First American Financial Corp (FAF) 2010 Q3 法說會逐字稿

Welcome, and thank you all for standing by. At this time, all participants are on a listen-only mode. During the question-and-answer session, (Operator Instructions).

Today's conference is being recorded. If you have any objections, you may disconnect at this time. Copies of today's discussion material are available on First American's website at www.firstam.com/investor. Please note that the call is being recorded and will be available for replay from the Company's investor website and for a short time by dialing 203-369-1888.

We will now turn the call over to Craig Barberio, Director of Investor Relations, to make an introductory statement.

Good morning, everyone, and thank you for joining us for our third-quarter 2010 earnings conference call. At this time, we would like to remind listeners that management's commentary and responses to your questions may contain forward-looking statements, such as those described on page five of today's earnings release, and other statements that do not relate strictly to historical or current fact.

The forward-looking statements speak only as of the date they are made, and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Risks and uncertainties exist that may cause the results to differ materially from those set forth in these forward-looking statements. Factors that could cause these anticipated results to differ from those described in the forward-looking statements are also described on page five of the news release.

Management's commentary contains, and responses to your questions may also contain, certain financial measures that are not presented in accordance with generally accepted accounting principles. The Company does not intend for these non-GAAP financial measures to be a substitute for any GAAP financial information.

In the Form 8-K that we filed today, which is available on our website, www.firstam.com, the non-GAAP financial measures disclosed in management's commentary are presented with and reconciled to the most directly comparable GAAP financial measures. Investors should use these non-GAAP financial measures only in conjunction with the comparable GAAP financial measures.

With that said, joining us on today's call will be our Chief Executive Officer, Dennis Gilmore; our Executive Vice President and Chief Financial Officer, Max Valdes; and Mark Seaton, Senior Vice President of Finance. With that, I will turn it over now to Dennis Gilmore.

Thank you, Craig. In the third quarter, First American earned $0.31 per diluted share on total revenues of $1 billion. The Company's Title Insurance segment generated pretax earnings of $60 million for a pretax margin of 6.5%. Excluding the impact of net realized investment gains and losses, Title margins showed improvement relative to last year despite a 10% decline in revenue. Open orders increased throughout the quarter to 6600 orders per day, driven by strong refinance activity.

Orders in October are relatively stable compared to September, providing a strong pipeline as we move through the fourth quarter. If open orders continue to be strong, we will experience a better-than-expected first quarter, which is typically our weakest quarter.

Our Commercial Title business continues to build momentum, with total revenues of $73 million during the quarter, a 39% increase relative to last year. The growth in commercial activity is broad-based across both geographic markets and customer segments, and we also are benefiting by larger transactions, as our average revenue per order has increased by 50% when compared to last year.

Revenues in our International division were $77 million, down 4% compared to last year. The Canadian market remains stable, and the UK market continues to be soft, but is showing signs of stabilization.

Our default business generated revenues of $43 million during the third quarter, down approximately 30% compared to last year. However, default activity hit a low point in July, and revenues have increased each month since then.

Our Title business recently announced several new initiatives to enhance the service we provide our customers. During the quarter, our national lender and default businesses were rebranded under the new name First American Mortgage Services. The division provides title, settlement and valuation solutions to large national customers. Its focus is to grow market share by providing efficient, cost-effective solutions to its customers.

In addition, we launched a national platform that provides our customers who manage large REO portfolios a single point of contact that leverages our local closing capacity.

Data Trace, our title plant business, launched a fully-automated product called Title IQ, which enables customers to order title information products directly online.

Lastly, we expanded our AgentFirst mobile application for smart phones, providing real estate agents, where permitted, access to detailed property information and allowing them to place title and escrow orders directly from their phone.

Although we covered it in detail in our press release, let me comment briefly on our response to the foreclosure situation. We have devoted a substantial amount of time studying the issue and have determined that it is prudent to continue to insure sales of REO properties. Though we have supplemented our underwriting guidelines on these properties, given the actions taken by lenders to remediate deficiencies and to improve their processes going forward, we do not think a general indemnity is necessary. The lending community is taking this very seriously, and we support their efforts to address the concerns that have been raised.

Moving on to our other businesses, Special Insurance had another strong quarter. Total revenues were $74 million, with a pretax margin of 16.5%, both numbers showing improvement over last year. Our Property and Casualty continues to benefit from good claims experience, with a loss ratio of approximately 45%. Our home warranty business, despite seasonally high claims, still delivered better pretax margins compared to last year due to strong operation and cost management.

In terms of the market environment, we are encouraged by our order pipeline for the fourth quarter. However, we are planning for a challenging year in 2011, and we will continue to maintain a conservative balance sheet until we get further clarity on the health of the real estate markets. And we will stay focused on improving our financial performance, while taking advantage of select profitable growth opportunities.

I would now like to turn the call over to our Senior Vice President of Finance, Mark Seaton.

Thank you, Dennis. I will comment on our revenue reclassification, liquidity and capital. Beginning this quarter, we are providing a more detailed breakout of revenues in our earnings release and on our Form 10-Q. We have created a new line item titled Information and Other, which includes all non-risk-related operating revenue, such as title plant information, information reports, search products, appraisal and other revenues. Historically, these revenues were primarily included within our direct revenue line item.

The purpose of this reclassification is twofold. First, although we recognize that the reclass is a bit of a nuisance in the short term, over the long term, we believe the new information will be valuable to investors seeking to understand our key revenue drivers.

Second, the new revenue disclosures improve our representation of certain ratios. For example, our loss provision ratio is now determined by dividing our loss provision expense by the sum of direct premiums and escrow fees, and agent premiums. This ratio is a more meaningful representation of the claim losses relative to the risk-related revenue that generates such losses. By removing non-risk-related revenues from the denominator, our loss ratio will be higher than previously reported, but it will not affect our loss provision expense.

Our revenue per order is determined by dividing direct premiums and escrow fees by our closed orders for a given period. After removing non-risk-related activity from both our direct revenue and order counts, our revenue per order during the third quarter was $1300. This is primarily composed of refinance, purchase and commercial orders. During the third quarter, our average revenue per order was $800 for refinance, $1400 for purchase and $7,700 for national commercial orders.

This revenue reclassification does not affect total revenue or earnings for any period. The new revenue breakout includes the following line items. First, direct premiums and escrow fees includes risk-related revenues, such as insurance premiums, endorsements and closing fees. Second, agent premiums includes premiums received from the Company's agents and will remain unchanged from prior disclosures.

Third, Information and Other includes non-risk-related revenue, such as title plant information from our Data Tree and Data Trace subsidiaries, search products, appraisal and other revenues. Finally, investment income includes income from our cash and investment portfolios.

In addition to the revenue reclassification, we are also restating order counts to exclude all non-risk-related orders, such as search packages and information-related orders. To help investors understand the impact of these changes, we have included in the 8-K we filed this morning a more detailed explanation of the changes, as well as five years' of annual historical financials, in addition to quarterly financials dating back to the first quarter of 2009. You may also download this information from our website at www.firstam.com.

In terms of liquidity, we currently have $43 million of cash at our holding company. We expect to receive approximately $28 million in dividends from our operating subsidiaries between now and the end of the year. We also expect to make cash payments at the holding company of approximately $26 million. So we expect to end the year with approximately $45 million of cash at the holding company.

In addition to this cash, we also have $94 million of our $233 million CoreLogic stock investment at our holding company, and $200 million available on our credit facility. So holding company liquidity remains strong.

In the third quarter, we generated $55 million of cash flow from operations. Debt on our balance sheet totaled $297 million as of September 30. Our debt consists of $200 million funded on our credit facility, $48 million of trustee notes and $48 million of other notes, primarily related to acquisitions. Our debt-to-capital ratio as of September 30 was 13.3%.

Our cash and investment portfolio totaled $3.3 billion as of September 30. The portfolio is comprised of debt securities of $2 billion, cash and short-term deposits of $811 million, equity securities of $284 million, which is primarily related to our ownership interest in CoreLogic, and $209 million in less liquid, long-term investments. Overall, we have a high-quality portfolio, with 75% of our debt securities rated AAA and only 2% rated below investment grade.

On our last call, we noted that we were in the process of combining our New York underwriter, First American Title Insurance Company of New York, into our primary California underwriter. This process was completed in the third quarter. We have now merged or eliminated 16 title underwriters during the last two years, which reduces complexity and administrative costs and represents yet another step in our efforts to further simplify our operating structure.

In terms of our capital structure, we intend to remain conservative heading into 2011, as we prepare for a challenging market environment, while maintaining adequate flexibility to act on any opportunities that may arise.

I would now like to introduce Max Valdes, who will provide an overview of our financial results.

Thanks, Mark. On a consolidated basis, total revenues for the third quarter were $1 billion, down 9% from the same quarter of the prior year. Net income was $33 million, or $0.31 per diluted share, compared with $39 million, or $0.37, for the third quarter of 2009. The results for the current quarter include a small net realized investment loss of $400,000, while results for the same quarter of the prior year benefited from net realized gains of $5 million, or $0.03 per diluted share.

In our Title Insurance and Services segment, total revenues for the third quarter were $925 million, down 10% compared with the same quarter of the prior year. Current-quarter title premiums and escrow fees were $754 million, down 9% compared with the same quarter of last year. Direct premiums and escrow fees were down 6%, driven by a 13% decline in closed orders, partially offset by higher average revenue per order.

Average revenue per direct title order increased 8% to $1307 compared to the same quarter of last year, reflecting the strength of our Commercial Title business and the impact of price increases filed in 2009. These factors more than offset the increase in the mix of lower premium refinance transactions in the current quarter.

Agent premiums were down 12% in the third quarter, primarily due to the normal reporting lag of about a quarter. As a result, lower agent remittances this quarter reflect weaker second-quarter mortgage origination activity in 2010 relative to 2009.

Information and Other revenues totaled $149 million in the third quarter, down 11% compared to the same quarter of last year. The decline in these revenues was generally in line with a decline in overall mortgage origination activity and our direct order flow.

Investment income totaled $20 million, which was down 9% compared with the same quarter of last year, driven by the decline in interest rates that reduced our portfolio income.

Total expenses in the Title Insurance and Services segment were down 10% in the third quarter compared with the same quarter of last year. We have done a good job keeping expenses in line with revenues. Salary and other personnel costs and other operating expenses were $468 million, down $49 million or 9% compared with the same quarter of last year.

Agent retention was 80.6% of agent premiums, unchanged as compared to the third quarter of 2009. The impact of the geographic mix of agent premiums on agent retention outweighed the progress we continue to make on improving our agent splits.

Our provision for title losses was $50 million in the quarter, or 6.6% of premium and escrow revenue, compared with 6.8% last quarter and 6.0% in the same quarter of 2009. The loss provision rate in the current quarter reflects a lower expected ultimate loss rate of 5.2% for the 2010 policy year and adverse development in prior policy years, primarily 2006 and 2007. We continue to book to our actuary's best point estimate.

The Company's Title Insurance segment generated a pretax margin of 6.5%. Excluding the impact of net realized investment gains and losses, this was a 40 basis point improvement in pretax margin relative to last year. The improved margin was driven by better expense control, as revenues were down 10% compared to last year. The increase in the mix of revenue coming from higher-margin direct title operations also contributed to the improvement in pretax margin during the quarter.

Now, moving on to our Specialty Insurance segment, total revenues were $74 million, up 5% from the same quarter of the prior year. The current quarter includes the impact of $2 million in net realized investment gains. Overall, expense control remains strong, with total expenses essentially flat compared to the third quarter of 2009.

Our Property and Casualty business benefited from a favorable loss ratio of 45%, while lower personnel costs in the home warranty business more than offset higher seasonal claims.

The Specialty Insurance segment pretax margin was 16.5% in the quarter, up from 11.4% in the same quarter of the prior year. Included in the current quarter were net realized investment gains that improved the margins by 250 basis points.

To wrap up, corporate expenses were $16 million for the quarter, which was our first full quarter as a stand-alone company. At this point, we are tracking to our expectation of $60 million on an annual basis.

With that, I will turn the call back over to the operator to take your questions.

(Operator Instructions) Jason Deleeuw.

Thanks, and good morning. For October, the open orders were running just a little bit below September. Can you give us some color on what is driving that? Is that just less refi activity? Are you seeing any reduced foreclosure, sales, real sales in October with the Foreclosuregate issue?

Sure, Jason. This is Dennis. Now let me kind of recap the quarter, the third quarter. We were building through the quarter; we ended up at 6500 orders per day. In October, we were running at 6600 orders -- excuse me -- in September, we were running at 6600 orders per day.

October, it looks like we are going to run right around 6300 orders per day. And the mix is shifting just slightly, Jason. It is moving just slightly more to a refinance mix. We are running right now about 54% refinances. The foreclosure moratorium has not impacted our revenue at this point.

So you know, here's how we are looking at it. We're going into the fourth quarter with a strong inventory, and if it continues to build at this level, we are clearly going to have a better-than-expected first quarter, which is typically our weakest quarter.

Okay. That's encouraging. And then when you are thinking about your capital structure, and you talked about wanting to be conservative until you get better visibility, are you speaking specifically on the home purchase market? What are your thoughts -- what do we need to see in the market place for you guys to get more comfortable, and then maybe start to address the capital structure?

Sure. Well, we are just being conservative right now going into 2011. We are facing an MBA forecast right now at under $1 trillion, which would be the lowest market we have faced in probably 15 years. And we just think it is a prudent thing to do for the Company to be conservative just overall. It is not one business channel -- it is not one revenue line for us right now.

Now, we understand for us to hit our long-term objectives of ROE 10% to 12%, we are going to need to deploy capital. We are constantly looking at what we should do or what the best deployment of that capital is. So kind of going into 2011 right now, we are going to be conservative, and we also want to be opportunistic with our capital base. There could be some really interesting opportunities that could present themselves next year, if we are actually operating in a $1 trillion or less market.

Okay. Let us just say the refis -- I mean, the refis can be volatile. I mean, are you focused on that home purchase market -- is that the thing that really you need to get more confidence, or --?

Well, it is one of the key indicators. I mean, clearly if we see stability and actually increase in the home purchase market, it will show us signs that the overall economy is just improving. We treat a refinance market as really transient; it could be here today, gone tomorrow type of thing. So yes, at the end of the day, we would like to see some improvement in the home purchase market.

Okay, great. And then one last quick one. The share repurchase, believe you guys have talked about seeking to get an authorization in place. Is that still in the thinking, and could we expect something in the near term?

What we continue to do is just evaluate what the best use of our capital is. So we will continue to give that consideration. But just our overall philosophy right now, just kind of heading into this market, is to stay conservative and keep a lot of capital on the sideline and potentially have opportunities to deploy it.

Okay. Thank you very much.

Mark DeVries.

Dennis, I just wanted to clarify a point. When you indicated that the policy is that you don't see a need to require general indemnity on these foreclosed property transactions, does that mean you are not seeking it in certain cases? Or are you doing it on a limited basis with certain originators that might be -- or services that are a higher risk?

Let me have a few comments on that. I'm probably to hand it over also to Ken DeGiorgio, our EVP and Chief Legal Counsel, who has worked really closely with our underwriters over the last three weeks.

As I said in the press release, we have put a lot of detail in that press release our overall view on the situation. We've spent a lot of time studying it, as you can imagine. And we've just generally concluded overall that we do not need general indemnity across all lenders.

But with that, kind of let me throw it to Ken, and he will probably add a couple other comments.

Yes, Mark, thanks. I think to get specifically to your question, we are not going to ask for an indemnity with respect to any specific servicer. In the title insurance business generally when we insure products, sometimes we ask for an indemnity on a case-by-case basis.

And so these -- the insurance REO sellouts are no different. On a case-by-case basis, we may ask the seller to provide us an indemnity, just like we may do in any other sale transaction. So it is nothing unique to this situation.

Okay. And any color you can provide on -- or update on what has been rumored to be a developing negotiation with Fannie and Freddie to generate some type of a global indemnity agreement for the entire industry?

You know, we haven't heard any more developments on that. I understand that Freddie and Fannie were sort of without front trying to get a general indemnity. But so far, we haven't heard anything more developed on that than what is out sort of in the media generally now.

Okay. And has there been any pushback from services in general who have been approached about providing indemnity?

We understand that some servicers have indicated that under no circumstances would they provide an indemnity. That wasn't -- I will note that wasn't in response necessarily to us seeking one from any particular servicer, but it's just our understanding out in the marketplace that several of them have said that they had confidence in their foreclosure practices and saw no reason to provide an indemnity. And as indicated by our underwriting guidelines, we didn't see any need to request one.

Okay, great. And then finally, just any thoughts on -- it seems like there have been at least a few different approaches between you and your competitors on this issue. Any kind of thoughts on what impact this might have on market share?

I would imagine -- I mean, again, from what we've heard from some of the servicers is that if any of the title insurance companies required an indemnity, they may shift their business elsewhere. But as Dennis mentioned, we haven't seen any impact at all on our orders yet.

So who knows? I think the servicers might be the better ones to answer that question. But certainly, given what I had mentioned about the position of some of these servicers that they don't want to provide an indemnity, I would imagine there might be some market share shift. But we haven't seen anything yet.

Mark, I would only add -- this is Dennis -- we've made our decision and based our underwriting on a risk perspective, not from a market perspective.

Okay. Great. Thanks for your comments.

Tyler Bozynski.

Good morning, guys. I wanted to maybe kind of drill down on the loss provision. It's kind of been jumping around over the past couple of quarters, and maybe just what your expectations are for 4Q. Maybe talk about the confidence you have that we won't continue to see some of these adverse adjustments that we've seen in some of the historical policy years going forward.

Sure. This is Max. I'd answer that, as we've said, we feel good about policy year 2010, and the loss rates for that are coming in in the low 5%s. The two policy years that are developing a little bit worse than expectations are 2006 and 2007.

So we feel -- it is hard to answer your question because you just never know what's going to happen in a subsequent quarter. But what we are expecting is no more adverse development in those two years. We expect to see a rate low to mid fives. If we have a little bit more bleeding in those two years, it could be closer to six.

Okay, great. Did you all talk about the percent of closed orders that were refinanced versus purchase, the mix, this quarter?

We didn't mention it on the script, but we closed 51% -- our closing ratio on refinancings were 51%; and our openings, our current openings are running at 54%.

Now I said though -- [make sure] I'm clear on that. Our percentage of closing is 51%. Our closing ratio was about 66% for the quarter.

And you said -- and the percent of refis has kind of jumped up a little bit here into October?

Slightly. We've moved from the very low 50s to the mid 50s.

So would you continue to maybe see a little bit more pressure on the revenue per order going forward in the Q4? Do you think we've bottomed or --?

Yes, let me give it some thought on that perspective. We had a nice uptick year-over-year on this in the quarter. We were up about 10% on our average revenue per order.

Now, we are anticipating probably another drop of low to mid single digits going into the fourth quarter, really driven by a continued shift upward in the refinance mix. Now, could offset -- that could be offset by increases in our commercial business to continue to remain strong.

Right. And then lastly, just kind of a bigger picture. You talked a little bit about the new MBA forecast of less than $1 trillion. I know you've talked about various long-term objectives and origination environment with a base of $1.5 trillion. Is there anything you're doing differently looking into 2011 in your planning or your outlook, based on this new forecast, or any changes there?

Sure. Let me just give -- kind of give everybody a kind of an outlook, just an overall outlook as we look into 2011.

Clearly, we are looking at a challenging market. The MBA just came out with a forecast of under $1 trillion, and I think as I mentioned earlier, I think that is probably the first time it has been under $1 trillion in 15 years.

We have built pipelines strong into the fourth quarter. If that continues, we will probably do better than we anticipate in the first quarter, which is historically our weakest quarter seasonally. We are planning on it. We have restructured this business aggressively over the last three years. We've demonstrated, I think, very strong expense management.

Kind of to that point, when I look third-over-third, our revenue is down 10% on the Title business and our margin is actually up. All of our key ratios are right where we want them to be or improving.

We've maintained and we are going to continue to maintain a conservative balance sheet as we go into 2011. We are optimistic, actually. We actually think we are very well positioned right now going into this market. We feel we are probably the most well-positioned title company as we enter 2011.

We intend to continue to improve our performance, actually, going into 2011. It is philosophically how we want to run the business. No matter what the market throws at us, we think we can continue to improve. Now, we won't always succeed at that, but that is our objective. We do expect to be profitable throughout 2011.

And last comment I'm going to make, again on this, is we like our conservative balance sheet, and if the market could be as bad as it may be, there could be good opportunities for us to deploy capital.

Okay, great. I really appreciate it.

Nat Otis.

Actually, just one question. A lot of good questions have been asked. Going into 2011, certainly, it looks like things at least might start the year off a little better than expected, with all the refi business going through. Any thoughts on when and if, if things start to trail off, as MBA has kind of implied, what you can do from an expense standpoint to kind of -- what further you can do from an expense standpoint to kind of restructure yourself to meet that lower estimate in 2011?

Sure. I'll give you just a little bit more color on that. First of all, we don't have to do any kind of -- I will call it structurally -- changing our structure. We've been working on that for now a couple years, so we are very well structured.

Clearly, if the market trails off, we'll have to adjust some of our expenses, but that just kind of normal operations for us. So I think we are just well-positioned going into this market. And you know, we are going to deal with whatever the market throws at us.

But as you are hearing in some of my comments also too, I think there is opportunities for our company to grow in this market. I think it will put challenges on other competitors, and I think we can take advantage of that.

All right, fair enough. So ultimately, structure-wise, you are pretty comfortable with where you are. It would be more of the blocking and tackling of headcount up or down, assuming orders started to trend off from here?

That's exactly how we are looking at it.

Okay, thank you.

(Operator Instructions) Adam Klauber.

Thanks. Commercial looked good during the quarter. How does the pipeline look for the next two quarters? And seasonally, isn't fourth quarter usually a pretty good quarter for Commercial?

Sure. Let me give you some comments on that. Yes, definitely, the Commercial business has built all year long for us. It looks like last year, 2009, was definitely our low point.

Now, when I say Commercial is improving I should put a little color on that. It is still a lot of distressed transactions. But from our perspective, there is an increase in the velocity of the transactions, so that's strong.

The second thing that's encouraging to us is the size of our average revenue. It has grown almost 50% over last year. So the fourth quarter looks good, and we are hoping that the trend that has built all through 2010 goes into 2011.

Great. It seems like you went through a fair amount of effort to break out the information in the Other category in your financials. Is that -- and that represents a number of different line items, as Mark mentioned. Is that an area in the near term we can look for some growth?

Hi, Adam. This is Mark. Yes, I mean, that's one of the reasons why we decided to break out that line item, is because it is going to have a slightly different trajectory than our direct and our agent premiums.

We've got a lot of our International revenue included within Information and Other, and it is really non-risk-related revenue. And International is generally going to grow at a higher rate overall than the domestic business. And so -- and we have other emerging businesses, like appraisal and some other things.

So that's one of the reasons why we broke it out, because we think it will have a different -- different drivers than just our core domestic business.

Great. Just a follow-up on that. I know you have discussed 2011, which is always challenging. But I guess one summary question. If we are in an under $1 trillion market, can you hold the margin that you had in 2010 in 2011?

I'm not going to make a prediction on the margin. I can just tell you we are going to continue to try to drive efficient as we can, just like we have over the last couple years.

And the last comment I will make on it, too, is a lot of it will depend on what the contribution of the revenue is. If we see an increase in our resale business, that will definitely help the margin.

Okay, and one last question. With the foreclosure issue, have you received any claims related to that, or have you received any legal actions related to that?

At this stage, no.

Great. Thank you very much.

[John Bockler.]

Yes, gentlemen, on the anniversarying of the rate increases that you saw in 2009, when did those fully anniversary, and are there any rate increase applications coming?

The majority of them hit us in the second quarter of 2009, so we are seeing the impact right now, and that helped our average revenue per order.

In 2010, we are still seeking rate increases where appropriate, where our returns are inadequate. But it is in a much smaller scale, around six or seven states. And again, that is happening more in the second half of the year.

And per your comment, I would as assume none of those states are the major states that you are doing business in?

More of the minor states.

Okay. And you did some further breakout, which is helpful, this quarter. And last quarter, I had asked on the call regarding breaking out escrow. Have you given more thought to that, so that we could better clarify on the revenue of escrow versus title?

Thanks for the question, John. This is Mark Seaton. We actually looked at it, and at the end of the day, our escrow revenue really tracks our insurance premiums really tightly. It's about a 95% correlation, because typically when we get a title order, we're going to get an escrow order, in many parts of the country. So breaking out escrow really doesn't -- it really doesn't add a lot, because they are going to -- our premiums and our escrow are really going to behave exactly the same.

So when we looked at it, we said, what's not going to behave the same? And that is kind of when we came up with this Information and Other revenue line item. So we thought that was just sort of a more useful measure for investors to analyze this by.

Well, is escrow then included in the Information side or in the Title side?

Escrow is included on the Title side, in our direct premiums and escrow fees. Because escrow revenue, we put it in there because it is somewhat risk-related; I mean, we do get escrow claims. About 10% of our claims come from escrow cases. And therefore, we thought it was appropriate to include escrow revenue in direct premiums and escrow.

I guess what I was looking for was trying to see the escrow profitability trends and title profitability trends broken out, so that we could see. Yes, I understand your point that if you have a title, you have an escrow. What is the margins on each of those and how are those tracking? I guess that was more the point -- or more the question.

Well, we wouldn't really break out escrow earnings, profits -- earnings and title earnings. I mean, typically, it is all kind of mixed in together. And so we wouldn't really break out title earnings and escrow earnings separately.

And we just don't really feel like it adds that much to break out the revenue separately, considering they trend the same. So I'm not sure if that answers your question, but we would be happy to talk about it off-line if you would like.

Great. Thank you.

That is all the time we have for questions today. That concludes this morning's call. We would like to remind listeners that today's call will be available for replay on the Company's website or by dialing 203-369-1888.

The Company would like to thank you for your participation. This does conclude today's conference call. You may now disconnect.