FAF - Earnings call transcript Q3 2017 | First American Financial Corporation

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Operator

Greetings and welcome to the First American Financial Corporation Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. A copy of today's press release is available on First American's website at www.firstam.com/investor. XXX-XXX-XXXX call from recorded and XXXXXXXX. the short by the available will for that enter time replay and for Company's dialing note is ID and being be a the Please conference XXX-XXX-XXXX of or investor website

will over Craig President the Barberio, an introductory call to Investor Relations, make turn statement. now Vice We to of

Craig Barberio

Good Call. Quarter Earnings morning, Conference everyone and welcome to our XXXX Third

Financial Dennis Officer. today’s will President be Gilmore; Officer, and on Executive Vice Mark us Joining and Chief Chief Executive Seaton, our

As the or the exist not contain strictly only fact. of materially does date always the events that to these statements to these to forward-looking undertake cause forth update occur Company statements in the the forward-looking not current forward-looking and statements. may uncertainties some they today are made statements forward-looking and circumstances are or date that speak made. relate that Risks do may of those set These made differ results forward-looking as statements from reflect statements after historical to

information on these and refer release earnings discussed SEC more risks subsequent uncertainties, and factors and today's our the to in please filings. Form risks XX-K For

insight financial and to today certain presentation contains competitors. provide operational Company's and relative that periods performance earlier the non-GAAP also believe we additional of Our the relative into efficiency measures Company to the

to refer financial available please measures, the at with is over Dennis reconciliation and website I measures, most this release presentation comparable non-GAAP including now more www.firstam.com. details on GAAP financial Gilmore. turn our these For to the morning’s call on directly will which to earnings

Dennis Gilmore

were quarter of regarding and will termination per you In share, include pension losses for for remainder our expense provide investment third of GAAP review and an which a morning our our net joining Good earnings realized $X.XX. the comments our thank call. quarter, $X.XX Craig. the for the of $X.XX XXXX. outlook and few I results third Thanks,

per the in were performed by businesses increase XX% commercial driven X% and third well a up fee revenues quarter. purchase Our order. average Purchase the in

business from higher real from continues and Our transaction to growth purchase benefit estate values. activity and

revenues had Our year. strong commercial X% quarter over last up business the a with

and have heading to business. We year XXXX fourth another be quarter pipeline commercial this expect for into we the a healthy

to segment. grew pre-tax margin service lesser a contractor losses X.X% through degree X%, the its can in business Turning improve from with XX%. loss now by Home that weather our reduced our significantly benefited Insurance strong which Warranty ratio to another Specialty Revenue in overall favorable had a to of also And and it and quarter improvements operations. claim conditions.

third the experienced frequency. Property losses claim quarter, and During our severity due Casualty business to higher and elevated

develop California the to also in We retention we our to fourth impact wildfires reinsurance these negative expect and to the quarter. the continue from losses million. hit products will of limit business $X anticipate We in P&C

Turning operations. to in We the quarter. acquired acquisition a direct capital our agency management, we spent title that during complements $XX Nevada million leading on

and and First extreme a have title addition recent majority broadening many employees and venture company, In position our bought footprint country American people number a the hardship and of our to partner title strengthen information. joint wildfires out we of our including customers. geographic for across caused leadership further information The hurricanes

impacted people back in employees them I'm proud worked and how operations was our up to resources these needed. focus immediate quickly they service to our to events, the Throughout our our allowing Our running us helping and of providing customer. get resume with hard

open our X% financial to be head performance will Company's orders We grow continues purchase the in result, optimistic up our a not we significantly expect about with remain into impacted. we quarter, title segment As that as fourth October. business

enable shrink turn results. our going to the pipeline strong, favorably. will us Company for the claims now deliver to XXXX. and to position call sized into Mark and in will conditions continue well is of will XXXX detailed right commercial title financial review the results I over financial these business refinance is We Our believe more

Mark Seaton

by impacted incurred begin an will our completion few a I quarter. Dennis. share to items We of pension this that termination. discussing earnings unusual $X.XX related expense you, our Thank the per

This annual quarter a we an tax in before of begin termination. this segment realizing $XX corporate result benefit as million our of

net We also losses. incurred investment $X.XX realized of

within $X agent commercial commercial to XX%. reporting order revenues The compared increased by reflecting Investment These recent increased and another revenue we decrease were included addition, that compared three purchase up which other was the $XXX was mix, revenue of agent fees segment, X% million one the of the increased decrease lag transactions. quarter revenues per quarter. year. Services other. In down premiums. Title premiums X% of XX.X% million, a was quarter. Title revenue benefit the for in transactions, order per Agent average the average with orders split were closed order. personal to revenue of was XX% and Insurance write for transactions in average $X.XX. order and increase which offset a by to million asset by each last the the was of title year. contributed average a with normal The agent offset number acquisitions while tax per This $XX from by last last $X.XX per in increase XX% driven due off expense and revenue totaled premium Services premium The purchase of direct escrow third items The In a and X%, year. shift $XX and approximately period the items $X,XXX essentially had segment of plan for income this $X.XX offset Insurance a higher X%, up Information driven up million, of

rate as Personnel with interest costs policy business, our compared $XXX and X.X% million The quarter, mortgage escrow in call and we for as the current our short-term recent property change due software, as estimates prior operating of was driven margin $XXX bad loss provision rate quarter in out-of-period in prior our legal floating agency X% acquisitions of in escrow last compared from no million has increase volume loss X.X% debt by and securities $XX ultimate differed policy or of The compared quarter expenses. third As expenses policy XX.X% lower premiums from million, prior loss year with XXXX. last the same Services X% for balances. year. income our million X.X% reflects XX.X% higher An by segment an personnel million and in portfolio, losses last Including well down provision to decline were interest investment quarter, were rate with Pre-tax tax increase on with in the third income years. is was benefited and last title This other discussed title reserve claims year. year. was year. up recent on was Insurance backed for the compared the Title $XXX expense with rates. reductions, rate Pre-tax for the the expense current from the a fees, lower of production-related impact with Other our exchange an year. offset quarter primarily million, order as in million from from $XXX $XX acquisitions, $XX of of expense well the

our $XXX this this expenses offsetting our revenues contracts in business. of favorable higher the Insurance compared loss Warranty Pre-tax Claims X% in segment, claims notably with third pension included from the The experienced segment year. million improved from Property to the loss Specialty business, improved termination. due operations. the Net in and X.X% segment X.X% were operational claims business to margins compared quarter. last total basis our to amount the ratio particularly networking XXX points $XXX ratio this Home is in Turning related Corporate up quarter was XX% year. Specialty primarily Casualty this were last for prior segment Home the in the The to for down million, million, year. $XXX improvement, service of with with in Insurance this quarter XX% was Partially XX% Warranty

in after forward, basis rate segment expect tax The negative the the an payment. pension was on we effective approximately million for expenses $XX quarter account the net into XX.X%. annual Corporate be taking Moving to

this earlier, I tax sheet noted $XXX $X This to due as we on benefit items be As earnings with basis, of to XX%. this rate Debt pre-tax expect posted totaled tax a balance quarter. our On coupled we September an low termination, tax closer negative quarter. to caused relating a normalized million million our rate pension XXth. to certain benefit the

obligations. and of million of senior facility, and $XXX $XXX million $X credit consisted million other our debt million of notes Our on trustee notes $XX notes,

September ratio debt-to-capital Our XX.X%. as was of XXth

our $XXX facility. have million revolving on credit We $XXX million remaining

by increase primarily provided a In we would to was questions. terms relative take cash of the made turn pension million due to to operations the your to contribution $XX now $XXX cash call I million, last to year. over back like the year, operator flow, last XXX%

Operator

you. Thank

first now begin proceed session. DeVries comes of will [Operator with We from the question. question-and-answer question line Mark Our from your Instructions] Please the Barclays.

Mark DeVries

we XX.X%, first out that back sound all these the in of to you items If closer you. have a Thank Mark? pre-tax quarter, non-operating right we to margin does got

Mark Seaton

the sound [indiscernible]. expense if that right, and you are out think I backing Yes, the personnel

Mark DeVries

more XX% pre-tax to the Okay, target. given thoughts have and on for Interested margin the some of and commented I albeit to could well above kind updated a the have seasonally ones, that that believe you at you a strong had your target recent now, quarters be conference, these get ones results. couple that of XX% upside

Dennis Gilmore

the is the very, now our margin to continues of is going a I Dennis, is But the stronger that right XX% business XX.X commercial Again said year-to-date increased the efficiency. year. range. to is still strong, improve, Running very like we this forward, drive continue I is Mark, through about our than into this to the will before, And pre-tax operating if right XX% good objective, we approach positioned, very to market appropriate. higher in we had going quarter. thought margin think Company

right where are to the drive business. we in we we and to drive now, as efficiency greater the to happy improve look continues are continue that we up market continue So to

Mark DeVries

Okay.

are transactions, comments bit particular little I right seeing was should and a if your volatility because that guess we similar that indicated I or so the in you ARPU around right pipeline think now quarters. Mark, you mix of commercial of expect that strong in ARPU some your coming in kind larger the is a of

Mark Seaton

that deals we little our a prices, ARPU seeing transactions, a both, you general the but higher and is is volatility just there is coming think estate this seen I help I as higher statement, which around because know also always deals, we commercial larger through. are commercial ARPU quality there have lumpiness mean to real are

few those is why it the ARPU So this this up things year up why quarter. and was our are reason XX%

Mark DeVries

thoughts in just last Okay and Would updated benefits with could updated of the the here be forward current next what Mark from and are be what question hearings curve interested investment on tightening market expectations given kind are just the for one on from in kind that what your over me, is thoughts income general - year. of, rates and your higher your

Mark Seaton

Well more happened, million look least that’s of basis. has mean I XX ago, [indiscernible] million investment what X on so the year if than income year, in the we over did annualize last you back, an at

of [indiscernible] because So some say it, lot of more redriven. income, investment its but million XX got of a would I of annualized is higher balances, we

And tighten, the going that to to continues so see benefit. if continue we are to Fed

annualized over more every million XX basis XX raises year, basis. of level investment to points, So Fed get we last income the high an time on about the just

the of. that’s servicing but benefit So somewhat

Mark DeVries

Okay helpful. that’s you. Thank

Mark Seaton

you. Thank

Operator

Campbell your Our Please line of next with question. question from comes the proceed John from Stephens.

John Campbell

Hey guys.

roughly the Title there business know little your as I wouldn’t any I if to more comments we is of expansion why moving lot mean income, reason any there margin Mark then you about year. of next a lifting commercial next be Is flattish year. at especially kind parts there, a but bit just next see reason think back I may Just year, considering there hold is that and about investment margin,

Mark Seaton

are like and Really and to two going right purchase on will we they will running our year, to they right it’s two in will and things I now continue commercial think commercial at to of right on expand XXXX and are seek efficiencies the in XX%; the the now, right how end we we market, XXXX we in from going XX% continue those should to the we upper right better optimistic are continue to remaining now. It hold right. drive to drive where of think, to depends it depend business. margins if at the depend come and to on but performs back to think market we XX% range But the

we we business the we So where by looking are on forward. and are are encouraged encouraged

John Campbell

the Absolutely. or annual there. you And evenly the say quarters? to I the any Is spread $XX in line that is really expense throughout Great it job corporate. of I million, heard expected seasonality of Mark, kind kind there think,

Mark Seaton

quarter. It's very spread No throughout evenly the seasonality.

John Campbell

Okay. And an up then idea, Can of revenue from for maybe run and give the some me. the of talk to kind those you us size rate try acquisitions? last to acquisitions

Mark Seaton

$XX will them you guess closed of I quarter was for would We us. what we million deals got acquisitions - average the about when worth active Yes, it million is, and an $XX say together, I annualized revenue go of as premiums. and were through of are and that through [indiscernible]. a as margins item other overall third two-thirds And will our direct at at line high they information about are flow about least the and

John Campbell

and it. million Got $XX said in was is rate understand a sure, up are the to-date To $XX Okay. make what quarter? million that you you running run I

Mark Seaton

run outlaid $XX cash the be [indiscernible] million revenue million would sorry the for $XX was annualized I’m rate.

John Campbell

And two-thirds a and is indirect? third in info and of is other that then

Mark Seaton

That’s right.

John Campbell

Okay, guys. great. Thanks,

Dennis Gilmore

Thank you.

Operator

of comes question your the from Mark line proceed with SunTrust. next Please question. Our Hughes with

Mark Hughes

we The think what an Yes. growth when Thank on you. about expect information basis, of in other morning. run Good rate there? and should kind organic you

Mark Seaton

there in drivers there. is is one little different - a difficult to that Well,

have default have international have there. revenue revenue, we revenue purchased we there, we we a revenue, through operations lot refinance of So within our have went

So is I different would multiple say there drivers.

fact, will and increase and as other However, escrow info fast I the of we the item at line line line some info light the increase would of doing in would think our Particularly item. these acquisitions of items. as and direct least other premium are

Mark Hughes

for share And then October, in what is might refis if you rate the run that?

Dennis Gilmore

X,XXX We orders our over right and adjusted cost to few around are also last running months now have stabilized level. current we today, open structure we the that

Mark Hughes

M&A, that steps the of your coming elevated of the taking Is management, on I the focus, pretty a M&A is seem having your doesn’t and some then And of repurchase, some share like quarter. destocking capital this the in quarters? level done should think that’s robust near-term it anticipate prominent we

Dennis Gilmore

agents continuing the lumpy, to stays definitely will opportunities title It our to we want the strategy footprints. be where but our look for same. we build primarily to are direct

and We continue are it looking to build automation. out our title relates businesses how information to

focus of lot a So there.

they core are outside are opportunities We have continue size. look change to have we really some seen but our slightly that in to couple the guess complementary expand quite we look of a products, is taking offerings. and seen of new core last to those, the mortgage I at of a but few title, not thing only very significant are months we over mortgage for the

Mark Hughes

Thank you.

Operator

proceed Deleeuw Jason of line the from with with comes Piper question. question next your Our Jaffray. Please

Erick Robinson

on digital guys guys be I been you Would support for got origination to could on the my your I detail solid on Congrats data a you other just to going have have Erick used been focusing guess asked, lot quarter. - Jason. are the touch recently. that API questions little initiatives have but technology initiatives the on initiatives going you if of technology recent and to A Thanks more and related here Robinson mind into regarding process. just

Mark Seaton

we to continue titling past strategy automation to drive the acquisition look digital and of the bottom quarter. we on over public closing. out try deals to that’s And continue efficiency and we our did databases look process for in to to Sure, continue line, long-term, in this augment in we record the drive respective that building focus and one the

from So will acquisitions of energy and the us. be We market there there for lot a from big is think future. and organic both there opportunity prospective in a

Erick Robinson

again far touch right, October, here just I thus purchase I guess it then Got in where it October. hear of was it the and open purchase to did on in X%

Mark Seaton

Correct.

about are year. above X% We last running

Erick Robinson

Thanks me. that’s guys. Alright, it Great. for

Dennis Gilmore

Erick. Thanks

Operator

question of George the from proceed next with Our question. Instructions] [Operator KBW. with line your comes Bose Please

Bose George

morning. Good

the a mean level kind I or acquisition you pretty sort could this follow-up on question, obviously capital would more of seeing a so of use acquisition opportunistic, the see strong. you of forward. bigger just you characterize just Just is out by quarter are this being as there, of going

Mark Seaton

Probably a little of both.

lot will think are are in deals always we but this be now seeing I quarter viable opportunistic the before. and I a it spaces we mentioned of lumpy,

is we So we we continue nothing but again us, unless it, I for will on of we expect. the at won't day changing end to returns focus the think get deploy

Bose George

great for earlier to potential so and number just million comments about your at capped reinsurance, thanks was your given the loss then guys. Okay just the $X essentially impact, switching is wildfire that

Mark Seaton

are that $X we retention, million losses so we basically capped are so Yes, million. will going $X to at have exceeding our

We have be a reinstate don’t capped. going exactly to are million, roughly but fee our losses that’s know to as will a our to reinsurance, well restatement pay we but

Bose George

Okay thanks are think and on period, one-time or the the do we periodic the like guys out of as things personal they adjustments expense one-time had, one expense. really happen. Should that like you they them actually of

Mark Seaton

in expense personal Well the quarter. it the real is case current it Company the expense, incurred that of just in the wasn’t

the title in thing. was truly shouldn’t it the that operating the And we found been that But kind plans so on effort to was the of broke from In all we one-time there we off that basically booked was effective was book million case an until you and title it. the reconcile through plan, of at have that that sense the going our to would exclude results $X plans are when really different in occur I they are title looking went third that quarter time-to-time.

mix a So pleasant there.

Dennis Gilmore

great Okay, thanks.

Mark Seaton

Thank you.

Operator

from with comes next question. of Our & proceed question Geoffrey from line the Please Dowling Dunn your Partners.

Geoffrey Dunn

Mark three guys. those morning declare I wildfire my of own to on I this, sort as but that as follow-up want just on understand, good Thanks, I of events. out question,

cover sure, it I'm So an asking but is you max encompassing I’m is thing works, million $X that how your it hits, you or that address three does correctly, not reinsurance event somehow. all based have where concept? if might

Mark Seaton

have, the Well, really the have. day, for - Geoff, of it’s understood one we we the end have at event properties the way that that claims is we the

more because there expect $X as So different event. multiple long than [indiscernible] we were to but within of million don’t are we each this hours kind hit they other, into a can one be consolidate them events, as of XXX

Geoffrey Dunn

you. Got

on the Okay. Perfect. got rate you corporate I to expect as about forward? you. expense going follow-up corporate. you Thank where about Actually, be were you What talking were rate, one saying run

Mark Seaton

million. $XX

Geoffrey Dunn

Okay. Thanks.

Mark Seaton

Thank you.

Operator

further call time. at like today’s There to your questions We XXXX-XXXX. are Company's to replay Company This be The conference does of today's no website or by XXX-XXX-XXXX will available thank participation. concludes listeners remind morning's this and would for This ID this conference would the that XXX-XXX-XXXX enter dialing on the like for you conclude call. or call.

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First American Financial (FAF) 26 Oct 172017 Q3 Earnings call transcript