The First American Financial Corporation announces first quarter 1995 results


April 26, 1995, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF) announced today a first quarter 1995 loss. However, the outlook for the rest of the year is encouraging and second quarter interim results indicate an increase in order counts from First American's title and non-title operations. A loss for the first three months of 1995 was expected, as indicated in the company's February earnings release, in light of increased mortgage interest rates, the continuing poor real estate economy in California, and a return to traditional, seasonal conditions that negatively impact new order volumes and closings.

The first quarter 1995 loss totaled $12.7 million, or $1.11 per share, compared to 1994 first-quarter after-tax earnings of $9.4 million, or 82¢ per share. Revenues for the first three months of 1995 totaled $261.2 million, a decrease of 30 percent from first quarter 1994 when revenues totaled $372.4 million, the highest revenues of any first quarter in the company's history.

"A downward trend in order counts and closings which began in the second quarter 1994 and intensified at year-end 1994 was carried into the first quarter 1995," said President Parker S. Kennedy. "The mortgage origination pipeline was reduced by year-end closings and cancellations during December 1994, resulting in a low inventory of open transactions going into 1995. The pipeline began to increase during February and March of 1995--too late to substantially impact first quarter 1995 closing levels."

Weather was also a factor. A slow real estate economy in California coupled with a particularly wet winter throughout the West further hindered any recovery in that real estate market, according to Kennedy.

"To combat these market forces, the company embarked on a cost reduction program, starting in April 1994, designed to consolidate operational units and match appropriate staffing levels to order levels," Kennedy said. "At the same time, First American took the opportunity to further its long-term objectives and to significantly enhance its ability to provide customers with consistent, high-quality service."

Immediately following the key acquisitions in January 1995 of credit reporting and flood compliance companies, now operating under the banner of First American Real Estate Information Services, Inc., the company began the process of integrating its title, flood, credit and tax services nationwide. Management is concentrating on this effort and positive results were already apparent in late March 1995 revenues.

"In light of our current cost structure, anticipated increases in revenue will flow substantially to our bottom line," Kennedy said. "We are confident that we will return to profitability in the near term. In addition to an improvement in the title insurance business, the early returns from our flood and credit operations confirm our expectations and are very encouraging. Our earning potential remains stronger than ever."

The First American Financial Corporation, based in Santa Ana, California, is a leading provider of real estate financial services, including title insurance, tax monitoring, home warranty, credit reporting, flood compliance and property information services, to real property buyers and mortgage lenders. The company also operates a trust and banking business in Southern California. The company offers its title services through a network of more than 300 offices and 4,000 agents throughout the United States. It also provides title services abroad in the Bahama Islands, Bermuda, Canada, Guam, Mexico, Puerto Rico, the U.S. Virgin Islands and the United Kingdom.

Synopsis:

 
Quarter ended March 31:			1995		1994 
Revenues			    $261,154,000    $372,436,000 
Income (loss) before  
  income taxes			    $(21,509,000)   $ 16,498,000 
Net income (loss)		    $(12,709,000)   $  9,398,000 
Average shares outstanding	      11,401,000      11,416,000 
Net income (loss) per share	    $      (1.11)   $       0.82 


SELECTED FINANCIAL DATA
(Unaudited)

For the Three Months Ended

March 31



1995 1994


RESULTS OF OPERATIONS
Revenues
Operating revenues $256,288,000 $368,604,000
Investment and other income 4,866,000 3,832,00




261,154,000 372,436,000



Expenses
Salaries and other personnel costs 100,050,000 110,320,000
Premiums retained by agents 93,395,000 145,912,00
Other operating expenses 59,287,000 58,591,000
Provision for title losses and other claims 21,306,000 29,663,000
Depreciation and amortization 4,211,000 4,610,000
Interest 1,613,000 1,568,000
Minority interests (20,000) 949,000




279,842,000 351,613,000



Income (loss) before premium and income taxes (18,688,000) 20,823,000
Premium taxes 2,821,000 4,325,000



Income (loss) before income taxes $(21,509,000) $16,498,000



OPERATING REVENUES
Title Insurance:
Direct operations $104,291,000 $153,258,00
Agency operations 115,026,000 178,811,000




219,317,000 332,069,000
Real Estate Information 26,105,000 27,463,000
Home Warranty 7,389,000 6,135,000
Trust and Banking 3,477,000 2,937,000



Total operating revenues $256,288,000 $368,604,000



INCOME (LOSS) BEFORE INCOME TAXES
Title Insurance $(14,561,000) $14,392,000
Real Estate Information (1,380,000) 9,568,000
Home Warranty 1,528,000 1,399,000
Trust and Banking 932,000 677,000



Total before corporate expenses and premium taxes (13,481,000) 26,036,000
Corporate expenses 5,207,000 5,213,000
Premium Taxes 2,821,000 4,325,000



Income (loss) before income taxes $(21,509,000) $16,498,000



TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
Title orders opened 190,600 259,700
Title orders closed 135,300 212,800

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