First American Corp. said it lost $67.5 million and laid off 1,100 employees during the fourth quarter, as the company boosted loss reserves by $122.3 million against higher expected claims.
The Santa Ana, Calif.-based title insurer and real estate information provider said it expects to lay off more workers and consolidate offices to cut costs as the credit crunch continues to weigh on real estate and mortgage markets.
“While we are encouraged by an increase in title orders during January and February, we will continue our focus on aggressive expense reduction efforts throughout the entire organization,” First American Chief Executive Officer Parker Kennedy said in a statement.
First American, which announced last month it plans to spin its title insurance and related businesses off into a separate company (see Inman News story), said fourth-quarter revenues fell 14 percent from a year ago, to $1.9 billion. Revenues for the year were down 4 percent, to $8.2 billion, and the fourth-quarter loss contributed to a net loss for the year of $3.1 million.
Fourth-quarter revenues in the title insurance segment fell 19 percent from a year ago, to $1.2 billion, thanks to declining mortgage originations. Title orders closed during the quarter fell 29 percent from a year ago, to 339,700. Average revenue per direct title order was up 16 percent, however, to $1,911.
Loss provisions for claims rose to 14.6 percent of revenue, compared with 5.6 percent a year ago, contributing to a $185.7 million pretax loss for the title insurance segment. The increase in loss provisions was blamed on higher expected losses on title insurance policies issued in 2004 through 2006.
First American cut salary and other personnel costs in the title insurance segment by 10 percent during the quarter, despite $11.5 million in separation costs related to the layoff of 1,100 workers.
On the information technology side, greater demand for default services helped prop up revenue generated by the mortgage information segment, which fell 2 percent from a year ago to $124.7 million. The decrease was attributed to a drop in flood certification-related revenues and an increase in the estimated servicing life of the tax service loan portfolio due to slower prepayment speeds.
Revenue in the property information segment was down 13 percent from a year ago, to $148.7 million, while the First Advantage segment saw revenues grow by 1 percent.