Record-high earnings for title insurers will level off this year, according to Fitch Ratings’ latest sector dashboard. However, Fitch predicts continued healthy inflow for the “Big Four” underwriters.
Title operating margins at Fidelity National Financial (FNF), First American Financial Corp. (FAF), Old Republic International Corp. (ORI) and Stewart Information Services Corp. (STC) reached record highs in 2021. Title revenue grew 32 percent year-over-year, with the four national underwriters reporting an aggregate title operating margin of 16 percent, the highest on record.
Fitch attributed last year’s title revenue growth to strong home price appreciation, driven by elevated market demand, limited housing supply and historically low interest rates and title-related losses.
“Underwriters will likely report modest reductions in margins and overall profits in 2022, but that profitability will continue to exceed historical averages,” Fitch Insurance Ratings Director Gerry Glombicki said in a release.
Rising mortgage rates curbed refi volumes in 2021, but demand for higher margin purchase orders remains strong, according to Fitch.
“Continued recovery in employment levels and constrained housing inventory should continue to support home price appreciation during the year, which will boost title insurance premiums,” Glombicki said.
Commercial transactions continued to impact FAF, FNF and STC in 2021. Commercial orders closed increased 25 percent, and commercial premiums made up around 10 percent of total premiums in aggregate across the three underwriters. While Fitch expects commercial deals to decrease slightly this year, it also predicts favorable commercial sector economics should continue to drive commercial order volumes.