Editor’s note: As the real estate boom soars to new levels, pumping money through the industry like blood through a runner’s arteries, real estate agents, title companies, mortgage brokers, lenders and homeowners alike are prospering. In this three-part series, Inman News explores the real estate windfall, digging to find who’s making tons of money in this heated market. (See Part 1: Real estate agents reap housing boom harvest and Part 2: Real estate boom fills mortgage lenders’ coffers.)
As the real estate boom soars to new levels, pumping money through the industry like blood through a runner’s arteries, title insurance is booming as well.
In 2004, gross revenue, or total operating income, for the title insurance industry was $16.4 billion, according to a 2005 study by the American Land Title Association. The net gain from operations was $755.1 million, ALTA’s study said.
“This has been an unusual time in the history of the housing market,” acknowledged James Maher, executive president of ALTA. “Overall the industry for the past two and a half years has been very strong based on the refinance market, which has gone through the roof with people refinancing homes multiple times.”
Though gross revenue in 2004 was down 1.2 percent from $16.56 billion in 2003, it was still the second strongest year for revenues ever, the study said. Net income after taxes, which includes investment income, was $1.086 billion in 2004, according to ALTA’s study.
In 2003, pretax operating gains, including net investment income, had soared to about $1.5 billion, a “staggering” 87 percent leap over 2002, according to an October 2004 report by A.M. Best done for ALTA.
“Obviously, with the prices going through the roof, it helps everybody in the industry because our fees are based on sales price,” said James Cortese, division president of Stewart Title of California’s Santa Clara County Division. “So as prices go up so do the fees we collect.”
The breakdown of company earnings is jaw-dropping. For example, the First American family of title insurance companies had a 28.62 percent market share in the industry in the first quarter of 2005, according to ALTA’s market share data. First American pulled in $1.09 billion in revenue just in that quarter. (Because title insurers usually encompass a number of separate companies, breakdowns refer to “families.”)
With a 27.6 percent market share, the Fidelity family of companies, which includes Chicago Title, scored $1.06 billion in revenue in the first quarter of 2005. The LandAmerica family, with 18.01 percent market share, had $680 million in revenue.
Rounding out the top five, the Stewart family had 11.61 percent of market share, and brought in $421,675,881 in revenue in the first quarter of 2005, according to ALTA. The Old Republic family, with 5.99 percent of the market, had $217.6 million in revenue.
“The five national underwriters have such a huge market share across the industry that by getting a snapshot of them you’re getting a snapshot of the industry,” noted Maher.
Between the five of them, these families of companies had 91.83 percent of the market in the first quarter of 2005.
ALTA credited the refinance market, along with the strong new and resale housing markets, for the title industry’s strong showing. Sales of new and existing homes in 2002 hit 6.53 million, and this record was surpassed in 2003, with sales of 7.18 million homes, according to the ALTA/A.M. Best “Title Insurance and Industry Statistics” study.
Commenting on the refinancing boom, Maher said, “When title insurance was first introduced, people bought a house, kept it 30 years and then burned the mortgage. It’s not like the past five years with everyone refinancing every year, which has been a challenge and a boom as well.”
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