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First American (FAF) Q4 Earnings Miss, Revenues Decline Y/Y
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First American Financial Corporation (FAF - Free Report) reported fourth-quarter 2022 operating income per share of $1.35, which missed the Zacks Consensus Estimate by 6.8%. Also, the bottom line decreased 40.7% year over year.
The insurer’s results reflect soft performances in the Title Insurance and Services segment, partially offset by improved net investment income and solid performance in Specialty Insurance.
First American Financial Corporation Price, Consensus and EPS Surprise
Operating revenues of $1.7 billion decreased 29% year over year due to lower direct premiums and escrow fees, agent premiums and information and other. The top line missed the Zacks Consensus Estimate by 6.7%. The figure was lower than our estimate of $1.8 billion.
Net investment income more than doubled year over year to $141 million. The figure was higher than our estimate of $123 million.
The total expense of $1.6 billion decreased 20.2% year over year due to lower personnel costs, premiums retained by agents, other operating expenses, provision for policy losses and other claims and premium taxes. The figure was lower than our estimate of $1.8 billion.
Segment Results
Title Insurance and Services: Total revenues, excluding net investment gains and losses, decreased 25.3% year over year to $1.6 billion. The downside was due to lower direct premiums and escrow fees, agent premiums and information and other. The figure was lower than our estimate of $1.8 billion.
Pretax margin, excluding net investment gains and losses, contracted 490 basis points (bps) year over year to 10.4%.
Title open orders decreased 41.8% to 153,100 while Title closed orders decreased 47.6% to 125,300.
The average revenue per direct title order increased to $4,020, primarily attributable to a shift in the mix to higher premium commercial from lower premium refinance transactions.
Specialty Insurance: Total revenues, excluding net investment gains and losses, increased 2.6% year over year to $119 million, primarily driven by lower direct premiums and escrow fees. The figure was higher than our estimate of $106.2 million.
Pretax margin, excluding net investment gains and losses, was 18.5%, expanded 1250 bps year over year.
Full-Year Highlights
Full-year 2022 adjusted income of $6.09 per share missed the Zacks Consensus Estimate of 1.6%. The bottom line decreased 25.4% year over year.
Total revenues decreased 17.5% from the year-ago quarter to $7.6 billion and missed the consensus estimate by 1.7%.
Financial Update
First American exited the quarter with cash and cash equivalents of $1.2 billion, down 0.3% from 2021 end. Notes and contracts payable were $1.6 billion, down 0.1%.
Stockholders’ equity was $4.7 billion, down 19.1% from 2021 end.
Cash flow from operations was $246 million, down 28.4% year over year. The debt-to-capital ratio was 30.
Share Repurchase and Dividend Update
The company bought back shares worth $441 million in 2022. It also raised its dividend by 2% in 2022 to an annual rate of $2.08 per share.
Zacks Rank
First American currently has a Zacks Rank #4 (Sell).
Chubb Limited (CB - Free Report) reported fourth-quarter 2022 core operating income of $4.05 per share, which missed the Zacks Consensus Estimate by 4%. However, the bottom line improved 6.3% from the year-ago quarter. Net premiums written improved 11.9% year over year to $10.2 billion in the quarter. The figure was higher than our estimate of $10 billion. Net premiums earned rose 13.2% to $10.6 billion. The figure was higher than our estimate of $9.7 billion.
Net investment income was $1 billion, increased 25%. The figure was higher than our estimate of $0.9 billion. Property and casualty underwriting income was $1.1 billion, down 11.4% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.2 billion, up 1.9%. CB incurred an after-tax catastrophe loss of $323 million in the fourth quarter, increased 31.8% year over year.
Selective Insurance Group, Inc. (SIGI - Free Report) reported fourth-quarter 2022 operating income of $1.46 per share, which met the Zacks Consensus Estimate. The bottom line declined 6.4% from the year-ago quarter. Total revenues of $958 million increased 10.4% from the year-ago quarter’s figure, primarily driven by higher premiums earned.
The top line missed the Zacks Consensus Estimate by 0.7%. On a year-over-year basis, net premium written increased 14% to $849.7 million, driven by renewal pure price increases, solid retention, new business and exposure growth.
Net investment income increased 1% year over year to $65.5 million because of decreased after-tax alternative investment income, partially offset by higher income from the fixed-income securities portfolio due to higher book yields. Net underwriting income, after-tax, dropped 15% to $36.4 million. The combined ratio deteriorated 160 bps on a year-over-year basis to 94.7, owing to higher catastrophe losses.
American Financial Group, Inc. (AFG - Free Report) delivered fourth-quarter 2022 core net operating earnings per share of $2.99, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line decreased 27.4% year over year. Total operating revenues amounted to $1.9 billion in the fourth quarter, which rose 9% year over year. The improvement can be attributed to growth in P&C insurance net earned premiums. The top line beat the Zacks Consensus Estimate by 13.3%.
P&C insurance net earned premiums of $1.6 billion climbed 11.8% year over year. Net investment income decreased 19.6% year over year to $168 million. The figure was lower than our estimate of $194.5 million. On a year-over-year basis, other income of $24 million decreased 44.2% in the quarter under review.
Total costs and expenses of American Financial increased 20.6% year over year to $1.6 billion driven by higher P&C insurance losses & expenses and expenses of managed investment entities. The figure was higher than our estimate of $1.4 billion.
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First American (FAF) Q4 Earnings Miss, Revenues Decline Y/Y
First American Financial Corporation (FAF - Free Report) reported fourth-quarter 2022 operating income per share of $1.35, which missed the Zacks Consensus Estimate by 6.8%. Also, the bottom line decreased 40.7% year over year.
The insurer’s results reflect soft performances in the Title Insurance and Services segment, partially offset by improved net investment income and solid performance in Specialty Insurance.
First American Financial Corporation Price, Consensus and EPS Surprise
First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote
Behind the Headlines
Operating revenues of $1.7 billion decreased 29% year over year due to lower direct premiums and escrow fees, agent premiums and information and other. The top line missed the Zacks Consensus Estimate by 6.7%. The figure was lower than our estimate of $1.8 billion.
Net investment income more than doubled year over year to $141 million. The figure was higher than our estimate of $123 million.
The total expense of $1.6 billion decreased 20.2% year over year due to lower personnel costs, premiums retained by agents, other operating expenses, provision for policy losses and other claims and premium taxes. The figure was lower than our estimate of $1.8 billion.
Segment Results
Title Insurance and Services: Total revenues, excluding net investment gains and losses, decreased 25.3% year over year to $1.6 billion. The downside was due to lower direct premiums and escrow fees, agent premiums and information and other. The figure was lower than our estimate of $1.8 billion.
Pretax margin, excluding net investment gains and losses, contracted 490 basis points (bps) year over year to 10.4%.
Title open orders decreased 41.8% to 153,100 while Title closed orders decreased 47.6% to 125,300.
The average revenue per direct title order increased to $4,020, primarily attributable to a shift in the mix to higher premium commercial from lower premium refinance transactions.
Specialty Insurance: Total revenues, excluding net investment gains and losses, increased 2.6% year over year to $119 million, primarily driven by lower direct premiums and escrow fees. The figure was higher than our estimate of $106.2 million.
Pretax margin, excluding net investment gains and losses, was 18.5%, expanded 1250 bps year over year.
Full-Year Highlights
Full-year 2022 adjusted income of $6.09 per share missed the Zacks Consensus Estimate of 1.6%. The bottom line decreased 25.4% year over year.
Total revenues decreased 17.5% from the year-ago quarter to $7.6 billion and missed the consensus estimate by 1.7%.
Financial Update
First American exited the quarter with cash and cash equivalents of $1.2 billion, down 0.3% from 2021 end. Notes and contracts payable were $1.6 billion, down 0.1%.
Stockholders’ equity was $4.7 billion, down 19.1% from 2021 end.
Cash flow from operations was $246 million, down 28.4% year over year.
The debt-to-capital ratio was 30.
Share Repurchase and Dividend Update
The company bought back shares worth $441 million in 2022. It also raised its dividend by 2% in 2022 to an annual rate of $2.08 per share.
Zacks Rank
First American currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Chubb Limited (CB - Free Report) reported fourth-quarter 2022 core operating income of $4.05 per share, which missed the Zacks Consensus Estimate by 4%. However, the bottom line improved 6.3% from the year-ago quarter. Net premiums written improved 11.9% year over year to $10.2 billion in the quarter. The figure was higher than our estimate of $10 billion. Net premiums earned rose 13.2% to $10.6 billion. The figure was higher than our estimate of $9.7 billion.
Net investment income was $1 billion, increased 25%. The figure was higher than our estimate of $0.9 billion. Property and casualty underwriting income was $1.1 billion, down 11.4% from the year-ago quarter. Global P&C underwriting income, excluding Agriculture, was $1.2 billion, up 1.9%. CB incurred an after-tax catastrophe loss of $323 million in the fourth quarter, increased 31.8% year over year.
Selective Insurance Group, Inc. (SIGI - Free Report) reported fourth-quarter 2022 operating income of $1.46 per share, which met the Zacks Consensus Estimate. The bottom line declined 6.4% from the year-ago quarter. Total revenues of $958 million increased 10.4% from the year-ago quarter’s figure, primarily driven by higher premiums earned.
The top line missed the Zacks Consensus Estimate by 0.7%. On a year-over-year basis, net premium written increased 14% to $849.7 million, driven by renewal pure price increases, solid retention, new business and exposure growth.
Net investment income increased 1% year over year to $65.5 million because of decreased after-tax alternative investment income, partially offset by higher income from the fixed-income securities portfolio due to higher book yields. Net underwriting income, after-tax, dropped 15% to $36.4 million. The combined ratio deteriorated 160 bps on a year-over-year basis to 94.7, owing to higher catastrophe losses.
American Financial Group, Inc. (AFG - Free Report) delivered fourth-quarter 2022 core net operating earnings per share of $2.99, which outpaced the Zacks Consensus Estimate by 1.3%. The bottom line decreased 27.4% year over year. Total operating revenues amounted to $1.9 billion in the fourth quarter, which rose 9% year over year. The improvement can be attributed to growth in P&C insurance net earned premiums. The top line beat the Zacks Consensus Estimate by 13.3%.
P&C insurance net earned premiums of $1.6 billion climbed 11.8% year over year. Net investment income decreased 19.6% year over year to $168 million. The figure was lower than our estimate of $194.5 million. On a year-over-year basis, other income of $24 million decreased 44.2% in the quarter under review.
Total costs and expenses of American Financial increased 20.6% year over year to $1.6 billion driven by higher P&C insurance losses & expenses and expenses of managed investment entities. The figure was higher than our estimate of $1.4 billion.