premiums

 

 

656,154

 

 

 

656,154

 

 

 

—

 

 

 

—

 

Information and other

 

 

208,297

 

 

 

205,282

 

 

 

3,270

 

 

 

(255

)

Net investment income

 

 

76,628

 

 

 

72,044

 

 

 

3,064

 

 

 

1,520

 

Net realized investment gains

 

 

1,507

 

 

 

449

 

 

 

1,058

 

 

 

—

 

 

 

 

1,671,196

 

 

 

1,540,741

 

 

 

129,190

 

 

 

1,265

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

470,683

 

 

 

447,795

 

 

 

20,742

 

 

 

2,146

 

Premiums retained by agents

 

 

518,824

 

 

 

518,824

 

 

 

—

 

 

 

—

 

Other operating expenses

 

 

248,252

 

 

 

218,687

 

 

 

19,230

 

 

 

10,335

 

Provision for policy losses and other claims

 

 

124,683

 

 

 

50,519

 

 

 

74,164

 

 

 

—

 

Depreciation and amortization

 

 

31,719

 

 

 

29,822

 

 

 

1,859

 

 

 

38

 

Premium taxes

 

 

19,484

 

 

 

17,310

 

 

 

2,174

 

 

 

—

 

Interest

 

 

12,213

 

 

 

4,214

 

 

 

—

 

 

 

7,999

 

 

 

 

1,425,858

 

 

 

1,287,171

 

 

 

118,169

 

 

 

20,518

 

Income (loss) before income taxes

 

$

245,338

 

 

$

253,570

 

 

$

11,021

 

 

$

(19,253

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

September 30, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

649,375

 

 

$

532,769

 

 

$

116,606

 

 

$

—

 

Agent premiums

 

 

615,113

 

 

 

615,113

 

 

 

—

 

 

 

—

 

Information and other

 

 

198,680

 

 

 

195,963

 

 

 

2,981

 

 

 

(264

)

Net investment income

 

 

67,874

 

 

 

60,871

 

 

 

2,573

 

 

 

4,430

 

Net realized investment gains

 

 

11,144

 

 

 

9,125

 

 

 

2,019

 

 

 

—

 

 

 

 

1,542,186

 

 

 

1,413,841

 

 

 

124,179

 

 

 

4,166

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

449,839

 

 

 

425,565

 

 

 

19,416

 

 

 

4,858

 

Premiums retained by agents

 

 

485,621

 

 

 

485,621

 

 

 

—

 

 

 

—

 

Other operating expenses

 

 

227,670

 

 

 

200,932

 

 

 

18,705

 

 

 

8,033

 

Provision for policy losses and other claims

 

 

122,196

 

 

 

45,916

 

 

 

76,280

 

 

 

—

 

Depreciation and amortization

 

 

31,729

 

 

 

29,978

 

 

 

1,713

 

 

 

38

 

Premium taxes

 

 

18,774

 

 

 

16,910

 

 

 

1,864

 

 

 

—

 

Interest

 

 

10,770

 

 

 

2,380

 

 

 

—

 

 

 

8,390

 

 

 

 

1,346,599

 

 

 

1,207,302

 

 

 

117,978

 

 

 

21,319

 

Income (loss) before income taxes

$

195,587

$

206,539

$

6,201

$

(17,153

)

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

September 30, 2019

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

1,910,830

 

 

$

1,561,926

 

 

$

348,904

 

 

$

—

 

Agent premiums

 

 

1,701,538

 

 

 

1,701,538

 

 

 

—

 

 

 

—

 

Information and other

 

 

581,858

 

 

 

573,150

 

 

 

9,490

 

 

 

(782

)

Net investment income

 

 

236,607

 

 

 

213,067

 

 

 

8,496

 

 

 

15,044

 

Net realized investment gains

 

 

42,564

 

 

 

35,114

 

 

 

7,450

 

 

 

—

 

 

 

 

4,473,397

 

 

 

4,084,795

 

 

 

374,340

 

 

 

14,262

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,329,322

 

 

 

1,251,590

 

 

 

60,246

 

 

 

17,486

 

Premiums retained by agents

 

 

1,344,517

 

 

 

1,344,517

 

 

 

—

 

 

 

—

 

Other operating expenses

 

 

667,047

 

 

 

581,455

 

 

 

57,284

 

 

 

28,308

 

Provision for policy losses and other claims

 

 

331,525

 

 

 

130,539

 

 

 

200,986

 

 

 

—

 

Depreciation and amortization

 

 

97,537

 

 

 

92,043

 

 

 

5,379

 

 

 

115

 

Premium taxes

 

 

50,887

 

 

 

44,988

 

 

 

5,899

 

 

 

—

 

Interest

 

 

36,057

 

 

 

11,271

 

 

 

—

 

 

 

24,786

 

 

 

 

3,856,892

 

 

 

3,456,403

 

 

 

329,794

 

 

 

70,695

 

Income (loss) before income taxes

 

$

616,505

 

 

$

628,392

 

 

$

44,546

 

 

$

(56,433

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

September 30, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

1,854,835

 

 

$

1,515,537

 

 

$

339,298

 

 

$

—

 

Agent premiums

 

 

1,701,831

 

 

 

1,701,831

 

 

 

—

 

 

 

—

 

Information and other

 

 

596,090

 

 

 

588,079

 

 

 

8,807

 

 

 

(796

)

Net investment income

 

 

167,000

 

 

 

154,009

 

 

 

7,561

 

 

 

5,430

 

Net realized investment gains

 

 

10,975

 

 

 

8,891

 

 

 

2,084

 

 

 

—

 

 

 

 

4,330,731

 

 

 

3,968,347

 

 

 

357,750

 

 

 

4,634

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,312,455

 

 

 

1,246,240

 

 

 

57,234

 

 

 

8,981

 

Premiums retained by agents

 

 

1,341,808

 

 

 

1,341,808

 

 

 

—

 

 

 

—

 

Other operating expenses

 

 

675,085

 

 

 

594,164

 

 

 

56,184

 

 

 

24,737

 

Provision for policy losses and other claims

 

 

336,395

 

 

 

128,700

 

 

 

207,695

 

 

 

—

 

Depreciation and amortization

 

 

92,534

 

 

 

87,438

 

 

 

4,981

 

 

 

115

 

Premium taxes

 

 

51,837

 

 

 

46,401

 

 

 

5,436

 

 

 

—

 

Interest

 

 

29,997

 

 

 

5,031

 

 

 

—

 

 

 

24,966

 

 

 

 

3,840,111

 

 

 

3,449,782

 

 

 

331,530

 

 

 

58,799

 

Income (loss) before income taxes

 

$

490,620

 

 

$

518,565

 

 

$

26,220

 

 

$

(54,165

)

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,671,196

 

 

$

1,542,186

 

 

$

4,473,397

 

 

$

4,330,731

 

Less: NRIG(L)

 

 

1,507

 

 

 

11,144

 

 

 

42,564

 

 

 

10,975

 

Total revenues excluding NRIG(L)

 

$

1,669,689

 

 

$

1,531,042

 

 

$

4,430,833

 

 

$

4,319,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

245,338

 

 

$

195,587

 

 

$

616,505

 

 

$

490,620

 

Less: NRIG(L)

 

 

1,507

 

 

 

11,144

 

 

 

42,564

 

 

 

10,975

 

Pretax income excluding NRIG(L)

 

$

243,831

 

 

$

184,443

 

 

$

573,941

 

 

$

479,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

14.7

%

 

 

12.7

%

 

 

13.8

%

 

 

11.3

%

Less: Pretax margin impact of NRIG(L)

 

 

0.1

%

 

 

0.7

%

 

 

0.8

%

 

 

0.2

%

Pretax margin excluding NRIG(L)

 

 

14.6

%

 

 

12.0

%

 

 

13.0

%

 

 

11.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share (EPS)

 

$

1.65

 

 

$

1.34

 

 

$

4.26

 

 

$

3.38

 

Less: EPS impact of NRIG(L)

 

 

0.01

 

 

 

0.08

 

 

 

0.30

 

 

 

0.08

 

EPS excluding NRIG(L)

 

$

1.64

 

 

$

1.26

 

 

$

3.96

 

 

$

3.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title Insurance and Services Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,540,741

 

 

$

1,413,841

 

 

$

4,084,795

 

 

$

3,968,347

 

Less: NRIG(L)

 

 

449

 

 

 

9,125

 

 

 

35,114

 

 

 

8,891

 

Total revenues excluding NRIG(L)

 

$

1,540,292

 

 

$

1,404,716

 

 

$

4,049,681

 

 

$

3,959,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

253,570

 

 

$

206,539

 

 

$

628,392

 

 

$

518,565

 

Less: NRIG(L)

 

 

449

 

 

 

9,125

 

 

 

35,114

 

 

 

8,891

 

Pretax income excluding NRIG(L)

 

$

253,121

 

 

$

197,414

 

 

$

593,278

 

 

$

509,674

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

16.5

%

 

 

14.6

%

 

 

15.4

%

 

 

13.1

%

Less: Pretax margin impact of NRIG(L)

 

 

0.1

%

 

 

0.5

%

 

 

0.8

%

 

 

0.2

%

Pretax margin excluding NRIG(L)

 

 

16.4

%

 

 

14.1

%

 

 

14.6

%

 

 

12.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Specialty Insurance Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

129,190

 

 

$

124,179

 

 

$

374,340

 

 

$

357,750

 

Less: NRIG(L)

 

 

1,058

 

 

 

2,019

 

 

 

7,450

 

 

 

2,084

 

Total revenues excluding NRIG(L)

 

$

128,132

 

 

$

122,160

 

 

$

366,890

 

 

$

355,666

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

11,021

 

 

$

6,201

 

 

$

44,546

 

 

$

26,220

 

Less: NRIG(L)

 

 

1,058

 

 

 

2,019

 

 

 

7,450

 

 

 

2,084

 

Pretax income excluding NRIG(L)

 

$

9,963

 

 

$

4,182

 

 

$

37,096

 

 

$

24,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

8.5

%

 

 

5.0

%

 

 

11.9

%

 

 

7.3

%

Less: Pretax margin impact of NRIG(L)

 

 

0.7

%

 

 

1.6

%

 

 

1.8

%

 

 

0.5

%

Pretax margin excluding NRIG(L)

 

 

7.8

%

 

 

3.4

%

 

 

10.1

%

 

 

6.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Total revenues

 

$

1,540,741

 

 

$

1,413,841

 

 

$

4,084,795

 

 

$

3,968,347

 

Less: Net realized investment gains

 

 

449

 

 

 

9,125

 

 

 

35,114

 

 

 

8,891

 

Net investment income

 

 

72,044

 

 

 

60,871

 

 

 

213,067

 

 

 

154,009

 

Premiums retained by agents

 

 

518,824

 

 

 

485,621

 

 

 

1,344,517

 

 

 

1,341,808

 

Net operating revenues

 

$

949,424

 

 

$

858,224

 

 

$

2,492,097

 

 

$

2,463,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel and other operating expenses

 

$

666,482

 

 

$

626,497

 

 

$

1,833,045

 

 

$

1,840,404

 

Ratio (% net operating revenues)

 

 

70.2

%

 

 

73.0

%

 

 

73.6

%

 

 

74.7

%

Ratio (% total revenues)

 

 

43.3

%

 

 

44.3

%

 

 

44.9

%

 

 

46.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net operating revenues

 

$

91,200

 

 

 

 

 

 

$

28,458

 

 

 

 

 

Change in personnel and other operating expenses

 

 

39,985

 

 

 

 

 

 

 

(7,359

)

 

 

 

 

Success Ratio(1)

 

 

44

%

 

 

 

 

 

 

-26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q319

 

 

Q219

 

 

Q119

 

 

Q418

 

 

Q318

 

Open Orders per Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

2,108

 

 

 

2,251

 

 

 

1,907

 

 

 

1,611

 

 

 

2,067

 

Refinance

 

 

1,922

 

 

 

1,408

 

 

 

1,001

 

 

 

763

 

 

 

937

 

Refinance as % of residential orders

 

 

48

%

 

 

38

%

 

 

34

%

 

 

32

%

 

 

31

%

Commercial

 

 

523

 

 

 

515

 

 

 

491

 

 

 

471

 

 

 

509

 

Default and other

 

 

405

 

 

 

454

 

 

 

335

 

 

 

368

 

 

 

441

 

Total open orders per day

 

 

4,958

 

 

 

4,628

 

 

 

3,734

 

 

 

3,213

 

 

 

3,954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Closed Orders per Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

1,639

 

 

 

1,626

 

 

 

1,205

 

 

 

1,413

 

 

 

1,647

 

Refinance

 

 

1,256

 

 

 

854

 

 

 

605

 

 

 

603

 

 

 

674

 

Refinance as % of residential orders

 

 

43

%

 

 

34

%

 

 

33

%

 

 

30

%

 

 

29

%

Commercial

 

 

289

 

 

 

301

 

 

 

271

 

 

 

330

 

 

 

295

 

Default and other

 

 

318

 

 

 

291

 

 

 

392

 

 

 

456

 

 

 

313

 

Total closed orders per day

 

 

3,502

 

 

 

3,072

 

 

 

2,474

 

 

 

2,802

 

 

 

2,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Revenue per Order (ARPO)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

$

2,528

 

 

$

2,560

 

 

$

2,430

 

 

$

2,446

 

 

$

2,473

 

Refinance

 

 

1,159

 

 

 

1,128

 

 

 

1,119

 

 

 

1,093

 

 

 

1,045

 

Commercial

 

 

10,791

 

 

 

9,356

 

 

 

8,960

 

 

 

11,153

 

 

 

9,886

 

Default and other

 

 

257

 

 

 

358

 

 

 

223

 

 

 

245

 

 

 

389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ARPO

 

$

2,513

 

 

$

2,620

 

 

$

2,475

 

 

$

2,824

 

 

$

2,667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Days

 

64

 

 

64

 

 

61

 

 

63

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) U.S. operations only.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals may not sum due to rounding.

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20191024005281/en/

Media Contact: Marcus Ginnaty Corporate Communications First American Financial Corporation 714-250-3298

Investor Contact: Craig Barberio Investor Relations First American Financial Corporation 714-250-5214