FAF Q3 Earnings Top on Solid Investment Income, Dividend Raised

First American Financial Corporation FAF reported third-quarter 2025 operating income per share of $1.70, which beat the Zacks Consensus Estimate by 19.7%. The bottom line increased 26.8% year over year.

The quarterly results reflect higher premiums, improved net investment income, expanded pretax margin, and a declining claim loss rate.

What’s Behind the Headlines for FAF?

Operating revenues of $1.9 billion increased 40.7% year over year due to higher direct premiums and escrow fees, agent premiums, information and other, as well as improved net investment income. The top line also beat the Zacks Consensus Estimate by 6.8%.

Investment income was $163.8 million in the third quarter, up 11.7% year over year. Our estimate was $146.6 million.

Expenses rose 11.7% to $1.7 billion. Our estimate was $1.6 billion.

FAF’s Segment Results

Title Insurance and Services: Total revenues increased 42% year over year to $1.8 billion. The upside was due to higher direct premiums and escrow fees, agent premiums, information and other as well as improved net investment income. Our estimate was $1.7 billion. Investment income of $153.1 million increased 12.1% year over year. The increase was primarily driven by higher interest income from FAF's investment portfolio. It was partly offset by lower interest income from operating cash due to a decline in balances as well as lower short-term interest rates.

Adjusted pretax margin expanded 130 basis points (bps) year over year to 12.9%. Title open orders increased 15.2% to 191,300. Title closed orders increased 16.6% to 141,800. The average revenue per direct title order increased 22% to $16,100.

Home Warranty: Total revenues increased 3.3% to $114.6 million, lower than our estimate of $115.8 million. Pretax income of $16 million increased 80% year over year. The claim loss rate declined to 47% in the reported quarter, primarily due to lower claim frequency attributable to favorable weather conditions. The pretax margin was 14.1%, expanding 600 bps year over year.

Corporate: Corporate pretax loss (excluding net recognized investment gains and losses) was $25 million in the reported quarter, up $6 million compared with the third quarter of 2024. The increase in the pretax loss was due to $3 million in higher interest expense in the current quarter and a favorable reserve adjustment that reduced the net loss last year.

FAF’s Financial Update

First American exited the quarter with cash and cash equivalents of $2.91 billion, up 69.4% from the end of 2024. Notes and contracts payable were $1.5 billion, down 0.07% from the end of 2024.

Stockholders’ equity was $5.3 billion, up 8% from the 2024-end level. The debt-to-capital ratio was 33. FAF bought back shares worth $34 million in the quarter. Cash flow from operations was $273 million, up 15.2% year over year.

First American Raises Dividend

The board of directors raised the dividend by 2 cents to $2.20 per share. The board declared a dividend of 55 cents in the third quarter.

Zacks Rank

FAF currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Chubb Limited CB reported third-quarter 2025 core operating income of $7.49 per share, which beat the Zacks Consensus Estimate by 26%. The bottom line increased 30.9% year over year. Net premiums written improved 7.5% year over year to $14.8 billion in the quarter. Our estimate was $14.4 billion while the Zacks Consensus Estimate was pegged at $14.5 billion. 

Pre-tax net investment income was $1.65 billion, up 9.3% year over year. Our estimate and the Zacks Consensus Estimate were both pegged at $1.8 billion. Revenues of $16.1 billion beat the consensus estimate by 1.6% and improved 7.4% year over year. Property and casualty (P&C) underwriting income was $2.2 billion, up 55% year over year. The Zacks Consensus Estimate was pegged at $1.4 billion. 

The Travelers Companies TRV reported third-quarter 2025 core income of $8.14 per share, which beat the Zacks Consensus Estimate by 35.4%. The bottom line increased 55% year over year. Travelers’ total revenues increased 5% from the year-ago quarter to $12.44 billion, primarily driven by higher premiums, net investment income, fee income and other revenues. The top-line figure beat the Zacks Consensus Estimate by 0.7%.

Net written premiums increased 1% year over year to a record $11.47 billion. The underwriting gain doubled year over year to $1.4 billion. The consolidated underlying combined ratio of 83.9 improved 170 bps year over year. The combined ratio improved 590 bps year over year to 87.3 due to lower catastrophe losses and an improvement in the underlying combined ratio, partially offset by lower net favorable prior year reserve development.

W.R. Berkley Corporation's WRB third-quarter 2025 operating income of $1.10 per share beat the Zacks Consensus Estimate of $1.03 by 2.8%. The bottom line increased 18.3% year over year. Operating revenues came in at $3.6 billion, up 8.2% year over year, on the back of higher net premiums earned as well as improved net investment income and higher insurance service fees. The top line beat the consensus estimate by 0.4%.

W.R. Berkley’s net premiums written were $3.4 billion, up 5.5% year over year. Our estimate was $3.3 billion.  The consolidated combined ratio (a measure of underwriting profitability) remained flat year over year at 90.9. The Zacks Consensus Estimate was pegged at 89.6.

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