While First American Corp., the nation’s second largest title company, saw a decline in 2Q13 net earnings on a year-over-year basis, rivals Old Republic International and Stewart Information Service Corp. both reported increases.
First American had net income of $34.7 million, compared with $73 million in 2Q12. The results for 2Q13 include an $89 million addition to its reserves.
CEO Dennis J. Gilmore said in a press release that paid title claims were down 8% year-to-date. But he continued claims from its legacy book of business are not declining at the pace the company expected and as a result it made the addition to its reserves.
Total revenue increased 18% to $1.3 billion. Direct orders open increased by over 10,000 to 421,500. The
ORI’s net income was $194 million, up from a $34 million loss in 2Q12. Its run-off mortgage insurance business reported pretax income of $56 million for the quarter (one year earlier it lost $110 million).
The MI business had significantly lower clams provisions, as the number of newly reported defaults declined. The claim ratio was 27.5%, much improved over the 213.7% reported for 2Q12.
Title insurance added $40.4 million in pretax operating income, up from $22.5 million in 2Q12. In its press release, ORI said title claims ratios for 2013 are lower than they were in 2012 as claim frequency and severity continue to abate. ORI has been
Matthew W. Morris, CEO, said, “Our title operations delivered a 15.4% pretax margin, up from 9.9% in the prior year quarter, driven by improving transaction volume and increasing prices, as well lower title losses.” The company also benefited from a 3.8% rate increase in Texas, the first rate increase for title companies in the state in more than 20 years.
Revenue in the mortgage services segment was down 16% from 2Q12, this decline was anticipated and does not alter Stewart’s strategy of continuing to invest in new offerings and diversifying its client base, he said.
