A year of low mortgage rates and high demand for housing was certainly good for Old Republic International Corporation.
During the firm’s fourth quarter earnings call on Thursday, Craig Smiddy, Old Republic’s president and CEO, announced that the firm’s pre-tax income, excluding investment gains, was $335.1 million for the fourth quarter and $1.16 billion for all of 2021, representing 20.7% and 40.2% year-over-year increases, respectively. This was the first time yearly pre-tax income exceeded $1 billion.
“We feel very good about where Old Republic International sits with our two key businesses, General Insurance and Title Insurance, and we look forward to another productive good year in 2022,” Smiddy said during the earnings call.
Old Republic’s title insurance sector experienced significant growth in premiums and fees, as demand for homes and the number of refinances soared due to record low mortgage rates.
Income generated from title insurance premiums and fees totaled $1.1856 billion in the fourth quarter up from $1.0317 billion in Q3. Overall, in 2021, title insurance generated $4.4043 billion in revenue up 34% from a year prior. However, a larger volume of title insurance premiums written means an increase in the claims rate. In the fourth quarter, Old Republic’s title insurance claim ratio increased 0.1 percentage point from the third quarter to 1.5%. The claim ratio for all of 2021 came in at 2.6%, up from 2.3% in 2020. As a result of the rising claim ratio, claim costs from 49.9% in 2021 to $112.9 million.
How much could wire and title fraud cost lenders?
In comparing Q3 2021 with Q2 2021 numbers, there was a 19.7% increase in fraud and risk exposure related to CPL errors, a 6.5% increase in CPL/agent validation errors with title insurers, and a 12.8% increase in state licensing issues among closing agents.
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“The title group posted an all-time high for quarterly underwriting revenue, while quarterly operating profits only trailed the record set of results reported in the second quarter of 2021,” Carolyn Monroe, the president of Old Republic’s title insurance group, said during the earnings call. “While we have seen a decline in order counts over the second half of the year as a result of the slowdown in the refinance sector, purchase transactions, which generate a higher fee per file, remained healthy to close out the year.”
During 2021, purchase transactions represented roughly 72% of the title group’s revenue, with refinance transactions making up the remaining 28% of revenue.
Old Republic’s total operating expenses also rose during the fourth quarter of 2021, increasing 9% from Q3 to $1.931 billion, and closing out the year at $7419.5 billion, a 14.5% increase from 2020.
Chicago-based Old Republic is the third largest of the “Big Four” title insurers. During the third quarter of 2021, Old Republic’s market share was 14.8%, making it the third largest underwriter by market share, according to the American Land Title Association.
Last month, Old Republic announced that that its subsidiary, Old Republic National Title Insurance Company, had acquired the operating assets of Mountain View Title & Escrow, Inc. This acquisition added nine office locations and 86 employees to Old Republic’s existing network that includes more than 270 branch and subsidiary office locations nationwide.