[PART I: FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes [A. Condensed Consolidated Balance Sheets](index=5&type=section&id=A.%20Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific reporting dates Assets (June 30, 2025 vs Dec 31, 2024) | Asset Category | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :----------------------- | :---------------------- | :---------------- | :--------- | | Cash and cash equivalents | $2,031.2 | $1,718.1 | $313.1 | 18.2% | | Accounts and accrued income receivable | $412.6 | $374.8 | $37.8 | 10.1% | | Investments (Total) | $8,817.0 | $8,042.6 | $774.4 | 9.6% | | Secured financings receivable | $975.1 | $690.0 | $285.1 | 41.3% | | Goodwill | $1,814.0 | $1,804.3 | $9.7 | 0.5% | | **Total Assets** | **$16,273.9** | **$14,908.6** | **$1,365.3** | **9.2%** | Liabilities & Equity (June 30, 2025 vs Dec 31, 2024) | Liability/Equity Category | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :----------------------- | :---------------------- | :---------------- | :--------- | | Deposits | $5,959.7 | $5,048.1 | $911.6 | 18.1% | | Secured financings payable | $883.8 | $643.8 | $240.0 | 37.3% | | Notes and contracts payable | $1,546.8 | $1,546.6 | $0.2 | 0.0% | | **Total Liabilities** | **$11,124.6** | **$9,981.6** | **$1,143.0** | **11.4%** | | Total stockholders' equity | $5,126.2 | $4,908.5 | $217.7 | 4.4% | | **Total Equity** | **$5,149.3** | **$4,927.0** | **$222.3** | **4.5%** | [B. Condensed Consolidated Statements of Income](index=6&type=section&id=B.%20Condensed%20Consolidated%20Statements%20of%20Income) This section provides the condensed consolidated statements of income, outlining revenues, expenses, and net income for the reported periods Three Months Ended June 30 (2025 vs 2024) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :--------- | | Direct premiums and escrow fees | $704.2 | $632.7 | $71.5 | 11.3% | | Agent premiums | $716.5 | $616.3 | $100.2 | 16.3% | | Information and other revenue | $270.1 | $246.6 | $23.5 | 9.5% | | Net investment income | $160.2 | $129.9 | $30.3 | 23.3% | | Net investment losses | $(9.7) | $(13.2) | $3.5 | -26.5% | | **Total Revenues** | **$1,841.3** | **$1,612.3** | **$229.0** | **14.2%** | | Personnel costs | $571.1 | $509.0 | $62.1 | 12.2% | | Premiums retained by agents | $573.5 | $492.2 | $81.3 | 16.5% | | Other operating expenses | $309.4 | $277.0 | $32.4 | 11.7% | | Provision for policy losses and other claims | $81.9 | $79.5 | $2.4 | 3.0% | | **Total Expenses** | **$1,646.1** | **$1,460.7** | **$185.4** | **12.7%** | | Income before income taxes | $195.2 | $151.6 | $43.6 | 28.8% | | Net income attributable to the Company | $146.1 | $116.0 | $30.1 | 25.9% | | Basic EPS | $1.41 | $1.11 | $0.30 | 27.0% | | Diluted EPS | $1.41 | $1.11 | $0.30 | 27.0% | Six Months Ended June 30 (2025 vs 2024) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :---------------- | :--------- | | Direct premiums and escrow fees | $1,265.3 | $1,133.6 | $131.7 | 11.6% | | Agent premiums | $1,371.1 | $1,180.1 | $191.0 | 16.2% | | Information and other revenue | $512.3 | $469.6 | $42.7 | 9.1% | | Net investment income | $295.4 | $257.8 | $37.6 | 14.6% | | Net investment losses | $(20.5) | $(4.2) | $(16.3) | 388.1% | | **Total Revenues** | **$3,423.6** | **$3,036.9** | **$386.7** | **12.7%** | | Personnel costs | $1,077.8 | $993.9 | $83.9 | 8.4% | | Premiums retained by agents | $1,099.0 | $940.0 | $159.0 | 16.9% | | Other operating expenses | $587.7 | $542.8 | $44.9 | 8.3% | | Provision for policy losses and other claims | $152.0 | $149.0 | $3.0 | 2.0% | | **Total Expenses** | **$3,131.8** | **$2,827.0** | **$304.8** | **10.8%** | | Income before income taxes | $291.8 | $209.9 | $81.9 | 39.0% | | Net income attributable to the Company | $220.3 | $162.7 | $57.6 | 35.4% | | Basic EPS | $2.12 | $1.56 | $0.56 | 35.9% | | Diluted EPS | $2.12 | $1.56 | $0.56 | 35.9% | [C. Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=C.%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details the condensed consolidated statements of comprehensive income, including net income and other comprehensive income components Comprehensive Income (Three Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | | Net income | $147.1 | $116.4 | $30.7 | | Change in unrealized gains (losses) on debt securities | $19.0 | $(5.8) | $24.8 | | Change in foreign currency translation adjustment | $34.9 | $(3.8) | $38.7 | | Total other comprehensive income (loss), net of tax | $54.2 | $(9.2) | $63.4 | | **Comprehensive income attributable to the Company** | **$200.3** | **$106.8** | **$93.5** | Comprehensive Income (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | | Net income | $221.9 | $163.1 | $58.8 | | Change in unrealized gains (losses) on debt securities | $111.3 | $(56.4) | $167.7 | | Change in foreign currency translation adjustment | $38.8 | $(18.3) | $57.1 | | Total other comprehensive income (loss), net of tax | $150.8 | $(73.9) | $224.7 | | **Comprehensive income attributable to the Company** | **$371.1** | **$88.8** | **$282.3** | [D. Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=D.%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including net income, dividends, share repurchases, and other comprehensive income Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | Item | Amount (millions) | | :-------------------------------- | :---------------- | | Balance at December 31, 2024 | $4,908.5 | | Net income attributable to the Company | $220.3 | | Dividends on common shares | $(111.0) | | Repurchases of Company shares | $(88.7) | | Other comprehensive income | $150.8 | | **Balance at June 30, 2025** | **$5,126.2** | - The company repurchased **1.5 million shares** for **$88.7 million** during the six months ended June 30, 2025[23](index=23&type=chunk) [E. Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=E.%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2025 (millions) | 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------- | :-------------- | :---------------- | | Cash provided by operating activities | $309.0 | $336.0 | $(27.0) | | Cash used for investing activities | $(957.7) | $(130.6) | $(827.1) | | Cash provided by (used for) financing activities | $947.8 | $(1,757.2) | $2,705.0 | | Net increase (decrease) in cash and cash equivalents | $313.1 | $(1,556.7) | $1,869.8 | | Cash and cash equivalents—End of period | $2,031.2 | $2,048.6 | $(17.4) | - Key investing activities for the six months ended June 30, 2025, included purchases of debt securities (**$1,393.7 million**) and significant advances (**$18,613.4 million**) and collections (**$18,328.3 million**) under secured financing agreements[29](index=29&type=chunk) - Key financing activities for the six months ended June 30, 2025, included a net increase in deposits (**$911.6 million**), borrowings (**$18,071.3 million**) and repayments (**$17,831.3 million**) under secured financing agreements, repurchases of company shares (**$88.7 million**), and payments of cash dividends (**$111.0 million**)[29](index=29&type=chunk) [F. Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=F.%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies, significant estimates, and specific financial statement line items [Note 1 – Basis of Condensed Consolidated Financial Statements](index=11&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Condensed%20Consolidated%20Financial%20Statements) This note describes the basis of preparation for the unaudited condensed consolidated financial statements, adhering to U.S. GAAP and SEC regulations - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and SEC Regulation S-X[32](index=32&type=chunk) - Recently adopted accounting pronouncements (December 2023 FASB guidance on income tax disclosures and August 2023 FASB guidance on joint venture contributions) had no material impact on the condensed consolidated financial statements[33](index=33&type=chunk)[34](index=34&type=chunk) - Pending FASB guidance on expense category disclosures (effective after December 15, 2026) is not expected to have a material impact on the financial statements, except for disclosure requirements[35](index=35&type=chunk) [Note 2 – Trust Assets, Escrow and Other Deposits](index=12&type=section&id=Note%202%20%E2%80%93Trust%20Assets%2C%20Escrow%20and%20Other%20Deposits) This note details the company's administration of trust assets, escrow, and other deposits, clarifying their treatment on the balance sheet - Escrow deposits totaled **$10.7 billion** at June 30, 2025, up from **$8.9 billion** at December 31, 2024, with **$4.5 billion** held at First American Trust, FSB[37](index=37&type=chunk) - Trust assets administered by FA Trust totaled **$4.9 billion** at June 30, 2025, up from **$4.8 billion** at December 31, 2024, with **$150.3 million** held at FA Trust[38](index=38&type=chunk) - Like-kind exchange funds administered by the Company totaled **$2.3 billion** at June 30, 2025, consistent with December 31, 2024[40](index=40&type=chunk) - Cash deposits for residential mortgage loan subservicing operations totaled **$1.3 billion** at June 30, 2025, up from **$901.0 million** at December 31, 2024, with **$908.6 million** held at FA Trust[41](index=41&type=chunk) - These funds are generally not considered assets of the Company and are not included in the consolidated balance sheets, but the Company could be held contingently liable for their disposition or if FA Trust breaches fiduciary duties[37](index=37&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) [Note 3 – Debt Securities](index=13&type=section&id=Note%203%20%E2%80%93%20Debt%20Securities) This note provides information on the company's debt securities portfolio, including fair values, unrealized gains/losses, and credit quality Debt Securities Portfolio (June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 (millions) | Dec 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :----------------------- | :---------------------- | :---------------- | | Amortized cost | $8,334.2 | $7,730.9 | $603.3 | | Gross unrealized gains | $46.2 | $19.6 | $26.6 | | Gross unrealized losses | $(361.5) | $(484.6) | $123.1 | | **Estimated fair value** | **$8,018.9** | **$7,265.9** | **$753.0** | - For the six months ended June 30, 2025, sales of debt securities resulted in **$2.5 million** in realized gains, **$9.4 million** in realized losses, and **$507.0 million** in proceeds[44](index=44&type=chunk) - As of June 30, 2025, the total estimated fair value of debt securities in an unrealized loss position was **$4,989.9 million**, with total unrealized losses of **$(361.5) million**, determined to be due to non-credit factors, and the company does not intend to sell these securities before recovery of their amortized cost basis[45](index=45&type=chunk) Credit Quality of Debt Securities Portfolio (June 30, 2025) | Rating Category | Estimated Fair Value (millions) | Percentage | | :-------------------------------- | :------------------------------ | :--------- | | A- or higher | $7,271.0 | 90.6% | | BBB+ to BBB- | $533.4 | 6.7% | | Non-Investment Grade | $214.5 | 2.7% | | **Total** | **$8,018.9** | **100.0%** | [Note 4 – Equity Securities](index=17&type=section&id=Note%204%20%E2%80%93%20Equity%20Securities) This note details the company's equity securities, distinguishing between marketable, non-marketable, and equity method investments Equity Securities Summary (June 30, 2025 vs Dec 31, 2024) | Category | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :-------------------------------- | :----------------------- | :---------------------- | | Marketable equity securities | $396.0 | $386.8 | | Non-marketable equity securities | $218.3 | $202.4 | | Equity method investments | $101.1 | $102.1 | | **Total** | **$715.4** | **$691.3** | - Net gains of **$26.1 million** (Q2 2025) and **$19.1 million** (YTD 2025) were recognized from changes in the fair values of marketable equity securities[57](index=57&type=chunk) - The carrying amount of non-marketable equity securities, primarily related to the venture investment portfolio, increased to **$218.3 million** at June 30, 2025[58](index=58&type=chunk) [Note 5 – Allowance for Credit Losses – Accounts Receivable](index=18&type=section&id=Note%205%20%E2%80%93%20Allowance%20for%20Credit%20Losses%20%E2%80%93%20Accounts%20Receivable) This note outlines the changes in the allowance for credit losses on accounts receivable, including provisions and write-offs Allowance for Credit Losses (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Balance at beginning of period | $21.5 | $21.8 | | Provision for expected credit losses | $4.7 | $2.8 | | Write-offs/recoveries | $(2.7) | $(3.2) | | **Balance at end of period** | **$23.5** | **$21.4** | [Note 6 – Goodwill](index=18&type=section&id=Note%206%20%E2%80%93%20Goodwill) This note details the changes in goodwill, including additions from acquisitions and foreign currency translation adjustments Goodwill Changes (Six Months Ended June 30, 2025) | Item | Amount (millions) | | :-------------------------------- | :---------------- | | Balance at beginning of period | $1,804.3 | | Acquisitions | $4.5 | | Foreign currency translation | $5.2 | | **Balance at end of period** | **$1,814.0** | - The Title Insurance and Services segment accounts for **$1,773.1 million** of the total goodwill[60](index=60&type=chunk) [Note 7 – Other Intangible Assets](index=18&type=section&id=Note%207%20%E2%80%93%20Other%20Intangible%20Assets) This note provides information on other intangible assets, including finite-lived and indefinite-lived assets, and their amortization expense Other Intangible Assets, Net (June 30, 2025 vs Dec 31, 2024) | Category | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :-------------------------------- | :----------------------- | :---------------------- | | Finite-lived intangible assets (gross) | $248.9 | $266.5 | | Accumulated amortization | $(150.8) | $(158.2) | | Finite-lived intangible assets (net) | $98.1 | $108.3 | | Indefinite-lived intangible assets (Licenses) | $16.9 | $16.9 | | **Total other intangible assets, net** | **$115.0** | **$125.2** | - Amortization expense for finite-lived intangible assets was **$18.6 million** for the six months ended June 30, 2025, compared to **$23.5 million** for the same period in 2024[61](index=61&type=chunk) Estimated Amortization Expense for Finite-Lived Intangible Assets (Next Five Years) | Year | Amount (millions) | | :-------------------------------- | :---------------- | | Remainder of 2025 | $20.5 | | 2026 | $28.5 | | 2027 | $13.1 | | 2028 | $8.5 | | 2029 | $6.0 | [Note 8 – Reserve for Known and Incurred But Not Reported Claims](index=19&type=section&id=Note%208%20%E2%80%93%20Reserve%20for%20Known%20and%20Incurred%20But%20Not%20Reported%20Claims) This note details the activity and composition of the reserve for known and incurred but not reported claims, including loss provision rates Reserve Activity (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Balance at beginning of period | $1,193.4 | $1,282.4 | | Provision related to current year | $171.7 | $165.7 | | Provision related to prior years | $(19.7) | $(16.7) | | Payments, net of recoveries | $(164.5) | $(179.4) | | **Balance at end of period** | **$1,189.3** | **$1,252.2** | - The provision for title insurance losses, as a percentage of title insurance premiums and escrow fees, was **3.0%** for both the three and six months ended June 30, 2025 and 2024[63](index=63&type=chunk) - The **3.0%** loss provision rate for 2025 reflects an ultimate loss rate of **3.75%** for the 2025 policy year and reserve releases of **0.75%** for prior policy years[64](index=64&type=chunk) Loss Reserve Composition (June 30, 2025) | (dollars in millions) | June 30, 2025 | Percentage | | :-------------------------------- | :-------------- | :--------- | | Known title claims | $54.8 | 4.6% | | Incurred but not reported claims | $1,105.4 | 93.0% | | Non-title claims | $29.1 | 2.4% | | **Total loss reserves** | **$1,189.3** | **100.0%** | [Note 9 – Income Taxes](index=20&type=section&id=Note%209%20%E2%80%93%20Income%20Taxes) This note discusses the company's effective income tax rates, valuation allowances, uncertain tax positions, and the impact of recent tax legislation - The effective income tax rates were **24.6%** for the three months and **24.0%** for the six months ended June 30, 2025, an increase from **23.2%** and **22.3%** respectively in the prior year[67](index=67&type=chunk) - The Company carried a valuation allowance of **$27.9 million** for deferred tax assets as of June 30, 2025[68](index=68&type=chunk) - Liabilities for income taxes associated with uncertain tax positions were **$33.2 million** at June 30, 2025, an increase from **$31.6 million** at December 31, 2024[69](index=69&type=chunk) - The 'One Big Beautiful Bill Act,' signed July 4, 2025, is not expected to have a material effect on the Company's ongoing effective tax rate, despite anticipated impacts to deferred tax liability and income tax payable[74](index=74&type=chunk) [Note 10 – Earnings Per Share](index=21&type=section&id=Note%2010%20%E2%80%93%20Earnings%20Per%20Share) This note provides a breakdown of net income attributable to the company and the corresponding basic and diluted earnings per share Net Income Attributable to the Company and EPS (Three Months Ended June 30) | Metric | 2025 (millions/per share) | 2024 (millions/per share) | | :-------------------------------- | :------------------------ | :------------------------ | | Net income attributable to the Company | $146.1 | $116.0 | | Basic EPS | $1.41 | $1.11 | | Diluted EPS | $1.41 | $1.11 | Net Income Attributable to the Company and EPS (Six Months Ended June 30) | Metric | 2025 (millions/per share) | 2024 (millions/per share) | | :-------------------------------- | :------------------------ | :------------------------ | | Net income attributable to the Company | $220.3 | $162.7 | | Basic EPS | $2.12 | $1.56 | | Diluted EPS | $2.12 | $1.56 | [Note 11 – Employee Benefit Plans](index=21&type=section&id=Note%2011%20%E2%80%93%20Employee%20Benefit%20Plans) This note details the net periodic benefit costs and contributions made to the company's unfunded supplemental benefit pension plans Net Periodic Benefit Costs (Six Months Ended June 30) | Metric | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | Service costs | $0.1 | $0.1 | | Interest costs | $4.7 | $4.8 | | Amortization of net actuarial loss | $0.9 | $1.1 | | **Total Expense** | **$5.7** | **$6.0** | - The Company contributed **$7.5 million** to its unfunded supplemental benefit pension plans during the six months ended June 30, 2025, and expects to contribute an additional **$8.8 million** during the remainder of 2025[76](index=76&type=chunk) [Note 12 – Fair Value Measurements](index=22&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20Measurements) This note describes the company's fair value measurements, categorizing assets and liabilities into a three-level hierarchy based on input observability - The Company categorizes its assets and liabilities carried at fair value using a three-level hierarchy: Level 1 (unadjusted quoted market prices in active markets), Level 2 (observable inputs other than Level 1 prices), and Level 3 (unobservable inputs)[79](index=79&type=chunk)[80](index=80&type=chunk) Assets Measured at Fair Value (June 30, 2025) | Asset Category | Total (millions) | Level 1 (millions) | Level 2 (millions) | Level 3 (millions) | | :-------------------------------- | :--------------- | :----------------- | :----------------- | :----------------- | | Debt securities | $8,018.9 | $— | $8,018.9 | $— | | Equity securities | $396.0 | $396.0 | $— | $— | | **Total** | **$8,414.9** | **$396.0** | **$8,018.9** | **$—** | - During the six months ended June 30, 2025, the Company recorded **$35.5 million** in impairment losses on property and equipment related to internally developed software[84](index=84&type=chunk) [Note 13 – Share-Based Compensation](index=24&type=section&id=Note%2013%20%E2%80%93%20Share-Based%20Compensation) This note outlines the share-based compensation expense and amendments to the company's incentive compensation plan Share-Based Compensation Expense (Six Months Ended June 30) | Category | 2025 (millions) | 2024 (millions) | | :-------------------------------- | :-------------- | :-------------- | | RSUs | $39.2 | $25.8 | | PRSUs | $5.0 | $3.5 | | Employee stock purchase plan | $3.6 | $3.5 | | **Total Expense** | **$47.8** | **$32.8** | - The Company's 2020 Incentive Compensation Plan was amended in March 2025 to increase the number of shares available for grant by **2.0 million** and extend the term until May 13, 2035[85](index=85&type=chunk) [Note 14 – Stockholders' Equity](index=24&type=section&id=Note%2014%20%E2%80%93%20Stockholders'%20Equity) This note details changes in stockholders' equity, including share repurchase plans and actual repurchases made during the period - In July 2025, the Company's board of directors approved a new share repurchase plan authorizing up to **$300 million** of common stock repurchases, terminating the prior plan[86](index=86&type=chunk) - During the six months ended June 30, 2025, the Company repurchased and retired **1.5 million shares** of its common stock for **$88.7 million** under the previous authorization[86](index=86&type=chunk) [Note 15 – Accumulated Other Comprehensive Income (Loss) ("AOCI")](index=25&type=section&id=Note%2015%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%20(%22AOCI%22)) This note provides the balance and components of accumulated other comprehensive income (loss), highlighting changes from unrealized gains/losses and foreign currency adjustments AOCI Balance (June 30, 2025 vs Dec 31, 2024) | Component | June 30, 2025 (millions) | Dec 31, 2024 (millions) | | :-------------------------------- | :----------------------- | :---------------------- | | Unrealized gains (losses) on debt securities | $(242.4) | $(353.7) | | Foreign currency translation adjustment | $(72.2) | $(111.0) | | Pension benefit adjustment | $(31.0) | $(31.7) | | **Total AOCI** | **$(345.6)** | **$(496.4)** | - The change in AOCI for the six months ended June 30, 2025, was primarily driven by a **$149.7 million** change in unrealized losses on debt securities and a **$39.6 million** change in foreign currency translation adjustment, resulting in total other comprehensive income of **$150.8 million**, net of tax[88](index=88&type=chunk) [Note 16 – Litigation and Regulatory Contingencies](index=26&type=section&id=Note%2016%20%E2%80%93%20Litigation%20and%20Regulatory%20Contingencies) This note describes the company's involvement in ongoing legal and regulatory proceedings, including class action lawsuits and their potential financial impact - The Company is involved in ongoing routine legal and regulatory proceedings, including class action lawsuits, similar to those faced by competitors[90](index=90&type=chunk)[92](index=92&type=chunk) - In the Sjobring vs. First American Title Insurance Company lawsuit, a jury rendered a verdict in favor of the Company on March 26, 2025, and the plaintiffs' motion for a new trial was denied on June 23, 2025, though plaintiffs filed a notice of appeal on July 1, 2025[92](index=92&type=chunk) - The Company does not believe that any pending examinations or investigations will have a material adverse effect on its financial condition, results of operations, or cash flows, but acknowledges potential changes to business practices[94](index=94&type=chunk) [Note 17 – Segment Information](index=27&type=section&id=Note%2017%20%E2%80%93%20Segment%20Information) This note provides financial information for the company's reportable segments: Title Insurance and Services, Home Warranty, and Corporate - The Company operates in three reportable segments: Title Insurance and Services, Home Warranty, and Corporate[96](index=96&type=chunk) Total Segment Revenue (Three Months Ended June 30) | Segment | 2025 (millions) | 2024 (millions) | $ Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | | Title Insurance and Services | $1,722.9 | $1,521.9 | $201.0 | 13.2% | | Home Warranty | $110.2 | $106.8 | $3.4 | 3.2% | | Corporate and Eliminations | $8.2 | $(16.4) | $24.6 | 150.0% | | **Total Consolidated Revenue** | **$1,841.3** | **$1,612.3** | **$229.0** | **14.2%** | Total Segment Revenue (Six Months Ended June 30) | Segment | 2025 (millions) | 2024 (millions) | $ Change | % Change | | :-------------------------------- | :-------------- | :-------------- | :------- | :------- | | Title Insurance and Services | $3,207.3 | $2,841.7 | $365.6 | 12.9% | | Home Warranty | $218.0 | $212.0 | $6.0 | 2.8% | | Corporate and Eliminations | $(1.7) | $(16.8) | $15.1 | 89.9% | | **Total Consolidated Revenue** | **$3,423.6** | **$3,036.9** | **$386.7** | **12.7%** | - The Title Insurance and Services segment's pretax margin increased to **12.6%** for Q2 2025 (from **11.7%** in Q2 2024) and **10.1%** for YTD 2025 (from **8.8%** in YTD 2024)[97](index=97&type=chunk)[107](index=107&type=chunk)[142](index=142&type=chunk) - The Home Warranty segment's pretax margin increased to **20.2%** for Q2 2025 (from **15.4%** in Q2 2024) and **21.6%** for YTD 2025 (from **17.4%** in YTD 2024), primarily due to lower claims frequency and severity[97](index=97&type=chunk)[107](index=107&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - The Corporate segment reported a loss before income taxes of **$(43.8) million** for Q2 2025 and **$(78.7) million** for YTD 2025, primarily due to net investment losses and increased interest expense[97](index=97&type=chunk)[107](index=107&type=chunk)[148](index=148&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, condition, and results of operations for the three and six months ended June 30, 2025 [Summary](index=34&type=section&id=Summary) This section summarizes the company's overall financial performance, highlighting key revenue drivers and transaction trends for the period - Total revenues for the second quarter of 2025 increased by **$229.0 million**, or **14.2%**, to **$1.8 billion** compared to the second quarter of 2024[123](index=123&type=chunk) - The increase in revenues was primarily driven by a **16.3%** increase in agent premiums and a **12.6%** increase in direct premiums and escrow fees in the title insurance business[123](index=123&type=chunk) - Domestic commercial transactions increased by **32.6%** and residential refinance transactions increased by **54.0%** in Q2 2025, while domestic residential purchase transactions decreased by **3.4%**[123](index=123&type=chunk) - Domestic title orders opened per day increased **5.8%** in Q2 2025, with refinance orders up **34.2%** and commercial orders up **10.6%**, while residential purchase orders decreased **2.4%**[125](index=125&type=chunk) [Title Insurance and Services](index=35&type=section&id=Title%20Insurance%20and%20Services) This section analyzes the financial performance of the Title Insurance and Services segment, focusing on premium growth, investment income, and operating expenses - Direct premiums and escrow fees increased by **12.6%** to **$600.4 million** for Q2 2025 and by **13.2%** to **$1.1 billion** for YTD 2025, driven by higher domestic average revenues per order and increased closed orders[127](index=127&type=chunk) - Agent premiums increased by **16.3%** to **$716.5 million** for Q2 2025 and by **16.2%** to **$1.4 billion** for YTD 2025[128](index=128&type=chunk) - Net investment income increased by **17.0%** to **$147.1 million** for Q2 2025, primarily due to higher interest income from the investment portfolio[132](index=132&type=chunk) - Net investment losses of **$5.4 million** for Q2 2025 were primarily attributable to **$35.5 million** in asset impairments[133](index=133&type=chunk) - Personnel costs increased by **7.7%** to **$523.0 million** for Q2 2025, mainly due to higher incentive compensation, salaries, employee benefits, and share-based compensation[134](index=134&type=chunk) - Other operating expenses increased by **14.0%** to **$277.8 million** for Q2 2025, primarily due to higher production expenses, software, travel, and professional services[136](index=136&type=chunk) - Pretax margins for the segment improved to **12.6%** for Q2 2025, up from **11.7%** in Q2 2024[142](index=142&type=chunk) [Home Warranty](index=37&type=section&id=Home%20Warranty) This section reviews the Home Warranty segment's financial results, including premium growth, claims experience, and pretax margin improvements - Direct premiums increased by **4.1%** to **$103.7 million** for Q2 2025 and by **4.1%** to **$205.3 million** for YTD 2025, primarily due to increases in the average price per policy[143](index=143&type=chunk) - The provision for home warranty claims, as a percentage of home warranty premiums, decreased to **41.3%** for Q2 2025 (from **45.8%** in Q2 2024) and **39.2%** for YTD 2025 (from **43.7%** in YTD 2024), primarily attributable to lower claims frequency and severity[145](index=145&type=chunk) - Pretax margins for the segment improved to **20.2%** for Q2 2025 (from **15.4%** in Q2 2024) and **21.6%** for YTD 2025 (from **17.4%** in YTD 2024)[146](index=146&type=chunk) [Corporate](index=38&type=section&id=Corporate) This section discusses the Corporate segment's financial performance, detailing investment losses, interest expense, and other operating costs - The Corporate segment reported a loss before income taxes of **$(43.8) million** for Q2 2025 and **$(78.7) million** for YTD 2025[148](index=148&type=chunk) - Net investment losses of **$(3.7) million** for Q2 2025 and **$(10.2) million** for YTD 2025 were primarily related to unrealized losses on the Company's investment in Offerpad Solutions Inc[149](index=149&type=chunk) - Interest expense increased by **22.6%** to **$15.2 million** for Q2 2025 and by **22.1%** to **$30.4 million** for YTD 2025, primarily due to additional interest on the **$450.0 million** senior unsecured notes issued in September 2024[151](index=151&type=chunk) - Personnel costs and other operating expenses increased to **$37.0 million** for Q2 2025 and **$47.9 million** for YTD 2025, primarily due to higher severance and share-based compensation expense[150](index=150&type=chunk) [Eliminations](index=39&type=section&id=Eliminations) This section notes the immaterial impact of inter-segment eliminations on the company's consolidated financial statements - The Company's inter-segment eliminations were not material for the three and six months ended June 30, 2025 and 2024[152](index=152&type=chunk) [Income Taxes](index=39&type=section&id=Income%20Taxes) This section analyzes the effective income tax rates and the factors influencing them, including the impact of recent tax legislation - The effective income tax rates were **24.6%** for the three months and **24.0%** for the six months ended June 30, 2025, compared with **23.2%** and **22.3%** for the respective periods of the prior year[153](index=153&type=chunk) - The differences in effective tax rates are primarily due to the impact of state income taxes and permanent differences between financial statement and income tax reporting[153](index=153&type=chunk) - The 'One Big Beautiful Bill Act,' signed July 4, 2025, is not expected to have a material effect on the Company's ongoing effective tax rate[155](index=155&type=chunk) [Net Income and Net Income Attributable to the Company](index=39&type=section&id=Net%20Income%20and%20Net%20Income%20Attributable%20to%20the%20Company) This section presents the net income and net income attributable to the company, along with corresponding diluted earnings per share - Net income for the three months ended June 30, 2025, was **$147.1 million**, up from **$116.4 million** in the prior year[156](index=156&type=chunk) - Net income attributable to the Company for the three months ended June 30, 2025, was **$146.1 million**, or **$1.41 per diluted share**, compared with **$116.0 million**, or **$1.11 per diluted share**, in the prior year[156](index=156&type=chunk) - Net income attributable to the Company for the six months ended June 30, 2025, was **$220.3 million**, or **$2.12 per diluted share**, compared with **$162.7 million**, or **$1.56 per diluted share**, in the prior year[156](index=156&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's liquidity position, capital resources, and capital allocation strategy, including share repurchases and dividends - Management believes the Company's resources are sufficient to satisfy anticipated operational cash requirements and obligations for at least the next twelve months[157](index=157&type=chunk) - Cash provided by operating activities totaled **$309.0 million** for the six months ended June 30, 2025, compared to **$336.0 million** in the prior year[159](index=159&type=chunk) - In July 2025, the board approved a new share repurchase plan authorizing up to **$300 million** of common stock, terminating the prior plan[161](index=161&type=chunk) - The Company expects to continue paying quarterly cash dividends at or above the current level of **54 cents per common share**[160](index=160&type=chunk) - As of June 30, 2025, the holding company had **$114.2 million** in cash and cash equivalents and **$900.0 million** available on its revolving credit facility[163](index=163&type=chunk) Debt to Capitalization Ratios (June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 | Dec 31, 2024 | | :-------------------------------- | :------------ | :----------- | | Debt to capitalization ratio | 32.1% | 30.8% | | Adjusted debt to capitalization ratio (excluding secured financings payable) | 23.1% | 23.9% | - The Company's investment portfolio is high quality and liquid, with **95%** consisting of debt securities, of which **71%** were United States government-backed or rated AAA, and **97%** were rated or classified as investment grade as of June 30, 2025[166](index=166&type=chunk) [Off-balance sheet arrangements](index=41&type=section&id=Off-balance%20sheet%20arrangements) This section describes the company's off-balance sheet arrangements, primarily related to administered escrow deposits and trust assets - The Company administers **$10.7 billion** in escrow deposits, **$4.9 billion** in trust assets, **$2.3 billion** in like-kind exchange funds, and **$1.3 billion** in residential mortgage loan subservicing cash deposits as of June 30, 2025[168](index=168&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) - These funds are primarily held at third-party financial institutions and are not included in the Company's consolidated balance sheets, though the Company could be held contingently liable for their disposition[168](index=168&type=chunk)[169](index=169&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary exposure to market risk is interest rate risk associated with certain financial instruments. There have been no material changes in these market risks since the previous annual report, and the company does not extensively use derivative financial instruments for hedging - The Company's primary exposure to market risk relates to interest rate risk associated with certain financial instruments[174](index=174&type=chunk) - There have been no material changes in the Company's market risks since the filing of its Annual Report on Form 10-K for the year ended December 31, 2024[175](index=175&type=chunk) - The Company does not currently use derivative financial instruments on any significant scale to hedge these risks[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the quarter - The Company's chief executive officer and chief financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[176](index=176&type=chunk) - There was no change in the Company's internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting[177](index=177&type=chunk) [PART II: OTHER INFORMATION](index=43&type=section&id=PART%20II%3A%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, and other miscellaneous disclosures relevant to the company [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the details of legal proceedings and regulatory contingencies from Note 16 of the condensed consolidated financial statements - Refer to Note 16 Litigation and Regulatory Contingencies in Item 1. Financial Statements for information on legal proceedings[179](index=179&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various strategic, operational, legal, compliance, financial, and general risks that could materially and adversely affect the company's business, operations, reputation, financial position, or future financial performance [Strategic Risk Factors](index=43&type=section&id=STRATEGIC%20RISK%20FACTORS) This section identifies strategic risks, including inadequate risk management, challenges from innovation, and potential market disruptions - The Company's risk management framework, including enterprise risk management, information security, and underwriting policies, could prove inadequate, leading to adverse effects[181](index=181&type=chunk) - Pursuing innovative initiatives, such as utilizing artificial intelligence in product delivery, carries risks including design defects, misapplication of technologies, reliance on inadequate data, increased third-party costs, information security vulnerabilities, and failure to meet customer expectations, potentially resulting in increased claims or reputational damage[182](index=182&type=chunk) - Potentially disruptive innovation by other participants in the real estate industry could adversely impact the Company's businesses by changing demand for its products and services, fulfillment methods, and profitability, requiring significant additional investment and management attention[183](index=183&type=chunk) [Operational Risk Factors](index=44&type=section&id=OPERATIONAL%20RISK%20FACTORS) This section details operational risks such as real estate market sensitivity, economic downturns, model reliance, catastrophic events, and data security vulnerabilities - Demand for a substantial portion of the Company's products and services is generally impacted by conditions in the real estate market, with high mortgage interest rates and elevated home prices contributing to historically weak residential purchase activity[184](index=184&type=chunk)[188](index=188&type=chunk) - Unfavorable economic conditions can adversely affect the Company by reducing funds received from third parties held in trust, negatively impacting returns on deposited funds, and increasing the likelihood of losses in its investment portfolio[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk) - The Company's use of models, particularly those relying on artificial intelligence, involves inherent risks and uncertainties that could lead to erroneous outputs, imprudent business decisions, inadequate risk management, or heightened regulatory supervision[190](index=190&type=chunk) - Severe weather conditions, health crises, terrorist attacks, and other catastrophes could adversely affect the Company's business, operations, and financial results, including increasing home warranty claims and impacting investment values and reinsurance availability[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Difficulties in acquiring necessary data due to federal, state, and local regulations, as well as changes in relationships with large mortgage lenders or government-sponsored enterprises, could adversely affect the Company[195](index=195&type=chunk)[196](index=196&type=chunk) - A downgrade by ratings agencies, reductions in statutory capital and surplus, or a deterioration in other measures of financial strength could adversely affect the Company's results of operations, competitive position, and liquidity[197](index=197&type=chunk) - The issuance of title insurance policies and related activities by independent title agents could adversely affect the Company due to agents' failure to fulfill fiduciary duties or contractual obligations, potentially leading to increased claims and costs[198](index=198&type=chunk)[199](index=199&type=chunk) - Systems damage, failures, interruptions, cyberattacks, intrusions, and unauthorized data disclosures by the Company or its service providers may disrupt business, harm reputation, result in material claims for damages, or otherwise adversely affect the Company[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - Errors and fraud involving the transfer of funds, including fraudulent attacks targeting the Company or its agents, may result in lost funds, financial losses, reputational harm, or loss of customers[205](index=205&type=chunk) - The Company's failure to recruit and retain qualified employees, risks associated with its global workforce, and adverse effects from acquisitions (e.g., integration difficulties, unanticipated liabilities) may impair or disrupt business operations[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) [Legal and Compliance Risk Factors](index=48&type=section&id=LEGAL%20AND%20COMPLIANCE%20RISK%20FACTORS) This section outlines legal and compliance risks, including regulatory changes, data privacy laws, governmental scrutiny, and title insurance rate regulation - Regulatory oversight and changes in government regulation could require the Company to raise capital, make it more difficult to deploy capital (including dividends and share repurchases), prohibit or limit operations, or increase costs[210](index=210&type=chunk)[211](index=211&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) - An increasing number of federal, state, and international laws and regulations apply to the collection, use, retention, protection, disclosure, and transfer of personal data, with compliance costs and potential adverse effects if not followed[212](index=212&type=chunk) - Scrutiny of the Company's businesses and the industries in which it operates by governmental entities and others could result in changes that adversely affect operations, including inquiries, lawsuits, fines, or restrictions on conduct[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Regulation of title insurance rates, which varies by state, could hinder the Company's ability to promptly adapt to changing market dynamics through price adjustments, adversely affecting results of operations[218](index=218&type=chunk) [Financial Risk Factors](index=49&type=section&id=FINANCIAL%20RISK%20FACTORS) This section addresses financial risks such as bank failures, goodwill impairment, investment portfolio volatility, claims reserve accuracy, and capital requirements - Failures at financial institutions where the Company deposits substantial funds, including third-party escrow and like-kind exchange deposits, could lead to unrecovered funds and potential liability for third-party funds[219](index=219&type=chunk) - Unfavorable economic or other conditions could cause the Company to write off a portion of its goodwill and other intangible assets, materially affecting its results of operations and financial condition[220](index=220&type=chunk) - The Company's substantial investment portfolio, primarily fixed income debt securities, is subject to credit, interest rate, and liquidity risks, with changes in fair values potentially having a material adverse effect on results of operations, statutory surplus, financial condition, and cash flow[221](index=221&type=chunk) - The Company's venture investment portfolio, comprised of investments in private venture-stage companies, is volatile and subject to risks that could cause material fluctuations in quarterly results of operations[222](index=222&type=chunk) - Actual claims experience could materially vary from the expected claims experience reflected in the Company's reserve for incurred but not reported claims, particularly with changes in laws or regulations[223](index=223&type=chunk)[224](index=224&type=chunk) - The Company may have to provide capital to one or more of its subsidiaries, which could negatively affect its debt-to-capital ratio and liquidity position[225](index=225&type=chunk) - A reduction in the deposits at the Company's federal savings bank subsidiary, particularly when real estate transactions decline or interest rates rise, could require the Company to borrow funds to maintain liquidity[227](index=227&type=chunk) [General Risk Factors](index=51&type=section&id=GENERAL%20RISK%20FACTORS) This section covers general risks including anti-takeover provisions and challenges in protecting intellectual property or avoiding infringement claims - Certain provisions of the Company's bylaws and certificate of incorporation, such as a staggered board and restrictions on stockholder actions, along with regulatory hurdles, may reduce the likelihood of any unsolicited acquisition proposal or potential change of control[228](index=228&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - The Company may be susceptible to claims of intellectual property infringement and may not be able to adequately protect its own intellectual property, especially with the expanded use of innovative technologies and open-source code, potentially leading to litigation, damages, or loss of competitive advantage[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not issue any unregistered common stock during the second quarter of 2025. It repurchased over 1 million shares for approximately $58 million under its prior share repurchase program, which had $56.7 million remaining authorization as of June 30, 2025. A new $300 million share repurchase plan was approved in July 2025 - The Company did not issue any unregistered common stock during the quarter ended June 30, 2025[234](index=234&type=chunk) Purchases of Equity Securities by the Issuer (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :------------------------------- | :--------------------------- | | April 1 to April 30, 2025 | 366,129 | $59.92 | | May 1 to May 31, 2025 | 274,652 | $56.11 | | June 1 to June 30, 2025 | 403,277 | $57.43 | | **Total** | **1,044,058** | **$57.95** | - As of June 30, 2025, the Company had **$56.7 million** remaining authorization under its prior share repurchase program[236](index=236&type=chunk) - In July 2025, the Company's board of directors approved a new share repurchase plan authorizing up to **$300 million** of common stock, terminating the prior plan[236](index=236&type=chunk) [Item 3. Defaults Upon Senior Securities](index=53&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[237](index=237&type=chunk) [Item 4. Mine Safety Disclosures](index=53&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the Company[238](index=238&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) No other material information was reported for the quarter ended June 30, 2025. Specifically, no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or Section 16 officers - No director or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[240](index=240&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, the incentive compensation plan, and certifications by the Chief Executive Officer and Chief Financial Officer - The exhibits include the Restated Certificate of Incorporation, Bylaws, Employment Agreements for key executives, the 2020 Incentive Compensation Plan (as amended), and certifications by the CEO and CFO[242](index=242&type=chunk)

Core Insights - First American Financial (FAF) reported a second-quarter 2025 operating income per share of $1.53, exceeding the Zacks Consensus Estimate by 9.3%, with a year-over-year increase of 20.5% [1][9] - The company's operating revenues reached $1.8 billion, reflecting a 14.2% year-over-year growth, driven by higher direct premiums, escrow fees, and investment income, surpassing the Zacks Consensus Estimate by 5% [2][9] Financial Performance - Investment income for the quarter was $160 million, marking a 23% increase year over year, which was above the estimate of $157.3 million [2] - Total expenses rose by 6.7% year over year to $1.6 billion, aligning with estimates [2] - Cash flow from operations increased by 33.4% year over year to $355 million [8] Segment Analysis - Title Insurance and Services segment saw total revenues increase by 13.2% year over year to $1.7 billion, with investment income rising 17% to $147 million, primarily due to higher interest income [3] - The average revenue per direct title order increased by 7.7% year over year to $4,112, driven by higher commercial transaction revenues [4] - Home Warranty segment revenues grew by 3.1% to $110.2 million, with a pretax income increase of 35% year over year [5] Corporate Developments - The corporate pretax loss was $40 million, an increase of $17 million compared to the second quarter of 2024, largely due to a one-time executive separation expense [6] - The company ended the quarter with cash and cash equivalents of $2 billion, an 18.2% increase from the end of 2024, and stockholders' equity rose by 4.4% to $5.1 billion [7] Shareholder Actions - FAF repurchased shares worth $61 million during the quarter and approved a $300 million share buyback program in July [7]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $1.53, which includes a $0.12 impact from executive separation costs [5][11] - GAAP earnings were $1.41 per diluted share, with revenue in the title segment reaching $1.7 billion, a 13% increase compared to the same quarter of 2024 [11][12] - Investment income grew by 17% this quarter, totaling $147 million, driven by higher interest income and increased average interest-bearing deposit balances [7][13] Business Line Data and Key Metrics Changes - Commercial revenue increased by 33%, with a record fee per file in the National Commercial Services division [6][12] - Purchase revenue declined by 3%, attributed to a 6% decrease in closed orders, while refinance revenue surged by 54%, accounting for only 5% of direct revenue [8][12] - The home warranty segment reported total revenue of $110 million, up 3%, with a loss ratio improvement from 46% to 41% [14][15] Market Data and Key Metrics Changes - The residential market continues to face challenges, with purchase orders down 8% in July, while refinance orders increased by 29% [9] - The commercial orders are up 13% in July, indicating strong activity in that sector [9] Company Strategy and Development Direction - The company is focused on capital management and has ramped up share repurchases, with a new $300 million authorization approved [10] - Investments in data technology and AI are expected to drive productivity improvements and differentiate the company in the long term [10][45] Management's Comments on Operating Environment and Future Outlook - Management noted that the commercial business is experiencing broad-based strength, particularly in industrial and multifamily sectors [6][20] - The company anticipates continued strength in the refinance market for another year, although it will eventually normalize [22][25] Other Important Information - The effective tax rate for the quarter was 24.6%, slightly above the normalized rate of 24% [15] - The company repurchased 1 million shares for $61 million at an average price of $57.95 during the quarter [15] Q&A Session Summary Question: Source of strength in commercial ARPO - Management indicated that the fee per file for commercial transactions increased by 30%, driven by high-quality and higher liability transactions across various asset classes [17][19] Question: Increase in percentage of commercial from refinance - Management explained that the increase is cyclical, with a significant amount of refinance business expected in the coming year [22][25] Question: Durability of refinance activity in Canada - Management expects strong refinance activity in Canada to continue for the remainder of the year, contributing positively to revenue [27][28] Question: Competitive environment in home warranty - Management acknowledged a competitive landscape but noted strong results due to lower claim frequency and effective pricing strategies [29][32] Question: Sustainability of strong margins - Management indicated that while margins improved significantly, the second half of the year may present tougher comparisons, but they expect to finish the year with improved margins [38][49] Question: Update on technology investments - Management reported progress on technology rollouts, with plans for national implementation in early 2026, which is expected to enhance operational efficiency [40][45] Question: Update on FHFA title pilot - Management confirmed that the pilot is underway, focusing on low-risk refinance transactions, and they are monitoring its progress closely [50][52]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $1.53, which includes a one-time expense of $0.12 related to executive separation costs [5][11] - GAAP earnings were $1.41 per diluted share, with revenue in the title segment reaching $1.7 billion, a 13% increase compared to the same quarter of 2024 [11][12] - Investment income grew by 17% this quarter, totaling $147 million, driven by higher interest income and increased average interest-bearing deposit balances [7][13] Business Line Data and Key Metrics Changes - Commercial revenue increased by 33% to $234 million, with closed orders up 2% and average revenue per order up 30% [12] - Purchase revenue declined by 3%, driven by a 6% decrease in closed orders, while refinance revenue surged by 54%, accounting for just 5% of direct revenue [12][13] - Home warranty segment revenue was $110 million, up 3%, with a loss ratio improvement from 46% to 41% due to lower claim frequency [14][15] Market Data and Key Metrics Changes - The residential market continues to face challenges, with purchase revenue declining due to home affordability issues and elevated mortgage rates [8] - In July, open purchase orders were down 8%, while refinance orders increased by 29%, indicating a strong commercial activity [9] Company Strategy and Development Direction - The company is focused on capital management, including a new $300 million share repurchase authorization [10] - Investments in data technology and AI are expected to drive productivity improvements and differentiate the company in the market [10][47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the commercial business outlook, citing broad-based strength and a potential acceleration of deals due to expiring tax incentives [21][22] - The company anticipates continued strength in the refinance market for at least another year, although it will eventually normalize [24][25] Other Important Information - The effective tax rate for the quarter was 24.6%, slightly above the normalized rate of 24% [15] - The company repurchased 1 million shares for $61 million at an average price of $57.95 during the quarter [15] Q&A Session Summary Question: Source of strength in commercial ARPO - Management noted that commercial revenue growth was driven by higher quality transactions and a broad array of asset classes, with a significant increase in fee per file [18][20] Question: Increase in commercial refinance activity - Management indicated that the increase is cyclical, with a significant amount of refinance business expected in the coming year [23][24] Question: Durability of refinance activity in Canada - Management expects strong refinance activity in Canada to continue for the remainder of the year, contributing positively to overall growth [28] Question: Competitive environment in home warranty - Management acknowledged competition but highlighted strong results driven by lower claim frequency and effective pricing strategies [31][34] Question: Sustainability of strong margins - Management indicated that while margins improved significantly, the second half of the year may present tougher comparisons, but they expect to finish the year with improved margins [39][40] Question: Update on technology investments - Management reported progress on technology rollouts, with plans for national implementation in early 2025, aiming to enhance operational efficiency [42][47] Question: FHFA title pilot update - Management confirmed the pilot is underway, focusing on low-risk refinance transactions, and they are monitoring its progress closely [52][56]

Core Insights - First American Financial reported strong second quarter results for Q2 2025, with adjusted earnings per share of $1.53, surpassing analyst estimates of $1.35, and total revenue reaching $1.84 billion, exceeding expectations of $1.75 billion, marking a year-over-year increase [1][2] - The company experienced a net income growth to $146 million from $116 million a year earlier, reflecting a 25.9% increase [1][2][5] - The performance was driven by robust growth in the commercial title and home warranty segments, despite mixed order growth in the residential market [1][5] Financial Performance - Adjusted earnings per share (EPS) for Q2 2025 were $1.53, a 20.5% increase from $1.27 in Q2 2024 [2] - Total revenue for Q2 2025 was $1.84 billion, a 14.2% increase from $1.61 billion in Q2 2024 [2] - Net income for Q2 2025 was $146 million, up 25.9% from $116 million in Q2 2024 [2] - Cash flow from operations was $355 million, a 33.5% increase from $266 million in Q2 2024 [2] Business Overview - First American Financial is a major provider of title insurance and settlement services, with a business model dependent on the volume of residential and commercial real estate transactions [3] - The company has been focusing on technology and innovation, investing in digital transformation and automation through platforms like Endpoint and Sequoia [4][10] - The Title Insurance and Services segment saw commercial revenue increase by 33% to $234 million, with average revenue per U.S. commercial order rising from $11,700 to $15,300 [6] Segment Performance - The Home Warranty segment reported a 3% revenue increase compared to Q2 2024, with an adjusted pretax margin improvement to 20.7% from 15.2% [7] - The segment's loss ratio improved to 41%, indicating a decrease in warranty claims [7] - In the residential title segment, direct orders closed increased by 5%, while average revenue per direct order rose by 8% [6] Cost Management - Personnel expenses and other operating costs increased due to higher incentive compensation and production expenses, including a one-time $13 million expense related to executive separation [8] - The company is managing legacy and new technologies simultaneously, aiming to retire older systems as new digital processes are implemented [8] Market Dynamics - International operations, particularly in Canada, contributed to a 10% increase in "information and other" revenue due to increased refinance activity [9] - Regulatory changes, such as the Texas title rate cut effective July 1, are anticipated, but the company believes its national scale will help mitigate local impacts [9] Future Outlook - Management expressed cautious optimism about maintaining commercial momentum in the coming quarters, with confidence in capitalizing on an expected upcycle in real estate [11] - The company remains active in capital management, repurchasing shares and maintaining a quarterly dividend of $0.54 per share, reflecting a commitment to returning capital to shareholders [12]

Core Viewpoint - First American Financial (FAF) reported quarterly earnings of $1.53 per share, exceeding the Zacks Consensus Estimate of $1.4 per share, and showing an increase from $1.27 per share a year ago, indicating a positive earnings surprise of +9.29% [1] Financial Performance - The company achieved revenues of $1.84 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.04%, compared to $1.61 billion in the same quarter last year [2] - Over the last four quarters, First American Financial has consistently exceeded consensus EPS estimates four times and topped revenue estimates three times [2] Stock Performance and Outlook - First American Financial shares have declined approximately 7.8% since the beginning of the year, while the S&P 500 has gained 7.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] Estimate Revisions and Industry Context - The trend for estimate revisions prior to the earnings release was unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, suggesting expected underperformance in the near future [6] - The current consensus EPS estimate for the upcoming quarter is $1.42 on revenues of $1.82 billion, and for the current fiscal year, it is $4.98 on revenues of $6.96 billion [7] - The Insurance - Property and Casualty industry, to which First American Financial belongs, is currently ranked in the top 38% of over 250 Zacks industries, indicating a favorable industry outlook [8]

Selected Financial Information ($ in millions, except per share data) | | | | Three Months Ended | | | --- | --- | --- | --- | --- | | | | | June 30, | | | | 2025 | | | 2024 | | Total revenue | $ | 1,841.3 | $ | 1,612.3 | | Income before taxes | $ | 195.2 | $ | 151.6 | | Net income | $ | 146.1 | $ | 116.0 | | Net income per diluted share | $ | 1.41 | $ | 1.11 | | Adjusted net income | $ | 158.4 | $ | 132.5 | | Adjusted net income per diluted share | $ | 1.53 | $ | 1.27 | Total revenue for the second quarter ...

Core Viewpoint - Kaskela Law LLC is investigating First American Financial Corp. on behalf of long-term investors due to a significant decline in the company's stock price since November 2024, which has dropped over 11% from above $70.00 to under $62.00 per share [1][2]. Group 1 - The investigation aims to determine if First American and its officers and directors violated securities laws or breached fiduciary duties related to recent corporate actions [2]. - The decline in stock price indicates potential concerns among investors regarding the company's governance and operational decisions [1][2]. Group 2 - First American shareholders are encouraged to reach out to Kaskela Law LLC for more information regarding their legal rights and options related to the investigation [3]. - Kaskela Law LLC specializes in representing investors in securities fraud, corporate governance, and merger & acquisition litigation on a contingent basis [3].

Core Insights - First American Financial Corporation (FAF) shares are trading at a discount compared to the Zacks Property and Casualty Insurance industry, with a forward price-to-book value of 1.18X, lower than the industry average of 1.56X, the Finance sector's 4.15X, and the S&P 500 Composite's 8.12X [1] - The company has a market capitalization of $5.93 billion and an average trading volume of 0.9 million shares over the last three months [2] - FAF's stock has gained 8.6% over the past year, underperforming the industry's growth of 19.1%, the Finance sector's return of 18.9%, and the S&P 500 composite's appreciation of 10.1% [3] Growth Projections - The Zacks Consensus Estimate for FAF's 2025 earnings per share indicates a year-over-year increase of 14.8%, with revenues projected at $7.00 billion, reflecting a 14.2% year-over-year improvement [5] - For 2026, the consensus estimates suggest an increase of 20.9% in earnings per share and 12.6% in revenues compared to 2025 [9] Business Outlook - FAF anticipates modest improvements in both residential purchase and refinance businesses for 2025, driven by direct premiums, escrow fees, and title agent premiums [8] - The company expects increased demand for first-time home purchases among millennials, supported by a favorable economic environment and labor market [15][16] - The title insurer is focused on enhancing its product offerings, improving core business operations, and expanding valuation and data services [17] Financial Performance - FAF has surpassed earnings estimates in each of the last four quarters, with an average surprise of 21.08% [10] - The average target price for FAF shares is $77, suggesting a potential upside of 31% from the last closing price [11] Shareholder Returns - First American distributes wealth to shareholders through dividend hikes and share buybacks, with a dividend yield and payout ratio better than the industry average [18] - The company is well-positioned for long-term growth due to its leadership in title data, strong distribution relationships, and continued investments in technology [16]

Core Viewpoint - First American Financial Corporation (FAF) is currently trading at a discount compared to the Zacks Property and Casualty Insurance industry, with a forward price-to-book value of 1.23X, lower than the industry average of 1.49X and significantly below the Finance sector's 4.1X and the S&P 500 Composite's 7.82X [1] Company Performance - FAF has a market capitalization of $6.18 billion and an average trading volume of 0.8 million shares over the last three months [2] - The stock closed at $60.15, below its 52-week high of $70.92, and is trading below both the 50-day and 200-day simple moving averages of $62.16 and $63.51, indicating downward momentum [2] - Over the past year, FAF shares have gained 4.5%, underperforming the industry's growth of 18.7%, the Finance sector's return of 16.2%, and the S&P 500 composite's appreciation of 11% [5][6] Growth Projections - The Zacks Consensus Estimate for FAF's 2025 earnings per share indicates a year-over-year increase of 15.9%, with revenues projected at $7.01 billion, reflecting a 14.3% improvement [8] - For 2026, the consensus estimates suggest an increase of 21.8% in earnings per share and 12.4% in revenues compared to 2025 [8] Earnings Performance - FAF has surpassed earnings estimates in each of the last four quarters, with an average surprise of 21.08% [9] Financial Efficiency - FAF's return on equity (ROE) stands at 10% for the trailing 12 months, outperforming the industry average of 7.7%, indicating effective utilization of shareholders' funds [10] Market Drivers - Increased demand for first-time home purchases among millennials, along with an improving economy and labor markets, is expected to drive home price appreciation, benefiting FAF [11] - The company anticipates modest improvements in both residential purchase and refinance businesses for 2025, supported by growing direct premiums, escrow fees, and title agent premiums [12] Strategic Focus - FAF is focused on enhancing its product offerings, core business, and expanding valuation and data businesses, alongside upgrading technology solutions to increase efficiency [13] - The company also returns wealth to shareholders through dividend hikes and share buybacks, with a dividend yield and payout ratio better than the industry average, making it attractive for yield-seeking investors [13] Investment Outlook - The favorable growth estimates and affordability of shares suggest that holding FAF stock is a wise decision at present [16]