I agree with you that there's likely to be little money earned for the next year or two. That's happened for a couple of years in the early-1990s real-estate crisis. You could get firms with weak balance sheets going under, like LandAmerica did last month.
I think ITIC is better off than most firms in this environment, because they have a lot of investments, mostly municipal bonds, far beyond what they need for claim reserves. If I take cash and investments and net out all liabilities, I get $33 per share. Add in something for future title insurance earnings, and on paper this stock is probably worth a whole lot.
But ITIC is obscure and thinly traded, and I'm not sure it's ever going to trade for what it's probably worth. I've looked at data going back to the 1980s, though, and most years the stock has traded for book + claims reserves (what Buffett calls the 'float'.) At the end of Q3 that book + reserves figure was $56-$57 per share.
I imagine they'll add to book value (and reserves) over time, just by collecting the interest on those bonds if nothing else, so I wouldn't be shocked to see $60 in 2010.
My opinion is that ITIC is the best of the public title companies. It doesn't have a lot of debt and intangibles like the others which was at least a factor in the recent bankruptcy of Landamerica. It is much smaller than FAF, FNF and STC, so it gets no coverage from the financial establishment. Therefore, shareholders need to be long-term investors who intend to get their rewards from the company in the form of dividends and capital appreciation as a result of retained earnings and a growing business. The management of ITIC is well paid but not excessively so as in some public companies. They seem to be conservative and have invested the companies money in what appears to be a conservative fashion.
Because of the decline in interest rates, there has been an increase in re-financings which creates business for title companies. I expect this to continue and increase. The government is trying to reflate the housing market and they will do what they can to make housing affordable and reduce the number of foreclosures. I have recently been buying ITIC after having sold my position in it about five years ago. I do not own and will not buy the other title companies. My opinion is that ITIC is the best of the title companies and I am putting my money where my mouth is.