First American Financial Corp (FAF) Reports Q3 2023 Earnings
First American Financial Corp (NYSE:FAF) reported a net loss of $2 million, or $0.02 per diluted share, and adjusted earnings per share of $1.22 for Q3 2023.
Total revenue for the quarter was $1.5 billion, a decrease of 19% compared to the same period last year.
The company's Title Insurance and Services segment reported an increase in investment income of 35% compared to last year, reaching $142 million.
The company raised its common stock dividend by 2% to an annual rate of $2.12 per share.
First American Financial Corp (NYSE:FAF), a leading provider of title, settlement, and risk solutions for real estate transactions, announced its financial results for the third quarter ended September 30, 2023, on October 26, 2023. The company reported a net loss of $2 million, or $0.02 per diluted share, primarily due to unrealized losses recognized in the venture portfolio and changes in the fair market value of equity securities. However, on an adjusted basis, earnings per share stood at $1.22.
Financial Performance
The company's total revenue for the third quarter was $1.5 billion, marking a 19% decrease compared to the same period last year. The Title Insurance and Services segment reported an investment income of $142 million, up 35% compared to last year. The segment's provision for policy losses and other claims was reduced to 3.0% of title premiums and escrow fees, down from the previous loss rate of 3.5%. The segment's pretax margin was 10.5%, or 12.0% on an adjusted basis.
Company's Commentary
The rapid increase in interest rates to levels not seen in many years continues to produce challenging market conditions," said Ken DeGiorgio, chief executive officer at First American Financial Corporation. "Despite these historically difficult conditions, our continued focus on expense management and strong growth in net investment income enabled us to deliver a pretax title margin of 10.5 percent this quarter, or 12.0 percent on an adjusted basis."
Financial Tables
The company's selected financial information showed a net loss of $1.7 million before taxes, compared to a loss of $3.2 million in the same period last year. The adjusted net income was $128.2 million, compared to $176.8 million in the third quarter of last year. The company's Title Insurance and Services segment reported total revenues of $1.5 billion, down 19% compared to the same quarter of 2022. The Home Warranty segment reported total revenues of $108 million, up 3% compared to the third quarter of 2022.
Analysis and Outlook
Despite the challenging market conditions due to the rapid increase in interest rates and the slowest annual pace of existing home sales since the global financial crisis, First American Financial Corp (NYSE:FAF) managed to deliver a pretax title margin of 10.5% this quarter, or 12.0% on an adjusted basis. The company expects these difficult market conditions to persist well into next year, affecting both its residential and commercial businesses. However, the company's financial discipline and strong balance sheet allow it to continue investing in strategic initiatives that support long-term growth, while returning capital to shareholders.
Explore the complete 8-K earnings release (here) from First American Financial Corp for further details.
This article first appeared on GuruFocus.
