First American Financial Corp. reported net income of $2 million Thursday, compared with $445 million in the third quarter of 2021.
The company, which provides title, settlement, and risk solutions for real estate transactions, reported total revenue of $1.8 billion, down 29% year-over-year. Excluding net investment losses of $226 million, total revenue was $2.1 billion, down 10% compared to last year.
The company said the title insurance and services segment investment income of $105 million represented a 114% increase year-over-year and commercial revenues of $260 million represented a 1% decline over 2021.
"The cyclical downturn in the real estate market precipitated by rapidly rising mortgage rates led to a decline in the company's residential business," said Ken DeGiorgio, CEO at First American Financial Corporation. "Despite those conditions, First American's commercial business delivered another strong quarter and we benefited from robust growth in our investment income.
DeGiorgio said in a statement that while the challenging market environment is expected to continue into 2023, he believes First Financial is well-positioned to emerge even more robust.
“The market has shifted away from refinance toward purchase and commercial transactions where we are stronger and, consequently, we are growing our market share,” he said. “We are also the only title company that has a bank, which enables us to better capitalize on higher interest rates."
DiGiorgio added that the company’s strong balance sheet allows it to continue to invest in strategic initiatives, pursue acquisitions, as well as return capital to shareholders.
Cash flow from operations was $302 million, compared with $399 million last year, the company said.
Investment losses included $126 million due to unrealized losses recognized in First American Financial’s venture portfolio, $50 million related to losses in marketable equity securities and $50 million due to the sale of fixed-income securities in connection with the company’s tax planning efforts.
Since the beginning of this year, First American Financial has repurchased approximately 7% of shares outstanding as of the end of last year, DiGiorgio said.
According to the earnings report, the company repurchased 1.3 million shares for a total of $72 million at an average price of $53.31. Through October 26, First American Financial repurchased an additional 339,000 shares for a total of $16 million at an average price of $46.46, officials said.
The company also raised the common stock dividend by 2% to an annual rate of $2.08 per share.
