Large title underwriters benefit from 3Q uptick

While the majority of the publicly traded title insurance underwriters were profitable in the third quarter, First American Financial not only ended the period in the red, but posted a larger year-over-year net loss.

However, that loss was largely a result of an investment portfolio rebalancing that, while causing some short-term pain, should end up increasing investment income by $67 million per year when the funds are reinvested in higher yielding securities.

First American was the only large underwriter to do fewer orders on a quarter-to-quarter basis.

The third quarter was also the end of the line for an independent Doma, which was expected; Lennar was a major shareholder and going forward it will have a stake in the new owner. But after the period ended, another underwriter, Alliant National, announced it was being bought by a homebuilder.

The following is a roundup of the third quarter earnings from the remaining publicly traded title insurers.

First American optimistic despite GAAP loss

For the third quarter, First American Financial lost $104 million, compared with net income of $116 million for the previous quarter and a loss of $1.7 million one year prior.

But management was optimistic about its third quarter performance for several reasons.

"We benefited from measured improvement in market conditions during the third quarter, with adjusted revenue up 4%, the first year-over-year growth since the second quarter of 2022," said Ken DeGiorgio, CEO, on the earnings call. "Our adjusted earnings per diluted share were $1.34, an increase of 10%. In our title segment, premiums and escrow revenues were up across all key business lines, but most notably in our commercial division, where revenues were up 19%."

He did temper those comments by noting that housing demand, which drives title insurance, softened at the end of the quarter as mortgage rates rose in reaction to the Federal Open Market Committee's 50 basis point short-term rate cut at its September meeting.

Open orders in the third quarter were 166,100 units, down from 169,600 in the second quarter, but higher than 157,300 one year ago.

For the fourth quarter, "we expect challenging conditions in the purchase market to persist," DeGiorgio said. "For the first three weeks of October, our open purchase orders are down 3%."

During that same time frame, refi open orders were up 76% but that was off of a low base level, DeGiorgio noted.

Purchase orders, profits slip at Fidelity National

Fidelity National Financial reported that daily purchase orders at its underwriting units were down 8% between the second and third quarters on normal seasonality.

"Within the quarter's results, however, we saw daily purchase orders opened in September higher than August," CEO Mike Nolan said on the earnings call. "This is atypical and due to a decline in rates, and we believe is indicative of the pent-up demand for housing."

But refinance volume pushed total orders higher for the quarter, to 352,000 units. In the second quarter FNF had 344,000 orders while one year ago, it had 318,000.

Net earnings for the third quarter were $266 million, compared with $306 million and $426 million for the same period last year.

The title segment contributed $244 million to the third quarter's adjusted net earnings of $356 million.

Stewart doubles profits year over year

Unlike its larger competitors, Stewart Information Services reported higher year-over-year earnings, continuing its upward climb.

It reported net income of $30.1 million for the third quarter. This compared with $17.3 million for the period ended June 30 and more than double the $14 million reported for the third quarter of 2023.

At one point because of its financial issues, Stewart had agreed to be acquired by FNF, but both the Federal Trade Commission and New York insurance regulators put the kibosh on the deal in 2019. Current CEO Fred Eppinger took over in September of that year and used the earnings call to comment on what has changed since then.

"We feel our performance reflects the efforts we have put in over the past four years on our journey," Eppinger said on the earnings call. "We remain dedicated to positioning ourselves well for the market recovery and feel confident that we will have significant upside in a more normalized market from the actions we have taken to improve the company."

Stewart has been an acquirer of agencies, but market choppiness has slowed that activity. "However, we remain very positive about the future outlook for opportunities and maintain a warm pipeline in preparation for an improved market," Eppinger said. "Our top priority in this business is to grow our share in attractive markets."

Stewart ended the quarter with 87,464 open orders, up from 86,721 three months prior and 81,267 for the third quarter of 2023.

Old Republic execs: real estate entering transition period

While the current market environment is constricting Old Republic International's title business, right now is the beginning of a transition period in real estate, company executives said in its earnings call.

In spite of those headwinds, the title business produced $40.2 million of pretax operating income in the third quarter, Craig Smiddy, president and CEO, said.

That pretax income compares with $46 million and $37.4 million one year prior. Net income at the parent company, which also operates a general insurance segment, was $338.9 million, versus $52.6 million in the third quarter of 2023.

Old Republic "would be happy if we continue to see the positive increases that we've seen quarter-over-quarter this year," Carolyn Monroe, president and CEO of the title insurance group, said.

"A lot of people believe that we'll start seeing some recovery later in 2025, and then 2026 should be when it really starts having a larger effect on us," Monroe said. "It's just so hard to predict anymore."

Open orders of 56,202 for the third quarter compared with 54,747 for the three months ended June 30, and 45,320 one year ago. Those numbers include a revision in methodology that Old Republic implemented in the second quarter.

Investors' expansion builds revenues

Investors Title, the smallest of the stand-alone publicly traded companies in the sector, saw its net income increase over the comparative periods as expansion efforts enhanced revenues.

In the third quarter, it earned $9.3 million, compared with $8.9 million three months prior and $7.1 million one year ago.

Revenues increased 12.1% versus the third quarter of 2023 to $68.8 million, compared with $61.4 million for the prior period. This was primarily due to an increase in net premiums written and a positive change to net investment gains.

Net premiums written increased primarily due to Investors expansion efforts in the Texas and Florida markets, along with higher average home prices and more title activity due to lower average mortgage interest rates.

"Market conditions remain challenging for the industry and transaction volumes remain materially below levels seen in the years immediately following the Covid pandemic," J. Allen Fine, chairman, said in a press release. "However, activity seems to have generally stabilized, and third quarter volumes were higher than the second quarter of the year."

Doma acquisition completed

Doma's brief foray as a publicly traded company came to an end during the third quarter as its previously announced acquisition by Title Resources Group closed on Sept. 27.

Doma Title Insurance, the underwriting business, is now operating as a subsidiary of TRG. Its technology unit, rebranded as Doma Technology, or Doma TechCo for short, was separately capitalized and will be a sister company to TRG.

Centerbridge Partners is the largest shareholder in TRG and through a subsidiary, is now the majority owner of Doma TechCo. Hudson Structured Capital Management has a "significant ownership stake" in the technology business.

"We are thrilled to have closed this transaction for all of our stakeholders," said Max Simkoff, who post-transaction is now the Doma TechCo CEO. 'With the acquisition behind us, we look forward to focusing on growing our business and continuing to innovate for the benefit of American homeowners."

As part of the transaction, Doma shareholder Lennar is now a minority owner of TRG. It continues a relationship that started when Doma forerunner States Title acquired the homebuilder's underwriting business North American Title.

"Combining DTI with TRG's existing underwriter, we have become the fifth largest independent underwriter in the United States," said Scott McCall, Title Resource Group CEO. "We have always been interested in expanding our relationships within the homebuilding community and Lennar becoming a part owner of TRG is an exciting milestone in fulfilling that goal."

Another homebuilder is buying a title underwriter

On Oct. 28, publicly traded Dream Finder Homes agreed to buy privately held Alliant National Title Insurance from Presidio Investors.

Terms of the transaction were not disclosed. Dream Finders already operates a title agency.

"This is a strategic acquisition for DFH and allows us to further vertically integrate alongside our existing title insurance agency business while facilitating growth in the title insurance marketplace," said Patrick Zalupski, the homebuilder's chairman and CEO, in a press release.

Alliant claims to be the largest title underwriter that does not have any direct or affiliated operations.

"The collaboration of an innovative builder, strong title agency, and the Alliant National underwriting team will promote our long-term success and growth into a national real estate partner," said David Sinclair, its president and CEO.

Presidio acquired Alliant in 2018. "It has been an exciting six-year journey to see Alliant National dramatically increase its footprint and develop tools to scale and to assist its customers," said Chris Puscasiu, managing partner. "Despite the uncertainty during the pandemic and the recent housing market challenges, the company's continued investment in growth enabled it to be recognized as an innovation leader in its space, as this transaction illustrates."
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