The third quarter earnings season kicked off with a bang last week with three (Stewart, first American and Old Republic) on the big four title insurers reporting earnings on Thursday.
Given the current volatility in mortgage rates and the related slowdown in demand from homebuyers, it’s no surprise that all three companies posted weaker financial results compared to the same quarter a year ago.
At Stewart, third-quarter revenue was $716.4 million, down from $836.7 million a year ago, while net income was $29.4 million, down from $88.7 million dollars last year. The company’s securities segment reported operating income of $647.9 million, down 16% year-over-year, and pre-tax income of $51.8 million, which represents an annual decline of 56%. Additionally, non-commercial and commercial securities revenue declined, with annual declines of 18% and 5%, respectively.
“Our third quarter results reflect the headwinds from rising mortgage interest rates that have had a significant impact on the market. We are managing our operations in a disciplined manner during these challenging times,” said Fred Eppinger, Chief Executive Officer. of Stewart, in a statement.
First American also had a much slower third quarter than a year ago, with total revenue falling 29% year-over-year to $1.8 billion and net income falling from $445 million in Q3 2021 to $2 million in Q3 2022. The corporate securities segment performed somewhat better. than that, with securities revenue down just 12% from a year earlier to $1.883 billion and pre-tax income down from $351 million last year to $186 million this year, the the number of securities orders closed in the quarter fell from 252,700 to 160,500. Executives also noted that refinancing revenue was down 68% from a year ago.
“Refinancing has been declining since the start of last year, so it is now near all-time lows and no longer contributing significantly to our financial results. Our open purchase orders were down 23% this quarter, with orders declining every month throughout the quarter,” Ken DeGiorgio, the company’s CEO, said in a call with analysts and investors Thursday morning. “And so far in October, that trend has continued with purchase orders – open orders down about 35% from a year ago. Despite the challenging environment ahead of us, we believe that the company is well positioned to emerge even stronger from this cycle. The market has shifted from refinancing to buying and trading, and that is where we are strongest. And as a result, we are increasing our market share.
The latest company to report third quarter results last week was Old Republic. Overall, the company reported net income of $206.2 million in the third quarter, excluding investment gains, down 14.3% year-over-year. With the inclusion of investment income, the company recorded a net income loss of $91.7 million, compared to a gain of $88.7 million a year ago. Similar to Stewart and First American, Old Republic also experienced a decline in revenue from its securities segment, which reported pretax operating income of $73.3 million, a 46% annual decline, bonuses and net title insurance costs fell 15.2% year-over-year. at $968.1 million. As with other businesses, Old Republic executives attributed the decline to rising mortgage rates, which they said caused a “sharp drop in refinancing and, to a lesser extent, mortgage activity.” purchase”.
“We believe that continuing our strategic focus on serving our agents, who represent 81% of our revenue this quarter, creates a sustainable competitive advantage. The expense structure associated with this model has a relatively high degree of variable expense, which is beneficial as we continue to navigate current market conditions,” said Carolyn Monroe, President, Title Insurance Segment. Old Republic, to investors on a Thursday afternoon call. “We will continue to deliver on our technology roadmap and digital business plan with a focus on optimization by seeking improvements in existing productivity and revenue with better customer engagement with a focus on automation .”
With mortgage rates hitting some of their highest levels in decades and real estate brokerages, such as Everywheresaying they expect to see a 25% year-over-year decrease in home sales transactions in the fourth quarter of 2022, things don’t look good for the end of the year.
#Title #insurers #profits #market #cools