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First American’s Q2 Earnings Up 18% Over Last Year

""First American Financial Corporation"":http://www.firstam.com reported Tuesday that its net income during the second quarter was $33.8 million, or 32 cents per share.
[IMAGE] The Q2 profit posted by the California-based title insurance and settlement company represents an 18 percent increase compared to a year earlier, when First American reported earnings of $28.6 million.

The current quarter results include net realized investment gains of $3.2 million, or 2 cents per diluted share, compared with net realized investment losses of $23.2 million, or 13 cents per diluted share, in the second quarter of 2009, First American said in its ""earnings statement"":http://www.firstam.com/assets/downloads/news/2010-2q-press-release.pdf.

Tuesday's financial results were the first to be reported by the new trimmed-down version of First American since the company's analytics business was split off by its parent two months ago to form a separate publicly traded firm, ""CoreLogic"":http://www.corelogic.com.

""I am pleased with the progress we are making in the face of difficult market conditions,"" said Dennis J. Gilmore, CEO of First American Financial Corporation. ""The completion of the spin-off transaction on June 1, 2010, was


a substantial accomplishment for First American and its shareholders. We've come out of the spin-off solidly profitable, with a strong balance sheet and well positioned to continue to execute on our strategy.""

Despite a 30 percent decline in closed orders compared with the second quarter of 2009, First American's Title Insurance and Services segment delivered a pretax margin of nearly 7 percent.

The Q2 numbers got a boost from an increase in average revenue per order of 20 percent relative to the second quarter of last year. First American says this is the result of a shift in the order mix to higher premium resale transactions.

However, as the second quarter progressed and record-low mortgage rates emerged, new title orders for refinance transactions began to increase, the company reported. This trend accelerated in July, with open orders per day up approximately 8 percent over June.

Also in the second quarter, the company's commercial business picked up. Commercial title revenues were $61.5 million on closed orders, an increase of 17 percent over the prior year.

First American also reported that its loss provision in Q2 was 5.8 percent of title premiums, escrow, and other related fees, compared with 6.5 percent in the second quarter of 2009. The current rate reflects an expected claims rate of 4.8 percent for policy year 2010, the company said.

Gilmore said, ""We expect real estate and mortgage markets to continue to be volatile, but they seem to be gradually improving. More specific to the title business, today's low mortgage rates have improved the residential refinance market and the commercial pipeline appears to be building as the third quarter progresses.""