SANTA ANA — First American Financial Corp., showing the effects of the real estate slump, reported Thursday a slight increase in revenues but a 76% drop in net earnings last year. And the profit picture would have been worse except for a major tax benefit taken by the company.
First American, which operates one of the nation's largest title insurers, said it earned $3.3 million on record revenue of $707.8 million in 1990, compared to net profits of $13.5 million on revenue of $699.4 million in 1989.
For the fourth quarter, the company reported net income of $523,000 on revenue of $172.9 million, compared to net earnings of $7.4 million on revenue of $186.9 million in the same three-month period in 1989.
The fourth quarter and yearly earnings included a $7.8-million tax benefit. The company took the benefit under the new federal tax law. The provision excuses firms from paying deferred taxes that had been accumulated in connection with settlements of some claims.
Donald P. Kennedy, the company's president, blamed the poor earnings performance on the real estate slump. "The real estate recession continued in most areas of the country during 1990 and in the fourth quarter spread to the far western states," he said in a statement.
Kennedy also blamed the poor results on operating losses in the company's insurance-agency operations and increased provisions for title losses and other claims.
He said in his statement that the company, the parent of First American Title Insurance Co., is stressing cost controls and had pared salaries and other personnel costs by 5% in the fourth quarter.
"Provisions for title losses continue to plague the company," Kennedy said. "There is, however, evidence that our training programs and careful administration of the agency network are producing favorable results."