NYSE:FAF First American Financial Q2 2023 Earnings Report $60.98 -1.62 (-2.59%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$60.93 -0.05 (-0.08%) As of 04/25/2025 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast First American Financial EPS ResultsActual EPS$1.35Consensus EPS $0.96Beat/MissBeat by +$0.39One Year Ago EPSN/AFirst American Financial Revenue ResultsActual Revenue$1.65 billionExpected Revenue$1.50 billionBeat/MissBeat by +$143.06 millionYoY Revenue GrowthN/AFirst American Financial Announcement DetailsQuarterQ2 2023Date7/27/2023TimeN/AConference Call DateThursday, July 27, 2023Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by First American Financial Q2 2023 Earnings Call TranscriptProvided by QuartrJuly 27, 2023 ShareLink copied to clipboard.There are 7 speakers on the call. Operator00:00:00Greetings, and welcome to the Second Quarter 2023 First America Financial Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Barberio, Vice President, Investor Relations. Operator00:00:35Please go ahead. Speaker 100:00:38Good morning, and welcome to First American's earnings conference call for the Q2 of 2023. Joining us today on the call will be our Chief Executive Officer, Ken DiGiorgio and Mark Seaton, Executive Vice President and Chief Financial Officer. Some of the statements made today may contain forward looking statements that do not relate strictly to historical or current fact. These forward looking statements speak only as of the date they are made, The company does not undertake to update these forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward looking statements. Speaker 100:01:19For more information on these risks and uncertainties, Please refer to this morning's earnings release and the risk factors discussed in our Form 10 ks and subsequent SEC filings. Our presentation today contains certain non GAAP financial measures that we believe provide additional insight into the operational performance and performance of the company operational efficiency, excuse me, and performance of the company relative to earlier periods and relative to the company's competitors. For more details on these non GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP Financials, Please refer to this morning's earnings release, which is available on our website at www.firstam.com. I would now like to turn the call over to Ken DiGiorgio. Speaker 200:02:07Thank you, Craig. We posted good results in the 2nd quarter Given the continuing market headwinds, a seasonal uplift in our business, strong growth in net investment income And a continued focus on expense management enabled us to deliver a pre tax title margin of 12.1% or 12.6% on an adjusted basis. On a consolidated basis, we earned $1.33 per diluted share or $1.35 on an adjusted basis. Demand in our residential purchase business continues to be pressured by affordability issues Due to high mortgage rates along with low inventory that has kept home prices elevated. The purchase market, however, appears to have stabilized, albeit at trough levels. Speaker 200:02:58For the 1st 3 weeks of July, we are seeing this typical seasonal decline in purchase orders with open orders down 1% compared with June. Refinance open orders remained at trough levels in the 2nd quarter, Averaging $3.50 per day. As I indicated on last quarter's call, the current pool of mortgage loans outstanding would need to see rates Drop well below 5% to incentivize a significant uplift in refinance activity, which is highly unlikely in the near future. The commercial market, which began to deteriorate in the back half of twenty twenty two, appears to have stabilized. While commercial revenue was down 39% year over year, it was up 20% on a sequential basis, in line with the typical seasonal trend. Speaker 200:03:52Commercial open orders for the 1st 3 weeks of July were down 26%, Consistent with what we experienced in the Q2, there is still a high degree of uncertainty concerning the commercial market outlook. However, based on the feedback we are still getting from customers, we expect the transaction activity in the second half of the year will be better than the first, which is consistent with normal seasonal patterns. While our key purchase, commercial and refinance markets appear to have troughed, The timing of a recovery in these markets remains unclear. Despite these challenging conditions, Our financial discipline and strong balance sheet allow us to continue to invest in strategic initiatives for the long term benefit of the company as well as return capital to our shareholders. We continue to make progress at Endpoint, our digital title and settlement company. Speaker 200:04:50Our initiative to develop instant title decisioning for purchase transactions remains on track for deployment in 2 markets early next year. We've also made substantial progress at ServiceMac, our subservicing business, which delivered strong revenue growth and its first quarterly profit. And since the market began to deteriorate at the beginning of last year, We have returned $811,000,000 to our shareholders through share repurchases and dividends. In closing, I am proud that First American has been selected as one of just 100 Companies To Fast Company's best workplaces for innovators for 2023, we are the only company in our industry to have ever received this recognition. This accomplishment is a testament to our ongoing commitment to innovation and is a tribute to our people, who in addition to delivering best in class customer service enable us to lead the digital transformation of our industry. Speaker 200:05:56Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results. Speaker 300:06:02Thank you, Ken. This quarter, we earned $1.33 per diluted share or $1.35 on an adjusted basis. Beginning this quarter, we are defining adjusted earnings for the first time to make our results more comparable to our peers. Our adjusted earnings exclude net investment gains and losses as well as purchase related intangible amortization. These adjustments will also apply to pre tax margin. Speaker 300:06:30A reconciliation can be found in our press release. Revenue in our title segment was $1,500,000,000 down 25% compared with the same quarter of 2022. Commercial revenue was $178,000,000 a 39% decline over last year. Our average revenue per order for commercial transactions declined 12 This quarter to $11,600 due to a combination of lower valuations as prices in the commercial market reset and fewer large transactions. Purchase revenue was down 29% during the quarter driven by a 30% decrease in the number of orders closed, partially offset by a 1% increase in the average revenue per order. Speaker 300:07:13Refinance revenue declined 59% relative to In the agency business, revenue was $625,000,000 down 33% from last year. Given the reporting lag in agent revenues of approximately 1 quarter, these results reflect remittances related to Q1 economic activity. Our information and other revenues were $244,000,000 down 20% relative to last year. This decline was the result of lower transaction levels across several business units, driven by the company's data and property information products and post close and document generation services. Investment income within the title insurance Services segment was $142,000,000 a 105% increase relative to the prior year. Speaker 300:07:58In the Q2, we saw escrow balances increase due to normal seasonality of the business. We also continue to generate higher rates on our The Federal Reserve has hiked 4x this year. We continue to manage expenses given the decline in transaction activity. Our success ratio was 50%, meaning that our personnel and other operating expenses declined $200,000,000 and our net operating revenue declined $399,000,000 The provision for policy losses and other claims was $40,000,000 in the 2nd quarter or 3.5% of title premiums and escrow fees, down from the 4.0% loss provision rate in the prior year. The 3.5% loss rate reflects an ultimate loss rate of 3.8% for the current year with a $3,000,000 release for prior closing years. Speaker 300:08:46As Ken highlighted, we continue to invest in businesses and innovation initiatives that we believe will positively contribute to our profitability in the long term, but at this point in their lifecycle adversely impact our financial results. We have discussed 3 initiatives, ServiceMac, endpoint and instant decisioning for purchase transactions, which together generated a pre tax loss of $15,000,000 Quarter impacting our pre tax title margin by 130 basis points, an improvement from the 150 basis point margin drag in Q1, primarily driven by profitability gains at ServiceMac, which generated a 10% pretax margin this quarter. Pre tax margin in the title segment was 12.1% or 12.6% on an adjusted basis. Total revenue in our home warranty business totaled $106,000,000 a 4% increase compared with last year. Pretax income in home warranty was $14,000,000 up 61 percent from the prior year. Speaker 300:09:43The loss ratio in home warranty was 49%, down from 52% in 2022, driven by a lower frequency of claims, partially offset by higher claim severity. The effective tax rate for the quarter was 23.4%, Lower than our normalized rate of 24% due primarily to the mix of income between our insurance and non insurance businesses, since our insurance business generally pays state premium taxes in lieu of income taxes. In the second quarter, we repurchased 173,000 shares for a total of $15,000,000 at an average price of $56.04 Our debt to capital ratio as of June 30 was 29.2%. Excluding secured financings payable, our debt to capital ratio was 22.5%. In May, we entered into a new $900,000,000 senior credit facility, upsized from our prior $700,000,000 facility. Speaker 300:10:36We currently have the entire amount available for liquidity. Now, I would like to turn the call back over to the operator to take your questions. Operator00:10:46Thank you. We will now be conducting a question and answer session. Our first question comes from Bose George with KBW. Please go ahead. Speaker 400:11:25Hey, guys. Good morning. First, I just wanted to ask about investment income. Can you give us an update on your expectations for investment income? Can you remind me if there's something unusual in investment income in the second quarter? Speaker 300:11:40Hey, good morning, Bose. Thanks for the question. There's nothing really unusual in the Q2. We've given different Assumptions in the past for investment income. But at this point of the year, we're halfway done through the year. Speaker 300:11:54We've got a lot more visibility in terms of where balances are. And so in the title segment, we should be somewhere between $550,000,000 $550,000,000 of investment income for the full year. Well, we'll have an increase in Q3 and then we're expecting a little bit of a decrease in Q4 just because of some balances that will run off related to service and that's what we're looking at somewhere between $515,000,000 $560,000,000 right now, full year. Speaker 400:12:19Okay, great. Thanks. That's helpful. And then actually with the sale of HomePoint to Cooper, When that servicing is if that does move over to Cooper, how much escrow could that move could you lose as that happens? And Is there any sort of negative operating leverage while you sort of refill that at ServiceMac? Speaker 200:12:41Hi, Bose. Thanks for the question. I mean, we're anticipating that about 40% of the loans are going to off board in September. And to get to the second part of your question on that, we're already making expense reductions associated with that. Now there There's a healthy pipeline that we think will replace that. Speaker 200:13:04And but obviously The timelines on those aren't quick, but there is a healthy pipeline. The remaining 60%, They could they'll probably be there through the end of the year and could extend into next year. It's not exactly clear when the remaining 60% are going to come off, but we're Hopeful that would at least be into the next year. Speaker 400:13:28Okay, great. And actually, can you remind me the Interest income from the escrow at ServiceMac, does that come through corporate or is that in title? Speaker 300:13:39It's in title. Yes. It's most of it goes through our bank and our bank rolls up to our title segment. So it's entitled. Speaker 400:13:46Okay. So your guidance, the number you gave sort of incorporates All the changes at ServiceMac as well? Speaker 300:13:53It does, yes. Speaker 400:13:54Okay, great. Thank you. Operator00:14:08Our next question comes from John Campbell with Stephens Inc. Please go ahead. Speaker 500:14:15Hey, guys. Good morning. Speaker 300:14:17Good morning. Good morning. Speaker 500:14:17Hey, congrats on a great quarter. But I wanted to touch on the July order data again. I might have missed this, but I think you said that The 1st 3 weeks commercial orders down 26%, so a little bit better obviously than 2Q, but could you maybe rehash on purchase refi And other? Speaker 300:14:38So for the 1st 3 weeks, we're looking at Purchase, we're looking down 14% versus prior year. Refi, we're looking at about 3.40 orders a day. That's down 39% from last year. Speaker 500:14:51Okay. Very helpful. Speaker 600:14:53Yes. Yes. Go ahead, Ken. Speaker 300:14:54No, that's it. Speaker 500:14:56Okay. And then on the Insta title decisioning for purchase, feel like that's a side of the story that holds a lot of promise for you guys. I know it's very early stage. You guys are also tend to be very conservative in kind of how you roll that out. But maybe if Speaker 600:15:10you could give us some kind of early Speaker 500:15:11call outs from early round of pilots and then what you might need to see to be comfortable and start to move that And the national expansion efforts? And then also what the initiative can do for your business over time? Is it more of a share gain kind of revenue driver or is it Efficiency gain and margin driver. Speaker 200:15:30Yes. I'll start on that, John. I mean, I think what we've seen from sort of our MVP effort that it is we're confident that it's ready for rollout as I mentioned in my earlier comments In 2 counties at the beginning of next year. But you're right, It is going to take some time, but I would anticipate that we will have a national rollout probably within the next Couple of years, we'll continue to roll out markets as our development efforts progress. And I think there's a couple of aspects of the product that will drive results for it. Speaker 200:16:11There will be efficiency gains. And again, the precise amount of that remains to be seen, but we'll certainly see some efficiency gains in the business. But I think a big part of it is just the improvement in the customer experience, We think ultimately will drive market share gains. Customers want to know early if there are title issues that are going to need to be resolved and We're going to be able to indicate to them initially, even before an order is placed, whether or not there's going to be a title issue Or whether or not we can issue a commitment. Speaker 500:16:43Okay, great. Thanks for taking our questions, guys. Speaker 300:16:46Thanks, Operator00:16:59Next question comes from Sohan Vossel with BTIG. Please go ahead. Speaker 600:17:06Hey, good morning guys. Thanks for taking the questions. Mark, maybe want to just take a step back and think through title margin sensitivity here more long term. So obviously, you have the investments that should moderate from here and that should help margins. But as we think about volume sort of stabilizing and maybe even improving next year, How are you sort of thinking about the lift that you could see right from that improvement? Speaker 600:17:32Because clearly you're able to write orders more efficiently today than in years past. And so that makes it sort of hard to look at the past as a precedent here. So if you could just offer any sort of framework on how you're thinking about margins as volume sort of Do you end up sort of improving here? Speaker 300:17:50Yes. Thanks for the question, Solon. Well, first of all, I'd say that For this year, last quarter we talked about double digit margins in title this year and we stand by that. I mean, we feel good about hitting that In a pretty tough economic environment, there's no question about that. When we look at 2024, we expect margins to improve on 2024. Speaker 300:18:13Even if volumes are flat, even if volumes are flat, because we've got a few tailwinds. You pointed out the strategic investments, they're going to be less of a drag next year. We also have efficiencies that we're ringing out of the business now that will help us next year. And then we'll also have, Yes, depending on what the Fed does, at least some tailwind with investment income next year. And so even in a flat, let's call it origination market, We think we can improve margins. Speaker 300:18:40The MBA has some pretty aggressive growth for mortgage originations. If that happens, We'll look really good, but even if we get half of that or a quarter of that growth, we should be even better. So we feel like we'll definitely have margin expansion next year. And then the question is, well, it just depends on how good the market is. Speaker 600:18:58Got it. Okay. And then in the second half here, just on success ratio, So obviously, seasonality wise, volume should subside here. But is there any reason outside Beside that, that your success ratios cannot sort of stay flattish, any other items that we should be thinking about in the back half here? Speaker 300:19:19No, I mean there's no extraordinary items to think about. For the first half of the year, we've been at 50%, Again, in our title segment. And for the back half of the year, we think we'll be at around 50%. I mean, it could be plus or minus a little bit, but 50% is what I would think For the second half and therefore the full year as well. Speaker 600:19:39Got it. And if I could just squeeze 1 in. Ken, I just wanted to touch on commercial here for a second. So it looks like, at least based on the ARPU, there were some mix shift a little bit to the higher larger deals. As you look at your pipeline for the back half, I mean, what's sort of the mix looking like between small and large deals? Speaker 200:19:59Well, I think we're anticipating, particularly as you go into the Q4, we're probably anticipating to have some more large deals. But I think on the ARPU going down, I think it's less about mix and more about price discovery, which we take as a good sign. Obviously, we don't like The RAR will go down, but we like to see that the price discovery is going on because there's going to that implies to us that once that's done Completely done. There'll be a lot more transaction activity. Speaker 600:20:29Got it. Thank you, guys. Speaker 300:20:31Thanks, Alain. Operator00:20:36Since there are no further questions, this concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation and have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallFirst American Financial Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) First American Financial Earnings HeadlinesQ1 2025 First American Financial Corp Earnings Call TranscriptApril 25 at 12:37 AM | gurufocus.comAnalysts Are Bullish on These Financial Stocks: Discover Financial Services (DFS), First American Financial (FAF)April 24 at 3:38 PM | markets.businessinsider.comFrom Social Security to Social Prosperity?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 26, 2025 | Paradigm Press (Ad)First American Financial sees 29% commercial revenue growth in Q1 2025 amid new leadership focusApril 24 at 3:38 PM | msn.comFirst American Financial Corporation (FAF) Q1 2025 Earnings Call TranscriptApril 24 at 3:10 PM | seekingalpha.comA Peek at First American Financial's Future EarningsApril 24 at 2:00 AM | benzinga.comSee More First American Financial Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like First American Financial? Sign up for Earnings360's daily newsletter to receive timely earnings updates on First American Financial and other key companies, straight to your email. Email Address About First American FinancialFirst American Financial (NYSE:FAF), through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Home Warranty segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services internationally. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, document generation services, mortgage loans subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in various states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, New Zealand, South Korea, and internationally. The Home Warranty segment provides home warranty products, including residential service contracts that cover residential systems, such as heating and air conditioning systems, and various appliances against failures that occur as the result of normal usage during the coverage period. This segment operates in various states and the District of Columbia. The company was founded in 1889 and is headquartered in Santa Ana, California.View First American Financial ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 7 speakers on the call. Operator00:00:00Greetings, and welcome to the Second Quarter 2023 First America Financial Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Barberio, Vice President, Investor Relations. Operator00:00:35Please go ahead. Speaker 100:00:38Good morning, and welcome to First American's earnings conference call for the Q2 of 2023. Joining us today on the call will be our Chief Executive Officer, Ken DiGiorgio and Mark Seaton, Executive Vice President and Chief Financial Officer. Some of the statements made today may contain forward looking statements that do not relate strictly to historical or current fact. These forward looking statements speak only as of the date they are made, The company does not undertake to update these forward looking statements to reflect circumstances or events that occur after the date the forward looking statements are made. Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward looking statements. Speaker 100:01:19For more information on these risks and uncertainties, Please refer to this morning's earnings release and the risk factors discussed in our Form 10 ks and subsequent SEC filings. Our presentation today contains certain non GAAP financial measures that we believe provide additional insight into the operational performance and performance of the company operational efficiency, excuse me, and performance of the company relative to earlier periods and relative to the company's competitors. For more details on these non GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP Financials, Please refer to this morning's earnings release, which is available on our website at www.firstam.com. I would now like to turn the call over to Ken DiGiorgio. Speaker 200:02:07Thank you, Craig. We posted good results in the 2nd quarter Given the continuing market headwinds, a seasonal uplift in our business, strong growth in net investment income And a continued focus on expense management enabled us to deliver a pre tax title margin of 12.1% or 12.6% on an adjusted basis. On a consolidated basis, we earned $1.33 per diluted share or $1.35 on an adjusted basis. Demand in our residential purchase business continues to be pressured by affordability issues Due to high mortgage rates along with low inventory that has kept home prices elevated. The purchase market, however, appears to have stabilized, albeit at trough levels. Speaker 200:02:58For the 1st 3 weeks of July, we are seeing this typical seasonal decline in purchase orders with open orders down 1% compared with June. Refinance open orders remained at trough levels in the 2nd quarter, Averaging $3.50 per day. As I indicated on last quarter's call, the current pool of mortgage loans outstanding would need to see rates Drop well below 5% to incentivize a significant uplift in refinance activity, which is highly unlikely in the near future. The commercial market, which began to deteriorate in the back half of twenty twenty two, appears to have stabilized. While commercial revenue was down 39% year over year, it was up 20% on a sequential basis, in line with the typical seasonal trend. Speaker 200:03:52Commercial open orders for the 1st 3 weeks of July were down 26%, Consistent with what we experienced in the Q2, there is still a high degree of uncertainty concerning the commercial market outlook. However, based on the feedback we are still getting from customers, we expect the transaction activity in the second half of the year will be better than the first, which is consistent with normal seasonal patterns. While our key purchase, commercial and refinance markets appear to have troughed, The timing of a recovery in these markets remains unclear. Despite these challenging conditions, Our financial discipline and strong balance sheet allow us to continue to invest in strategic initiatives for the long term benefit of the company as well as return capital to our shareholders. We continue to make progress at Endpoint, our digital title and settlement company. Speaker 200:04:50Our initiative to develop instant title decisioning for purchase transactions remains on track for deployment in 2 markets early next year. We've also made substantial progress at ServiceMac, our subservicing business, which delivered strong revenue growth and its first quarterly profit. And since the market began to deteriorate at the beginning of last year, We have returned $811,000,000 to our shareholders through share repurchases and dividends. In closing, I am proud that First American has been selected as one of just 100 Companies To Fast Company's best workplaces for innovators for 2023, we are the only company in our industry to have ever received this recognition. This accomplishment is a testament to our ongoing commitment to innovation and is a tribute to our people, who in addition to delivering best in class customer service enable us to lead the digital transformation of our industry. Speaker 200:05:56Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results. Speaker 300:06:02Thank you, Ken. This quarter, we earned $1.33 per diluted share or $1.35 on an adjusted basis. Beginning this quarter, we are defining adjusted earnings for the first time to make our results more comparable to our peers. Our adjusted earnings exclude net investment gains and losses as well as purchase related intangible amortization. These adjustments will also apply to pre tax margin. Speaker 300:06:30A reconciliation can be found in our press release. Revenue in our title segment was $1,500,000,000 down 25% compared with the same quarter of 2022. Commercial revenue was $178,000,000 a 39% decline over last year. Our average revenue per order for commercial transactions declined 12 This quarter to $11,600 due to a combination of lower valuations as prices in the commercial market reset and fewer large transactions. Purchase revenue was down 29% during the quarter driven by a 30% decrease in the number of orders closed, partially offset by a 1% increase in the average revenue per order. Speaker 300:07:13Refinance revenue declined 59% relative to In the agency business, revenue was $625,000,000 down 33% from last year. Given the reporting lag in agent revenues of approximately 1 quarter, these results reflect remittances related to Q1 economic activity. Our information and other revenues were $244,000,000 down 20% relative to last year. This decline was the result of lower transaction levels across several business units, driven by the company's data and property information products and post close and document generation services. Investment income within the title insurance Services segment was $142,000,000 a 105% increase relative to the prior year. Speaker 300:07:58In the Q2, we saw escrow balances increase due to normal seasonality of the business. We also continue to generate higher rates on our The Federal Reserve has hiked 4x this year. We continue to manage expenses given the decline in transaction activity. Our success ratio was 50%, meaning that our personnel and other operating expenses declined $200,000,000 and our net operating revenue declined $399,000,000 The provision for policy losses and other claims was $40,000,000 in the 2nd quarter or 3.5% of title premiums and escrow fees, down from the 4.0% loss provision rate in the prior year. The 3.5% loss rate reflects an ultimate loss rate of 3.8% for the current year with a $3,000,000 release for prior closing years. Speaker 300:08:46As Ken highlighted, we continue to invest in businesses and innovation initiatives that we believe will positively contribute to our profitability in the long term, but at this point in their lifecycle adversely impact our financial results. We have discussed 3 initiatives, ServiceMac, endpoint and instant decisioning for purchase transactions, which together generated a pre tax loss of $15,000,000 Quarter impacting our pre tax title margin by 130 basis points, an improvement from the 150 basis point margin drag in Q1, primarily driven by profitability gains at ServiceMac, which generated a 10% pretax margin this quarter. Pre tax margin in the title segment was 12.1% or 12.6% on an adjusted basis. Total revenue in our home warranty business totaled $106,000,000 a 4% increase compared with last year. Pretax income in home warranty was $14,000,000 up 61 percent from the prior year. Speaker 300:09:43The loss ratio in home warranty was 49%, down from 52% in 2022, driven by a lower frequency of claims, partially offset by higher claim severity. The effective tax rate for the quarter was 23.4%, Lower than our normalized rate of 24% due primarily to the mix of income between our insurance and non insurance businesses, since our insurance business generally pays state premium taxes in lieu of income taxes. In the second quarter, we repurchased 173,000 shares for a total of $15,000,000 at an average price of $56.04 Our debt to capital ratio as of June 30 was 29.2%. Excluding secured financings payable, our debt to capital ratio was 22.5%. In May, we entered into a new $900,000,000 senior credit facility, upsized from our prior $700,000,000 facility. Speaker 300:10:36We currently have the entire amount available for liquidity. Now, I would like to turn the call back over to the operator to take your questions. Operator00:10:46Thank you. We will now be conducting a question and answer session. Our first question comes from Bose George with KBW. Please go ahead. Speaker 400:11:25Hey, guys. Good morning. First, I just wanted to ask about investment income. Can you give us an update on your expectations for investment income? Can you remind me if there's something unusual in investment income in the second quarter? Speaker 300:11:40Hey, good morning, Bose. Thanks for the question. There's nothing really unusual in the Q2. We've given different Assumptions in the past for investment income. But at this point of the year, we're halfway done through the year. Speaker 300:11:54We've got a lot more visibility in terms of where balances are. And so in the title segment, we should be somewhere between $550,000,000 $550,000,000 of investment income for the full year. Well, we'll have an increase in Q3 and then we're expecting a little bit of a decrease in Q4 just because of some balances that will run off related to service and that's what we're looking at somewhere between $515,000,000 $560,000,000 right now, full year. Speaker 400:12:19Okay, great. Thanks. That's helpful. And then actually with the sale of HomePoint to Cooper, When that servicing is if that does move over to Cooper, how much escrow could that move could you lose as that happens? And Is there any sort of negative operating leverage while you sort of refill that at ServiceMac? Speaker 200:12:41Hi, Bose. Thanks for the question. I mean, we're anticipating that about 40% of the loans are going to off board in September. And to get to the second part of your question on that, we're already making expense reductions associated with that. Now there There's a healthy pipeline that we think will replace that. Speaker 200:13:04And but obviously The timelines on those aren't quick, but there is a healthy pipeline. The remaining 60%, They could they'll probably be there through the end of the year and could extend into next year. It's not exactly clear when the remaining 60% are going to come off, but we're Hopeful that would at least be into the next year. Speaker 400:13:28Okay, great. And actually, can you remind me the Interest income from the escrow at ServiceMac, does that come through corporate or is that in title? Speaker 300:13:39It's in title. Yes. It's most of it goes through our bank and our bank rolls up to our title segment. So it's entitled. Speaker 400:13:46Okay. So your guidance, the number you gave sort of incorporates All the changes at ServiceMac as well? Speaker 300:13:53It does, yes. Speaker 400:13:54Okay, great. Thank you. Operator00:14:08Our next question comes from John Campbell with Stephens Inc. Please go ahead. Speaker 500:14:15Hey, guys. Good morning. Speaker 300:14:17Good morning. Good morning. Speaker 500:14:17Hey, congrats on a great quarter. But I wanted to touch on the July order data again. I might have missed this, but I think you said that The 1st 3 weeks commercial orders down 26%, so a little bit better obviously than 2Q, but could you maybe rehash on purchase refi And other? Speaker 300:14:38So for the 1st 3 weeks, we're looking at Purchase, we're looking down 14% versus prior year. Refi, we're looking at about 3.40 orders a day. That's down 39% from last year. Speaker 500:14:51Okay. Very helpful. Speaker 600:14:53Yes. Yes. Go ahead, Ken. Speaker 300:14:54No, that's it. Speaker 500:14:56Okay. And then on the Insta title decisioning for purchase, feel like that's a side of the story that holds a lot of promise for you guys. I know it's very early stage. You guys are also tend to be very conservative in kind of how you roll that out. But maybe if Speaker 600:15:10you could give us some kind of early Speaker 500:15:11call outs from early round of pilots and then what you might need to see to be comfortable and start to move that And the national expansion efforts? And then also what the initiative can do for your business over time? Is it more of a share gain kind of revenue driver or is it Efficiency gain and margin driver. Speaker 200:15:30Yes. I'll start on that, John. I mean, I think what we've seen from sort of our MVP effort that it is we're confident that it's ready for rollout as I mentioned in my earlier comments In 2 counties at the beginning of next year. But you're right, It is going to take some time, but I would anticipate that we will have a national rollout probably within the next Couple of years, we'll continue to roll out markets as our development efforts progress. And I think there's a couple of aspects of the product that will drive results for it. Speaker 200:16:11There will be efficiency gains. And again, the precise amount of that remains to be seen, but we'll certainly see some efficiency gains in the business. But I think a big part of it is just the improvement in the customer experience, We think ultimately will drive market share gains. Customers want to know early if there are title issues that are going to need to be resolved and We're going to be able to indicate to them initially, even before an order is placed, whether or not there's going to be a title issue Or whether or not we can issue a commitment. Speaker 500:16:43Okay, great. Thanks for taking our questions, guys. Speaker 300:16:46Thanks, Operator00:16:59Next question comes from Sohan Vossel with BTIG. Please go ahead. Speaker 600:17:06Hey, good morning guys. Thanks for taking the questions. Mark, maybe want to just take a step back and think through title margin sensitivity here more long term. So obviously, you have the investments that should moderate from here and that should help margins. But as we think about volume sort of stabilizing and maybe even improving next year, How are you sort of thinking about the lift that you could see right from that improvement? Speaker 600:17:32Because clearly you're able to write orders more efficiently today than in years past. And so that makes it sort of hard to look at the past as a precedent here. So if you could just offer any sort of framework on how you're thinking about margins as volume sort of Do you end up sort of improving here? Speaker 300:17:50Yes. Thanks for the question, Solon. Well, first of all, I'd say that For this year, last quarter we talked about double digit margins in title this year and we stand by that. I mean, we feel good about hitting that In a pretty tough economic environment, there's no question about that. When we look at 2024, we expect margins to improve on 2024. Speaker 300:18:13Even if volumes are flat, even if volumes are flat, because we've got a few tailwinds. You pointed out the strategic investments, they're going to be less of a drag next year. We also have efficiencies that we're ringing out of the business now that will help us next year. And then we'll also have, Yes, depending on what the Fed does, at least some tailwind with investment income next year. And so even in a flat, let's call it origination market, We think we can improve margins. Speaker 300:18:40The MBA has some pretty aggressive growth for mortgage originations. If that happens, We'll look really good, but even if we get half of that or a quarter of that growth, we should be even better. So we feel like we'll definitely have margin expansion next year. And then the question is, well, it just depends on how good the market is. Speaker 600:18:58Got it. Okay. And then in the second half here, just on success ratio, So obviously, seasonality wise, volume should subside here. But is there any reason outside Beside that, that your success ratios cannot sort of stay flattish, any other items that we should be thinking about in the back half here? Speaker 300:19:19No, I mean there's no extraordinary items to think about. For the first half of the year, we've been at 50%, Again, in our title segment. And for the back half of the year, we think we'll be at around 50%. I mean, it could be plus or minus a little bit, but 50% is what I would think For the second half and therefore the full year as well. Speaker 600:19:39Got it. And if I could just squeeze 1 in. Ken, I just wanted to touch on commercial here for a second. So it looks like, at least based on the ARPU, there were some mix shift a little bit to the higher larger deals. As you look at your pipeline for the back half, I mean, what's sort of the mix looking like between small and large deals? Speaker 200:19:59Well, I think we're anticipating, particularly as you go into the Q4, we're probably anticipating to have some more large deals. But I think on the ARPU going down, I think it's less about mix and more about price discovery, which we take as a good sign. Obviously, we don't like The RAR will go down, but we like to see that the price discovery is going on because there's going to that implies to us that once that's done Completely done. There'll be a lot more transaction activity. Speaker 600:20:29Got it. Thank you, guys. Speaker 300:20:31Thanks, Alain. Operator00:20:36Since there are no further questions, this concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation and have a great day.Read morePowered by