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First American (FAF) Banks on Segmental Growth Amid Cost Woes
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First American Financial Corporation (FAF - Free Report) is well-poised for growth, driven by higher interest rates in the cash and investment portfolio, improved agent premiums, stronger net realized investment gain and effective capital deployment.
The Title Insurance and Services business of First American is expected to gain momentum from improved agent premiums, higher direct premiums and escrow fees, as well as increased domestic residential purchase and commercial transactions.
Higher operating revenues in the home warranty business and stronger net realized investment gain in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
A higher number of closed orders, an increase in average revenue per order, a solid performance of the commercial market, as well as improved direct premium and escrow fees from favorable refinance are likely to drive revenue growth. Higher demand for title information products in data and analytics and commercial and loss mitigation business lines should also add to the upside.
FAF has been focusing on strategic initiatives to strengthen its product offerings and core business. The company pursued small title agency buyouts in the regions that it identifies as growth markets.
Net investment income has been an important component of the company’s top-line growth. The metric should continue to grow riding on higher short-term interest rates in the company’s cash and investment portfolio and improved escrow and tax-deferred property exchange balances. Higher earnings on investments associated with the insurer’s deferred compensation plan also contributed to the increase.
Given a strong operational performance, the company engages in shareholder-friendly moves. The board of directors increased dividend by 2% to an annual rate of $2.12 per share in the first quarter of 2024. The company’s quarterly dividend witnessed a nine-year (2016-2024) CAGR of 8.2%. These make the stock an attractive pick for yield-seeking investors.
The insurer has been experiencing an increase in expenses due to higher personnel costs, premiums retained by agents, operating expenses, premium taxes and interests. The company must strive to control costs or increase revenues at a higher magnitude than expenses, or else the margin may continue to erode.
Other Industry Players
Other players in the property and casualty insurance industry include Palomar Holdings, Inc. (PLMR - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .
Palomar has a decent history of delivering earnings surprises in each of the last four quarters, the average being 11.12%.
New business, strong premium retention rates for existing business and renewals of existing policies, better pricing and effective capital deployment continue to drive Palomar. Continued operational excellence helps it maintain a strong capital position.
Axis Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 102.57%.
AXS’ insurance business should benefit from a diversified portfolio of global specialty businesses, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. Axis Capital’s solid capital position, aided by operational expertise, supports effective capital deployment.
Cincinnati Financial has a decent history of delivering earnings surprises in each of the last four quarters, the average being 43.05%.
Prudent pricing, an agent-centric model, a higher level of insured exposures and a disciplined expansion of Cincinnati Re should continue to drive Cincinnati Financial’s premiums. CINF boasts above-average industry premium growth.
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First American (FAF) Banks on Segmental Growth Amid Cost Woes
First American Financial Corporation (FAF - Free Report) is well-poised for growth, driven by higher interest rates in the cash and investment portfolio, improved agent premiums, stronger net realized investment gain and effective capital deployment.
The Title Insurance and Services business of First American is expected to gain momentum from improved agent premiums, higher direct premiums and escrow fees, as well as increased domestic residential purchase and commercial transactions.
Higher operating revenues in the home warranty business and stronger net realized investment gain in both the home warranty and property and casualty businesses should drive the Specialty Insurance business.
A higher number of closed orders, an increase in average revenue per order, a solid performance of the commercial market, as well as improved direct premium and escrow fees from favorable refinance are likely to drive revenue growth. Higher demand for title information products in data and analytics and commercial and loss mitigation business lines should also add to the upside.
FAF has been focusing on strategic initiatives to strengthen its product offerings and core business. The company pursued small title agency buyouts in the regions that it identifies as growth markets.
Net investment income has been an important component of the company’s top-line growth. The metric should continue to grow riding on higher short-term interest rates in the company’s cash and investment portfolio and improved escrow and tax-deferred property exchange balances. Higher earnings on investments associated with the insurer’s deferred compensation plan also contributed to the increase.
Given a strong operational performance, the company engages in shareholder-friendly moves. The board of directors increased dividend by 2% to an annual rate of $2.12 per share in the first quarter of 2024. The company’s quarterly dividend witnessed a nine-year (2016-2024) CAGR of 8.2%. These make the stock an attractive pick for yield-seeking investors.
The insurer has been experiencing an increase in expenses due to higher personnel costs, premiums retained by agents, operating expenses, premium taxes and interests. The company must strive to control costs or increase revenues at a higher magnitude than expenses, or else the margin may continue to erode.
Other Industry Players
Other players in the property and casualty insurance industry include Palomar Holdings, Inc. (PLMR - Free Report) , Axis Capital Holdings Limited (AXS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .
Palomar has a decent history of delivering earnings surprises in each of the last four quarters, the average being 11.12%.
New business, strong premium retention rates for existing business and renewals of existing policies, better pricing and effective capital deployment continue to drive Palomar. Continued operational excellence helps it maintain a strong capital position.
Axis Capital has a decent history of delivering earnings surprises in each of the last four quarters, the average being 102.57%.
AXS’ insurance business should benefit from a diversified portfolio of global specialty businesses, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. Axis Capital’s solid capital position, aided by operational expertise, supports effective capital deployment.
Cincinnati Financial has a decent history of delivering earnings surprises in each of the last four quarters, the average being 43.05%.
Prudent pricing, an agent-centric model, a higher level of insured exposures and a disciplined expansion of Cincinnati Re should continue to drive Cincinnati Financial’s premiums. CINF boasts above-average industry premium growth.