Refinance Rush Boosts Profits for 2 Title Insurers

Orange County’s two major title insurers rode the home-refinancing market to high profits and record revenues in the first quarter--generally the slowest time for title underwriters--but both conceded Thursday that the road ahead will be bumpy.

First American Financial Corp. in Santa Ana posted first-quarter net income of $6.3 million, or 70 cents a share, turning around from a year-earlier loss of $9.5 million, or 97 cents a share.

And Fidelity National Financial Inc. in Irvine reported record net income of $2.2 million, a more than tenfold increase from the $212,000 earned for the first three months of 1991. Quarterly revenue rose 64% to a record $72 million this year from $44 million in last year’s initial quarter.

First American Financial said its earnings came entirely from operations, making this the company’s record first-quarter profit from operations. The company’s highest first-quarter earnings--$11.8 million in 1987--included a onetime tax benefit benefit of $9 million.

The holding company for First American Title Insurance Co. also posted record quarterly revenue of $228.4 million, a 55% increase from $147.7 million a year earlier.

Low-interest rates fueled the mortgage refinancings at both firms, as they did in the last quarter of 1991, said the heads of the two companies. But the refi market, as it is known, has slowed.

A “healthy mix of resales and new home sales” has increased and helped to keep First American’s business strong, said Donald P. Kennedy, the company’s president, but “new orders are not being received at record levels as refinancing activity slows.”

First American is the nation’s second-largest title insurer in terms of gross premiums collected. It operates throughout the nation, but 36% of its business comes from California.

William P. Foley II, Fidelity’s president, said the situation is similar for his company’s primary subsidiary, Fidelity National Title Insurance Co.

“The refi business was a gigantic order surge,” Foley said. “It peaked in February and tailed off in March.”

And while new business is coming in because resale residential sales are up 16% in the West over last March, he said, “that doesn’t offset the loss of the refi business.”

Fidelity has been a regional operator in 34 states, primarily in the West, and has become a bigger competitor for First American, especially in California where Fidelity does 72% of its business.

Fidelity is awaiting federal approval for a new stock offering that would raise about $15 million. More than $13 million of that amount will cover the remaining purchase price of Meridian Title Insurance Co. and its subsidiary, American Title Insurance Co.

The previously announced cash-and-stock acquisition is valued at more than $20 million, Foley said.

Previously, 500,000 shares of Fidelity stock worth about $7.5 million were turned over to Meridian Bancorp Inc. in Reading, Pa.