FAF - Earnings call 3 2023 | First American Financial Corporation

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Operator

Greetings, and welcome to the First American Financial Corporation third quarter earnings conference call. [Operator Instructions] A copy of today's press release is available on First American's website at www.firstam.com/investor. Please note that the call is being recorded and will be available for replay from the company's investor website and for a short time by dialing (877) 660-6853 or (201) 612-7415 and enter the conference ID 13741673.

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

Craig J. Barberio

Good morning, everyone, and welcome to First American's Earnings Conference Call for the Third Quarter of 2023.

Joining us today on the call will be our Chief Executive Officer, Ken DeGiorgio; and Mark Seaton, Executive Vice President and Chief Financial Officer.

made -- contain to or current statements do statements historical the fact. reflect not relate of today forward-looking may that or Some to strictly made, of statements update to are the to events date only date forward-looking or statements company as circumstances occur These they not speak forward-looking are made. that and reflect undertake the the does statements the after forward-looking

that from forward-looking exist uncertainties may those statements. forth and to materially cause Risks differ these set in results

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

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

financial which on refer our financials, available GAAP measures, presentation details directly the release with please website to www.firstam.com. more these earnings and is most morning's including reconciliation For comparable at on to this non-GAAP

turn to I like call Ken would to DeGiorgio. now the over

Kenneth DeGiorgio

Thank market home The many produce X point existing not over to levels years, affordability continues interest seen challenging in you, in rates rapid With at its in housing decades, currently lowest Craig. sales annual pace conditions. to each year Moreover, of year have declined market down XX% from the pandemic are approximately to the volumes load global XXXX. financial to this crisis. in reverted since slowest sales have commercial the levels and increase

our consolidated business an generated title expense basis. focus purchase earnings XX% and basis, a us of net continued Despite growth our diluted $X.XX deliver income per adjusted on management to margin these difficult we adjusted share. of pretax historically conditions, residential on On enabled investment strong a in

with X% September, purchase prior with [Audio the orders is open compared year. are but are October, consistent Gap] X up compared slightly weeks with down normal seasonality, which in

stabilized. the that also division While a has is low the further and is indication this our reflects comparison period, driven homebuilder mostly of market results historically performance it by industry-leading

remained at orders third averaging the open trough quarter, Refinance in levels

in the Gap] significant foreseeable refinance [Audio future. uplift in

open consistent revenue Average order X October with underway business for commercial X% year, and year. well half price the with also first are suggests last the this fifth as of per orders uncertainty commercial with weeks which X% the Our declined is again for discovery high quarter of is market. of declined the Commercial last are compared XX% quarter, still consecutive that first degree corrects. market compared down down sequentially. the There concerning the a year revenue

revenues the our pattern. However, consistent in based we with is intelligence, on the which fourth to normal quarter, market commercial higher seasonal expect continue

While sheet our the to and key our shareholders. next balance purchase in commercial appear of conditions a and financial of these persist along of into to the allow with our Despite expect to invest our have difficult markets, market discipline we uncertainty growth timing well business, refinance recovery long-term markets returning troughed, us the while strong to for continue strength the capital to year.

rate share our raised $X.XX dividend common X% we of annual quarter, an to This per by stock

an our purchasing of Gap] already $X [Audio shares. additional common million

of our is named proud of for Magazine and X/X workplaces to that eighth am business, our American's of been I which First year. the given closing, First In people commitment I'm This consecutive American Work approximately tribute Fortune are the by the women has X to Place importance accomplishment that workforce, to pleased Great for best a women.

to turn I'd over Gap] Now like call more [Audio Mark the detail to for

Gap] [Audio

Mark Seaton

earnings [Audio per Gap] Our $X.XX. adjusted was share

intangible as in unrealized million. exclude losses of adjusted primarily million, portfolio securities recognized due amortization in losses market fair Our $XX of to purchase net $XXX earnings equity the and well venture the changes investment value related of as

in equity and our the $XXX decline Title which X% of total assets. Revenue last million, totaled of equates $X.X same Commercial the XX% a of portfolio of over book $XXX quarter revenue to As approximately was was value XXXX. compared of million, segment venture XX% billion, our down September our XX, with our X% year.

revenue decrease driven due declined $XX,XXX Our the large transactions lower per due a Refinance as number quarter, last year a increase transactions relative mortgage to by partially to XX% average X% during an revenue down to XX% order of commercial XX% declined prices increase reset. in orders in and combination in XX% the closed, the revenue offset revenue to by order. this of fewer quarter rates. valuations average for market in Commercial the was the per Purchase

down In million, XX% from business, the last $XXX revenue year. Agency was

these agent in one lag activity. economic quarter, remittances of related approximately reporting reflect the Given results revenues to QX

Our the services. result information post year. data the was units across $XXX levels other decline property million, driven revenues were XX% of last generation information down by This company's and business to document and close transaction and several products and lower relative

prior of rising the to due higher Investment increase balances, The and company's was within relative investment in which year. income cash the higher exchange segment $XXX primarily Title million, Services interest primarily tax-deferred and balances company's from increase partially the portfolio, was Insurance tax and to offset rates was a impact exchange investment drove interest by property income The XX% balances. deferred the escrow balances. lower and rates, average

transaction decline manage expenses in given to continue We activity. the

$XXX of rate of year the and provision the with $X million losses million, our a reflects declined and X.X% $XX loss $XXX X.X% success and for the of was revenue net an X.X% personnel first for policy X.XX% was provision ultimate prior premiums down release Title meaning rate other The rate other fees, in from and prior loss down million ratio year in declined The loss provision rate the quarter in and operating that claims or for operating million. escrow loss X.X% half year. the current years. Our expenses our XX%, policy this the from

endpoint strategic instant for last we drag in highlighted and ServiceMac, purchase quarters, to decision segment the initiatives: several the related transactions. Over have margin the Title X

$XX these Pretax by an million, or fees Title QX, by adjusted quarter, on loss points, margin by basis. received This in generated our XX.X% XX.X% segment an title the pretax margin in basis boarding pretax point basis XXX from XXX ServiceMac. deep the initiatives impacting together was improvement primarily of a drag driven

claims. Total in with prior in driven year. warranty home $XXX XXXX, income warranty The The lieu pays business a between tax loss was tax $X.X compared in income insurance generally year. home lower the warranty income business XX% mix of our premium Pretax insurance of totaled the state up for last from of our from of XX.X%, increase higher to our since quarter million, frequency our rate home rate severity down X% in the and revenue by due million, businesses in ratio was and primarily normalized was than effective taxes. XX%, XX%, noninsurance XXX%

third shares for quarter, repurchased of the price we a $X $XX.XX. total an In million XXX,XXX at of average

October, ramped buying purchases we have So our up in far

XX.X%. [Audio Gap] it was

our debt-to-capital was Excluding payable, financings secured ratio XX.X%.

call Now the like turn to operator to I would your back questions. the over to take

Operator

question line [Operator Instructions] the Stephens. comes first with John Campbell Our of from

John Campbell

want correctly just order on to you I for I the heard commentary October.

up October? You said trending thus that purchase is far in year-over-year

Mark Seaton

Yes.

also homes which purchases, it homes new a within very up purchase in is included we is October, X resale, of most driven of is and And weeks So the performing first is new have the them. slightly because lot pretty slightly. transactions And it's for well.

is cross yes, in purchase, together, mix do you to X slight have here. nice increase we a which the when So see lines those

John Campbell

just absolutely. continued outcome. backdrop Yes, on of mean I that's rates, given a pressure the upward great

higher? little home bit you bit sales, look that little think, guys mix. for a I the New a national XX% of maybe like than less does What

Mark Seaton

related. It's bit are of a little higher. XX% orders the average long-term home is Historically, about our purchase

in they're XX%, far little October, So overweight. a

-- primarily bit interest that's on higher mix So Gap] That's expense average. [Audio bonds. is the we the that a our pay our little than really

have also We

too. expense, Gap] interest [Audio

make interest X expense that So $XX.X had components up the we the of the those our are in million

[Audio Gap]

Operator

BTIG. from of next Our Bhonsle with Soham question comes line the

Soham Bhonsle

-- do just, maybe of sort to quickly sort on just I And And update interest roll-off the then needs us help you'd guess what maybe ServiceMac? the be first of the replaced us Can income. one, size how the here? to that? be able you Mark, from on in year on just investment

Mark Seaton

Thanks for Soham. question, the Yes.

$XXX So the driven in that a couple million a call now, of investment so, million bit think of lost little did dip related just or million-ish, Home really mean, what few say, look we're on QX, which is $X we've the fact we've obviously, year, let's done. by based When we're X days we these loans, it, QX, for about we I earning, about deposits -- to terms which income plus was And or should -- let's of seeing that last in quarters of most XX in Point the quarters. funds. at Fed we're lose a we talked minus. that, And

say income. be reduction though, going we're to of that of of fourth about that kind in that, Title XX% investment a interest in that's the the will terms to going our quarter So in segment headwind too. see expense the I in is

it's of So the bottom line, will. but fall XX% all it about to not

Soham Bhonsle

You do how deeper could What versus, of translate legacy could dig margins does of value efficiencies enabling the the better that hoping customer you there's call sort was And this to it, potentially of efficiency maybe service. get title piece bit envision? but efficiency some of little of proposition. then sort also sort gains, you I maybe on a the business?

Mark Seaton

we'll But this do increasing more past. we some of to deploying started gains measure gain of gaining mean and on the there's days But endpoint just I the by for tasks to fairly people-intensive in will third intensive that at of exactly notary anticipate early systems. up efficiencies we that And of escrow and a also an there which Again, Yes. our point. and the the from other for that the efficiency does I know automate the in JOT, them freeze technology hard mundane of as task. We on question. sort some past already -- it's officer Thanks relied mobile We've put of think and an mentioned management we officer their number about we that have the escrow it's substantially. more our parts sort parties efficiency efficiencies. be in to other is company.

Gap] it sometime be rolled in fully division out will probably [Audio the year. next direct

Soham Bhonsle

Okay. Mark. And just one more,

more and rate, But right, of sort macro a points. on lowered we the go potentially . [Audio you think XX of are guess, environment, basis provision I Gap] as uneven year loss I in into next we sort

we in did I'll pandemic, The the And you lower actually we building pandemic comes fruition. the start on we to that. to I recall the it which conservative our reserves. up come rate had think the point when we our when out, I'll pretty that yes, took one as rate. approach loss concerns did during didn't And thing reflects

the Some of

I want bounds Gap] And emphasize upper to [Audio the reasonableness. of

I directly I to think your question, think probably could expect you rate more this

[Audio Gap]

Operator

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

Bose George

To just question, your from that was And is before this fully that that how deboarding fees more on much quarter? come first there rolls the of ServiceMac, to off?

Mark Seaton

about had this because a benefit Yes. fees. Bose, roughly so deboarding of And of the we XX% loans million were quarter, deordered. $X

have cadence we've as entire accelerated business of and come the bought such October right to we attractive. We're very other Gap] Bose, But we the pace accelerated we did at the we're leverage . [Audio repurchase of as stock Gap] Could repurchases, buybacks. it, against same a uses We've the obviously [Audio it's also M&A. We've buybacks what And not now, next obviously, at exactly in is Gap] third another, the already we obviously, our just see attractive. think I is talked from reinvesting So shares think pace year. quarter. back But call and And of the up? capital, standpoint, some in we that. [Audio earlier, we XX% point pick about in

part to right leverage comment question. [Audio we're very are on buybacks quarter. Bose, the talked pretty XX% debt being long-term just Gap] XX% I'll target. of like comfortable now XX% We've our this attractive about alternative. And But that

feel Gap] million [Audio really AOCI about the we and of great

parties. you funds. that difference Does Fed return? of kind on make that? of a Gap] is terms earn most in Or then the we'll it invested Or bank, of sort the our the of typically will are Gap] third [Audio one the you the. [Audio could agnostic Fed buy of bank it, funds. earn securities. of push bank, at we rest on we the And that's escrow deposits When mortgage-backed cash the we at increase

a mortgage-backed And opposed so Fed to funds. getting kind of as we're rate security really

right could Fed the some that that lower. fact be funds just sometimes of lower could higher risen. is have And And rates be times that because now and

Operator

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

Geoffrey Dunn

seeing where a large that opportunity talk little versus could market. interested are In you deals the importantly, commercial particular, office it's areas you're the office, hoping color. the the I'm bit are down I'm most? more but market? more about assuming drag in where And I'm a outside

Mark Seaton

of couple a say. Well, things I'd

are at what We're had the large over premium deals, when large call we look million large year X And $X seeing of deals. a just them multifamily. speaking, ago, this of was deals -- at all, we level deals that quarter. there the that the But are with deals not half The -- generally quarter. one a least, are I would we this We mega it seeing say really X. development another had not of First just large we're just just was you site. are same

of terms is revenue. we XX% where commercial like our in top multifamily our In asset classes of business, see

XX%. even then pandemic. XX% So been we're development always seeing of our these sites which activity for at lot through the strong sites, is there. a Industrial And revenue. has It's of greenfield

Geoff, is X%. top So X. office that, those are is mentioned XX%. Office, you our Retail

more So terms of flavor that a bit little in our gives revenue. you

doesn't asset add. classes big got the but Now We've there's got XXX, we that energy, to I other ones. up hospitality, all referenced add

Kenneth DeGiorgio

multifamily class the when outside The ones already too, where the and sort energy we've office, like in big also be going ones office going most more that's the is thing terms going be I say attractive seen going multifamily asset be of the think to are the of suburban I it's and probably I forward would discovery asset anything to suburban back price areas. us. outlook of CBD thinking probably to then And classes, Geoff, on and add going be big a to on for

the not -- districts going central just to obvious right for are reasons. now strain business under You're

Geoffrey Dunn

Great.

to is resi? more your press #X direct point mind? 'XX, your So commentary at as What out in release. What it uncertain Is your cautious look Is you is in your is this concern? it one commercial?

Kenneth DeGiorgio

know uncertain to I'm I concerned of mean that's and get except all not better. about going refi, I Well, them,

them. So I of think there's concern in all

feel you the our Commercial, just this making about price have me way I through I'm because we to like forced think Gap] I probably think a way I if optimistic more anticipate [Audio two, little And discovery. we're

they'll lower but orders, discovery. prices more see be the we'll at price given

Gap] [Audio the of middle next beginning year.

fruition, forward if comes is the that But inaccurate. historically will curve help. that Now to

[Audio Gap]

Operator

of Hughes with question the Securities. next comes Mark from Our line Truist

Mark Hughes

[Audio Gap]

Impact in the purchase market [Audio Gap]

purchase seen it, when it's orders, -- haven't at And been because we little No, Mark. when the look a you at surprising you look our

to though time on some Well, contracts we and the or be see impact realized. Gap] almost. [Audio on takes immediate DTC, it for profitability

on that the I and job they've then story with time more of of really the warranty in [Audio done a managing good is think home Gap] And goes claims more we're realizing the

[Audio beginning next Gap] market basis the on a test of year. at

milestones So that positive they're about hitting their and we're real

[Audio Gap] anyone.

it's so And

[Audio Gap]

First American Financial (FAF) 26 Oct 232023 Q3 Earnings call transcript