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First American Financial (FAF) Q1 Earnings, Revenues Top

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First American Financial Corporation (FAF - Free Report) reported first-quarter 2019 operating income per share of 74 cents, which outperformed the Zacks Consensus Estimate by 7.3%. Moreover, the bottom line improved 4.2% year over year.

The quarter benefited from effective expense management and growth in investment income that helped the company achieve 12.1% pretax title margin.

Behind the Headlines

Operating revenues of $1.3 billion improved 0.5% year over year and beat the Zacks Consensus Estimate by nearly 2%

Net investment income surged 92% to $82.3 million.

Closed title orders declined 12% due to 29% decline in refinance orders and 8% decline in purchase orders.

Average revenue per order increased 7%, driven by higher average fee per file from commercial transactions.

Total expense of $1.2 billion decreased 3.5% year over year, attributable to lower personnel costs, premiums retained by agents, premium taxes and other operating expenses.

First American Financial Corporation Price, Consensus and EPS Surprise

Segment Results

Title Insurance and Services: Total revenues decreased 1.1% year over year to $1.3 billion.

Pretax margin expanded 350 bps.

Title open orders declined 10% to 227,800 while Title closed orders declined 13.1% year over year to $150,900.

Specialty Insurance: Total revenues increased 7.8% year over year to $122.2 million.

Pretax margin expanded 590 basis points to 14.6%.

Financial Update

First American exited the quarter with cash and cash equivalents of $1.3 billion, down 8.9% from 2018 end. Notes and contracts payable were $730.9 million, down 0.1% from 2018 end.

First American exited the quarter with stockholders’ equity of $3.9 billion, up 3.6% from 2018 end.

Return on equity was 18.1% in the first quarter.

Cash flow from operations was $34.5 million, down 20% year over year.

Zacks Rank

First American currently has a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among other companies in the insurance industry, which have already reported first-quarter earnings, The Travelers Companies, Inc. (TRV - Free Report) , The Progressive Corporation’s (PGR - Free Report) and RLI Corp. (RLI - Free Report) outpaced the respective Zacks Consensus Estimate.

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