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FAF's Q2 Earnings Beat on Solid Commercial Business, Investment Income
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Key Takeaways
FAF's Q2 operating EPS rose 20.47% to $1.53, beating estimates by 9.3% on strong seasonal demand.
Revenue climbed 14.2% to $1.8B, driven by gains in premiums, fees, and investment income.
Title segment revenue rose 13.2%, with title orders up and margins expanding 130 basis points.
First American Financial (FAF - Free Report) reported a second-quarter 2025 operating income per share of $1.53, which beat the Zacks Consensus Estimate by 9.3%. The bottom line increased 20.5% year over year.
The insurer’s results reflect the benefits of the seasonal pick-up in demand despite challenging market conditions.
Behind the Headlines
Operating revenues of $1.8 billion increased 14.2% year over year due to higher direct premiums and escrow fees, agent premiums, as well as information and other and net investment income. The top line beat the Zacks Consensus Estimate by 5%.
First American Financial Corporation Price, Consensus and EPS Surprise
Investment income was $160 million in the second quarter, which increased 23% year over year. The figure was higher than our estimate of $157.3 million.
Expenses increased 6.7% year over year to $1.6 billion, in line with our estimate.
Segment Results
Title Insurance and Services: Total revenues increased 13.2% year over year to $1.7 billion. The figure was in line with our estimate. Investment income of $147 million, up 17% year over year. The improvement was primarily driven by higher interest income from the company's investment portfolio.
Adjusted pretax margin expanded 130 basis points (bps) year over year to 13.2%. Title open orders rose 5.8% year over year to 179,500. Title closed orders rose 5.1% year over year to 131,100.
The average revenue per direct title order increased 7.7% year over year to $4112, primarily due to an increase in the average revenue per order for commercial transactions, partially offset by a shift in the mix to lower premium refinance transactions.
Home Warranty: Total revenues grew 3.1% to $110.2 million. The figure was lower than our estimate of $114.6 million. Pretax income of $22 million jumped 35% year over year. The claim loss rate was 41% in the second quarter, improving 500 bps, primarily due to lower claim severity. The pretax margin was 20.7%, which expanded 550 bps year over year.
Corporate: Corporate pretax loss (excluding net investment losses primarily related to changes in the fair value of marketable securities) was $40 million in the reported quarter, up $17 million compared with the second quarter of 2024. The higher loss in the current quarter was largely driven by a $13 million one-time expense related to executive separation costs.
Financial Update
First American exited the quarter with cash and cash equivalents of $2 billion, up 18.2% from the end of 2024. Notes and contracts payable of $1.5 billion remained flat from the end of 2024.
Stockholders’ equity was $5.1 billion, up 4.4% from the 2024-end level. The debt-to-capital ratio was 32.1.
FAF bought back shares worth $61 million in the quarter. Its board approved a $300 million share buyback program in July. Through July 23, it repurchased an additional $32 million worth of shares.
Cash flow from operations was $355 million, up 33.4% year over year.
RLI Corp. (RLI - Free Report) reported second-quarter 2025 operating earnings of 84 cents per share, beating the Zacks Consensus Estimate by 12%. The bottom line, however, decreased 2.3% from the prior-year quarter. Operating revenues for the reported quarter were $441 million, up 6.9% year over year, driven by 6% higher net premiums earned and 16% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.5%. Net investment income increased 16% year over year to $39.4 million, which is in line with our estimate. The Zacks Consensus Estimate was pegged at $38.9 million. The investment portfolio’s total return was 2.9% in the quarter.
Chubb Limited (CB - Free Report) reported second-quarter 2025 core operating income of $6.14 per share, which outpaced the Zacks Consensus Estimate by 4.2%. The bottom line increased 14.1% year over year. Net premiums written improved 6.3% year over year to $14.2 billion in the quarter, which is in line with the Zacks Consensus Estimate. Our estimate was pegged at $14 billion. Net investment income was $1.5 billion, up 6.8 % year over year. The Zacks Consensus Estimate was pegged at $1.8 billion, while our estimate for the same was $1.9 billion. Revenues of $14.8 million missed the Zacks Consensus Estimate by a whisker but improved 6.9% year over year.
W.R. Berkley's (WRB - Free Report) second-quarter 2025 operating income of $1.05 per share beat the Zacks Consensus Estimate of $1.03 per share. The bottom line increased about 1% year over year. Operating revenues came in at $3.6 billion, up 7.9% year over year, on the back of higher net premiums earned as well as improved net investment income, higher insurance service fees and other income. The top line beat the consensus estimate by 1.8%.
Catastrophe losses of $99.2 million in the quarter were wider than $89.7 million incurred in the year-ago quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 50 bps year over year to 92.1. The Zacks Consensus Estimate was 91.
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FAF's Q2 Earnings Beat on Solid Commercial Business, Investment Income
Key Takeaways
First American Financial (FAF - Free Report) reported a second-quarter 2025 operating income per share of $1.53, which beat the Zacks Consensus Estimate by 9.3%. The bottom line increased 20.5% year over year.
The insurer’s results reflect the benefits of the seasonal pick-up in demand despite challenging market conditions.
Behind the Headlines
Operating revenues of $1.8 billion increased 14.2% year over year due to higher direct premiums and escrow fees, agent premiums, as well as information and other and net investment income. The top line beat the Zacks Consensus Estimate by 5%.
First American Financial Corporation Price, Consensus and EPS Surprise
First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote
Investment income was $160 million in the second quarter, which increased 23% year over year. The figure was higher than our estimate of $157.3 million.
Expenses increased 6.7% year over year to $1.6 billion, in line with our estimate.
Segment Results
Title Insurance and Services: Total revenues increased 13.2% year over year to $1.7 billion. The figure was in line with our estimate. Investment income of $147 million, up 17% year over year. The improvement was primarily driven by higher interest income from the company's investment portfolio.
Adjusted pretax margin expanded 130 basis points (bps) year over year to 13.2%. Title open orders rose 5.8% year over year to 179,500. Title closed orders rose 5.1% year over year to 131,100.
The average revenue per direct title order increased 7.7% year over year to $4112, primarily due to an increase in the average revenue per order for commercial transactions, partially offset by a shift in the mix to lower premium refinance transactions.
Home Warranty: Total revenues grew 3.1% to $110.2 million. The figure was lower than our estimate of $114.6 million. Pretax income of $22 million jumped 35% year over year. The claim loss rate was 41% in the second quarter, improving 500 bps, primarily due to lower claim severity. The pretax margin was 20.7%, which expanded 550 bps year over year.
Corporate: Corporate pretax loss (excluding net investment losses primarily related to changes in the fair value of marketable securities) was $40 million in the reported quarter, up $17 million compared with the second quarter of 2024. The higher loss in the current quarter was largely driven by a $13 million one-time expense related to executive separation costs.
Financial Update
First American exited the quarter with cash and cash equivalents of $2 billion, up 18.2% from the end of 2024. Notes and contracts payable of $1.5 billion remained flat from the end of 2024.
Stockholders’ equity was $5.1 billion, up 4.4% from the 2024-end level. The debt-to-capital ratio was 32.1.
FAF bought back shares worth $61 million in the quarter. Its board approved a $300 million share buyback program in July. Through July 23, it repurchased an additional $32 million worth of shares.
Cash flow from operations was $355 million, up 33.4% year over year.
Zacks Rank
FAF currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
RLI Corp. (RLI - Free Report) reported second-quarter 2025 operating earnings of 84 cents per share, beating the Zacks Consensus Estimate by 12%. The bottom line, however, decreased 2.3% from the prior-year quarter. Operating revenues for the reported quarter were $441 million, up 6.9% year over year, driven by 6% higher net premiums earned and 16% higher net investment income. The top line, however, missed the Zacks Consensus Estimate by 0.5%. Net investment income increased 16% year over year to $39.4 million, which is in line with our estimate. The Zacks Consensus Estimate was pegged at $38.9 million. The investment portfolio’s total return was 2.9% in the quarter.
Chubb Limited (CB - Free Report) reported second-quarter 2025 core operating income of $6.14 per share, which outpaced the Zacks Consensus Estimate by 4.2%. The bottom line increased 14.1% year over year. Net premiums written improved 6.3% year over year to $14.2 billion in the quarter, which is in line with the Zacks Consensus Estimate. Our estimate was pegged at $14 billion. Net investment income was $1.5 billion, up 6.8 % year over year. The Zacks Consensus Estimate was pegged at $1.8 billion, while our estimate for the same was $1.9 billion. Revenues of $14.8 million missed the Zacks Consensus Estimate by a whisker but improved 6.9% year over year.
W.R. Berkley's (WRB - Free Report) second-quarter 2025 operating income of $1.05 per share beat the Zacks Consensus Estimate of $1.03 per share. The bottom line increased about 1% year over year. Operating revenues came in at $3.6 billion, up 7.9% year over year, on the back of higher net premiums earned as well as improved net investment income, higher insurance service fees and other income. The top line beat the consensus estimate by 1.8%.
Catastrophe losses of $99.2 million in the quarter were wider than $89.7 million incurred in the year-ago quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 50 bps year over year to 92.1. The Zacks Consensus Estimate was 91.