Refis drives and limits title insurers' premium income 12 months after 12 months

In the second quarter, title insurers achieved 8% more new premiums year-on-year as lower refinancing of receipts dominated a period of record mortgages.

According to the American Land Title Association, the industry generated total premiums of $ 4.18 billion in the second quarter. That was an increase of over 6% from the first quarter before the brunt of the impact of the pandemic, when title insurers wrote $ 3.92 billion. At this pace, the industry will hit the $ 16 billion in awards it made last year.

In the meantime, the group of independent companies has stolen more market share from the four dominant title insurers. For the second quarter, these underwriters as a group had a 19.5% share compared to 17.8% in the first quarter. Throughout 2019, this group wrote nearly 15% of new business.

This is the highest group share of independent companies since the property insurance business was consolidated in the mid-2000s.

The pandemic was and is a major contributor to the low interest rate environment, and it helped drive mortgage volume to over $ 1.1 trillion in the second quarter, double the $ 581 billion a year earlier, according to Fannie Mae.

However, $ 872 billion of this year's volume in the second quarter came from refinances that earn lower premiums than home buying policies. The purchase share a year ago was 65%. In the second quarter of this year, the purchase share was 28%.

At First American, for example, the average revenue per order fell from $ 2,315 to $ 1,950, even though the number of direct open orders in the second quarter increased from 296,200 a year ago to 351,300.

At Fidelity National Financial, direct title awards in the second quarter were $ 575 million, while agency-generated policy awards were $ 784 million.

In the same period last year, direct awards were $ 625 million and the agency was $ 754 million.

In terms of market share in the second quarter, FNF was at the top with 32.7%, followed by First American with 23%, Old Republic with 14.8% and Stewart with 10.8%.

The leading independent company was Westcor Land Title Insurance at 5.9%, a record for an independent company and up 5.2% in the first quarter, followed by WFG at 3% (down from 2.8%).

These companies could thrive by doing business through unaffiliated agents. That source controls 60% of the property insurance business, noted Bose George, an analyst at Keefe, Bruyette & Woods. The independent firms saw a sharp increase in the business share of agencies as their overall market share increased over the past decade.

He pointed out that Westcor, a 100% agency underwriter, has grown its market share by over 2% in the past decade to late last year, "which would support that view. I know the mix of some not the other independents but this trend could also occur with other independents who have also grown. "

However, George also pointed out that the larger underwriters had acquired agencies to increase their market share. For example, in January First American bought the remaining stake in Title Security Agency, which was a minority investor.

However, the expected trends in mortgage origination for the remainder of 2020 should benefit title company revenues.

While Fannie Mae predicts total volume will drop to $ 862 billion in the third quarter and $ 615 billion in the fourth quarter, a greater proportion should come from purchases (48% and 52%, respectively), which should give title insurers more revenue brings.

"The question remains how the commercial market will recover," said Diane Tomb, CEO of ALTA, in a press release. "Depending on how the commercial market develops over the remainder of the year, 2020 could prove to be one of the most important."

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