Good Afternoon —
Again we find ourselves in the midst of earnings reporting season. Last week, three of the "Big Four" title insurers, Stewart, First American and Old Republic, all reported their earnings and had calls with their investors.
As was expected, thanks to mortgage rates rising to their highest level in a decade, refinance volumes were down drastically for all three firms, leading to an overall decrease in the number of title orders opened and closed during Q1 2022.
While executives at both Stewart and First American called this time a "transitional period" for the market, Old Republic CEO Craig Smiddy decided to take a bolder stance.
"I think the way we are looking at refinancing activity right now, is that it is dried up and we don't expect that to rebound," Smiddy said on the call. "We don't think refinancing activity is going to be any kind of significant contributor this year."
After record-breaking quarters in 2021, the first quarter results for these three show the effect of falling volume. However, all three still realized net incomes. Stewart reported a net income of $57.9 million, up from $51.7 million a year prior. Meanwhile, Old Republic and First American both saw year-over-year declines in their title segment's pretax income, dropping from $103.7 million to $80.9 million and $280 million to $220 million, respectively.
While refinance volumes decreased year over year during Q1, commercial title volumes saw major increases. At Stewart, the number of commercial title orders opened during the first quarter rose to 6,042 orders in 2022 compared to 3,569 orders in 2021. At First American, the number of commercial title orders opened per day in Q1 2022 rose to 572 orders compared to 537 orders a year prior. Old Republic did not report its order volumes, however, despite the downturn in refinance volume, its net premiums and fees earned increased 3.2% year over year to $998.9 million.
Despite the changing market and the uncertainty generated by rising mortgage rates, all three firms remain confident in the future of the title insurance market.
"Our view is that [it's] choppy right now — look at demographics and look at all the trends. But the next two years are still going to be very good years for title," Stewart's Chief Financial Officer David Hisey said on the call. "So we still believe that there is still a relatively strong market position. We usually manage ourselves effectively and we will continue to do so."
But I want to hear from you. What trends have you noticed at your firm? Email me at brooklee@hwmedia.com.
Until Next Week,
Brooklee Han
Real Estate and Title Industry Reporter
brooklee@hwmedia.com
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