Title Industry’s Bubble Bursts

Columbus, Ohio – September 10, 2008:

With half of 2008 in the books for the Title insurance industry, we are no closer to knowing when the industry will reach a stable level and start recovering. What is clear is that the industry will have lost most of the gains made since 2001 by the end of this year.  Based on the second quarter results, Demotech, Inc. predicts that despite the significant expense reductions already taken, the industry will operate at an underwriting loss.  While publicly traded groups are announcing mergers, to help strengthen their balance sheets, the benefits will not materialize in 2008. Regional underwriters, those licensed in less than six jurisdictions, are faring much better on average than the national underwriters.  These smaller underwriters have lost an average loss of 6.7% of premiums written from the second quarter of 2007, as opposed to a 28.7% loss for underwriters licensed in over forty jurisdictions.

The industry financial data reported in the second quarter 2008 Demotech Performance of Title Insurance Companies – Quarterly Update showed that rising losses and falling premiums out-paced cost containment measures and resulted in a $200 million operating loss.  The industry produced a positive net income in the second quarter, due in large part to the solid results from Chicago Title Insurance Company, without which the combined industry figure would have been a $37 million loss.

The industry was able to increase surplus as regards policyholders’ from year-end 2007 after a small drop in the first quarter.  If the rapid slide in premiums is nearing its nadir, and if the industry can restore its traditional loss ratios, then further capital infusions or expense cutting might not be necessary.  The rescue of Freddie Mac and Fannie Mae should help lower mortgage interest rates in the short term.  In a few markets, home prices have already started to stabilize.  Both of these things should help temper the pressures on Title insurance premiums.  However, a leveling off seems to be the best the industry can hope for over the remainder of 2008.

Title Industry Information and Analysis

The 2008 edition of Demotech Performance of Title Insurance Companies, which includes the associated Quarterly Updates, was distributed in May of 2008.

Contact Demotech at (800) 354-7207 or visit https://www.demotech.com for more information regarding Demotech and the availability of Title industry data for customized research, consulting services and Financial Stability Ratings®.

# # #

Paul Osborne, Senior Consultant
Email questions  here.