Jul 31, 2009
Executives
Jo Etta Bandy – SVP, Corporate Communications Park Kennedy – Chairman & CEO Buddy Piszel – CFO & Treasurer Frank McMahon – EVP and CEO of Information Solutions Group Dennis Gilmore – EVP and CEO of Financial Services Group
Analysts
Jason Deleeuw – Piper Jaffray Nik Fisken – Stephens Rajeev Patel [ph] – Gallon Group [ph]
Operator
Welcome, and thank you for standing by. At this time, all participants are in a listen-only mode.
After the presentation, we will conduct a question-and-answer session. (Operator instructions) A copy of today’s press release and the accompanying presentation are also 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 period time by calling 203-369-1047. We will now turn the call over to Ms.
Jo Etta Bandy, Senior Vice President of Corporate Communications to make an introductory statement.
Jo Etta Bandy
Good morning everyone and thank you for joining us on this morning’s call. At this time we would like to remind listeners that management’s commentary 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 exist 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 questions 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 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; Buddy Piszel, First American’s Chief Financial Officer; Frank McMahon, Chief Executive Officer of Information Solutions Group; and Dennis Gilmore, Chief Executive Officer of the Financial Services Group.
During the call we will be referring to the 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.
Park Kennedy
Thank you, Jo. First American reported strong results in the second quarter.
Earnings per diluted share were $0.75 versus $0.21 in the second quarter of 2008. Second quarter earnings include net realized investment losses of $13.1 million or $0.14 per diluted share net of tax.
Excluding this item, earnings per diluted share were $0.89. During Q2 of each of our primary business groups clearly demonstrated the unique strength of its business model.
The steady earnings of our Information Solutions Group reflect our diversified business mix and the deep relationships with the major mortgage originator and servicers. We do well with the very big lenders and they are active originators in any real estate environment.
The Financial Services Group showed the strength of its unique systems and its strong offshore business model. This model allows us to respond to higher order volumes without significantly increasing our U.S.
employee base. I am confident that the executives in each business group are experienced and aggressive and will do well in any market.
We recently announced that we have made an offer to acquire the issued and outstanding common stock of our publicly traded subsidiary, First Advantage. Acquiring the minority interest in First Advantage will enhance our financial flexibility, reduce organizational complexity, and provide greater overall operational efficiency.
We believe this transaction will boost the financial strength of First American as we continue to prepare for the separation of our Information Solutions and Financial Services businesses. On January 15th, 2008, the Company announced its intention to separate its Financial Services companies from its Information Solutions companies in a spin-off transaction, resulting in two separate publicly traded entities.
Due to negative trends and uncertainty in the real estate and mortgage credit markets, the Company delayed the consummation of the transaction to focus on responding to these conditions. During the first quarter, the Company stepped up efforts to prepare for the spin-off and is working diligently toward completing the transaction, including obtaining the IRS ruling request, making the filing with various insurance and banking regulatory authorities and preparing the Form 10.
We expect to consummate the spin-off during the first half of 2010. We are targeting a completion date in the first quarter, but we don’t have full control over the ultimate timing of the transaction due to regulatory matters.
The timing also assumes that there is not a severe downturn in the real estate and mortgage markets. We will update the investor community on a regular basis as we make progress towards the spin-off.
Now, I would like to introduce Buddy Piszel, who will comment on our financial results.
Buddy Piszel
Thank you, Park. Let’s get right into the results.
Operating revenue were $1.5 billion in the second quarter, a decrease of 10% relative to the prior year, and a 14% increase relative to the first quarter of 2009. For sequential quarters, direct title revenues were up 24%.
On the agency side growth of – on the agency side sequential revenues were up 18%. Information Solutions had total revenue growth of 8% year-over-year.
The increase was driven by a 34% revenue growth in the Information and Outsourcing Solutions segment, which continued to benefit from the refinance volumes and market share gains. So, a very strong revenue quarter.
The Company recorded $21.8 million of realized losses for the quarter, primarily related to common equity securities. Most of the losses occurred in the Title Insurance and the Specialty Insurance segments.
85% of our equity security holdings are index funds, much of which was purchased over fiver years ago. Like the over equity market, values for equity securities has declined significantly since the second quarter of 2008.
Even though we’ll continue to hold these investments, the accounting world has changed so that once unrealized losses are over a year old, many companies recognize the losses in the P&L. Given the way practices evolve, we felt it was prudent to recognize these losses now.
We fully expect that we will see appreciation of these holdings in the future. Overall, the quality of our investment portfolio remains very high.
With this action we’ve taken essentially all of our equity security market value declines. We have relative small cash losses projected for our remaining non-agency portfolio.
And the rest of the portfolio is largely government-backed. Turning to expenses, expenses in the second quarter declined 15% relative to the prior year, and were up 7% sequentially.
Salary and other expenses are up 3% sequentially. On the headcount side, title headcount remained relatively unchanged compared to the first quarter.
Headcount in the rest of the Company is essentially flat. We remain committed to improving the efficiency of the business, regardless of the market environment.
The loss provision in the Title Insurance segment was 6.5% for the second quarter. The current quarter rate reflects the expected claims experience for policy year 2009 with no reserve estimate adjustments required for the prior policy year.
Both paid and incurred claims were lower than our forecast for both the second quarter and the year-to-date periods. And we continue to believe that we are well reserved.
So you put all that together, and adjusted EPS was $0.89 per share, excluding the impact of the net realized investment losses. Next [ph], liquidity and capital management.
As of June 30th, First American had $60 million of cash at the holding company. At the end of July, we will have about $70 million at the holding company, and that’s after making our second quarter dividend.
Our forecast for the rest of the year would leave approximately $125 of cash at the holding company at year-end. This positions us well to fund both holding companies upon the spin.
The total Company had over $1 billion of cash on the balance sheet as of June 30th. We believe there is considerable opportunity on the Financial Services side to permanently reinvest cash into fixed income securities.
We expect much of that reinvestment to occur throughout 2009. The debt-to-capital ratio at the end of the quarter was 20.8%.
We estimate that share price [ph] at the regulated insurance company improved over the quarter and should end the year up significantly even after its dividends to the holding company. So, overall, we continue to have good financial flexibility.
Lastly, I would like to point out that we’ve removed all references to our post-win pro forma balance sheets and income statements for the Financial Services and Information Solutions companies. I want to explain why we did that.
As Park said, we are making a lot of progress on the spin. Part of that work is to create the most flexibility and the strongest balance sheets that we can for both companies.
We’ve come up with solid ideas that will improve both companies’ financial strength, but cannot continue to disclose these iterations as they evolve. We are targeting early fourth quarter to start the filing process with the SEC.
So you will see at that point what will be close to a final view of the balance sheets for both companies. Now, I will pass it on to Frank McMahon, who will comment on the Information Solutions companies.
Frank McMahon
Great. Thank you, Buddy.
The second quarter of 2009 was a relatively strong one for the Information Solutions Group. Consistent with our first quarter results, the actions taken in 2008 have positioned us well to capitalize on this year’s opportunities.
The actions taken over the last 12 months have been a combination of expense cuts, product company integrations, site development initiatives, and key hires. Our second quarter revenues increased 5.3% on a sequential quarter basis and over 8% relative to the second quarter of last year.
Our revenue growth is being driven by market share gains, the introduction of new products, and an increase in origination related revenues. During the first six months of this year, we have been hired by 21 new of existing clients for new business that is expected to generate over $95 million in annualized revenue.
We experienced revenue growth in flood, collateral valuation, both appraisal and BPOs, defaults, and lead generation products in the second quarter relative to last year. Our appraisal revenues were favorably impacted by the conversion of a joint venture relationship to a direct relationship and market share gains as more and more lenders elected to outsource their appraisal work to companies that can provide the right level of expertise, technology, and geographic coverage.
Conversely, the employer and litigation support business at First Advantage continued to experience year-over-year declines in revenue. However, we are starting to see signs of life in both areas with our pipelines building and our employers services business adding 10 new clients in the second quarter that will result in over $10 million in annualized revenue.
Finally, our property tax outsourcing business had higher revenue in this quarter than in the preceding quarter as market share gains in the first quarter began to be visible as we bought [ph] the loans on our system and began to recognize revenue. In terms of new products, this summer we have introduced a number of new and enhanced mortgage risk analytic products.
This would include our new HPI Index and our HPI Forecast, a decision, a decision and analytic tool we call Wellcap [ph] that can help servicers select the optimal loss mitigation strategy, and a new bond analytic platform that provides analysis and pricing capabilities. We have created a product partnership with Intex that brings together the best-in-class in terms of loan level data, geo libraries and cash flow information, and analytics and pricing models.
We introduced this product earlier this week at our annual risk summit and received very favorable feedback from many of the 245 clients that attended that conference. Finally, we recently announced enhancement to the loss mitigation model [ph] of our default technology platform called VendorScape to fully support the home affordability modification program.
On the expense side, our controllable costs, which are all cost except cost of goods sold, depreciation, and interest, were down 6.5% relative to last year and were up 2.5% on a sequential quarter basis. We continue to take a disciplined approach to managing our costs and infrastructure in an effort to increase margins.
The combination of revenues increasing 8.1% and controllable costs going down by 6.5%, resulted in meaningful margin expansion. Our EBITDA margin for the quarter was 25.9%, which was up over 8% relative to the last year and our pretax margin was over 20%, up over 17% year-over-year.
I would now like to comment on our outlook for the second half of 2009. Based on what we are seeing in terms of order flows, especially in our credit business, we expect organization related revenues, which are about 34% of our total revenues, to decline by 10% to 15% relative to the first half of the year.
However, we expect to be able to make up most of that shortfall through an increase in default-related revenues, continued market share gains, and increased adoption rates on new products. We also expect government actions to continue to provide further growth.
Default related volumes should continue to increase as the HAM [ph] program continues to be rolled out. And the impact of the expiration of foreclosure moratoriums is mostly is seen in the marketplace.
In addition, the public-private investment program continues to move toward implementation and that is expected to increase demand for many of our mortgage risk analytic tools. In terms of our full year outlook, as we have previously disclosed, the Information Solutions Group probably has three primary long term financial goals – revenue growth of 7%, EBITDA growth of 10%, and EBITDA margin improvement of 5%, not five percentage points, but 5%.
On our last earnings call we discussed that in 2009 we expect to make progress toward our revenue goal although we do not anticipate achieving 7% in 2009. In fact, our revenue were up 4.4% year-over-year.
We stated that we will make considerable progress towards achieving our 10% EBITDA growth goal, an in fact we are up 11.4% year-over-year. So we are ahead of where we thought we would be in terms of that goal.
We stated that we anticipate achieving our 5% EBITDA margin improvement goal and we have improved the margin by 6.6% year-over-year. So, based on our performance year-to-date and our expectations for the balance of the year, we remain comfortable that we can achieve both our EBITDA growth and EBITDA margin goal, but do not expect to achieve the revenue goal this year.
However, we remain confident as the economy improves and businesses like our employer and dealer business that are very much tied to that economy, we will be able to meet our long term goal of 7% revenue growth over time. With that, I now like to turn it over to Dennis to discuss the Financial Services Group results.
Dennis Gilmore
Thank you, Frank. Second quarter pretax income for the Title Insurance segment was $62 million, which included $15.5 million of net realized investment losses.
Excluding these investment losses, pretax income was $78 million, for an adjusted pretax margin of 8.2%. During the quarter, the Company experienced an increase in refinance activity as well as a modest increase in purchase activity.
The default businesses continue to perform well, which offset weaknesses in our commercial and international markets. In the second quarter, we opened 566,000 orders, including 10,100 orders per day in April, 9200 orders in May, 7200 orders in June, and in July we are opening approximately 7100 orders per day.
The Company experienced a sharp decline in refinance orders at the end of May. This order volume decline will have an impact on our third quarter revenue due to the lag between opened and closed orders.
Direct revenue declined 10% over the prior year due to a decrease in the average revenue per order, offset by an increase in the number of title orders closed. Our average revenue per order was 1300 [ph] for the quarter, an increase of 4% relative to the first quarter, primarily due to a shift in the order mix.
Our agency revenue declined 26% over the prior year. The decline was a result of the same factors affecting our direct operations as well as the continued termination of unprofitable agency relationships.
We believe there is significant opportunity to enhance the profitability of our agency business by improving our agency splits, terminating underperforming agents, and optimizing our agency distribution. Our salaries and other personnel cost decreased 18% over the prior year.
During the second quarter, employees at the Title Insurance segment remained flat at 12900. Other operating expenses declined 21% over the prior year.
The primary driver of the decline was successful implementation of cost containment programs, including reduced occupancy cost. The Company closed 29 offices during the quarter in our continued effort to rationalize our footprint.
Total revenue in our commercial division was $52 million, a 44% decline relative to the prior year. The commercial outlook for 2009 remains challenging due to weaknesses in the credit market.
However, First American is well positioned when the commercial markets recover, due to our strong balance sheet and healthy financial ratings. Total revenues in our international division are $80 million, a 35% decline relative to the prior year.
While our international operations are experiencing the impact of the global recession our relationships with our large foreign lenders remain strong and the long term prospect remains promising. Total revenues at our Specialty Insurance segment were $64 million, a 16% decrease over the prior year, primarily due to decline in business volumes impacting our property and casualty insurance and home market divisions.
Pretax income for the segment was $1.3 million, which included a $6.3 million of net realized investment losses. Excluding these investment losses, pretax income was $8 million for our pretax margin of 11%.
As we discussed last quarter, we are centralizing our claims processing. In June, we launched or first processing center with another four to go live by the end of the third quarter.
This central approach to claims handling will reduce our outside legal costs and improve our recovery rates and standardize our overall claims handling process. This project is consistent with our overall strategy of simplifying and standardizing our operations.
To summarize, though disappointed with our investment losses, we are pleased with the progress we are making to improve our operating margins. Decline in open orders in June and July will impact our revenue next quarter, but we will continue to focus on the efficiencies of our business by simplifying our operations structure, leveraging our technology, and our offshore capacities, and act swiftly on expenses when mat conditions dictate.
Our long term objective is to achieve an annual pretax margin of at least 10% in the Title segment. I would now like to open up the line for questions.
Operator
(Operator instructions) Our first question comes from Jason Deleeuw from Piper Jaffray. Sir, your line is open.
Jason Deleeuw -- Piper Jaffray
Thank you, good morning everyone.
Park Kennedy
Good morning, Jason.
Jason Deleeuw -- Piper Jaffray
With the 7100 open orders per day in July, what percent of those are you seeing is refi orders? And then your direct order, you revenue per direct -- per order was up a little bit sequentially quarter-over-quarter.
If you get more of a normal like a 50-50 purchase, refi mix, do you think your revenue per order can return to like the levels we saw back in 2008, 15, 16, above 1600?
Dennis Gilmore
Sure. This is Dennis.
Let me answer the question. A couple of things, first, we are running at about 34% to 37% refinance right now in our mix.
We have seen an increase in our purchase market, but we still are operating in a weak commercial market. When we look at our average order profile, we had a sequential decline over the last year, I think of 18%.
But we are encouraged by an increase of 4% over the first quarter, so we are running right now at about $1300 per file. We are anticipating a modest increase in our average fee per order heading into the second quarter, but I am going to use the word again, ‘modest,’ because we are going to see a better mix towards resale, but that mix is still heavily swayed towards lower end properties, which have lower average fees and we still will not see a recovery in the commercial markets, probably until 2010 at the earliest.
Jason Deleeuw -- Piper Jaffray
So, in that we would still – you are probably going to fall a little bit short at least on the revenue per order than what we saw like a year ago even if the mix is the same just because of the lower end properties and commercial weakness.
Dennis Gilmore
That’s what we are modeling right now.
Jason Deleeuw -- Piper Jaffray
Okay. And then for – I am just wondering if you have the title business right-sized for the current volumes you are seeing through July, do you think there will be more cuts needed?
And what kind of pretax margin – I mean it was very strong this quarter and I am just wondering what kind of margin in title do you think you can get at these current volumes.
Dennis Gilmore
Sure, let me – again, this is Dennis. A couple of points here.
First, we are very encouraged by our first half performance and the fact that we were able to deal with a very strong increase in volumes with at a net level of no increase in employees. Actually we were down 200 plus employees for the first six months.
So, what that’s really showing us is the benefit that we have towards our common brand, our common processing, our common offshore approach to our production. We were able to really handle big increases in volumes with a pretty stable workforce.
Now we did add costs that were really on the closing side. And most of those costs were more variable in nature.
So, as we go into the second quarter, and I do think we’ll see some revenue pressure in the second quarter, we’ll adjust our – as we go into the third quarter I think we’ll see some revenue pressure and will adjust our cost accordingly. Like we have for the last two years we’ll be very aggressive on taking the cost out where we think they are appropriate.
So, we’ll just continue to adjust the business as we see fit with the order volumes.
Jason Deleeuw -- Piper Jaffray
But you would expect that the second quarter margin was – just because of the volumes being so strong, I mean that would be the high for the year?
Dennis Gilmore
Well, I think that we are going to have more pressure in the second half.
Jason Deleeuw -- Piper Jaffray
Okay. And then I’ll just get back in queue and I just have one last question on – I am wondering on the split-up of the two companies, are the current volumes healthy enough to support the split-up of the companies?
Park Kennedy
Yes, Jason, this is Park. I do feel that the current volumes are healthy enough and if they continue I think we’ll be able to comfortably split the companies.
Even if they decline a bit, I think we’ll be okay because of some of the things that we’re going to do to the balance sheet between now and the split.
Jason Deleeuw -- Piper Jaffray
Can you elaborate on some of those things or is it too early?
Park Kennedy
Yes. It’s a tad early.
Jason Deleeuw -- Piper Jaffray
Alright. Thank you very much.
Dennis Gilmore
Thank you.
Park Kennedy
Thank you.
Operator
Our next question would come from Nik Fisken of Stephens. Sir, your line is open.
Nik Fisken – Stephens
Hi, good morning, and congrats on another strong quarter.
Park Kennedy
Thank you.
Nik Fisken – Stephens
Can you give us a little bit more detail on the processes that you are going through to enable the spin, I mean can you kind of give us an idea where we are with the IRS, the regulators, and the debt, please?
Park Kennedy
This is Park. I’ll start and turn it over to Buddy.
One of the things that we’ve done is in effect clarify the balance sheet. A step in that direction was the offer to buy in the First Advantage shares.
And then there are other things that are underway. Buddy?
Buddy Piszel
Yes, Nik, we said that we are targeting the Form 10 submission early fourth quarter. We think that give us enough time to be able to accomplish something in the first quarter, so we are working diligently on that, including all the auditing work on the prior years.
We are starting the process, we are well underway in sort of identifying the way the companies are going look, which really is critical to the IRS tax-free ruling that again we’ve not filed yet, but we are getting close to that. The long pole really is regulatory approval especially internationally.
So we’ve yet to begin that work, but I mean to formally submit information to the regulators, but again a lot of work underway. You mentioned the debt and the credit facilities, again we are working very closely with our bankers and the banks in our syndicates to start engaging in that process.
So, literally there is no aspect of the preparatory work related to the spin that we are not fully engaged in at this point.
Nik Fisken – Stephens
Thank you. The other thing, Dennis, I am wondering why you haven’t started cutting heads already given that the volumes have slowed.
Dennis Gilmore
Okay. We had an opportunity this last first half of the year to not add heads, and so we’re running this business differently than it’s been run in the past.
We are seeing the benefits of our really our worldwide approach to how we are running the business. So while others had to add a lot of headcount in the first half of the year, we didn’t add heads.
Actually we are down net 200. But we did add costs that was in our closing aspect.
And we still have very elevated closing ratios going into the third quarter. Now, as those roll off and that the volumes stay where they are, and they go down, we’ll address the expenses base in a very aggressive manner like we always have.
Nik Fisken – Stephens
So, if I look at the closed orders in June, should it be representative of what July should look at?
Dennis Gilmore
I think you will be close.
Nik Fisken – Stephens
Okay, great, thanks so much.
Operator
(Operator instructions) Our next question comes from Rajeev Patel [ph] of Gallon Group [ph]. Sir, your line is open.
Rajeev Patel -- Gallon Group
Yes, hey guys. Thanks for taking a question from me.
In the Title business, I was just looking at the – your reserve coverage, and can you just help explain the methodology behind that because – and this could be rough math, but if I look at the claims you did this quarter and annualize them, and take your reserves and divide it by the annualized claims, I come to about 4.2-4.3 years. But then when I do the same thing with one of your competitors, Fidelity National, I come to a little north of eight years.
So, can you just explain the – what goes into the reserve methodology there? Thanks.
Dennis Gilmore
Well, Rajeev [ph], we don’t really try to calculate how many years of coverage. The way this works is we do a very detailed evaluation of the emerging claims experience both on the paid and the incurred side, and then we determine, by every vintage year what’s the adequacy of the reserves.
And then we make a selection as to what we think we need for the current year’s business. We have been getting more and more – we’ve increased our ability to get into a much more deeper view of different splits as to what’s contributing to the loss experience that we have and may be what might help is when we look back at policy year 2007, which is at a 7.7% accrual rate, we are now able to see [ph] the revenue lines that had the higher loss experience, which were essentially gone today.
And if you just move out that revenue and move out the losses for products that had very high loss ratios, you get to a adjusted 2007 policy year experience of 6.3% and what that tells us is that when you look at our accrual rate for 2009, which is 6.5%, that – it feels conservative. And the early read on the 2009 book is that we are building up some redundancies.
So, I can't comment specifically on the 4.3 years, but I can just tell you, we feel better with each passing month as to where our reserve levels will set [ph].
Rajeev Patel -- Gallon Group
So, you feel like you may actually – and not to put words in your month – do you feel like you may have, as this cycle kind of plays out, you may have additional redundancies, which could be – which you could take to the P&L sometime in the future.
Dennis Gilmore
I’d say it’s early to tell. I’d say that the initial trends are favorable.
Rajeev Patel -- Gallon Group
Okay, great, thanks very much.
Unidentified Company Speaker
Thank you.
Operator
Our next question comes from Jason Deleeuw. Sir, your line is open.
Jason Deleeuw -- Piper Jaffray
Thank you. I just want to hone in here on the Info Solutions business a little bit.
It sounds like you are going to fall short of the revenue growth goal, but you are still very confident on the margins. And the margins were very strong this quarter.
So I am just wondering is this orders margin a sustainable run rate or are there some revenue mix issues in there that – where we can may be see the volumes trail off or other issues where may be the margins come down a bit from the strong levels this quarter?
Frank McMahon
Jason, it’s Frank. So, we are looking at – we do think we can improve the margin by 5% for the year.
We are up a little over 6% year-to-date, so we are comfortable we can get to the 5%. We may see a little erosion in the second half especially given the growth that we are seeing on the appraisal side, and again some of that is market driven, some of that just how lenders are thinking about that business today.
And the appraisal business is a slightly lower margin business for us than some of the others. But overall, we still think we can get to that 5% goal, which we tell you that we’re – if we see some erosion, it’s not going to be material relative to the first half.
Jason Deleeuw -- Piper Jaffray
Thank you. And then just on that collateral valuation revenue, I mean it’s very strong, it is up nicely quarter-over-quarter and with the appraisal increased outsourcing the appraisals.
But there is also – there is a volume aspect to it. So, kind of going forward, I mean just with the volumes coming down, I mean it sounds like you guys have picked up market share there, but the volumes have also trailed off.
So, I mean do you – would you expect that the revenue to trail off a bit too from strong levels this quarter?
Frank McMahon
Yes I think – well, not necessarily because I think that if we see a 10% to 15% reduction in refinance activity, which is kind of what we have seen in July, we think that some of the market share gains that we have been able to pick up this year may offset that. So, we look for appraisal to actually be relatively steady for the balance of the year.
Jason Deleeuw -- Piper Jaffray
Great. And then the 41 new business deals that you guys have, can you just give us some color on the types of clients that you are winning this business from?
Frank McMahon
Well, again it’s 41 either new or existing clients. And so there is really two dynamics going on.
The first is that our clients are telling us that they want to go deeper with fewer. The large financial institutions want to do business with people that had best-in-class products that are sustainable, who are going to be around, that have invested in the right level of information security, compliance, et cetera.
And so we continue to experience very good cross-sell experience with the large lenders. In addition, primarily on the investor side, a number of people have raised money to buy distressed assets, both home [ph] loans and securities.
And that wave of selling activity really hasn’t happened yet. But as some of these government programs get implemented, but also as the market just starts to operate in a more liquid fashion, we see a lot of people lining up to use our mortgage risk analytic product.
So, we’ve added a lot of clients in that business. We expect to add even more going forward.
Jason Deleeuw -- Piper Jaffray
Okay. So you have seen some benefit from clients that have raised money to buy distressed assets.
In looking at your business, have they actually signed up and become clients, are they still kind of sitting on the fence and do you have like a timeline (inaudible) for when you think there is going to be some action on that front in terms of putting the money to work on buying these distressed assets? What are you guys seeing in the marketplace?
Frank McMahon
Yes, I would say actually in the second quarter there wasn’t – that didn’t move the needle in terms of our financial results. So we still think that is something that’s a growth opportunity for us.
So, what typically happens is people don’t want to spend a lot of money until they can execute in terms of buying assets. So, high level engagement, I mentioned earlier we had a – our risk summit conference earlier this week.
We had 245 clients attend that mostly interested in our mortgage risk analytic product. So given the environment, we were thrilled with that attendance and the level of engagement was very high.
So, we still think that’s an area of meaningful growth for us going forward.
Jason Deleeuw -- Piper Jaffray
Great. And then just my last question here is on the pipeline that you are seeing for the default services and info and outsourcing.
The revenue continues to be very strong. What are you guys seeing in the pipeline and your outlook for that revenue?
Frank McMahon
Well, again, just so we are clear, our default business there is some of it on my side and some of it on Dennis’ side and they are both pretty meaningful. So you need to look at both, but on my side, we continue to see good pipelines there.
It’s not as material as some of our competitors at – running at $70 million a quarter. But we still think there is a reasonable tail to the foreclosure activity and would expect that business to continue to grow for probably at least another 12 to 18 months.
Jason Deleeuw -- Piper Jaffray
Okay. And can you just give us some more color and remind us on exactly what type of services you are offering there, I mean I there is stuff with REO and there is probably handling delinquency (inaudible).
Can you just give us some color along the types of services that you are offering and to who, is it mostly mortgage servicers?
Frank McMahon
Yes. It’s primarily mortgage servicers, and we have a technology default platform that many servicers use called VendorScape.
We provide REO services, we provide field services. So those would be the three large buckets in terms of our default related activities.
Jason Deleeuw -- Piper Jaffray
Thank you very munch.
Operator
That is all the time we have for questions today. That concludes this morning’s call.
We’d like to remind listeners that today’s call will be available for replay on the Company’s website or by dialing 203-369-1047. Copies of the press release announcing First American’s first quarter results and the accompanying slide presentation are also available on First American’s website at www.firstam.com/investor.
The Company would like to thank you for your presentation. This concludes today’s conference call.
You may now disconnect.