Title insurance provider First American Financial (NYSE:FAF) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 21.6% year on year to $2.05 billion. Its non-GAAP profit of $1.99 per share was 38.8% above analysts’ consensus estimates.
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First American Financial (FAF) Q4 CY2025 Highlights:
- Revenue: $2.05 billion vs analyst estimates of $1.78 billion (21.6% year-on-year growth, 15.2% beat)
- Pre-tax Profit: $287.4 million (14% margin)
- Adjusted EPS: $1.99 vs analyst estimates of $1.43 (38.8% beat)
- Market Capitalization: $6.78 billion
Company Overview
Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial (NYSE:FAF) provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.
Revenue Growth
Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third. Unfortunately, First American Financial’s 1% annualized revenue growth over the last five years was weak. This fell short of our benchmarks and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. First American Financial’s annualized revenue growth of 11.4% over the last two years is above its five-year trend, suggesting its demand recently accelerated. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, First American Financial reported robust year-on-year revenue growth of 21.6%, and its $2.05 billion of revenue topped Wall Street estimates by 15.2%.
Net premiums earned made up 81% of the company’s total revenue during the last five years, meaning First American Financial barely relies on non-insurance activities to drive its overall growth.
While insurers generate revenue from multiple sources, investors view net premiums earned as the cornerstone - its direct link to core operations stands in sharp contrast to the unpredictability of investment returns and fees.
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Net Premiums Earned
Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.
First American Financial’s net premiums earned was flat over the last five years, much worse than the broader insurance industry and in line with its total revenue.
When analyzing First American Financial’s net premiums earned over the last two years, we can see that growth accelerated to 7.4% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. While these additional streams certainly contribute to the bottom line, their impact can vary. Some firms have shown greater success and long-term consistency in investing their float compared to peers. However, sharp fluctuations in the fixed income and equity markets can significantly affect short-term performance.
Key Takeaways from First American Financial’s Q4 Results
It was good to see First American Financial beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this quarter featured some important positives. The stock traded up 2.3% to $65.80 immediately after reporting.
Sure, First American Financial had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).