First American Financial (FAF) Q3 2024 earnings summary

Executive summary

• Adjusted revenue grew 4% year-over-year, marking the first increase since Q2 2022, with adjusted EPS up 10% to $1.34 per diluted share.

• Net loss of $104 million ($1.00 per diluted share) for Q3 2024, mainly due to $312 million in net investment losses from portfolio rebalancing.

• Commercial division revenue surged 19% year-over-year, with an 80% increase in large transactions and higher fee per file.

• Home warranty segment saw a 2% revenue increase but a decline in adjusted pre-tax margin to 7.7% due to higher marketing spend in direct-to-consumer channels.

• Investment portfolio rebalancing expected to increase annual interest income by $67 million.

Financial highlights

• GAAP loss of $1 per diluted share, but adjusted EPS was $1.34, excluding $312 million in net investment losses and purchase-related amortization.

• Title segment revenue was $1.3 billion, down 15% year-over-year, but up 4% excluding net investment losses.

• Commercial revenue reached $190 million, up 19% year-over-year, with a 23% increase in average revenue per order.

• Cash and cash equivalents at September 30, 2024 were $2.95 billion.

• Home warranty pre-tax income was $9 million, down 4% year-over-year, with a loss ratio of 54%.

Outlook and guidance

• Modest full-year 2024 revenue growth expected, with title margins similar to 2023 and cautious optimism for further improvement in 2025.

• Commercial business anticipated to perform well in Q4, supported by a strong pipeline and higher term refinancing demand.

• Q4 investment income in the title segment projected at $140–$145 million, assuming two 25 basis point Fed cuts.

• Management expects to continue paying quarterly cash dividends at or above the current level, with the September 2024 dividend increased to $0.54 per share.

• The company believes its liquidity and resources are sufficient to meet operational and financial obligations for at least the next twelve months.