First American 3Q net income falls 37%
First American Financial Corporation (FAF) posted a third-quarter net income of $21 million, or 20 cents per diluted share. The figure is a 37% decrease from net income of $33.1 million, or 31 cents per diluted share, in the same quarter a year ago. The Santa Ana, Ca.-based title insurance and settlement services provider’s third quarter results include net realized investment losses of $3.3 million, or 2 cents per diluted share, up from the same period last year when investment losses were $400,000, or 0.2 cents per diluted share. Total revenues for the third quarter were $965.0 million, a decline of 4% from last year. In First American's title insurance and services division, revenue fell 3% to $897.8 million from $924.7 same quarter a year earlier. The lower revenues were due to a decline in direct and agent title premiums. Direct premiums and escrow fees were down 1%, compared to the third quarter of 2010 because of an 18% decline in the number of direct title orders closed in the quarter. Average revenue per direct title order rose 21% from a year earlier to $1,561 because of a change in the mix toward higher-premium resale and commercial transactions. In March 2010, Bank of America (BAC) sued First American over its refusal to pay claims on more than 4,500 properties in which owners defaulted on their mortgages. In the lawsuit, BofA alleged First American relied on homebuyers to tell them about liens on their properties and other matters rather than conducting traditional title searches. BofA maintained that title policies issued by First American and its sister firm, United General Title Insurance, made the firm liable for the bank’s loan losses. In the report, First American estimated that its financial exposure from this lawsuit is between $13 million and $42 million. It stated its best estimate of its financial exposure is $13 million, which is also the amount for which the company has offered to settle the case. These amounts do not reflect any potential recovery from third parties. Write to Justin T. Hilley. Follow him on Twitter @JustinHilley.