Three of the four major title underwriters reported their financial results for the third quarter today. While all three title business have shown much stronger revenues and profits in the past year, some title executives are expressing concerns about lower revenues going forward because of an expected drop in mortgage volume, particularly refinances.
Of title insurers that reported today, Stewart Information Services, the parent company of Stewart Title, is faring by far the best in the eyes of investors. Stewart, which has been barely breaking even in recent quarters, posted a robust profit of $34.7 million in the latest quarter, as Stewart benefited from a combination of an improving real estate market and improved performance by the company.
Stewart seemed to point to the fact that it had thinned its herd of independent agents as a major factor in its improvement in claims losses. The company said that it had reduced its number of independent agents by half, since 2008, and in the past year, the policy loss ratio of its independent agents is less than one third of its level in 2008. The company's claims loss ratio decreased to 7.3% for the quarter, down from 8.7% in the prior quarter.
Stewart noted however that forecasts indicate a reduction in future mortgage volume from 2012 due to lower refinance activity. This trend is expected to take hold in the current quarter and extend through 2013, and will likely tend to reduce title insurance revenues and profits.
Old Republic International's stock is trading down in the stock market today, but that likely is due to its lines of insurance other than title insurance, because Old Republic's title insurance business is also performing well. Title insurance premiums and fees at Old Republic Title are up 35% from last year, and the title business' $21.7 million pretax profit in the quarter was up a healthy 125% from a year ago. The company's claims ratio is moderately lower from a year ago, the company said. There are lingering concerns in the market that the company's troubled mortgage insurance business may cause events which could
First American's title revenues are up 25% from last year, and its income of $103 million for the latest quarter was nearly five times as large as its $21 million profit in the same quarter of 2011. First American is optimistic about the quality of the new policies it is issuing; it expects an ultimate claims ratio of 5.6% on its policies written in 2012, which is nearly a return to claims levels in the strong housing market of the early 2000s. Of course that is only an estimate, and First American still had to set aside about ten million additional dollars in the most recent quarter as its estimates for losses in prior quarters was revised upward.
The only major title underwriter yet to report its third quarter earnings is the largest, Fidelity National Financial, which will report on November 5th.