Profits and revenues for First American Corp. continued to slide in the fourth quarter, a result of the slowing national housing market and a big decline in title insurance business, the Santa Ana-based company said on Thursday.
The company’s profits dropped 11% to $104 million in the fourth quarter, versus a year ago. Revenue was down 2% to $2.2 billion, compared to a year ago.
Sales for 2006 were up 5% to $8.5 billion, but net income was down 40% to $287.7 million.
“This year was marked by a number of challenges for our company, including a general decline in real estate activity, home price depreciation and increased industry regulation,” said Chief Executive Parker Kennedy. “We achieved reasonable top-line growth with a 5% increase in revenues to a record level. However, we feel our margins fell short of where they can and will be.”
Wall Street was unfazed by the news. The company’s stock held at about $47 in early trading on Thursday. Its 52-week high is $48.47.
First American’s largest business segment, title insurance, saw a 44% decline in quarterly profit, before income taxes and minority interest, compared to last year. The unit’s profitability was hit by an increase in regulatory and litigation expenses, and an unrelated $155 million charge taken earlier in the year.
2007 “will be a transitional year for our title company,” Kennedy said. “In our quest to improve margins and returns on allocated capital, we may not experience the same level of revenue growth that we have seen historically.”
First American’s management is expecting a continued slowdown in home sales and an increase in defaults and foreclosures in 2007.
That will likely result in the company’s title, tax and flood businesses seeing a slower level of growth than that seen during the past several years.
These businesses will focus on keeping down expenses next year, the company said.
Many of the First American’s other business lines, particularly default, mortgage-risk analytics and employment screening, are expected to see a bigger increase in work next year, the company said.
