First American Financial Tops on Earnings - Analyst Blog


First American Financial Corporation ( FAF ) reported its third-quarter 2013 operating net income of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents per share by 3.3%. The results also exceeded the year-ago earnings by a penny.

The company's net income came in at 59 cents per share, including net realized investment losses of 4 cents per share. The result plunged 37.9% year over year. The year ago quarter includes net realized investment gains of 27 cents per share and favorable impact of 6 cents per share from certain tax items.

Operational Update

First American Financial's top line grew 7.7% year over year to $1.3 billion, riding primarily on the back of higher agent premiums (up 23.9% year over year) and direct premiums and escrow fees (up 7% year over year). The results also surpassed the Zacks Consensus Estimate of $1.2 billion by 10.5%.

Total expenses of First American Financial also rose 13.4% year over year to nearly $1.2 billion in the reported quarter owing to higher personnel cost, premiums retained by agents and other operating expenses.

Segment Update

Title Insurance: Direct premiums and escrow fees of $487.8 million increased 6.2% year over year. Agent premiums also surged 23.9% year over year to $549 million.

Investment income of the segment increased 13.9% year over year to $22.2 million during the quarter.

Pretax margin contracted 260 basis points (bps) year over year to 10.3% due to rise in expenses.

Specialty Insurance: Direct premiums and escrow fees came in at $85.3 million, increasing 11.2% year over year.

Investment income declined 22.8% year over year to $1.8 million in the reported quarter.

Pretax margin of 4.7% contracted 530 bps from the year-ago quarter due to higher losses in both the property and casualty and home warranty business lines.

Corporate: Investment income of $1.9 million in the reported quarter surged 52.3% year over year.

Financial Update

First American Financial exited the third quarter with cash and cash equivalents of $833.8 million, up 32.9% from Dec 31, 2012.

Total assets of $6.5 billion for First American Financial increased 7.4% from the 2012 year-end level.

First American Financial's total shareholders' equity stood at nearly $2.4 billion as of Sep 30, inching up 1% from the 2012 year-end level.

Total cash flows from operations during the quarter totaled $87.4 million for First American Financial.

Share Repurchase Update

First American Financial spent $47.1 million to buy back 2.2 million shares in the third quarter.

Performances by Other Property and Casualty Insurers

Allied World Assurance Company Holdings, AG ( AWH ) reported its third-quarter 2013 operating net income of $2.93 per share, surpassing the Zacks Consensus Estimate by 37.5% and the prior-year figure by 35.6%.

Platinum Underwriters Holdings Ltd. ( PTP ) reported its third-quarter 2013 net earnings of $1.32 per share, which beat the Zacks Consensus Estimate of $1.00. However, the results declined 48% from the year-ago quarter level.

RLI Corporation ( RLI ) reported third-quarter 2013 operating earnings of $1.40 per share, surpassing both the Zacks Consensus Estimate by 47% and the year-ago figure by 37.2%.

Zacks Rank

First American Financial presently carries a Zacks Rank #3 (Hold).

ALLIED WORLD AS (AWH): Free Stock Analysis Report

FIRST AMER FINL (FAF): Free Stock Analysis Report

PLATINUM UNDRWT (PTP): Free Stock Analysis Report

RLI CORP (RLI): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AWH , FAF , PTP , RLI

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