2008-10-15 02:46:59 -
www.ambest.com - The deterioration in the title industry's revenues and profitability in 2007 and the first half 2008 is likely to be accelerating in the second half of 2008, as the industry grapples with the significant slowdown in the housing market and increased claims activity from higher home foreclosures. Any improvement in profitability will depend largely on the length and
depth of the housing downturn, the availability of credit and the ability of title insurers to aggressively reduce expenses in alignment with the decreased revenue levels. This A.M. Best Co. special report provides an overview of the title industry's financial condition, the trends in the housing market, the economy and the title industry. Some key points follow.
-- Title's combined ratio, at 100.6, became unprofitable for the first time in 17 years, with the industry experiencing an $84.5 million underwriting loss.
-- Due to inadequate loss reserving practices earlier in the decade, incurred claims are rising. Higher claims activity also is coming from agent-related fraud activity, generally involving embezzlement of funds held in escrow.
-- The industry's expense ratio increased modestly as premium revenues and transactions declined. Commissions and general expenses incurred as part of the title search process typically make up 85% or more of premium volume.
-- As of August 2008, there were 4.91 million existing homes for sale, or 10.4 months of supply at current sales rates. While sales and prices may rebound sooner, housing starts and permits are expected to continue declining through 2009 because of the level of inventory.
-- In August 2008, U.S. privately owned housing starts on an annual basis dropped to a preliminary 895,000 units, 33.1% lower than in August 2007. Driving the decrease are the ongoing shrinking demand and excess inventory.
BestWeek subscribers can download a PDF copy of all full special reports or a combination of the report and all related spreadsheet files of the report data at no charge at www.bestweek.com.
Nonsubscribers can visit www.bestweek.com for pricing information or call customer service for more information at (908) 439-2200, ext. 5742.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
A.M. Best Co.
Analyst:
Neil DasGupta, 908-439-2200, ext. 5206
neil.dasgupta@ambest.com
or
Analytical Communications:
Stephen Brown Klinger, 908-439-2200, ext. 5894
stephen.brown-klinger@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com 
