Title Insurance Industry Trends

Consolidation: Mortgage Originators

Mortgage originators, such as mortgage companies and banks, are the principal source of business for title companies. Mortgage companies have grown rapidly in the past decade, originating 60 percent of all residential mortgages in 2000 versus 35 percent in 1990. Mergers and acquisitions have produced a handful of very large originators.

Consolidation: Title Companies

Large title companies have been built in the past decade: Lawyers Title Insurance and Commonwealth Land Title merged to form LandAmerica, and Fidelity National acquired Chicago Title. Largely for marketing reasons (brand name loyalty), consolidated companies continue to operate their brands as separate entities. Fidelity National operates Fidelity Title, Chicago Title, Ticor Title, Security Union Title, and Alamo Title as independent organizations. With larger size an important consideration for serving national mortgage companies, more consolidation among smaller market participants can be expected in the next few years.

Real Estate Boom

Revenues for the title insurance industry are closely tied to real estate activity, which grew rapidly during the past decade. Most important has been the volume of annual residential mortgage originations, including both "purchase" mortgages (used to buy a home) and "refinance" mortgages (those that replace an existing mortgage with a lower-interest mortgage).

Diversification

Many title insurance companies, in pursuit of new revenue growth and to mitigate economic cycle risks, are diversifying into other areas of business. Some are performing real estate-related services such as escrow, default management and exchange intermediary, and home warranty and homeowners' insurance sales. Default services can generate more income during difficult economic periods when title income is down.