The First American Corp., which owns title and other specialty insurance businesses, today reported lower fourth-quarter earnings.
Fourth-quarter profits in 2006 were $104 million, down 11 percent from $116 million during the same quarter in 2005. Revenues were $2.2 billion, a 2 percent decline from the same quarter a year earlier.
Net income fell 40 percent to $287.7 million in 2006 from $480.4 million in 2005. Revenues were up 5 percent for the full year at $8.5 billion.
The company faced a number of challenges in 2006, said Parker Kennedy, chairman and CEO, including a slowdown in the real estate market, home-price depreciation and increased industry regulation.
Kennedy said this year the company will focus on integration, organic growth, building scale in selected businesses and expense management. “Our approach to acquisitions will be very selective and focused on businesses and markets with high expected growth rates,” he said.
First American’s title insurance segment suffered primarily from expenses related to increased litigation and regulation and “the reserve strengthening charge of $155 million that we took in the second quarter of 2006,” Kennedy said. First American’s title segment experienced a 44 percent decline in income before taxes and minority interest relative to the prior year.
During the fourth quarter of 2006, First American’s title segment saw a 5 percent decline in revenues to $1.6 billion compared to the same quarter the prior year.
Meanwhile, the company’s specialty insurance, property information and First Advantage segments saw growth in revenues and earnings for the year. Revenues within the specialty insurance segment, which sells home warranties and homeowner’s property and casualty insurance, grew 6 percent in the fourth quarter to $85 million.
Revenues within the mortgage segment fell 11 percent to $126.4 million due to the declining real estate market.
First American’s property information segment grew revenues 27 percent to $170.2 million. And First Advantage Corp. grew its fourth-quarter revenues 19 percent.
The company expects a continued slowdown in housing activity and an increase in loan defaults and property foreclosures in 2007. First American says that while its title, tax and flood businesses may see slower growth this year, some of its other businesses such as default, mortgage-risk analytics and employment screening are expected to see a strong increase in demand for products.