First American Corp. says it will save $108 million a year by laying off about 1,900 workers in the second and third quarter of the year — nearly all of them in title insurance.
The Santa Ana, Calif.-based company, which recorded a $66 million loss in the second quarter, announced Tuesday that it was also eliminating $16 million in annual perquisites and benefits for executives as a cost-cutting measure.
First American said it cut 600 positions in the second quarter, and plans to lay off another 1,300 employees in the third quarter. Of the 1,900 positions being eliminated, 1,400 are in title insurance.
A First American competitor, LandAmerica Financial Group Inc., last week announced it will reduce its workforce by about 1,400 people in the second half of 2007.
In addition to title insurance, First American provides mortgage and property information. In its last quarterly report to investors, the company said earnings for the first half of the year totaled $17.8 million, down from $93.3 million in 2006, due to the $66 million second-quarter loss.
Second-quarter operating revenue from title insurance fell 5 percent to $1.48 billion, the company said. While the average revenue per order grew to $1,695 during the quarter, title orders closed through direct operations were down slightly from a year ago, to 482,900.
A slowdown in mortgage originations depressed operating revenue from mortgage information services by 4.9 percent, to $131.5 million. Revenue from property information services was up 44.8 percent to $209.5 million from a year ago, growth that was attributed to the company’s new acquisitions.
First American on Feb. 2 combined its First American Real Estate Solutions division with CoreLogic Systems, Inc. which provides mortgage risk assessment and fraud prevention services. First American completed nine other acquisitions in the first six months of the year.
In addition to declining revenue in some lines of business, First American was also forced to boost loss reserves from $937 million at the end of 2006 to $1.26 billion as of June 30.
First American recorded provisions for policy losses and other claims of $387 million during the second quarter, as it revisited previous estimates for expected losses for policies issued from 2004 to 2006. Those policies experienced higher-than-expected claims in the first half of 2007, the company said, due to “a significant increase in defaults, foreclosures and mortgage fraud.”
“Given the increase in claims frequency that became apparent during the quarter, management now expects that ultimate losses for policy years 2004 through 2006 will be significantly higher than anticipated,” the company warned investors.