Lower mortgage volume drives title earnings down, Doma layoffs
May 13, 2022 11:00 AM
Earnings at the publicly-traded title insurers trended down in the first quarter as business waned, going in a different direction as their brethren in the mortgage insurance industry.
Both industries rely on mortgage origination volume but while only certain transactions require MI, namely most conforming loans with less than 20% down, title insurance touches practically all transactions.
And with several major lendersguiding to even fewer originations in the second quarter, the outlook for the title business becomes cloudier.
To support its business prospects, First American acquired title agency Mother Lode in a deal that closed subsequent to the quarter's end. First American reported first quarter net income of $98 million, well down from $260 million in the fourth quarter and $234 million one year prior.
Here are the results from the other publicly-traded underwriters:
Both industries rely on mortgage origination volume but while only certain transactions require MI, namely most conforming loans with less than 20% down, title insurance touches practically all transactions.
And with several major lenders
To support its business prospects, First American
Here are the results from the other publicly-traded underwriters:
Fidelity spinning out 15% of its stake in life insurer F&G
At Fidelity National Financial, the parent company of three of the top seven underwriters during 2021, net earnings fell to $397 million for the first quarter, compared with $533 million in the fourth quarter and $605 million one year ago.
Title revenue, however, was stable on a year-over-year basis at $2.4 billion, versus $2.5 billion for the 2021 period. "Our title business was boosted by strong demand in the commercial market and home price appreciation in the residential purchase market, which offset the continued decline in refinance volumes in the rising interest rate environment," said Chairman William Foley in a press release.
Open orders were down to 522,000 from 536,000 in the fourth quarter and 770,000 for the first quarter of 2021. FNF had 380,000 closed orders in the first quarter, versus 477,000 in the fourth quarter and 597,000 one year prior.
The company is spinning out 15% of its ownership stake in F&G , a life insurance company it acquired total ownership of following regulators quashing the Stewart deal.
"Looking ahead in 2022, we believe that we are well-positioned to navigate the effects of a rising interest rate environment, with scale advantage as the nationwide market leader, efficiencies from our innovative technology enabled platform, and a disciplined operating strategy and proven track record of quickly adjusting our operating model for significant fluctuations in opened and closed orders," CEO Mike Nolan said.
Title revenue, however, was stable on a year-over-year basis at $2.4 billion, versus $2.5 billion for the 2021 period. "Our title business was boosted by strong demand in the commercial market and home price appreciation in the residential purchase market, which offset the continued decline in refinance volumes in the rising interest rate environment," said Chairman William Foley in a press release.
Open orders were down to 522,000 from 536,000 in the fourth quarter and 770,000 for the first quarter of 2021. FNF had 380,000 closed orders in the first quarter, versus 477,000 in the fourth quarter and 597,000 one year prior.
The company is spinning out 15% of
"Looking ahead in 2022, we believe that we are well-positioned to navigate the effects of a rising interest rate environment, with scale advantage as the nationwide market leader, efficiencies from our innovative technology enabled platform, and a disciplined operating strategy and proven track record of quickly adjusting our operating model for significant fluctuations in opened and closed orders," CEO Mike Nolan said.
Purchase orders steady at Old Republic
Old Republic International, a holding company which also offers property and casualty lines, earned $306.3 million in the first quarter, compared with $268.2 million in the fourth quarter and $502.1 million one year prior.
In its title insurance segment, pretax earnings of $80.9 million, compared with $137.3 million for the prior quarter and $103.7 million in the first quarter of 2021.
"Purchase order levels were in line with the prior period and continue to benefit from strong housing prices," the company's earnings release said.
Direct orders opened totaled 126,976 for the three months ended March 31, compared with 120,251 for the prior three months and 161,851 for the previous year. Closed orders during that time ended at 106,801 versus 113,577 and 140,281 respectively.
While premiums earned in Old Republic's run-off mortgage insurance business fell 29% year-over-year to $6.5 million in the first quarter, its pretax operating income nearly doubled to $9.7 million from $4.9 million as the company recorded a claims benefit for the period rather than claims costs.
That line item "reflect[s] significantly fewer newly reported delinquencies along with improving trends in cure rates, influenced by a relatively strong economy and real estate market," the press release said.
In its title insurance segment, pretax earnings of $80.9 million, compared with $137.3 million for the prior quarter and $103.7 million in the first quarter of 2021.
"Purchase order levels were in line with the prior period and continue to benefit from strong housing prices," the company's earnings release said.
Direct orders opened totaled 126,976 for the three months ended March 31, compared with 120,251 for the prior three months and 161,851 for the previous year. Closed orders during that time ended at 106,801 versus 113,577 and 140,281 respectively.
While premiums earned in Old Republic's run-off mortgage insurance business fell 29% year-over-year to $6.5 million in the first quarter, its pretax operating income nearly doubled to $9.7 million from $4.9 million as the company recorded a claims benefit for the period rather than claims costs.
That line item "reflect[s] significantly fewer newly reported delinquencies along with improving trends in cure rates, influenced by a relatively strong economy and real estate market," the press release said.
Stewart's income rises from prior year
Bucking the trend on a year-over-year basis was Stewart Information Systems, whose first quarter income of $57.9 million was higher than the $54.2 million in the same period in 2021. But this was still much lower than the $85.5 million reported for the fourth quarter.
Pretax income for the title insurance business rose 7% to $82.8 million from $77.1 million one year prior.
Opened orders fell to 116,755 from 157,918 last year, while closed orders fell 87,885 from 115,791.
Its real estate solutions business had pretax income of $6.8 million, compared with $2.7 million in the first quarter of 2021.
"I am pleased with the results we delivered in the first quarter 2022 in a rising interest rate environment," CEO Fred Eppinger said in a press release. "We remain optimistic on both the operating structure we continue to build as well as the long-term opportunity the market offers us given strong underlying demographic trends."
Pretax income for the title insurance business rose 7% to $82.8 million from $77.1 million one year prior.
Opened orders fell to 116,755 from 157,918 last year, while closed orders fell 87,885 from 115,791.
Its real estate solutions business had pretax income of $6.8 million, compared with $2.7 million in the first quarter of 2021.
"I am pleased with the results we delivered in the first quarter 2022 in a rising interest rate environment," CEO Fred Eppinger said in a press release. "We remain optimistic on both the operating structure we continue to build as well as the long-term opportunity the market offers us given strong underlying demographic trends."
Doma retrenches, reduces workforce by 15%
Doma will be refocusing its financial resources on "home purchase-focused strategic initiatives," CEO Max Simkoff said on its earnings call. This includes deploying the investment dollars it raised when it went public on a more conservative basis.
However, Simkoff admitted on the call that Doma's industry share of purchase transactions in the first quarter was less than 1%. But that should grow as it brings its Doma Intelligence technology, currently primarily used for refinancings, to the purchase business.
As a result of the shift, Doma reduced its workforce by 15% last week. Of the 310 people affected, 259 were in Doma's fulfillment organization, representing a 28% reduction to that group, Simkoff said.
In addition, Doma is now looking for partners for its previously stated intention to expand into home warranty and appraisal "as a means to de-risk our speed to market," Simkoff said.
Doma lost $50 million in the first quarter, compared with a loss of $43.7 million in the fourth quarter and $11.8 million in the first quarter of 2021.
Open orders ended the period at 35,192; in the fourth quarter it was 43,247 and 41,048 for the first quarter of 2021. For the same time frame, closed orders ended at 27,347 from 37,042 and 32,650.
However, Simkoff admitted on the call that Doma's industry share of purchase transactions in the first quarter was less than 1%. But that should grow as it brings its Doma Intelligence technology, currently primarily used for refinancings, to the purchase business.
As a result of the shift, Doma reduced its workforce by 15% last week. Of the 310 people affected, 259 were in Doma's fulfillment organization, representing a 28% reduction to that group, Simkoff said.
In addition, Doma is now looking for partners for its previously stated intention to
Doma lost $50 million in the first quarter, compared with a loss of $43.7 million in the fourth quarter and $11.8 million in the first quarter of 2021.
Open orders ended the period at 35,192; in the fourth quarter it was 43,247 and 41,048 for the first quarter of 2021. For the same time frame, closed orders ended at 27,347 from 37,042 and 32,650.
Investors Title’s net premiums written set 1Q record
Investors Title, the smallest of the publicly-traded companies, had first quarter net income of $6.2 million, versus $18.9 million during the fourth quarter and $13.8 million for the first quarter of 2021.
Net premiums written increased year-over-year by 2.7% to $63.1 million, the best first quarter ever for Investors Title, driven by increases in average home values and a higher level of purchase activity.
"We remain optimistic about the prospects for solid results for the company in 2022" J. Allen Fine, Investor Title's chairman, said in a press release. "Regardless of cyclical changes in the real estate market, we will remain focused on profitably expanding our market presence and enhancing our competitive strengths."
Net premiums written increased year-over-year by 2.7% to $63.1 million, the best first quarter ever for Investors Title, driven by increases in average home values and a higher level of purchase activity.
"We remain optimistic about the prospects for solid results for the company in 2022" J. Allen Fine, Investor Title's chairman, said in a press release. "Regardless of cyclical changes in the real estate market, we will remain focused on profitably expanding our market presence and enhancing our competitive strengths."
