First American (FAF) Q1 Earnings & Revenues Top, Rise Y/Y

First American Financial Corporation FAF reported first-quarter 2021 operating income per share of $1.64, which beat the Zacks Consensus Estimate by 27.1%. Also, the bottom line improved 54.7% year over year.

The purchase and refinance businesses continued to perform well, benefiting from strong order trends and continued focus on cost efficiency. However, expenses witnessed an increase.

First American Financial Corporation Price, Consensus and EPS Surprise

  First American Financial Corporation Price, Consensus and EPS Surprise

First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote

Behind the Headlines

Operating revenues of $2 billion increased 43% year over year on the back of higher agent premiums, direct premiums and escrow fees and information and other revenues as well as net investment income. Moreover, the top line beat the Zacks Consensus Estimate by 10.2%.

Total expense of $1.7 billion increased 28.3% year over year due to higher personnel costs, premiums retained by agents, provision for policy losses and other claims, depreciation and amortization, interest, and other operating expenses.

Segment Results

Title Insurance and Services: Total revenues increased 45% year over year to $1.9 billion. The upside was driven by improved direct premium and escrow fees, increased agent premiums as well as higher information and other revenues.

However, pretax margin expanded 1150 year over year to 17.1%.

Title open orders increased 2.4% to 363,200. Title closed orders jumped 31.6% to 287,600, driven by a 41.9% rise in refinance orders.

Average revenue per order decreased 9% due to a shift to refinance transactions.

Average revenue per direct title order declined to $2,118, primarily due to shift in the order mix from higher-premium commercial and purchase transactions to lower-premium residential refinance transactions.

Specialty Insurance: Total revenues increased 12% year over year to $136.5 million, driven by higher operating revenues in the home warranty business and higher net realized investment gains in both the home warranty and property and casualty businesses.

However, pretax margin was 4.6%, up 590 basis points year over year.

Financial Update

First American exited the quarter with cash and cash equivalents of $2 billion, down 58.8% from 2020 end. Notes and contracts payable were $1 billion, down 0.2%.

Stockholders’ equity was nearly $5 billion, up 1.7% from 2020 end.

Cash flow from operations was a record $223.9 million, up more than  nine-fold year over year.

Debt-to-capital ratio was 25.

Share Repurchase Update

The company bought back shares worth $64.8 million.

Zacks Rank

First American currently has a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported first-quarter results so far, The Travelers Companies TRV, W.R. Berkley Corporation WRB and RLI Corporation RLI beat the Zacks Consensus Estimate for earnings.

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

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