First American Financial (FAF) Corp.’s title segment reported strong fourth-quarter revenue driven by a huge increase in refinance orders, according to the company’s latest earning statement.
FAF’s title segment produced $2 billion in fourth-quarter revenue, up 26 percent compared with the $1.591 billion one year ago. Overall, FAF reported 2020 revenue of $7.1 billion, up 14 percent compared with 2019.
“Our focus on automating title production and digitizing the closing process paid off in 2020,” CEO Dennis Gilmore said during a conference call with analysts, investors and journalists, according to a transcript provided by Seeking Alpha. “In a year of rapidly surging volume, we closed 32 percent more orders this quarter, than the prior year with just 6 percent more employees.”
Gilmore said FAF effectively managed its expenses, achieving a 53 percent success ratio, which contributed to a pretax margin of 18.9 percent.
For the quarter, FAF generated 354,600 opened title orders, up compared with 251,700 during 2019’s fourth quarter. The company reported 295,100 closed title orders during the fourth quarter, up compared with 224,200 one year ago.
The segment’s average revenue per title order declined to $2,457.
“Refinance revenue continued to benefit from low mortgage rates with revenue rising 79 percent over the prior year. Commercial rebounded strongly in the fourth quarter,” Gilmore said, according to the transcript. “Since the onset of the pandemic, commercial has been slower to recover than residential. Commercial revenue was down 39 percent in the second quarter, 29 percent in the third quarter and the fourth quarter improved to a 5 percent decline of an all-time high fourth quarter of 2019. We are encouraged that the order momentum over the last few months has picked up and we expect to have a strong commercial year in 2021.”
Gilmore said early indications point to a robust real estate market this year.
“We think this will be another good year for our commercial business,” he said. “While we are encouraged by the strength of our markets, we remain focused on the long-term opportunities of our business. In 2021, we will continue to invest in automation of our title production process and in the refinement of our digital closing platform.”