First American(FAF) - 2024 Q2 - Quarterly Results

Financial Performance Summary First American Financial reported Q2 2024 total revenue of $1.6 billion, a 2% decrease year-over-year, with net income of $116 million or $1.11 per diluted share Q2 2024 Financial Highlights First American Financial reported total revenue of $1.6 billion for Q2 2024, a 2% decrease year-over-year, with net income of $116 million or $1.11 per diluted share Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenue | $1,612.3 M | $1,646.9 M | | Income Before Taxes | $151.6 M | $178.1 M | | Net Income | $116.0 M | $138.5 M | | Diluted EPS | $1.11 | $1.33 | | Adjusted Net Income | $132.5 M | $140.9 M | | Adjusted Diluted EPS | $1.27 | $1.35 | - Successfully launched "Sequoia," an ongoing pilot program for the automated underwriting of purchase transactions[34][16] - The company repurchased 752,000 shares for $41 million in Q2 and an additional 281,000 shares for $15 million through July 23, 2024[34] - Cash flow from operations was strong at $267 million, nearly flat compared to $269 million in the prior year's quarter[34] Management Commentary CEO Ken DeGiorgio acknowledged challenging market conditions but noted a seasonal pickup in demand, highlighting strong adjusted pretax margins in key segments - Management stated that despite challenging market conditions, the company benefited from a seasonal pick-up in demand[16] - The company is maintaining its focus on managing operating expenses while investing in long-term strategic initiatives, including the Sequoia automated underwriting pilot[16] - The full-year performance outlook depends on the strength of the commercial market in the second half of the year, particularly in the fourth quarter[16] Segment Performance This section details the financial performance of First American's Title Insurance, Home Warranty, and Corporate segments Title Insurance and Services The Title Insurance and Services segment reported revenues of $1.5 billion, a slight 1% decrease year-over-year, with a pretax margin of 11.7% Title Insurance and Services Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenues | $1,521.9 M | $1,530.7 M | | Income Before Taxes | $177.4 M | $185.7 M | | Pretax Margin | 11.7% | 12.1% | | Adjusted Pretax Margin | 11.9% | 12.6% | - Direct premiums and escrow fees increased by 3% YoY, driven by a 5% increase in average revenue per order closed, which was partially offset by a 3% decline in the number of direct title orders closed[18] - Investment income declined by $16 million compared to Q2 2023, primarily due to lower average balances in interest-bearing escrow and tax-deferred property exchange accounts[18] - The provision for policy losses was 3.0% of title premiums and escrow fees, down from 3.5% in the prior year, reflecting a favorable change in loss reserve estimates for prior policy years[18] Home Warranty The Home Warranty segment's revenue remained flat year-over-year at $107 million, but profitability improved significantly with a pretax margin of 15.4% Home Warranty Segment Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenues | $106.8 M | $106.5 M | | Income Before Taxes | $16.5 M | $14.3 M | | Pretax Margin | 15.4% | 13.4% | | Adjusted Pretax Margin | 15.2% | 12.9% | - The claim loss rate improved to 45.8% from 49.2% last year, attributed to lower claim severity, which was partially offset by higher claim frequency[19] Corporate The Corporate segment's pretax loss widened to $42.3 million in Q2 2024, primarily due to $20 million in net recognized investment losses - The Corporate segment recorded a pretax loss of $42.3 million, compared to a loss of $21.9 million in Q2 2023[13] - The increased loss was driven by net recognized investment losses of $20 million this quarter, in contrast to gains of $3 million in the same period last year[40] - Excluding net recognized losses and gains, the Corporate pretax loss was $23 million, an improvement from the $25 million loss in Q2 2023[40] Consolidated Financial Statements This section provides an overview of the company's consolidated income statement and balance sheet information Summary of Consolidated Financial Results This section presents the consolidated income statement for the three and six months ending June 30, 2024, showing a year-over-year decline in revenue and profitability Consolidated Financial Results (Three Months Ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $1,612.3 M | $1,646.9 M | | Net Income Attributable to Company | $116.0 M | $138.5 M | | Diluted EPS | $1.11 | $1.33 | | Cash Dividends Declared per Share | $0.53 | $0.52 | Consolidated Financial Results (Six Months Ended June 30) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenues | $3,036.9 M | $3,093.0 M | | Net Income Attributable to Company | $162.7 M | $184.4 M | | Diluted EPS | $1.56 | $1.76 | | Cash Dividends Declared per Share | $1.06 | $1.04 | Selected Consolidated Balance Sheet Information The company's balance sheet shows total assets of $15.2 billion as of June 30, 2024, a decrease from $16.8 billion at year-end 2023, primarily due to reduced cash Consolidated Balance Sheet Highlights | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,048.6 M | $3,605.3 M | | Investments | $7,847.2 M | $7,948.9 M | | Total assets | $15,157.3 M | $16,802.8 M | | Notes and contracts payable | $1,399.7 M | $1,393.9 M | | Total stockholders' equity | $4,813.6 M | $4,848.1 M | Supplemental Financial Information This section provides detailed segment-level financial data, non-GAAP reconciliations, and supplemental title insurance operational metrics Segment Information (Detailed Tables) This section provides a granular breakdown of revenues and expenses for the Title Insurance, Home Warranty, and Corporate segments for both quarterly and six-month periods Segment Pretax Income (Loss) - Three Months Ended June 30 | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Title Insurance | $177.4 M | $185.7 M | | Home Warranty | $16.5 M | $14.3 M | | Corporate (incl. Elims.) | $(42.3) M | $(21.9) M | | Consolidated | $151.6 M | $178.1 M | Segment Pretax Income (Loss) - Six Months Ended June 30 | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Title Insurance | $250.1 M | $273.9 M | | Home Warranty | $36.8 M | $30.2 M | | Corporate (incl. Elims.) | $(77.0) M | $(66.4) M | | Consolidated | $209.9 M | $237.7 M | Reconciliation of Non-GAAP Financial Measures This section reconciles reported GAAP results to non-GAAP measures by adjusting for items such as net investment (losses) gains and purchase-related intangible amortization Consolidated GAAP to Non-GAAP Reconciliation (Q2 2024) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Pretax Income | $151.6 M | $21.6 M | $173.2 M | | Net Income | $116.0 M | $16.5 M | $132.5 M | | Diluted EPS | $1.11 | $0.16 | $1.27 | Title Insurance Segment GAAP to Non-GAAP Reconciliation (Q2 2024) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Pretax Income | $177.4 M | $2.4 M | $179.8 M | | Pretax Margin | 11.7% | +0.2% | 11.9% | Supplemental Title Insurance Data This section provides key operational metrics for the U.S. direct title insurance business, including daily order volumes and average revenue per order Total Orders Per Day (U.S. Direct Operations) | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Open Orders per Day | 2,650 | 2,728 | | Total Closed Orders per Day | 1,948 | 2,005 | Average Revenue Per Order (ARPO) (U.S. Direct Operations) | Order Type | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Purchase | $3,605 | $3,472 | | Commercial | $11,720 | $11,614 | | Total ARPO | $3,818 | $3,640 | Other Information This section provides details on the upcoming teleconference, company overview, and important legal disclaimers Teleconference/Webcast Information First American will host a teleconference and webcast to discuss its second quarter 2024 financial results on Thursday, July 25, 2024, at 11 a.m. EDT - A conference call to discuss Q2 2024 results is scheduled for Thursday, July 25, 2024, at 11 a.m. EDT[21] - The live audio webcast and an audio archive will be available on First American's investor website at www.firstam.com/investor[21](index=21&type=chunk) About First American First American Financial Corporation is a premier provider of title, settlement, and risk solutions for real estate transactions, recognized for its 135-year history and workplace culture - First American Financial Corporation (NYSE: FAF) is a leading provider of title, settlement, and risk solutions for real estate transactions with a 135-year history[22] - The company's total revenue was $6.0 billion in 2023[22] - In 2024, First American was named one of the 100 Best Companies to Work For by Great Place to Work® and Fortune Magazine for the ninth consecutive year[22] Forward-Looking Statements & Non-GAAP Measures This section includes standard legal disclaimers regarding forward-looking statements and the use of non-GAAP financial measures for additional insight - The report contains forward-looking statements subject to various risks and uncertainties, including interest rate fluctuations, real estate market conditions, and regulatory changes, that could cause results to differ materially[4] - The company uses non-GAAP financial measures (e.g., adjusted net income, adjusted EPS) to provide additional insight into financial leverage, operational efficiency, and performance relative to prior periods and competitors[5]