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First American Financial Reports Second Quarter 2013 Results

“Our business gained momentum in the second quarter as the housing market continued to improve,” said Dennis J. Gilmore, chief executive officer for First American Financial Corporation. “Strength in our title insurance segment drove revenue up 18 percent. Our commercial division’s performance was particularly strong, with revenues up 35 percent compared with last year.

“Year to date, our paid title claims are down 8 percent as compared with the prior year and our most recent policy years continue to perform well, with ultimate loss rates below historical averages. While claims from our legacy policy years have generally declined, they are not falling at the pace that we expected and, as a result, we strengthened our reserves in the quarter. Although the reserve strengthening impacted our otherwise strong results, it does not alter our long-term outlook for the business.

“The strong spring selling season has continued into summer, with resale orders in July remaining at the peak levels of May and June. On the refinance side, the surge in mortgage rates beginning in May impacted transaction activity with orders declining sharply through the end of June, but leveling out thus far in July.

“In June and July, we repurchased 1.6 million common shares at an average price of $21.92 for a total of $36 million. We purchased these shares based on our strong capital position and the long-term value we see in our stock relative to other investment opportunities.”

Title Insurance and Services

($ in millions, except average revenue per order)
For the Three Months Ended

June 30
2013                 2012
Total revenues $ 1,205.0                 $ 1,012.0
Income before taxes $ 73.0 $ 118.4
Pretax margin 6.1 % 11.7 %
Direct open orders 421,500 411,200
Direct closed orders 321,300 289,300
Total revenues $ 133.0 $ 98.2
Open orders 23,600 19,100
Closed orders 11,800 12,100
Average revenue per order $ 10,200 $ 7,100

* Includes commercial activity from the National Commercial Services division only.

Total revenues for the Title Insurance and Services segment were $1.2 billion, a 19 percent increase from the same quarter of 2012. Direct premiums and escrow fees were up 21 percent from the second quarter of 2012, driven by an 11 percent increase in the number of direct title orders closed in the quarter and a 9 percent increase in the revenue per direct title order to $1,593. The increase in revenue per direct title order was primarily attributable to higher real estate prices and an increase in the number of large commercial deals that closed in the quarter. Agent premiums were up 24 percent in the current quarter, which is consistent with the increase in direct premiums during the previous quarter, reflecting the typical reporting lag of approximately one quarter.

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