After cutting thousands of employees to stem losses in 2008, title insurers have seen a dramatic increase in business in recent months that’s largely driven by homeowners rushing to refinance loans to take advantage of low interest rates.

As business picks up, First American Corp. and Fidelity National Financial Inc. — parent companies of underwriters that insure about three-quarters of all title insurance policies — have increased or plan to increase rates by up to 20 percent in the states that generate most of their business.

Fidelity saw orders for title insurance policies shoot up from 5,000 orders per day in October and November to 14,200 orders a day in January. Part of that increase was the result of Fidelity’s acquisition in December of bankrupt LandAmerica Financial Group Inc.’s underwriting subsidiaries, which made Fidelity the nation’s biggest title insurance underwriter (see story).

Former LandAmerica subsidiaries Commonwealth Land Title and Lawyers Title accounted for about 15 percent of orders for title insurance policies in January, Fidelity officials said in a conference call with investors announcing fourth-quarter results.

First American executives say they also saw orders for new policies leap from about 5,500 orders a day in October and November to 10,000 orders per day in January.

While refinancings accounted for 40 percent of First American’s open orders in the fourth quarter, that share increased to 58 percent in January. The pace fell to 8,800 orders a day during the first three weeks of February.

Fidelity said it saw title orders peak at about 16,000 per day in the second week of January, slowing by the end of the month to 12,000-13,000 orders a day — a pace the company expects to stay on or near that pace for the remainder of the year.

"We are going to maintain 12,000 orders a day this year … we’ll all have a good investment experience," Fidelity Chief Executive Officer Alan Stinson promised. Few would argue that 2008 was a good investment experience for shareholders of title insurance companies.

Fidelity reported a $165.8 million net loss for 2008, as revenue fell 22 percent to $4.33 billion. But thanks in part to drastic cost cutting measures, Fidelity ended the year with a $2.6 billion reserve for claim losses — twice that of any competitor, and reserves plus stockholders’ equity of $5.4 billion.

By the end of January, Fidelity had fired 1,500 of the 5,500 workers employed by former LandAmerica underwriting subsidiaries, Lawyers, Commonwealth and United Capital Title, and closed 125 offices, eliminating $180 million in annual expenses. Fidelity said it also cut 600 workers from its own ranks during the fourth quarter, leaving the company with 8,000 field employees in title operations before the merger.

First American, in announcing an $89.8 million fourth-quarter loss, said it cut 1,210 jobs in the title insurance segment during final three months of the year. The company, which also has businesses that provide information and data analysis, eked out a $44.2 million profit for the year. But the title insurance segment lost $117.2 million, as revenue fell 30 percent to $3.9 billion.

In addition to cutting costs, title insurers are attempting to recoup losses by raising rates.

First American has filed for a roughly 10 percent rate increase in California, which it expects will become effective April 1, and will seek increases in about a dozen other states, company officials said in a conference call with investors.

Fidelity has already obtained approval for a 10 percent rate increase in California — a state that accounts for about 25 percent of the company’s business — which went into effect Jan. 9.

Fidelity has instituted revised rates in 21 states, which include "simplified rate structures" in some states and price increases ranging from zero to 20 percent, Chairman William Foley said in a conference call with investors to discuss fourth-quarter results.

Foley was updating a previous announcement in October that Fidelity would seek "very aggressive" price increases of 10 percent to 20 percent in 22 jurisdictions including California, Texas, New Mexico and Florida.

Foley said it will take longer to implement increases in Texas, New Mexico and Florida, where rates are promulgated and applied industrywide. In New York, he said, rates are set by a bureau that includes title insurers.

"We are working through our membership in New York in the New York Rate Bureau to ensure rates are properly set based upon industry performance and market expectations," Foley said.


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