First American Financial Corporation FAF reported first-quarter 2025 operating income per share of 84 cents, which beat the Zacks Consensus Estimate by 29.2%. The bottom line surged 86.7% year over year.

The insurer’s results reflect improved investment income, solid performances in the Title Insurance and Services and Home Warranty segments, partially offset by higher expenses. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Behind the Headlines

Operating revenues of $1.5 billion increased 11% year over year due to higher direct premiums and escrow fees, agent premiums, as well as information and other and net investment income. The top line beat the Zacks Consensus Estimate by 3.2%.

Investment income was $135.2 million in the first quarter, which increased 5.7% year over year. The figure was lower than our estimate of $142.2 million.

Expenses increased 8.7% to $1.5 billion, in line with our estimate.

First American Financial Corporation Price, Consensus and EPS Surprise

First American Financial Corporation price-consensus-eps-surprise-chart | First American Financial Corporation Quote

Segment Results

Title Insurance and Services: Total revenues increased 12% year over year to $1.5 billion. The downside was due to higher direct premiums and escrow fees, agent premiums and information and other. Our estimate was $1.4 billion. Investment income of $137.7 million increased 18% year over year. The improvement was primarily driven by higher interest income from the company's investment portfolio.

Adjusted pretax margin expanded 310 basis points (bps) year over year to 7.9%. Title open orders rose 5.4% to 163,900. Title closed orders jumped 2.6% to 105,400.

The average revenue per direct title order climbed 11.4% to $3,920, driven by an increase in the average revenue per order for commercial transactions.

Home Warranty: Total revenues grew 2.5% to $107.8 million. The figure was higher than our estimate of $106.8 million. Pretax income of $25 million jumped 22% year over year. The claim loss rate was 37% in the first quarter, contracting 500 bps, primarily due to lower claim severity. The pretax margin was 22.9%, which expanded 360 bps year over year.

Corporate: Net investment income was a loss of $3.3 million in the first quarter against the year-ago quarter’s income of $10.3 million. The loss was primarily attributable to fluctuations in the value of investments associated with the company’s deferred compensation program. This amount was largely offset by lower personnel expense, down $11 million from the prior year, reflecting returns on the plan participants’ investments.

Corporate pretax loss was $28 million in the reported quarter, up $4 million compared with the first quarter of last year, primarily due to higher interest expense.

Story Continues

Financial Update

First American exited the quarter with cash and cash equivalents of $2 billion, up 19% from the end of 2024. Notes and contracts payable were $1.5 billion, which remained unchanged from the end of 2024.

Stockholders’ equity was $5 billion, up 2.2% from the 2024-end level. The debt-to-capital ratio was 31.2.

Capital Deployment

FAF bought back shares worth $28 million in the first quarter of 2025. In the second quarter, through April 23, FAF repurchased shares for a total of $19 million.

Zacks Rank

FAF currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

W.R. Berkley Corporation’s WRB first-quarter 2025 operating income of $1.01 per share matched the Zacks Consensus Estimate. The bottom line, however, declined 2.9% year over year. W.R. Berkley’s net premiums written were $3.1 billion, up 9.9% year over year. The figure was higher than our estimate of $3 billion.

Operating revenues came in at $3.5 billion, up 9.3% year over year, on the back of higher net premiums earned as well as improved net investment income, higher insurance service fees and other income. The top line beat the consensus estimate by 2.2%. Net investment income grew 12.6% to $360.3 million. The figure was lower than our estimate of $380.4 million. The Zacks Consensus Estimate was pegged at $346 million. Solid operating cash flow continues to drive growth in net investable assets.

Chubb Limited CB reported first-quarter 2025 core operating income of $5.68 per share, which outpaced the Zacks Consensus Estimate by 12.8%. However, the bottom line decreased 30.1% year over year.  Net premiums written improved 3.5% year over year to $12.6 billion in the quarter. Our estimate was $13.2 billion, while the Zacks Consensus Estimate was pegged at $13 billion.

Net investment income was $1.5 billion, up 12.2% year over year. The Zacks Consensus Estimate and our estimate for the same were both pegged at $1.6 billion. Property and casualty (P&C) underwriting income was $441 million, down 68.5% year over year. Global P&C underwriting income, excluding Agriculture, was $387 million, down 71.2%. Chubb Limited incurred pre-tax net catastrophe losses of $1.64 billion, wider than the year-ago quarter’s loss of $435 million. The losses include $1.47 billion from the California wildfires.

The Travelers Companies TRV reported first-quarter 2025 core income of $1.91 per share, which beat the Zacks Consensus Estimate of 69 cents. The bottom line, however, declined 29.3% year over year. Travelers’ total revenues increased 6.1% from the year-ago quarter to $11.9 billion. The top-line figure, however, missed the Zacks Consensus Estimate of $12.1 billion.

Net written premiums increased 3% year over year to a record $10.5 billion, driven by strong growth across all three segments. Our estimate was $10.2 billion. Underlying underwriting income of $1.6 billion improved more than 30% year over year, driven by strong net earned premiums. The consolidated underlying combined ratio of 84.8 improved 290 bps year over year. The combined ratio deteriorated 860 bps year over year to 102.5 due to higher catastrophe losses. The Zacks Consensus Estimate was pegged at 105.

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