First American Financial announces fifth consecutive record-breaking quarterly ...


October 20, 1998, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF), the leading provider of real estate-related financial and information services, announced today record-breaking results for the third quarter ended September 30, 1998. Third quarter revenues, net income and earnings per share were the highest of any previously reported quarter in the company's history.

Record net income for the third quarter of 1998 was $55.8 million, or 93 cents per diluted share, representing a 171 percent increase over net income of $20.6 million, or 39 cents per diluted share, for the same period in 1997. Record revenues for the third quarter of 1998 were $753.3 million, a 50 percent increase when compared with the same period last year. Record third quarter results can be attributed to the strong volume in real estate transactions nationwide, recent acquisitions, market share improvements and an expanded product mix.

Net income for the nine months ended September 30, 1998, (excluding a previously announced first quarter investment gain of $32.4 million, $19.6 million on an after-tax basis, or 34 cents per diluted share, relating to the joint venture agreement with Experian) was $126.3 million, or $2.22 per diluted share. This compares with $42.0 million, or 79 cents per diluted share for the comparable period last year. Revenues for the first nine months of 1998 (excluding the investment gain mentioned above) totaled $2.03 billion, an increase of 51 percent when compared with revenues of $1.34 billion for the nine months of 1997.

"The Company continues to benefit from the boom in home sales and refinancing," said Parker S. Kennedy, president of First American Financial. "Most of our fees are earned when a real estate transaction closes; therefore, the current large backlog of orders still open at lending institutions, caused primarily by the recent surge in refinance transactions, should generate a steady revenue stream through the end of the year. With continued strength in the real estate markets and interest rates at historically low levels, we would expect a strong fourth quarter with favorable comparisons from a year ago, despite the inevitable seasonal slowdown in new home sales and residential resales."

Kennedy added: "Our diversified strategy includes the newly formed consumer risk management organization which is expected to produce consistent, high-margin income not dependent on factors such as mortgage interest rates and the real estate economy. We are committed to providing unparalleled information services to the real estate industry and to our expanding customer base, which now includes employers, landlords and consumers. Our goal is to continue our growth through aggressive market share expansion, increased efficiencies and enhanced technological capabilities."

The First American Financial Corporation, based in Santa Ana, California, is the nation's leading provider of real estate-related financial and information services. The corporation's subsidiaries include First American Title Insurance Company, a national and international title insurer; First American Real Estate Information Services, Inc., which offers tax monitoring, credit reporting, property data services, flood certification, field inspection services, appraisal services, mortgage loan origination and servicing systems, and mortgage document preparation nationally; First American Home Buyers Protection Corporation, a home warranty company; and First American Capital Management, an investment advisory firm. The corporation also operates First American Trust Company and First Security Thrift Company in Southern California. First American Financial has more than 17,000 employees in over 400 branches in the United States and abroad. Information about the company's subsidiaries and an archive of its press releases can be found a http://www.firstam.com on the Internet.

Any statements in this release looking forward in time involve risks and uncertainties, including but not limited to the following risks: the effect of interest rate fluctuations; changes in the performance of the real estate markets; the effect of changing economic conditions; the demand for and the acceptance of the company's products; and contingencies associated with the Year 2000 issue.

Quarter Ended September 30: 1998*
1997
Revenues $ 753,301,000
$ 501,848,000
Income before income taxes and minority interests $ 101,540,000
$ 34,565,000
Net income $ 55,848,000
$ 20,572,000
Net income per share:


Basic
$ 0.97
$ 0.40
Diluted
$ 0.93
$ 0.39
Weighted average shares outstanding:


Basic
57,387,000
52,038,000
Diluted
60,300,000
53,241,000








Nine Months Ended September 30:


Revenues $ 2,062,633,000
$ 1,335,099,000
Income before income taxes and minority interests $ 267,082,000
$ 70,841,000
Net income $ 145,919,000
$ 41,954,000
Net income per share:


Basic
$ 2.67
$ 0.81
Diluted
$ 2.56
$ 0.79
Weighted average shares outstanding:


Basic
54,694,000
52,088,000
Diluted
56,936,000
53,106,000

All per share amounts and shares outstanding have been adjusted for the 3-for-2 stock split distributed on January 15, 1998, and the 3-for-1 stock split distributed on July 17, 1998.

*Results for the nine months ended September 30, 1998, include an investment gain of $32.4 million relating to the joint venture with Experian.


SELECTED FINANCIAL DATA
(Unaudited)
For the Three Months EndedFor the Nine Months Ended
September 30
September 30
1998199719981997




RESULTS OF OPERATIONS
Revenues
Operating revenues $ 742,978,000 $ 495,181,000 $ 2,000,055,000 $ 1,315,053,000
Investment and other income10,323,000 6,667,000 62,578,000 *20,046,000

753,301,000

501,848,000

2,062,633,000

1,335,099,000
Expenses
Salaries and other personnel costs231,893,000 168,434,000 650,082,000 467,033,000
Premiums retained by agents217,587,000 144,959,000 552,614,000 396,114,000
Other operating expenses148,878,000 114,768,000 433,214,000 290,417,000
Provision for title losses and other claims29,358,000 24,540,000 88,889,000 65,589,000
Depreciation and amortization14,020,000 7,437,000 42,323,000 25,578,000
Premium taxes5,632,000 3,833,000 15,017,000 12,555,000
Interest4,393,000 3,312,000 13,412,000 6,972,000

651,761,000

467,283,000

1,795,551,000

1,264,258,000
Income before income taxes and minority interests


$ 101,540,000



$ 34,565,000



$ 267,082,000



$ 70,841,000


OPERATING REVENUES
Title Insurance:
Direct operations $ 286,264,000 $ 205,882,000 $ 786,810,000 $ 540,432,000
Agency operations269,983,000
179,940,000
690,038,000
492,706,000
556,247,000 385,822,000 1,476,848,000 1,033,138,000
Real Estate Information164,828,000 91,620,000 461,683,000 233,323,000
Home Warranty15,580,000 12,570,000 43,027,000 33,852,000
Trust and Banking6,323,000 5,169,000 18,497,000 14,740,000
Total operating revenues
$ 742,978,000

$ 495,181,000

$ 2,000,055,000

$ 1,315,053,000
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS
Title Insurance $ 67,703,000 $ 28,257,000 $ 154,359,000 $ 49,638,000
Real Estate Information35,805,000 11,672,000 91,773,000 32,639,000
Home Warranty2,270,000 2,208,000 8,607,000 6,288,000
Trust and Banking2,037,000
1,171,000
5,647,000
3,023,000
Total before corporate expenses107,815,000 43,308,000 260,386,000 91,588,000
Corporate expenses6,275,000 8,743,000 (6,696,000)20,747,000
Income before income taxes and minority interests
$ 101,540,000

$ 34,565,000

$ 267,082,000

$ 70,841,000
TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
Title orders opened391,200 309,500 1,175,400 874,500
Title orders closed310,900 235,900 873,500 646,700
* Includes an investment gain of $32.4 million relating to the joint venture agreement with Experian.

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