Santa Ana-based First American Corp. said Tuesday it plans to spin off its financial services operations, including its core title insurance business, into a separate publicly traded company.
The company’s title insurance and specialty insurance reporting businesses would be the core of a newly created public company, called First American Financial Corp.
First American’s remaining businesses, including its quicker-growing property information and mortgage information services, as well as its 75% interest in St. Petersburg, Fla.-based First Advantage Corp., will remain at the existing holding company, which is set to be renamed.
Dennis Gilmore, First American’s current chief operating officer, will become chief executive for the new company. Frank McMahon, First American’s vice chairman and chief financial officer, will be chief executive officer of the existing holding company.
First American chairman and chief executive Parker Kennedy will become executive chairman of both companies.
The spin-off is expected to be completed in the third quarter.
The transaction “will unlock the unrealized value of our information businesses, while strengthening the competitive positions of both companies,” Kennedy said in a statement.
The deal also should put each company in a better position to raise capital and align management, he said.
Wall Street has predicted a spinoff from First American since last year, following a $100 million acquisition of a Sacramento-based technology firm, CoreLogic Systems Inc. Kennedy long has felt that the non-title parts of First American have been undervalued.
The company’s title business, which vies with Florida’s Fidelity National Financial Inc as the country’s largest, has seen slower growth in the past few years during the housing downturn.
In separate news, First American said Tuesday it will report a loss of up to $50 million in the fourth quarter, with quarterly revenues of about $1.9 billion. The losses are related to costs associated with the California wildfires, investments writedowns and other charges.
First American also said its board has authorized the repurchase of $300 million of company stock.
