See how title insurers performed in 2Q

Title insurance earnings for the most part rebounded in the second quarter, with five of the six publicly traded companies reporting profits. Doma, the sixth, reported a lower net loss versus comparable periods.

Open orders generally rose quarter-to-quarter, reflecting the higher mortgage origination volume.
Doma was the exception, conducting an ongoing reinvention as it looks to achieve adjusted EBITDA profitability this year. Right now the company appears to have reached a make or break moment.

Among other industry happenings, the sale of Agents Title and Boston National Title from one publicly traded parent, Finance of America, to another, mortgage insurer Essent Group, was completed on July 1, after the quarter ended.

Essent now joins Radian Group in looking to bridge the two lines, efforts for which until now have not been successful, as Old Republic's results show.

During its earnings call, Doma CEO Max Simkoff discussed the company's latest pivot: to focus on licensing its instant underwriting technology directly to mortgage lenders.

This follows the three sales of its retail production office network. Besides the relationships from licensing the technology with lenders, Doma will rely on agent relationships to source new business.

Working directly with Doma, lenders can clear issues earlier in the process, while at the same time significantly reduce the title insurance and closing fees paid by consumers, Simkoff said.

"Importantly, we are now in discussions with a number of these parties…so that we can bring this model to life at a crucial time when housing affordability is at record lows," he said. That will allow Doma to increase its market share. The most recent American Land Title Association data puts Doma at 2% in terms of new business.

But it's a far cry from what the company was projecting its market share would be when it agreed to go public in a special purpose acquisition company merger in 2021.

For 2020, it had closed orders of 92,400. Its presentation estimated that it would grow to 330,500 by this year.

But for the six months of 2023, Doma's done just a fraction of that, with 13,316 closed orders. In 2022 over the same period, it did 46,146, a pace similar to its 2020 volume.

"The last 18 months have proved to be incredibly challenging to Doma as we navigated through a rapidly declining mortgage market and skyrocketing interest rates," Simkoff said. "The reconfiguration of our business model to best drive our vision gives us newfound confidence that our proven technology is now best positioned to drive a massive impact that we've always known we can achieve."

Doma lost $35.9 million in the second quarter, an improvement from the first quarter loss of $42.1 million and year-ago loss of $58.7 million.

Adjusted EBITDA, the non-GAAP measure that Doma is using to track profitability, was also in the red, a loss of $13.7 million, compared with $21.6 million three months prior and $43.3 million one year ago.

Opened orders of 8,368 were down from 9,940 in the first quarter and 25,231 a year ago.

During the quarter, it conducted a reverse split of its stock in order to regain stock market compliance.

Fidelity National Financial, the largest underwriter based on the combined output of its various units, regained profitability in the second quarter.

It earned $219 million for the period, compared with a loss of $59 million in the first quarter. This was below the net income of $537 million in the second quarter last year.

For the title business only, total revenue of $1.9 billion was a 27% decrease from $2.6 billion in the second quarter of 2022.

"Our title business delivered an industry leading adjusted pre-tax margin of 15.8% in the second quarter given the expense actions taken over the past year," said William Foley, chairman, in a press release. "While the long-term outlook for housing remains strong given household formation and underlying demographics in the U.S., the near term continues to be uncertain given the high level of interest rates which could persist for longer than expected."

Open orders totaled 347,000, compared with 308,000 in the prior quarter and 443,000 one year ago.

FNF still holds a majority stake in life insurer F&G Life & Annuities. But given that investors undervalue the title insurance business, a full divestiture of F&G is possible, a report from Soham Bhonsle of BTIG said.

"Our sense is that FNF remains highly satisfied by performance (which is fair given the solid growth over the past three years) and that for now, FG remains a part of the company's plan," Bhonsle said. "That said, we also think both the company and the board fully appreciate the valuation gap (where the title business trades at about 9 times price to earnings ratio versus peers at 11 to 12 times) that exists today and is open to all options that would maximize value long term."