First American Financial Corporation (FAF) Q1 2008 Earnings Report, Transcript and Summary

Welcome to The First American Corporation First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]. A copy of today's press release and the accompanying presentation are also available at the company's website at www.firstam.com/investor. Today's conference is being recorded, if you have any objections you may disconnect at this time. A replay of the call is available on First American’s investor website or for a short time over the phone by calling 203-369-1987. Now I will turn the meeting over to Ms. Jo Etta Bandy, Senior Vice President of Corporate Communications to make an introductory statement.

Thank you, and good morning, everyone. 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 two of the accompanying slides and other statements that do not relate strictly to historical or current facts. 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 exists that may cause results to differ materially from those set forth in these forward-looking statements. Factors that could cause the anticipated results to differ from those described in the forward-looking statements are described on slide two. As indicated on slide three, management's commentary and responses to your question also contains 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 slide presentation, these non-GAAP financial measures have been 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. Joining us on today's call will be our Chairman and Chief Executive Officer, Park Kennedy; Dennis Gilmore, First American's Chief Operating Officer; Frank McMahon, Vice Chairman; and Max O. Valdes, Interim Chief Financial Officer. During the call, we will be referring to a slide presentation, which is currently available on First American's website at firstam.com\investor. At this time, it is my pleasure to turn the call over to Park Kennedy.

Thank you, Jo, and thank you to everyone on the call. Our earnings for the quarter were $0.32 a share, down from an adjusted $0.68 per share during the same quarter of '07. Well, we never like to see a decline in earnings, we felt that this quarter’s results demonstrated two things. Number one, considerable progress by our Title Insurance segment toward the goal of having the best margins in the business, and number two, good results in our Information Solutions businesses, particularly in light of the difficult real estate environment. Directing your attention to slide four of our presentation, our Information Solutions company experienced a very significant 55.2% increase and adjusted pre-tax income when comparing this quarter to Q4 of 2007. The Information and Outsourcing Solutions segment of this group, which includes among other things are tax monitoring, flood certification, and default products posted its highest pre-tax income and margins since 2005, a solid performance. The Title Insurance segment showed a profit under very difficult economic conditions of meaningful importance or the expense and employee count reductions made during the quarter. These measures and many others will bear fruit in the second quarter and beyond. Our order counts while softening in recent weeks remain at a level where continued profit improvement is a very realistic goal. Our growth in the international title division continues to be strong and helps to offset challenging U.S. real estate markets. I would like to give everyone an update on our previously announced plan to separate our Financial Services and Information Solutions companies. Although we originally expected to close the transaction in the third quarter, we don't believe that is likely… that it is likely that we will meet that target, but as indicated in our press release we are making progress. Operationally, we have already separated the companies. Frank has stepped down as Chief Financial Officer and he is working full time as the Head of the Information Solutions company. Dennis has relinquished his role with the Information Solutions company and is working full-time leading the Financial Services company. We have restructured the management organization of both companies and have made meaningful progress in identifying and resolving the necessary inter-company relationships post been [ph]. In addition to allocate… to allocating operating assets, we are also making substantial progress in separating our offshore resources and we have retained a specialist to help in the naming and branding strategy for the Information Solutions company. We are taking a fresh look at the allocation of our equity and debt capital between the two companies with the expectation that we will move more equity capital to the Financial Services company with the Information Solutions company taking on more debt. There obviously are a number of other things we need to complete including finalizing arrangements with certain third parties and obtaining necessary regulatory approvals. We will continue to update you as appropriate in the future. Earlier this month we were pleased to welcome five new directors to our Board. Each of these new directors have already made important contributions to the company. At this point, I will turn the floor over to Dennis who will report on our Financial Services company.

Thanks, Park. The Title Insurance segment earned a profit in the first quarter despite of the challenging operating environment. Please direct your attention to page eight of the earnings presentation for information on the Title Insurance segment. The company opened 595,000 title orders during the first quarter for an average of 9,600 title orders per day, a decrease of 17% over the prior year. The company closed 389,000 title orders during the first quarter, a decline of 15% relative to the first quarter of 2007. The closing ratios for the first quarter were 66%, slightly higher than the 64% experienced in the first quarter of 2007. A closing ratio remains strong despite the higher mix of re-financed activity during the quarter. Direct revenues declined 18% over the prior year, due to decreases in the number of title orders closed and the average revenue per order. Our average revenue per order declined 4% relative to the prior year as a result of the increase mix of refinance transactions, a decline in home values, and the shift in the mix of new mortgage loans to include more conforming loans and less jumbo product. Our agency revenue declined 34% over the prior year. The company experienced a sharp drop in revenue from its large agents focused primarily in the western states. First American will continue its long-standing commitments to the agency business, which serves as an important distribution channel throughout much of the country. However, we will continue to analyze all of our agency relationships, and we are taking appropriate action for those agents not meeting the company's minimum standards on remittances, claims, and other factors. The agency business remains a key area focus for the company. Salary and other personnel costs decreased 16% over the prior year. During the first quarter, the Title segment reduced its number of employees by approximately 1,000, producing an annualized cost savings of approximately $58 million. We will continue to manage our labor costs aggressively and we can expect continued reductions during the second quarter. For the month of April, we reduced the number of employees in the Title segment by an additional 300. Effective March 30th, 2008, we have temporarily reduced the base salaries of most highly compensated Title Insurance employees. This salary reduction is estimated to reduce the salary, the company's salary expense by $7.3 million during 2008. Our other operating expenses declined 8% over the prior year and 19% from the fourth quarter of 2007. The primary driver of the decline in the other operating expenses were decreases in our occupancy cost and production cost. The company closed 118 offices during the first quarter yielding an annualized cost savings of $7.9 million. These savings represent least expense only and do not include property taxes, utility, and other expenses associated with occupying office space. The company has also identified an additional 76 offices that will be closed by the end of the year and we will continue to seek office consolidation opportunities where appropriate. With respect to our production costs, we continue to focus on lowering our average costs that takes to produce title order by further leveraging our centralized production centers and offshore capacity. The provision for claim loss was 6.2% for the first quarter versus 7.1% for the same period of the prior year. The current quarter rate reflects the expected claim experience for policy year 2008 with no reserve estimate adjustment for prior year policies. As page nine indicates, the company paid and known claim trends were favorable during the first quarter. However, quarterly claim results can fluctuate and we continue to monitor our claim development very closely. Turning to page ten, total revenues in our national, commercial services segment declined 26% relative to the first quarter of 2007. Revenues in the commercial business tend to be more volatile than in the residential business, as quarterly results can be skewed by the timing of large transactions. Commercial transactions are taking longer to close in the current environment as valuation expectations are adjusting. We expect the commercial markets to remain challenging during 2008 after a record breaking 2007, and we remain the industry's largest commercial underwriter. And our International Title business generated revenues of $103 million, a 14% increase over the prior year. The increase was primarily due to an increase in revenue from our United Kingdom operations and we expect continued revenue growth from the International businesses. Total revenue at our Specialty Insurance segment was $76.1 million, a 6% decrease over the prior year. The decrease was primarily due to a decrease in property and casualty insurance revenues. The loss ratio for home warranty and property casualty insurance businesses was 51% and 60%, respectively. Pretax income for the segment was $8.5 million, a 29% decrease relative to the prior year. To summarize, the real estate market and mortgage markets remain challenging. We were able to produce profit in the Title segment despite a 26% decline in revenue. We do not expect the traditional increase in order volumes for the spring and summer months, and we will manage the business accordingly with a sharp focus on expenses. Also we continue to centralize our administrative functions and we continue to translate… transition towards a more centralized structure. This will help to eliminate redundant costs and allow us to continue to streamline our operations. We are excited about the opportunities at First American, and we believe we are making significant progress toward our objectives. I'd now like to turn the call over to Frank McMahon who will comment on the Information Solutions company.

Great. Thank you, Dennis. I will spend a few minutes talking about our first quarter results. Our two key strategies are to accelerate product development activities and improve operational efficiency. Our reconfigured management team has already made significant progress in both of these areas and these improvements combined with continued emphasis on an enhanced level of integration and a one-firm mentality will provide a strong foundation for the company moving forward. Page13 reflects our pro forma adjusted results for the Information Solutions company. We've made two primary adjustments. Number one is as Park said earlier, we have, we can figure the company operationally in expectation of the spin-off as all of the corporate personnel have been allocated to one of the two different companies, and so those costs are reflected on net income statement. In addition, the interest expense associated with the entire balance of corporate debt of $562 million is reflected in the financials as well. Due to large investment gains in the first quarter of last year and in the fourth quarter, we have excluded net realized investment gains and losses and the severance paid to the former CEO of First Advantage for comparison purposes. In the fourth quarter of 2007, pretax income was… increased 55% on a sequential quarter basis and was up less than 1% relative to the first quarter. EBITDA for the first quarter of 2008 was $119.9 million, an increase of 26.5% relative to the fourth quarter and 3% relative to the first quarter of last year. Overall in spite of the current market conditions, the Information Solutions business generated adjusted EBITDA margins in the first quarter of 22.7% compared to 18.7% in the fourth quarter and 21% in the first quarter of last year. So, we’ve been able to increase our EBITDA margins and that will be an important metric that will follow for the balance of the year. We benefited from an increase in default related activity, market share gains driven by the strength of our relationships with many of the larger commercial banks that are capturing share in this environment, as well as greater penetration of our mortgage risk analytic products. Additionally, we implemented many cost cutting initiatives to improve margins. Now I'll talk about each of the segments in a little more detail and its background, we have reorganized the company, we reorganized the management team, and we now have new alignment of our segments. The first is our Information and Outsourcing Solutions segment, which was really formerly known as MISG and as always included our flood determination tax and default related businesses. The major change there is it now includes the collateral valuation businesses as well, as well as our appraisal joint ventures. Pretax margins for this segment were up materially in the first quarter to 25.8% compared to 16% in the fourth quarter. So very strong rebound for that segment. Revenues were up 13.5% relative to the fourth quarter and volume increased across all business lines generating over $20 million of that improvement. Our tax in flood business experienced a 12.2% increase in revenues on a sequential quarter basis, and this revenue growth was driven by increased volumes, but also some organic growth in the P&C insurance sector helped by new product development. April to-date, volumes appear to remain steady relative to first quarter levels. Our collateral valuations revenue increased 13%, driven by an increase in mortgage activity with our lender clients. We've also seen a shift in the mix of this business relative to the first quarter of last year. So, despite lower revenues, we have seen an improvement in our margins. Default and other revenue increased 16% sequentially and continues to be strong in the second quarter and we expect this trend to continue throughout 2008. Expenses for the segment increased… well actually... expenses for the segment were essentially flat on a sequential quarter basis with lower operating expenses offset by higher cost of goods sold. Our cost savings initiatives for the year, we’ve identified initiatives that are expected to result in annualized savings of $8 million for the year and we've already acted on $3 million of those. These initiatives include office consolidations, centralization of offshoring... centralization and offshoring of administrative functions and market-driven headcount reductions. Now, I will talk about our new Data and Analytic Solutions segment formerly known as PISG. This segment includes a CoreLogic, Data Trace, and Data Tree. It also includes MarketLinx, our MLS technology company and Equity Loan Services, our title information provider to the home equity lending space. Excluding net realized investment gains, revenues in the first quarter were up 4.7% relative to the fourth quarter of last year. Volumes increased across all… many of our transaction-based product lines. Growth in our project-oriented mortgage risk analytic business was offset by continued declines in revenues related to securitization transactions. And according to our loan performance data, non-agency issuances that are a seven-year low off nearly 90% since the second quarter of 2007. So that business remains basically dormant. We do have expectations that it will recover at some point, but we think that's at least a couple of quarters away. For the year, we’ve identified cost savings initiatives that are expected to result in annualized savings of $10 million and we’ve already executed on 60% of those. These initiatives include ongoing efforts to reduce data collection cost, facility closures, and market-driven headcount reductions. There was meaningful progress made in product development efforts during the quarter. We have just released LoanSafe 2.0, a loan fraud analytic product with more predictive modeling and new workflow and alert features. We are also releasing an upgraded version of our true standing securities product, which combines property data with loan data in order to enable a loan level collateral analysis on securities and updated loan to value ratios. As previously announced, First Advantage had a respectable quarter given the market conditions. Revenues were flat with the fourth quarter of 2007 and the segment did benefit from an improvement in margins in both their lender and data segments relative to the fourth quarter of last year. Cash provided by continuing operations excluding tax payments related to the DealerTrack gain we recognized in the fourth quarter totaled $22.5 million and CapEx for the quarter was $11 million. Additionally, First Advantage has announced a restructuring of its Employer Services segment that will result in a 17% reduction in their domestic workforce in the Employer Services and will… is expected to generate savings of $5 million annually. Finally, the management team there continues to make solid progress in identifying and disposing of non-core assets. Page 21 includes our most recent pro forma allocation of the company's balance sheet between the Financial Services and Information Solutions company, and relative to the pro forma balance sheet disclosed on January 15th, the Financial Services company has a reduced level of debt and a lower level of equity given the performance in the last two quarters. The resulting pro forma debt-to-cap ratio is 13.5% at March 31st, 2008 compared to the 20.4% previously disclosed. The Information Solutions company has a lower debt level due to the pay-offs relative to the third quarter of last year, as well as growth in earnings due to the performance of the last two quarters. The current pro forma debt-to-capitalization ratio is 26.8%, which is consistent with the ratio disclosed on January 15th. On a consolidated basis, our... there is very little change in the equity of the company and there is a minor reduction in total debt outstanding. With that I would like to turn it over to Parker for some closing comments.

Yes, thank you, Frank, and thank you everyone on the call. We will now turn it over to question-and-answers. Question and Answer

Thank you. [Operator Instructions]. Our first question comes from Darrin Peller with Lehman Brothers. Your line is open. You may ask your question.

Thanks, guys. Great job on the expense controls. It seems like it's at least now offsetting all of the revenue pressure, I know investors are waiting for that. And first of all though, on the agency premium side just real quick, the downtrend, 34% year-over-year drop, considerably lower than the direct premiums were down 18%, can you just clarify what exactly is going on there, where we should expect that?

Sure, this is Dennis. We did have a pretty material drop from quarter-over-quarter, but it's primarily driven by couple of factors here. First we have had a significant drop in our agency remittances from our large California agents and just the market is pretty tough here right now in California. The second issue is we have restructured some of our large national lender-based agents and also counseled a couple of those agents. So those are really the factors that drove that number.

All right. Let me looking forward the ratio of agency to direct, I mean is it going to come back a little more closely to historic norms of maybe high 40s, low 50s or percent wise?

I would anticipate that to happen, but we also continue to monitor our agency business very closely and we are making sure that all of our agents are profitable, meet our profit standards, our business standards, our claims standards, standards etcetera. So we are just watching this business very closely.

All right, thanks. And then on the expense cuts, you mentioned another 300 positions were eliminated during April. Where do you believe we stand now with regard to expense, expenses in general and really how much more room is there to cut or do you foresee the needs to cut considerably more and how much do you think that you said 300 positions, I mean what if, I don’t know if you’ve quantified that in your prepared remarks, but if not would you be able to do so?

We did not quantify, but let me answer the question more broadly. We continue to manage this business just to manage to the overall market. We are not seeing the increase in the summer spring order accounts. Order accounts have trended down a little bit from March. We were averaging March about 9,300 orders a day, we are now down to about 9,300 orders per day in March, we are now down to about 9,000 orders per day in April. So the spring and summer bump is not happening. So, we are going to continue to manage that very, very aggressively. We will continue to manage to our current order flow. The second thing we're seeing in the business too is we've seen some volatility on the average fee happening per title order, and that's driven primarily by increased acceleration of home price depreciations especially on the coast lines. It's also increased conforming loans and less jumbo products, so those factors are driving our average fee down. So all around we are going to just continue to be very aggressive on the expense base to match our EBITDA base.

Great, thanks guys.

Thank you, Darrin.

Our next question from Nick Fisken with Stephens, Incorporated. Your line is open.

Hey, good morning everybody. Frank or Park, whoever wants to handle, why are we delaying the spin?

Well, we’ve found that it is a complicated process. We knew it would be, but it is even a little more complicated, on the positive side, I think the process that we've gone through has been very, very productive in that. For instance, we've looked at every expense at the corporate level and decided which would go where and in some cases either Frank nor Dennis wanted the expense, so we eliminated it and we've just gone through a number of very positive processes and our goal is to close the transaction in the fourth quarter, but we felt, we should notice... give notice the markets that the third quarter is unlikely.

And [inaudible] when you are giving your guidance on what you think Info Solutions can do EBITDA or whatever metrics you are going to give?

We have not... we have not made a determination as to the policy for our forward guidance at this point, so that’s something that as we identify the Board and establish those policies that we’ll communicate to the marketplace.

So, if I look at the $120 million of EBITDA for Info Solutions for the rest of '08, you are going to get, call it low 20s of cost saves from initiatives you already put in place. So, the right way to think about it is, the $120 million is going to go up on a sequential basis and for rest of the year?

I would just say that our goal is to produce growth in EBITDA, and but we haven't given any guidance above that.

And I saw you had $27 million of unrealized losses, can you give some detail on that?

Sure. This is Frank. The primary driver of that was our DealerTrack stock. The good news is that we are able to sell a large percentage of that in the fourth quarter of last year. The bad news is that we still own some and their stock is down dramatically from December 31st of, and now we… mark-to-market that security. We also had some modest reductions in the value of our mortgage-backed securities portfolio, as we disclosed before that is highly rated floating rate in large part and is really just a function of market conditions we tend to be very long-term holders of those securities. We don't actively trade those securities and so we certainly expect those trading levels to recover to more normal levels all the time.

And one last one, what’s our Title headcount at March 31?

This is Dennis. On March 31, including all of our international operations, so everything in the business right now, we are at 5,900.

59.

Yeah, but that includes, I want to make sure clear that includes our international operation, which is significant.

But doesn't include Specialty?

It does not include Specialty.

Great, thank you.

Our next question from Nat Otis with KBW. Your line is open.

Good morning, gentlemen.

Good morning, Nat.

Just a couple of Title questions, I guess, Dennis, the first thing is, any color on, I know last year, you talked about losses from agents being almost 60%, is there any change that you are seeing yet with how those loss rates are coming in given what you are doing on the agent side of the business?

Right now, it's come back down a little bit to more of a normal mix for us, in fact again we are going to continue to monitor very closely. So, it’s drop down from the 60% down lower to about 55%, but again unlike I said before we are going to continue to monitor all our sites of our business very, very closely.

Okay, great. And just from a go-forward basis, it sounds like you are actually for '08, the loss ratio that you are kind of reserving at is at 6.2% since there was no prior-year development, is that correct?

That's correct.

Okay. And then just one last question, on the two businesses that were shifted from Title to Data and Analytic Solutions, market [inaudible] and other… I think there was a revenue number of about $37 million in the quarter, is there anyway to get an expense level for that for the quarter?

Yeah, we can get that number. Those two businesses were very immaterial in terms of bottom line, but, Nat, if you call us offline, we’ll give you those, but they were basically kind of break-even.

Okay, great. Thank you.

Yeah. Nat Otis – KBW: Okay.

Our next question from Jason Delu [ph] with Piper Jaffray. Your line is open.

Good morning.

Good morning.

Just on the… you guys have done a really good job with cutting expenses, especially on the title side and some of that those cutting expenses as volume have come down, some of that is more or less permanently taking cost out. Can you give us a sense of how much progress you’ve made on permanently changing the cost structure versus just how much has been, because volumes have declined?

Yes, great and thank you for the question. Yet I don't have the break-up for you, I’m going to disclose on which is just volume related versus permanent reductions, but just to give an high-level overview, we continue to adjust the businesses, our employees accounts according to our volumes in the business, but at the same time too we continue to very aggressively look at our structure. What we can centralize and we continue to move in that direction for our administrative functions to centralize, to just drive greater efficiency of the business, so it's really both, and we will continue to look at both angles for the foreseeable future.

So in that other operating expense line item, we can... we would expect to see continued progress and reducing that over the coming quarters?

That is our intent. Clearly that’s a difficult line to move, but that's our intend, we are going to continue to look at our office structure, like I said in my earlier comments, we have identified another 76 offices, and we are going to look to close offices where appropriate, where it make sense for the business that we will make sense, we want or won't make sense. Number one and number two, we are going to look and continue to look at all of our just miscellaneous expenses and then the last thing, I would comment on as we continue to try to get as much leverage as we can on our centralized production leverage and our centralized production centers in the U.S. and offshore, so those are really our three main objectives.

So it's been about a year now, since you last... since you gave us the update or you started the initiative to cut the cost, are you considering that you guys have been on plan with that, you fed [ph], you look out over the last year and how you have done and how you progress on that?

I think that the management team Curt Johnson and the leadership team at Title has done an incredible job. They’ve been very focused on this for the last year plus, continue to stay very focused on it moving forward, so I am very satisfied of where the team has come from and where we are going.

Great and then I just want to horn in on the property data and analytics or the data and analytics solution segment, the revenue even though especially with securitization volumes declined as much as they have. The revenues have still hung in there and they have actually been more up quarter-over-quarter, so I’m just trying to get a sense for with the securitization related businesses, those have trailed off, what has been replacing that loss revenue from there, is it some new products that they have been developed or just strong growth in existing product set, can we just get a little bit color on that?

Yes, Jason, this is Frank. Probably the largest contributor is what I mentioned, which is really kind of hi-tech related mortgage analytics revenue. So we have lot of clients coming to us, whether it be hedge funds or large institutions that are doing a risk analysis of their portfolio that are using our analytics to do that and that's great and we walk on that business, but as we have talk about historically, really we take that businesses as one that provide ongoing monitoring and surveillance of securities and is less project-oriented and is more of a licensing business and so we are working very hard to create products that will meet that need in the marketplace, so that's probably the biggest driver, I would say.. I'd tell you that we are capturing share on AVM side, but as you see the overall level of activity is down, but because we are capturing share, we are mitigating the overall declines in market activity.

And that that was actually kind of my next question is on the competitive front in this business, what are you guys seeing with the pullback in volumes, I am sure that you guys being the big dogs here in the state of business, you can weather this downturn better than most? So what are you seeing on the competitive front and eventually this mortgage market is going to turn, if you could just talk about how you think you are positioned for that turn?

We think we are positioned well. But we also think that we will probably see new entrants into the market because we... I think we see a need and an opportunity and I'm sure all the people see that need and opportunity as well. So we are not going to let our guard down at all and we may face greater competition in the future than we do today. But it's more likely to be from different parties than the people that we're competing with today. We are at least a different mix. So we are very focused on it, but... and we think we are doing well relative to the current competitors, but we are not going to let our guard down.

Great. And then the last thing is on the Title claims, what can we expect for an ongoing provision rate? It seems it’s bouncing around quarter-to-quarter and it looks like claims are... the trends you see are stabilizing relative to what you provisioned--?

I would say that what we saw as Dennis mentioned in the first quarter [inaudible] as we find no adverse development for prior years. So we are right now providing for what we feel is our best estimate of the claims for policy year 2008. But we would caution... right now we think that number is 6.2%. But we would caution you that that's just based on three months of experience. So a lot can change in one quarter. So again our best estimate today is 6.2% for the current year and no adverse development for prior years, but again that could change next quarter.

Great. Thanks very much.

[Operator Instructions]. Our next question comes from Jeff Bronchick with RCB Investment Management. Your line is open.

Good morning, gentlemen.

Good morning.

On the Information Services, maybe you folks can talk through... it would be fair to say that you have a very complicated structure and even more so in Information Services with joint ventures, with the FADF, FADV, probably traded sub, and maybe just talk through your thinking on how this will likely resolve itself over the next year?

Jeff, it's Frank McMahon. Right now, we are really focused on the operations and I think our corporate structure is something that what we will deal with after we get the operations coming as best we can. So it's not... our focus right now is operational.

So, with two-step function become a separate spin-off from First American and then deal with your second level of structural issues?

Well, I’ll just tell you… our operations right now and structurally there are lots of different things we could do, but we are really focused just right now operationally.

Thank you.

Our last question is from Paul Chetcuti from ScotiaMcLeod. Your line is open. You may ask your questions.

I am very great to have on the claims line that was a nice surprise.

Thanks, Paul.

Park, you mentioned the new directors made already significant contributions, although they’ve been very recently introduced to the Board. So, could you comment on that and then my next question pertains to the stock buyback program and if you can provide some comments there?

Well with regard to the new directors, this is Park, we brought on five new directors, but the process has been fairly long one. We've had the opportunity to interview each prior to bringing them on the Board and actually just to a large degree getting to know them and understand their unique capabilities and each brings a rich background to the company higher to the Board, I should say, and I think each fits in well with our management team and it is looking forward to working with all of us and with the existing Board, and I can say without a shadow of a doubt each is very interested in the same thing, all of our leaders are and that is to do the best we possibly can for First American. So we are united in a common goal and we had our first Board meeting yesterday and it went well, it was a positive meeting. We made a lot of progress, made good decisions, and we look forward with a lot of confidence.

In terms of the buyback, we did not repurchase shares in the quarter. We certainly have a hope of re-purchasing shares when market conditions would warrant. We are very focused on improving the profitability of the Title company and I think that will probably be a major driver in terms of our thoughts around capital.

Thank you.

Thank you.

Jason Delu with Piper Jaffray, your line is open.

Thank you. I just have a follow-up, on default and other services, that’s just for the Information Outsourcing Solutions, I believe you had some default services businesses in your property info segment, is that sizeable in the old property info segment or is it default in other that we're looking at for Info And Outsourcing Solutions, the predominant amount of your default revenue?

Yes, that's the prominent amount and it’s… there is default business in the Title company, but… the default related revenues are on that default and another line on slide 16 of the presentation.

And in this business, obviously given the environment, it continues to do well and actually the revenues accelerated quarter-over-quarter, can you just speak to the trends that you are seeing in this business and also on the competitive fronts is, who are you really competing against? Have you seen new entrants there?

We are not… we think we have, we are well positioned. We think we're one of the top two players in the market. Our sense is that the leading players in the market are probably capturing share. So as we said earlier, we… based on everything we see out there in the environment in terms of the level of foreclosure and default activity, we would expect the business to continue to grow into 2008. And we certainly expect to continue to get a meaningful market share of that opportunity.

Thank you.

Nick Fisken with Stephens, Incorporated, your line is open.

Hey, couple of quick follow-ups, can you give us the March opened and closed orders and then secondly if I look at your peers, they were mostly in the 57, 58% closing ratio, and I’m wondering if you guys did something structurally different to get that 66% closing ratio?

Yes, this is Dennis. I will answer it. Our open for March was 194,000 orders, our close was 141,000 orders. Our closing ratio was a low 70%. I really can't comment on how others calculate it, so I can only comment how we calculated, but we started off a little slow in the beginning of the quarter and built through the quarter. So, the quality of the refinanced business was good. I think that had to do a lot with the underwriting standards out on the lenders right now and so we do build into the second quarter here. And we look for closing ratios in the second quarter would be probably similar to what we saw last year. The tabular however is similar to what we saw last year.

Great. Thank you.

Thank you.

There are no further questions at this time. That concludes this morning's call. We’d like to remind listeners that today's call is available for a replay by dialing 203-369-1987. Copies of that press release announcing First American's first quarter results and the slide presentation are available on First American’s website at www.firstam.com/investor. The company would like to thank you for your participation today. This concludes today's conference. You may now disconnect.