Here is yet another very significant indicia of the declining real estate market, as of April 2008, as reported by Inman News:

There has been a 28 percent decline in revenue which helped push title insurer LandAmerica Financial Group Inc. to a $24.2 million first-quarter loss, despite ongoing cost-cutting measures that include the elimination of the equivalent of 3,600 full-time positions since the beginning of 2007.

Important Real Estate Deal Trend Warning >> Viewing  the title industry from a more macro perspective, LandAmerica and four other title insurers that dominate the U.S. market saw operating revenue from title operations fall 12 percent in 2007, and could yet see another 20 percent drop this year (see story), according to analysts at Fitch Ratings.

Here’s some specific, and quite alarming, results from LandAmericas recent Quarterly Earnings performance report. Keep in mind that LandAmerica as a leading title insurer issues title insurance policies through three (3) principal underwriting subsidiaries, Commonwealth Land Title Insurance Co., Lawyers Title Insurance Corp., and Transnation Title Insurance Co.

• A losing year: Land America finished 2007 with an $81.6 million net loss on $3.6 billion in revenue.
•  Revenue from title operations fell 29.9 percent from a year ago, to $570.5 million. The company’s largest business segment generated a $27.9 million pretax loss, compared with $34.1 million in earnings a year ago.
• Persistently lower residential mortgage originations helped reduce first-quarter revenue to $686.4 million, down from $948.6 million a year ago.
•  LandAmerica reported that claims as a percentage of operating revenue in the title insurance segment rose to 9.7 percent, up from 6.5 percent a year ago. The claims provision for the first quarter included $43.4 million for the 2008 policy year and $13.7 million for increases in claims rates for policies in prior years.
• Companywide, LandAmerica reduced full-time equivalent positions by approximately 300 in the first quarter. The 10,740 remaining jobs at the company represent a 25 percent reduction since Jan. 1, 2007.
•  In the title insurance division alone, LandAmerica has cut the equivalent of 3,400 full-time jobs in the last year, reducing salary and benefits costs by 30 percent, or $76.4 million. Average full-time equivalent positions in title operations fell from 11,500 a year ago to 8,100 in the first quarter.

In terms of getting a direct handle of actual orders processed by a major title insurer, although the fee per order has risen, note that there has been a steady decline in the number of policies issued, over the past several years:

• 2007 closed orders: 597,000.
• 2006 closed orders:  731,000.
•  2005 closed orders 861,000.

According to the company’s annual report to investors, about half ( ½ ) of LandAmerica’s title operations revenue in 2007 came from just five states, most of which were hardest hit by the sub-primes crisis:  

• California ($413 million)
• Texas ($391 million) 
• New York ($310 million), ($268 million)  
•  Florida ($268 million)
• Pennsylvania ($196 million)

Tags: Title Insurers Trends

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