Despite former Chief Executive Kenneth DeGiorgio’s sudden departure in April following his arrest for allegedly choking a cruise passenger, things appear to be going well at First American Financial Corp.
DeGiorgio was succeeded by Chief Financial Officer Mark Seaton, who said he’s optimistic in the company’s long-term outlook. The company on Oct. 22 reported third-quarter revenue increased 41% to $2 billion, while net income was $190 million, compared with a net loss of $104 million a year ago.
“We’re at the early stages of the next real estate cycle, and our industry-leading investments in data, technology and AI position us to outperform as the market strengthens,” Seaton said in a statement.
Analysts, on average, expect 17% growth this year to $7.1 billion, followed by another 6% increase next year to $7.5 billion.
That’s quite a contrast from the prior four years ago, when the Federal Reserve dramatically raised interest rates. After sales soared to $9.2 billion in 1991 at the height of the mortgage boom, sales then dropped 35% to $6 billion in 2024.
Its share price declined from $80 each at the beginning of 2022 to almost $43 about 10 months later. Since then, the shares have recovered to $62.82 with a $6.4 billion market cap (NYSE: FAF).
Santa Ana-based First American, one of the nation’s largest title insurers, reported having 1,226 local employees, down 5% from a year ago, making it the 36th largest employer in Orange County.
U.S. Housing Market Challenges
“We continue to see two distinct market dynamics,” Seaton said during an Oct. 23 earnings call.
“Our commercial business delivered outstanding performance, while the residential market remains in a period of transition.”
Commercial revenues increased 29% to $246 million, driven by a rebound in the commercial market beginning in the third quarter of 2024, according to Seaton.
The company noted that areas, including the industrial sector, showed strength with data center transactions.
Seaton said that the purchase market has remained soft over the last three years due to affordability challenges and high mortgage rates.
Annual house price appreciation rose in October, the first uptick in nearly a year, breaking a 10-month streak of price drops, according to First American’s October Home Price Index.
“The uptick is modest and better characterized as price stabilization, as affordability headwinds and gradually increasing supply continue to sap price pressures,” Mark Fleming, chief economist at First American, said in a statement.
“Appreciation remains close to its slowest pace since 2012 and will likely stay that way through the end of the year.”
$18.6M Payout?
DeGiorgio served as CEO for three years prior to his departure.
He joined the company in 1999 as vice president of mergers and acquisition counsel before moving up the ranks to executive vice president and president of the international division.
DeGiorgio was terminated without cause one week after being arrested for choking a fellow passenger aboard a Caribbean cruise ship on April 3. He has since been charged and released and faces up to a year in prison if convicted of the charge.
The investigation is being led by the FBI’s San Juan Field Office, and the case is being prosecuted by the U.S. Attorney’s Office for the District of Puerto Rico, according to National Mortgage Professional.
Under his employment contract, DeGiorgio is eligible to receive an $18.6 million payout, according to an April 16 filing. This includes $7.2 million in severance pay, $9.1 million in accelerated vesting of restricted stock units and $2.2 million under the company’s supplemental executive retirement plan.
