Dec 21 - While volume is still important for the U.S. title insurance industry, the correlation of volume to key earnings metrics has become less pronounced, said Standard & Poor's Ratings Services in a report titled "Title Insurance Outlook: Declining Losses And Leaner Operations Are Lifting Earnings".
The three U.S. title insurers that Standard & Poor's rates--Fidelity National Title Insurance Group, First American Title Insurance Co., and Old Republic National Title Insurance Co.--have generally lowered operating expenses by reducing their operations and staffing, restructuring commissions and agent relationships, and making greater use of technology.
We revised our outlook on the industry to stable from negative in August 2011.
"Operating performance for the companies we rate continues to support the stable outlook, as do their solid competitive positions," said Standard & Poor's credit analyst Robert Green.
We expect title operating margins in the 9% to 11% range in 2013 for First American Title Insurance Co. and Fidelity National Title Insurance Group and 4% to 6% for Old Republic Title Insurance Group.
While we don't expect a positive outlook to develop in the next 12 months, a negative outlook could result from a renewed recession because of a failure to solve fiscal cliff issues or other macroeconomic causes that would substantially reduce mortgage volume beyond our current expectations, leading potentially to losses or marginal earnings.