First American Financial (FAF) 22 Apr 212021 Q1 Earnings call transcript

Greetings, and welcome to the First American Financial Corporation First Quarter Earnings Conference Call. [Operator Instructions]. A copy of today's press release is available on First American's website at www.firstam.com/investor. Please note that the call is being recorded and will be available for replay from the company's investor website, and for a short time by dialing 877-660-6853 or 201-612-7415 and by entering the conference ID, 13718763.

We will now turn the call over to Craig Barberio, Vice President of Investor Relations, to make an introductory statement.

welcome quarter American's of and for conference everyone, first the XXXX. morning, to earnings First call Good

Joining us and today Dennis Gilmore; will be our Mark Executive Chief Seaton, Vice President Chief Officer. and Financial Executive Officer,

date not the they not strictly forward-looking are the do statements made, the of events cause to the update from that reflect statements facts. and in Risks as or only statements results forth forward-looking does or these materially relate statements contain may and statements to may Some forward-looking occur forward-looking undertake today forward-looking of uncertainties to that circumstances differ those speak that made. current set statements. are historical These after made the company exist date to

these morning's and to factors risks refer subsequent XX-K risk the on earnings and in filings. please this our discussed Form SEC and uncertainties, more For release information

of insight earlier provide Our operational competitors. efficiency presentation we the to that today performance believe company measures company's contains non-GAAP the into and financial relative the relative additional certain and periods to

more available www.firstam.com. will financial turn morning's presentation release, to the is over and reconciliation Gilmore. to website our comparable measures, most I please earnings on non-GAAP directly For with the this GAAP Dennis to which including With financials, these that, at on details refer call now

strong results. off year Good great morning, financial and thank start businesses you first quarter to a is achieving our for call. The our earnings joining with core

a in I'll first on transformation well paper is results. key will will progress well processes sector, my on digital. as the as based our number another initiatives remarks estate real optimistic remains A Mark and on investment Today, to are program. convert strategic are that quarter the intensive outlook trends, as focus then details provide the venture making of underway we be Our we confident good year. market XXXX on

the lead the and to investing the and capital time, title is settlement American within change industry. First expertise to continue

a of are investments launched methods. in enhance marketplace. first technology business, our finding through efforts these in streamlined greater major significant our to end conventional markets that real market captured this Since have continue we Many America's closing across In reimagine to the a businesses a the facilitated XX of to entered success we've experience First XX,XXX XXXX plan in Encouraged closing on now is is customer in solutions. the nationwide we We make to to We June, commercial transparency by in platform all process A experience start-up transactions. share launched area. recently growing digital innovation. provides by another example believe of the X our efficiency to the estate X% the markets, has and commercial success, enables solution for relative new over the we've and end-to-end we've transactions. Seattle and Endpoint commercial digital that ClarityFirst, that of year. rollout commitment in digital

are process, our experience, need the we significant digital providing to to competitive accelerating we versus today's only settlement transactions. productivity our data, long-term to the in Endpoint we position. enhance addition traditional gains experience, deploying and closing reimagine redesigning a In consumer we are anticipate investment customer Not is digital new tools

to and XX% fully in has ago, out A of number caption accurate hold milestone. have manner. a facilitated our data world-class which plan data XXXX, In title patents comprehensive of to XX over last Our steadily has set in property the and XX a to data out most the business property manual exceeded earnings, currently grown create company. automate years a us business significant we process. entry the OCR automated data $XXX industry's including data data, Years we over years. pretax we million set We ago, covering our data Today, extraction, information.

expect data allowed of has the capture. us We continue vastly amount to percentage in to increase technology grow we This to future. the this

every are title it in effort are on feeds plants, production. industry property engine. Based go-forward We of additional on largest XX% process, we we are a an we've point In X is company's the XX% virtually risk benefit underwriting achieved X,XXX month. transactions data Today, capturing fully own have those which leading support we of of refinance the we our currently started strong title plants on the decisions. to on the patent is journey per to foundation having data. data repository million Because when One have additional our XXX to basis. extraction title Today, automated automation of on through automated comes documents our it our a short, add data profile, a orders, XX%. semi-automated underwriting of run decision our that underwriting title and

we've success the purchase Given we turned had our automation, the with transactions. have attention to refinance

to focus in era. experience whether initiatives, title the the title have our related talent, the production, we lead and our and to settlement these why improve will of is customers productivity, and the necessary which capital own data or of closing digital dedicated All industry

these be well, insight strategy. shareholders they of venture have the comments. we've Mark be technology the and investments companies, are of term. component added from to financial Turning to into will most further attractive value a his companies believe Venture the allocation which these strategic the providing over financial partners. to capital continued Since venture-backed strategy. upside strategic perspective, invested a in of our We our become long elaborate and XXXX, will $XXX as investments have in proptech only value ecosystem. our but investments investments give and strategic high Not These in million have us growth

named will to for first fact a quarter First another Fortune lost employees American. for year. the sight comment XXXX, we year of For, of In who XXX we Additionally, I'm I'll recently closing, sixth great XXXX I'm key our challenges the announce over Company Work the call to pleased our our Amid Best to the company's are that that consecutive the that will now on confident turn earnings. success. to Mark, very be never

per results this of excellent quarter's realized pleased quarter. diluted We're Dennis. net $X.XX $X.XX in earned this We report investment were results gains. Included you, to share. Thank

of last and a an coupled commercial, purchase, showed gains, $X.X per by segment quarter, Excluding fourth this average was flat refinance relative $X.XX in our up to continued as start was refinance X first the XX% revenue to orders, mortgage the revenue Title order. closings of with XX% elevated at to increase result year rates. closed up revenue relative XX% compared climbed year-over-year commercial its a and low Notably, XXXX. driven as revenue be signaling in diluted since billion, of end closed markets, $XXX was was Revenue our quarter, the were of Commercial increase the we in quarter. Purchase X% the at I'll environment. quarter favorable business. share. pandemic. overall earned number million, All XX% the our increase a large number with Refinance transactions increase in year. commercial title major the these of with same over the strength revenue last of XX%, the per A

million, was On side, year. up record last from $XXX a the revenue XX% agency

economic experiencing are to lag in quarter, revenues activity. QX of surge we agent reporting the remittances in a X approximately Given related

not the from our were related not relative represents the lines interest is impact our Title The million, in income and down Investment a that within from $XX on the information was warehouse balances, year. investment of a Insurance business. year. XX% interest portfolio and segment, analytics million, the therefore, increase are or of higher up of and cash largest which other risk and company's last business from premium decline lending business, million, $XX revenue Services line due segment $XXX by Our revenues collection last component XX% and income primarily was short-term offset to information from pretax XX.X%. escrow to revenue rates margin other based. This totaled In Title item and data partially the XX%,

this XX.X%, our Excluding realized I'll to at quarter. pretax we've pandemic. net X.X% was XXXX, the quarter. loss gains, IBNR. the points record million we to where in brings first This line added X% XXX the loss in for we the that to rate prior note impact By lowered rate with a $XX booked basis our of margin investment booking

of Given home rising low and elected we claims to economy, significant strengthening home equity, quarter. lower a prices relatively activity, rate this levels loss the

segment. earnings $X Specialty Pretax from in million, XXXX. totaled Insurance Turning million to down $XX the

XX% Our over in home last warranty see business, up for of line. the revenue which XX% accounts to the year. for was the Revenue top continued segment, growth

our direct-to-consumer channel revenue in increased Importantly, XX%.

people continue as largely see to a more at spending elevated We result claims home. of time

in May. the rate to reduction is information in end we in-force York Our by Financial quarter. to property The on property With ongoing. Department posted of for schedule current our XX% normalized security and in our with quarter this nonrenewal our beginning least of loss tax $X respect matters business the The of policies XX% was casualty down expect Services the our of XX.X%, the line wind remain XX%. policies at business incident, year. rate and the New to a of progressing on tax SEC and with effective casualty plan, Based million

along perspective. they, believe the We be from financial immaterial all incident, relating will to with continue matters other that to a

to we've million Turning March to of amount the price of to which repurchased average our $XXX dividend Since stock is of quarter. an $XX.XX stock, million of at stockholders. close We $XX the capital management. XXXX, during annual of repurchased

We have in not the repurchased second shares thus quarter. far

to referenced we in the with call, last share on future. intend earnings be our we repurchases as active However, more

invested a in As companies. his of in remarks, Dennis $XXX venture-backed million mentioned we've total

iBuyer a year $XXX stockholders was be transaction OfferPad's at and is the on consideration month a Company, gain equity expect approximately announced If is consummated billion. the Partners an the aggregate of valuation, value will last equal to be million later would that investment $XX holders in with largest investment. to now of Acquisition who to Supernova we paid Our that to this to that option OfferPad, party our book million $X.XX merger

other high-performing outlook. [indiscernible] including remain a optimistic of SaaS this gains We quarter, recorded in agents, and serves teams $XX company Additionally, our real estate we brokers. venture investments, related XXXX about to million that

orders refinance commercial declined, to rates, an have the corresponding purchase to and mortgage in Although continue grow. increase markets

Our tail business. is the general economy the claims into our in and to experience improvement favorable

your like would over the call the take to turn I operator Now back to questions. to

[Operator Instructions].

with DeVries the come Barclays. Mark of first Our from questions line

your to to questions XXX Dennis you the hear have? add Did I you correct about said you're I X,XXX some wanted that ask the title you comments already around plants. clarifying to looking

set the And out data world-class got things. because and title company, how another the that And property really then did. one extraction all plants, we're we the the start we're go that a got XX plant all by information which the X probably largest fully on couple about and fields to out into -- me Number Mark, XX from documents documents, year. aggressively manual years not this data few building is you virtually industry we some well allows transform way, records to XX% extract us that, document, talked patents You to data a build that that repository And patents, extraction from the basically taking let million growing We've script, the now. property set forward. of extracting have. over I data go-forward background, entry. or documents give that. right to fairly wanted which we all be we a of information understood. OCR ago, do percentage We've a we're now, to automated. document to of we the on used those in as In for And plants is now going rapidly month X,XXX touching from

go we'll up think see the Now when necessary. forward, term used plant back I it's we the build --

automation X,XXX building combined follow-on that our over us long data very new to unique technology we here it's give haul. we're just the are think And going the advantages and of So strategy strategic the a plants. with

the smaller markets? that too Okay. That's automated scalable there it markets these think are extraction And are build this on more one more small helpful. can't the efficiencies I is build now And creating where make no just just in in scale. you focused there fact, given Does larger to MSAs, of historically, plants? only that much you've

to Well, we're allows right. we markets become to everything document get property be plant can small extracted you're the information us the just now plant. where again, in title data there build database. off either record of a basically And feed the our database and but too that may It or MSA, our non-transaction, approach because the extracting

sure plants. Now I want make are to go-forward these

significant. think to build us is XX X this, or it about back to you will when over have But next still we years So plant. a the start the competitive give X, advantage

Yes. question do this the think do sustainable in -- a topic plant share and and plant And only about I that one on see where -- in how gains a my that is, have my has you noticeable maybe last mean we you was that? markets or market? who

here Not that nuances limited We're built of any really historically, we what have historical this plants documents. limitation with because cost the historically, We longer. off don't on layoffs. building I'm but saying, of pulling the everything record

we feed the us long-term put, that plant, whatever the ultimately, will a So can automate want document in help we ultimately, we think, process. any

over a -- those that in that But Okay. your margin advantage markets will give you all competitors?

assets We data want way. we what been that extract I I'm you, advantage. answer building these all buildings. long-term are a again, have from tell will probably going those long-term competitive to not But to it

that put Let's it way.

of come next Truist. from Our Hughes questions the Mark with line

think I Does all in allocations your include pretax operations. any Is operation? million $XXX business? earnings Title from you third-party your data Dennis, from mentioned that that

Yes, But when Mark, at title lots you customers. those it companies, different is of from look sell one does I customers own our data they First include American. lenders, First business, to our mean American allocations of operations.

include it So does intercompany kind transactions. of

majority. the not it's But

maybe That X/X?

I roughly would about say $XX less than million. X/X,

right. first about in few here say All the trends to anything Okay. order weeks? April then And

Yes.

consider orders So March, we healthy a a about far refinance they it bit, day, little X,XXX for were a levels in so our day. refinance. April, In but would dipped still are X,XXX pretty

given opening going day for in on April. days purchase over a increase last about an in year. first we're far last a X,XXX an course, little bit in But the the anomaly XX% side, market, of the what business transactions was so purchase XX On it That's April. was but year, of X,XXX

How about commercial?

is X% XXX, over XXX about XX% last which it's the over increase We -- this last opening, were increase It's were commercial Commercial XXX orders. -- month. Commercial. an is year. and

by very add, a elevated bit. an level. back, per But same same in into We've just now. little day We orders running purchase. really the running commercial. strong, are the pandemic. healthy the refinances I'll I'll had market pandemic, to are recovery say On quarters now but right X,XXX coming down. now. very it's change We the from And Last optimistic very very commercial. forward. in very very We're And thing that at it's so I'll right 'XX in Rates good. quarter, strong, two last from and Clearly, came at see way, the step it's starting tailwinds step then the when right all we're going you We're about got And going optimistic strong the a in thing said very back purchase, the Demographics margin. the still optimistic. about issues strong. optimistic

be Yes, just little question I would -- you wonder last kind margin. on more a if could of

is from might I of quite versus that efficiency obviously the margin a about And be any you this the thoughts basis, success talked scale, go-forward updated guess top much line tailwind margin Your just question the targets? about? is How ratio on good. the

we're with Title obviously, commercial, margin our in of first tailwinds we've really with a XX% strong. the all Obviously, all pleased quarter. Well, purchase, combination It's X got They're refinance. both. markets: of the

efficiencies the helps seeing that we're But definitely too. also So margin.

process doing have the managing is of have. we're good automation, we much of we things expenses don't a ratio. the manually our as market to. to the seeing given that mean, You the as title right? XX% we're one success benefit mentioned I job We that used of And

margins, So too. automation we've title in benefit seen a really of

we really efficiency both. XXX top basis lowered better it's loss a of the And course, to line and points. combination ratio of a So

[Operator Instructions].

of next from Our Bose line George with KBW. come questions the

allocation the or continue now So the we business first, is be just your grows, the point? stand-alone just then it title? run something you And to is that you've always just And that on rate years? it since to as that a some venture that capital going of you've had a part investments something at of will made, should tech Or think could segment the complements last couple of a said, as of that same as strategy? sort is spend

part we the the in we're expect no like on to investment, but there's was venture quite we your question the venture we XXXX, as seeing heard since comment of XXXX, just George, did just got it opportunities second additional invested many It transactions seems XXXX. second. the first I'm about front-loaded. think we the that question, quarter. We're I'll to I One we've sorry, investments going is missed million $XXX continue thing invest. in We've but not as

that's allocation be ongoing that so quite strategy, although XXXX. degree to the call saw capital last going to it, our part over not the And of we probably

very I'll Dennis. probably allocation to our be and forward. is us. Yes, the products it's us get our us to this And underappreciated it's consume it customers partners/potentially deliver probably some to with growth it's the and capital your or Yes, I financial a proptech their for ecosystem to up up. follow data we companies Bose, close emerging question, services And help strategy high-tech and title and opportunity think in our or gives some This products going -- strategic. both little part going strategic services. of us. we an ultimately for to end of being And of

it's for returns the we for win-win. We've part But shareholders. to our delivering of your for good from it's think the think do the It's long-term right question, struggled second perspective. high we financial a with us So now. sorry. a It's thing right

second the repeat just you Do me part? want to

couldn't quite we Yes, hear.

Okay.

it's that a be something essentially that its complements term, stand could how about was thought on The could Title? kind it this, second always just business would of Or be whether you just part own? longer

sitting anything we today, business. we're our venture don't As or as to investments core complementary our segments like that. own here see Title Bose, very It's its

just in so don't anticipate breaking of it anytime out integrated that. kind it's We soon. And terms of

sort sort sort related any Okay. thoughts part as the that that exists are that are they disrupt of without can propositions guess, their on Great. value now there companies it thoughts title a question. on I But market specific naming technologies And companies, then that Any comments? of, or now? of of or out

particular certain really we've We're automation. on efficient. there's building there's order, Well, no digital mean, allow business. out that closing areas on in focused be in, us will there focused title been great more to process. I a few interested the on that We're data We're technologies focused

there's on, have So who those that will players new technologies types trying There's home to buying those out supercharge that process. can there been been really invest invested. help And are I'll we to that too. are areas focused improve mortgage also call and trying that's improve we've an and efforts, it, digitize the experience, also area in also those of, the -- we've

be those call So will to the on. two areas

next with Our from Stephens. Campbell come John the of questions line

want venture a great back I touch to the quarter. on investments. Congrats on

think OfferPad's like capital do of grow? I agree, the I and this monetizing just keep certain you've back I think do kind some your do you sounds gains, towards that is into of that's you level at story, a chalked and [indiscernible] title. some ride, just kind question, similar those of kind at but obviously of it Dennis, and you point. have out mean side some on the take underappreciated let Or core there, path of let returns invested good that's that redeployed maybe to then it But curious, interesting. Bose's you I pretty guys And super up that it's but

that? that, about of structured kind of process think kind around a Just if there's how you

Yes.

been investment it's XXXX, we we're for first just now mean, going statement. kind to we'll and A able So Dennis relatively It's mentioned, as we're be in bridge it. and a we're is it, to well. they've cross side. strategic I partners finally us. to these did before actually -- again, when we investments, as But we again, found strategic upside of starting that as the But while value. on to very monetize financial tremendous of of new broad come see a our some big lot

But continue concentrated add that in probably Yes. to depends how ultimately to those want to have public go but we have want partners, not It the John, ultimately to positions I strategic they ultimately hit depends going highly markets. how companies. we into. single on just We're would

sense. Makes

orders, commercial was it looks is the difficult. the On I actually up comp X% mean, pretty year-over-year. order like XQ open the

encouraging that's So see. to

maybe characteristics class pipeline. additional guys you can know kind size of deals. the talk color performance? it's then And of any the if the If of to I of asset kind or just on kind regional don't

Yes.

the the could the see that in It's Let residential to and We're strong. classes. is accelerated market, broad-based quarter. right come the slow It's can definitely recovery fourth deal, we Mark It but was strength us. the picking just to reemergence me probably fourth quarter, of a encouraging in. quarter strength the starting has big mentioned as on into up. asset start across -- in see the in now John, which last we

I'm stop rolls from the we've market ever mentioned, script, investing out commercial very [indiscernible] platform no tough middle It market I is in for question, also again, for directed a -- So us John, we going In say it on, think it. what become that a no be year. did more it a But new you mention Again, out a of on what we going business. goes in question, doesn't to transactions market-leading, us XX,XXX commercial matter kind there's like was time to want would like that definitely, but optimistic And record this mention as I the wasn't channel. business. of in the to to for not the rolled 'XX. I my

investing what continue these to going efficiencies. So to no we're matter kind is, in grow to of keep the businesses market

our terms a orders. open a bit deposits you of look sense our one just to in for do the of because orders, of other add it at the So size escrow obviously. gives we the look thing little that the commercial is I'd at thing pipelines, But we

so deposits deposits; risen January, end the year. Our escrow the In our $X of $X.X there's of our it's a you're it March, on this to had at $X.X because impressively we was bank that billion. month push quite Usually, February, billion transaction. have fallout closing far billion; bank

April, at billion A our deposits commercial lot get there. of $X.X our we're in bank. deposits put far So

So see for escrow it's balance when it's -- we just again, leading a our of activity this, like indicator economic commercial. rise

Yes, That's for sure. one me. for that's Last great. good insight

April open like purchase On compare to COVID that Obviously, orders, X,XXX. it last just sounds of the how that's on year does March up But kind pretty versus the substantially sequentially? comp.

basically it's we Sequentially, X,XXX is same month-over-month. what March, flat thing. in had

Our of next & with questions Geoffrey Partners. come from Dowling the Dunn line

to a these wanted Where Are are the it? just investments the regulated to it. of terms of of just little detail investments the within taking follow-up entities logistics I in more or some outside on venture place? of And they little there equities? are a VC you you the Can you sticking taking funds all vehicles? give funding direct there? you equity going Are color? out bit investments? different any Are Are more just of through

Geoff. Yes,

into part We've talked investing These done the made directly or underwriter we So about are about our so American investments. -- excess investments the all whole like We've most direct these we're out of everything of company. investments. isn't holding First the of company. So We're of this XX cash right? of Title company, out are investment making direct today portfolio.

venture gives of a revenue, done into we them, got where proptech B, reach type we've investments call companies are A it And have is where direct right, the us more those X, stage really also product. I'll of Series earlier We stage, companies. earlier Series firms. Most Series investments part in got C, we've done

investments and do have But we And most indirect. really direct. direct of so been our both

about we a and that's for. as get feel want And -- think I really what to Okay.

could into we certain As is the redistributed we your look company next? you at year common million more sources buyback, think dividend, earmarked cetera. amount a $XXX VC $X X the Do cash that it have Or holding to the opportunistic of initiative? truly et resources, be about be

would the opportunistic. it's buybacks that we something venture. it's last are saw or decided on And terms are. [indiscernible] go I in couple We about of truly and we say years, lot talked that's what venture we've in mean a I to whether really depending always of in acquisitions the there. opportunistic or big of opportunity opportunities

be earmarked. So on be there's year, million It $X opportunities. year, depends could just could the X $XXX X nothing it it

put Okay. put has a on into how to much funding the willing or VC Board And limit management the you're efforts?

No.

next questions Mark with line of Our come from the Truist. Hughes

how in first you as did quarter quarter much this Docutech say much year. Mark, And well. could last if contribute first how of

here, Give Mark. second X me

revenue about or talking You're EBITDA?

share If consumer, both, you'd And like thinking to well. was I revenue.

Hold on second. just a

a Then I'll ask competitor something have you've if just been seen one general other a impact -- title. new thoughts? that a competitor, of high-profile wonder any you in I one. There's any emerged that's from competitor or

but not we did understood well not our on something alone. businesses, with poorly going my probably, in is, or mention market script, have on, patents just to understood company not the data not which extraction, impact, really in example, I for on directly I'm again, and our OCR XX is comment

on. got active going campaign we've very, very IP So a

more give we too, future, probably in only data insight and the number across we'll have whole that of but patents extraction, not the enterprise, So on title the automation.

on come to that, more So okay?

Understood.

Yes.

it So Mark, million but owned $X had million. million. and $X of And info quarter revenue of entire about Docutech, the quarter, other, so EBITDA $X of year, And we not the we this in terms revenue and the in had quarter of so of all first we we and all, again, last year, then that's had first $XX million EBITDA.

the available you to thank does call. We'd be XXXXXXXX. like your company does this Again, are call will XXX-XXX-XXXX today's to entering teleconference. conclude by for conference time. this no by morning's that and dialing questions this at remind or today's like XXX-XXX-XXXX website There participation. company's ID or That the conclude additional replay would listeners The on for

You day. great may now disconnect. Have a