Will title insurers face monetary stress going ahead?

Title insurance coverage premiums written elevated on a sequential interval foundation within the second quarter, however they had been down 37% from one 12 months in the past as mortgage originations continued to say no, the American Land Title Affiliation discovered.

Excessive mortgage rates of interest, mixed with excessive residence costs have contributed to what some housing economists really feel is a sector-specific recession.

Within the second quarter, originators produced $463 billion, the newest information from the Mortgage Bankers Affiliation estimated. This was up from $333 billion within the first quarter, however down from $696 billion within the second quarter of 2022.

Because of this, title insurance coverage premium quantity ended the interval at $3.91 billion, in contrast with $3.37 billion three months prior and $6.21 billion a 12 months in the past, ALTA stated.

Due to the decrease quantity, working revenue was down 48.5% from the prior 12 months interval. In the meantime, within the first six months of 2023, title insurers paid $331.8 million in claims, up from $277.2 million for a similar timeframe final 12 months.

Nonetheless, ALTA stated title corporations are nonetheless working from a powerful monetary place, with complete property of $11.6 billion, a statutory surplus at $5.2 billion and statutory reserves of $5.9 billion.

The analysts at Fitch Rankings had a barely totally different view relating to the monetary finish of the enterprise.

“Broader macroeconomic headwinds proceed to stress top-line revenues for the title insurance coverage business,” stated the report from Gerald Glombicki and Douglas Baker. These embrace the aforementioned larger charges and elevated residence costs.

“Fitch Rankings expects these pressures will persist over the following 12 to 18 months, and refinance volumes are anticipated to stay severely depressed,” the report issued Sept. 5 stated. “Buy order volumes are anticipated to stay pressured, however will doubtless rebound considerably in 2024 as underlying housing demand stays sturdy.”

The combination working margin on the 4 largest holding corporations (which management 82% of the market) elevated 3% quarter-to-quarter and may proceed to enhance all through the remainder of the 12 months, Fitch stated.

By particular person underwriter, the 5 most prolific corporations and 6 of the highest seven belong to these 4 holding corporations.

First American Title Insurance coverage had a 22.3% market share within the second quarter, in contrast with 23% within the first quarter and 21.4% for a similar interval final 12 months.

Second was Previous Republic Nationwide Title Insurance coverage at 14.8%, down from 15.5% within the prior quarter and 14.9% one 12 months in the past.

Constancy Nationwide Monetary owns the following two underwriters on the checklist. Constancy Nationwide Title Insurance coverage had a 14.1% share, with Chicago Title Insurance coverage at 13.7%. Each had been larger than the primary quarter at 12.7% and 12.4% respectively.

One other FNF subsidiary, Commonwealth Land Title Insurance coverage, had a 3.5% share within the second quarter, up from 3.3% three months prior.

Ranked fifth was Stewart Title Warranty, whose 8.4% share was down from 9.6% within the first quarter and eight.8% for the second quarter of 2022.

Westcor Land Title Insurance coverage, whose share at one time approached that of the massive underwriters, continued to shrink, down to three.6% for the second quarter. Within the first quarter it was 3.6% and one 12 months in the past it was 4.2%.

Doma ended the second quarter with a 2% market share, ranked tenth. However through the interval, and into the third quarter, the corporate started promoting its retail manufacturing places of work because it shifts its enterprise mannequin in an effort to grow to be worthwhile.