First American Financial (FAF) Q4 Earnings & Revenues Beat

Zacks Equity Research

First American Financial Corporation FAF reported fourth-quarter 2019 operating income per share of $1.80, which outperformed the Zacks Consensus Estimate by 33.3%. Moreover, the bottom line improved 41.7%.
Increase in investment income and improved segmental performance were partially offset by increase in expenses.

First American Financial Corporation Price, Consensus and EPS Surprise

First American Financial Corporation Price, Consensus and EPS Surprise

First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote

Behind the Headlines

Operating revenues of $1.7 billion increased 22% year over year and beat the Zacks Consensus Estimate by 6.9%.

Net investment income grew 24.5% to $78.8 million.

Closed title orders increased 27%, attributable to 131% increase in refinance orders.

Average revenue per order decreased 8%, driven by the shift to refinance transactions.

Total expense of $1.4 billion increased 10.9% year over year, attributable to increase in personnel costs, premiums retained by agents, other operating expenses, premium taxes and interest.

Full-Year Highlights

Operating income per share of $5.76 outpaced the Zacks Consensus Estimate of $5.38. Moreover, the bottom line surged 25.8%.

Revenues of $6.2 billion increased 8% from 2018 and beat the Zacks Consensus Estimate by 1.8%.

Segment Results

Title Insurance and Services: Total revenues increased 21.1% year over year to $1.6 billion.

Pre-tax margin expanded 740 bps.

Direct open orders increased 24.4% to $251.7 billion while Direct closed orders increased 27% to $224.2 billion year over year.

Specialty Insurance: Total revenues increased 17.9% year over year to $131.6 million.

Pre-tax margin was 16.7%, much higher than 0.7% in the year-ago quarter.

Financial Update

First American exited 2019 with cash and cash equivalents of $1.5 billion, up 1.3% year over year. Notes and contracts payable were $728 million, down 0.5% year over year.

First American exited 2019 with stockholders’ equity of $4.4 billion, up 18.1% year over year.

Return on equity was 17.3% in 2019.

Cash flow from operations was $913.1 million, up 15% from 2018.

Zacks Rank

First American currently has a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Insurance Releases

Among other players from the insurance industry that have reported fourth-quarter earnings so far, the bottom line of Brown & Brown, Inc. BRO and RLI Corp. RLI beat the respective Zacks Consensus Estimate while that of Principal Financial PFG matched the same.

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