First American (FAF) Inks P&C Insurance Book Transfer Deal

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Zacks Equity Research
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First American Financial Corporation FAF inked book transfer agreements with Safeco Insurance, a Liberty Mutual Company, and Heritage Insurance Holdings. Per the agreements, First American property and casualty insurance agents and customers can transfer their policies to Safeco or Heritage.

First American anticipates the transfer to be completed by the end of the third quarter of 2022.

Last October, this Zacks Rank #3 (Hold) title insurer had announced its decision to divest its property and casualty insurance business, which is not performing as per expectation.

This is a strategic initiative to strengthen its product offerings and intensify focus on its core business. To that end, it agreed to ink a deal to acquire ServiceMac whose mortgage subservicing business is likely to enable First American Financial to provide enhanced end-to-end mortgage, settlement, post-closing services and servicing-related products and solutions. The company looks for opportunities to intensify focus on its core business and redeploy capital to those areas, which fetch higher returns.

First American Financial remains well poised to capitalize on increased demand for first-time home purchases among millennials. The company estimates sustained low rates and demographic tailwinds to continue to drive strong purchase and refinance activity. The company noted that strength in purchase and refinance businesses have been benefiting from robust order trends and consistent cost-control efforts.  

Shares of First American have lost 1.1% in the past six months against the industry’s 15.3% increase. Strength of its solid commercial business, expanding valuation and data businesses and effective capital deployment should help the stock bounce back.

Stocks to Consider

Some better-ranked stocks in the same space include Fidelity National Financial FNF, Alleghany Corporation Y and W.R. Berkley Corporation WRB.    
    
Fidelity National delivered an earnings surprise of 18.40% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany delivered an earnings surprise of 195.85% in the last reported quarter. It sports a Zacks Rank #1.

W.R. Berkley delivered an earnings surprise of 4.84% in the last reported quarter. It carries a Zacks Rank #2 (Buy).

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