First American Corporation (New)

Greetings and welcome to the First American Financial Corporation second quarter earnings conference call. At this time, all participants are on 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 877-660-6853 or 201-612-7415. And enter the conference ID 1374-7727. We will now turn the call over to Craig Barberio, Vice President, Investee Relations, to make an introductory statement.

Good morning everyone and welcome to First American's Earnings Conference call for the second quarter of 2024. 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 forward-looking statements to reflect the 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 risks and uncertainties, please refer to yesterday's earnings release and the risk factors discussed on our Form 10-K and subsequent SEC filings. Our presentation today also 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 yesterday's earnings release, which is available on our website at www.firstam.com. I will now turn the call over to Ken DiGiorgio.

Thank you, Craig. While market conditions remained challenging in the second quarter, we benefited from the seasonal pickup in demand. Total revenue was $1.6 billion, and our adjusted earnings per diluted share were $1.27. Our title segment delivered an adjusted pre-tax margin of 11.9% this quarter, compared with 12.6% last year. In the purchase market, Despite early positive signs, the spring selling season proved to be disappointing. Our closed orders were up less than 1% compared with last year as affordability issues, high mortgage rates, and elevated home prices suppressed demand. Despite the muted transaction activity, tight inventory conditions led to home price appreciation, resulting in a 4% increase in our direct purchase revenue. Challenging conditions continue into the third quarter with open purchase orders down 3% through the first three weeks of July. Closed refinance orders were down 5% in the second quarter. Refinance activity picked up as the quarter progressed. The double digit open order growth we posted in June has so far accelerated in the first three weeks of July with open orders up 19%. but we are coming off a low base with refinance accounting for less than 5% of direct revenue in the second quarter. Our commercial business is stable in the face of continuing uncertainty in the market. Closed orders were down 2% in the second quarter. For the first three weeks of July, while open orders are up 4%, we expect the ongoing uncertainty to weigh on our commercial business in the third quarter. We remain optimistic, however, that we will see a meaningful rebound in activity in the seasonally strong fourth quarter. Our home warranty segment again delivered strong results with an adjusted pre-tax margin of 15.2%. Though our real estate channel is facing the same headwinds we are seeing in our title company's purchase business, we are increasing our emphasis on the direct-to-consumer channel, which we expect to drive increased profitability over the long term. Turning to the progress we have made on our long-term strategic initiatives, First American is the undisputed leader in title data with the most comprehensive, accurate, and timely data assets in the industry. While for years we've leveraged these data assets to automate underwriting of refinance transactions, We have had early success in our efforts to extend the competitive advantage of these assets to purchase transactions. In April, we successfully launched an ongoing pilot of automated underwriting for purchase transactions, which is much more complex and heavily dependent on title data. This initiative, which we call Sequoia, was launched in Maricopa and Riverside counties with a goal of rendering an insurable title decision for at least 50% of residential properties. At Endpoint, we have successfully built a next generation settlement platform that is bringing extensive automation to the closing process for residential transactions. Going forward, we will focus on further enhancing this technology and deploying it in the broader organization. Over the long term, we expect that Sequoia Endpoint and other initiatives will enable us to service our customers faster and more efficiently than the competition. On our last earnings call, we indicated that we expect modest revenue growth this year, which will enable us to achieve title margins similar to what we posted in 2023. After closing the books on the first half and looking at the order pipeline in July, while we maintain our perspective on our full year performance, Our results will ultimately depend on the strength of a currently uncertain commercial market in the second half of the year, and in particular, the fourth quarter. Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.