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Third quarter earnings season kicked off last week with three (Stewart, First American, and Old Republic) “big four” insurers reporting earnings on Thursday.
Given the current environment of volatile mortgage interest rates and the resulting slowdown in homebuyer demand, it’s no surprise that all three companies had worse year-over-year financial results.
Stewart’s third-quarter revenue was $716.4 million, up from $836.7 million a year earlier, and net income was $29.4 million, up from 88 .7 million dollars last year.
The company’s property division reported operating income of $647.9 million, down 16% year-over-year, and pretax profit of $51.8 million, down 56% year-over-year. Meanwhile, sales of non-commercial and commercial titles were also down 18% and 5% respectively year-over-year.
“Our Q3 results reflect the negative impact of high mortgage rates, which had a significant impact on the market. “We are managing our operations in a disciplined manner during these challenging times,” said Stewart CEO Fred Eppinger.
First American had a much slower third quarter than last year, with total sales of $1.8 billion and net income of $2 million in the third quarter of 2022, down 29% from 455 million in the third quarter of 2021.
Property revenue was down 12% year-over-year to $1.883 billion, and pre-tax income was $186 million, up slightly from $351 million in the same period of last year. Management also noted that refinancing income was down 68% from a year ago.
“Refinance has declined since the beginning of last year, reaching current lows and no longer contributing significantly to our financial performance,” the company’s CEO Ken DeGiorgio said on a call with analysts and investors Thursday morning.
“In October, this trend continued with purchase orders. Orders started approximately 35% lower than last year. Despite the challenging environment ahead, we believe the company is well-positioned to become much stronger.
The market has moved from refinancing to where we are stronger in acquisitions and commercial transactions, because of which we are gaining market share.”
The last company to report third-quarter results last week was the Old Republic. Overall, the company reported a third-quarter net income of $26.2 million, down 14.3% from last year.
Including investment income, the company lost $91.7 million in net income, compared with a profit of $88.7 million a year ago. Like Stewart and First American, Old Republic saw revenue decline in its title segment, reporting pretax operating income of $73.3 million, excluding property premiums and fees, down 46% from year to year. 968.1 million, an increase of 15.2%.
As with other companies, Old Republic executives said the decline was attributed to rising mortgage rates and led to “a sharp decline in refinancing and purchase activity.”
The cost structure associated with this model is advantageous as we continue to explore current market conditions as variable costs are relatively high, Carolyn Monroe, president of Old Republic’s title insurance division, said in a call with investors on Thursday afternoon.
“We believe our continued strategic focus on agent services, which accounted for 81% of this quarter’s revenue, will provide a sustainable competitive advantage.”
We will keep delivering technological roadmaps and digital business plans with an automation and optimization focus on boosting current productivity and revenue through improved customer interaction.
As mortgage rates rise to their highest levels in decades, real estate brokers like Anywhere say home sales will fall 25% in the fourth quarter of 2022 from this year.
Reference Source: Housingwire
