Third Quarter No Charm for Title Industry

Columbus, Ohio – February 5, 2008:  The current housing crisis and looming recession has prompted the Federal Reserve Board to lower the federal funds rate to 3% in an effort to restore the flow of credit and bolster market confidence.  While mortgage refinancing applications have climbed recently, experts are predicting that housing prices will continue to slide through early 2009.  The prolonged soft market will keep pressure on the Title industry to keep gaining efficiencies while controlling losses and maintaining surplus.

The industry financial data reported in the third quarter 2007 Demotech Performance of Title Insurance Companies – Quarterly Update showed no improvement over the second quarter.  Premiums continued to decline while Losses continued to increase.  In stark contrast to 2006 when the industry made up a 30% shortfall in Net Income in the third quarter, in 2007 the industry’s Net Income was down over 25% after the third quarter.  Based on the year to date numbers and current economic forecasts, Demotech projects the Title Industry to end 2007 with $14.5 billion of Direct Premiums Written, the lowest level since 2002.

The Title underwriters’ financial results are certainly indicative of the current housing market.  While the Fed has already cut rates dramatically and mortgage rates are declining to two year lows, tighter lending standards are limiting the availability of low rate mortgages to only the most qualified buyers.  The fact that larger down payments and higher credit scores are needed to purchase a new home, and that housing prices are still too inflated from the boom markets of a few years ago, means home ownership remains out of reach for many Americans.  According to the Center for Housing Policy, over half of the metropolitan areas studied still have median home prices higher than the typical worker (nurses, retail sales, customer service, etc.) can afford.  For people who own a home with little equity, refinancing or selling may not be option if they are upside down on their current loan due to recent home value declines.  Until existing homeowners build enough equity to refinance and potential home buyers gain the financial strength to afford a new home, the demand for Title insurance will be reduced.  A recession would exacerbate the situation.  For the next year or so, Title companies will need to focus on reducing costs and containing losses in order to achieve healthier bottom lines as premium volumes decline.

Third Quarter – Quarterly Update

Released January 28th, the third quarter 2007 Quarterly Update includes quarterly market share reports and Underwriter GAAP Dashboard Reports, which offer full-page, graphical summaries of corporate financial information.  These dashboards present five years of GAAP financial statement data, along with 2007 quarterly results for those Title underwriters associated with publicly traded parent companies.  Underwriter GAAP Dashboard Reports facilitate competitive comparisons and are a single reference point to assess the current position as well as the historic performance of publicly traded Title insurers.

Title Industry Information and Analysis

The 2007 edition of Demotech Performance of Title Insurance Companies, which includes the associated Quarterly Updates, was distributed in June 2007 and introduced more than 100 pages of new content and publication enhancements, including Underwriter Dashboards, Five-Year Trend Reports and the expansion of Financial Ratios.

Contact Demotech at (800) 354-7207 or visit for more information regarding Demotech publications and the availability of the Title industry data in our Form 9 database for customized research and analysis.

About Demotech, Inc.

Since 1985, Demotech, Inc., a Columbus, Ohio-based financial analysis and actuarial services firm, has provided responsive services to address actuarial and financial analysis issues, whether the issues have been for a particular insurer or prevalent throughout the insurance industry.  As the first company to have its rating process formally reviewed and accepted by Fannie Mae, Freddie Mac and HUD, Demotech has been leveling the playing field by offering Financial Stability Ratings® to insurers of all sizes.  Demotech applies its broad actuarial and industry experience to its consulting services, which include pricing analysis and loss and loss adjustment expense reserve reviews.

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Douglas Powell, Senior Consultant
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