UPDATE 2-First American posts Q4 profit, sees challenging 2010

Thu Feb 25, 2010 1:36pm EST

* Q4 profit $0.38/shr vs yr-ago loss $0.72/shr

* Posts 17 pct rise in closed orders

* Delays spin-off of unit

* Says fall in open orders to pressure Q1 results (Adds conference call details, updates share movement)

By Abhinav Sharma

BANGALORE, Feb 25 (Reuters) - U.S. title insurer First American Corp (FAF.N) posted a fourth-quarter profit, helped in part by higher closed orders, but said it expects a challenging market in 2010.

"Severe winter weather in many parts of the country have impacted open orders which will put pressure on our first quarter earnings," Chief Executive of the company's financial services group Dennis Gilmore said on a post-earnings call.

In the title insurance segment, default related activity has declined and the company expects a flattening of the revenue curve in 2010, First American said.

Title insurance and services segment generated a year-over-year operating revenue growth for the first time since the second quarter of 2006, the company said in a statement.

During the fourth quarter, the title segment reduced its employees by 340 and further reductions have been made in 2010, First American said.

Salary and other personnel costs rose 7 percent to $280.2 million, while other operating costs declined 7 percent to $189.4 million.

The company revised the spin-off date of a unit to June 1, citing pending approvals.

In January 2008, First American had said it would spin off its financial services business, which includes worldwide residential and commercial title operations, home warranty and homeowner insurance businesses, and its trust and banking services.


For the latest fourth quarter, the company earned $38 million, or 38 cents a share, compared with a net loss of $66.9 million, or 72 cents a share, a year back.

Analysts on average were expecting earnings of 38 cents a share, according to Thomson Reuters I/B/E/S.

Total revenue for the period rose 11 percent to $1.5 billion.

The company's direct operations closed 333,800 title orders for the fourth quarter, a rise of 17 percent from the year-ago period.

Title insurance guarantees that property owners have title to property and can legally transfer that title. Many lenders require that buyers have the insurance before extending loans.

First American, Fidelity National Financial Inc (FNF.N) and Stewart Information Services Corp (STC.N) are the top players in the business.

Shares of the Santa Ana, California-based company were down 2 percent at $32.72 Thursday afternoon on the New York Stock Exchange. (Additional reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier, Ratul Ray Chaudhuri)

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