First American buying mortgage fintech company Docutech
First American Financial, a title insurance underwriter and settlement services provider, is acquiring mortgage document firm Docutech for $350 million in cash.
"The acquisition of Docutech reflects our steadfast commitment to invest in and grow our core business," First American CEO Dennis Gilmore said in a press release. "Moreover, it demonstrates our dedication to improving the home-buying experience for consumers and driving the digital transformation of the real estate settlement process."
Among Docutech's products is Solex, which is used for e-closings.
Amy Brandt, Docutech's president and CEO, will continue to head up the company. "The Docutech team will now have enhanced access to First American's industry-leading property data and its other industry-leading products and services, further enhancing the quality, accuracy and speed of our services," she said in the press release.
The deal is expected to close in March and should be accretive to First American's 2020 earnings.
Speaking of earnings, in the fourth quarter, First American had net income of $224 million, up from $188.2 million in the third quarter and $91.6 million in the fourth quarter of 2018.
"Our strong fourth-quarter results closed out another year of record financial performance," Gilmore said in a separate press release. "Favorable market conditions combined with our continued focus on operational efficiency enabled our title segment to deliver a record annual pretax margin of 16.1%. Our specialty insurance segment achieved a pretax margin of 13.2%, its highest since 2014."
The title insurance and services reporting segment had income before taxes of $283.8 million, up from $136.4 million for the same period in the prior year.
Direct premiums and escrow fees were up 17% year-over-year. There was a 27% increase in direct title orders closed that was partially offset by an 8% decline in average revenue. The average revenue per direct title order declined to $2,603 from $2,824 due as the order mix reflected an increase in refinance transactions to 49% of residential orders closed, compared with 30% one year prior.
There were 224,200 residential direct title orders closed in the fourth quarter, versus 176,500 one year prior.
Average revenue per commercial order rose by $200 to $11,400. However, commercial is a much smaller part of the business, with 20,900 title orders closed, up 100 units over the previous year.