Troubled Doma sold to Title Resources Group for $85 million

Doma launches in 2021 and hopes to not only Compete with the Big Four title underwriters and expand into other real estate transaction-related businessesis winding down its operations, selling itself to privately held Title Resources Group for $6.29 per share.

“The company’s goal of disrupting the title industry has proven elusive, and Doma has incurred significant losses since going public,” wrote Bose George, who does title company analysis for Keefe, Bruyette & Woods, who does not regularly Report Doma.

“Historically, this has been limited [merger and acquisition activity] “In the title insurance world, we expect this to continue,” George added. He said the deal was worth nearly $85 million.

The deal was announced after the market closed on March 28. Doma closed the day at $4.54 per share.

On April 1, the day after the stock market opened, Doma hit a high of $6.12 per share, close to but still below the sales price.

Doma’s underwriting business and its technology arm, which may be renamed Doma Technology LLC (Doma TechCo), are expected to operate as subsidiaries of TRG.

Doma TechCo will operate on an independent capital basis, with Hudson Structured Capital Management (also known as HSCM Bermuda) investing in Doma TechCo.

The latest data on title insurance market share as of the third quarter of 2023 released by the American Land Title Association shows that TRG ranks eighth with a market share of 2.9%, and Doma ranks eighth with a market share of 1.8%. tenth. It would be close in size to Westcor Land Title Insurance, the largest independent title underwriter, with a 4.8% share during the period. Note that this is a ranking of the underwriters, not the parent companies, and it’s not just the Big Four but several independents who also operate multiple units.

First American Title Insurance had the largest share during the period, at 21.6%, but Fidelity National’s three units combined for a 29.9% share.

Doma rebranded the company in 2021 from its previous name, States Title.Homebuilder Lennar is a major shareholder in the company because States purchase North American property rights.

Lennar, through its affiliates, owns 25% of the voting rights of Doma common stock and has agreed to vote in favor of the transaction. After the transaction is completed, Lennar will hold 8.36% of the shares of the combined company.

Meanwhile, TRG has strong ties to the real estate industry as a former subsidiary of Anywhere Real Estate (formerly Realogy). When Centerbridge Partners acquired 70% of TRG, Anywhere held a 30% stake. Anywhere’s competitor is owned by Berkshire Hathaway HomeServices of America has since purchased an undisclosed interest in TRG.

In March 2021, when the merger between its special purpose acquisition company and Capitol Investment Corp. V was announced, Doma Chief Executive Max Simkoff forecast the company’s annual filled orders would grow from 92,400 in 2020 to 330,500 in 2023. But Doma has never been able to do that. The title insurance market has consolidated as mortgage loan originations have declined significantly.

Doma spins off its own in-house title production business Williston Financial Group, Near North Title and Capital Title of Texas made several deals last year. As a result, it no longer reports the number of open or closed orders, but it still obtains business through relationships with independent title agents.

The total number of completed orders in 2023 is 71,953, down from 136,248 in 2022; when the SPAC deal was announced, Doma expected order volume for the year to be 212,200.

Simkov’s Tama’s ambitions also include expanding into neighboring businesses Examples include appraisals and home warranties.

But as a public company, Doma has never been profitable and has made multiple cuts to its operations, not just selling off production offices.

exist Doma lost $18 million in the most recent quarter ended December 31, 2023an improvement from the third quarter’s loss of $22 million.

During the earnings call, Simkov caused a stir by saying Dome supports President Joe Biden’s title waiver pilot program. The company is about to pilot the technology with Fannie Mae.

“As Doma’s technology arm will now become a subsidiary of TRG, we do not expect its expected role in the Fannie Mae pilot to change,” KBW’s George wrote.

The sale of Doma leaves only the four family-owned title insurance businesses — Fidelity National, First American Financial, Stewart and Old Republic International (which also writes general insurance) — and Investors Title as public companies.

In addition, private mortgage insurance companies Radian Group and Essent Group own title insurance underwriting companies.

National Mortgage News reached out to Doma, TRG and Lennar for comment but did not receive a response.

However, Simkoff said in the release that “today’s announcement is a win for Doma shareholders as well as the employees and customers of both companies.”

From TRG’s perspective, “We look forward to working with the Doma team to provide quality underwriting services to Doma’s many strong agents,” said Scott McCall, its president and CEO.

The deal comes with a 50-day trial period in which Doma can solicit better offers. The expected closing date of the transaction is September 28.

The contract calls for a termination fee of nearly $3.2 million unless a better proposal is received during the trial period; in that case, the fee would be about $1.8 million.

Advisers on this transaction include Houlihan Lokey Capital as financial advisor to the special committee of Doma’s board of directors, Latham & Watkins as legal counsel, Davis Polk & Wardwell as legal counsel to the company, Mayer Brown as insurance regulatory counsel, and Willkie Farr & Gallagher as legal counsel. Trading advisor. As TRG’s legal counsel, Morrison Foerster also plays a similar role to Lennar shareholders.

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