FIRST AMERICAN FINANCIAL ANNOUNCES RECORD SECOND QUARTER 1998 RESULTS Results ...


July 21, 1998, SANTA ANA, CALIFORNIA

The First American Financial Corporation (NYSE: FAF), the leading provider of real estate-related financial and information services, announced today a record-breaking 1998 second quarter for revenues and net income. Second quarter operating results were the highest of any previously reported quarter in the company’s history.

Record net income for the second quarter of 1998 was $45.1 million, or $0.80 per diluted share, representing a 144 percent increase over net income of $18.5 million, or $0.35 per diluted share, for the same period in 1997. (Per share amounts have been restated to reflect the company’s three-for-one stock split which was effected in the form of a 200 percent stock dividend and distributed on July 17, 1998.) Record revenues for the second quarter of 1998 were $704.3 million, a 56 percent increase when compared with the same period last year. Record second quarter results can be attributed to a robust national economy and exceptionally strong real estate activity, particularly in California.

Net income for the first six months of 1998 (excluding a previously announced first quarter investment gain of $32.4 million, $19.6 million on an after-tax basis, or $0.36 per diluted share, relating to the joint venture agreement with Experian) was $70.4 million, or $1.27 per diluted share. This compares with $21.4 million, or $0.40 per diluted share, in the first six months of 1997. Revenues for the first half of 1998 (excluding the investment gain mentioned above) totaled $1.28 billion, an increase of 53 percent when compared with revenues of $833.3 million for the first half of 1997.

"The company’s impressive second quarter operating results reflect the intense volume of real estate transactions nationwide, coupled with market share gains in all of our primary operating divisions," said Parker S. Kennedy, president of First American Financial. "If residential and high- margin commercial title transactions continue at current levels and the real estate market and national economy remain robust, we would expect strong second half results with favorable comparisons from a year ago."

Kennedy added: "We continue to realize significant opportunities and cost reductions as acquisitions are integrated into the First American family of companies. On June 15, 1998, we announced the formation of a joint venture with three Norwest Mortgage subsidiaries. This joint venture will provide enhanced products and services, increased capacity and improved technology to our expanding customer base. As part of our strategic growth plan, we will continue to add services and products that complement and broaden the scope of our highly profitable real estate information services sector."

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 approximately 15,000 employees in over 400 branch offices in the United States and abroad. Information about the company’s subsidiaries and an archive of its press releases can be found at http://www.firstam.com on the Internet.

Any statements looking forward in time inherently involve risks and uncertainties including, but not limited to, the effect of interest rate fluctuations, changes in the performance of the real estate markets and the effect of changing economic conditions.
Quarter ended June 30:                   1998               1997
Revenues                          $   704,283,000      $ 450,374,000
Income before income taxes
  and minority interests          $    83,424,000      $  31,199,000
Net income                        $    45,106,000      $  18,516,000
Net income per share:
     Basic                        $          0.83      $        0.35
     Diluted                      $          0.80      $        0.35
Average shares outstanding:
     Basic                             54,297,000         52,179,000
     Diluted                           56,292,000         52,968,000
Six months ended June 30:
Revenues                          $ 1,309,332,000*     $ 833,251,000
Income before income taxes
  and minority interests          $   165,542,000      $  36,276,000
Net income                        $    90,071,000      $  21,382,000
Net income per share:
     Basic                        $          1.69      $        0.41
     Diluted                      $          1.63      $        0.40
Average shares outstanding:
     Basic                             53,346,000         52,116,000
     Diluted                           55,254,000         53,088,000
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.

*Includes an investment gain of $32.4 million relating to the joint venture agreement with Experian.


SELECTED FINANCIAL DATA
(Unaudited)

        For the Three Months Ended   For the Six Months Ended
        June 30
  June 30
        1998   1997   1998   1997




RESULTS OF OPERATIONS
                     
Revenues                    
Operating revenues       $ 695,463,000   $ 443,447,000   $ 1,257,077,000   $ 819,872,000
Investment and other income       8,820,000   6,927,000   52,255,000 * 13,379,000
       
704,283,000
 
450,374,000
 
1,309,332,000
 
833,251,000
Expenses                    
Salaries and other personnel costs       219,067,000   157,812,000   418,189,000   298,599,000
Premiums retained by agents       194,982,000   128,962,000   335,027,000   251,155,000
Other operating expenses       149,336,000   93,689,000   284,336,000   175,649,000
Provision for title losses and other claims       32,203,000   22,457,000   59,531,000   41,049,000
Depreciation and amortization       14,597,000   9,156,000   28,303,000   18,141,000
Premium taxes       5,231,000   4,561,000   9,385,000   8,722,000
Interest       5,443,000   2,538,000   9,019,000   3,660,000
       
620,859,000
 
419,175,000
 
1,143,790,000
 
796,975,000
Income before income taxes
and minority interests
      $83,424,000
  $31,199,000
  $165,542,000
  $36,276,000
                     
                     
OPERATING REVENUES
                     
Title Insurance:                    
Direct operations       $ 274,827,000   $ 186,876,000   $ 500,546,000   $ 334,550,000
Agency operations       243,519,000
  160,660,000
  420,055,000
  312,766,000
        518,346,000   347,536,000   920,601,000   647,316,000
Real Estate Information       156,495,000   79,656,000   296,855,000   141,703,000
Home Warranty       14,274,000   11,214,000   27,447,000   21,282,000
Trust and Banking       6,348,000   5,041,000   12,174,000   9,571,000

Total operating revenues
     
$695,463,000
 
$443,447,000
 
$1,257,077,000
 
$819,872,000
                     
                     
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS
                     
Title Insurance       $ 56,395,000   $ 21,438,000   $ 86,656,000   $ 21,381,000
Real Estate Information       32,433,000   13,144,000   55,968,000   20,967,000
Home Warranty       3,311,000   2,444,000   6,337,000   4,080,000
Trust and Banking       2,022,000
  937,000
  3,610,000
  1,852,000
Total before corporate expenses       94,161,000   37,963,000   152,571,000   48,280,000
Corporate expenses       10,737,000   6,764,000   (12,971,000)   12,004,000
Income before income taxes
and minority interests
     
$ 83,424,000
 
$ 31,199,000
 
$ 165,542,000
 
$ 36,276,000
                     
                     
TITLE INSURANCE ORDER COUNTS
FROM DIRECT OPERATIONS
                     
Title orders opened       386,400   306,600   784,200   565,000
Title orders closed       302,000   229,300   562,600   410,800
                     
* Includes an investment gain of $32.4 million relating to the joint venture agreement with Experian.

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