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First American Q3 Earnings Beat Estimates, Dividend Raised
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First American Financial (FAF - Free Report) reported third-quarter 2024 operating income per share of $1.34, which beat the Zacks Consensus Estimate of $1.15. The bottom line increased 9.8% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The insurer’s results reflected the benefits of the seasonal pick-up in demand despite challenging market conditions.
First American Financial Corporation Price, Consensus and EPS Surprise
Operating revenues of $1.4 billion fell 5.1% year over year due to lower agent premiums and information and other. The top line also missed the Zacks Consensus Estimate by 15.7%.
Investment income was $146.6 million in the third quarter, up 5.4% year over year. Our estimate was $146.5 million.
Expenses rose 4.6% to $1.6 billion. Our estimate was $1.5 billion.
FAF’s Segment Results
Title Insurance and Services: Total revenues increased 3.8% year over year to $1.6 billion. The upside was due to higher agent premiums and information and other. The figure was in line with our estimate.
Investment income of $136 million declined 4% year over year. The downside was primarily due to lower average interest-bearing escrow and tax-deferred property exchange balances, partly offset by higher interest income from the company's warehouse lending business.
Adjusted pretax margin contracted 40 basis points (bps) year over year to 11.6%. Title open orders increased 5.6% to 166,100. Title closed orders increased 13% to 121,600. The average revenue per direct title order increased 22.2% to $13,200, primarily owing to lower average interest-bearing escrow and tax-deferred property exchange balances, partly offset by higher interest income from warehouse lending business and the partial impact of the company's investment portfolio rebalancing project.
Home Warranty: Total revenues increased 2% to $111 million, higher than our estimate of $109.7 million. Pretax income of $9 million decreased 4% year over year. The claim loss rate was 53.8% in the third quarter, improving 110 bps due to lower claim severity, which was partially offset by higher claim frequency. The pretax margin was 8.1%, expanding 60 bps year over year.
Corporate: Net investment income was $9 million versus $4 million loss incurred in the year-ago quarter. The increase was driven by changes in the value of investments associated with the company’s deferred compensation program. This amount was offset by higher personnel expense, reflecting returns on the plan participants’ investments.
The pretax loss was $19 million in the quarter, down $5 million from the year-ago quarter, due to favorable reserve adjustments related to the legacy property and casualty business.
FAF’s Financial Update
First American exited the quarter with cash and cash equivalents of $2.9 billion, down 18.1% from the end of 2023. Notes and contracts payable were $1.8 billion, up 32.6% from the end of 2023.
Stockholders’ equity was $5.1 billion, up 5% from the 2023-end level. The debt-to-capital ratio was 34.8.
FAF bought back shares worth $16 million in the quarter.
Cash flow from operations was $237 million, up 8.2% year over year.
First American Raises Dividend
The board of directors raised the dividend by 2 cents to $2.16 per share. The board declared a dividend of 54 cents in the third quarter.
The Travelers Companies (TRV - Free Report) reported third-quarter 2024 core income of $5.24 per share, which beat the Zacks Consensus Estimate by 38.2%. Total revenues increased 10.7% from the year-ago quarter to $11.84 billion, primarily driven by higher premiums, net investment income, fee income and other revenues. The top-line figure beat the Zacks Consensus Estimate by 1.4%.
Travelers’ net written premiums increased 8% year over year to a record $11.31 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $10.5 billion. Travelers witnessed an underwriting gain of $685 million against a loss of $136 million incurred in the year-ago quarter. The consolidated underlying combined ratio of 85.6 improved 500 bps year over year. The combined ratio improved 780 bps year over year to 93.2 due to an improvement in the underlying combined ratio and net favorable prior-year reserve development.
The Progressive Corporation’s (PGR - Free Report) third-quarter 2024 earnings per share of $3.97 beat the Zacks Consensus Estimate of $3.40. The bottom line more than doubled year over year. Operating revenues of $19.5 billion improved 24.9% year over year and beat the consensus estimate by 2.6%.
Net premiums written were $19.5 billion in the quarter, up 25% from $15.6 billion a year ago. Combined ratio — the percentage of premiums paid out as claims and expenses — improved 340 bps from the prior-year quarter’s level to 89.
RLI Corp. (RLI - Free Report) reported third-quarter 2024 operating earnings of $1.31 per share, beating the Zacks Consensus Estimate by 33.7%. The bottom line more than doubled year over year. Operating revenues for the reported quarter were $426 million, up 1.4% year over year. The top line beat the Zacks Consensus Estimate of $420 million.
Gross premiums written increased 13% year over year to $563.4 million. This uptick can be attributed to the solid performance of the Casualty (up 15.7%), Property (up 9.6%) and Surety segments (up 9%). Our estimate was $572.3 million. Underwriting income increased to $40.7 million from $4.2 million in the year-ago quarter. The combined ratio improved 910 bps year over year to 89.6. The Zacks Consensus Estimate for the metric was pegged at 96, while our estimate was 103.1.
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First American Q3 Earnings Beat Estimates, Dividend Raised
First American Financial (FAF - Free Report) reported third-quarter 2024 operating income per share of $1.34, which beat the Zacks Consensus Estimate of $1.15. The bottom line increased 9.8% year over year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The insurer’s results reflected the benefits of the seasonal pick-up in demand despite challenging market conditions.
First American Financial Corporation Price, Consensus and EPS Surprise
First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote
What’s Behind the Headlines for FAF?
Operating revenues of $1.4 billion fell 5.1% year over year due to lower agent premiums and information and other. The top line also missed the Zacks Consensus Estimate by 15.7%.
Investment income was $146.6 million in the third quarter, up 5.4% year over year. Our estimate was $146.5 million.
Expenses rose 4.6% to $1.6 billion. Our estimate was $1.5 billion.
FAF’s Segment Results
Title Insurance and Services: Total revenues increased 3.8% year over year to $1.6 billion. The upside was due to higher agent premiums and information and other. The figure was in line with our estimate.
Investment income of $136 million declined 4% year over year. The downside was primarily due to lower average interest-bearing escrow and tax-deferred property exchange balances, partly offset by higher interest income from the company's warehouse lending business.
Adjusted pretax margin contracted 40 basis points (bps) year over year to 11.6%. Title open orders increased 5.6% to 166,100. Title closed orders increased 13% to 121,600. The average revenue per direct title order increased 22.2% to $13,200, primarily owing to lower average interest-bearing escrow and tax-deferred property exchange balances, partly offset by higher interest income from warehouse lending business and the partial impact of the company's investment portfolio rebalancing project.
Home Warranty: Total revenues increased 2% to $111 million, higher than our estimate of $109.7 million. Pretax income of $9 million decreased 4% year over year. The claim loss rate was 53.8% in the third quarter, improving 110 bps due to lower claim severity, which was partially offset by higher claim frequency. The pretax margin was 8.1%, expanding 60 bps year over year.
Corporate: Net investment income was $9 million versus $4 million loss incurred in the year-ago quarter. The increase was driven by changes in the value of investments associated with the company’s deferred compensation program. This amount was offset by higher personnel expense, reflecting returns on the plan participants’ investments.
The pretax loss was $19 million in the quarter, down $5 million from the year-ago quarter, due to favorable reserve adjustments related to the legacy property and casualty business.
FAF’s Financial Update
First American exited the quarter with cash and cash equivalents of $2.9 billion, down 18.1% from the end of 2023. Notes and contracts payable were $1.8 billion, up 32.6% from the end of 2023.
Stockholders’ equity was $5.1 billion, up 5% from the 2023-end level. The debt-to-capital ratio was 34.8.
FAF bought back shares worth $16 million in the quarter.
Cash flow from operations was $237 million, up 8.2% year over year.
First American Raises Dividend
The board of directors raised the dividend by 2 cents to $2.16 per share. The board declared a dividend of 54 cents in the third quarter.
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
The Travelers Companies (TRV - Free Report) reported third-quarter 2024 core income of $5.24 per share, which beat the Zacks Consensus Estimate by 38.2%. Total revenues increased 10.7% from the year-ago quarter to $11.84 billion, primarily driven by higher premiums, net investment income, fee income and other revenues. The top-line figure beat the Zacks Consensus Estimate by 1.4%.
Travelers’ net written premiums increased 8% year over year to a record $11.31 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $10.5 billion. Travelers witnessed an underwriting gain of $685 million against a loss of $136 million incurred in the year-ago quarter. The consolidated underlying combined ratio of 85.6 improved 500 bps year over year. The combined ratio improved 780 bps year over year to 93.2 due to an improvement in the underlying combined ratio and net favorable prior-year reserve development.
The Progressive Corporation’s (PGR - Free Report) third-quarter 2024 earnings per share of $3.97 beat the Zacks Consensus Estimate of $3.40. The bottom line more than doubled year over year. Operating revenues of $19.5 billion improved 24.9% year over year and beat the consensus estimate by 2.6%.
Net premiums written were $19.5 billion in the quarter, up 25% from $15.6 billion a year ago. Combined ratio — the percentage of premiums paid out as claims and expenses — improved 340 bps from the prior-year quarter’s level to 89.
RLI Corp. (RLI - Free Report) reported third-quarter 2024 operating earnings of $1.31 per share, beating the Zacks Consensus Estimate by 33.7%. The bottom line more than doubled year over year. Operating revenues for the reported quarter were $426 million, up 1.4% year over year. The top line beat the Zacks Consensus Estimate of $420 million.
Gross premiums written increased 13% year over year to $563.4 million. This uptick can be attributed to the solid performance of the Casualty (up 15.7%), Property (up 9.6%) and Surety segments (up 9%). Our estimate was $572.3 million. Underwriting income increased to $40.7 million from $4.2 million in the year-ago quarter. The combined ratio improved 910 bps year over year to 89.6. The Zacks Consensus Estimate for the metric was pegged at 96, while our estimate was 103.1.