Increase in refinance transactions boosts title insurers' results
Title insurers benefited from the increase in origination volume — especially refinancings — during the second quarter, as open order counts increased compared with one year prior.
However, the bottom line impact was muted because title insurers earn lower fees on a refi transaction than they do for purchase mortgages.
At Stewart Information Services, open orders for refinance transactions were 33,342, up from 21,615 one year prior. Purchase open orders fell to 65,172 from 66,674 in the second quarter of 2018.
First American, which broke out transaction type in its open orders per-day tables, had an increase in the refinance share to 38% of residential transactions from 34% in the second quarter of 2018.
There was an increase in average purchase open orders per day to 2,251 from 1,907. But for refis, the increase was larger, to 1,408 from 1,001. Total open orders rose to 296,200 from 276,800 one year prior.
Old Republic International did not break out its title subsidiary's order count by source. But direct orders open rose to 128,801 in the second quarter from 115,278 for the same period in 2018.
Previously, Fidelity National Financial reported 544,000 direct orders opened in the quarter, up from 505,000 in the previous year. Refinancings made up 39% of the volume, up from 29% in the second quarter of 2018.
"The company delivered outstanding financial results in the second quarter, including a record 17% pretax title margin," CEO Dennis Gilmore said in a press release. "Low interest rates continue to strengthen the purchase market, drive substantial growth in refinance activity and sustain a healthy commercial market.
"Looking to the second half of 2019, we are optimistic in light of current market trends. So far in July, refinance activity continues its robust growth and purchase open orders are trending positively," Gilmore said.
Stewart Information Services, whose acquisition by Fidelity remains on hold as the parties try to convince New York regulators to approve the deal, reported net income of $19.3 million, down from $22.4 million a year ago.
The results included $3.7 million of third-party advisory expenses from the merger transaction.
But pretax income for the title insurance segment grew to $39 million from $37.7 million in the second quarter of 2018.
"We are pleased with our second-quarter results as we have been able to capitalize on the selling season in our direct domestic title business while continuing to reduce corporate expenses," CEO Matthew Morris said in a press release. "A continued stable real estate market along with favorable buyer demographics and falling interest rates provide continued momentum as we enter the second half of 2019."
Old Republic's title insurance segment had slightly lower pretax income, $60.2 million compared with $60.9 million in the second quarter of 2018. While operating revenue increased 0.6%, claims costs were $1.1 million, or 6.6% higher.
The mortgage insurance business, which remains in run-off status, had a 38.9% drop in pretax income because net premiums earned slipped 21.2% as no new business is being written.
Still the unit was profitable, at $8.4 million, compared with $13.8 million the previous year.
Meanwhile, CoreLogic reported a net loss of $6 million for the second quarter, down from net income of $59 million one year prior as operating income fell by 84% or $75 million to $15 million. Included in the year-to-year drop was a noncash impairment charge of $48 million and severance charges of $6 million related to the shift to appraisal management from the loan origination software and default management businesses.
"CoreLogic delivered a strong operating performance over the first six months of 2019 despite challenging market conditions in the U.S. and Australia," said President and CEO Frank Martell in a press release. "On a run-rate basis, after considering discrete items, revenues and profitability were essentially in line with a strong prior year comparative. We grew our insurance and international capabilities and footprint as well as expanded our real estate and valuation platform revenues."