First American Financial Corporation (NYSE:FAF) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 11:00 am ET

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First American Financial Corporation (NYSE:FAF) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Mark E. Seaton

loss reserve estimates for prior policy years. Pretax income for the Title Insurance and Services segment was $233 million in the second quarter compared with $210 million in the prior year. Pretax margin was 17.0% compared with 15.3% last year, excluding the impact of net realized investment gains and losses, pretax margin was 16.5% this quarter compared with 15.1% last year.

Net expenses in the corporate segment were $19 million, up 7% compared with last year. This quarter, we incurred $1.7 million related to the information security incident. Expenses associated with the incident are recorded in the corporate segment. Although we will incur additional expenses related to this incident, we expect them to be immaterial.

The effective tax rate for the quarter was 18.4% lower than our normalized rate of 24%, primarily due to the resolution of state tax matters from prior years. Cash provided by operations was $267 million, up from $211 million in the second quarter of 2018.

In April 2019 we entered into a new five-year, $700 million senior unsecured credit agreement. As of June 30, outstanding borrowings under the facility totaled $160 million. Notes and contracts payable on our balance sheet totaled $730 million as of June 30, which consists of 547 million of senior notes, $160 million on our credit facility, $18 million of trustee notes and $5 million of other notes and obligations. Our debt-to-capital ratio as of June 30 was 18.4%.

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