The title insurance industry posted a cumulative $710 million operating loss in 2008 — about eight times bigger than 2007 — but this year’s refinancing boom is expected to provide some welcome relief, an industry association reports.
Because title insurers are also paying significantly less in taxes, net losses for 2008 are expected to be a less severe $434.2 million, the American Land Title Association (ALTA) said. But that’s still a big turnaround from the $315.1 million in profits the industry registered in 2007, in spite of a cumulative $87.8 million operating loss.
In releasing its statistical analysis of the title industry’s 2008 results, ALTA said the last three months of the year marked the 11th quarter in a row with declines in title insurance premiums. Not only that, but each quarter’s year-over-year decline was greater than the last.
In the third quarter of 2007, title revenue was down 15 percent from a year ago. By the fourth quarter of 2008, the year-over-year decline was more than 34 percent, indicating that poor markets not only continued through 2008, but were still worsening by year end, ALTA said.
The four largest states in terms of written premiums — California, Texas, Florida and New York — were down 23 percent, 34 percent, 46 percent and 47 percent, respectively, during the final quarter of the year, ALTA said.
The title insurance business is expected to bounce back this year, with the Mortgage Bankers Association forecasting that mortgage originations will hit $2.78 trillion, which would be a 39 percent increase from last year and the fourth-highest year on record.
The MBA expects that refinancings will account for 69 percent of mortgage originations, compared with about 50 percent in recent years, as borrowers rush to take advantage of lower interest rates (see story).
That’s good news for title insurers, because mortgage lenders require new title insurance policies regardless of whether borrowers are purchasing a new home or simply refinancing their existing one. …CONTINUED
The nation’s largest title insurance underwriter, Fidelity National Financial Inc., recently reported that direct orders closed rose from 120,500 in January to 141,900 in February, and hit 166,200 in March. Those numbers include Fidelity’s new underwriting subsidiaries — Lawyers Title Insurance Corp., Commonwealth Land Title Insurance Co., and United Capital Title Insurance Co. — acquired from bankrupt LandAmerica Financial Group in December.
ALTA’s preliminary analysis shows underwriters now under Fidelity’s umbrella held a 45 percent market share during 2008, followed by companies owned by by First American Corp. (28.9 percent), Stewart Title Guaranty Co. (12.6 percent) and Old Republic International Corp. (5.7 percent).
With the demise of LandAmerica, the four largest title insurance underwriters control 92 percent of the market — making title insurance a "highly concentrated" industry, according to one measurement technique employed by the Department of Justice to analyze whether mergers will produce anticompetitive markets (see story).
ALTA’s analysis showed regional title companies accounted for the remaining 7.8 percent market share. The five biggest regional title companies were Attorney’s Title Insurance Fund, with 2 percent market share; Title Resources Guaranty Co. (1.1 percent); North American Title Insurance Co. (0.7 percent), Investors Title Insurance Co. (0.6 percent), and Westcor Land Title Insurance (0.5 percent).
During the fourth quarter of 2008, underwriters currently owned by Fidelity saw their collective market share slip 1.39 percent from a year ago, and First American’s underwriters saw market share shrink by 0.5 percent. Collectively, regional title companies also lost 0.5 percent market share.
Gaining ground were companies in the Stewart family, whose collective slice of the market grew 0.8 percent, and Old Republic, which added 0.6 percent market share.
Fidelity could see further erosion of its market share this year, having recently warned investors that LandAmerica’s underwriters suffered from a "loss of business momentum" as a result of their parent company’s Chapter 11 bankruptcy filing on Nov. 26.
Fidelity also disclosed that through the end of March it had fired 2,068 of the 5,500 workers formerly employed by LandAmerica’s subsidiaries, and closed 216 of the 500 direct title offices it acquired in the acquisition, achieving $231 million in annual savings (see story).
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