<![CDATA[First American Financial Corporation - All News]]> http://www.5suoz.com/news/first-american-financial-corporation-all-news.xml <![CDATA[Florida and Declining Fraud Risk>]]> http://www.5suoz.com/news/2019/florida-and-declining-fraud-risk-20190731.html First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the First American Loan Application Defect Index for June 2019, which estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The Defect Index reflects estimated mortgage loan defect rates over time, by geography and loan type. It is available as an interactive tool that can be tailored to showcase trends by category, including amortization type, lien position, loan purpose, property and transaction types, and can provide state- and market-specific comparisons of mortgage loan defect levels. 

June 2019 Loan Application Defect Index

  • The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications decreased by 7.0 percent compared with the previous month.

  • Compared to June 2018, the Defect Index increased by 3.9 percent.

  • The Defect Index is down 21.6 percent from the high point of risk in October 2013.

  • The Defect Index for refinance transactions decreased by 6.5 percent compared with the previous month, and is up 4.3 percent compared with a year ago.

  • The Defect Index for purchase transactions decreased by 7.8 percent compared with the previous month, and is up 3.8 percent compared with a year ago.   

Chief Economist Analysis: Fraud Risk for Purchase Transactions Declines for Third Straight Month

“This month, the Loan Application Defect Index for purchase transactions continued its downward trend, declining 7.8 percent in June compared with the month before, the third consecutive month defect risk in purchase transactions has fallen,” said Mark Fleming, chief economist at First American. “The Defect Index for refinance transactions also fell 6.5 percent compared with the previous month. The overall Defect Index, which includes both purchase and refinance transactions, fell 7.0 percent compared with last month, but remains 3.9 percent higher than one year ago. Yet, is declining loan application misrepresentation, defect and fraud risk isolated to a few markets, or is the trend more geographically broad based?” 

Florida Cities Lead the Charge

“The Defect Index also measures loan application misrepresentation, defect and fraud risk over time in 50 of the largest markets in the U.S.,” said Fleming. “Florida cities claimed four of the top six spots among the top cities where fraud risk declined the most on an annual basis: Jacksonville (-15.1 percent), Tampa (-11.5 percent), Orlando (-11.1 percent), and Miami (-7.3 percent). At the state level, Florida ranked second for the greatest year-over-year decline in fraud risk (-6.7 percent). 

“This is a deviation from the norm, as Florida has historically exhibited a relatively greater concentration of fraud risk due to some characteristics of the Florida housing market. Florida tends to have a higher percentage of investor-owned properties, which have a higher propensity for fraud risk,” said Fleming. “Indeed, according to the Defect Index in June 2019, applications for investment properties were 24 percent riskier than for owner-occupied properties, and applications for multi-unit properties, a popular purchase for investors, were 11 percent more likely to contain defects than applications for single-family homes.

“Another possible explanation for why transactions involving investor-owned properties tend to carry greater fraud risk is that investors can claim they are purchasing a property as a second home (to capitalize on lower rates), when they actually plan to rent it out as an investment property,” said Fleming. “High levels of income misrepresentation and undisclosed mortgage debt have also been a reason for the particularly high levels of fraud risk concentrated in Florida.”

“Additionally, according to data from DataTree by First American, the number of condo existing-home sales has fallen in Miami, Orlando, and Tampa compared with last year. Statewide, condo existing-home sales in Florida have fallen nearly 14 percent compared with one year ago, which is counter to the national trend,” said Fleming. “Loan applications for condos and multi-family properties have historically been riskier than single-family properties, so fewer condo and multi-family transactions may help explain the decline in fraud risk in Florida.

“While there are several possible explanations for the decline in fraud in Florida markets, there is one phenomenon that is working to reduce fraud in every market – the decline of the sellers’ market,” said Fleming. “As mortgage rates fall and the strong labor markets persists, potential home buyers feel less pressure to misrepresent information on a loan application. As the saying goes – a rising tide lifts all boats – and Florida is getting a bit of an extra lift this month.” 

June 2019 State Highlights

  • The five states with a year-over-year increase in defect frequency are: Nebraska (+34.8 percent), Iowa (+25.7 percent), New York (+25.3 percent), Pennsylvania (+19.7 percent), and Rhode Island (+19.1 percent).

  • The five states with a year-over-year decrease in defect frequency are: Arkansas (-10.3 percent), Florida (-6.7 percent), Vermont (-5.1 percent), Utah (-4.8 percent), and Arizona (-4.0 percent). 

June 2019 Local Market Highlights

  • Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with the greatest year-over-year increase in defect frequency are: Buffalo, N.Y. (+31.1 percent), Pittsburgh (+25.9 percent), New York (+16.9 percent), New Orleans (+16.9 percent), and San Jose, Calif. (+14.5 percent).

  • Among the largest 50 Core Based Statistical Areas (CBSAs), the five markets with year-over-year decrease in defect frequency are: Houston (-16.7 percent), Jacksonville, Fla. (-15.9 percent), San Diego (-15.1 percent), Tampa, Fla. (-11.5 percent), and Orlando, Fla. (-11.1 percent). 

    Next Release

    The next release of the First American Loan Application Defect Index will take place the week of August 26, 2019. 

    Methodology

    The methodology statement for the First American Loan Application Defect Index is available at http://www.5suoz.com/economics/defect-index

    Disclaimer

    Opinions, estimates, forecasts and other views contained in this page are those of First American’s chief economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2019 by First American. Information from this page may be used with proper attribution. 

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.5suoz.com

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Wed, 31 Jul 2019 07:00:00 GMT
<![CDATA[House-Buying Power May Reach Record>]]> http://www.5suoz.com/news/2019/house-buying-power-may-reach-record-20190729.html First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today released the May 2019 First American Real House Price Index (RHPI). The RHPI measures the price changes of single-family properties throughout the U.S. adjusted for the impact of income and interest rate changes on consumer house-buying power over time at national, state and metropolitan area levels. Because the RHPI adjusts for house-buying power, it also serves as a measure of housing affordability. 

May 2019 Real House Price Index

  • Real house prices decreased 0.7 percent between April 2019 and May 2019.

  • Real house prices declined 3.7 percent between May 2018 and May 2019.

  • Consumer house-buying power, how much one can buy based on changes in income and interest rates, increased 1.3 percent between April 2019 and May 2019, and increased 9.3 percent year over year.

  • Average household income has increased 2.8 percent since May 2018 and 56.4 percent since January 2000.

  • Real house prices are 17.0 percent less expensive than in January 2000.

  • While unadjusted house prices are now 3.2 percent above the housing boom peak in 2006, real, house-buying power-adjusted house prices remain 41.1 percent below their 2006 housing boom peak. 

Chief Economist Analysis: Mortgage Rates Below Four Percent Likely in 2019

“Later this week, the Federal Open Market Committee (FOMC) will convene and likely announce a rate cut, according to experts. The first Fed rate cut since December 2008 will trigger industry and media speculation about mortgage rates declining further,” said Mark Fleming, chief economist at First American. “While changes to the federal funds rate don't directly influence mortgage rates, a rate cut will indicate concern about possible economic weakness and that may increase demand for long-term Treasury bonds, which mortgage rates follow closely.

“The consensus among economists is that the 30-year, fixed-rate mortgage will decline from its first quarter 2019 rate of 4.4 percent to an average of 3.9 percent in 2019,” said Fleming. “Additionally, the expectation of lower rates comes during the longest economic boom in history and a continued healthy labor market, prompting the question: what do low mortgage rates and a still booming economy mean for housing?” 

Mortgage Rates and Income Growth Boosting Consumer House-Buying Power

Fannie Mae forecasts that the 30-year, fixed-rate mortgage will fall from its July 2019 rate of 3.8 percent to 3.7 percent for the remainder of the year, boosting affordability for home buyers,” said Fleming. “The First American Real House Price Index (RHPI) adjusts home prices based on changes to consumer house-buying power, how much one can buy based on household income and the 30-year, fixed-rate mortgage. Shifts in income and interest rates either increase or decrease consumer house-buying power or affordability. When incomes rise and/or mortgage rates fall, consumer house-buying power increases. 

“If the mortgage rate declines from its current July 2019 level of 3.8 percent to the expected level of 3.7 percent in the third quarter of 2019, assuming a 5 percent down payment, and the July 2019 average household income of $65,800, house-buying power increases a modest 0.1 percent, from $410,000 to $414,000,” said Fleming. “In this hypothetical 3.7 percent mortgage rate environment, consumer-house buying power would be 13.3 percent higher than it was in July 2018, when the 30-year, fixed mortgage rate was 4.5 percent. In fact, it would be the highest house-buying power in the history of the series, which dates to the year 2000.

“It’s no secret that declining mortgage rates increase affordability. However, mortgage rates have been below 3.7 percent before. Indeed, in 2012, the 30-year, fixed-rate mortgage hit a low of 3.3 percent,” said Fleming. “Yet, house-buying power was lower than it is today. The reason? The other half of the house-buying power equation: income.

“Our estimate of average household income, based on Census and Bureau of Labor Statistics data, is at the highest level since 2000. Average nominal household incomes are nearly 57 percent higher today than in January 2000,” said Fleming. “Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000. While rates are expected to remain low, the fate of the labor market will determine the direction of the other half of the house-buying power equation and, ultimately, affordability.” 

May Real House Price State Highlights

  • The four states with the greatest year-over-year increase in the RHPI are: Wisconsin (+1.5 percent), Maryland (+0.2 percent), New Hampshire (+0.2 percent), and Rhode Island (+0.1 percent).

  • The five states with the greatest year-over-year decrease in the RHPI are: North Dakota (-8.5 percent), Wyoming (-8.0 percent), California (-7.1 percent), Arkansas (-5.8 percent), and New Mexico (-5.7 percent). 

    May 2019 Real House Price Local Market Highlights

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year increase in the RHPI are: Providence, R.I. (+2.2 percent), Milwaukee (+1.1 percent), Columbus, Ohio (+0.7 percent), Detroit (+0.7 percent), and Las Vegas (+0.1 percent).

  • Among the Core Based Statistical Areas (CBSAs) tracked by First American, the five markets with the greatest year-over-year decrease in the RHPI are: San Jose, Calif. (-13.9 percent), Seattle (-9.4 percent), San Francisco (-7.8 percent), Portland, Ore. (-7.7 percent), and Riverside, Calif. (-7.0 percent). 

    Next Release

    The next release of the First American Real House Price Index will take place the week of August 26, 2019 for June 2019 data. 

    Sources:

Methodology

The methodology statement for the First American Real House Price Index is available at http://www.5suoz.com/economics/real-house-price-index

Disclaimer

Opinions, estimates, forecasts and other views contained in this page are those of First American’s Chief Economist, do not necessarily represent the views of First American or its management, should not be construed as indicating First American’s business prospects or expected results, and are subject to change without notice. Although the First American Economics team attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. © 2019 by First American. Information from this page may be used with proper attribution. 

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.5suoz.com.

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Mon, 29 Jul 2019 07:00:00 GMT
<![CDATA[Second Quarter 2019 Results>]]> http://www.5suoz.com/news/2019/second-quarter-2019-results-20190725.html 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.

Download the complete press release as a PDF

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.5suoz.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.5suoz.com.

Website Disclosure

First American posts information of interest to investors at www.5suoz.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

%