The U.S. title industry is poised to post $1 billion in net income for 2018, according to a new forecast from Kroll Bond Rating Agency (KBRA). This would mark the eighth consecutive year of net income, with KBRA added this would reach levels not since the Great Recession.
In its new report “Back to the Future: $1 Billion in Net Income,” KBRA marked the current state of the title industry for 2019 as “stable” and did not forecast this year’s net income to be “materially different” from last year.
“Highlighting this view is the stability of operating performance and profitability over the last six years, measured against the potential for a sluggish macroeconomic environment, real estate headwinds that may emerge with the next downturn of the credit cycle, and structural impediments within the industry,” said KBRA “Additionally, the current (and KBRA’s expectation for 2019) underwriting leverage is considerably lower compared to the pre-crisis period. However, this positive consideration in financial strength is somewhat weakened by the change in asset composition.”
KBRA also noted that the title industry will see less merger and acquisition activity in 2019 compared to 2018, and it added that technology initiatives are reshaping this industry’s vibrancy. Furthermore, KBRA did not see declining mortgage volumes as an obstacle, noting that “title underwriters have exhibited resilience with increased premium writings. Additionally, underwriting leverage is considerably lower compared to the pre-crisis period. However, this positive consideration in financial strength is somewhat weakened by the change in asset composition. KBRA believes improved risk management and expense efficiencies through technology should enable title insurers to better handle additional declines in mortgage originations.”