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Title Insurers Had Record 2003; Preparing for More Modest Pace This Year

By MATHEW PADILLA

2003 may have been the best money-making year ever for Orange County title insurers, despite a widely publicized bust in home loan refinancing as the year wore on.

Industry sources said they are bracing for more consolidation now that the heady days are over.

The county’s 15 largest title insurers handled $94.9 billion in OC transactions last year, a 41% rise from a year earlier, according to this week’s Business Journal list.

The list ranks the companies by the dollar value of all local transactions they insured. Deal data was provided by Anaheim-based First American Real Estate Solutions, a unit of Santa Ana-based First American Corp.

The results show companies did well across the board; all but one of the insurers posted strong gains in 2003 compared to the prior year, with growth ranging anywhere from 10% to 129% per company.

The first half of last year was a boon to title insurers as homeowners rushed to refinance loans amid falling interest rates. Rates hit rock bottom in mid-June, cooling demand, but sources said a backlog of loan applications kept many companies busy for a few more months.

Title insurers also benefited from a stellar housing market last year,another result of bargain basement interest rates.

The median sale price for homes in the county was $450,000 in January, up 22% from a year ago, according to market tracker DataQuick Information Systems. That price tag actually is off from December’s $467,000 median price.

This year the Business Journal’s title insurers list got a face-lift. Unlike past years, parent and subsidiary title companies have been grouped together under one name. This way, the list reflects the frenetic pace of acquisitions in the title industry over the past year or two.

Big title insurers have been gobbling up smaller ones, much like the homebuilding industry.

Indeed, title insurers also have been buying companies with non-title services to diversify and become less dependent on interest rates, sources said.

Homebuilders also have gotten into the title acquisition act.

Two of the title companies on this year’s list are owned by builders, such as Dallas-based Centex Corp. and Miami-based Lennar Corp. Many large homebuilders now offer title, escrow and mortgage services to buyers.

Top Contenders

The list is dominated by two heavyweights,No. 1 Fidelity National Financial Inc. and No. 2 First American Title Insurance Co.,who accounted for $46.2 billion in OC transactions last year, nearly half of the entire list.

Fidelity National Financial topped the list with a 43% rise in title transaction volume to $30.3 billion, versus a year earlier. The Jacksonville, Fla.-based company owns three big title brands in OC, including Fidelity National Title Co. and Chicago Title Insurance Co.

In a major growth play here, Fidelity last year acquired competitor American Title Co.,which appeared at No. 3 on last year’s list,and merged it into its Ticor Title Insurance Co. unit.

Like others on the list, Fidelity had its strongest ever year of deals in 2003, according to Eric Hungerle, Orange County manager with Fidelity.

He said business didn’t slow at Fidelity until late fall, even though interest rates starting rising in July after hitting the floor in June.

But Hungerle said now that business has returned to “normal levels” the company has scaled back its OC head count to about 200 employees, down from a peak of 270 or so in summer.

No. 2 First American maintained its spot on the list with a 33% rise in deal value to $15.9 billion. First American is a unit of Santa Ana-based First American Corp.

The company is the largest employer on the list with 1,344 OC workers, up 15% from last year but down from its summer peak, according to Elizabeth Corbett, operations manager and chief title officer with the company.

Corbett said that First American was very busy until September, even as rates began rising in July.

“People had locked in their interest rates with the lenders, and it took time for them to finalize the loan process and record their documentation,” Corbett said.

No. 3 LandAmerica Financial Group is the company to watch on the list. The Richmond, Va.-based company has been on an acquisition binge of late, which helped propel its total OC deal volume to $9.5 billion, up 32% from a year ago.

The company owns three companies on the list,Lawyers Title Co. and Commonwealth Land Title Co. in Irvine and Gateway Title Co. in Orange,and is buying a third: Southland Title Corp.

No. 4 Southland Title reported $7.1 billion in deals in 2003, up 75% from a year ago. Since LandAmerica’s acquisition of Southland isn’t final, the Business Journal didn’t merge their totals, but if we had, LandAmerica would have jumped up to No. 2 on the list.

Rounding out the top five is Phoenix-based Capital Title Group with $6.1 billion in deal volume. Capital Title’s OC presence includes United Title Co. in Newport Beach and New Century Title Co. in Santa Ana.

Homegrown OC title insurer Orange Coast Title Co. took the No. 6 spot with 56% growth in transaction volume insured to $5.8 billion. The Santa Ana-based company’s results also include those of unit California Title Co. in Mission Viejo.

Just one company saw a decline in transaction volume last year,No. 13 Commerce Title Co.

Commerce Title saw its transaction volume fall 13% to $1.4 billion, versus a year earlier. The title insurer’s Santa Ana operations are part of Dallas-based homebuilder Centex Corp.

Commerce Title’s business last year was “strong through July but dead from August,” said Glenn Awerkamp, a title services manager at the company.

Looking ahead to the rest of 2004, title insurers said they expect business to continue at a healthy pace, though results likely will be down from last year.

The big title insurers here said they have no plans to fire or hire any more workers in OC.

Still, Fidelity’s Hungerle expects some of the smaller title companies to shut down as competition for a smaller slice of business becomes fierce. If interest rates rise late this year as many economic experts believe, pressure on the small insurers could be even stronger.

“Smaller companies that were barely hanging on in a robust market won’t be in Orange County any more,” Hungerle said. “That’s when we tend to pick up market share.”

First American’s Corbett said transaction volume picked up again in January and February as interest rates dipped.

“How long it will last, I don’t know,” Corbett said.

Indeed, all sources interviewed for this story said the title industry is very dependent on interest rates, which is why many title insurers are attempting to diversify. A rate hike of even 1% could have a dramatic impact, sources said.

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