The First American Corporation announced its preliminary financial results for the second quarter yesterday. The company reported total revenues for the quarter ended June 30, 2008 to be $1.7 billion, a decrease of 20 percent from the second quarter of 2007. Net income was $42.0 million, or 45 cents per diluted share.
“We are pleased by the performance of both the Financial Services and Information Solutions businesses in light of the current market environment,” stated Parker S. Kennedy, chairman and CEO of First American. “We are especially encouraged by the operating results within our Title Insurance segment. Clearly, these results reflect the hard work that began last year to restructure our Title operations and change our business model.”
The company reported additional second quarter highlights: – Title Insurance and Service (a segment of the Financial Services group) pretax income of $38.4 million, or a margin of 3.4 percent

- Title Insurance claims development in-line with expectations at 6.2% of operating revenue – Information Solutions group pretax income of $88.7 million, or a margin of 16.2 percent – A decrease in salary and other operating expenses, on a consolidated basis, of $179.3 million, or 14.7 percent – Operating cash flow of $71.2 million
The company also provided an update to previously announced plans of a business line spin-off. First American said that based on management’s recommendations, its board of directors has decided to delay the separation of its Financial Services and Information Solutions companies. “We remain intent on moving forward with our planned spin-off,” said Kennedy. “We still firmly believe that splitting our businesses will unlock the unrealized value of the Information Solutions business and strengthen the competitive position of both companies. However, given the uncertainty in the real estate and mortgage credit markets,” continued Kennedy, “we believe it is prudent to delay the split.”
The company reported that at the end of last week, it became aware of circumstances surrounding an investment held by First American Title Insurance Company (FATICO) in a title agent that may cause the investment to be impaired. The company said it is currently evaluating whether to impair its $37.3 million carrying value, but it assured investors that any impairment will not impact FATICO’s statutory surplus. First American stated that any necessary adjustments will be reported in the company’s Form 10-Q filing for the quarter.
To view First American’s complete preliminary second quarter earnings announcement, click here.