Title Insurance Firms Hurt by Decline in Refinancings

Hurt by higher interest rates that reduced mortgage refinancings, title insurer First American Financial Corp. posted a $2.2-million fourth-quarter loss Wednesday and said it has laid off 13% of its work force during the last year.

Executives at the Santa Ana company, which operates the nation’s largest title insurance company, also said the slowdown has caused a “deep reduction” in orders for services, leading them to predict an operating loss for the first three months of this year.

The company said it has dismissed about 2,500 people in the last year. Most of the cuts came in the title division nationwide late last year. A First American spokeswoman said the company still employs more than 17,000 people.

Neither Parker S. Kennedy, the president, nor Thomas Klemens, the chief financial officer, was available for comment.

Higher interest rates also hindered operations at First American’s main rival, Fidelity National Financial Inc. Executives at the Irvine title insurer reported lower earnings for the fourth quarter and the year, but said the results met their expectations.

With interest rates rising recently, fewer homeowners refinanced their mortgages, which has resulted in title insurers writing fewer reports attesting to the clear path of homeownership. The slowdown also has hurt title insurers’ other real-estate-related services, such as checking to see that property taxes are paid.

First American said fourth-quarter revenue was significantly reduced because of a 60% decline in the number of refinancings over the 1998 final quarter.

Some analysts believe the trend doesn’t bode well for workers remaining at the company.

“I think there will be more layoffs,” said Charles Gunther, an analyst at First Security Van Kasper in San Francisco. But he added that the company’s cost-cutting measures should lead to improved results later this year.

First American’s fourth-quarter loss amounted to 3 cents a share. It earned $53.9 million, or 82 cents a share, for the final quarter the previous year. Quarterly revenue fell 14% to $700.4 million.

First American’s stock lost 50 cents on the New York Stock Exchange to close at $11.31, close to its 52-week low of $10.94.

At Fidelity National, the falloff in refinancings also took its toll, but William P. Foley II, the company’s chairman, said results were “solid” and met the company’s standards.

“We have been quick to respond to changes in market conditions and are committed to maintaining a cost structure consistent with revenue levels,” he said. “Barring any dramatic change in the overall economy, we believe . . . we can continue as the most productive and profitable company in the industry.’

Fidelity also said it has been integrating Chicago Title Corp.’s operations into its own in anticipation of completing their merger next month, overtaking First American to become the nation’s largest title insurer.

For the fourth quarter, Fidelity earned $8.7 million, or 30 cents a share, down from $28.7 million, or 87 cents, in the previous year’s final three months. Quarterly revenue fell 18% to $308.3 million.

Fidelity’s stock lost 38 cents, closing at $12.19 on Wednesday on the NYSE..