First American Financial Corporation (NYSE: FAF), a premier
provider of title, settlement and risk solutions for real estate
transactions and the leader in the digital transformation of its
industry, today announced financial results for the first quarter
ended March 31, 2024.
Current Quarter Highlights
- Earnings per diluted share of $0.45, or $0.45 per share on an
adjusted basis
- Total revenue of $1.4 billion, down 1 percent compared with
last year
- Adjusted total revenue of $1.4 billion, down 3 percent compared
with last year
- Title Insurance and Services segment investment income of $117
million, down 6 percent compared with last year
- Title Insurance and Services segment pretax margin of 5.5
percent, or 4.8 percent on an adjusted basis
- Includes a $6 million write-off of uncollectible balances
- Commercial revenues of $143 million, down 4 percent compared
with last year
- Home Warranty segment pretax margin of 19.3 percent, or 18.8
percent on an adjusted basis
- Debt-to-capital ratio of 30.3 percent, or 22.5 percent
excluding secured financings payable of $689 million
- In April, named one of the 100 Best Companies to Work For by
Great Place to Work® and Fortune Magazine for the ninth consecutive
year
Selected Financial Information
($ in millions, except per share data)
Three Months Ended
March 31,
2024
2023
Total revenue
$
1,424.6
$
1,446.1
Income before taxes
$
58.3
$
59.6
Net income
$
46.7
$
45.9
Net income per diluted share
$
0.45
$
0.44
Adjusted net income
$
46.9
$
59.2
Adjusted net income per diluted share
$
0.45
$
0.57
Total revenue for the first quarter of 2024 was $1.4 billion,
down 1 percent compared with the first quarter of 2023. Net income
in the current quarter was $47 million, or 45 cents per diluted
share, compared with net income of $46 million, or 44 cents per
diluted share, in the first quarter of 2023. Net investment gains
in the current quarter were $9 million, or 7 cents per diluted
share, compared with net investment losses of $7 million, or 5
cents per diluted share, in the first quarter of last year.
Adjusted net income in the current quarter was $47 million, or 45
cents per diluted share, compared with $59 million, or 57 cents per
diluted share, in the first quarter of last year.
“Market conditions in the real estate and mortgage industries
continued to be a challenge in the seasonally weak first quarter,”
said Ken DeGiorgio, chief executive officer at First American
Financial Corporation. “Elevated mortgage rates and low, albeit
growing, inventory levels have caused transaction volumes to remain
near historically low levels. During this period, we have
maintained our focus on managing operating expenses while
continuing to invest in long-term strategic initiatives such as
expanding our title plant assets and building technology solutions
to increase efficiency, reduce risk and enhance our customers’
experience.
"Though we believe these market challenges will persist
throughout the year, we continue to expect modest revenue growth
and title margins similar to what we achieved in 2023.
“I am pleased that our world-class workforce and culture has
been recognized as one of the 100 Best Companies to Work For by
Great Place to Work® and Fortune Magazine for the ninth consecutive
year. Though we are the leader in the digital transformation of our
industry, fundamentally we are a people business, and it is the
quality, talent and dedication of our people that ensure our
company’s long-term success.”
Title Insurance and Services ($ in millions, except
average revenue per order)
Three Months Ended
March 31,
2024
2023
Total revenues
$
1,319.8
$
1,348.6
Income before taxes
$
72.7
$
88.2
Pretax margin
5.5
%
6.5
%
Adjusted pretax margin
4.8
%
6.8
%
Title open orders(1)
155,500
172,600
Title closed orders(1)
102,700
106,600
U.S. Commercial
Total revenues
$
142.8
$
148.4
Open orders
25,800
25,600
Closed orders
14,300
14,900
Average revenue per order
$
10,000
$
9,900
(1) U.S. direct title insurance orders
only.
Total revenues for the Title Insurance and Services segment
during the first quarter were $1.3 billion, down 2 percent compared
with the same quarter of 2023. Direct premiums and escrow fees
declined 1 percent compared with the first quarter of last year,
driven by a 4 percent decline in the number of direct title orders
closed in our domestic operations, partly offset by a 3 percent
increase in the average revenue per order closed. The average
revenue per direct title order increased to $3,516, primarily
attributable to a shift in the mix from lower premium default
transactions to higher premium purchase transactions and an
increase in the average revenue per order for purchase
transactions. Agent premiums, which are recorded on approximately a
one-quarter lag relative to direct premiums, declined 5 percent in
the current quarter as compared with last year.
Information and other revenues were $217 million during the
quarter, down $4 million, or 2 percent, compared with last year.
This decline was primarily due to an increase in the capture rate
of title premiums from an affiliated title agent, which caused a
decline in information and other revenue and a comparable increase
in direct premium and escrow fees.
Investment income was $117 million in the first quarter, down $8
million compared with the same quarter last year. The decline was
primarily driven by lower average interest-bearing balances in the
company’s escrow and tax-deferred property exchange balances,
partly offset by higher interest income from the company's
warehouse lending business. Net investment gains totaled $19
million in the current quarter, compared with net investment gains
of $7 million in the first quarter of 2023. Net investment gains in
both periods were primarily attributable to a favorable change in
the fair value of marketable equity securities, partly offset by
losses recognized on the sale of fixed-income securities.
Personnel costs were $453 million in the first quarter, down $6
million, or 1 percent, compared with the same quarter of 2023. The
decline in personnel costs was primarily due to lower salary
expense driven by lower headcount.
Other operating expenses were $234 million in the first quarter,
an increase of $10 million, or 4 percent, compared with the first
quarter of 2023. The increase was primarily attributable to a $6
million write-off of uncollectible balances and higher legal
expense.
The provision for policy losses and other claims was $29 million
in the first quarter, or 3.0 percent of title premiums and escrow
fees, down from the 3.5 percent loss provision rate in the prior
year. The first quarter rate reflects an ultimate loss rate of 3.75
percent for the current policy year and a net decrease of $7
million in the loss reserve estimate for prior policy years.
Depreciation and amortization expense was $49 million in the
first quarter, up $5 million, or 10 percent, compared with the same
period last year, due to higher amortization of capitalized
software from recently deployed digital settlement products.
Interest expense was $22 million in the current quarter, up $6
million, or 41 percent from last year primarily due to higher
interest expense in the company's warehouse lending business.
Pretax income for the Title Insurance and Services segment was
$73 million in the first quarter, compared with $88 million in the
first quarter of 2023. Pretax margin was 5.5 percent in the current
quarter, compared with 6.5 percent last year. Adjusted pretax
margin was 4.8 percent in the current period, compared with 6.8
percent last year.
Home Warranty ($ in millions)
Three Months Ended
March 31,
2024
2023
Total revenues
$
105.2
$
103.7
Income before taxes
$
20.3
$
15.9
Pretax margin
19.3
%
15.3
%
Adjusted pretax margin
18.8
%
15.2
%
Total revenues for the Home Warranty segment were $105 million
in the first quarter, up $1 million, or 1 percent, compared with
the first quarter of 2023. The segment posted pretax income of $20
million this quarter, compared with $16 million last year. The
claim loss rate was 41.7 percent in the first quarter, compared
with 47.3 percent last year, due to fewer claims and lower claim
severity. Home Warranty’s pretax margin was 19.3 percent this
quarter, compared with 15.3 percent last year. Adjusted pretax
margin was 18.8 percent this quarter, compared with 15.2 percent
last year.
Corporate
Net investment income was $11 million this quarter, primarily
attributable to changes in the value of investments associated with
the company’s deferred compensation program. This amount was
largely offset by higher personnel expense reflecting returns on
the plan participants’ investments.
Net recognized investment losses were $11 million this quarter,
compared with losses of $14 million last year. Excluding these
losses, the Corporate pretax loss declined by $6 million this
quarter compared with last year due to reduced costs related to the
property and casualty business wind down and lower interest expense
resulting from the repayment of the company's $250 million senior
notes, which matured in February 2023.
Teleconference/Webcast
First American’s first quarter 2024 results will be discussed in
more detail on Thursday, April 25, 2024, at 11 a.m. EDT, via
teleconference. The toll-free dial-in number is +1-877-407-8293.
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 May 9, 2024, by
dialing +1-201-612-7415 and using the conference ID 13745815. 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
premier provider of title, settlement and risk solutions for real
estate transactions. With its combination of financial strength and
stability built over 135 years, innovative proprietary
technologies, and unmatched data assets, the company is leading the
digital transformation of its industry. First American also
provides data products to the title industry and other third
parties; valuation products and services; mortgage subservicing;
home warranty products; banking, trust and wealth management
services; and other related products and services. With total
revenue of $6.0 billion in 2023, the company offers its products
and services directly and through its agents throughout the United
States and abroad. In 2024, First American was named one of the 100
Best Companies to Work For by Great Place to Work® and Fortune
Magazine for the ninth consecutive year. The company was named one
of the 100 Best Workplaces for Innovators by Fast Company in 2023.
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 conditions of
the real estate markets; volatility in the capital markets;
unfavorable economic conditions; impairments in the company’s
goodwill or other intangible assets; failures at financial
institutions where the company deposits funds; regulatory oversight
and changes in applicable laws and government regulations,
including privacy and data protection laws; heightened scrutiny by
legislators and regulators of the company’s title insurance and
services segment and certain other of the company’s businesses;
regulation of title insurance rates; limitations on access to
public records and other data; climate change, health crises,
terrorist attacks, severe weather conditions and other catastrophe
events; 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 or venture 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 or use of models;
systems damage, failures, interruptions, cyberattacks 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;
failures to recruit and retain qualified employees; the company’s
use of a global workforce; inability of the company to fulfill
parent company obligations and/or pay dividends; inability to
realize anticipated synergies or produce returns that justify
investment in acquired businesses; a reduction in the deposits at
the company’s federal savings bank subsidiary; claims of
infringement or inability to adequately protect the company’s
intellectual property; and other factors described in the company’s
annual report on Form 10-K for the year ended December 31, 2023, 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 an adjusted debt to capitalization
ratio, personnel and other operating expense ratios, success
ratios, net operating revenues; and adjusted revenues, adjusted
pretax income, adjusted pretax margin, adjusted net income, and
adjusted earnings per share. The company is presenting these
non-GAAP financial measures because they provide the company’s
management and investors with additional insight into the financial
leverage, 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 millions, except per share
amounts and title orders, unaudited)
Three Months Ended
March 31,
2024
2023
Total revenues
$
1,424.6
$
1,446.1
Income before income taxes
$
58.3
$
59.6
Income tax expense
11.6
13.6
Net income
46.7
46.0
Less: Net income attributable to
noncontrolling interests
-
0.1
Net income attributable to the Company
$
46.7
$
45.9
Net income per share attributable to
stockholders:
Basic
$
0.45
$
0.44
Diluted
$
0.45
$
0.44
Cash dividends declared per share
$
0.53
$
0.52
Weighted average common shares
outstanding:
Basic
104.1
104.5
Diluted
104.4
104.8
Selected Title
Insurance Segment Information
Title orders opened(1)
155,500
172,600
Title orders closed(1)
102,700
106,600
Paid title claims
$
48.1
$
42.7
(1) U.S. direct title insurance orders
only.
First American Financial
Corporation
Selected Consolidated Balance
Sheet Information
(in millions,
unaudited)
March 31,
December 31,
2024
2023
Cash and cash equivalents
$
1,506.4
$
3,605.3
Investments
7,864.5
7,948.9
Goodwill and other intangible assets,
net
1,954.9
1,961.3
Total assets
14,697.8
16,802.8
Reserve for claim losses
1,261.6
1,282.4
Notes and contracts payable
1,396.0
1,393.9
Total stockholders’ equity
$
4,787.1
$
4,848.1
First American Financial
Corporation
Segment Information
(in millions,
unaudited)
Three Months Ended
Title
Home
Corporate
March 31, 2024
Consolidated
Insurance
Warranty
(incl. Elims.)
Revenues
Direct premiums and escrow fees
$
500.9
$
403.2
$
97.7
$
(0.0
)
Agent premiums
563.8
563.8
—
—
Information and other
223.0
217.2
5.9
(0.1
)
Net investment income
127.9
116.7
0.9
10.3
Net investment gains (losses)
9.0
18.9
0.7
(10.6
)
1,424.6
1,319.8
105.2
(0.4
)
Expenses
Personnel costs
484.9
452.5
19.8
12.6
Premiums retained by agents
447.8
447.8
—
—
Other operating expenses
265.8
233.7
22.1
10.0
Provision for policy losses and other
claims
69.5
29.0
40.7
(0.2
)
Depreciation and amortization
50.1
48.8
1.3
0.0
Premium taxes
13.9
12.9
1.0
—
Interest
34.3
22.4
—
11.9
1,366.3
1,247.1
84.9
34.3
Income (loss) before income taxes
$
58.3
$
72.7
$
20.3
$
(34.7
)
Three Months Ended
Title
Home
Corporate
March 31, 2023
Consolidated
Insurance
Warranty
(incl. Elims.)
Revenues
Direct premiums and escrow fees
$
502.2
$
405.6
$
96.6
$
(0.0
)
Agent premiums
590.4
590.4
—
—
Information and other
226.9
221.5
5.5
(0.1
)
Net investment income
134.0
124.6
1.4
8.0
Net investment (losses) gains
(7.4
)
6.5
0.2
(14.1
)
1,446.1
1,348.6
103.7
(6.2
)
Expenses
Personnel costs
487.6
458.8
19.2
9.6
Premiums retained by agents
469.0
469.0
—
—
Other operating expenses
258.5
224.1
20.6
13.8
Provision for policy losses and other
claims
82.3
34.9
45.7
1.7
Depreciation and amortization
45.5
44.2
1.3
(0.0
)
Premium taxes
14.5
13.5
1.0
—
Interest
29.1
15.9
—
13.2
1,386.5
1,260.4
87.8
38.3
Income (loss) before income taxes
$
59.6
$
88.2
$
15.9
$
(44.5
)
First American Financial
Corporation
Reconciliation of Non-GAAP
Financial Measures
(in millions, except margin
and per share amounts, unaudited)
Consolidated
Three Months Ended
March 31,
2024
2023
Total revenues
$
1,424.6
$
1,446.1
Non-GAAP adjustments:
Less: Net investment gains (losses)
9.0
(7.4
)
Adjusted total revenues
$
1,415.6
$
1,453.5
Pretax income
$
58.3
$
59.6
Non-GAAP adjustments:
Less: Net investment gains (losses)
9.0
(7.4
)
Plus: Purchase-related intangible
amortization
9.2
9.9
Adjusted pretax income
$
58.5
$
76.9
Pretax margin
4.1
%
4.1
%
Non-GAAP adjustments:
Less: Net investment gains (losses)
0.6
%
(0.5
)%
Plus: Purchase-related intangible
amortization
0.6
%
0.7
%
Adjusted pretax margin
4.1
%
5.3
%
Net income
$
46.7
$
45.9
Non-GAAP adjustments, net of tax:
Less: Net investment gains (losses)
7.2
(5.7
)
Plus: Purchase-related intangible
amortization
7.4
7.6
Adjusted net income
$
46.9
$
59.2
Earnings per diluted share (EPS)
$
0.45
$
0.44
Non-GAAP adjustments, net of tax:
Less: Net investment gains (losses)
0.07
(0.05
)
Plus: Purchase-related intangible
amortization
0.07
0.07
Adjusted EPS
$
0.45
$
0.57
Purchase-related intangible amortization
includes amortization of noncompete agreements, customer
relationships, and trademarks acquired in business
combinations.
Totals may not sum due to rounding.
First American Financial
Corporation
Reconciliation of Non-GAAP
Financial Measures
(in millions except margin,
unaudited)
By Segment
Three Months Ended
March 31,
2024
2023
Title Insurance and Services
Segment
Total revenues
$
1,319.8
$
1,348.6
Non-GAAP adjustments:
Less: Net investment gains
18.9
6.5
Adjusted total revenues
$
1,300.9
$
1,342.1
Pretax income
$
72.7
$
88.2
Non-GAAP adjustments:
Less: Net investment gains
18.9
6.5
Plus: Purchase-related intangible
amortization
9.2
9.9
Adjusted pretax income
$
63.0
$
91.6
Pretax margin
5.5
%
6.5
%
Non-GAAP adjustments:
Less: Net investment gains
1.4
%
0.4
%
Plus: Purchase-related intangible
amortization
0.7
%
0.7
%
Adjusted pretax margin
4.8
%
6.8
%
Home Warranty Segment
Total revenues
$
105.2
$
103.7
Non-GAAP adjustments:
Less: Net investment gains
0.7
0.2
Adjusted total revenues
$
104.5
$
103.5
Pretax income
$
20.3
$
15.9
Non-GAAP adjustments:
Less: Net investment gains
0.7
0.2
Adjusted pretax income
$
19.6
$
15.7
Pretax margin
19.3
%
15.3
%
Non-GAAP adjustments:
Less: Net investment gains
0.5
%
0.1
%
Adjusted pretax margin
18.8
%
15.2
%
Purchase-related intangible amortization
includes amortization of noncompete agreements, customer
relationships, and trademarks acquired in business
combinations.
Totals may not sum due to rounding.
First American Financial
Corporation
Expense and Success Ratio
Reconciliation
Title Insurance and Services
Segment
($ in millions,
unaudited)
Three Months Ended
March 31,
2024
2023
Total revenues
$
1,319.8
$
1,348.6
Less: Net investment gains
18.9
6.5
Net investment income
116.7
124.6
Premiums retained by agents
447.8
469.0
Net operating revenues
$
736.4
$
748.5
Personnel and other operating expenses
$
686.2
$
682.9
Ratio (% net operating revenues)
93.2
%
91.2
%
Ratio (% total revenues)
52.0
%
50.6
%
Change in net operating revenues
$
(12.1
)
Change in personnel and other operating
expenses
3.3
Success Ratio(1)
-27
%
(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)
Q124
Q423
Q323
Q223
Q123
Open Orders per Day
Purchase
1,498
1,105
1,461
1,584
1,459
Refinance
332
325
356
355
349
Refinance as % of residential orders
18
%
23
%
20
%
18
%
19
%
Commercial
416
349
399
402
412
Default and other
263
231
280
387
564
Total open orders per day
2,508
2,010
2,497
2,728
2,784
Closed Orders per Day
Purchase
939
930
1,141
1,171
936
Refinance
240
221
280
279
248
Refinance as % of residential orders
20
%
19
%
20
%
19
%
21
%
Commercial
231
252
236
239
241
Default and other
247
219
249
315
294
Total closed orders per day
1,656
1,623
1,905
2,005
1,719
Average Revenue per Order
(ARPO)(2)
Purchase
$
3,360
$
3,421
$
3,474
$
3,472
$
3,302
Refinance
1,151
1,284
1,227
1,258
1,283
Commercial
9,989
11,001
10,763
11,614
9,926
Default and other
363
421
469
314
315
Total ARPO
$
3,516
$
3,899
$
3,653
$
3,640
$
3,428
Business Days
62
62
63
64
62
(1) U.S. operations only.
(2) Average revenue per order (ARPO)
defined as direct premiums and escrow fees divided by closed title
orders.
Totals may not sum due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240424593866/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
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