|[November 27, 2012]
Fitch Releases U.S. Title Insurance Industry 2013 Outlook
CHICAGO --(Business Wire)--
Link to Fitch Ratings' Report: 2013 Outlook: U.S. Title Insurance
Fitch Ratings maintains its stable rating outlook on the U.S. Title
Insurance industry. The outlook reflects a belief that rating actions
for the industry will on balance approximate current levels over the
next 12 - 18 months as financial performance has improved recently and
capital levels remain adequate based on several measures.
A new special report '2013 Outlook: U.S. Title Insurance Industry.'
published today highlights key factors affecting title insurer ratings,
reviews financial performance in 2012, and assesses industry prospects
Operating profit margins on a GAAP basis for Fitch's title universe rose
to 10.3% in the first nine months of 2012 versus 6.1% in the prior year.
Earnings improved for all underwriters, but larger players First
American Financial (FAF) and Fidelity National Title (FNF) posted the
highest margins. Title revenues through nine months 2012 increased by
over 15% as refinancing activity exceeded expectations and housing
markets stabilized. The period's 90.7% underwriting combined ratio
reached levels uneen since 2006, as growth reduced expense ratios and
claims experience improved as well.
The title insurance industry is benefitting from an improving housing
market that is showing less home inventory and increasing home prices
nationally. According to the National Association of Realtors (NAR), US
housing prices rose in 2012 with many markets showing year-over-year
home price growth for the first time since the beginning of the housing
crisis. Economists attribute the price increase primarily to reduced
housing inventory and, to a lesser extent, fewer homes sold in distress.
The Mortgage Bankers Association of America (MBA) forecasts mortgage
originations to decline to $1.3 billion in 2013 and just over $1 billion
in 2014, compared with $1.7 billion in 2012. The drop is driven by a
projected material decline in refinance activity over the next two
years, which is expected to be somewhat offset by greater purchase
Fitch continues to view the industry as adequately capitalized, although
individual company capital strength varies considerably. Fitch's view is
based on both a non-risk adjusted approach such as net written premiums
to surplus and a risk adjusted approach via Fitch's Risk Adjusted
Capital (RAC) model.
The report '2013 Outlook: U.S. Title Insurance Industry' dated Nov. 26,
2012, is available at 'www.fitchratings.com'
under 'Insurance' and 'Special Reports'.
Additional information is available at 'www.fitchratings.com'.
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