First American Corporation (New)

Greetings and welcome to the First American Financial Corporation Second 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 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 13761705. We will now turn the call over to Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement.

Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig Barberio, Vice President, Investor Relations to make an introductory statement. Craig 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 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.gov. I'll now turn the call over to Mark Seaton.

Thank you, Craig. Our earnings momentum continued in the second quarter as we generated adjusted earnings per share of $2.08, an increase of 36% from the prior year. Commercial continued to be a standout performer. Revenue increased 34%, setting a second-quarter record. We closed 14 transactions, generating more than $1 million of premium, up from 11 a year ago. Within our National Commercial Services Division, demand remains broad-based, with 10 of our 11 asset classes growing year-over-year. Purchase revenue increased 2% as affordability challenges continue to weigh on existing home sales. Refinance revenue increased 18%, reflecting the brief surge in open orders we experienced at the end of the first quarter when mortgage rates reached their lowest level since 2022. While that activity provided a tailwind during the second quarter, volumes have moderated as mortgage rates have moved higher again. One of the most important earnings drivers continues to be our bank, First American Trust, which provides a growing source of investment income. During the quarter, average deposits totaled $7.9 billion. An increase of 30% from last year. Growth was driven by deposits outside of our captive title business. During the quarter, 36% of deposits came from sources beyond our captive title operations. The largest contributor was Servicemac, our mortgage subservicer, which accounted for $1.7 billion of deposits, up 76% from last year. ServiceMax loan portfolio grew 54% during the quarter, and as that portfolio expands, so should its deposits. Our second largest source of non-title deposits came from our 1031 exchange business. Last year, all exchange deposits were held at third-party banks. Since launching our 1031 banking solution less than one year ago, we have rapidly grown deposits, which averaged $827 million in the second quarter. representing roughly one-third of our total 1031 balances. Finally, our agent banking strategy continues to gain traction. Today, 310 title agents bank with First American Trust, an increase of 37% from last year. We expect those balances to grow as real estate activity recovers. Taken together, servicing 1031 Exchange and agent banking provide meaningful long-term growth opportunities while reinforcing the bank's role as a valuable counter-cyclical earnings driver. Our primary strategic priority remains leveraging AI across the enterprise to amplify the talents of our people, better serve our customers, and strengthen our operating capabilities. These benefits are already becoming tangible. Recently, we needed to update 1300 forms across the company. Historically, this would have required a lengthy manual process. Using our new AI tools, we reduced the time required by 97%. We launched a product called ExamAssist QC, which is an AI-enabled quality control workflow. It has now processed more than 50,000 orders, delivering 92% with no additional human review, a clear example of how we can deploy AI at scale for our quality control process. We are also starting to see meaningful evidence that AI can improve customer-facing service delivery. At ServiceMac, we rolled out a virtual agent last month for loan transfer inquiries and improved self-service success from 0% in April to 42% in June. While still early, it is a useful proof point that AI can support live customer workflows in a regulated servicing environment. We expect to expand the number of self-service use cases from one to seven by the end of the year. We are also building broader enterprise capability in agentic product development. In the past four months, we've had nearly 700 people participate in hands-on boot camps focused on rewriting legacy code and solving real business problems. The result is a growing enterprise capability to apply agentic AI across functions and workflows Moving technology teams from basic awareness to real adoption in product development. And, of course, at the enterprise level, we are fundamentally reimagining title and settlement through Endpoint and Sequoia, and both platforms continue to achieve important milestones. Beginning with Endpoint, we remain on track to scale the platform across our local title branch network by the end of 2027. During the quarter, we converted our first First American title office in Spokane, Washington. While it is still early, every indication suggests the transition has been successful. Escrow professionals now operate from a platform where Gentic AI automates routine tasks, which will allow our teams to spend more time serving customers and managing complex transactions. This quarter, we will expand endpoint across additional offices in Western Washington before completing a statewide rollout by year-end, followed by a broader national deployment throughout 2027. We have also improved automation rates from 30% in Q1 to 34% in Q2, and so far in July, we were at 39%. We expect those rates to improve as the platform matures. This represents a fundamental shift in how title and settlement work gets done. As workflows become standardized, the role of our people increasingly shifts from executing routine tasks to validating AI generated work and focusing on higher value customer interactions. We also continue to make excellent progress with Sequoia, our AI-powered title decisioning platform. Since our last earnings call, we expanded Sequoia's refinance capabilities beyond our local direct operations into our centralized lender division in Southern California. We also broadened our refinance coverage in California, increasing our footprint from eight counties to 41. During the quarter, our automation rate improved from 35% to 40%, and we expect further gains as the platform continues to learn and mature. Purchase transactions remain a more complex challenge. We launched purchase capability in three counties during the first quarter and expanded into Orange and San Diego counties during the second quarter. Currently, in these counties, Sequoia provides instant title decisioning for approximately 16% of purchase transactions at order opening. Over time, we believe we can automate title decisions for approximately 70% of purchase transactions and 80% of refinance transactions in markets where we maintain title plants. That capability is made possible by our industry-leading title plant data, deep underwriting expertise, and innovative technology. By year-end, we expect Sequoia to be deployed across California and Florida with a broader national rollout plan for 2027. Once Endpoint and Sequoia are fully rolled out, we believe they will create a durable competitive advantage by improving the experience for employees, delivering better service for our customers, and creating meaningful long-term value for shareholders. Turning to our outlook, we remain optimistic about our earnings trajectory for the second half of the year. Six months ago, we said our commercial business was on pace to deliver a record year, and we continue to believe that. Our commercial pipeline has never been stronger. We've already closed three transactions generating more than $1 million in premium during July, and commercial open orders are up 9% over the first three weeks of the month. We remain more cautious than the broader consensus on the residential purchase market. Through the first three weeks of July, our open purchase orders are flat relative to last year as existing home sales remain sluggish. Finally, I'll comment on capital management. Our business continues to generate substantial and growing cash flow. During the first six months of the year, our free cash flow was $285 million, up 32% relative to last year. This is a result of improving operating cash flow and declining capital expenditures, which were down 18% year over year. We expect cash generation to strengthen during the second half, particularly since the first quarter is our seasonally weakest period. Our first capital allocation priority remains investing in the technology, platforms, and products that will extend our leadership position in the industry. Importantly, these investments are already embedded within our existing run rate. In fact, our company-wide technology spend has remained relatively flat since 2022, and we do not anticipate the need to invest materially more in our business than what we're currently investing. Our second priority is acquisitions. The bar for acquisitions is higher today than it has been in many years. We are pleased with our geographic footprint and portfolio of businesses, and we have no interest in pursuing acquisitions simply for the sake of scale or diversification. However, we will continue to pursue opportunities that have strong strategic synergies with our current business, whether in title or near adjacencies. Finally, we remain committed to returning capital to shareholders through a combination of dividends and opportunistic sharing purchases. We expect to continue increasing our dividend over time, reflecting our confidence in the company's long-term earnings growth. We will also repurchase shares when we see attractive opportunities like we did in the second quarter. In summary, we remain intensely focused on reimagining title and settlement through AI. We have a strong balance sheet of discipline strategy, unique assets like First American Trust, and industry-leading title data that position us to capitalize on the transformational opportunities AI presents. Together, these strengths give us a differentiated competitive advantage and position us well for years to come. Now, I'll turn the call over to Matt, who will discuss our financial results in greater detail.