Exhibit 99.1
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NEWS |
FOR IMMEDIATE RELEASE |
FIRST AMERICAN FINANCIAL REPORTS third QUARTER 2019 RESULTS
—Reports Earnings of $1.65 per Diluted Share—
SANTA ANA, Calif., Oct. 24, 2019 – 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
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• |
Total revenue of $1.7 billion, up 8 percent compared with last year |
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- |
Closed orders up 21 percent, driven by an 89 percent increase in refinance orders |
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- |
Average revenue per order down 6 percent, driven by a shift in the mix to lower-premium refinance transactions |
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• |
Title Insurance and Services segment pretax margin of 16.5 percent |
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- |
16.4 percent excluding net realized investment gains |
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• |
Commercial revenues of $199.6 million, up 9 percent compared with last year |
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• |
Title Insurance and Services segment investment income of $72.0 million, up 18 percent compared with last year |
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• |
Specialty Insurance segment pretax margin of 8.5 percent |
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- |
7.8 percent excluding net realized investment gains |
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• |
Debt-to-capital ratio of 18.5 percent |
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• |
Cash flow from operations of $310.6 million, compared with $230.8 million last year |
Selected Financial Information
($ in millions, except per share data)
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Three Months Ended |
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|||||
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September 30, |
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||||||
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2019 |
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2018 |
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||
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Total revenue |
|
$ |
1,671.2 |
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|
$ |
1,542.2 |
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Income before taxes |
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|
245.3 |
|
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195.6 |
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Net income |
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$ |
187.2 |
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$ |
151.5 |
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Net income per diluted share |
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|
1.65 |
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|
1.34 |
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|
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 $11.1 million, or 8 cents per diluted share, last year.
“The company delivered another good quarter, as increased transactions across our businesses drove strong growth in revenue and earnings,” said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. “In the purchase market, open order growth turned positive for the first time since early 2018, and our commercial business continued its strong performance. Lower interest rates drove substantial growth in our refinance business. Effective expense management and higher
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First American Financial Reports Third Quarter 2019 Results
Page 2
investment income, coupled with the broad-based revenue growth across key markets, propelled the company’s strong financial performance this quarter.
“We are optimistic heading into the fourth quarter given current purchase and refinance order trends as well as a robust commercial pipeline. Although recent Fed funds rate reductions will impact our investment income, we expect that current business conditions and the efficiency of our operations will enable us to deliver strong financial results in the final quarter of 2019.”
Title Insurance and Services
($ in millions, except average revenue per order)
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Three Months Ended |
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|||||
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September 30, |
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|||||
|
|
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2019 |
|
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2018 |
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||
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Total revenues |
|
$ |
1,540.7 |
|
|
$ |
1,413.8 |
|
|
|
|
|
|
|
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Income before taxes |
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$ |
253.6 |
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$ |
206.5 |
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Pretax margin |
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16.5 |
% |
|
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14.6 |
% |
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|
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|
|
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Title open orders(1) |
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317,300 |
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249,100 |
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Title closed orders(1) |
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224,100 |
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184,500 |
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U.S. Commercial |
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|
|
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Total revenues |
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$ |
199.6 |
|
|
$ |
183.5 |
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Open orders |
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|
33,500 |
|
|
|
32,100 |
|
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Closed orders |
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18,500 |
|
|
|
18,600 |
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Average revenue per order |
|
$ |
10,800 |
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$ |
9,900 |
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(1) U.S. direct title insurance orders only |
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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.
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First American Financial Reports Third Quarter 2019 Results
Page 3
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)
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Three Months Ended |
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September 30, |
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2019 |
|
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2018 |
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||
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Total revenues |
|
$ |
129.2 |
|
|
$ |
124.2 |
|
|
|
|
|
|
|
|
|
|
|
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Income before taxes |
|
$ |
11.0 |
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|
$ |
6.2 |
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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.
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First American Financial Reports Third Quarter 2019 Results
Page 4
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
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First American Financial Reports Third Quarter 2019 Results
Page 5
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.
|
Media Contact: Marcus Ginnaty |
Investor Contact: Craig Barberio Investor Relations First American Financial Corporation 714-250-5214 |
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First American Financial Reports Third Quarter 2019 Results
Page 6
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First American Financial Corporation |
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Summary of Consolidated Financial Results and Selected Information |
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(in thousands, except per share amounts and title orders, unaudited) |
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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|
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2019 |
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2018 |
|
|
2019 |
|
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2018 |
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||||
|
Total revenues |
|
$ |
1,671,196 |
|
|
$ |
1,542,186 |
|
|
$ |
4,473,397 |
|
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$ |
4,330,731 |
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|
|
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|
|
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|
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|
|
|
|
|
|
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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 |
|
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$ |
483,412 |
|
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$ |
382,847 |
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Net income per share attributable to stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic |
|
$ |
1.65 |
|
|
$ |
1.34 |
|
|
$ |
4.28 |
|
|
$ |
3.40 |
|
|
Diluted |
|
$ |
1.65 |
|
|
$ |
1.34 |
|
|
$ |
4.26 |
|
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$ |
3.38 |
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Cash dividends declared per share |
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$ |
0.42 |
|
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$ |
0.42 |
|
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$ |
1.26 |
|
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$ |
1.18 |
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Weighted average common shares outstanding: |
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|
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|
|
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Basic |
|
|
113,163 |
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|
112,722 |
|
|
|
112,983 |
|
|
|
112,541 |
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Diluted |
|
|
113,741 |
|
|
|
113,365 |
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|
|
113,509 |
|
|
|
113,213 |
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Selected Title Insurance Segment Information |
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|
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Title orders opened(1) |
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|
317,300 |
|
|
|
249,100 |
|
|
|
841,300 |
|
|
|
779,400 |
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|
Title orders closed(1) |
|
|
224,100 |
|
|
|
184,500 |
|
|
|
571,600 |
|
|
|
554,300 |
|
|
Paid title claims |
|
$ |
38,451 |
|
|
$ |
41,073 |
|
|
$ |
119,738 |
|
|
$ |
122,429 |
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(1) U.S. direct title insurance orders only. |
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First American Financial Reports Third Quarter 2019 Results
Page 7
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First American Financial Corporation |
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Selected Consolidated Balance Sheet Information |
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(in thousands, unaudited) |
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September 30, |
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December 31, |
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||
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2019 |
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2018 |
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Cash and cash equivalents |
|
$ |
1,710,999 |
|
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$ |
1,467,129 |
|
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Investments |
|
|
6,553,134 |
|
|
|
6,225,520 |
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Goodwill and other intangible assets, net |
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|
1,242,620 |
|
|
|
1,253,538 |
|
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Total assets |
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|
11,804,092 |
|
|
|
10,630,635 |
|
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Reserve for claim losses |
|
|
1,054,724 |
|
|
|
1,042,679 |
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Notes and contracts payable |
|
|
728,332 |
|
|
|
732,019 |
|
|
Total stockholders’ equity |
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$ |
4,242,141 |
|
|
$ |
3,741,881 |
|
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First American Financial Reports Third Quarter 2019 Results
Page 8
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First American Financial Corporation |
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Segment Information |
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(in thousands, unaudited) |
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Three Months Ended |
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Title |
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Specialty |
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Corporate |
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|||
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September 30, 2019 |
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Consolidated |
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|
Insurance |
|
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Insurance |
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(incl. Elims.) |
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||||
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Revenues |
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|
|
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|
|
|
|
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Direct premiums and escrow fees |
|
$ |
728,610 |
|
|
$ |
606,812 |
|
|
$ |
121,798 |
|
|
$ |
— |
|
|
Agent premiums |
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|
656,154 |
|
|
|
656,154 |
|
|
|
— |
|
|
|
— |
|
|
Information and other |
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|
208,297 |
|
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|
205,282 |
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|
|
3,270 |
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|
(255 |
) |
|
Net investment income |
|
|
76,628 |
|
|
|
72,044 |
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|
|
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 |
) |
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|
Three Months Ended |
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Title |
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Specialty |
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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 |
) |
-more-
First American Financial Reports Third Quarter 2019 Results
Page 9
|
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 |
) |
-more-
First American Financial Reports Third Quarter 2019 Results
Page 10
|
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. |
|
|||||||||||||||
-more-
First American Financial Reports Third Quarter 2019 Results
Page 11
|
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. |
|
|
|
|
|
|
|
|
|
|||||||
-more-
First American Financial Reports Third Quarter 2019 Results
Page 12
|
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. |
|
|||||||||||||||||||
###