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The favorable conditions present throughout 1998 continued into 1999, resulting in record-setting revenues for the first half of the year. However, commencing in the second quarter of 1999, new orders began to soften as rising interest rates led to a significant decline in refinance transactions, although residential resale and commercial activity remained relatively strong. During the second half of 1999, the trend of higher interest rates continued. New orders, including residential resale orders, continued to decline. This, coupled with fourth quarter seasonal factors, led to a decrease in operating revenues for the fourth quarter of 1999 and resulted in a low inventory of open orders going into the first quarter of 2000. The Company instituted personnel reductions and other cost-containment programs during the latter part of 1999; however, because of separation costs, the benefits of these programs were not fully realized in 1999. As a result of the low inventory of open orders going into the first quarter of 2000, and the relatively weak real estate economy present during the first half of 2000, revenues and profits during this period decreased significantly when compared with the same period of 1999. During the second half of 2000, real estate activity began to increase as a result of declining mortgage interest rates. New order counts in the latter part of the third quarter began to show favorable comparisons with the same period of 1999. This trend continued into the fourth quarter of 2000 and resulted in a significant increase in revenues and profits in the second half of 2000 when compared with the same period of 1999.
Operating revenues from direct title operations increased 1.5% in 2000 over 1999 and decreased 2.8% in 1999 from 1998. The increase in 2000 over 1999 was attributable to an increase in the average revenues per order closed, offset in part by a decrease in the number of title orders closed by the Company’s direct title operations. The decrease in 1999 from 1998 was attributable to a decrease in the number of title orders closed by the Company’s direct title operations, offset in part by an increase in the average revenues per order closed. The Company’s direct title operations closed 975,000, 1,119,900 and 1,210,200 title orders during 2000, 1999 and 1998, respectively, representing a decrease of 12.9% in 2000 from 1999 and 7.5% in 1999 from 1998. These decreases were primarily due to the significant decline in refinance transactions mentioned above. The average revenues per order closed were $1, 111, $953, and $907 for 2000, 1999 and 1998, respectively, representing an increase of 16.6% in 2000 over 1999 and 5.1% in 1999 over 1998. These increases were primarily attributable to appreciating home values, an increased mix of resale activity and, primarily in 2000, a resurgence in commercial real estate transactions. Operating revenues from agency title operations decreased 9. 5% in 2000 from 1999 and increased 12.6% in 1999 over 1998. These fluctuations were primarily attributable to the same factors affecting direct title operations mentioned above, compounded by the inherent delay in the reporting of transactions by agents. Real estate information operating revenues decreased 3.0% in 2000 from 1999 and 8.7% in 1999 from 1998. These fluctuations were primarily attributable to the same factors affecting title insurance mentioned above, offset in part by acquisition activity. In addition, the decrease in 1999 from 1998 was also due to a $22.7 million reduction in tax service operating revenues attributable to a change in revenue recognition policy (see Note 1 to the consolidated financial statements). Operating revenues of $32.1 million and $19. 3 million were contributed by new acquisitions in 2000 and 1999, respectively. Consumer information operating revenues increased 22.1% in 2000 over 1999 and 19. 2% in 1999 over 1998. These increases were primarily attributable to an increased awareness and acceptance of this business segment’s products, increased market share and acquisition activity. Operating revenues of $15.0 million and $8.1 million were contributed by new acquisitions in 2000 and 1999, respectively. |
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Overview
— The
majority of the revenues for the Company’s title insurance and real
estate information segments depend, in large part, upon the level of real
estate activity and the cost and availability of mortgage funds. Revenues
for these segments result primarily from resales and refinancings of residential
real estate and, to a lesser extent, from commercial transactions and
the construction and sale of new housing. The majority of the revenues
for the Company’s consumer information segment are isolated from
the volatility of real estate transactions. Traditionally, the greatest
volume of real estate activity, particularly residential resale, has occurred
in the spring and summer months. However, changes in interest rates, as
well as other economic factors, can cause fluctuations in the traditional
pattern of real estate activity. 
Interest
rate declines, which started in the fourth quarter of 1997, continued
throughout 1998. This, coupled with higher consumer confidence, led to
nationwide record-setting residential resale and refinance transactions,
which, together with the particularly strong California real estate market,
resulted in record-setting revenues and net income for the Company in
1998. 