First American Corporation (New)

Greetings 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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Barberio, Vice President, Investor Relations. Please go ahead.

Good morning and welcome to First Americans Earnings Conference call for the second quarter 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, and 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. For more information on these risks 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 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 width directly comparable gap 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 thank you Craig we posted good results in the second quarter given the continuing market headwinds a seasonal uplift in our business strong growth in net investment income and

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 for the first three weeks of july we are seeing this typical seasonal decline in purchase orders with open orders down one percent compared with june refinance open orders remained at trough levels in the second quarter averaging 350 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 2022, appears to have stabilized. While commercial revenue was down 39% year over year, it was up 20% on a sequential basis, in line with a typical seasonal trend. Commercial open orders for the first three weeks of July were down 26%, consistent with what we experienced in the second quarter. 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 dropped, 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. Our initiative to develop instant title decisioning for purchase transactions remains on track for deployment in two markets early next year. We've also made substantial progress at ServiceMac, our sub-servicing business, which delivered strong revenue growth and its first quarterly profit. Since the market began to deteriorate at the beginning of last year, we have returned $811 million 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. Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.