First American Financial Corporation (FAF) reported its third-quarter 2013 operating net income of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents per share by 3.3%. The results also exceeded the year-ago earnings by a penny.
The company’s net income came in at 59 cents per share, including net realized investment losses of 4 cents per share. The result plunged 37.9% year over year. The year ago quarter includes net realized investment gains of 27 cents per share and favorable impact of 6 cents per share from certain tax items.
First American Financial’s top line grew 7.7% year over year to $1.3 billion, riding primarily on the back of higher agent premiums (up 23.9% year over year) and direct premiums and escrow fees (up 7% year over year). The results also surpassed the Zacks Consensus Estimate of $1.2 billion by 10.5%.
Total expenses of First American Financial also rose 13.4% year over year to nearly $1.2 billion in the reported quarter owing to higher personnel cost, premiums retained by agents and other operating expenses.
Title Insurance: Direct premiums and escrow fees of $487.8 million increased 6.2% year over year. Agent premiums also surged 23.9% year over year to $549 million.
Investment income of the segment increased 13.9% year over year to $22.2 million during the quarter.
Pretax margin contracted 260 basis points (bps) year over year to 10.3% due to rise in expenses.
Specialty Insurance: Direct premiums and escrow fees came in at $85.3 million, increasing 11.2% year over year.
Investment income declined 22.8% year over year to $1.8 million in the reported quarter.
Pretax margin of 4.7% contracted 530 bps from the year-ago quarter due to higher losses in both the property and casualty and home warranty business lines.
Corporate: Investment income of $1.9 million in the reported quarter surged 52.3% year over year.
First American Financial exited the third quarter with cash and cash equivalents of $833.8 million, up 32.9% from Dec 31, 2012.
Total assets of $6.5 billion for First American Financial increased 7.4% from the 2012 year-end level.
First American Financial’s total shareholders’ equity stood at nearly $2.4 billion as of Sep 30, inching up 1% from the 2012 year-end level.
Total cash flows from operations during the quarter totaled $87.4 million for First American Financial.
Share Repurchase Update
First American Financial spent $47.1 million to buy back 2.2 million shares in the third quarter.
Performances by Other Property and Casualty Insurers
Allied World Assurance Company Holdings, AG (AWH) reported its third-quarter 2013 operating net income of $2.93 per share, surpassing the Zacks Consensus Estimate by 37.5% and the prior-year figure by 35.6%.
Platinum Underwriters Holdings Ltd. (PTP) reported its third-quarter 2013 net earnings of $1.32 per share, which beat the Zacks Consensus Estimate of $1.00. However, the results declined 48% from the year-ago quarter level.
RLI Corporation (RLI) reported third-quarter 2013 operating earnings of $1.40 per share, surpassing both the Zacks Consensus Estimate by 47% and the year-ago figure by 37.2%.
First American Financial presently carries a Zacks Rank #3 (Hold).