First American Financial (FAF) Q4 Earnings & Revenues Beat

First American Financial Corporation (NYSE: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

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. (NYSE:BRO) and RLI Corp. (NYSE:RLI) beat the respective Zacks Consensus Estimate while that of Principal Financial (NASDAQ:PFG) matched the same.

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