Headquarters: 1 First American Way, Santa Ana
Employees: 35,444; 2,395 in OC
Business: title insurance, financial services
Market value, as of April 4: $3.7 billion
12-month revenue: $8.1 billion, up 20%
12-month net income: $485 million, up 39%
Year in review: First American Corp., the nation’s No. 2 title insurer after Jacksonville, Fla.-based Fidelity National Financial Inc., spent 2005 buying, diversifying and holding its own in an industry that’s slowed from its 2003 peak.
First American has been buying non-title companies at a monthly rate in recent years. But title insurance, which boomed along with the housing and mortgage markets earlier this decade, remains king at 72% of 2005 revenue.
Title business was up for much of last year, though down in December.
In the fourth quarter, First American announced plans to buy Clearwater, Fla.-based TransContinental Title Co. Otherwise, First American has grown by grabbing business from rivals.
“We are all beating each other up all day long,” Chief Executive Parker Kennedy said last year.
In 2005, the company moved deeper into data services related to real estate, which it provides to lenders, real estate agents and appraisers.
First American scans documents, inputs digital and aerial photos and collects other data on buildings in 2,000 of the nation’s 3,000 counties.
In July, First American and other title insurers agreed to pay $37.8 million to settle charges over alleged kickbacks brought by California Insurance Commissioner John Garamendi.
Now First American and others are being investigated by New York Attorney General Eliot Spitzer.
What’s ahead: More slowing could be on tap for First American and other title insurers.
The company saw business slow in December and start to pick up again in January. Even so, the title insurance market could be off by about 10% this year, according to Gary Kermott, vice president of the company’s title insurance business.
Blame it on higher interest rates, which continue to cool the mortgage and housing markets.
Look for more buying. The company is looking at “quite a few fairly expensive acquisitions” in real estate information, Kennedy said in February.
Deals could expand the company abroad, according to Parker. Meanwhile, look for First American to continue shifting work to India to cut costs.
The company also is close to wrapping up the expansion of its Santa Ana campus. First American is adding nearly 300,000 square feet of space.
Wall Street’s take: Kennedy is at odds with Wall Street over the value of First American.
The executive said in February he believes the company should be valued closer to $6 billion, with its more profitable data services and its 77% stake in St. Petersburg, Fla.-based First Advantage Corp., a holding company for businesses outside real estate.
But analysts continue to view the company as a title insurer, with a discount for concerns about the housing and mortgage markets.
First American’s shares are off about 20% this year. In March, Raymond James Financial Inc. analyst Michael Vinciquerra lowered his 2006 profit outlook for First American to $370 million from $406 million.
“While we like the company’s overall business model, we think that sentiment in the title and mortgage space is not favorable at this time,” Vinciquerra wrote.
Overall, analysts expect sales of $7.6 billion this year and net income of about $400 million.
WHO’S IN CHARGE
Parker Kennedy
Chairman, chief executive;
chairman, First American Title Insurance Co.
Joined company: 1977, great-grandfather started company
Education: bachelor’s in economics from USC; law degree from Hastings College of Law, San Francisco
Career: Before joining First American, spent four years with Beverly Hills law firm Levinson & Lieberman. Became First American vice president in 1979, executive vice president in 1983. Became president in 1993 (company didn’t use chief executive title back then). Added chairman’s title in 1999 upon retirement of father Donald Kennedy.
Notable: Has run Los Angeles Marathon. Likes fly-fishing and golf.
