A.M. Best: U.S. Title Insurance Sector Delivers Strong Operating Performance in 2015

October 11, 2016

The U.S. title insurance industry reported solid operating results in 2015 on the backs of improved macroeconomic activity and a remarkably low 30-year fixed mortgage rate, according to a new A.M. Best special report.

Title insurance industry surplus grew 3.9 percent in 2015, more than double the level reported in 2014, and net premiums written (NPW) increased by 16.2 percent, compared with a drop of 11.4 percent in 2014.

The Best’s Special Report, titled, “Title Sector Delivers Strong Operating Performance,” states that A.M. Best has maintained its stable outlook on the sector, noting that the majority of its ratings are expected to be affirmed over the near to medium term. While the outlook reflects the industry’s continued positive financial condition, it also incorporates some degree of uncertainty surrounding the regulatory changes governing the mortgage and title sectors, the strength of the economy and the current environment in the housing market.


The industry’s combined ratio, termed composite ratio in title insurance terminology, improved by 2.7 points to 92.6 percent in 2015, the fourth consecutive year it has been under 100 percent .This improvement resulted from decreases in the loss and expense ratios of 1.2 and 1.5 points, respectively. Both ratios are the lowest of the most recent 11-year period, reflective of the increase in NPW, favorable loss experience and continued cost-control/expense management initiatives by leading insurers that have occurred during this time.

The top four states in terms of premium volume (Texas, California, Florida and New York), showed an increase in direct premiums written to $5.8 billion from $5.1 billion at year-end 2014. All four states reported premium increases, led by California’s 18.8 percent gain. These four states represented 45.7% of the market in 2015, but remained below 2005 levels when market share peaked at nearly 50% for these states.

The favorable underwriting results, along with investment gains, resulted in an 11.1% increase in pre-tax operating income to $1.1 billion in 2015, the highest level since the $1.2 billion profit recorded in 2006. The improved performance was more than offset by a 56.0% increase in income taxes to $323.8 million from $207.6 million in 2014.

Most of the major title insurers reported an increase in commercial business transactions, which typically carry higher margins per order. Given a continued favorable environment of low interest rates, the housing market continued to experience improvement in 2015, as home prices showed appreciation, housing completions rose and foreclosure rates continued to decline.

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