There’s room for another national player in title insurance, according to Patrick Stone, president and CEO of a startup that aims to join the ranks of the big four title insurers before the end of the decade.
Based in Lake Oswego, Ore., WFG National Title Insurance Co. has grown rapidly by acquiring other companies, employing nearly 200 workers nationally. WFG was licensed to do business in 33 states just six months after launch, and plans to be in more than 40 by the end of the year.
"The market is very underserved in the sense that the industry has not changed or adapted to market-driven changes that Realtors and lenders have had to adapt to," Stone said.
"There’s an opportunity for a new player to come in and be client oriented and use technology to replace hierarchical management structures. I think there’s tremendous potential to be a fairly significant player in a five- to seven-year window."
He declined to be more specific about exactly how WFG National Title Insurance plans to use technology to gain an edge over competitors. Established title insurance underwriters have made some changes to take advantage of new technologies, Stone acknowledged, but he thinks those companies remain burdened by sunken costs and committed to traditional operating standards.
And Stone should know. During the housing boom and bust, he spent time on the board of directors of what are today the nation’s top two title insurers: Fidelity National Financial, where he was a director from 2002 to 2004, and First American Corp., whose board he served on for one year.
Stone resigned from First American’s board on May 26, 2009, to pursue the new venture.
Stone’s resume also includes a stint as president and chief operating officer of Fidelity National Financial from 1997 to 2002, followed by two years as CEO of Fidelity National Information Systems (FNIS).
After stepping down as CEO of FNIS in 2004, Stone became vice chairman of Metrocities Mortgage Corp. More recently, he’s served as chairman of The Stone Group, a commercial real estate brokerage, and Wystein Capital LLC, a real estate and financial asset investment company.
Last year, Stone and a group of other veteran title insurance managers, joined with a San Francisco-based private equity firm, Golden Gate Capital, to launch the new venture, WFG Title Insurance.
That deal was followed by the acquisition of California-based underwriter, TransUnion Title Insurance Co., which closed in March.
WFG "will be seeking a few carefully selected non-affiliated underwritten title companies to appoint as agents to further grow premium revenue," the company said in a filing with California insurance regulators.
The difficult real estate climate makes it a good time for WFG to be making acquisitions and forging relationships with independent title agents, Stone said.
There are also new rules governing the provision of title insurance and settlement services under the Real Estate Settlement Procedures Act (RESPA), which are aimed at encouraging consumers to shop around. But Stone said it’s not RESPA that’s driving the opportunity he sees for a new industry player.
"Title insurance is still done in the traditional way," Stone said. "If you ask 100 Realtors or lenders the difference between Fidelity and First American, they wouldn’t be able to tell you the difference. This industry’s product is a commodity — everybody has the same product, and everybody charges essentially the same price."
The key to winning market share in the title insurance business remains providing Realtors and lenders with easy access to fast, dependable service they can count on, Stone said.
WFG plans to provide that access through three separate business segments: direct-owned operations, in which agents employed by WFG write new policies; agency operations, where WFG underwrites policies written by independent title insurance agents; and a national lender group providing title insurance on refinancings.
"If you want to be a national player, you must have all three components," Stone said.
West of the Mississippi, rates and regulations favor direct-owned operations, Stone said. East of the Mississippi, WFG will rely more heavily on agency operations, policies written by independent agents.
WFG acquired a turnkey lender group by purchasing New Millennium Title Group, which has offices in Minnesota, Nevada and Utah, and national processing centers in California, Texas and Wisconsin.
So far, WFG’s market share remains small. According to the latest figures from the American Land Title Association, during the first three months of the year, WFG and the two TransUnion underwriters it’s acquired to date wrote $4,434,390 in premiums, or about 0.2 percent of the $2.07 billion total for the industry as a whole (New Millennium Title Group is not an underwriter).
But ALTA’s first-quarter market share statistics do show smaller companies have been making inroads at the expense of their larger competitors.
All told, 35 regional title companies claimed a combined market share of 10.7 percent market share during the first quarter of 2010, up from 7.8 percent in 2008.
Old Republic International Corp., the smallest of the "big four" title insurers, has also been growing rapidly, nearly doubling its market share from 5.7 percent in 2008 to more than 10 percent during the first three months of 2010.
Third-place Stewart Title has also made modest inroads, boosting its market share from 12.6 percent in 2008 to nearly 14 percent in the first quarter of 2010.
The battle for market share among title insurers heated up in 2008, when LandAmerica Financial Group Inc. filed for bankruptcy and sold its underwriting subsidiaries to Fidelity National Financial Inc.
Fidelity’s acquisition of LandAmerica’s two primary underwriting subsidiaries — Lawyers Title Insurance Corp. and Commonwealth Land Title Insurance Co. — made it the nation’s largest title insurer.
When the deal closed in December 2008, Fidelity owned a stable of companies that had collected nearly half of the more than $10 billion in premiums written that year (other companies under the Fidelity umbrella include Chicago Title, Ticor Title Insurance, and Security Union).
But since they were acquired by Fidelity, Lawyers and Commonwealth have lost considerable market share. While Fidelity remains the nation’s largest title insurance underwriter by a comfortable margin, it’s not as dominant as company executives might have hoped they would be when acquiring LandAmerica’s underwriting business.
By the first quarter of 2010, the combined market share of Lawyers and Commonwealth had slipped to 10.8 percent, according to statistics compiled by the American Land Title Association (ALTA). That left Fidelity with 36.9 percent of the market, instead of the 45 percent it would have commanded had it been able to keep all of LandAmerica’s business.
First American, the second-largest title insurance underwriter, has also seen its market share slip slightly, from 28.9 percent in 2008 to 28.3 percent in the first quarter of 2010.