First American Corporation (New)

Greetings and welcome to the First American Financial Corporation fourth quarter and full year 2021 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A copy of today's press release is available on First American's website at www.firstam.com forward slash investor. Please note that the call is being recorded and will be available for replay from the company's investor website and for a short time by dialing 877-3255. 660-6853 or 201-612-7415 and enter the conference ID 137-26034. We will now turn the call over to Craig Barbario, Vice President, Investor Relations, to make an introductory statement.

Good morning, everyone, and welcome to First American's fourth quarter and year-end 2021 earnings conference call. Joining us today on the call will be Dennis Gilmore, former chief executive officer and recently appointed chairman of the company's board of directors, Ken DiGiorgio, First American's new chief executive officer, 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 and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risk and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these risk and uncertainties, please refer to this morning's earnings release and the risk factors discussed in our Form 10-K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency 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 width 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 will now turn the call over to Janice Gilmore. Thanks, Craig. Good morning, and thank you for joining our call.

In addition to our record earnings, we recently announced that our company's president, Ken DiGiorgio, has been promoted to chief executive officer. Over his 23 years of service to First American employees, customers, and shareholders, Ken has acquired an in-depth understanding of our business and demonstrates that he has the vision, strategic insight, and skill to lead our company. Under Ken's leadership, First American will continue to lead the digital transformation of the title insurance and settlement industry. Ken and his team will continue to capitalize on the many opportunities the company has to grow our business. At the request of our board of directors, I am honored to continue to serve on the board now as its chairman. Immediate past chairman, Parker Kennedy, will remain on our board as chairman emeritus and lead director. During my 12 years as CEO, I've had the incredible privilege to work alongside First America's great people. Our company culture that puts people first has driven our success. As I've said many times, when we put our people first, they'll take care of our customer, and when they do and we run the business efficiently, we will deliver superior results to our shareholders. I know that Ken and his leadership team and all of our employees will maintain our exceptional culture will continue to raise the bar on our performance. I'd now like to turn the call over to Kim. Thank you, Dennis. On behalf of First American's 22,000 employees, I want to recognize and thank you for your inspirational leadership and dedication over your nearly three decades with our company. Your focus on fostering a world-class culture while delivering an annualized total shareholder return of 18.2% during your 12-year tenure as CEO has set the bar high. Your vision for our company to be the premier title insurance and settlement services company, the vision that has guided us to where we are today, will continue to guide our future success. And the strategy we developed to achieve that vision, a strategy that has served us well for over a decade, will not change. We will continue to strive to profitably grow our core title and settlement business including through innovation and the acquisition of companies that are compatible with our culture and advance our vision. We will continue to strengthen our business by leveraging data and process advantage. And where we have a strategic advantage, we will continue to manage and actively invest in businesses that are complementary to our title and settlement business. Thank you again, Dennis. Your impact on First American will be lasting. Turning to our financial results, 2021 capped off record revenue of $9.2 billion, record title margin of 16.3%, and record earnings per share of $11.14. Even excluding net investment gains, EPS was $8.17, yet another record. While we are proud of these achievements, our focus continues to be on the things that will drive future growth. At the beginning of 2021, we announced our intention to expand our title plant footprint from 500 counties to 1,500 by the end of that year. Leveraging our proprietary data extraction technology, we are currently maintaining more than 1,600 title plants, covering nearly 80% of the US population. This data is critical as it fuels our operational efficiency initiatives, our title automation efforts, and our ongoing efforts to digitize the real estate closing experience. You can't automate unless you have data, and we are the industry's undisputed leader in title data. Last month, we announced an agreement to acquire Motherlode Holding Company, a title company with 92 offices across 11 states, including the key markets of California, Texas, and Arizona. Motherload is an important transaction for us in many ways. First, we have the opportunity to welcome amazing talent to our organization. Second, we further expand our distribution network as Motherload's 10 brands are among the best within their respective real estate communities. Lastly, Motherload is a key step in a multi-brand strategy for our title company that will accelerate our growth efforts. The transaction is awaiting regulatory approval and is expected to close in the coming months, after which we will provide additional detail. We are excited to welcome Motherlode to the First American family and look forward to growing together in the future. In terms of the outlook for 2022, it will be a year of transition we are well positioned for. We expect market conditions in our purchase and commercial businesses which account for approximately 80% of our direct revenue, to remain favorable. Refinance volumes will continue to wane as mortgage rates tick up, but we believe increased investment income due to a rise in short-term rates will help offset the decline. As short-term rates rise, we will benefit from higher investment income from our cash and escrow balances, 1031 exchange deposits, and bank portfolio. We believe our bank is a competitive advantage and serves as a natural hedge when higher mortgage rates drive refinance volumes lower. In January, we opened 2,000 purchase orders per day, a 7% decline from a strong January 2021, and a 9% increase relative to January of 2020. Our refinance orders were 1,200 per day, steady with what we experienced in December. Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.