STEWART INFORMATION SERVICES CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 Performance: Grew revenues by 10% and adjusted net earnings by 42% despite a challenging housing market. Recognized as one of the best companies to work for by U.S. News & World Report.
• Business Segments: Commercial Services team stood up dedicated to hospitality and affordable housing; energy team rebranded to energy and infrastructure. Domestic Commercial revenues up 38% for the year. Real Estate Solutions up 36% in 2024, with Q4 revenue more than doubling 2019's in the segment.
• Infrastructure and Technology: Invested in infrastructure upgrades and technology, built operational leverage through global centralization centers.
• Dividends and Philanthropy: Announced fourth annual cash dividend increased to $2 per share. Donated over $1 million to the Stewart Title Foundation in 2024, with $2.9 million total donated through the foundation since inception.

Segment Performance

• Direct Operations: Domestic Commercial revenues grew 38% for the year. Direct Title business had closed orders up 15% primarily driven by higher Domestic Commercial and refinancing transactions. Domestic Residential average fee per file decreased 8% due to lower purchase transaction mix.
• Commercial Services: Was a strong performer with investments in talent. Domestic Commercial operations saw revenues increase $28 million or 50%, with average fee per file up 33% to $19,600.
• Real Estate Solutions: Operating revenues improved by $26 million driven by credit-related data and valuation services. Expect to be in the low teens cash margin as relationships mature. In Q4, revenue in this segment more than doubled the entire year 2019 revenue.
• International: Focus on growing Canadian business with 17% growth in Commercial presence.

Guidance

• Housing Market: 2025 housing market expected to be choppy, with first half challenging and transition to normal existing home sales in second half.
• Commercial Growth: Expected to be single-digit, sector-oriented, with continued momentum from second half 2024.
• Real Estate Solutions: Margins expected to normalize with pricing changes implemented, moving towards low teens cash margin.
• Title Loss Ratio: Expected to be in the low 4% range for 2025.

Risks

• Housing Market Uncertainty: Prolonged elevated mortgage rates may keep demand at bay in the first few months of 2025.
• Market Competition: Impact on share gains in various business segments.
• Cyclicality: Real Estate Solutions business has cyclicality related to market conditions.

Question and Answer

• Q: Bose George asked about Commercial growth expectations and Real Estate Solutions margin normalization A: Fred Eppinger stated Commercial growth expected to be single-digit, uncertain but positive. David Hisey said Real Estate Solutions margin normalization due to start-up costs settling and pricing changes implemented, moving towards better margins.
• Q: John Campbell asked about Commercial share gains, Title loss provision, and investment income A: Fred Eppinger discussed Commercial share gains due to mix and underwriting capability. David Hisey talked about Title loss provision being in low 4% range due to mix and avoiding large claims, and investment income expected to hold in $13 million range with stable rates.