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First American (FAF) Q1 Earnings Lag Estimates, Revenues Top

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First American Financial (FAF - Free Report) reported first-quarter 2022 operating income per share of $1.17, which missed the Zacks Consensus Estimate by 3.31%. Also, the bottom line declined 28.7% year over year.

The quarterly earnings reflect soft performance at both Title Insurance and Services segment and the Specialty Insurance segment.

First American Financial Corporation Price, Consensus and EPS Surprise


Behind the Headlines

Operating revenues of $2 billion were flat year over year on the back of higher agent premiums, direct premiums and escrow fees and information and other revenues. The top line beat the Zacks Consensus Estimate by 3.1%.

Net investment income decreased 6.1% to $46 million.

The total expense of $1.9 billion increased 10.7% year over year due to higher personnel costs, other operating expenses, depreciation and amortization, premium taxes and interest.

Segment Results

Title Insurance and Services: Total revenues increased 8% year over year to $2 billion. The upside was driven by improved direct premium and escrow fees, increased agent premiums as well as higher information and other revenues. Pretax margin, excluding net investment gains, contracted 450 basis points (bps) year over year to 9.7%. Title open orders decreased 23% to 279,000 while Title closed orders decreased 28.7% to 205,100. The average revenue per direct title order increased to $2,969.

Specialty Insurance: Total revenues, excluding net investment gains, decreased 15% year over year to $115 million. The pretax margin was 10.4%, up  600 basis points year over year.

Financial Update

First American exited the first quarter with cash and cash equivalents of $1.7 billion, up 38.8% from 2021 end. Notes and contracts payable were $1.6 billion, down 0.1%.

Stockholders’ equity was $5.4 billion, down 7% from 2021 end.

The debt-to-capital ratio was 29.1 at quarter end.

Share Repurchase Update

FAF bought back 1.6 million shares for 108 million in the first quarter and another 1.7 million for $102 million in April 2022.

Zacks Rank

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

Performance of Some Other P&C Insurers

Of the insurance industry players that have reported first-quarter results so far, The Travelers Companies (TRV - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) missed the mark.

Travelers reported first-quarter 2022 core income of $4.22 per share, which beat the Zacks Consensus Estimate by 14% and increased 54.6% year over year. Total revenues increased 6.8% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and fee income but missed the consensus estimate. Travelers’ combined ratio deteriorated 530 bps year over year to 91.3.

RLI’s first-quarter 2022 operating earnings of $1.43 per share beat the Zacks Consensus Estimate by 40.2% and improved 64.4% from the prior-year quarter. Operating revenues were $287 million, up 17.1% year over year and beat the Zacks Consensus Estimate by 0.8%. RLI’s gross premiums written increased 22% year over year to $359.2 million. The combined ratio improved 900 bps year over year to 77.9.

Progressive’s first-quarter 2022 earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.24 and declined 34.9% from the year-ago quarter. Net premiums written were $13.2 billion in the quarter, up 12% from $11.7 billion a year ago. Progressive’s combined ratio deteriorated 520 bps from the prior-year quarter to 94.7.