Fitch Releases U.S. Title Industry 2017 Outlook

CHICAGO--(BUSINESS WIRE)--Fitch Ratings maintains its stable rating outlook on the U.S. title insurance industry, according to its 2017 Outlook report. The outlook reflects a belief that rating actions for the industry will on balance approximate current levels over the next 12-24 months, as financial performance is stable and capital levels remain strong based on several measures.

Fitch also maintains a stable fundamental sector outlook for 2017. Title operating margins improved in recent years for most large underwriters. Insurers' staffing and cost structures will likely prove adaptive in managing through any near term revenue and margin pressures.

"Higher interest rates and employment levels are the top risks for title insurers in 2017; however, an uptick in business investment and consumer confidence could benefit title insurers," said Gerry Glombicki, Director at Fitch Ratings.

The largest variable influencing mortgage originations and title insurance orders is interest rates, which have recently increased. Higher rates reduce the benefits of mortgage refinancing activity, and may decrease purchase originations or shift some into variable rate loans to offset the rise in borrowing costs.

Over the longer term, a shift to consistent, stronger economic growth, particularly driven by expansion of business investment in housing markets and commercial real estate would positively influence title insurer revenues and earnings.

Fitch's title insurance universe reported a GAAP combined ratio of 93.6% for the first nine months of 2016 almost 2 percentage points worse than prior year. Consolidated GAAP operating profit margin for the group increased to 9.7% in the first nine months of 2016 versus 8.6% in the prior year. Operating margins are anticipated to stay flat to modestly decline in 2017.

Fitch continues to view the industry as strongly capitalized, although capitalization among individual companies varies somewhat. Fitch's view is based on both a non-risk-adjusted approach such as net written premiums-to-surplus and a risk-adjusted approach derived from Fitch's risk-adjusted capital (RAC) model.

The report '2017 Outlook: U.S. Title Insurance Industry' dated Dec. 1, 2016, is available at 'www.fitchratings.com' under 'Insurance' and 'Special Reports'.

Additional information is available at 'www.fitchratings.com'.

Related Research

2017 Outlook: U.S. Title Insurance Industry (Strong Results; Economic Uncertainty Looms)
https://www.fitchratings.com/site/re/890829

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