First American Corporation (New)

Greetings and welcome to the First American Financial Corporation's fourth quarter and full year 2025 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 877-660-6853 or 201-612-7415 and enter the conference ID 137. I will now turn the call over to Craig Barbiero, Vice President, Investor Relations, to make an introductory statement.

Thank you, operator. Good morning, everyone, and welcome to First American's earnings conference call for the fourth quarter and full year of 2025. Joining us today on the call will be our Chief Executive Officer, Mark Seaton, and Matt Wagner, 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 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 the 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 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 yesterday's earnings release, which is available on our website at www.firstam.com. I will now turn the call over to Mark Seaton.

Thank you, Craig. The fourth quarter was a strong one for First American. We generated adjusted EPS of $1.99, a 47% improvement from the prior year. In the fourth quarter, we experienced trends similar to those we saw throughout 2025. A strong commercial market contrasted with a sluggish residential market. On the commercial side, revenue grew 35% as we saw improvement in nine of the 11 asset classes we track. Several positive dynamics are driving this growth. We achieved price stability in 2025, which provides a solid foundation for future transaction activity. We've seen a persistent increase in sales volumes, rising commercial lending, and higher levels of refinance activity. Historically, refinance activity accounted for about 30% of our commercial premiums. In 2025, that figure increased to roughly 40%. Some lenders are choosing to write shorter maturities, which naturally leads to more refinance activity. Our commercial revenue growth was driven by both higher average revenue per order and transaction volumes. Commercial ARPO increased by 22%, while closed orders increased by 10%. On the residential side, conditions remain challenging. Existing home sales are running approximately 4 million units, well below the 5.5 million units we consider to be a normalized level, as the rate lock-in effect discouraged homeowners from selling, and therefore also not buying, and affordability remain constrained. One benefit of operating in a trough market is that it creates an opportunity to implement meaningful change. In December, we reached an important milestone with the launch of Endpoint in one office, and we closed the industry's first AI-powered escrow. As of last week, we have opened 153 orders and closed 47 on the Endpoint platform. While the volumes are immaterial today, the learnings are highly consequential. Endpoint improves every day, and we plan to roll it out nationally over the next two years. We believe the capabilities we're building over time will be a durable competitive advantage. On the refinance side, revenue grew 47%. While refinance volumes remain at relatively low levels, the recent drop in mortgage rates has given us some optimism. Continuing on the technology theme, in the fourth quarter, we launched our enhanced AI-powered Sequoia title production engine for refinance transactions. Sequoia AI is now live in Phoenix, Arizona, and three markets in Southern California. In these markets, we've achieved 40% automation rates of the search and examination functions for the products that are supported. By Q2, we expect to roll out Sequoia AI purchase capabilities in these markets. with plans to expand Sequoia across California and Florida by year end, followed by a broader national rollout in 2027. As with Endpoint, we are learning and improving every day. Over time, we expect geographic expansion, higher capture rates, and improved operating leverage as market issues improve, while reducing risk, cost, and cycle time. I also want to highlight another strategic initiative we're excited about, the Owner's Portal. In the 25 states where we have direct operations, customers who close with First American receive free property title monitoring and fraud alert service, providing an important layer of protection for homeowners amid rising real estate fraud risk. Today, we have approximately 53,000 users on the platform, which has grown 580% just over the last quarter. At our bank, First American Trust, we recently launched our 1031 exchange product, Historically, we've managed savings and checking deposits at First American Trust. Now, we are also supporting 1031 exchange deposits. We ended the year with $94 million in 1031 deposits and have quickly grown to over $300 million today. We expect to be closer to a billion by year-end. The growth in deposits will help offset the impact to investment income related to lower short-term interest rates. Looking ahead to 2026, we expect growth across each of our major revenue drivers, commercial, purchase, and refinance. On the commercial side, we expect a record revenue year, exceeding our prior peak in 2022. While uncertainty remains, our pipeline is strong. On the purchase side, we are less optimistic than some industry forecasts. We're calling for 7% to 8% growth. But we do expect improvement in 2026. as the rate lock-in effect discouraging homeowners from selling and buying fades, and slow house price appreciation allows affordability to modestly improve in many markets. Open purchase orders were down 7% in the fourth quarter, implying continued weakness in purchase revenue in the first quarter. January open orders were essentially flat, with growth expected to emerge later in the year. Refinance activities harder to predict, but refinance open orders were up 72% in January, a good sign for our seasonally weak first quarter. In closing, we remain focused on being the best title and escrow company in the industry. Based on the most recent ALTA data, we've gained 90 basis points of organic market share over the last 12 months, with additional initiatives underway to expand that further. We are reimagining our core title and escrow business by building modern AI-powered products that improve the experience for our customers, amplify the work of our employees, and ultimately create long-term value for our shareholders. Our adjacent businesses also enhance our competitive advantage and contribute to our earnings growth. Our data assets become more valuable over time, and in 2025, we delivered record earnings at our bank, in home warranty, at ServiceMac, and at First Funding. With that, I'll turn the call over to Matt for a more detailed review of our financial results.