First American Corporation (New)

Greetings, and welcome to the First American Financial Corporation Third Quarter 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. 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 877-660-6853 or 201-612-7415 and enter the conference ID 13741673. 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 Americans Earnings Conference Call for the third quarter of 2023. Joining us today on the call will be our Chief Executive Officer, Ken DiGiorgio, and Mark Seton, 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. 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 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 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. The rapid increase in interest rates to levels not seen in many years continues to produce challenging market conditions. With housing affordability currently at its lowest point in over three decades, Existing home sales this year have declined to the slowest annual pace since the global financial crisis. Moreover, sales volumes in the commercial market have reverted to pandemic low levels and are down approximately 50% from the peak year of 2021. Despite these historically difficult conditions, our continued focus on expense management and strong growth in net investment income enabled us to deliver a pre-tax title margin of 12% on an adjusted basis. On a consolidated basis, we generated adjusted earnings of $1.22 per diluted share. Our residential purchase business continues to reflect these market headwinds but appears to have stabilized at trough levels. For the first three weeks in October, open purchase orders are down 7% compared with September, which is consistent with normal seasonality, but are up slightly compared with the prior year. While this performance is mostly driven by a historically low comparison period, it also reflects the results of our industry-leading home builder division and is further indication that the market has stabilized. Refinance open orders remained at trough levels in the third quarter, averaging 350 per day, a level they have held all year. Given the current pool of mortgage loans outstanding and the outlook for interest rates, it remains unlikely we will see a significant uplift in refinance in the foreseeable future. Our commercial business revenues declined 39% compared with last year, consistent with the first half of the year. Average revenue per order also declined again this quarter for the fifth consecutive quarter which suggests that price discovery is well underway as the market corrects. Commercial open orders for the first three weeks of October are down 5% compared with last year and are down 3% sequentially. There is still a high degree of uncertainty concerning the commercial market. However, based on our market intelligence, we continue to expect higher commercial revenues in the fourth quarter, which is consistent with the normal seasonal pattern. While our key purchase, commercial, and refinance markets appear to have troughed, we expect the difficult market conditions to persist well into next year. Despite the uncertainty of the timing of a recovery in these markets, the strength of our business, along with our financial discipline and strong balance sheet, allow us to continue to invest for long-term growth while returning capital to our shareholders. This quarter, we raised our common stock dividend by 2% to an annual rate of $2.12 per share. We also repurchased $9 million of our shares in the third quarter and have accelerated our purchases in October, already purchasing an additional $9 million of our common shares. In closing, given the importance of people to our business, I am pleased that First American has been named one of the best workplaces for women by Great Place to Work and Fortune Magazine for the eighth consecutive year. This accomplishment is a tribute to our workforce, approximately two-thirds of which are women. I'm proud that First American's commitment to advancing the careers of women in our world-class culture enable us to achieve this recognition year after year. Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.