First American Financial Reports Results for the Fourth Quarter and Full Year of 2017

Reports Earnings of $1.96 per Diluted Share for the Fourth Quarter, Includes $1.01 per Share Net Benefit Related to Tax Reform


February 8, 2018, Santa Ana, Calif.

First American Financial Corporation (NYSE: FAF), a leading global provider of title insurance, settlement services and risk solutions for real estate transactions, today announced financial results for the fourth quarter and year ended Dec. 31, 2017.

Download the complete press release as a PDF

Current Quarter Highlights

  • Total revenue of $1.5 billion, down 2 percent compared with last year
    • Closed title orders down 19 percent, driven by a 41 percent decline in refinance orders
    • Average revenue per order up 23 percent, driven by the shift in the mix to higher-premium purchase and commercial transactions
  • Title Insurance and Services segment pretax margin of 12.2 percent
  • Commercial revenues of $196.2 million, up 6 percent compared with last year
  • Specialty Insurance segment pretax margin of 9.2 percent
  • Property and casualty loss rate of 108.1 percent impacted by California wildfires
  • Debt-to-capital ratio of 17.4 percent as of Dec. 31, 2017
  • Net tax benefit of $114.1 million, or $1.01 per diluted share, related to tax reform

Full Year 2017 Highlights

  • Total revenue of $5.8 billion, up 4 percent compared with last year
  • Title Insurance and Services segment pretax margin of 12.1 percent
  • Closed acquisitions totaling $91 million
  • Completed termination of pension plan, resulting in annualized savings of $22 million
  • Raised common stock dividend 12 percent to an annual rate of $1.52 per share
  • Cash flow from operations of $632.1 million, up 29 percent from last year
  • Return on equity of 13.0 percent

Selected Financial Information

($ in millions, except per share data)

 

 

Three Months Ended

 

 

Full Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Total revenue

 

$

1,481.3

 

 

$

1,504.3

 

 

$

5,772.4

 

 

$

5,575.8

 

Income before taxes

 

 

159.3

 

 

81.5

 

 

 

445.3

 

 

477.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

221.1

 

 

$

81.0

 

 

$

423.0

 

 

$

343.0

 

Net income per diluted share

 

 

1.96

 

 

0.73

 

 

 

3.76

 

 

3.09

 

 

Total revenue for the fourth quarter of 2017 was $1.5 billion, a decline of 2 percent relative to the fourth quarter of 2016. Net income in the current quarter was $221.1 million, or $1.96 per diluted share, compared with net income of $81.0 million, or 73 cents per diluted share, in the fourth quarter of 2016.

This quarter's effective tax rate of negative 38.5 percent includes a net benefit of $114.1 million, or $1.01 per diluted share, primarily due to the re-measurement of net deferred tax liabilities as a result of recent tax reform legislation.

Total revenue for the full year of 2017 was $5.8 billion, an increase of 4 percent relative to the prior year. Net income was $423.0 million, or $3.76 per diluted share, compared with net income of $343.0 million, or $3.09 per diluted share, in 2016.

"The company had strong results in 2017, achieving earnings per share of $3.76 and a return on equity of 13 percent," said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. "Total revenue grew 4 percent, primarily driven by strength in our purchase and commercial businesses, which offset the sharp drop in refinance transactions. We continued to manage the company at a high level of efficiency, enabling us to deliver a pretax margin of 12.1 percent in our title segment.

"In 2018, we will maintain our efforts to develop innovative solutions for our customers and acquire companies that strengthen our core business. In addition, we believe the company will continue to benefit from the ongoing improvement in housing and the general economy. We will remain focused on operating efficiently and strategically deploying our capital in ways that create shareholder value."

Title Insurance and Services

($ in millions, except average revenue per order)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Total revenues

 

$

1,356.0

 

 

$

1,384.0

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

165.6

 

 

$

150.1

 

Pretax margin

 

 

12.2

%

 

 

10.8

%

 

 

 

 

 

 

 

 

 

Direct open orders

 

 

231,500

 

 

 

265,800

 

Direct closed orders

 

 

204,200

 

 

 

252,700

 

 

 

 

 

 

 

 

 

 

U.S. Commercial

 

 

 

 

 

 

 

 

   Total revenues

 

$

196.2

 

 

$

185.5

 

   Open orders

 

 

30,300

 

 

 

30,000

 

   Closed orders

 

 

20,600

 

 

 

21,100

 

   Average revenue per order

 

$

9,500

 

 

$

8,800

 

 

Total revenues for the Title Insurance and Services segment during the fourth quarter were $1.4 billion, down 2 percent compared with the same quarter of 2016. Direct premiums and escrow fees were down 1 percent compared with the fourth quarter of 2016, driven by a 19 percent decline in the number of direct title orders closed that was largely offset by a 23 percent increase in the average revenue per direct title order. The growth in the average revenue per direct title order to $2,411 was primarily attributable to the shift in the order mix to higher-premium residential purchase and commercial transactions. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were down 5 percent in the current quarter as compared with last year.

Information and other revenues were $187.5 million this quarter, down 1 percent compared with the same quarter of last year. Higher revenues from recent acquisitions were offset by lower revenues from the company’s centralized lender business, largely due to the decline in refinance activity.

Investment income was $38.3 million in the fourth quarter, up $8.9 million, or 30 percent, primarily due to the increase in short-term interest rates that drove higher interest income in the company’s investment portfolio and cash balances. Net realized investment losses totaled $2.7 million in the current quarter, compared with losses of $0.3 million in the fourth quarter of 2016.

Personnel costs were $414.2 million in the fourth quarter, a decrease of $9.8 million, or 2 percent, compared with the same quarter of 2016. This decline was primarily driven by lower temporary labor, overtime and incentive compensation expenses, partially offset by personnel costs associated with recent acquisitions.

Other operating expenses were $208.6 million in the fourth quarter, up $3.3 million, or 2 percent, compared with the fourth quarter of 2016. The increase was due to an $8.5 million write off of uncollectible balances this quarter, partially offset by lower production-related costs as a result of the decline in order volume.

The provision for policy losses and other claims was $45.3 million in the fourth quarter, or 4.0 percent of title premiums and escrow fees, compared with a 5.5 percent loss provision rate in the fourth quarter of 2016. The current quarter rate reflects an ultimate loss rate of 4.0 percent for the current policy year and no change in the loss reserve estimates for prior policy years.

Depreciation and amortization expense was $30.1 million in the fourth quarter, an increase of $3.5 million, or 13 percent, compared with the same period last year. The increase was primarily attributable to higher amortization expense associated with both internally developed and purchased software.

Pretax income for the Title Insurance and Services segment was $165.6 million in the fourth quarter, compared with $150.1 million in the fourth quarter of 2016. Pretax margin was 12.2 percent in the current quarter, compared with 10.8 percent last year.

Specialty Insurance

($ in millions)

 

Three Months Ended

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Total revenues

 

$

121.1

 

 

$

118.6

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

11.1

 

 

$

21.3

 

Pretax margin

 

 

9.2

%

 

 

18.0

%

 

Total revenues for the Specialty Insurance segment were $121.1 million in the fourth quarter of 2017, an increase of 2 percent compared with the fourth quarter of 2016. The results from the home warranty business benefited from both lower claim severity and frequency. The decline in severity was primarily driven by operational improvements in claims management processes. The company’s property and casualty business experienced high claim losses in the quarter due to two separate California wildfires, with losses exceeding our $5 million reinsurance retention limit for each event. As a result, the overall loss ratio for the segment increased to 63.5 percent this quarter, compared with 54.6 percent last year. The segment’s pretax margin in the current quarter was 9.2 percent, compared with 18.0 percent in the fourth quarter of last year.

Teleconference/Webcast

First American’s fourth-quarter and year-end 2017 results will be discussed in more detail on Thursday, Feb. 8, 2018, at 11 a.m. EST, via teleconference. The toll-free dial-in number is 877-407-8293. Callers from outside the United States may dial +1-201-689-8349.

The live audio webcast of the call will be available on First American’s website at www.firstam.com/investor. An audio replay of the conference call will be available through Feb. 22, 2018, by dialing 201-612-7415 and using the conference ID 13675613. An audio archive of the call will also be available on First American’s investor website.

About First American

First American Financial Corporation (NYSE: FAF) is a leading provider of title insurance, settlement services and risk solutions for real estate transactions that traces its heritage back to 1889. First American also provides title plant management services; title and other real property records and images; valuation products and services; home warranty products; property and casualty insurance; and banking, trust and wealth management services. With total revenue of $5.8 billion in 2017, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2016 and again in 2017, First American was named to the Fortune 100 Best Companies to Work For® list. More information about the company can be found at www.firstam.com.

Website Disclosure

First American posts information of interest to investors at www.firstam.com/investor. This includes opened and closed title insurance order counts for its U.S. direct title insurance operations, which are posted approximately 10 to 12 days after the end of each month.

Forward-Looking Statements

Certain statements made in this press release and the related management commentary contain, and responses to investor questions may contain, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and may contain the words “believe,” “anticipate,” “expect,” “intend,” “plan,” “predict,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or other similar words and phrases or future or conditional verbs such as “will,” “may,” “might,” “should,” “would,” or “could.” These forward-looking statements include, without limitation, statements regarding future operations, performance, financial condition, prospects, plans and strategies. These forward-looking statements are based on current expectations and assumptions that may prove to be incorrect. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements include, without limitation: interest rate fluctuations; changes in the performance of the real estate markets; volatility in the capital markets; unfavorable economic conditions; impairments in the company’s goodwill or other intangible assets; failures at financial institutions where the company deposits funds; changes in applicable laws and government regulations; heightened scrutiny by legislators and regulators of the company’s title insurance and services segment and certain other of the company’s businesses; use of social media by the company and other parties; regulation of title insurance rates; limitations on access to public records and other data; changes in relationships with large mortgage lenders and government-sponsored enterprises; changes in measures of the strength of the company’s title insurance underwriters, including ratings and statutory capital and surplus; losses in the company’s investment portfolio; material variance between actual and expected claims experience; defalcations, increased claims or other costs and expenses attributable to the company’s use of title agents; any inadequacy in the company’s risk management framework; systems damage, failures, interruptions and intrusions or unauthorized data disclosures; errors and fraud involving the transfer of funds; the company’s use of a global workforce; inability of the company’s subsidiaries to pay dividends or repay funds; inability to realize the benefits of, and challenges arising from, the company’s acquisition strategy; and other factors described in the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2017, as filed with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made. The company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Use of Non-GAAP Financial Measures

This news release and related management commentary contain certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including personnel and other operating expense ratios, and success ratios. The company is presenting these non-GAAP financial measures because they provide the company’s management and investors with additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company’s competitors. The company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information. In this news release, these non-GAAP financial measures have been presented with, and reconciled to, the most directly comparable GAAP financial measures. Investors should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures.

First American Financial Corporation

 

Summary of Consolidated Financial Results and Selected Information

 

(in thousands, except per share amounts and title orders, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Total revenues

 

$

1,481,323

 

 

$

1,504,257

 

 

$

5,772,363

 

 

$

5,575,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

159,335

 

 

$

81,451

 

 

$

445,331

 

 

$

477,581

 

Income taxes

 

 

(61,378

)

 

 

490

 

 

 

23,468

 

 

 

134,105

 

Net income

 

 

220,713

 

 

 

80,961

 

 

 

421,863

 

 

 

343,476

 

Less: Net (loss) income attributable to noncontrolling interests

 

 

(414

)

 

 

(62

)

 

 

(1,186

)

 

 

483

 

Net income attributable to the Company

 

$

221,127

 

 

$

81,023

 

 

$

423,049

 

 

$

342,993

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.98

 

 

$

0.73

 

 

$

3.79

 

 

$

3.10

 

Diluted

 

$

1.96

 

 

$

0.73

 

 

$

3.76

 

 

$

3.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.38

 

 

$

0.34

 

 

$

1.44

 

 

$

1.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

111,904

 

 

 

110,740

 

 

 

111,668

 

 

 

110,548

 

Diluted

 

 

112,846

 

 

 

111,464

 

 

 

112,435

 

 

 

111,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Title Insurance Segment Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title orders opened(1)

 

 

231,500

 

 

 

265,800

 

 

 

1,069,000

 

 

 

1,281,400

 

Title orders closed(1)

 

 

204,200

 

 

 

252,700

 

 

 

823,700

 

 

 

958,400

 

Paid title claims

 

 

51,262

 

 

 

51,149

 

 

 

200,350

 

 

 

210,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) U.S. direct title insurance orders only.

 

 

First American Financial Corporation

 

Selected Balance Sheet Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Cash and cash equivalents

 

$

1,387,226

 

 

$

1,006,138

 

Investments

 

 

5,378,303

 

 

 

5,140,699

 

Goodwill and other intangible assets, net

 

 

1,212,918

 

 

 

1,096,315

 

Total assets

 

 

9,573,222

 

 

 

8,831,777

 

Reserve for claim losses

 

 

1,028,933

 

 

 

1,025,863

 

Notes and contracts payable

 

 

732,810

 

 

 

736,693

 

Total stockholders’ equity

 

$

3,479,955

 

 

$

3,008,179

 

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2017

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

642,661

 

 

$

530,126

 

 

$

112,535

 

 

$

 

Agent premiums

 

 

602,863

 

 

 

602,863

 

 

 

 

 

 

 

Information and other

 

 

190,035

 

 

 

187,469

 

 

 

2,832

 

 

 

(266

)

Net investment income

 

 

45,293

 

 

 

38,258

 

 

 

2,595

 

 

 

4,440

 

Net realized investment gains (losses)(1)

 

 

471

 

 

 

(2,679

)

 

 

3,150

 

 

 

 

 

 

 

1,481,323

 

 

 

1,356,037

 

 

 

121,112

 

 

 

4,174

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

439,623

 

 

 

414,206

 

 

 

17,973

 

 

 

7,444

 

Premiums retained by agents

 

 

475,748

 

 

 

475,748

 

 

 

 

 

 

 

Other operating expenses

 

 

231,692

 

 

 

208,590

 

 

 

17,225

 

 

 

5,877

 

Provision for policy losses and other claims

 

 

116,715

 

 

 

45,285

 

 

 

71,430

 

 

 

 

Depreciation and amortization

 

 

31,761

 

 

 

30,068

 

 

 

1,655

 

 

 

38

 

Premium taxes

 

 

17,274

 

 

 

15,572

 

 

 

1,702

 

 

 

 

Interest

 

 

9,175

 

 

 

950

 

 

 

 

 

 

8,225

 

 

 

 

1,321,988

 

 

 

1,190,419

 

 

 

109,985

 

 

 

21,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

159,335

 

 

$

165,618

 

 

$

11,127

 

 

$

(17,410

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2016

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

640,424

 

 

$

533,347

 

 

$

107,077

 

 

$

 

Agent premiums

 

 

632,640

 

 

 

632,640

 

 

 

 

 

 

 

Information and other

 

 

197,415

 

 

 

188,938

 

 

 

8,483

 

 

 

(6

)

Net investment income

 

 

33,417

 

 

 

29,368

 

 

 

2,391

 

 

 

1,658

 

Net realized investment gains (losses)(1)

 

 

361

 

 

 

(287

)

 

 

648

 

 

 

 

 

 

 

1,504,257

 

 

 

1,384,006

 

 

 

118,599

 

 

 

1,652

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

517,504

 

 

 

424,019

 

 

 

16,584

 

 

 

76,901

 

Premiums retained by agents

 

 

497,733

 

 

 

497,733

 

 

 

 

 

 

 

Other operating expenses

 

 

230,846

 

 

 

205,247

 

 

 

19,047

 

 

 

6,552

 

Provision for policy losses and other claims

 

 

122,128

 

 

 

63,667

 

 

 

58,461

 

 

 

 

Depreciation and amortization

 

 

28,142

 

 

 

26,560

 

 

 

1,485

 

 

 

97

 

Premium taxes

 

 

17,666

 

 

 

15,976

 

 

 

1,690

 

 

 

 

Interest

 

 

8,787

 

 

 

749

 

 

 

 

 

 

8,038

 

 

 

 

1,422,806

 

 

 

1,233,951

 

 

 

97,267

 

 

 

91,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

81,451

 

 

$

150,055

 

 

$

21,332

 

 

$

(89,936

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Includes impairment losses recorded in earnings, except for impairments on investments accounted for under the equity method, which are recorded in net investment income.

 

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2017

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

2,461,854

 

 

$

2,022,384

 

 

$

439,470

 

 

$

 

Agent premiums

 

 

2,360,659

 

 

 

2,360,659

 

 

 

 

 

 

 

Information and other

 

 

776,214

 

 

 

766,018

 

 

 

11,259

 

 

 

(1,063

)

Net investment income

 

 

162,402

 

 

 

137,439

 

 

 

9,713

 

 

 

15,250

 

Net realized investment gains(1)

 

 

11,234

 

 

 

6,656

 

 

 

4,578

 

 

 

 

 

 

 

5,772,363

 

 

 

5,293,156

 

 

 

465,020

 

 

 

14,187

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,898,551

 

 

 

1,636,483

 

 

 

71,604

 

 

 

190,464

 

Premiums retained by agents

 

 

1,863,356

 

 

 

1,863,356

 

 

 

 

 

 

 

Other operating expenses

 

 

880,874

 

 

 

788,020

 

 

 

67,813

 

 

 

25,041

 

Provision for policy losses and other claims

 

 

450,410

 

 

 

175,322

 

 

 

275,088

 

 

 

 

Depreciation and amortization

 

 

128,053

 

 

 

121,540

 

 

 

6,351

 

 

 

162

 

Premium taxes

 

 

69,801

 

 

 

62,545

 

 

 

7,256

 

 

 

 

Interest

 

 

35,987

 

 

 

3,526

 

 

 

 

 

 

32,461

 

 

 

 

5,327,032

 

 

 

4,650,792

 

 

 

428,112

 

 

 

248,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

445,331

 

 

$

642,364

 

 

$

36,908

 

 

$

(233,941

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2016

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

2,416,039

 

 

$

2,004,686

 

 

$

411,353

 

 

$

 

Agent premiums

 

 

2,286,630

 

 

 

2,286,630

 

 

 

 

 

 

 

Information and other

 

 

723,990

 

 

 

713,137

 

 

 

10,877

 

 

 

(24

)

Net investment income

 

 

126,134

 

 

 

110,757

 

 

 

9,476

 

 

 

5,901

 

Net realized investment gains(1)

 

 

23,053

 

 

 

18,915

 

 

 

4,138

 

 

 

 

 

 

 

5,575,846

 

 

 

5,134,125

 

 

 

435,844

 

 

 

5,877

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,756,633

 

 

 

1,578,244

 

 

 

67,733

 

 

 

110,656

 

Premiums retained by agents

 

 

1,801,571

 

 

 

1,801,571

 

 

 

 

 

 

 

Other operating expenses

 

 

853,841

 

 

 

764,388

 

 

 

62,610

 

 

 

26,843

 

Provision for policy losses and other claims

 

 

488,601

 

 

 

235,661

 

 

 

252,940

 

 

 

 

Depreciation and amortization

 

 

99,047

 

 

 

93,069

 

 

 

5,593

 

 

 

385

 

Premium taxes

 

 

66,358

 

 

 

59,464

 

 

 

6,894

 

 

 

 

Interest

 

 

32,214

 

 

 

2,856

 

 

 

 

 

 

29,358

 

 

 

 

5,098,265

 

 

 

4,535,253

 

 

 

395,770

 

 

 

167,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

$

477,581

 

 

$

598,872

 

 

$

40,074

 

 

$

(161,365

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)  Includes impairment losses recorded in earnings, except for impairments on investments accounted for under the equity method, which are recorded in net investment income.

 

 

First American Financial Corporation

 

Expense and Success Ratio Reconciliation

 

Title Insurance and Services Segment

 

($ in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Total revenues

 

$

1,356,037

 

 

$

1,384,006

 

 

$

5,293,156

 

 

$

5,134,125

 

Less: Net realized investment (losses) gains

 

 

(2,679

)

 

 

(287

)

 

 

6,656

 

 

 

18,915

 

Net investment income

 

 

38,258

 

 

 

29,368

 

 

 

137,439

 

 

 

110,757

 

Premiums retained by agents

 

 

475,748

 

 

 

497,733

 

 

 

1,863,356

 

 

 

1,801,571

 

Net operating revenues

 

$

844,710

 

 

$

857,192

 

 

$

3,285,705

 

 

$

3,202,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel and other operating expenses

 

$

622,796

 

 

$

629,266

 

 

$

2,424,503

 

 

$

2,342,632

 

Ratio (% net operating revenues)

 

 

73.7

%

 

 

73.4

%

 

 

73.8

%

 

 

73.1

%

Ratio (% total revenues)

 

 

45.9

%

 

 

45.5

%

 

 

45.8

%

 

 

45.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net operating revenues

 

$

(12,482

)

 

 

 

 

 

$

82,823

 

 

 

 

 

Change in personnel and other operating expenses

 

 

(6,470

)

 

 

 

 

 

 

81,871

 

 

 

 

 

Success Ratio(1)

 

 

52

%

 

 

 

 

 

 

99

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Change in personnel and other operating expenses divided by change in net operating revenues.

 

 

First American Financial Corporation

 

Supplemental Direct Title Insurance Order Information (1)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q417

 

 

Q317

 

 

Q217

 

 

Q117

 

 

Q416

 

Open Orders per Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

1,686

 

 

 

2,156