Earnings Drop 9% at Insurer

Title insurer and financial data provider First American Corp. reported Wednesday a 9% decline in fourth-quarter profit as refinancing transactions slowed and mortgage applications dropped.

The Santa Ana-based company earned $86.1 million, or 93 cents a share, down from $94.1 million, or $1.07, a year earlier. Revenue rose 12% to $1.8 billion from $1.61 billion.

The results for the quarter ended Dec. 31 included a $13-million charge for litigation issues stemming from a federal jury’s decision last month ordering First American to pay $43 million in damages for hiring away an executive from rival title insurer Fidelity National Corp. First American is appealing the decision.

The charge, as well as a nearly 50% drop nationwide in refinancings, was a drag on margins at First American’s title insurance subsidiary, trimming them to 7.5% from 8.8% a year earlier. First American has set a goal of sustaining margins of 10% or better in its title operations. So-called refis are a high-margin business for the title industry.

Without the charge, First American’s profit would have increased 1%, Chairman and Chief Executive Parker Kennedy said. Its title business represents more than two-thirds of the company’s operations.

Despite the profit decline, four of First American’s six business units had improved earnings in 2004 when compared with 2003, Kennedy told analysts in a conference call. He credited the still-strong real estate market.

For the year, the company earned $365 million, or $4 a share, on $6.7 billion in revenue. Analysts had forecast a profit of $4.11 a share.

First American shares fell 34 cents to $36.17 on the New York Stock Exchange.