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    FAF
    Earnings call· Jun 2026(Q2 FY26)

    First American Financial Corp FAF

    Jul 23, 2026 Source

    Executive summary

    First American Financial Corporation Q2 FY26 — Record Commercial Performance and AI-driven Automation

    First American Financial delivered strong Q2 FY26 results, driven by record commercial performance and significant growth in its banking operations. The company is aggressively leveraging AI to enhance operational efficiency and customer service, with key platforms Endpoint and Sequoia expanding their capabilities and geographic reach. While residential purchase and refinance markets remain challenged, the company maintains an optimistic outlook for the second half, underpinned by a robust commercial pipeline and disciplined capital management.

    Highlights

    5

    • Adjusted EPS increased 36% year-over-year to $2.08.

    • Commercial revenue increased 34%, setting a Q2 record, with 14 transactions over $1 million premium.

    • Average deposits at First American Trust grew 30% to $7.9 billion, with non-captive sources contributing 36%.

    • AI tools reduced form update time by 97% and Exam Assist QC processed over 50,000 orders with 92% no-human-review rate.

    • Endpoint platform scaled to first local title branch, with automation rates improving from 30% in Q1 to 39% in July.

    Concerns

    3

    • Purchase revenue increased only 2% due to affordability challenges and a 3% decline in closed orders.

    • Refinance activity softened as mortgage rates moved higher again, accounting for only 5% of direct revenue.

    • Success ratio was 66%, higher than the 60% target, due to investments in ServiceMac.

    Guidance & targets

    10
    CategoryTargetConfidence
    Earnings trajectory
    Optimistic about earnings trajectory
    high materiality
    High
    Commercial business performance
    On pace to deliver a record year
    high materiality
    High
    AI self-service use cases
    Expand from 1 to 7
    medium materiality
    Medium
    Endpoint platform rollout (Washington)
    Statewide rollout
    medium materiality
    High
    Endpoint platform rollout (National)
    Broader national deployment
    medium materiality
    High
    Sequoia platform deployment
    Deployed across California and Florida
    high materiality
    High
    Sequoia platform rollout (National)
    Broader national rollout plan
    medium materiality
    High
    Dividend
    Continue increasing our dividend
    medium materiality
    High
    Cash generation
    Strengthen
    medium materiality
    High
    Agent banking balances
    Grow
    low materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Title
    Adjusted total revenue increased 14% year-over-year, driven by record commercial performance. Commercial revenue grew 34% with a 31% increase in average revenue per order. Purchase revenue was up 2% despite a 3% decline in closed orders, while refinance revenue increased 18% due to a temporary rate decline. The adjusted pretax margin was 14.0%.
    Pretax margin: 15.7%Commercial revenue: $314 millionCommercial revenue growth: 34%Commercial average revenue per order: $19,980Purchase revenue growth: 2%Purchase closed orders decline: 3%Purchase average revenue per order growth: 6%Refinance revenue growth: 18%Refinance closed orders growth: 12%Refinance average revenue per order growth: 5%Refinance as % of direct revenue: 5%Agency business revenue: $820 millionAgency business revenue growth: 14%Information and other revenues: $295 millionInformation and other revenues growth: 12%Provision for policy losses and other claims as % of Title premiums and escrow fees: 3.0%
    		$2 billion14%—14.0% (adjusted pretax margin)
    Home Warranty
    Adjusted total revenue increased 1% year-over-year. The loss ratio improved slightly to 40% from 41% in the prior year, driven by lower claim frequency partially offset by higher claim severity. The adjusted pretax margin was 20.2%.
    Pretax margin: 21.3%Loss ratio: 40%Loss ratio YoY change: -1 percentage point
    		$112 million1%—20.2% (adjusted pretax margin)

    Operational metrics

    23
    Adjusted EPS
    $2.08increase of 36% from the prior year
    Q2 FY26

    Excludes the impact of net investment gains and purchase-related intangible amortization.

    Average deposits (First American Trust)
    $7.9 billionincrease of 30% from last year
    Q2 FY26

    Growth driven by deposits outside of captive title business.

    Deposits from non-captive title operations
    36%
    Q2 FY26

    Contribution of deposits from sources beyond captive title operations.

    ServiceMac deposits
    $1.7 billionup 76% from last year
    Q2 FY26

    Largest contributor to non-title deposits.

    ServiceMac loan portfolio growth
    54%during the quarter
    Q2 FY26

    Loan portfolio expansion drives deposit growth.

    1031 Exchange banking solution deposits
    $827 million
    Q2 FY26

    Rapid growth since launching less than 1 year ago.

    Agent banking title agents
    310increase of 37% from last year
    Q2 FY26

    Number of title agents banking with First American Trust.

    AI form update time reduction
    97%
    Q2 FY26

    Efficiency gain from using new AI tools to update 1,300 forms.

    Exam Assist QC processed orders
    50,000
    Q2 FY26

    AI-enabled quality control workflow.

    Exam Assist QC no-human-review rate
    92%
    Q2 FY26

    Rate at which orders processed by Exam Assist QC required no additional human review.

    ServiceMac virtual agent self-service success
    42%from 0% in April
    June 2026

    Improvement in self-service for loan transfer inquiries after virtual agent rollout.

    Endpoint automation rate
    39%from 30% in Q1 to 34% in Q2
    July 2026

    Automation rate for the Endpoint platform, expected to improve as the platform matures.

    Sequoia automation rate
    40%from 35%
    Q2 FY26

    Automation rate for the AI-powered title decisioning platform, expected to gain further as it learns and matures.

    Sequoia instant title decisioning for purchase transactions
    16%
    Q2 FY26

    Rate of instant title decisioning at order opening for purchase transactions in specific counties.

    Personnel costs
    $572 millionup 9% compared with the same quarter of 2025
    Q2 FY26

    Increase mainly due to incentive compensation expense and higher salary expense.

    Other operating expenses
    $319 millionup 15% compared with last year
    Q2 FY26

    Primarily attributable to higher production expense driven by higher volumes and increased software expense.

    Success ratio
    66%
    Q2 FY26

    Higher than target due to investments in businesses outside domestic Title operations, such as ServiceMac.

    Interest expense
    $30 millionup 33% compared with last year
    Q2 FY26

    Due to higher interest expense related to the growth in deposit balances at First American Trust.

    Effective tax rate
    22.8%
    Q2 FY26

    Slightly below the company's normalized tax rate.

    Debt-to-capital ratio
    31.4%
    Q2 FY26

    Excluding secured finances payable, the ratio was 21.5%.

    Commercial asset class premium mix
    Industrial 23%, Multifamily 16%, Development sites 14%, Retail 14%
    Q2 FY26

    Breakdown of commercial premium by top asset classes.

    Commercial asset class growth
    Development sites +33%, Multifamily +23%, Retail +59%, Data centers +147%year-over-year
    Q2 FY26

    Growth rates for key commercial asset classes.

    Commercial business growth (excluding data centers)
    11%year-over-year
    Q2 FY26

    Indicates broad-based growth beyond the high-profile data center segment.

    Industry KPIs

    3
    MetricValueDetails
    Capital returns$20 millionUSD
    Net investment income$164 millionUSD
    Prior year reserve developmentnet decrease of $11 millionUSD

    Product announcements

    4
    ProductTypeDetails
    Exam Assist QClaunch
    Virtual agent for loan transfer inquiries (ServiceMac)launch
    Endpointexpansion
    Sequoiaexpansion

    Risks & headwinds

    4
    Affordability challenges in residential purchase marketQ2 FY26, ongoing

    Purchase revenue increased 2%, partially offset by a 3% decline in closed orders.

    Mitigation: Focus on commercial business strength and AI-driven operational efficiencies.

    Softening refinance activity due to rising mortgage ratesQ2 FY26, ongoing

    Refinance activity has softened as mortgage rates moved higher again; refinance accounted for just 5% of direct revenue.

    Mitigation: Diversification of revenue streams through commercial and banking operations.

    Difficulty in forecasting commercial business strengthQ4 FY26

    It's hard to forecast and particularly the strength of it in Q4.

    Mitigation: Strong commercial pipeline and broad-based growth across asset classes provide confidence.

    Potential regulatory changes impacting title insuranceUnspecified 'soon'

    Bill Pulte posted about FHFA working on expanding title and expecting something soon from Fannie Mae.

    Mitigation: Monitoring developments; FHFA has already extended title acceptance product through November '27.

    What to watch in Q3 FY26

    5

    Commercial business strength

    Q3 FY26, Q4 FY26
    CurrentRecord Q2 revenue, 34% growth, 9% open orders growth in July
    TargetContinued strong growth, especially in Q4

    Why it matters

    Commercial performance is a key driver for overall revenue and Title segment margin expansion.

    When we look at the back half of the year, I think we can expand on that, but the level of expansion that we get from the 12.3% is really going to be tied closely to the commercial business, which, as you know🎣, it's hard to forecast and particularly the strength of it in Q4.

    Q&A highlights

    7

    How sustainable is the deposit inflow, especially from ServiceMac, and what is the cadence for investment income in the second half?

    Management highlighted the strategic advantage of their bank, growth in agent banking, 1031 solutions, and ServiceMac's loan growth. They expect net investment income (net of interest expense) to grow 8% year-over-year in the second half.

    “So investment income net of interest expense grew 8% year-over-year. And I think that 8% is a good proxy for the growth that you'll see in the back half of the year.”

    asked by Terry Ma · answered by Matthew Wajner

    2 min read6 chapters

    Detailed Narrative

    01

    Commercial Business Strength

    Commercial revenue surged 34% to a Q2 record of $314 million, driven by a 31% increase in average revenue per order and 14 transactions exceeding $1 million in premium. The company noted broad-based demand across 10 of 11 asset classes, with industrial, multifamily, and development sites being key contributors. Data center transactions saw a significant 147% increase, contributing to the overall commercial business growth of 11% excluding data centers.

    02

    First American Trust Growth

    The company's bank, First American Trust, continued to be a valuable countercyclical earnings driver, with average deposits growing 30% year-over-year to $7.9 billion. Non-captive sources, including ServiceMac ($1.7 billion, up 76%) and 1031 Exchange banking solutions ($827 million), now account for 36% of total deposits. The agent banking strategy is also gaining traction, with 310 title agents banking with First American Trust, an increase of 37% from last year.

    03

    AI-Driven Operational Efficiency

    First American is aggressively leveraging AI to improve internal processes and strengthen operating capabilities. AI tools reduced the time required to update 1,300 forms by 97%. The newly launched Exam Assist QC, an AI-enabled quality control workflow, has processed over 50,000 orders, delivering 92% with no additional human review, demonstrating successful deployment of AI at scale for quality control.

    04

    AI in Customer-Facing Services

    Tangible benefits from AI are also emerging in customer-facing service delivery. At ServiceMac, a virtual agent rolled out last month for loan transfer inquiries improved self-service success from 0% in April to 42% in June. The company plans to expand the number of self-service use cases from 1 to 7 by the end of the year, showcasing AI's potential in regulated servicing environments.

    05

    Endpoint and Sequoia Platform Rollouts

    The Endpoint platform successfully converted its first local title branch in Spokane, WA, with automation rates improving from 30% in Q1 to 39% in July. A statewide rollout in Washington is expected by year-end, followed by national deployment in 2027. Sequoia, the AI-powered title decisioning platform, expanded refinance coverage to 41 California counties and launched purchase capability in 5 counties, providing instant title decisioning for approximately 16% of purchase transactions. Sequoia is expected to be deployed across California and Florida by year-end, with a national rollout in 2027, aiming for 70% purchase and 80% refinance automation in title plant markets.

    06

    Residential Market Headwinds

    Despite strong commercial performance, the residential purchase market remained sluggish, with purchase revenue up only 2% due to a 3% decline in closed orders, reflecting ongoing affordability challenges. Refinance revenue increased 18% due to a temporary rate decline earlier in the year but has since softened as mortgage rates moved higher again, accounting for only 5% of direct revenue and highlighting the continued challenges in this market segment.

    AI-generated summary of the company’s earnings call. Not investment advice.