Stewart, First American profits suffered a dip in Q4 due to a cooling buyer demand
It was not surprising that Stewart and First American had lower financial results in the fourth quarter 2022 than the same quarter last year.
Thursday saw the Big Four title insurers announce their Q4 2022 earnings. They hosted earnings calls for analysts and investors.
Stewart seeks to diversify his offerings
Stewart’s Q4 revenue was $665.9 Million, a decrease of $961.7 million from a year earlier. Net income was $13.3 Million, a decrease of $85.5 million from a year ago. Stewart’s title segment saw an operating revenue of $581.6million, down 30% year-over-year, and a pretax income in the range of $26.9million — a 77% decrease year over year. These decreased revenues are attributed to “volume decreases in agency and direct title operations.”
The quarter’s total direct title revenue was 31% lower at $269.9million. This was due to a 32% annual decline in non-commercial domestic titles orders to $171.3million and a 28% decrease in commercial domestic orders to $66.69 million. However, the company noted that the average domestic residential fee per filed increased 45% year-over-year due to the dramatic decline in refinance order.
“As such, we are taking material but thoughtful and targeted expenses actions throughout the year in order to ensure that we maintain financial strength and service our business well, and position us for more normal markets,” Fred Eppinger (CEO) said during Stewart’s fourth-quarter earnings conference with investors on Thursday morning.
Stewart executives are looking to diversify the company’s product offerings as they look ahead to 2023. This is in line with the firm’s long-term goal of “creating a stronger, more resilient business that can survive through real estate cycles.
Eppinger stated that FNC Title Services was added to the company during the fourth quarter. This title service specializes in reverse mortgage transactions. “We are searching for market segments that can be differentiated and have growth potential, based on what is happening in the economy as well as the demographics.”
First American looks at managing expenses
Stewart was a similar example. First American executives emphasized their focus on expense management after a slow fourth-quarter. The firm is now looking to navigate the 2023 housing markets.
First American reported a revenue decline of 29% to $1.7 billion in the fourth quarter 2022 and a net loss of $54 million. This is a decrease of $260 million from last year. First American’s total revenue for 2022 was $1.62 billion less than 2021. Its net income fell to $263 millions from $1.2 billion in 2021.
In Q4, the firm’s title segment raked in $1.614 billion in total revenue. This was 26% less than a year before. The pretax net income of $114million was also down from $368million a year ago. The number of title orders closed fell from 263,300 to 125,000 in Q4 2021.
The firm’s commercial titles segment suffered a rough fourth quarter. Revenue dropped to $251 million, which is a decrease of 34% compared with the year before. Closed orders also fell to 18,200, from 23,500. The full year 2022 saw commercial title revenue rise 2.0% from 2021, to a record $1.0 Billion — which was certainly a bright spot during a year marked by the slowdown in the housing market.
Ken DeGiorgio (CEO of the firm) stated that “Refinance has declined for the past two year, so it’s now at trough level.” “Based on our order trends we are seeing early signs for stabilization with open purchase orders increasing from 40% in November to 31% in January. We are cautiously optimistic that the market for purchase is on the cusp of recovery due to the recent decline in mortgage rates and lower home prices.
Executives highlighted the fact that First American’s “healthy” balance sheet will allow them to continue investing in strategic initiatives and acquisitions.