PART I: FINANCIAL INFORMATION Financial Statements The company reported decreased total assets and Q2 revenues, with lower net income, but a significant increase in operating cash flow for the first half of 2024 Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 (millions) | December 31, 2023 (millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,048.6 | $3,605.3 | | Total Investments | $7,847.2 | $7,948.9 | | Total Assets | $15,157.3 | $16,802.8 | | Deposits | $5,616.1 | $7,308.0 | | Total Liabilities | $10,324.7 | $11,940.0 | | Total Stockholders' Equity | $4,813.6 | $4,848.1 | Condensed Consolidated Income Statement Highlights (in millions, except per share data) | Metric | Q2 2024 (millions) | Q2 2023 (millions) | Six Months 2024 (millions) | Six Months 2023 (millions) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,612.3 | $1,646.9 | $3,036.9 | $3,093.0 | | Income before income taxes | $151.6 | $178.1 | $209.9 | $237.7 | | Net income attributable to the Company | $116.0 | $138.5 | $162.7 | $184.4 | | Diluted EPS ($) | $1.11 | $1.33 | $1.56 | $1.76 | Condensed Consolidated Cash Flow Highlights (in millions) | Cash Flow Category | Six Months Ended June 30, 2024 (millions) | Six Months Ended June 30, 2023 (millions) | | :--- | :--- | :--- | | Cash provided by operating activities | $336.0 | $176.7 | | Cash (used for) provided by investing activities | $(130.6) | $245.9 | | Cash (used for) provided by financing activities | $(1,757.2) | $595.1 | | Net (decrease) increase in cash | $(1,556.7) | $1,022.4 | Segment Information The Title Insurance segment saw a slight revenue decrease, Home Warranty revenues were stable with increased pretax income, and Corporate reported a wider pretax loss Segment Revenues and Pretax Income (Loss) for Q2 2024 (in millions) | Segment | Revenues (millions) | Income (loss) before income taxes (millions) | | :--- | :--- | :--- | | Title Insurance and Services | $1,521.9 | $177.4 | | Home Warranty | $106.8 | $16.5 | | Corporate and Eliminations | $(16.4) | $(42.3) | | Total | $1,612.3 | $151.6 | Segment Revenues and Pretax Income (Loss) for Six Months 2024 (in millions) | Segment | Revenues (millions) | Income (loss) before income taxes (millions) | | :--- | :--- | :--- | | Title Insurance and Services | $2,841.7 | $250.1 | | Home Warranty | $212.0 | $36.8 | | Corporate and Eliminations | $(16.8) | $(77.0) | | Total | $3,036.9 | $209.9 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Q2 2024 revenue decreased due to investment losses, while Title Insurance saw a slight decline, Home Warranty improved pretax income, and Corporate's loss widened, with strong liquidity maintained Results of Operations Q2 2024 revenues decreased due to investment income decline, Title Insurance pretax income fell, Home Warranty pretax income rose due to lower claims, and Corporate's loss widened - In Q2 2024, domestic residential purchase transaction fees increased 4.3%, while commercial and residential refinance fees decreased by 0.7% and 8.9%, respectively, compared to Q2 2023109 - The provision for title policy losses was 3.0% of title premiums in Q2 2024, down from 3.5% in Q2 2023, reflecting an ultimate loss rate of 3.75% for the 2024 policy year and reserve releases from prior years123 - The Home Warranty segment's claims rate decreased to 45.8% of premiums in Q2 2024 from 49.2% in Q2 2023, primarily due to lower claims severity131 - The Corporate segment's net investment losses of $19.5 million in Q2 2024 were primarily related to unrealized losses on the Company's investment in Offerpad134 Liquidity and Capital Resources The company maintains strong liquidity from operations and investment income, with $79.8 million cash at the holding company and $900.0 million credit facility, while managing significant off-balance sheet deposits - The company repurchased 811 thousand shares for $44.2 million in the first six months of 2024, with $169.6 million remaining under the current $400.0 million repurchase authorization87148 - The holding company has access to dividends from insurance subsidiaries, with a maximum of $525.1 million available for the remainder of 2024 without prior regulatory approval149 - The company's adjusted debt-to-capitalization ratio was 20.1% at June 30, 2024, slightly down from 20.2% at December 31, 2023154 - The company expects to repay its $300.0 million 4.60% senior unsecured notes due November 15, 2024, upon maturity, using available cash, credit facility borrowings, or new bond issuance151 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is interest rate fluctuations, with no material changes reported since the 2023 Annual Report - The company's main market risk exposure relates to interest rate risk, with no material changes in this risk profile reported since year-end 2023165166 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO have certified that the company's disclosure controls and procedures were effective as of the end of the quarter167 - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting168 PART II: OTHER INFORMATION Legal Proceedings The company is involved in routine lawsuits and regulatory proceedings, with no expected material adverse effect on its financial condition or results - The company is party to various lawsuits and regulatory proceedings but does not believe any pending matters will have a material adverse effect on its financial condition or results9395170 Risk Factors Key risks include strategic challenges from innovation, operational risks from market conditions and cyberattacks, extensive legal and compliance oversight, and financial risks from investment portfolio volatility - Strategic risks include the potential inadequacy of the risk management framework and disruptions from innovative initiatives, including the use of artificial intelligence172173 - Operational risks are highlighted by the impact of real estate market conditions, unfavorable economic conditions, and the potential for systems damage, failures, and cyberattacks, referencing the December 2023 incident176177191 - Legal and compliance risks include increasing regulatory oversight, potential changes in government regulation (such as CFPB policy considerations), and scrutiny of business practices by governmental entities200203204 - The company's venture investment portfolio is described as high-risk, illiquid, and concentrated, which may cause material fluctuations in quarterly results211 Use of Proceeds and Issuer Purchases of Equity Securities The company repurchased 752,300 shares for $40.7 million in Q2 2024, with $169.6 million remaining under its share repurchase authorization Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share ($) | Total Cost (approx.) (millions) | | :--- | :--- | :--- | :--- | | April 2024 | 38,099 | $54.55 | $2.1 | | May 2024 | 377,270 | $54.73 | $20.6 | | June 2024 | 336,931 | $53.43 | $18.0 | | Total | 752,300 | $54.14 | $40.7 | - As of June 30, 2024, the company had approximately $169.6 million remaining under its share repurchase authorization222223 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents
First American(FAF) - 2024 Q2 - Quarterly Report