FAF - Earnings call transcript Q3 2024 | First American Financial Corporation

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Operator

Greetings, and welcome to 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/investors. Please note that this call is being recorded, and we will -- 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 13749447.

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

Craig J. Barberio

welcome quarter American's of and for conference everyone, third the XXXX. morning, to earnings First call Good

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

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

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

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

www.firstam.com. I available to For our non-GAAP to yesterday's including reconciliation and earnings with, refer directly financial which DeGiorgio. financials, the these turn most release, the is more call presentation to, comparable at to like measures, website GAAP details would Ken on now please on over

Kenneth DeGiorgio

In third Craig. measured conditions. quarter, the market you, improvement Thank we benefited in from

a XXXX. adjusted the increase escrow a up our revenue up Growth commercial but increase XX%, X%, the in growth as of and transactions was XX%. Title decline quarter backed affordability an of in in the Fed we've commercial sharp quarter were year-over-year were X% XXXX. division XX purchase premiums XX% was with increase mortgage revenues rates revenues points to around rates key ahead first up basis the contributed. In driven revenue since in to persisted. all adjusted pick XX late to in fee up of second large impacting cut business our per lines, basis other notably by which started the the point Our per increase the softened up And across factors also after quarter however, the of diluted Fed's in demand meeting the first file in and $X.XX, where an since most mortgage Demand, mid-September. second soon were earnings share market, experienced

last a closed As result, orders year. declined per our this with X% day purchase quarter compared

refinance revenue one factors in While negatively continued, increase albeit was our increasing moderating, and orders drive a our third purchase resulting increase quarter, the were transaction in activity flow, in up impacted The X% with a a an resulted in XX% appreciation our the improved price increase per higher progressed. average fee as that of the refinance with order It order did home file, affordability. per XX% quarter revenue. Closed combined revenue. in

remarks. title income Mark declined in his compared our our rebalancing of began investment to we the year, portfolio will investment benefit segment it with detail greater grew Although as last project. that sequentially discuss realize this in quarter

new time. as Warranty direct-to-consumer Though marketing increased an we over segment last in delivered value improvement to X.X% profitability pretax is a direct-to-consumer spend from down lifetime margin year. our Home the margin, is contracts deliberately claims Our the adjusted channel. X.X%, the realized helped increased in drive expected This rate slight of of investment

to commitment that in on without reduce simplifying spend operations. are sustainable that proprietary to promise discussed technology and calls, technology committed the customer an by competitive developing advantage. productivity will our believe, technologies on standardizing opportunity our experience boost we ways our we've and this compromising We a create prior enhance however, that to As centralizing, innovative exists

benefits additional have reduced that to effort. realize already further in changes progress have implemented make We and expect as certain we costs this we

to outlook the for year. of Turning the remainder the

in conditions market challenging persist. the expect to We purchase

orders continue though base. open X off our of improve, are down October, a refinance X%, market should to weeks our first are though open the low For purchase up resale X.X%. The orders

Our of price October we XX%. refinancing that large continued perform the weeks transactions. with will business higher pipeline commercial our given well the And first and own progress in open accelerated X of up in quarter refinance fourth business the optimistic orders robust demand, remain on term discovery,

year full rebalancing and enable similar to the last to will the interest project. outcome As recent achieve from portfolio of that increase in us that title now we we income growth have for modest quarter, stronger what posted our indicated revenue we our of in expect conviction resulting XXXX. given performance We the margins XXXX business in commercial

further first we are in The the will XXXX. X affordability abate earlier improvement our in that coupled that mentioned new a will revenue that us quarters that I expectation gradually in make growth year-over-year with in stage cautiously drive also challenges optimistic cycle of beginning

an commitment shareholders. per for Since XXXX, price our million the of XX downturn return sheet enabled through interest in cyclical its have the been we since make and business have of capital investments has total while $XX.XX million meaningful $XXX cycle our beginning balance shares we a historic strong to XXXX, of to began a maintaining average hike repurchased strength share. While operating at to operating us rate early Fed our in

communities stock During and endured by damage to increased widespread profound the the that they like comment across on have to would hurricanes $X.XX the closing, in dividend have share. In rate we I hardships. common and devastation Many which our inflicted same states. also the an several of Southeastern period, recent live employees per the X% annual of

are all hand to grateful people company's to and to the our want face to many task and all recovery. of of for to lend their impacted done we I we support now our difficult our are reiterate communities. a those our safe, commitment have know thank people While that people that they

a for over Mark more like I'd detailed of to results. Now financial to discussion call our turn the

Mark Seaton

you, Thank Ken.

diluted of This quarter GAAP $X per we generated a share. loss

the of and earnings, per investment share. impact amortization, net $X.XX purchase excludes diluted losses was Our which adjusted related

in unrealized an loss certain the investment position. our During by securities we third quarter, portfolio rebalanced debt selling

losses Our due primarily of rebalancing. $XXX net investment this quarter million were to this realized

we $XX $XX the As per investment securities. higher-yielding expect unchanged average as rebalancing. and this term, we a approximately by near to of duration to result taxes quality income and portfolio by proceeds save cash beginning increase a the in in of in million year expect million the result, is of reinvesting QX The credit

$X.X title compared the to segment. our Revenue XXXX. quarter Turning of down with billion, same XX% was

our revenue was a an was year. our Excluding commercial over closed XX% net investment last $XXX per last from up year. during all orders improvement the fee X% improvement file. Commercial million, in revenue revenue losses, quarter, Purchase X% X%, driven surged increased Though fell our revenue the was XX%. business, Despite climbed revenue per XX% direct X% up growth last year. order agency refinance activity, just year. average commercial to revenue order $XXX relative revenue. In last the for transactions of still in from X% Refinance for million, by accounts

lag third information uptick year quarter, up in agent quarter, with balances. quarter in due was products. Investment reflect property exchange activity. income Given primarily to the for demand average an in X% last same million company's QX approximately of escrow results remittances the the economic million the compared year revenues to the and lower down interest-bearing with last these the $X million tax-deferred compared X due Information during to quarter, related revenues were other reporting $XXX and $XXX

was our a million However, on income investment up basis. $XX sequential

rate ramped fixed quarter I and income the third $XXX mentioned fourth going $XXX title to security rate estimate QX, of cash our the benefited basis estimate like that December. approximately and basis million cut million rebalancing the November assumes run XX interest average point This point earlier, in quarter. We'd throughout XX this basis We million up XX that the claims by $XX investment more year and to expect now In beginning expect we generate cut provision the investment on It our the line the of of in fees, we second million in rebalancing income current annual portfolio to As cut and projects. our item investment million quarter, point escrow Based segment. each includes quarter. X.X% a $XX year. Fed $X or in balances, escrow investment we visibility by Fed losses provide of related a we full million. The purchases portfolio as funds also segment per additional $XX third and prior little other a policy income from unchanged the reduce into initiative title premiums between in in income was in income title the will forward. for

income the title amortization. Total reflects million, for net $XXX years. the of our loss last third XXXX, was ultimate policy decrease realized excluding loss rate policy was up XX.X%, The of current an in Warranty and in severity. in lower offset million, for X.X% was The claim loss due Pretax margin frequency X% to year. The Home Home from ratio the XX% segment the from was prior X.X%, compared higher partially and estimate net purchase-related rate margin year the X% Warranty the Warranty Adjusted revenue pretax Warranty was year. down tax to totaled in year. in for XX%, in business X.XX% was Home losses quarter Home with prior Adjusted quarter down $X in million a claim reserve effective compared XX.X%. that both $X by segment rate last pretax

amortization, net the our impact and million rate the research realized during Excluding losses development tax and of was normalized tax related of XX.X%, due quarter. credits and recognized rate the than purchase XX% of to $X lower investment foreign

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

XX raised XX.X%. notes. the Excluding of paying a public November we $XXX this that was In on notes secured of $XXX payable, year. will our of financings million ratio go off toward mature debt-to-capital million XX-year proceeds September, senior offering in

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

Operator

KBW. The comes of first Instructions] line the George with [Operator question Bose from

Bose George

Can a get margins. what of ranges what you wanted sort to margins thought normalized guys you did update question where just start back And think of kind that with In home an for be. if past, some you do give to level? normal range give the sales you margin is? could you us see a I where just on as

Kenneth DeGiorgio

further we And for got we is we our mean is But not thanks our -- -- my for commercial probably I margin performance how I improvement once I'll market would on remarks, I'm of a conviction would I think anymore. question. even what shapes a I margin saying, revisit business. the what indicated strong out. outlook sure year, what Bose, this we've expect the I the by especially in Yes. start guess see in given XXXX. let's as say normal XXXX

Bose George

comment, just spend. tech earlier the Great. think, then, Okay. And you on I mentioned actually, Ken,

the at could there some that, like those had that and cost endpoint Are that Can instant tech of discuss terms saves. sounds titling, of in quarter. kind the it the into X sort related spend? So be this in you of tie impact

Kenneth DeGiorgio

Yes.

opportunity think opportunity progress doing standardize As think making to we're to -- that spend there's real any on. I bring and on we've we an mentioned, great compromising we simplify, there's do and not tech without reduce costs down. to of been the going that innovative work are We a centralize, and though will

this and, already We're fact, seen shifting some making. But in at projects those we're to down ahead make and And to of continue doing we're the the in-house the in escrow the of on slowing not outside initiatives. going more down -- stage We're Sequoia. from high-cost we've looking not make from reduction at assess our on budgeting zero-based on not looking and In progress opportunities cost a initiatives. efficient, process slowing parties review. developers. And make to We're -- return for ourselves we're down. large third our process again, we're press investments slowing all efficiency to part on

Operator

the question Stephens, Campbell Next comes of from with John line Inc.

John Campbell

a efforts, check $XX corresponding have great the I to this on really impact. rebalancing annualized a so to first. wanted addition uptick the P&L, thinking there. work million does interest to that not effect I'm so obviously that That's On but good expense,

Mark Seaton

right, No that John. got you effect. Yes,

John Campbell

or a then turn you guys I about cycle. the And cautiously cycle, think you of beginning it turn in the stages sounds mentioned of the Okay. like are, optimistic

to we I move Is a to think going higher with than But next possible year? is there. you bit matter, to guys historical able you where you might assume actually success success enough would to growth next typically that that little expect be if it manage agree ratio? guys year we the ratio

Mark Seaton

statement, general target. I the think stand in we general, a as by John, I mean, XX%

got we've tailwinds there's a got investment got next in lot we've tailwinds how depends tailwinds Of commercial, lot much in and of purchase, in of differences, course, revenue our will on a in year. got tailwinds it refi, We've grow we've income.

small some think you ratio there's, if But revenue, in outcomes there's then so play. X% grows let's revenue success or into get comes in than, And the ratio. say, funky more so, with success I if if changes then theory, really

so heading into And stand that, at by next we least year.

John Campbell

great. direct-to-consumer maybe you If framework. the squeeze curious Okay, in maybe, higher Home to efforts talk if the you long-term opportunity up If could I can you the I X just size LTV-to-CAC for that's spend. about broadly, could Home maybe more I'm know And Warranty. just Warranty. more. the don't then within see marketing

Kenneth DeGiorgio

Yes.

a mentioned, good investment leads value make We've past takes investments the we're year so there's rates that. of those from Obviously, and factor on conversion when made term. with And the I realize costs those it an that, opportunistic the in. But As we direct-to-consumer investments. quarter. in or a this we made the investment we to associated generating the it's But over long think about spend. fundamentally, leads

So and least at we it value investing makes the for the at point, on recent very, the current it's this pricing -- we very we at it's leads, of and given it us in. to of But early to carefully, it's, in prudent comment realize days continue look DTC. we've value think these made the think investments

John Campbell

could I in more. if And just Okay. X squeeze

you mean, next meaningful I of where will over gauge success that venture, years? guess, or I turbocharge you -- the, think how the it do of is in growth On kind supercharge couple it's enough it

Kenneth DeGiorgio

Home Warranty? in about the in talking direct-to-consumer channel you Are

John Campbell

Right.

Kenneth DeGiorgio

opportunity where think given the is, We such that market under pressure. is particularly the purchase that's

Warranty channel in of there's in the agents in given think mind, lot where transactions, So selling space have them. channel. Keeping in on with estate there's connection real warranties open homes many in direct-to-consumer pressure we're Home real Not real market, our through estate a home in the the we opportunity home business. that

competitive don't a business lot in order there's to So because space. that we a -- our go competitors a chase down there's realize open to have customers from in advantage of

Operator

Barclays. Mr. ahead the comes Ma, with please with from question Next line Ma Terry of your question. go

Terry Ma

on Sorry, mute. I was

So out XXXX, other as it offset take and additional investment we about kind of mostly million will cut XX a you reinvestment kind forward of like anticipated or of any more can to are point the more maybe first repositioning any the portfolio, the that just then optimize of think ones. $XX the of portfolio there benefit, the of then the fair look basis Is seems of to to that X to rate your kind it? And actions offset investment kind get rate cuts? way

Mark Seaton

First of funds mean our where it. the we in about every that's XX in to right expect $XX points investment a I think income. yes, rate, Fed reduction balances way the all, basis given now, current right million are, Terry, for

So cuts. get X-plus really fund the we're $XX to Fed million at least going benefit will basically

have is income, year. could Fed Now that commercial purchase investment way might our lot there's year and volumes, we if some additional that one rising insulate that that a I factors other that these thing next mean generate and come of will of could too. cuts offset next volumes

kind think of about our income. that's we investment So how

Terry Ma

Got it.

will any Okay. continue? you the color this Anything the kind provide saw commercial helpful. in And what momentum That's of third you you're quarter that seeing on that gives so then other you far can confidence in quarter?

Kenneth DeGiorgio

Well, Yes. the thanks I -- think question, for Terry. the

results on business give then of And then lot real of revenue I weeks to revenue our the we we've year-over-year X deals indicators. a and I positive -- increase in business. first confidence. think, of saw in first strong as price quarter mean in are our indicator. We're the progress of the in third the increase is we of really, biggest I the a pipeline have think lot discovery. demand us one commercial seeing have own the a seeing an October, actually for And We're seen in well.

market, change, the in So good our commercial but of a year we it's things pretty can the Obviously, volatile feel pretty good. we rest feel business. about

Operator

with from the line comes Mark question Next Deutsche of DeVries Bank.

Mark DeVries

Yes. Thanks.

look in reposition. the or to kind that do on of more want the question, are way might be? XXXX, First now there positioned you you to Is securities you

Mark Seaton

it still some that, it; we And the the that haven't the of say done. do could has losses. But would do is of of we we're yet. that most be been would it scope of we're I would of bulk But There million the that is considering. if about scope done. really decided most to going $XXX be that

Mark DeVries

more then is help to through one you commercial and/or terms And think from if from I incremental versus you Okay. think either some income on volume commercial Can which is, impactful, offsets us in like alluded potential purchase. purchase? higher of investment

Mark Seaton

but investment because take size, longer deposits terms we to I is commercial income, fluctuates, the is are they than at it of just a to say transaction estimate commercial I estate. that deals In longer. commercial thumb close residential so escrow us. escrow of is in mean of of a more purchase our the the -- larger our company deposits we And terms what are. in XX% typically are real that about the valuable deposits driver rule typically, would hold big But

Mark DeVries

you market? alternative then any use as And lenders last it. AOLs by that of traction seeing to Got title kind an question. gaining is efforts certain signs in the Okay. Are just

Kenneth DeGiorgio

And cheaper. realize malpractice. AOL, think given a that an is they're probably policy. an they're accompany think than pretty it's not of I write not coverage lawyer sue often that lenders not because having adjustments fraud, of slower tick-up are -- underwriting price we've the lot a limitations, AOLs it They're attorney for I when opinion, better actually your And seen title to loan-level think I others slight for faster, in small. a fundamentally, not but an usage to AOLs, and

might that see on AOLs, been take-up some think hasn't so far, too but continue -- I we So some to meaningful. it see slight

Mark DeVries

it. in policymakers kind of an versus how AOLs. of they're around how educate And is Got to the D.C. moving effective getting and quite kind Ken, ALTA making obviously of much any in sense title perceptions? are traction effort they value on

Kenneth DeGiorgio

Well, I and been there's with from traction they've other think there's But regulators think title alternatives -- sign including gotten and and in waivers some Congress. members been the happens telltale a AOLs But election. of pushback what of the administration. lot lot will legislators, with the a be -- I of

think that, regulators themselves I a the good appreciated has these appreciated already and have our already title think frankly, done alternatives. of group job. relative legislators value I And to trade -- had insurance

So I we've And the vigilant that battle. got remain of and ever to out on is think, we're to -- value continue the frankly, that get industry insurance. the title winning message

Operator

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

Mark Hughes

transactions, commercial the any types more a Or pipeline of any particular or talked you're the that? of On mix seeing side, property discovery the on where larger price end-markets about proceed? you healthy

Kenneth DeGiorgio

it asset probably to the office. expect, lot We're that Suburban pretty commercial markets, thing this struggle, that board. discovery, doing CBD about office price thing as continues our out, one class office, a business and is is Obviously, the Yes. but anecdotal, a point the of is better. But you'd particularly seeing across one we're diversified. we're the seeing I'll little nice

presence in We asset have classes. strong a all

for pretty for deep. and mall worse So the we're we're in not in or mall one by any asset class. better We're the buffeted

Mark Hughes

in were do little or of an just like What interest deals uptick environment? is transactions waiting this, Yes. of these the see that? variability, are sidelines of the hanging make a rate that on for the we normal kind better you size When it

Mark Seaton

X%, saw here per future hard what is. year-to-date was XX% terms to and we our just our June, I through surge a revenue commercial it QX. of thing determine in mean It's down in fee file

in we're then QX. But do are in said, file per further anything on But open to terms those sometimes we of somehow to seeing can Ken get we is But until predict. as the tough broad-based file. know we what difficult predicting strength, don't into really the door commercial, and deals the than so size, quarter optimistic really a we're in per And the forecast. things fee and fee our is heading

Mark Hughes

front Yes. regulatory CFPB Anything from on Anything there? a the perspective?

Kenneth DeGiorgio

CFPB. much to see We on earlier probably, they've in think front. question, response heard may activity forgotten. other the I responded as CFPB haven't for our mentioned with I the industry the we've a don't tick-up to areas, don't the for they've the election, I we still focused think after And it. -- that there; we'll in But I forgotten. on think I is now, But minute a they're RFI think think but out I that

Operator

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

Geoffrey Dunn

sales a platform talk strategic value in in approach think Warranty, about the change the Home can the bit of company? Given how the the to you you about

Kenneth DeGiorgio

say And it's I sales the wouldn't in Yes. a change platform.

an I evolution. it's think

I And job has on too. some think, just it competitor, it been DTC. we've aggressive of we've has ramping the pretty -- done investment. good working working But with one particular, it, And with -- we're a in on up think been I

evolution even call and and purchase furthest is. And of I suffering I it's our how the the I there's is going the real and I will and for but think then business market We business. that well. of expertise as it the title real estate it. we think around, underpenetrated particularly like and the turns settlement furthest I, channel real than what of though right it business helpful more clearly given for as a market that business like a business, think core around, penetration title mentioned now it, be I earlier, lot -- mean is example, once purchase the in alongside estate turn the channel estate our opportunity to So it's an market from in change. We the that company, deep

Operator

questions for participation. conference call. the available XXXXXXXX. The your or are concludes Instructions] There dialing like today's thank this listeners to This time. call. on this That would ID We no replay (XXX) or to call XXX-XXXX will for (XXX) website morning's remind the like company's would you [Operator conference today's enter by company be and you. at concludes Thank additional that XXX-XXXX

disconnect. now may You

First American Financial (FAF) 24 Oct 242024 Q3 Earnings call transcript