The refinancing boom and rising home sales during the second quarter helped slow shrinkage of title insurance premiums, which nonetheless registered their 13th consecutive quarter of year-over-year declines.
The title insurance industry generated $2.55 billion in premiums during the second quarter, down 8.1 percent from the $2.77 billion in policies written during same period a year ago, the American Land Title Association reported.
That’s a less drastic year-over-year decline than the 25 percent drop seen in the first three months of the year, the 34 percent drop registered in the fourth quarter of 2008, or any quarter dating back to the second quarter of 2006, ALTA said.
Coupled with a 34.8 percent reduction in loss and loss adjustment expenses and a nearly fourfold increase in gains on investments, the industry as a whole posted $111.4 million in net income for the quarter, compared with a $190.4 million net loss the same time a year ago.
Among the four largest underwriters, First American Corp. was the lone title insurer to lose market share compared to a year ago.
The title insurance underwriters with the greatest market share were: Fidelity National Financial Inc. (45.8 percent of all premiums, up from 45.5 percent a year ago); First American Corp. (26.6 percent, down from 28.8 percent a year ago); Stewart Title Guaranty Co. (12.9 percent, up from 12.5 percent a year ago); and Old Republic International Corp. (6.6 percent, up from 5.4 percent a year ago).
Fidelity became the nation’s largest title insurer in December, after it took over troubled rival LandAmerica Financial Group Inc.’s underwriting companies. The year-over-year comparisons of Fidelity’s market share include LandAmerica’s underwriters before they were acquired by Fidelity.
Despite the industry’s return to profitability for the quarter, analysts at Fitch Ratings this week lowered insurer financial strength ratings for Fidelity and Stewart, and corporate debt ratings of Fidelity and First American. …CONTINUED
Fitch analysts downgraded the insurer financial strength ratings of Fidelity’s underwriting companies by one notch, to BBB-. Those underwriters include Fidelity National Title, Ticor Title, Nations Title, Chicago Title, and Security Union Title.
Fitch analysts cited Fidelity’s "aggressive capital management strategy," including the dividend payments to the parent holding company to support shareholder dividends and share buybacks, as reducing statutory capital surpluses at the underwriters.
Fitch said Fidelity’s underwriting companies’ insurer financial strength ratings were not downgraded below investment grade because the companies have outperformed their peers and because of Fidelity’s dominant market share.
The insurer financial strength ratings of LandAmerica’s former underwriting subsidiaries — Lawyers Title Insurance Corp., Commonwealth Land Title Insurance Co., and LandAmerica N.J. Title Insurance Co. — already at BBB-, were affirmed.
Fitch also downgraded the insurer financial strength ratings of Stewart Title Guaranty Co. and its subsidiary, Stewart Title Insurance Co., from A- to BBB+, citing "below average profitability relative to peers and declines in statutory surplus."
Fitch analysts affirmed the A- insurer financial strength rating of First American’s underwrititng companies, but downgraded all of the holding company’s corporate debt ratings one notch. Fitch cited "heightened scrutiny" of the company’s debt to capital ratio "given the current stressful environment."
Fitch noted that a planned spin-off of the company’s title and specialty insurance segment will leave First American without the benefits of the "unregulated cash flows" of its information solutions division.
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