Title insurers wrote 22% more in new premiums in the third quarter compared with the second quarter, benefiting from a slight shift in the share of purchase versus refinance origination’s.
There were $5.1 billion of premiums generated during the third quarter versus $4.2 billion in the second quarter and $3.9 billion in the first quarter, according to the American Land Title Association. For the third quarter last year, title insurers wrote approximately $4.2 billion in premiums.
In the third quarter, the origination mix shifted to 43% purchase and 57% refi from 37%/63% in the second quarter, according to the Mortgage Bankers Association. Purchase mortgages have higher premiums than refinancings.
During the first nine months of the year, title insurance premiums written are up 17% over the same period in 2019, $13.2 billion versus $11.3 billion. And given the MBA’s expectations that the fourth quarter will bring in over $900 billion in loan volume — just like the second and third quarters — premiums written this year should top the near $16 billion in business the industry wrote in 2019.
Meanwhile, the shift in market share between the four national title insurers and the smaller independents continued. In the third quarter, the independents wrote 19.9% of all premiums, up from 19.5% in the third quarter.
Westcor, which was recently acquired by a group affiliated with former Citigroup CEO Vikram Pandit, has a 6% market share.
On the other hand, Stewart Information Services had its market share slip to 9.1% for the third quarter from 10.8% in the second quarter.
Fidelity National Financial remained the largest title insurer in the third quarter, holding a 33.4% share compared with 32.7% in the second quarter. First American’s share over the same period was relatively flat at 23.1% compared with 23%, while Old Republic’s share slipped slight to 14.5% from 14.8%.
Meanwhile, Fitch Ratings is bullish on title insurers going into 2021 even with the expected drop in overall origination volume and the economic fallout from the COVID pandemic. The MBA predicts 62% of next year’s $2.6 trillion in origination’s will come from home purchases.
“Title insurers benefit from favorable profit margins, very strong capital, conservative asset allocation and macroeconomic variables that are supportive of another year of strong operating performance,” said Gerry Glombicki, a director of Fitch’s Insurance Ratings Group in a report written prior to the release of the third-quarter data. “Claims experience also continues to trend favorably, and 2020 will be the fifth consecutive year with an annual loss ratio below 5%.”
Going into next year, the strength of the economic recovery remains a source of uncertainty for title insurers because revenue remains vulnerable to declines in employment and economic activity, Glombicki said. A return to prior employment levels will likely greatly influence future housing sales, construction and title order flow.
On the commercial side, which generates three to four times more revenue per transaction than residential title policies, Glombicki expects activity to be higher next year than in 2020 but below 2019’s levels.
“Pandemic-related socioeconomic shifts in consumer spending, travel and transportation, and workplace environments that may not revert to prior norms will affect investment in property sectors, including retail, hotels and commercial offices, and in turn, future commercial title revenue flow,” Glombicki said.
Overall, title insurers are better prepared now for any economic volatility versus the 2008 recession because of their capital strength, solid reserve positions and operating efficiencies gained from technology investments, he said.