First American Financial Reports Results for the Fourth Quarter and Full Year of 2018

Reports Fourth Quarter Earnings of $0.81 per Share or $1.27 per Share Excluding Net Realized Investment Losses


February 14, 2019, 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, 2018.

Download the complete press release as a PDF

Current Quarter Highlights

  • Total revenue of $1.4 billion, down 4 percent compared with last year
    • Closed title orders down 14 percent, driven by a 42 percent decline in refinance orders and a 9 percent decline in purchase orders
    • Average revenue per order up 17 percent, driven by the shift in the mix to higher-premium purchase and commercial transactions
  • Investment income of $63.3 million, up 40 percent compared with last year
  • Net realized investment losses of $67.5 million, primarily due to change in the fair value of equity securities
  • Title Insurance and Services segment pretax margin of 10.4 percent
    • 14.2 percent excluding net realized investment losses
  • Commercial revenues of $232.2 million, up 18 percent compared with last year
  • Specialty Insurance segment pretax margin of 0.7 percent
    • 8.5 percent excluding net realized investment losses
  • Repurchased $20.9 million in shares at an average price of $44.20 per share, including $2.1 million during the first quarter of 2019

Full Year 2018 Highlights

  • Total revenue of $5.7 billion, down 0.4 percent compared with last year
  • Record Title Insurance and Services segment pretax margin of 12.4 percent
    • 13.2 percent excluding net realized investment losses
  • Record commercial revenues of $753.3 million, up 8 percent compared with last year
  • Investment income of $230.3 million, up 42 percent compared with last year
  • Net realized investment losses of $56.5 million, primarily due to change in the fair value of equity securities
  • Closed acquisitions totaling $82.9 million
  • Raised common stock dividend 11 percent to an annual rate of $1.68 per share
  • Cash flow from operations of $793.2 million, up 25 percent from last year
  • Return on equity of 13.1 percent

Selected Financial Information

($ in millions, except per share data)

 

 

Three Months Ended

 

 

Full Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Total revenue

 

$

1,417.1

 

 

$

1,481.3

 

 

$

5,747.8

 

 

$

5,772.4

 

Income before taxes

 

 

118.9

 

 

 

159.3

 

 

 

609.5

 

 

 

445.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

91.6

 

 

$

221.1

 

 

$

474.5

 

 

$

423.0

 

Net income per diluted share

 

 

0.81

 

 

1.96

 

 

 

4.19

 

 

 

3.76

 

 

Total revenue for the fourth quarter of 2018 was $1.4 billion, a decline of 4 percent relative to the fourth quarter of 2017. Net income in the current quarter was $91.6 million, or $0.81 per diluted share, compared with net income of $221.1 million, or $1.96 per diluted share, in the fourth quarter of 2017. Net realized investment losses in the current quarter were $67.5 million, or $0.47 per diluted share, primarily due to the change in the fair value of equity securities.

Total revenue for the full year of 2018 was $5.7 billion, a decline of 0.4 percent relative to the prior year. Net income was $474.5 million, or $4.19 per diluted share, compared with net income of $423.0 million, or $3.76 per diluted share, in 2017.

“The company had a strong finish to a record year in 2018, achieving annual earnings per share of $4.19 and a return on equity of 13.1 percent,” said Dennis J. Gilmore, chief executive officer at First American Financial Corporation. “For the year, total revenue was relatively flat, with growth in our commercial business and rising investment income largely offsetting the decline in refinance transactions. We continued to manage the company at a high level of efficiency, enabling our title segment to deliver a record pretax margin of 12.4 percent, or 13.2 percent excluding net realized losses.

“Looking forward to 2019, we expect strong performance in our commercial business and growth in investment income, however, we anticipate continued pressure in our residential business. We have adjusted our cost structure accordingly and, as a result, we expect to meet our long-term financial objectives for the year.

“As part of our growth strategy, during the year we will continue to focus on developing innovative solutions that improve the customer experience and increase our efficiency. These include the expansion of our digital closing services, further automation of our title production process, and utilization of artificial intelligence to expand and leverage our extensive data assets.”

Title Insurance and Services

($ in millions, except average revenue per order)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Total revenues

 

$

1,314.4

 

 

$

1,356.0

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

136.4

 

 

$

165.6

 

Pretax margin

 

 

10.4

%

 

 

12.2

%

 

 

 

 

 

 

 

 

 

Direct open orders

 

 

202,400

 

 

 

231,500

 

Direct closed orders

 

 

176,500

 

 

 

204,200

 

 

 

 

 

 

 

 

 

 

U.S. Commercial

 

 

 

 

 

 

 

 

   Total revenues

 

$

232.2

 

 

$

196.2

 

   Open orders

 

 

29,700

 

 

 

30,300

 

   Closed orders

 

 

20,800

 

 

 

20,600

 

   Average revenue per order

 

$

11,200

 

 

$

9,500

 

 

Total revenues for the Title Insurance and Services segment during the fourth quarter were $1.3 billion, down 3 percent compared with the same quarter of 2017. Direct premiums and escrow fees were up 1 percent compared with the fourth quarter of 2017, driven by a 17 percent increase in the average revenue per direct title order that was largely offset by a 14 percent decline in the number of direct title orders closed. The growth in the average revenue per direct title order to $2,824 was primarily attributable to the shift in the order mix to higher-premium residential purchase and commercial transactions and the increase in the number of large commercial transactions in the current quarter. Agent premiums, which are recorded on approximately a one-quarter lag relative to direct premiums, were down 3 percent in the current quarter as compared with last year.

Information and other revenues were $182.6 million this quarter, down 3 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.

Investment income was $69.3 million in the fourth quarter, up $31.0 million, or 81 percent, benefiting from both an increase in average balances due primarily to strength in our commercial business and rising short-term interest rates that drove higher interest income in the company’s investment portfolio and cash balances. Net realized investment losses totaled $58.0 million in the current quarter, compared with losses of $2.7 million in the fourth quarter of 2017.

Personnel costs were $425.6 million in the fourth quarter, an increase of $11.4 million, or 3 percent, compared with the same quarter of 2017. This increase was primarily driven by severance expense and the impact of recent acquisitions.

Other operating expenses were $199.2 million in the fourth quarter, down $9.3 million, or 4 percent, compared with the fourth quarter of 2017. The decline was due to an increase in earnings credits, a reduction in discretionary spending and lower production-related costs due to the decline in order volume, that was partially offset by a write-off of uncollectible balances and the impact of recent acquisitions.

The provision for policy losses and other claims was $44.8 million in the fourth quarter, or 4.0 percent of title premiums and escrow fees, compared with a 4.0 percent loss provision rate in the fourth quarter of 2017. 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 $31.6 million in the fourth quarter, an increase of $1.5 million, or 5 percent, compared with the same period last year. The increase was primarily attributable to higher amortization expense associated with recent acquisitions.

Pretax income for the Title Insurance and Services segment was $136.4 million in the fourth quarter, compared with $165.6 million in the fourth quarter of 2017. Pretax margin was 10.4 percent in the current quarter, compared with 12.2 percent last year. Excluding the impact of net realized investment losses, the pretax margin was 14.2 percent this year, compared with 12.4 percent last year.

Specialty Insurance

($ in millions)

 

Three Months Ended

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Total revenues

 

$

111.6

 

 

$

121.1

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

0.8

 

 

$

11.1

 

Pretax margin

 

 

0.7

%

 

 

9.2

%

 

Total revenues for the Specialty Insurance segment were $111.6 million in the fourth quarter of 2018, a decrease of 8 percent compared with the fourth quarter of 2017. The home warranty business benefited from policy renewals bolstered by an improvement in its retention rate. The company’s property and casualty business experienced high claim losses due to California wildfires, with losses exceeding its $5 million reinsurance retention limit for one event in the current quarter, compared with two such events last year. As a result, the overall loss ratio for the segment declined moderately to 61.9 percent this quarter, compared with 63.5 percent in the prior year. The segment’s pretax margin in the current quarter was 0.7 percent, compared with 9.2 percent in the fourth quarter of last year. However, excluding net realized losses, the current quarter’s pretax margin was 8.5 percent, compared with 6.8 percent last year, excluding net realized gains.

Teleconference/Webcast

First American’s fourth-quarter and year-end 2018 results will be discussed in more detail on Thursday, Feb. 14, 2019, 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. 28, 2019, by dialing 201-612-7415 and using the conference ID 13686642. 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; banking, trust and wealth management services; and other related products and services. With total revenue of $5.7 billion in 2018, the company offers its products and services directly and through its agents throughout the United States and abroad. In 2018, First American was named to the Fortune 100 Best Companies to Work For® list for the third consecutive year. 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; 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; process automation; technological and other developments that change the way real estate transactions are conducted and related documents are processed; 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; and other factors described in the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2018, 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, success ratios, adjusted earnings per share, and adjusted pretax margins for the company, its title insurance and services segment and its specialty insurance segment. 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,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Total revenues

 

$

1,417,113

 

 

$

1,481,323

 

 

$

5,747,844

 

 

$

5,772,363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

118,918

 

 

$

159,335

 

 

$

609,538

 

 

$

445,331

 

Income tax expense (benefit)

 

 

25,744

 

 

 

(61,378

)

 

 

133,640

 

 

 

23,468

 

Net income

 

 

93,174

 

 

 

220,713

 

 

 

475,898

 

 

 

421,863

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

1,525

 

 

 

(414

)

 

 

1,402

 

 

 

(1,186

)

Net income attributable to the Company

 

$

91,649

 

 

$

221,127

 

 

$

474,496

 

 

$

423,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.81

 

 

$

1.98

 

 

$

4.21

 

 

$

3.79

 

Diluted

 

$

0.81

 

 

$

1.96

 

 

$

4.19

 

 

$

3.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.42

 

 

$

0.38

 

 

$

1.60

 

 

$

1.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

112,768

 

 

 

111,904

 

 

 

112,613

 

 

 

111,668

 

Diluted

 

 

113,387

 

 

 

112,846

 

 

 

113,279

 

 

 

112,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Title Insurance Segment Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title orders opened(1)

 

 

202,400

 

 

 

231,500

 

 

 

981,800

 

 

 

1,069,000

 

Title orders closed(1)

 

 

176,500

 

 

 

204,200

 

 

 

730,800

 

 

 

823,700

 

Paid title claims

 

 

43,342

 

 

 

51,262

 

 

 

165,771

 

 

 

200,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

First American Financial Corporation

 

Selected Consolidated Balance Sheet Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Cash and cash equivalents

 

$

1,467,129

 

 

$

1,387,226

 

Investments

 

 

6,225,520

 

 

 

5,378,303

 

Goodwill and other intangible assets, net

 

 

1,253,538

 

 

 

1,212,918

 

Total assets

 

 

10,630,635

 

 

 

9,573,222

 

Reserve for claim losses

 

 

1,042,679

 

 

 

1,028,933

 

Notes and contracts payable

 

 

732,019

 

 

 

732,810

 

Total stockholders’ equity

 

$

3,741,881

 

 

$

3,479,955

 

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

652,834

 

 

$

537,414

 

 

$

115,420

 

 

$

 

Agent premiums

 

 

583,075

 

 

 

583,075

 

 

 

 

 

 

 

Information and other

 

 

185,377

 

 

 

182,646

 

 

 

2,995

 

 

 

(264

)

Net investment income

 

 

63,289

 

 

 

69,307

 

 

 

2,629

 

 

 

(8,647

)

Net realized investment losses

 

 

(67,462

)

 

 

(58,011

)

 

 

(9,451

)

 

 

 

 

 

 

1,417,113

 

 

 

1,314,431

 

 

 

111,593

 

 

 

(8,911

)

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

436,494

 

 

 

425,605

 

 

 

18,122

 

 

 

(7,233

)

Premiums retained by agents

 

 

458,028

 

 

 

458,028

 

 

 

 

 

 

 

Other operating expenses

 

 

225,123

 

 

 

199,200

 

 

 

17,841

 

 

 

8,082

 

Provision for policy losses and other claims

 

 

116,238

 

 

 

44,820

 

 

 

71,418

 

 

 

 

Depreciation and amortization

 

 

33,393

 

 

 

31,615

 

 

 

1,740

 

 

 

38

 

Premium taxes

 

 

17,938

 

 

 

16,245

 

 

 

1,693

 

 

 

 

Interest

 

 

10,981

 

 

 

2,481

 

 

 

 

 

 

8,500

 

 

 

 

1,298,195

 

 

 

1,177,994

 

 

 

110,814

 

 

 

9,387

 

Income (loss) before income taxes

 

$

118,918

 

 

$

136,437

 

 

$

779

 

 

$

(18,298

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

471

 

 

 

(2,679

)

 

 

3,150

 

 

 

 

 

 

 

1,481,323

 

 

 

1,356,037

 

 

 

121,112

 

 

 

4,174

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

435,969

 

 

 

414,249

 

 

 

17,973

 

 

 

3,747

 

Premiums retained by agents

 

 

475,748

 

 

 

475,748

 

 

 

 

 

 

 

Other operating expenses

 

 

235,346

 

 

 

208,547

 

 

 

17,225

 

 

 

9,574

 

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

)

 

First American Financial Corporation

 

Segment Information

 

(in thousands, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

 

 

 

 

Title

 

 

Specialty

 

 

Corporate

 

December 31, 2018

 

Consolidated

 

 

Insurance

 

 

Insurance

 

 

(incl. Elims.)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct premiums and escrow fees

 

$

2,507,669

 

 

$

2,052,951

 

 

$

454,718

 

 

$

 

Agent premiums

 

 

2,284,906

 

 

 

2,284,906

 

 

 

 

 

 

 

Information and other

 

 

781,467

 

 

 

770,725

 

 

 

11,802

 

 

 

(1,060

)

Net investment income

 

 

230,289

 

 

 

223,318

 

 

 

10,190

 

 

 

(3,219

)

Net realized investment losses

 

 

(56,487

)

 

 

(49,119

)

 

 

(7,368

)

 

 

 

 

 

 

5,747,844

 

 

 

5,282,781

 

 

 

469,342

 

 

 

(4,279

)

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,748,949

 

 

 

1,671,846

 

 

 

75,355

 

 

 

1,748

 

Premiums retained by agents

 

 

1,799,836

 

 

 

1,799,836

 

 

 

 

 

 

 

Other operating expenses

 

 

900,208

 

 

 

793,364

 

 

 

74,025

 

 

 

32,819

 

Provision for policy losses and other claims

 

 

452,633

 

 

 

173,520

 

 

 

279,113

 

 

 

 

Depreciation and amortization

 

 

125,927

 

 

 

119,053

 

 

 

6,721

 

 

 

153

 

Premium taxes

 

 

69,775

 

 

 

62,646

 

 

 

7,129

 

 

 

 

Interest

 

 

40,978

 

 

 

7,513

 

 

 

 

 

 

33,465

 

 

 

 

5,138,306

 

 

 

4,627,778

 

 

 

442,343

 

 

 

68,185

 

Income (loss) before income taxes

 

$

609,538

 

 

$

655,003

 

 

$

26,999

 

 

$

(72,464

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

11,234

 

 

 

6,656

 

 

 

4,578

 

 

 

 

 

 

 

5,772,363

 

 

 

5,293,156

 

 

 

465,020

 

 

 

14,187

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel costs

 

 

1,723,539

 

 

 

1,636,429

 

 

 

71,604

 

 

 

15,506

 

Premiums retained by agents

 

 

1,863,356

 

 

 

1,863,356

 

 

 

 

 

 

 

Other operating expenses

 

 

1,055,886

 

 

 

788,074

 

 

 

67,813

 

 

 

199,999

 

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

)

 

First American Financial Corporation

 

Reconciliation of Pretax Margins and Earnings per Diluted Share

 

Excluding Net Realized Investment Gains and Losses ("NRIG(L)")

 

(in thousands, except margin and per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

 

 

December 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,417,113

 

 

$

1,481,323

 

 

$

5,747,844

 

 

$

5,772,363

 

Less: NRIG(L)

 

 

(67,462

)

 

 

471

 

 

 

(56,487

)

 

 

11,234

 

Total revenues excluding NRIG(L)

 

$

1,484,575

 

 

$

1,480,852

 

 

$

5,804,331

 

 

$

5,761,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

118,918

 

 

$

159,335

 

 

$

609,538

 

 

$

445,331

 

Less: NRIG(L)

 

 

(67,462

)

 

 

471

 

 

 

(56,487

)

 

 

11,234

 

Pretax income excluding NRIG(L)

 

$

186,380

 

 

$

158,864

 

 

$

666,025

 

 

$

434,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

8.4

%

 

 

10.8

%

 

 

10.6

%

 

 

7.7

%

Less: Pretax margin impact of NRIG(L)

 

 

(4.2

)%

 

 

0.1

%

 

 

(0.9

)%

 

 

0.2

%

Pretax margin excluding NRIG(L)

 

 

12.6

%

 

 

10.7

%

 

 

11.5

%

 

 

7.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per diluted share (EPS)

 

$

0.81

 

 

$

1.96

 

 

$

4.19

 

 

$

3.76

 

Less: EPS impact of NRIG(L)

 

 

(0.47

)

 

 

 

 

 

(0.39

)

 

 

0.08

 

EPS excluding NRIG(L)

 

$

1.27

 

 

$

1.96

 

 

$

4.58

 

 

$

3.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title Insurance and Services Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,314,431

 

 

$

1,356,037

 

 

$

5,282,781

 

 

$

5,293,156

 

Less: NRIG(L)

 

 

(58,011

)

 

 

(2,679

)

 

 

(49,119

)

 

 

6,656

 

Total revenues excluding NRIG(L)

 

$

1,372,442

 

 

$

1,358,716

 

 

$

5,331,900

 

 

$

5,286,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax income

 

$

136,437

 

 

$

165,618

 

 

$

655,003

 

 

$

642,364

 

Less: NRIG(L)

 

 

(58,011

)

 

 

(2,679

)

 

 

(49,119

)

 

 

6,656

 

Pretax income excluding NRIG(L)

 

$

194,448

 

 

$

168,297

 

 

$

704,122

 

 

$

635,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pretax margin

 

 

10.4

%

 

 

12.2

%

 

 

12.4

%

 

 

12.1

%

Less: Pretax margin impact of NRIG(L)

 

 

(3.8

)%

 

 

(0.2

)%

 

 

(0.8

)%

 

 

0.1

%

Pretax margin excluding NRIG(L)

 

 

14.2