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First American Quarterly Profits Jump 31% : Earnings: Increase for Santa Ana firm is attributed to a surge in home loan refinancing and a rise in the number of new mortgages.

July 27, 1993|DEBORA VRANA | SPECIAL TO THE TIMES

SANTA ANA — The continuing boom in home loan refinancings as well as an increasing amount of new mortgages helped First American Financial Corp. record a second-quarter profit of $17.5 million.

The net income of $1.55 a share for the Santa Ana title insurance holding company was 31% higher than last year's second-quarter earnings of $13.4 million, or $1.50 a share.

Quarterly revenue was $333.5 million, a 19% increase from last year's $280.9 million.

The earnings were "slightly better than expected," said Roland Underhill, an analyst with the investment banking firm Van Kasper & Co. in San Francisco. He had predicted earnings of $1.40 to $1.50 per share. The higher profits were diluted by a 26% increase in outstanding shares to 11.3 million.

Underhill predicted that a continued strong demand to refinance older mortgages plus an eventual rebound in residential real estate would mean continued growth for the title insurance industry. A title insurer guarantees that a policy holder has valid ownership rights to property and can transfer or sell it.

For the first half of 1993, the company reported net income of $26.2 million compared with $19.7 million for the same period in 1992. For the first six months, company revenues increased 20% to $612.5 million from $509.3 million.

The company's primary subsidiary, First American Title Insurance Co., closed a record number of orders during the quarter because of strong refinance activity and an increase in home resales, said Parker S. Kennedy, president.

"We are extremely pleased with our second-quarter results," Kennedy said, "and are encouraged by the record volume of new orders opened during the period."

First American, which had $1.1 billion in annual revenue last year, also monitors property tax payments for lenders and provides home warranty services for home buyers. First American also manages customer assets through its First American Trust Co. It has more than 300 title offices nationwide, including five in Orange County, and provides title services in eight countries.

The company's stock closed unchanged at $27.25 a share Monday on NASDAQ.

"These days, a company's stock price only goes up if earnings are way better than expected; they crater if earnings are much less than expected," Underhill said in explaining the market's lackluster response.

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