Title firm First American posts $8.3-million loss
First American Corp., one of the nation’s largest title insurers, lost $8.3 million in the third quarter because of declining sales of title insurance and rising costs related to the housing foreclosure crisis.
The net loss of 9 cents a share contrasts with a year-earlier profit of $46.6 million, or 49 cents a share. Revenue at the Santa Ana company fell 26% to $1.5 billion.
Title insurance, which protects home buyers and lenders against claims and legal fees if a dispute over ownership rights should arise, is taking a hit largely because fewer people are buying or refinancing their homes, said Doug Pawlowski, an insurance analyst at Fitch Ratings.
First American executives said they were focusing on cost-saving measures such as cutting employees and expenses and consolidating facilities.
The company eliminated 1,250 jobs during the July-September quarter and has closed 68 offices. Plans are underway to close 30 more offices by year’s end, Chief Operating Officer Dennis J. Gilmore said in a conference call with analysts and investors Thursday.
“We continue to operate in a difficult real estate market,” Chief Executive Parker S. Kennedy said. “The next two quarters are predicted to be slow, and we continue to reduce expenses as quickly as we can.
“The structural changes we’ve made and will continue to make throughout the organization will position us well when the market rebounds,” Kennedy said.
All companies in the title insurance sector have been hit hard by the housing crisis, Pawlowski said.
First American’s main competitors -- Fidelity National Financial Inc., Stewart Title Guaranty Co. and Old Republic Title Insurance Group -- also reported losses in the third quarter.
LandAmerica Financial Group Inc., another competitor, will announce third-quarter results Wednesday.
“We’ve had a negative outlook on the whole industry since March,” Pawlowski said. “I suspect that everyone in the industry is going to report a loss this quarter.”
Title insurers probably won’t rebound until after the housing market bottoms out, said Pawlowski, who predicted that the market wouldn’t pick up again until at least 2010.
“I’m not sure we’ve seen the bottom of the market yet,” he said. “Until the real estate market recovers, title insurance is not going to start showing a profit.”
First American’s shares fell $1.24 to $19.96.
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