Although title insurance revenues declined in 2014, this year holds the promise of a solid pipeline of activity, according to a recently released Fitch Ratings special report. Title premiums could rise in response to increased business competition in the industry, but probably not by much.
The report, “Title Insurance Industry 2014 GAAP Financial Results,” reviewed the title insurance industry’s financial performance last year and found that title insurance revenues were negatively impacted by lower refinancing activity, but also that an increase in purchase activity, commercial transactions and rising home prices offset the decline.
The nation’s four publicly traded underwriters — Fidelity National Title Insurance Co., First American Title Insurance co., Stewart Title Guaranty Co. and Old Republic National Title Insurance Group, which together comprise nearly 90 percent of the industry — reported a less than 1 percent decline in 2014 title operating revenues, the report found.
However, given the strong refinance volume that title companies have enjoyed in the past few months, Fitch said it expects revenues to either stay flat or be slightly positive in 2015. In addition, open orders will keep the industry in the black through the first half of the year, Fitch said.
The ratings firm also said profit margins are likely to remain at current levels, and expense structure will continue to differentiate profitability for each underwriter. Profitability may also be impacted by certain ongoing factors such as interest rates, inflation, employment, taxes, public sector debt levels, and U.S. monetary and fiscal policies.
These results are in line with Fitch’s 2015 industry outlook released in December, which maintained a stable rating outlook for the title industry and predicted the industry will approximate current levels over the next 12 to 24 months.
Fitch has also maintained a stable sector outlook for 2015 due to a potential increase in purchase originations and maturation of troubled policy years 2005 to 2008 that promote earnings stability.
The Mortgage Bankers Association forecasted mortgage originations to increase to $1.2 trillion this year, compared with $1.1 trillion in 2014. Notably, purchase originations are forecast to grow by 15 percent, and refinances are anticipated to decline by 3 percent, according to the MBA.