Title insurers First American Financial and Stewart Information Services late this week posted second quarter earnings above market expectations, mostly on reduced costs.
First American, Santa Ana, Calif., earned $32.3 million in 2Q, slightly below what it earned in the same period a year ago.
Stewart Information, Houston, earned $6 million in 2Q, down 33% from a year ago. Its title business took a $4 million charge on the payoff of a defaulted third-party loan on which it had issued a guarantee, and a $5 million charge related to an increase in estimated reserves covering several existing large title losses.
Stewart reduced employee costs by 2.5%, and has cut 190 employees since June 2010. The firm said industry forecasts are for declining market activity and it anticipates a continued reduction in employee costs.
At First American, total revenues for its title insurance segment (which includes commercial services) fell 5% to $857 million, compared to 2Q10. However, its results were bolstered by a strong showing in the commercial group which is national in scope.
Dennis Gilmore, First American's CEO, said the company has implemented a cost-reduction program that will provide $40 million in annualized cost savings, starting in the third quarter.
Title firms are directly impacted by the origination market. As residential loan volumes struggle to keep pace with last year’s volume, fewer title insurance policies are being written.
