First American Financial Corporation (NYSE:FAF) Q2 2019 Earnings Conference Call Transcript
Jul 25, 2019 • 11:00 am ET
Dennis J. Gilmore
56.4% driving a pretax margin of 12.8% compared with 8.4% last year.
As we previously announced, we have completed our investigation into the consumer impact of our recent information security incident. Though the investigation identified only 32 impacted consumers, we take seriously our responsibility to keep our customers information secure and we regret the concerns this incident caused.
Turning to the outlook, the strong economy and lower mortgage rates continue to drive improvement in the market. We are encouraged by July's open order trend. Purchase orders were up 4% driven by strength in new home orders. Refinance orders were up 65%, which bodes well for the residential market in the second half of the year. In addition, we expect continued strong performance from our Commercial business. Although the anticipated reduction of the Fed funds rate will impact our investment income given current market business conditions and the efficiencies of our operation, we expect to deliver strong financial results in the second half of the year.
I'll now turn the call over to Mark for a more detailed review of our financial results.
Mark E. Seaton
Thank you, Dennis. In the Title Insurance and Services segments direct premium and escrow fees were up 1% compared with last year. This increase reflects a 1% increase in the average revenue per order with the number of direct title orders closed flat relative to last year. The average revenue per order increased to $2,620 primarily due to higher residential real estate values, partially offset by a shift in the mix of direct revenues to lower premium refinance transactions. The average revenue per order for purchase transactions increased 3%, while the average revenue per order for commercial transactions increased 1%.
Agent premiums which are recorded on approximately a one quarter lag relative to direct premiums were down 3%, the agent split was 78.9 % of agent premiums. Information and other revenues totaled $198 million down 4% compared with last year. The decline was primarily due to lower revenues from the Company's centralized lender businesses and international operations.
Investment income within the Title Insurance and Services segment was $71 million, up 37%. The increase resulted from higher average balances and rising short-term interest rate that drove higher interest income in the Company's investment portfolio and cash balances. Short-term rates impact our escrow deposits, operating cash, 1031 Exchange business and our bank where we held $4.2 billion in cash and debt securities as of June 30. Personnel costs were $423 million, down 1% from the prior year. The decrease was due to lower salary expense driven by lower average headcount during the quarter.
Other operating expenses were $194 million down 4% from last year. The decline was due to lower production and office-related expenses. The provision for title policy losses and other claims was $44 million or 4.0% of title premiums and escrow fees unchanged relative to the prior year. The current quarter rate reflects an ultimate loss rate of 4.0% for the current policy year with no change in