First American Financial (FAF) Q2 2024 earnings summary

Executive summary

• Second quarter 2024 revenue was $1.61 billion, down 2.1% year-over-year, with adjusted earnings per diluted share of $1.27 and reported EPS of $1.11.

• Net income attributable to the company was $116 million, down from $139 million last year; adjusted net income was $133 million.

• Title insurance direct premiums and escrow fees rose 3.1% year-over-year, while agent premiums declined 1.3%.

• Home warranty segment revenues were $107 million, up 0.3% year-over-year, with pretax margin improving to 15.4%.

• Strategic initiatives like Sequoia (automated underwriting) and Endpoint (settlement platform) are being piloted and expanded to drive efficiency.

Financial highlights

• Title segment revenue was $1.5 billion, down 1% year-over-year; purchase revenue up 4% due to home price appreciation.

• Net investment income fell 13.6% to $129.9 million; net investment losses of $13 million versus gains last year.

• Cash and cash equivalents at June 30, 2024, were $2.05 billion.

• Cash provided by operating activities for the first half of 2024 was $336 million, up from $176.7 million prior year.

• Repurchased over 1 million shares for $56 million through July 23, 2024.

Outlook and guidance

• Expecting modest revenue growth in 2024, with title margins similar to 2023, contingent on commercial market strength in the second half.

• Open purchase orders down 3% in early July; commercial business expected to remain under pressure in Q3 but optimism for a rebound in Q4.

• Investment income expected at $120 million per quarter in Q3 and Q4, with some downside from lost Home Point loans and potential Fed rate cuts.

• Management expects to continue paying quarterly cash dividends at or above the current level, subject to board discretion.

• The company expects to repay $300 million in senior unsecured notes due November 2024 through available cash, credit facility, or new bond issuance.