Good Afternoon —
If the past few weeks of earnings calls revealed anything, it is that 2021 was a banner year for the title insurance industry. All four members of the "Big Four" announced strong, if not record breaking earnings during their calls with investors. But smaller upstart Doma didn't fare as well, losing $113 million in 2021 (for context, Stewart netted $323 million in profit). Doma's losses can primarily be attributed to rising expenses – $55 million in customer acquisition costs and $130 million on other indirect costs, including corporate support, research and development, and other operating costs. Personnel costs also rose to $238.1 million. Doma is investing heavily in its business and expects to be profitable in 2023.
Industry veteran Pat Stone of rival firm WFG National Title Insurance Co. said that while Doma has touted its automated title capabilities as a strength, this feature could be hindering Doma's chances at generating a profit in the near-term, especially as the market switches over to purchase.
"The application of automated title is really somewhat limited and we are not in a position from a database or consistency basis to apply automated title nationally in all types of businesses," Stone said. "I think virtually every other title company made money last year. The volume was there, the business was there."
Stone sees diversity in the types of transactions a firm covers as a major source of strength as the market switches from refinance to purchase.
"I think this year you'll see a significant downturn in refis and I think companies will have to adjust to that, but if you have a broad base of business, if you are doing sale, refis, builder and commercial transactions, then there is ample business there to make a profit," he explained.
WFG, which is a private company, expanded its footprint in Texas last year and also launched a commercial title insurance operation. While Stone says the addition of commercial transactions had always been part of the plan for 2021 and 2022, a shift to purchase accelerated growth.
"We wanted to be in commercial because commercial is a substantial amount of premiums written annually in the title business, but we didn't want to be in commercial until we were ready financially and had the skill set to participate in it," Stone said. "So, it had more to do with that than it did the ebb and flow of refi business. We feel really good about where we are. Now we can sustain what we've got and what we started."
That's it for this week, folks. As always feel free to reach out to me with topics or ideas you would like me to dive into. You can email me anonymously at bhan@housingwire.com.
Until next week —
Brooklee Han
Real Estate and Title Industry Reporter
bhan@housingwire.com
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