Preliminary 2007 Title Industry Results: Profitability Maintained Amidst Dramatic Downturn
Columbus, Ohio – March 20, 2008: In February, Demotech forecasted that the Title industry would end 2007 with the lowest level of revenues since 2002. Throughout 2007, the real estate market had escalating alarms of decreased sales activity, price depreciation and increased foreclosures as the overall economy struggled. Not surprisingly, as year-end 2007 figures are compiled, preliminary analysis indicates a significant downturn in the Title industry’s performance. Yet, 2007 is merely a point in the larger cycle. As would be expected in such a heavily cyclical industry, the industry has amassed adequate capital, established a reasonable reserve positions and maintained a stable financial base to weather these declines. While individual underwriter results and positions may fluctuate widely, as a whole, the industry’s solvency is not jeopardized by this most recent stage of the cycle.
While final year-end results have not yet been reported by all companies, preliminary figures reveal 2007 revenue was approximately $14 billion, which is a 14 percent reduction from 2006. The industry has not experienced this dramatic of a year-over-year decrease since 1995. Contributing proportionally to this decline were underwriters struggling in the two leading jurisdictions, California and Florida, who experienced revenue decreases of 23 and 30 percent respectively.
In addition to experiencing a revenue decline, the Title industry reported increased loss activity. Industry Net Operating Income reflects the revenue decrease, coupled with rising loss activity. Affected by the poor economic factors reported throughout 2007, the preliminary figures show the industry recorded a decline in Net Income of approximately 70 percent. Although the Title industry has taken steps to reduce expenses, the efforts have been overshadowed by the drop in revenue. The Title industry is likely to continue to face more financial challenges until the housing market and the broader economy improve; however, amidst all the negatives and challenging results, the industry remained profitable in 2007.
Title Industry Information and Analysis
For 20 years, Performance of Title Insurance Companies has assisted in analyzing the Title insurance industry and its competitive landscape with industry-wide benchmarks, along with underwriters and group level analysis for competitive assessment. Representing more than 99% of the Title industry, Demotech Performance of Title Insurance Companies is the most complete and thorough industry analysis available.
The 2008 edition of Demotech Performance of Title Insurance Companies will present year-end 2007 Title industry results with extensive supporting detail and reports. The 2008 publication will continue our efforts to deliver expanding content. The upcoming edition’s release will be accelerated for distribution in May 2008.
Contact Demotech at (800) 354-7207 or visit https://www.demotech.com/ptic to preorder the 2008 edition and for more information regarding Demotech publications and the availability of customized research and analysis of Title industry data from our Form 9 database. Sample industry analysis reports and publication excerpts are available online.
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.
Visit https://www.demotech.com for more information.
Douglas Powell, Senior Consultant
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