Headquarters: One First American Way, Santa Ana
Employees: 23,321; 2,712 in OC
Business: title insurer, business
information
Market value, as of April 1: $3 billion
Revenue for 12 months ended Dec. 31: $8.2 billion, down 4%
Loss for 12 months ended Dec. 31: $3.1 million, versus a profit of $287.7 million in the year-ago period
Year in review:
The housing market slump and crash of the mortgage market took their toll on Orange County’s oldest company.
First American, which vies with Jacksonville, Fla.-based Fidelity National Inc. as the country’s largest title insurer, took a hit in sales and profits last year, primarily due to the decline in business in title insurance work.
The company’s title business writes policies protecting buyers of homes and other real estate from claims contesting ownership. First American also offers home, home warranty, lender and other types of insurance.
Companywide revenue was down 4% to $8.2 billion in 2007, with the biggest year-over-year declines in the latter half of the year. The company posted a net loss of $3.1 million last year, compared to profits of $287.7 million a year ago.
The company’s core title operations saw a 9% drop in revenue last year,not bad considering mortgage originations were down 14% for the year, according to executives.
First American expects things to remain challenging in 2008. After years of emphasizing growth and gains in title insurance through acquisitions, 2007 saw a change in plans.
“In 2007, we set out a strategy to de-emphasize acquisition activity in the title company. We are going to continue with that strategy,” Chief Operating Officer Dennis Gilmore said.
What’s ahead:
Big changes are on tap. In January, the company pulled the trigger on a spinoff that had been in the works for more than a year.
The company plans to separate its core business providing title insurance for homes and other real estate from its growing data division.
Technically, the biggest part of First American,title insurance,is the spinoff. The company’s title and other insurance businesses are set to become a newly created public company called First American Financial Corp.
First American’s remaining businesses, including its property and mortgage information services,as well as its 75% interest in St. Petersburg, Fla.-based First Advantage Corp.,are set to stay with the existing holding company, which is to be renamed.
Both companies will stay in Santa Ana. Gilmore will head up First American Financial and its title and insurance business. Frank McMahon, the company’s vice chairman and chief financial officer, will be chief executive of the existing holding company, which inherits the information business.
The move clears up succession plans for a business that has been family-run since its founding in 1889. A successor for Chairman and Chief Executive Parker Kennedy had never been discussed publicly. He’ll remain as executive chairman of both companies, but will step back from day-to-day operations.
The title and insurance businesses did about $6.3 billion in revenue in the past year, which likely would put the spinoff at either the No. 2 or No. 3 spot among local public companies.
What First American calls its “information solutions” business,which executives long have felt is undervalued and misunderstood by Wall Street,did about $2.3 billion in revenue in the past year. That would rank it No. 9 among this year’s list of OC’s public companies.
Wall Street’s Take:
First American’s shares have slumped amid the housing downturn, falling nearly 40% during 2007.
News of the spinoff in January helped stopped the bleeding, with shares rising about 10% on the news. Analysts are upbeat that the value of the company’s information solution business, which many feel is undervalued, will be unlocked through the deal.
The title and insurance spinoff is expected to have a market value of about $2.4 billion, according to analysts. The information business could be worth about $1 billion.
,
Mark Mueller
WHO’S IN CHARGE
PARKER KENNEDY
Chairman, chief executive; First American Corp.
chairman, First American Title Insurance Co.
Joined Company:
1977, great-grandfather started company
Education:
bachelor’s in economics from University of Southern California; 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.
