First American Financial Corporation
) reported second quarter 2014 operating income of 43 cents per
share, missing the Zacks Consensus Estimate by 12.2%. However,
earnings improved 48.3% year over year due to lower expenses.
First American Financial Corporation - Earnings
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Including net realized investment gain of 4 cents, net income of
First American Financial came in at 47 cents per share, up nearly
52% year over year.
First American Financial experienced normal seasonal growth in
purchase transactions, improvement in commercial business and
benefits of controlled expenses in the quarter.
First American Financial generated total revenue of $1.15
billion, down 11% year over year. However, results
outperformed Zacks Consensus Estimate by 2.5%. Revenues decreased
due to a fall in direct premiums and escrow fees, agent premiums as
well as information and other revenues.
Total expenses of First American Financial declined 12.6% to $1.1
billion year over year due to a decrease in personnel costs,
premiums retained by agents, other operating expenses and provision
for policy losses and other claims.
Closed orders per day during the quarter declined 33.3% largely due
to a 57% decrease in refinance orders.
Title orders opened in second-quarter 2014 were $318 million, down
24.5% year over year. Title orders closed were $214 million, down
3.33% from the year-ago quarter.
Average revenue per direct order of First American Financial in the
reported quarter improved 27.1% due to higher-premium purchase and
Title Insurance and Services:
Total revenue declined 12% to $1.1 billion year over year due to a
13% fall in direct premiums and escrow fees. Average fee per order
increased 6% due to rise in home value. Agent premiums declined 15%
year over year.
Information and other revenues decreased 3% year over year due to
low demand for the company's default and title plant information
products. However, revenues from Interthinx acquisition limited the
Investment income declined 10.5% due to lower investment earnings.
Pre-tax income for the Title Insurance and Services segment fell
16.1% year over year. Pre-tax margin rose 190 basis points (bps) to
8% year over year.
Total revenue increased by 9% to $91.2 million year over year,
driven by higher premiums earned in the home warranty as well as
property and casualty business lines.
The loss ratio improved 200 bps in the current quarter due to
weather-related claims and decline in the home warranty business
that led pre-tax margin to increase 340 bps.
The segment recorded revenue of $3.4 million compared with negative
$0.6 million in the year-ago quarter.
Pre-tax loss narrowed to $19.4 million from $21 million loss
incurred in the year ago quarter.
First American Financial exited 2014 with cash and cash equivalents
of $1.04 billion, up 24.5% from Dec 31, 2013.
Total assets of First American Financial of $7.01 billion increased
7.0% from the 2013 year-end level.
Total shareholders' equity came in at nearly $2.5 billion as of Jun
30, 2014, up 3.7% from the 2013 year-end level.
Performance of Other Property and Casualty
While ACE Limited (
) outperformed the Zacks Consensus Estimate, RLI Corporation's (
) earnings were in line with the same. The Travelers Companies Inc.
), on the other hand, missed the Zacks Consensus Estimate on
higher-than-expected catastrophe losses.
First American Financial currently has Zacks Rank #3 (Hold).
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