First American Financial (FAF) Q3 2024 earnings summary

Executive summary

• Adjusted revenue grew 4% year-over-year, marking the first increase since Q2 2022, with adjusted EPS up 10% to $1.34 per diluted share.

• Net loss attributable to the company was $104 million ($1.00 per diluted share) for Q3 2024, mainly due to $312 million in net investment losses from portfolio rebalancing.

• Commercial division revenue surged 19% year-over-year, driven by an 80% increase in large transactions and higher fee per file, marking the first overall revenue growth in nine quarters.

• Portfolio rebalancing is expected to increase annual investment income by $67 million.

• Home warranty segment saw a 2% revenue increase but a decline in adjusted pre-tax margin to 7.7% due to higher marketing spend.

Financial highlights

• GAAP loss of $1 per diluted share, but adjusted EPS was $1.34, excluding net investment losses and purchase-related amortization.

• Net investment losses were $312 million in Q3 2024, primarily due to portfolio rebalancing.

• Title segment revenue was $1.3 billion, down 15% year-over-year, but up 4% excluding investment losses.

• Cash and cash equivalents at September 30, 2024 were $2.95 billion.

• Effective tax rate was 28.4%; adjusted rate was 20.5% due to tax credits.

Outlook and guidance

• Challenging purchase market conditions expected to persist through year-end; open purchase orders down 3% in October, but open resale orders up 1.4%.

• Modest full-year revenue growth expected, with title margins similar to 2023; cautious optimism for further improvement in 2025.

• Management expects to continue paying quarterly cash dividends at or above the current level, with the September 2024 dividend increased to $0.54 per share.

• Commercial business anticipated to perform well in Q4, supported by a strong pipeline and higher term refinancing demand.

• Q4 investment income in title segment projected at $140–$145 million, assuming two 25 bps Fed cuts.