Data Push or Not, Title Still Drives First American

Parker Kennedy wants investors to view First American Corp. as more than a title insurer. It’s been a tough sell.

His work to diversify Santa Ana-based First American, likely Orange County’s oldest company, has been overshadowed by the housing boom.

Despite buying a non-title company a month in recent years, title insurance still accounts for 70% of First American’s sales,the same as in 2000 when the housing market began to take off.

Of course, Kennedy, First American’s chairman and chief executive, isn’t complaining about revenue. First American is on track to hit $7.4 billion in sales this year, up 10% from last year, according to Thomson financial.

Revenue Dip Seen

But he’s looking at next year, when analysts forecast First American’s revenue and profit will dip as housing markets cool. The company’s stock price,$42 at recent check with a market value of nearly $4 billion,reflects the prospect of a housing downturn.

That’s frustrating for Kennedy, who thinks Wall Street should give the company’s shares a premium for First American’s other real estate data services.

Title insurance is a mature business in which existing companies are well established, Kennedy said. Unless the housing market is on an upswing, expansion requires stealing customers from competitors, he said.

“We are all beating each other up all day long,” Kennedy said.

Title insurance rises and falls with the housing market. First American is less of a cyclical company today than a decade ago, Kennedy said. But it’s still at risk if mortgage rates spike and home buying and refinancing plunge.

Kennedy’s goal is to have title insurance account for 50% of sales. It could take five years to get there, he said.

First American, founded in 1889 as Orange County Title, stepped up its diversification into financial data businesses in the late 1990s.

The company hoards data at its neoclassically designed campus in Santa Ana and sells access to lenders, real estate agents and appraisers.

Construction is wrapping up on the final buildings of the 500,000-square-foot campus, Kennedy said.

The company scans documents, inputs digital and aerial photos and collects other data on buildings in 2,000 of the nation’s 3,000 counties, according to Evan Jafa, chief technology officer.

First American tracks information on 80% to 90% of properties trading hands nationwide, Jafa said.

“They have the largest real estate database in the country,” said Geoffrey Dunn, an analyst who tracks the company for Keefe, Bruyette