Connect with us
HOUSTON WEATHER

Business

First American Financial Corp (FAF) Q4 2019 Earnings Call Transcript

Published

on

Image source: The Motley Fool.

First American Financial Corp (NYSE:FAF)
Q4 2019 Earnings Call
Feb 13, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the First American Financial Corporation Fourth Quarter and Full Year 2019 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. [Operator Instructions] The copy of today’s press release is available on the First American website at www.firstam/ — I’m sorry, www.firstam.com/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 conference ID of 13698002.

I will now turn the call over to Craig Barberio, Vice President, Investor Relations to make an introductory statement.

Craig BarberioVice President, Investor Relations

Good morning, everyone, and welcome to First American’s fourth quarter and full-year 2019 earnings conference call. Joining us today will be our Chief Executive Officer, Dennis Gilmore, and Mark Seaton, Executive Vice President and Chief Financial Officer.

Some of the statements made today may contain forward-looking statements that do not relate strictly to current or historical 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 this morning’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 with and reconciliation to the most directly comparable GAAP financials, please refer to this morning’s earnings release, which is available on our website at www.firstam.com.

I will now turn the call over to Dennis Gilmore.

Dennis J. GilmoreChief Executive Officer

Good morning and thank you for joining our call. Today, I’ll begin with a review of our fourth quarter and full year results, followed by a discussion of our outlook for 2020. I’ll close with some comments regarding our pending acquisition of Docutech announced this morning.

Fourth quarter earnings per share were $1.97 or $1.80, excluding net realized investment gains. Adjusted EPS for the quarter was up 41% compared to last year. Lower mortgage rates drove improved performance in our refinance and purchase business. Refinance revenue was up 153% in the fourth quarter and our purchase revenue increased 8%. In addition, our commercial business delivered record revenues, up 3% from the prior year. These favorable market conditions, combined with our operational efficiency, enabled us to achieve record margins in our Title Insurance segment. Overall, our Title Insurance segment posted a pre-tax margin of 17.8% or 16.8%, excluding net realized investment gains.

In our Specialty Insurance segment, our home warranty business continues to deliver strong returns, driven by growth in our real estate and direct-to-consumer channels, combined with lower loss rates. Our property and casualty business improved this quarter, benefited from lower claims severity and lower wildfire-related claims. The Specialty Insurance segment’s overall loss ratio declined to 51%, driving a pre-tax margin of 16.7% or 14.7%, excluding net realized investment gains.

Turning to the full year of 2019, the Company delivered earnings per share of $6.22 on revenue of $6.2 billion. Our pre-tax title margin was 16.1%, the highest in our Company’s history and our Specialty Insurance segment delivered a pre-tax margin of 13.2%, the highest margin achieved since 2014.

We remain optimistic with regards to our outlook. January refinance orders per day were up 45% from December, and up 96% compared to last year. The positive refinance order trends continue into February. Purchase orders per day were up 6% in January and this momentum continuing — is continuing into February. We believe that 2020 will be a good year for the purchase market, and we expect our commercial business will continue to deliver strong results this year. As we have previously discussed, we anticipate that our investment income will decline in 2020, driven by the Federal Reserve’s rate cuts in the second half of last year.

In summary, we are optimistic about market conditions in 2020 and the Company’s ability to continue to deliver strong financial results. Given our confidence in the prospects of our business and our commitment to maximize long-term shareholder value, we raised the dividend by 5% in January.

I’d now like to share a few thoughts on our pending acquisition of Docutech, a highly respected leader in the document technology solution industry. This acquisition reflects our ongoing commitment to invest and grow our core business. It demonstrates our dedication to improving the home buying experience for our consumers and driving the digital transformation of the real estate settlement process.

In closing, I’m proud of our Company’s performance in 2019. Our vision remains consistent to be the premier title insurance and settlement service Company for our employees, our customers, and our shareholders.

I’d now like to turn the call over to Mark for more detailed review of our financial results.

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Thank you, Dennis. In the Title Insurance and Services segment, direct premium and escrow fees were up 17% compared with last year. This increase reflects a 27% increase in closed orders, partially offset by an 8% decrease in the average revenue per order. The average revenue per order decreased to $2,603 due to a shift in the mix of direct title orders to lower premium refinance transactions. The average revenue per order for each major business line, however, increased during the quarter, with commercial up 2%, purchase up 4%, and refinance up 9%. Agent premiums, which are recorded on approximately a one quarter lag relative to direct premiums, were up 15%. The agent split was 78.9% of agent premiums.

Information and other revenues totaled $203 million, up 11% compared with last year. The increase was primarily due to growth in real estate transactions that led to higher demand for the Company’s title information products. Investment income within the Title Insurance and Services segment was $70 million, up 1%. Higher average balances, primarily due to strength in the tax deferred property exchange and warehouse lending businesses were largely offset by the impact of the decline in short-term interest rates on the Company’s investment portfolio and cash balances.

Personnel costs were $450 million, up 6% from the prior year. The increase was due to higher incentive compensation over time and temporary employee expense. Other operating expenses were $224 million, up 12% from last year. The increase was due to higher production-related costs as a result of the increase in order volume and higher software and professional services expense. The provision for title policy losses and other claims was $52 million or 4% of title premium and escrow fees, unchanged relative to the prior year. The current quarter rate reflects an ultimate loss rate of 4% for the current policy year with no change in the loss reserve estimates for prior policy years. Pretax income for the Title Insurance and Services segment was $284 million in the fourth quarter compared with $136 million in the prior year. Pretax margin was 17.8% compared with 10.4% last year. Excluding the impact of net realized investment gains, pre-tax margin was 16.8% this quarter compared with 14.2% last year. Net expenses in the corporate segment were $17 million, down $1 million compared with last year.

The effective tax rate for the quarter was 22.2%, lower than our normalized tax rate of 23.5%, due to discrete tax benefits, including research and development credits. Notes and contracts payable on our balance sheet totaled $728 million as of December 31, which consists of $548 million of senior notes, $160 million on our credit facility, $15 million of trustee notes and $5 million of other notes and obligations. Our debt to capital ratio as of December 31 was 18.5%.

With respect to the Docutech acquisition, we expect from [Phonetic] the entire $350 million purchase price with cash at the holding company. We do not expect to draw on our credit facility and we’ll continue to have $540 million of availability on our line after the close of the transaction.

I would now like to turn the call back over to the operator to take your questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Mark DeVries of Barclays. Please go ahead.

Mark DeVriesBarclays Capital — Analyst

Thanks. I have a two-part question for you. First is, how should we think about the success ratio here if order strength remains as strong for the balance of the year as what we’ve seen so far? And then given any commentary there, how should we think about your expectations for a more sustainable long-term pre-tax title margin? I mean, you’re clearly delivering results that are kind of well above guidance that you provided in the past.

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Yeah. Thanks, Mark, I’ll start with that. First of all, in terms of the success ratio, 2019 was obviously a great year. In the Title segment, it was 27%, which definitely exceeded our target of 60%. Looking forward to 2020, I mean we’re always focused on efficiencies, we’ve shown that over the years. I think we’re going to lose some of that success ratio in 2020. It wouldn’t surprise as it was higher than 60% for a couple of different factors. But one is we just continue to invest in technology in our systems, and so we were sort of incredibly efficient in 2019. I think we don’t expect nearly that same level of success ratio going into 2020.

In terms of the margins, we’re really proud of the 15.2% adjusted margin we had in ’19. There’s a few things going on. So, on the positive side, I mean, we feel great about the purchase market, feel great about the commercial market, but we’ve got headwinds. Dennis talked about our investment income headwind, given the fact that the Fed cut rates 3 times and that’s going to be a headwind for us. So, if you just look at what the Fed did at the second half of last year, that’s going to put about $30 million of investment income headwinds next year, which is tough to recapture that. So overall, we think margins will be really strong next year, just maybe not quite at the level they were in 2019.

Mark DeVriesBarclays Capital — Analyst

Got it. Thank you.

Operator

Thank you. Our next question is coming from Bose George of KBW. Please go ahead.

Tommy McJoyntKeefe, Bruyette & Woods — Analyst

Hey guys, this is Tommy McJoynt on for Bose. I want to ask how much cash remained at the holding company post the Docutech acquisition. And how much of that do you guys consider excess?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Well, we’re going to have — at the end of the year, we had $342 million of cash at the holding company. But we’re in the process of taking dividends from our primary insurance subsidiary and other subsidiaries to fund the Docutech acquisition. So typically, we like to have about $100 million of cash at the holding company and that’s roughly what we’ll have post-close. And then in addition to that, of course, we’re going to have the $540 million liquidity on our line that we’ll continue to have.

Tommy McJoyntKeefe, Bruyette & Woods — Analyst

Okay. Got it. And then when you talk about the headwinds to investment income next year, the $30 million, how much of that could potentially be offset by strength, and I guess, warehouse or 1031 balances, which you called out this quarter? And if rates remained favorable, the warehouse lender could remain robust. So just how much support can you get to that to the investment income?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Well, that’s a good point. So the $30 million number that I quoted, that’s assuming that balances just staying flat. So obviously if commercial continues to grow, if our 1031 exchange balances grow, which they are, so far in January, our exchange balances were higher than they were all of last year. So, that’s going to just make that $30 million number lower. So, a lot of it depends on what happens with balances. And so far this year, we’re seeing really strong commercial balances.

Tommy McJoyntKeefe, Bruyette & Woods — Analyst

Got it. And then just last one, if I could sneak it in. When you guys think about the accretion from Docutech, is it reasonable to assume something like a mid-teens ROI on that acquisition?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Well, I think the way that I would think about it is, we’ve got a confidentiality provision in our purchase agreement that prohibits us from disclosing financial information until the deal closes. But it’s going to be immediately accretive by the tune of about $0.10 this year on a pro forma basis and we were just thinking it would grow after that.

Tommy McJoyntKeefe, Bruyette & Woods — Analyst

Got it. Appreciate it.

Operator

Thank you. Our next question is coming from John Campbell of Stephens. Please go ahead.

John CampbellStephens — Analyst

Hey, guys, good morning. Congrats on a good quarter.

Dennis J. GilmoreChief Executive Officer

Thank you.

John CampbellStephens — Analyst

I wanted to touch right back on Mark’s — on the comments you made about the $0.10 of accretion. You said that’s on an adjusted basis, is that backing out the purchase amortization?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

No, it’s not. No. That’s just on a GAAP basis.

John CampbellStephens — Analyst

Okay. That would be on a GAAP basis. Got you. And it sounds like you guys can’t really provide much as far as details from Docutech. I guess, could you let us know — would that be falling under the info and other line within Title? Is that a new segment you might be creating?

Dennis J. GilmoreChief Executive Officer

No, it will be under information.

John CampbellStephens — Analyst

Okay. And then on the information services, the growth popped a pretty good bit this quarter. Is that just kind of tracking natural, I guess, just the resi trends, or is there something else going on there?

Dennis J. GilmoreChief Executive Officer

It’s definitely tracking our natural trends, our order trends, and we’re also seeing some acceleration in our data businesses going on there right now.

John CampbellStephens — Analyst

Okay. That’s good to hear. And then, obviously, I know you guys aren’t economists. But I wanted to get your view on the refi environment this year. I mean, the industry forecasters, it looks like they’re kind of grouped together down 20%, 25% or so this year. You guys put up really good January orders, looks like refi accelerated, give it, sequentially. I don’t know if that was expected or if it’s kind of ahead of schedule or if that influences your view for refi trends for the year. But all that to say, I guess, what are you guys thinking for refi this year? Would you take the over or under on the industry projections?

Dennis J. GilmoreChief Executive Officer

I don’t think I’m going to take either on that John, because I mean, it’s really a difficult one as you know. When we put our budget together a couple of months ago, we budgeted like the industry forecast, that down 20% range. We’re coming out of the gates very strong. January very strong, accelerated in February. So, I’m thinking right now we’re going to have a very strong refinance at least the first half of the year. And clearly the comps will get more difficult in the second half of the year. But, so far so good.

John CampbellStephens — Analyst

Okay. And you said February actually accelerated from January?

Dennis J. GilmoreChief Executive Officer

Yeah, we’re accelerating right now. So, very strong business.

John CampbellStephens — Analyst

Okay, great. Thanks, guys.

Dennis J. GilmoreChief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Chris Gamaitoni of Compass Point. Please go ahead.

Chris GamaitoniCompass Point — Analyst

Good morning, guys. On the $0.10 from Docutech, is that a full year number or is that the three quarters assuming that it closes sometime by the end of March?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

That’s a full year number, the $0.10. Yeah. So yeah, we expect it to close-in by the end of the first quarter.

Chris GamaitoniCompass Point — Analyst

Then I wanted to dig more into the title margin kind of color. It’s hearing that you were amazingly efficient. I’m wondering was most of that efficiency picked up in the centralized channel. It just looks as though the margin improvement, excluding the positive or negative NII benefit, really accelerated once refinance picked up. So, I’m wondering if we shifted more to a purchase-centric market, if we shouldn’t expect the same healthy level of success rates.

Dennis J. GilmoreChief Executive Officer

Yeah. Let me take — I’ll take the first cut at that and Mark can follow-on if there’s anything he needs to say. We’re doing very well. I mean, we’ve had six years of growing margins. ’19 was a record margin for us. So, overall performance is very strong. As Mark mentioned, our success ratio was very strong in ’19.

Coming into 2020, we’re very optimistic on the year by the way. We’re becoming more optimistic as we’ve entered the year; purchase strong, refinance strong. We’ll probably get a question on it. The commercial is strong. So, all we think will be strong performers in 2020. P&C and our home warranty business, the specialty business having a lot of momentum. So everything is strong going into 2020.

But the negatives as Mark mentioned will be the investment income. That’s we’re guiding lower, obviously because of the Fed rate increases last year. We’ll have natural increases in our expenses.

You kind of put all that together, we’re going to have a good year. And then specifically to your question, we are definitely getting benefits from the automation across the enterprise. We got direct benefits in our refinance business and we’re moving forward on other automation efforts across the purchase. So, if we have a very strong purchase market we will definitely benefit from that.

Chris GamaitoniCompass Point — Analyst

Okay. And following-up on specialty commercial, you noted increasing strength in the home warranty business. Curious what’s driving the accelerated growth. Is it marketing, etc. and kind of it seems like claims were better? Just wondering what’s the underlying event? Is that a pricing initiative you did? Is it weather? Any color would be great.

Dennis J. GilmoreChief Executive Officer

It’s a little of everything. Our channels are strong, both consumer direct and real estate. We’re growing on both right now, growing our consumer direct, probably disproportionately faster than our real estate channel right now. Our claim rate was low, our severities were low. So, all in all, the business is performing very well and we had favorable weather, primarily through the year, so beneficial across the board. That business is entering ’20 with a lot of momentum.

Chris GamaitoniCompass Point — Analyst

All right. Thank you so much.

Dennis J. GilmoreChief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Mackenzie Aron of Zelman & Associates. Please proceed with your question.

Mackenzie AronZelman & Associates — Analyst

Thanks. Good morning.

Dennis J. GilmoreChief Executive Officer

Good morning.

Mackenzie AronZelman & Associates — Analyst

Just one question from me. Following the Docutech acquisition, can you just talk about the appetite in 2020 for further tuck-in acquisitions? You talked in the past about potential agent opportunities or other things on the technology front. So, given where the capital is now kind of what the outlook is or the pipeline?

Dennis J. GilmoreChief Executive Officer

Sure, yeah. We’ve got a pretty good pipeline right now. So we’re excited about that. Our strategy has been very consistent and will remain consistent. We want to invest in the core title business and the settlement businesses like we have been. So no change there at all. We will look for tuck-in agency acquisitions where they fit both geographically and culturally. That’s very important in the title agency business. And then we’re going to look for either technology, data, or information businesses that either advance our title automation or advance our digital closing efforts. So really consistent with what we’ve been doing. We’ll continue to look for the same type of opportunities.

Mackenzie AronZelman & Associates — Analyst

Okay. Great. Thank you.

Dennis J. GilmoreChief Executive Officer

Thank you.

Operator

Thank you. Our next question is coming from Mark Hughes of SunTrust Robinson Humphrey. Please go ahead.

Mark HughesSunTrust Robinson Humphrey — Analyst

Thank you. Yeah. I’ll ask about the commercial open order up 11% seems pretty strong. Could you give some context around that? What’s happening there?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Yeah. We just continue to see strength in the commercial business. I mean, in 2018, it was a record year for us. Last year, our revenue grew by 3%, which we were really proud of and we’ve just seen the momentum continue into January and into February. So our order counts are strong. It’s coming from across the country various different asset classes. And so we’re real proud of how our commercial business is performing right now.

Mark HughesSunTrust Robinson Humphrey — Analyst

And then the — when we think about Docutech, I wonder whether you could just give a little more detail how they come to market, what kind of distribution? What’s their customer profile like? Where do you all add value with that transaction?

Dennis J. GilmoreChief Executive Officer

Sure. The core customers are lenders that provide mortgage docs. We think market-leading technology to provide mortgage docs. So a large percentage of the lenders right now. It allows us to get earlier in the transaction, number one, tighter to our lenders, and it allows us to advance our e-closing of the mortgage docs, which ultimately lead to e-settlement for us. So pretty excited about the fit. Excellent company, excellent leadership. We’re excited and happy [Phonetic] they’ll join us.

Mark HughesSunTrust Robinson Humphrey — Analyst

Is that — as you look at it, is this — how much do you get from revenue gains versus cost synergies on a go-forward basis?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

It’s more of a revenue play. It’s not a cost synergy play and it’s really just a strategic fit as Dennis mentioned, because it opens up the gateway for eClose for us. So it’s not an acquisition that we’re going to create value by taking a lot of cost out. We’re going to get value by creating new solutions for our customers.

Mark HughesSunTrust Robinson Humphrey — Analyst

Thank you.

Dennis J. GilmoreChief Executive Officer

Thank you.[Operator Instructions] Our next question is coming from Jack Micenko with SIG. Please go ahead.

Jack MicenkoSusquehanna Financial Group — Analyst

Hi. Good morning. Following on the last two questions, I guess, looking at the momentum in commercial open orders, do you feel like you can grow ARPO either in the first quarter or on a full year basis? I mean, obviously the refi numbers have sort of been pretty resilient here. But how do you think directionally about that? Because it seems like you’ve got a little more commercial in your back pocket going into the year?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

We do feel like we can grow it. Now, commercial isn’t a business where we’re going out and trying to raise the rates. I mean, I think we’re really — our ARPO is just a function of the types of deals that we close, but commercial prices have been rising, which helps our ARPO. There’s been a lot of high-quality deals that have happened. We’re getting a lot of business in California in commercial. So we’re a little overweight there. And so yeah, we think we can grow ARPO, but it’s more of a function of the deals that come to us as opposed to being proactive about and trying to grow ARPO.

Jack MicenkoSusquehanna Financial Group — Analyst

Okay. And then with Docutech, looks like they do business with about 175 lenders. I’m curious, what you think their market share is there, if you can share with us? And then secondly, on revenue, is it a subscription model generally or is it volume-driven? Just thinking about the cyclicality of the business.

Dennis J. GilmoreChief Executive Officer

Yeah. Let me take the second first. It’s a transaction business, not a subscription business. On market share, it’s tough to answer the question directly, because it’s hard to know market share for that segment. We think they’re a market leader though.

Jack MicenkoSusquehanna Financial Group — Analyst

Okay. Thank you.

Dennis J. GilmoreChief Executive Officer

And the business by the way is very sticky.

Operator

Thank you. Our next question is coming from Geoffrey Dunn of Dowling & Partners. Please go ahead.

Geoffrey DunnDowling & Partners — Analyst

Thanks. Good morning.

Dennis J. GilmoreChief Executive Officer

Good morning.

Geoffrey DunnDowling & Partners — Analyst

Mark, can you tell us what the total operating subsidiaries’ dividends were in 2019 and what that level is looking like potentially for ’20?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

You mean the dividends that we actually did in 2019?

Geoffrey DunnDowling & Partners — Analyst

Yes, I think originally the capacity was almost $290 million [Phonetic] to start the year. Just curious, what you actually did and what that expected number is for ’20?

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Geoff, we can get the exact number maybe offline. I would say that we maximized the dividends in 2019 and where we just take everything we can out of our subsidiaries, we’re not holding anything there. And obviously with Docutech, we expect to do the same thing. But I don’t have the exact numbers off the top of my head for 2019.

Geoffrey DunnDowling & Partners — Analyst

Okay. And then with Docutech, can you talk a little bit about what does that platform bring to you that are new capabilities versus deepening and broadening existing capabilities?

Dennis J. GilmoreChief Executive Officer

Geoff, let me start on that one. First of all, we’ve been working on advancing the eClosing, e-settlement efforts for the last number of years. We think it’s very important as we look forward that closing and this last — the settlement will move in that direction. Specifically, the Docutech, what it brings to us is the document creation, so we’re moving up the value chain into the length of creating the documents, we’ll have knowledge of the document creations much earlier. And I think what it does specifically for us is, it allows us to accelerate the eClosing of the mortgage docs as part of the settlement.

Geoffrey DunnDowling & Partners — Analyst

So, when you say create the document, are you talking about the digitized forms that could be sent to the borrower to sign in advance? Does it include any kind of e-notarization?

Dennis J. GilmoreChief Executive Officer

The first part, yes. E-notarization is a separate effort we have under way. But it’s actually the creation of the docs that can ultimately be signed in an e-format. Again, we think it simplifies the process. It actually enhances the consumer experience. And so, remember the mortgage docs are just a component of the ultimate settlement, but it’s a large component.

Geoffrey DunnDowling & Partners — Analyst

And is this something that you previously outsourced or just didn’t have the capability at all?

Dennis J. GilmoreChief Executive Officer

Previously, we’d get them from somebody like Docutech.

Geoffrey DunnDowling & Partners — Analyst

Got you. Okay. Thanks.

Mark E. SeatonExecutive Vice President, Chief Financial Officer

And Geoff, I just wanted to follow-up on your last question. So in 2019, our holding company had $385 million of dividends from its subsidiaries. And that’s both regulated and unregulated. And then in 2020, we’d expect it to be a little bit higher just because of the way that the calculations work, but that gives you a sense for our dividends.

Geoffrey DunnDowling & Partners — Analyst

Okay. Thank you.

Operator

[Operator Instructions] Our next question is coming from Mark Hughes of SunTrust Robinson Humphrey. Please go ahead.

Mark HughesSunTrust Robinson Humphrey — Analyst

I wonder just a quick update on the Specialty Insurance, your direct-to-consumer initiatives, the mix of business there based on transactions versus renewals or that direct channel.

Dennis J. GilmoreChief Executive Officer

I’m going to have Mark give the specifics on the volume transactions.

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Well, I would say that the direct-to-consumer, we didn’t have one direct-to-consumer order 10 years ago and now a significant part of the business comes from direct-to-consumer. About half of our business in home warranty comes from renewals and half of it is sort of new business that we get every year. And again, once you have those renewals, there’s an 80% chance that they renew after the first year. So, about half the book come from renewals and half from new business.

Dennis J. GilmoreChief Executive Officer

Yeah. And then I’ll just add from a strategy standpoint, we do very, very well in the real estate channel. And we’ve probably been a little underweight in the direct-to-consumer which we put a large effort into ’19 and that effort will continue into ’20 and beyond.

Mark HughesSunTrust Robinson Humphrey — Analyst

Thank you.

Operator

Ladies and gentlemen, this concludes today’s conference. We’d like to remind listeners that today’s call will be available for replay on the Company’s website or by dialing 877-660-6853 or 201-612-7415, and enter the conference ID of 13698002. The Company would like to thank you for your participation. This does conclude today’s conference. You may disconnect your lines at this time and have a wonderful day.

Duration: 30 minutes

Call participants:

Craig BarberioVice President, Investor Relations

Dennis J. GilmoreChief Executive Officer

Mark E. SeatonExecutive Vice President, Chief Financial Officer

Mark DeVriesBarclays Capital — Analyst

Tommy McJoyntKeefe, Bruyette & Woods — Analyst

John CampbellStephens — Analyst

Chris GamaitoniCompass Point — Analyst

Mackenzie AronZelman & Associates — Analyst

Mark HughesSunTrust Robinson Humphrey — Analyst

Jack MicenkoSusquehanna Financial Group — Analyst

Geoffrey DunnDowling & Partners — Analyst

More FAF analysis

All earnings call transcripts


AlphaStreet Logo



Enter your email address:


Source

Continue Reading
Partners
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Central Bank of India plans to exit housing finance subsidiary

Published

on

MUMBAI: State-run Central Bank of India is looking to sell its entire 64.40 per cent stake in its housing finance subsidiary – Cent Bank Home Finance (CBHFL), a top bank official said. The lender has floated a request for proposal (RFP) for appointing merchant bankers. The shortlisted bankers will help the lender scout for a potential investor to buy its stake in the mortgage financier.

“We plan to exit from Cent Bank Home Finance. The bank already provides housing loans, and so, we feel that there is no need to have a housing finance subsidiary,” Central Bank of India managing director and chief executive officer, Pallav Mohapatra, told .

The bank holds 64.40 per cent in the unlisted housing finance company, while the remaining stake is held by Housing & Urban Development Corporation (HUDCO), Unit Trust of India (UTI) and National Housing Bank (NHB).

The bank is facing operational curbs under the Reserve Bank’s (RBI) prompt corrective action (PCA) framework.

Mohapatra said the process of determining the valuation of the Bhopal-headquartered home finance company will begin as soon as the merchant bankers are appointed.

“Right now, it is difficult to say how much we will be able to realise through this disinvestment. Once the valuation is done, we will be in a better position to assess the amount we can raise. But, we expect a better valuation for CBHFL than its peers as it is a deposit-taking NBFC,” he said.

In 2016, the bank had tried to sell its entire stake in CBHFL, but the deal could not be concluded.

It had then reported that another state-run Bank of Baroda had shown interest in buying a majority stake in the mortgage lender. In 2016, the 64 per cent stake sale by the bank in its housing finance subsidiary could have fetched nearly Rs 250 crore, experts had said.

CBHFL’s net owned fund stood at Rs 111.57 crore as on March 31, 2019. Its advances stood at Rs 1270.9 crore while deposits were at Rs 482.33 crore as of end March 2019.

During FY19, it reported a net profit of Rs 16.28 crore, with earning per share of Rs 6.51.

In the April-December 2019, it had reported a net profit of Rs 8.92 crore as against Rs 9.87 crore in the first nine months of FY19. Its total assets stood at Rs 1,390.90 crore in the first nine months of FY20.

CBHFL was incorporated as ‘Apna Ghar Vitta Nigam Ltd’ and was subsequently renamed as ‘Cent Bank Home Finance Ltd’. It commenced operation in June 1991.

The home loan financier has presence in nine states through 18 branches.

Besides the sale of this strategic investment, the city-based lender is also in the talks to sell its 20 per cent stake in Indo Zambia Bank from where it is looking to garner around Rs 60 crore.

The other stakeholders in the bank include Bank of India (BoI) and Bank of Baroda (BoB) with 20 per cent stake each, and the Zambian government owning the balance.

“We are in talks with BoB and BoI to buy our stake in the bank,” Mohapatra had told reporters after the announcement of Q3 FY20 results.

The bank is also targeting to raise Rs 200 crore in the current quarter by monetising its real estate properties.

In the quarter ended December, the lender reported a net profit of Rs 155 crore as against a net loss of Rs 718 crore in the year-ago period.

The profitability was achieved due to better recoveries, higher income and reduction in cost, Mohapatra had said.

The bank’s recovery, including sale to asset reconstruction companies stood at Rs 1,273 crore. Recovery in written off accounts was Rs 520 crore during Q3 of FY20.

It is expecting a good recovery in some of the stressed accounts such as Religare Finvest, Coastal Energen Ltd and Flexi Tuff in the present quarter.

Gross non-performing assets (NPAs) in the quarter ended December reduced to 19.99 per cent from 20.64 per cent, while net NPAs improved to 9.26 per cent from 10.32 per cent in the year-ago period.

Mohapatra had said he expects net NPAs to come below 6 per cent by end this fiscal which will help the bank to come out of PCA.



Enter your email address:


Source

Continue Reading

Business

Fears about virus hit Asian American businesses

Published

on

NEW YORK — In Arizona, a burgeoning Asian American community fields xenophobic calls about a planned night market featuring Asian street foods. In New York, a dim sum restaurant owner worries he won’t make rent. In the San Francisco Bay Area, a local Asian American-owned restaurant chain is mulling temporarily shuttering one of its properties because of the downturn in trade.

In major U.S. cities, Asian American businesses are seeing a remarkable decline in customers as fear about the viral outbreak from China spreads. City and health officials are trying to stanch the financial bleeding through information campaigns and personal visits to shops and restaurants, emphasizing that, with just 15 cases diagnosed in the entire country, there is no reason to avoid them.

Business owners, some of whom have seen their customer traffic cut by more than half, are anxiously waiting for things to return to normal.

The freshly crowned Asian District in Mesa, Ariz.,was deep into organizing its night market when news broke that a case of the illness known as Covid-19 was confirmed at nearby Arizona State University.

Xenophobic comments on social media and phone calls started almost immediately, according to Arizona Asian Chamber of Commerce CEO Vicente Reid.

“I probably should stop picking up my phone altogether,” Reid said. “One lady was like, ‘Well, aren’t people coming to your event that are the cause of it?'”

The Feb. 29 food festival, modeled after popular outdoor Taiwanese markets, was designed to get the public acquainted with the district.

Mesa Mayor John Giles called the xenophobia directed at the event “ridiculous.”

“We certainly take any health crisis seriously but to make those kinds of connections is just offensive,” he said.

Organizers will be handing out specially made masks with playful Asian-food theme slogans like “Bao to me” and “Insert lumpia here.”

The virus has sickened tens of thousands of people, mostly in China. Fifteen people have been diagnosed with the virus in the U.S., all but two who recently traveled from China. U.S. citizens have also been diagnosed abroad, including 14 who were on a cruise ship quarantined off Japan and have been taken to hospitals in the U.S.

ALARM IN NYC

Vegetarian Dim Sum House has been a fixture in Manhattan’s Chinatown for 23 years, but suddenly owner Frankie Chu said he will not be able to make his rent this month.

Chu said sales have plunged 70% over the past two weeks at his no-frills restaurant. Three couples trickled in for lunch on a recent weekday. Normally, Chu said he gets up to 30 customers for lunch. At dinnertime, his narrow restaurant is usually packed with about 70 diners. These days, he gets about four.

Chu has sent some of his staff on vacation to cut costs. Under the circumstances, he will ask his landlord to forgive a 5% late fee normally charged.

“I don’t know how long I can stay here,” Chu said. “After 9/11, it wasn’t this bad.”

The crisis has alarmed New York City officials and business leaders, who have launched a campaign to lure people back to hard-hit communities in Manhattan, Queens and Brooklyn.

“Chinatown is bleeding,” said Wellington Chen, executive chairman of the Chinatown Partnership, a local business and community group. “This thing is thousands of miles away. This fear is really out of proportion.”

Small businesses in Manhattan’s Chinatown have reported sales drops of between 40% and 80% the past month as the viral outbreak in China spread, Chen said. In Flushing, business is down an estimated 40%, according to the Flushing Chinese Business Association.

For some businesses, it’s much higher. Derek Law, senior vice chairman of the America China Hotel Association, said business has dropped about 70% at a spa he owns in Flushing.

New York City is home to more than half a million Chinese Americans, the biggest population of any U.S. city. Some New Yorkers of Chinese descent are frustrated at being made to feel like foreigners because of a disease outbreak that feels as far away to them as any other resident.

“I’m probably more American than a lot of the people asking me about coronavirus. It’s a little annoying, to be honest,” said Christina Seid, owner of the Chinatown Ice Cream Factory, a neighborhood fixture that her father founded four decades ago with flavor offerings like mango and green tea.

Seid, whose great-grandparents immigrated to New York from China, said business has been slower than usual but added that the winter months are never good for ice cream shops. She said she feels optimistic that things will soon return to normal, relying on New Yorkers’ determination to get on with life.

ACROSS THE U.S.

With no confirmed cases of the virus in New York City, officials and politicians are trying to drive home the point that there is no reason to avoid any neighborhood, with many eating at Chinese restaurants and tweeting out photos under the hashtags #supportchinatown.

In Boston, Mayor Marty Walsh has launched a similar social media campaign, encouraging people to share photos of themselves supporting small businesses in the neighborhood with the hashtag #LoveBostonChinatown.

Allison Arwady, the Chicago Department of Public Health commissioner, said she and her colleagues “continue to field rumors” about threats to public health. She said the health risk is low and urged people to not fear visiting and spending time at restaurants or stores in Chicago’s Chinatown.

“Please do not allow stigma, xenophobia or fear to control your decisions,” Arwady said.

In the San Francisco Bay Area, the situation is dire enough that Sunny Wong’s family is considering temporarily closing one of the four restaurants it owns in Oakland’s Chinatown. Even some of his friends and patrons have told him about hearing of untrue rumors of people getting sick at one of his restaurants.

“People just are clueless. They hear stories and rumors and they just don’t really look for the facts in a situation,” said Wong, adding that he has had to cut back hours for his workers.

Carl Chan, president of the Oakland Chinatown Chamber of Commerce, said business owners have reported a drop of roughly 50% to 75% in business. The chamber is planning a Chinese New Year celebration, with Oakland Mayor Libby Schaaf encouraging residents to patronize Chinatown restaurants.

New York City Mayor Bill de Blasio recently visited Nom Wah Tea Parlor, the oldest restaurant in Manhattan’s Chinatown.

The restaurant has seen a 40% drop in business over the past three weeks, said manager Vincent Tang, whose cousin Wilson Tang took over the restaurant from his father. Normally, the restaurant fills up at lunchtime. But during a recent weekday, nearly half the tables were empty, although it was at least busier than many of its lesser-known neighbors.

“We’re lucky to have loyal customers,” said Tang, sitting near a row of green stools that he used to swing around in as a child. “Usually at this time we are packed and there is a line outside.”

Customers at Nom Wah said they were perplexed that others were staying away.

“It didn’t cross my mind at all,” said Kate Masterson, an artist digging into dumplings with her uncle at a booth beneath signed framed photographs of celebrities such as Kirsten Dunst.

“It’s not happening here,” she said of the outbreak.

Information for this article was contributed by Noreen Nasir and Terry Chea of the Associated Press.

SundayMonday Business on 02/23/2020

Enter your email address:


Source

Continue Reading

Business

Daily Financial News Analysis in Hindi – 22 February 2020 – Financial Current Affairs for All Exams

Published

on



Get FLAT 70% #Discount on all #Pendrive_Courses for Various Govt. Exams, Click here to know in detail OR #Call95_8004_8004.

👇 Choose Pendrive Course categories from links given below 👇

UPSC/CSE – This is our Flagship & Most Selling Course. This course covered Length & Breadth of UPSC vast syllabus and made by Elite & Very best faculties from all over India with StudyIQ Trust. Click here to watch Demo Videos, Course Content, Authors, Etc. UPSC Prelim Test Series 2020 – Our flagship test series for UPSC Prelims. More than 55-60% Success rate in 2018-19. Click here to enrol right now

SSC & Bank – This is our oldest Course, made by Founders of StudyIQ. 1000+ videos so far and new videos added every week. Click here to know more.

UPSC Optionals – We have covered almost all major UPSC Optionals. Click here to find yours

State Exams PSCs – Currently we have 18 States covered, More to come, Choose your state. Click to watch demo videos, know about authors and all.

Defense Exams – CDS, NDA, CAPF, SSB, AFCAT, Airforce. Click here to get into the Army, Navy or Airforce

SSC JE Exams – Civil, Mechanical, Electrical, Electronics. Click here to know more

RBI Grade B – Grade B is the most popular Job after IAS. This course made by well-experienced faculties of Study IQ. Click here to watch demo videos, Authors, Course content.

NTA NET – Start your preparation for UGC(NTA) NET prestigious exam. We have courses for both Paper 1 & 2. Click here to check

UPSC Prelim Test Series 2020 – Our flagship test series for UPSC Prelims. More than 55-60% Success rate in 2018-19. Click here to enrol right now

DMRC Exams – Courses for Delhi Metro Technical & Non-Technical Exams. Click here to know more

Insurance Exams – LIC, NICL, and other insurance exams. Click here to know more

Law Exams – Find courses for Undergraduate and Judiciary Exams. Click here to check

Railway Jobs – More than 1.5 Lac jobs to come this year. Start your preparation with us for Tech or Non-Tech posts. Click here to check the available courses

Teaching Jobs – CTET, DSSSB. Click here to know more

NABARD Grade A –

Have a doubt? Click here to start instant Chat with our Sale team or you can call 95-8004-8004

Download POKET NEWS app –

STUDYIQ on Instagram –

STUDYIQ [OFFICIAL] Telegram –

UPSCIQ Magazine (For Serious UPSC Aspirants) –

UPSC Mains Answer Writing Practice –

Bank IQ Magazine –

Daily Current Affairs –

Download All Videos PDFs –

Monthly Current Affairs –

Topic Wise Current Affairs –

Free PDFs –

Free Quiz –

Free Video Courses –
Follow us on Facebook –
Telegram –

The Hindu Editorial Analysis –
Current Affairs by Dr Gaurav Garg –
UPSC/IAS Burning Issues analysis-
World History for UPSC –
Indian History –

UPSC/IAS past papers questions –
SSC CGL + IBPS Quantitative tricks –
English Vocabulary –
Reasoning tricks for Bank PO + SSC CGL-
Error spotting / Sentence correction
Static GK complete-
Complete GK + Current Affairs for all exams-
World History – UPSC / IAS –
Learn English for SSC CGL, Bank PO
Science and Technology for UPSC/IAS –
Philosophy for UPSC/IAS –
Yojana Magazine analysis –
History for SSC CGL + Railways NTPC –

Source

Continue Reading

Trending

//onemboaran.com/afu.php?zoneid=2954224
This website uses cookies. If you continue to use the website, we assume your consent.
accept