Q3 earnings for title’s Big Four are a mixed bag

Stewart and Old Republic record net incomes, while First American loses $2 million.

Thursday was a big day for title firm earnings, with three of the Big Four title insurers reporting their third-quarter 2023 earnings.

The day began with Stewart’s Q3 2023 earnings call with investors and analysts. During the quarter, the smallest of the Big Four recorded a total revenue of $601.7 million, down from $716.4 million a year ago. Stewart’s net income also fell year over year dropping from $29.4 million in Q3 2022 to $14.0 million in Q3 2023.

“Although the current economic environment continues to pose significant short-term challenges, we have materially improved our business, creating a strong and more resilient enterprise that will thrive over a full real estate cycle,” Fred Eppinger, Stewart’s CEO, said on the Thursday morning call.

Despite what Eppinger called a “challenging environment” the title segment of the firm continued to perform well, although not as well as a year ago. Title segment operating revenue came in at $522.1 million, down 19% year over year, while pretax income dropped 32% annually to $35.4 million.

The firm attributed the decreases to transaction volume declines in direct and agency title business. Overall, Stewart reported the total number of title orders opened during the quarter fell from 86,974 in Q3 2022 to 81,267 in Q3 2023. Yearly decreases were reported across the commercial, purchase and refinance segments, with purchase order volume take the largest hit, dropping by over 7,000 opened orders to 53,506 orders. These decreases were partially offset by a nearly 7,000 order increase in the number of “other” title orders opened. This category includes things like home equity loans and lines of credit.

As Stewart looks ahead to the new year, executives are less than optimistic about the near future.

“We see 2024 as a transition year to a more normal market in ’25, and we believe the next six months will continue to be very challenging given the macroeconomics laid on top of the typical seasonal impacts,” Eppinger said.

First American, the second largest of the Big Four, was up next. Like Stewart the firm reported a 19% annual decrease in revenue for the quarter, resulting in total revenue of $1.481 billion. Unlike Stewart, however, First American failed to record a profit, reporting a net loss of $1.2 million. For comparison, the title firm recorded a $2.4 million net income in Q3 2022.

“With housing affordability currently at its lowest point in over three decades, existing home sales this year have declined to the slowest annual pace since the global financial crisis. Moreover, sales volumes in the commercial market have reverted to pandemic-low levels, and are down approximately 50% from the peak year of 2021,” Ken DeGiorgio, First American’s CEO, said of the challenges his firm has faced this quarter.

Despite the headwinds, First American’s title segments reported a pretax income of $160.3 million, down slightly from the pretax income of $185 million reported a year ago. The title segment’s total revenue also declined this quarter falling 19% annually to $1.524 billion.

First American attributed this to a drop in the number of title orders opened during the quarter from 206,200 in Q3 2022 to 157,300 in Q3 2023. In addition, the average revenue per order to $3,653, primarily attributable to a decrease in the average revenue per order for commercial transactions.

DeGiorgio also does not believe housing market conditions will improve any time soon.

“We expect that difficult market conditions will persist well into next year and continue to weigh on both our residential and commercial businesses,” DeGiorgio said.

Old Republic, the second smallest of the Big Four, closed out the busy earnings reporting day. The firm reported total operating revenue of $1.947 billion in Q3 2023, down just 7.2% year over year, and a net income of $52.6 million, compared to a net loss of $91.7 million in Q3 2022.

Despite the company’s strong quarter, Old Republic’s title insurance segment did not fare as well. During the third quarter of 2023, the company’s title segment reported a 29.3% annual decrease in net premiums and fees earned to $684.4 million, and a pretax income of $37.4 million, down 48.9% year over year.

The company attributed these results to declines in both direct produced and agency produced revenues, which were driven by the continued drop in mortgage originations due to higher mortgage rates. Old Republic executives noted that a 10.6% annual increase in its general insurance segment helped offset the weaker numbers generated by its title segment.

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