First American Financial completes record-setting year; record fourth quarter ...


February 10, 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 fourth quarter for revenues, net income and earnings per share. These results were the highest of any previously reported quarter and culminated in the best year overall in the company’s history.

Record net income for the fourth quarter 1997 increased 93.2 percent to $22.8 million, or $1.31 per basic share, as compared with $11.8 million, or 69 cents per basic share, for the same period in 1996. (Per share amounts have been restated for the company’s 3-for-2 stock split which was effected in the form of a 50 percent stock dividend and distributed on January 15, 1998.) Analysts’ consensus estimates on an after-split basis were $1.16 per basic share. Record revenues for the fourth quarter 1997 were $552.4 million, an increase of 29.8 percent when compared with the $425.5 million reported for the same period last year.

The company’s 1997 profits were a record-breaking $64.7 million, or $3.73 per basic share, an increase of 20.7 percent when compared with 1996 earnings of $53.6 million, or $3.12 per basic share. Record revenues in 1997 were $1.887 billion, an increase of 18.1 percent when compared with last year’s record-setting $1.598 billion.

Continued affordable mortgage interest rates and a high level of consumer confidence contributed to record-setting residential resale transactions, an increase in new home sales and renewed commercial activity. In addition, lower interest rates in the latter part of 1997 prompted an increase in refinance transactions.

"Our successful integration of First American services for the lending community as well as the market share improvement in all of our businesses contributed to the company’s strong operating performance in 1997," said President Parker S. Kennedy.

"We look forward to the future benefits of the acquisitions we made in 1997 as they are integrated into the First American family," Kennedy continued. "Our previously announced joint venture with Experian became effective January 1, 1998. As a result of the transaction, the company will recognize a pre-tax gain of $33.0 million in the first quarter of 1998. The combination, over time, will redefine the real estate services industry and provide significant opportunities for First American.

"December was a very strong closing month and we are encouraged by the continued strength in new orders, particularly in California. The traditional seasonal slowdown in residential resales and new home sales has been mitigated by a substantial increase in refinance transactions. With our current inventory levels, we expect a profitable first quarter 1998 with favorable comparisons from a year ago. We remain focused on increasing market share and delivering strong operating results throughout 1998," Kennedy concluded.

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 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 13,000 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 December 31:	     1997		       1996
Revenues	              $	  552,362,000		$   425,512,000
Income before income taxes    $    37,655,000		$    17,811,000
Net income	              $    22,755,000		$    11,811,000
Net income per share*:					
     Basic	              $          1.31		$           .69
     Diluted	              $          1.27		$           .67
Year ended December 31:					
Revenues	              $ 1,887,461,000		$ 1,597,566,000
Income before income taxes    $   106,209,000		$    89,189,000
Net income	              $    64,709,000		$    53,589,000
Net income per share*:					
     Basic	              $          3.73		$          3.12
     Diluted	              $          3.64		$          3.09
Average shares outstanding*:					
     Basic		           17,362,000		     17,179,000
     Diluted		           17,785,000		     17,325,000
* All per share amounts and shares outstanding have been adjusted for the 3-for-2 stock split distributed on January 15, 1998.


SELECTED FINANCIAL DATA

        For the Three Months Ended   For the Twelve Months Ended
        December 31
  December 31
        1997
  1996
  1997
  1996
RESULTS OF OPERATIONS
                     
Revenues                    
Operating revenues       $ 545,152,000   $ 419,889,000   $ 1,860,205,000   $ 1,571,168,000
Investment and other income       7,210,000   5,623,000   27,256,000   26,398,000
       
552,362,000
 
425,512,000
 
1,887,461,000
 
1,597,566,000
Expenses                    
Salaries and other personnel costs       180,717,000   145,381,000   647,750,000   531,250,000
Premiums retained by agents       167,023,000   143,737,000   563,137,000   516,593,000
Other operating expenses       122,950,000   86,224,000   411,319,000   322,709,000
Provision for title losses and other claims       24,734,000   18,999,000   90,323,000   86,487,000
Depreciation and amortization       10,523,000   7,580,000   38,149,000   27,242,000
Interest       3,022,000   1,013,000   9,994,000   4,796,000
Minority interests       1,389,000   473,000   3,676,000   2,624,000
       
510,358,000
 
403,407,000
 
1,764,348,000
 
1,491,701,000
Income before premium and income taxes       42,004,000   22,105,000   123,113,000   105,865,000
Premium taxes       4,349,000   4,294,000   16,904,000   16,676,000
Income before income taxes      
$ 37,655,000
 
$ 17,811,000

 

$ 106,209,000
 
$ 89,189,000
                     
                     
OPERATING REVENUES                    
                     
Title Insurance:                    
Direct operations       $ 221,342,000   $ 161,201,000   $ 761,774,000   $ 626,314,000
Agency operations       207,487,000   180,558,000   700,193,000   641,919,000
        428,829,000   341,759,000   1,461,967,000   1,268,233,000
Real Estate Information       98,049,000   62,401,000   331,372,000   246,745,000
Home Warranty       13,007,000   9,883,000   46,859,000   38,351,000
Trust and Banking       5,267,000   5,846,000   20,007,000   17,839,000
Total operating revenues      
$ 545,152,000
 
$ 419,889,000
 
$ 1,860,205,000
 
$ 1,571,168,000
                     
                     
INCOME BEFORE INCOME TAXES                    
                     
Title Insurance       $ 34,091,000   $ 17,204,000   $ 95,636,000   $ 66,056,000
Real Estate Information       12,678,000   8,327,000   45,317,000   52,581,000
Home Warranty       2,805,000   1,583,000   9,741,000   8,178,000
Trust and Banking       1,039,000
  1,129,000
  4,062,000
  3,728,000
Total before corporate expenses and                    
premium taxes       50,613,000   28,243,000   154,756,000   130,543,000
Corporate expenses       8,609,000   6,138,000   31,643,000   24,678,000
Premium taxes       4,349,000   4,294,000   16,904,000   16,676,000
Income before income taxes      
$ 37,655,000
 
$ 17,811,000
 
$ 106,209,000
 
$ 89,189,000
                     
                     
TITLE INSURANCE ORDER COUNTS                    
FROM DIRECT OPERATIONS                    
                     
Title orders opened       298,800   239,500   1,173,300   1,026,900
Title orders closed       238,900   192,800   885,600   775,100

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