01.25.08
Industry Stocks show plight of Title Business
Its a sign of the times, stock prices reflecting the woes of the industry. Fitch Ratings placed The First American Corp. on negative ratings watch Friday after seeing the company’s pre-announced fourth-quarter earnings. Fitch said the company’s title insurance segment would be negatively impacted by the mortgage industry’s ongoing woes.
Fitch put First American’s ratings on a “rating watch negative,” saying that it anticipates perhaps lowering credit ratings a full notch on seeing year-end results. A downgrade on First American’s debt ratings would leave them high enough to be considered investment-grade designations. First American, Fitch is anticipating a loss for the fourth quarter that will not exceed $50 million.
Tuesday of last week, First American said it would spin off its title company into a separate company from its title related businesses.
Meanwhile, Mortgage insurer Old Republic International Corp. on Thursday said its fourth-quarter earnings fell nearly 81 percent on losses in both its mortgage guaranty and title insurance businesses, but the results met Wall Street expectations.
The company reported net income of $20.2 million, compared with $104.6 million, during the same quarter a year ago. Old Republic reported a $112.6 million quarterly pretax loss in its mortgage guaranty business, compared with earnings of $46.4 million in the year-ago period. The composite ratio, which measures the amount of expenses and claims an insurer pays out compared to underwriting premiums, rose to 194.6 from 76 in the year-ago period. A ratio above 100 means the insurer paid out more in claims and expenses than it generated underwriting insurance. The company also reported a $15.7 million quarterly pretax loss in its title insurance business, compared with earnings of $300,000 in the year-ago period.
For 2007, Old Republic reported net income of $272.4 million, or $1.17 per share, compared with $464.8 million, or $1.99 per share, in 2006.