A pair of the nation's largest title insurers, First American Financial Corp. and Stewart Information Services Corp., reported net losses for the first quarter. Meanwhile, while the title insurance operations at Old Republic International Corp. were profitable, the mortgage insurance subsidiary posted an operating loss, contributing to the parent company's net loss.
First American's first quarter net loss of $15.3 million includes a reserve strengthening adjustment of $45 million for losses on a guaranteed valuation product that is only offered in Canada. Also hurting the company's results were increased claims in its U.S. title operations.
In the first quarter of 2010, FAF earned nearly $14 million.
The title insurance and services segment had a loss before taxes of $18.6 million, which includes the reserve strengthening for the Canadian product.
Stewart had a loss of $10.3 million, which is an improvement over its first quarter 2010 loss of $29 million. The company said results from operations improved significantly during the quarter because of increased home sale and commercial transactions, where the premiums are higher, and fewer refinance transactions. Total revenues increased by 4% over the first quarter 2010, although when compared with the fourth quarter 2010 they declined nearly 19%.
Old Republic lost $12.9 million, as its mortgage guaranty business had operating losses of $101 million. The Title insurance business had pretax profits of $2.6 million. One year prior, the company made $25 million, but the mortgage guaranty business had an operating loss of $34 million and the title insurance business had an operating loss of $9 million.
ORI said higher claims costs and lower net investment income hurt the mortgage guaranty segment. In addition, in the first quarter of 2010, Republic Mortgage Insurance Co. terminated a number of captive reinsurance arrangements and under accounting rules needed to recognize any premiums received as a result as income at that time rather than being deferred to when a claim was made.
On the title side, ORI said it benefited from market share gains which led to a 30% increase in net premiums earned when compared with the first quarter 2010. However, claims costs rose by 38% over the same timeframe.
