The five companies that control more than 90 percent of the title insurance business all saw double-digit decreases in revenue during the first quarter, and only the two biggest companies — First American Corp. and Fidelity National Financial Inc. — remained profitable.
Members of the big five posting losses for the quarter were LandAmerica Financial Group Inc., Stewart Information Services Corp., and Old Republic International Corp.
The five biggest title insurers saw operating revenue from title operations fall 12 percent in 2007 and could see another 20 percent drop this year, analysts at Fitch Ratings said in issuing a negative outlook for the industry in March (see story).
The first-quarter results of the big five suggest Fitch analysts may be on the mark — so far at least.
Stewart Information Services
Stewart said it lost $36.3 million during the first quarter as revenues fell 26 percent from a year ago, to $394.1 million. That compares with a $4.6 million loss in the same quarter a year ago, the company said this week in a report to investors.
Stewart, which posted a net loss of $40.2 million for all of 2007 — the company’s first full-year loss since 1974 — blamed the loss for the quarter on the usual suspects: a decrease in title orders because of falling home sales, and reduced financing activity due to tightened mortgage lending practices.
Title orders opened during the quarter declined by 13 percent compared to a year ago, to 150,600, and were down even more sharply in March, by 26 percent to 47,000. Title orders closed fell 18 percent from a year ago, to 89,500.
The company said it "continues to respond aggressively" to the decline in the real estate market and "is taking appropriate steps to restore profitability."
Those steps include slashing 2,500 positions since the end of 2005 or 24.8 percent of the company’s workforce. Stewart laid off 460 workers, or 5.4 percent of the workforce, in the first quarter, leaving the company with about 8,040 employees.
Stewart said it’s been unable to cut costs as fast as revenue has plummeted because of fixed costs such as rent and other occupancy expenses.
The Houston, Texas-based title insurer and real estate information provider said it will slash more jobs this year as it closes three data centers as part of a move to a Web-based production platform on a centralized application services provider and data center.
On the upside, Stewart noted that the company’s transaction management system, SureClose, has been adopted by the Arizona Association of Realtors and will serve more than 5,000 brokerage companies statewide. SureClose allows buyers, sellers, lenders and Realtors to track the progress of closings over the Web.
First American Corp.
Santa Ana, Calif.-based First American Corp. said direct title orders closed slipped 15 percent during the first quarter, to 389,600, contributing to an 18 percent decline in operating revenue from direct title operations. Operating revenues from agency operations decreased by 34 percent.
First American remained profitable during the first quarter, but at $29.3 million, earnings were off 65 percent from a year ago. Total operating revenues fell by 19.7 percent, to $1.59 billion, the company said in a regulatory filing.
First American said it’s laid off 4,600 workers since the end of the first quarter 2007, including approximately 1,000 employees in the first quarter of 2008. First American was able to cut salaries and other personnel costs in its title insurance segment by 16 percent from a year ago, to $342 million.
First American saw revenue fall 4 percent in 2007, to $8.2 billion, and posted a nominal loss of $3.1 million for the year (see story).
Old Republic
In a regulatory filing last week, Old Republic said it posted a $19 million net loss for the first quarter, compared with a $107.7 million profit a year ago. Although operating revenues fell by only 2.1 percent, to $950.7 million, Old Republic is also in the mortgage guarantee business, and that segment of the company posted a $122.3 million pretax operating loss as claims shot up.
Old Republic’s title insurance business saw revenue fall 23 percent to $167.1 million, and the division posted a $12.6 million loss for the quarter.
The Chicago-based company said it was able to cut production and operating expenses in title insurance by 17.4 percent during the quarter compared to a year ago, but that those savings were "insufficient to counter the much larger reduction in title premium and fees revenues."
Much of the losses in mortgage guaranty and title insurance were offset by Old Republic’s more profitable property and liability insurance lines, however.
Fidelity National Financial
Fidelity National Financial Inc. saw a 17 percent decline in first-quarter operating revenue, to $1.14 billion, and a 67 percent decline in net earnings, to $27.2 million (see story).
LandAmerica
LandAmerica Financial Group Inc. posted a $24.2 million loss and said revenue declined 28 percent, to $686.4 million. Land America officials said they have eliminated the equivalent of 3,600 full-time positions since the beginning of 2007 (see story).
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