Q4 2021 First American Financial Corp Earnings Call
Greetings and welcome to the first American Financial Corporation fourth quarter, and full year 2021 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation, if anyone should require operator.
Speaker 1: Greetings and welcome to the First American Financial Corporation fourth quarter and full year 2021 earnings conference call. At this time all participants are in a listen all.
Speaker 1: A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. If you have any questions, please post them in the chat box below.
Assistance during the conference. Please press Star zero on your telephone keypad.
Copy of today's press release is available on first American's website at Www Dot first day dotcom forward Slash Investor. Please note that the call is being recorded and will be available for replay from the company's investor website and for a short time by dialing 877 dash six.
Speaker 1: A copy of today's press release is available on First American's website at www.firstam.com forward slash investor. Please note that the call is being recorded and will be available for replay from the company's investor website and for a short time by dialing 877-
Speaker 1: or 606-663-6606 or 606-612-7415 and enter the conference ID 13726034.
606853, or 20161 to 7415 and enter the conference I D 1372603 or four.
We will now turn the call over to Craig Barberio, Vice President Investor Relations to make an introductory statement.
Speaker 1: We will now turn the call over to Craig Barberio, Vice President, Investor Relations, to make an introductory speech.
Good morning, everyone and welcome to first American's fourth quarter and year end 2021 earnings conference call.
Speaker 2: Good morning, everyone, and welcome to First American's fourth quarter and year-end 2021 earnings conference.
Joining us today on the call will be Dennis Gilmore, former Chief Executive Officer, and recently appointed Chairman of the company's board of Directors Ken.
Speaker 2: Joining us today on the call will be Dennis Gilmore, former Chief Executive Officer and recently appointed Chairman of the company's Board of Directors.
Kinda Giorgio first American's, New Chief Executive Officer, and Mark Seaton, Executive Vice President and Chief Financial Officer.
Speaker 2: Ken DiGiorgio, First American's new Chief Executive Officer, and Mark Seaton, Executive Vice President and Chief Financial Officer.
Some of the statements made today may contain forward looking statements that do not relate strictly to historical or current fact these forward looking statements speak only as of the date. They are made and the company does not undertake to update forward looking statements to reflect circumstances or events that occur. After the date. The forward looking statements are made risks.
Speaker 2: Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current facts.
Speaker 2: These forward-looking statements speak only as of the date they are made, and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statement.
Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward looking statements.
Speaker 2: Risks and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking states.
For more information on these risks and uncertainties. Please refer to this morning's earnings release and the risk factors discussed in our Form 10-K , and subsequent SEC filings.
Speaker 2: For more information on these risks and uncertainties, please refer to this morning's earnings release and the risk factors discussed in our Form 10-K and subsequent SEC files.
Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company's competitors.
Speaker 2: Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company's competitors.
For more details on these non-GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP financials. Please refer to this morning's earnings release, which is available on our website at www Dot first AAM dot com.
Speaker 2: more details on these non-GAAP financial measures, including presentation with and reconciliation to the most directly comparable GAAP financial measures.
Speaker 2: Please refer to this morning's earnings release, which is available on our website at www.firstam.com. I will now turn the call over to Dennis Gilmore.
I will now turn the call over to Dennis Gilmore.
Thanks, Greg Good morning, and thank you for joining our call.
In addition to our record earnings we recently announced that our company's President Canada, Giorgio has been promoted to Chief Executive Officer.
Speaker 3: In addition to our record earnings, we recently announced that our company's president, Ken DiGiorgio, has been promoted to Chief Executive Officer.
Over his 23 years of service to first American employees customers and shareholders. Ken has acquired an in depth understanding of our business and demonstrate that he has the vision strategic insight and skill to lead our company.
Speaker 3: Over his 23 years of service to First American employees, customers, and shareholders, Ken has acquired an in-depth understanding of our business and demonstrates that he has the vision, strategic insight, and skill to lead our company.
Under Ken's leadership first American will continue to lead the digital transformation of the title insurance and settlement industry.
Speaker 3: Under Ken's leadership, First American will continue to lead the digital transformation of the title insurance and settlement industry.
Ken and his team will continue to capitalize on the many opportunities the company has to grow our business.
Speaker 3: Ken and his team will continue to capitalize on the many opportunities the company has to grow our plants.
At the request of our board of Directors I am honored to continue to serve on the board now as its chairman.
Speaker 3: At the request of our board of directors, I am honored to continue to serve on the board, now as its chairman.
Immediate past Chairman Parker Kennedy will remain on our board as Chairman Emeritus and lead director.
Speaker 3: Immediate past chairman Parker Kennedy will remain on our board as Chairman Emeritus and lead yourbrandt.
During my 12 years as CEO I've had the incredible privilege to work alongside first American has great people.
Speaker 3: During my 12 years as CEO , I've had the incredible privilege to work alongside First American's great people. Our company culture that puts people first has driven our...
Our company culture that puts people first has driven our success.
As I've said many times when we put our people first so they will take care of our customers and when they do and we run the business efficiently, we will deliver superior results to our shareholders.
Speaker 3: When we put our people first, they'll take care of our customer. And when they do, and we run the business efficiently, we will deliver superior results to our shareholders.
I know that Ken and his leadership team and all of our employees will maintain our acceptable exceptional culture and will continue to raise the bar on our performance I would now like to turn the call over to Ken.
Speaker 3: I know that Ken and his leadership team and all of our employees will maintain our exceptional culture and will continue to raise the bar on our performance.
Thank you Dennis on behalf of first American has 22000 employees.
Speaker 4: Thank you, Dennis. On behalf of First American's 22,000 employees...
I want to recognize and thank you for your inspirational leadership and dedication over nearly three decades with our company.
Speaker 4: I want to recognize and thank you for your inspirational leadership and dedication over your nearly three decades with our community.
Your focus on fostering a world class culture, while delivering an annualized total shareholder return of 18, 2%. During a 12 year tenure as CEO has set the bar high.
Speaker 4: Your focus on fostering a world-class culture while delivering an annualized total shareholder return of 18.2% during your 12-year tenure as CEO has set the bar high.
Your vision for our company to be the Premier title insurance and settlement services company.
Speaker 4: Your vision for our company to be the premier title insurance and settlement services company.
Vision that has guided us to where we are today.
Speaker 4: vision that has guided us to where we are today, will continue to guide our future success.
We will continue to guide our future success and.
And the strategy, we developed to achieve that vision a strategy that has served us well for over a decade will not change we will continue to strive to profitably grow our core title and settlement business <unk>.
Speaker 4: strategy that has served us well for over a decade will not change.
Speaker 4: We will continue to strive to profitably grow our core title and settlement business.
Including through innovation and the acquisition of companies that are compatible with our culture and advance our vision.
Speaker 4: including through innovation and the acquisition of companies that are compatible with our culture and advance our vision.
We will continue to strengthen our business by leveraging data and process advantage.
Speaker 4: We will continue to strengthen our business by leveraging data and process advance.
And where we have a strategic advantage, we will continue to manage and actively invest in businesses that are complementary to our title and settlement business.
Speaker 4: and where we have a strategic advantage, we will continue to manage and actively invest in businesses that are complementary to our title and settlement.
Thank you again, Dennis your impact on first American will be lasting.
Speaker 4: Thank you again, Dennis. Your impact on First American will be lasting.
Turning to our financial results 2021 capped off a record revenue of $9 2 billion record title margin of 16, 3% and record earnings per share of $11 14.
Speaker 4: Turning to our financial results, 2021 capped off record revenue of $9.2 billion, record title margin of 16.3%, and record earnings per share of 11.2 billion.
Even excluding net investment gains.
Speaker 4: Even excluding net investment gains, EPS was $8.17.
<unk> was $8 17.
Yet another record.
While we are proud of these achievements our focus continues to be on the things that will drive future growth.
Speaker 4: While we are proud of these achievements, our focus continues to be on the things that will drive future growth.
At the beginning of 2021, we announced our intention to expand our title plant put footprint from 500 counties to 1500 by the end of that year.
Speaker 4: At the beginning of 2021, we announced our intention to expand our title plant footprint from 500 counties to 1,500 by the end of that year.
Bridging our proprietary data extraction technology, we are currently maintaining more than 1600 title plans covering nearly 80% of the U S population.
Speaker 4: Leveraging our proprietary data extraction technology, we are currently maintaining more than 1,600 tidal plants, covering nearly 80% of the US population.
This data is critical as it fuels, our operational efficiency initiatives, our title automation efforts and our ongoing efforts to digitize the real estate closing experience.
Speaker 4: This data is critical as it fuels our operational efficiency initiatives, our title automation efforts and our ongoing efforts to digitize the real estate closing experience.
You can't automate unless you have data and we are the industry's undisputed leader entitled data.
Speaker 4: You can't automate unless you have data, and we are the industry's undisputed leader in tidal data.
Last month, we announced an agreement to acquire mother load holding company.
Speaker 4: Last month, we announced an agreement to acquire mother lode holding
<unk> company with 92 offices across 11 states, including the key markets of California, Texas and Arizona.
Speaker 4: A title company with 92 offices across 11 states, including the key markets of California, Texas and Arizona.
Mother Lode is an important transaction for us in many ways.
Speaker 4: Motherload is an important transaction for us in many ways.
First we have the opportunity to welcome amazing talent to our organization.
Speaker 4: First, we have the opportunity to welcome amazing talent to our organization.
Second we further expand our distribution network as mother lowest 10 brands are among the best within their respected real estate communities.
Speaker 4: Second, we further expand our distribution network as Motherlode's 10 brands are among the best within their respective real estate.
Lastly mother load is a key step in our multi brand strategy for our title company that will accelerate our growth efforts.
Speaker 4: Lastly, Motherload is a key step in a multi-brand strategy for our title company that will accelerate our growth.
The transaction is awaiting regulatory approval is expected to close in the coming months after which we will provide additional detail.
Speaker 4: transaction is awaiting regulatory approval and is expected to close in the coming months. discover which we will.
We are excited to welcome other though to the first American family and look forward to growing together in the future.
Speaker 4: We are excited to welcome Motherlode to the First American Family and look forward to growing together in the future.
In terms of the outlook for 2022, it will be a year of transition we are well positioned for we expect market conditions in our purchase and commercial businesses, which account for approximately 80% of our direct revenue to remain favorable.
Speaker 4: In terms of the outlook for 2022, it will be a year of transition we are well positioned for. We expect market conditions in our...
Speaker 4: which account for approximately 80% of our direct revenue to remain favorable.
Refinance volumes will continue to wane as mortgage rates tick up but we believe increased investment income due to a rise in short term rates will help offset the decline.
Speaker 4: Refinance volumes will continue to wane as mortgage rates tick up, but we believe increased investment income due to a rise in short-term rates will help offset the day.
As short term rates rise, we will benefit from higher investment income from our cash in escrow balances 10, 31 exchange deposits and bank portfolio.
Speaker 4: As short-term rates rise, we will benefit from higher investment income from our cash and escrow balances, 1031 exchange deposits, and bank portfolios.
We believe our bank is a competitive advantage and serves as a natural hedge when higher mortgage rates drive refinance volumes lower.
Speaker 4: We believe our bank is a competitive advantage and serves as a natural hedge when higher mortgage rates drive refinance volumes lower.
In January we opened 2000 purchase orders per day, a 7% decline from a strong January 2021, and a 9% increase relative to January of 2020, our refinance orders were 200 per day steady with what we experienced in December .
Speaker 4: In January , we opened 2000 purchase orders per day, a 7% decline from a strong January 2021, and a 9% increase relative to January of 2021.
Speaker 4: Our refinance orders were $1,200 per day, steady with what we experienced.
Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.
Speaker 4: Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results. Thank you, Ken.
Thank you Ken.
We are pleased to report excellent results this quarter.
We earned $2 33 per diluted share <unk>.
Speaker 5: We are in $2.33 per diluted share.
Included in this quarter's results were five <unk> of net investment gains.
Speaker 5: Included in this quarter's results were five cents of net investment gains.
Excluding these gains we earned $2 28 per diluted share.
Speaker 5: Excluding these gains, we earn $2.28 per dilution.
I'll start with our title business revenue in our title segment was $2 3 billion up 13% compared with the same quarter of 2020 due in part to a record quarter in our commercial business.
Speaker 5: I'll start with our title business. Revenue in our title segment was $2.3 billion, up 13% compared with the same quarter of 2020, due in part to a record quarter in our commercial business.
Commercial revenue was 377 million, 66% increase over last year.
Speaker 5: Commercial revenue was $377 million, a 66% increase over last year.
We experienced strength across the board in terms of geography asset class and deal size. We closed 117 transactions in the U S with premium greater than $250000 up from 58 last year for the year, our commercial business generated over $1 billion of revenue.
Speaker 5: We experienced strength across the board in terms of geography, asset class, and deal size. We closed 117 transactions in the US with premium greater than $250,000 up from 58 last year.
Speaker 5: For the year, our commercial business generated over $1 billion of revenue, eclipsing our prior record achieved in 2019 by 34%.
Lipson, our prior record achieved in 2019 by 34%.
Purchase revenue was up 2% during the quarter driven by a 7% increase in the average revenue per order, partially offset by a 3% decline in the number of orders closed.
Speaker 5: Purchase revenue was up 2% during the quarter, driven by a 7% increase in the average revenue per order, partially offset by a 3% decline in the number of orders closed.
Our purchase orders declined from an unusually strong quarter in Q4 of 2020, which.
Speaker 5: Our purchase orders declined from an unusually strong quarter in Q4 of 2020, which experienced the release of pennant demand due to the pandemic.
<unk> the release of pent up demand due to the pandemic.
Looking at a more normalized two year trend are closed purchase orders this quarter were up 15% relative to the fourth quarter of 2019.
Speaker 5: Looking at a more normalized two-year trend, our closed purchase orders this quarter were up 15% relative to the fourth quarter of 2019.
Refinance revenue declined 46% relative to last year due to the increase in mortgage rates.
Speaker 5: REIT Finance revenue declined 46% relative to last year due to the increase in mortgage rates.
And the agency business revenue was a record 1 billion up 20% from last year.
Speaker 5: In the agency business, revenue was a record $1 billion, up 20% from last year. Given the reporting lag in agent revenues of approximately one quarter, we are experiencing growth in remittances related to Q3 economic activity.
Even the reporting lag in agent revenues of approximately one quarter, we are experiencing growth and Rubens as related to Q3 economic activity.
Our information and other revenues were $322 million up 15% relative to last year.
Speaker 5: Our information and other revenues were $322 million, up 15% relative to last year.
Revenue growth was primarily due to the recently completed acquisition of service Mac and higher demand for the company's loss mitigation products.
Speaker 5: Revenue growth was primarily due to the recently completed acquisition of ServiceMac and higher demand for the company's loss mitigation product.
Investment income within the title insurance and services segment was $49 million down 8%, primarily due to lower interest income from the Companys warehouse lending business and other cash balances.
Speaker 5: Investment income within the title insurance and services segment was $49 million, down 8%, primarily due to lower interest income from the company's warehouse lending business and other cash balances.
If the federal reserve raises rates, we expect to generate additional investment income from our escrow deposits cash balances 10, 31 exchange deposits in our bank investment portfolio, where we have over 1 billion of floating rate securities.
Speaker 5: If the Federal Reserve raises rates, we expect to generate additional investment income from our escrow deposits, cash balances, 1031 exchange deposits, and our bank investment portfolio, where we have over $1 billion in floating rate securities.
We estimate based on current deposit balances that a 25 basis point increase in the federal funds rate will equate to a 15% to $20 million increase to our annualized investment income in the title segment.
Speaker 5: We estimate, based on current deposit balances, that a 25 basis point increase in the federal funds rate will equate to a $15 to $20 million increase to our annualized investment income in the title segment.
Pre tax margin in the title segment was 16, 3%.
Speaker 5: Pre-tax margin in the title segment was 16.3%.
Turning to the specialty insurance segment revenue in our home warranty business totaled $104 million up 1% compared with last year.
Speaker 5: Turning to the specialty insurance segment, revenue in our home warranty business totaled $104 million, up 1% compared with last year.
Pre tax income and home warranty was $17 million down from 21 million in the prior year, primarily due to elevated claims activity as the loss rate rose to 52.0% from 55%.
Speaker 5: Pre-tax income and home warranty was $17 million, down from $21 million in the prior year, primarily due to elevated claims activity, as the loss rate rose to 52.0% from 50.5%.
Our property and casualty business had a pre tax loss of $6 million this quarter and year and our policies in force have declined by 71% since the beginning of the year and we expect a full wind down of the property and casualty business to be completed in the third quarter of this year.
Speaker 5: Our property and casualty business had a pre-tax loss of $6 million this quarter. At year end, our policies in force had declined by 71% since the beginning of the year, and we expect a full wind down of the property and casualty business to be completed in the third quarter of this year.
The effective tax rate for the quarter was 21, 6% lower than our normalized tax rate of 24% due primarily to reduced state taxes as a result of larger than forecasted insurance income in the quarter, which is generally not subject to state income tax.
Speaker 5: The effective tax rate for the quarter was 21.6%, lower than our normalized tax rate of 24%, due primarily to reduced state taxes as a result of larger than forecasted insurance income in the quarter, which is generally not subject to state income.
This quarter, we recorded $7 million of net investment gains on a consolidated basis.
Speaker 5: This quarter, we recorded $7 million of net investment gains on a consolidated basis.
We generated $52 million of gains related to three prop tech investments and $26 million of gains from our public equities portfolio.
Speaker 5: We generated $52 million of gains related to three PropTech investments and $26 million of gains from our public equities portfolio. Those gains were offset by a $75 million decline in the market value of our stake and offer path.
Those gains were offset by a $75 million decline in the market value of our stake in offer pattern.
Cash flow from operations was $344 million in the fourth quarter down 15% from the prior year due to a change in working capital accounts in.
Speaker 5: Cash flow from operations was $344 million in the fourth quarter, down 15% from the prior year due to a change in working capital accounts.
In the fourth quarter, we repurchased 270400 shares for a total of $20 million at an average price of $74 38.
Speaker 5: In the fourth quarter, we repurchased 270,400 shares for a total of $20 million at an average price of $74.38.
So far in Q1, we repurchased approximately 345000 shares for a total of $27 million our debt to capital ratio as of December 31 was 27, 4% or 22, 2%, excluding secured financings payable slightly higher than our target ratio of 18% to 20 <unk>.
Speaker 5: So far in Q1, we've repurchased approximately 345,000 shares for a total of $27 million.
Speaker 5: Our debt-to-capital ratio as of December 31 was 27.4%, or 22.2%, excluding secured financings payable, slightly higher than our target ratio of 18 to 20%. Now I would like to turn the call back over to the operator to take your questions.
Now I would like to turn the call back over to the operator to take your questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Speaker 1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
One moment, please pull for questions.
Our first question comes from Mark Devries with Barclays. Please proceed with your question.
Speaker 1: Our first question comes from Mark Deverese with Barclays. Please proceed with your question.
Yes. Thank you.
Speaker 6: yeah i think you um... and congratulations dennis and can on your new roles so can uh... you know i appreciate you've been there for a long time uh... and also a kind of joining a time when i have to do it quite well so i'm i'm sure there's a sense of like a good broke don't fix it but interested to get your thoughts on kind of your early priorities you know kind of whether they've been different or any new level of emphasis or investment that that you're going to focus on
And congratulations Dennis and Ken on your new roles.
So Ken.
I appreciate you've been there for a long time.
And also we're kind of joining at a time when FNF is doing quite well.
Sure there is a sense of like if it Ain't broke don't fix it but interested to get your thoughts on kind of your early priorities.
Kind of whether there is anything different or any new levels of emphasis or investment that youre kind of focused on.
Yes.
Speaker 4: Yeah, thanks Mark for your kind initial comments. And listen, I've been working with Dennis for 23 years and at his side for the last 12 as CEO .
Thanks, Mark for your.
The initial comments.
And listen I've been working with that with Dennis for 23 years at.
At his side for the last 12.
<unk>.
And so I don't anticipate any dramatic shift in our strategy you know Dennis is vision that he initiated for our company is going to remain to be our vision and that is to be the premier title and settlement services company and obviously as demonstrated by the results that has worked well for us yes.
Speaker 4: And, you know, so I don't anticipate any dramatic shift in our strategy. You know, Dennis's vision that he initiated for our company is going to remain to be our vision and that is to be the, you know, the premier title and settlement services company. And obviously, you know, as, you know, demonstrated by the results, you know, that has worked well for us. Yes. And, you know, and to execute on that vision, we're going to execute on the same strategy.
And and to execute on that vision, we're going to execute on the same strategy.
To grow our core title and settlement business to.
Speaker 4: you know, to grow our core title and settlement business to, you know, leverage data and process advantage of the benefit of the business and, you know, to invest in our complementary business. So I don't really see the need to.
Leverage data and process advantage to the benefit of the business and to invest in our in our complementary business. So I don't really see the need to.
Two.
Speaker 4: to initiate any dramatic change. Obviously, there's gonna be things we're gonna focus on going forward as the market changes.
Initiate any dramatic change, obviously theres going to be things, where we're going to focus on going forward with ads.
As the market changes, but I don't think we're going to be doing anything dramatically different than what what Dennis has done.
Speaker 4: But I don't think we're gonna be doing anything dramatically different than what Dennis has done.
The other thing I'll add is that.
Speaker 4: And the other thing I'll add is that one of Dennis's many lasting legacies here is the team he built, and he built an incredible team, and that team, which
Dennis has lagged many lasting legacies here is the team he built and he built an incredible team and that team, which by the way includes Mark Seaton, who I know you know well in my opinion is probably the best CFO any any public company.
Speaker 4: by the way, includes Mark Seaton, who I know you know well, and in my opinion is probably the best CFO in any public company.
We built this strategy and.
Speaker 4: We built this strategy and so it's all of our strategy including mine.
And so it's all of our strategy, including mine.
Okay great.
Speaker 6: okay great uh... and entering to mark uh... mark on the uh... this question on the the sensitivity of the investment income to rising rates first of all that i think it's a fifteen the to twenty million of incremental annual for every twenty five that kind of wide what what what can i get you the difference between the the fifteen million outcome in the end the twenty million
And then turning to Mark.
Mark I'm just.
Question on the sensitivity of the investment income the rising rates first of all I think you said 15.
$20 million of incremental annual for every 25 bps.
Kind of why and what kind of gets you the difference between the $15 million outcome in the $20 million.
Yeah. Thanks, Mark there's a lot of moving pieces to come up with that that's our best estimate right now, but we've got our bank floaters, we've got our escrow deposits. We got our operating cash we got our 10 31, there is a lot of moving pieces.
Speaker 5: Yeah, thanks, Mark. You know, there's a lot of moving pieces to come up with that. That's our best estimate right now. But we've got, you know, our bank floaters, we've got our escrow deposits, we got our operating cash, we got our 1031. There's a lot of moving pieces.
We think that in our discussions with our banks certainly maybe the first one or two rate increases we might be at the lower end of that range.
Speaker 5: You know, we think that, you know, in our discussions with our banks, certainly maybe the first one or two rate increases, we might be at the lower end of that range.
But I think as as the fed continues to raise which we all expect will probably be more at the high end of that range of $20 million as banks make more loans and right now they just don't really need our deposits. They don't most most of the banks, we have they don't really value the deposits and thats why the rates are so low so it might take a couple of increases for them to.
Speaker 5: But I think as the Fed continues to raise, which, you know, we all expect, we'll probably be more at the high end of that range of 20 million as banks, you know, make more loans. And right now, they just don't really need our deposits. They don't, most of the banks we have, they don't really value the deposits, and that's why their rates are so low. So it might take a couple of increases for them to really start to man the deposit. So I think certainly the initial raises might be the low end of that range, but over time, we do think we'll be at the high end of that range. And that, of course, assumes our deposit balances kind of stay at current level.
Really start demand deposits. So I think certainly the initial raises might be the loan in that range, but over time, we do think we'll be at the high end of that range and that of course assumes our deposit balances kind of stay at current levels.
Okay got it.
Speaker 6: Okay, got it. And it sounds like it ramps a little bit with more rates, but is that in general, the guidance fairly linear? So in other words, you know, if the five and a half or so increases that's implied by the forward curve is accurate, that by the end of the year you could have almost, you know, somewhere between $75 million and $100 million of incremental run rate investment income.
It sounds like it ramps a little bit with more rates, but is that in general the guidance fairly linear so in other words.
If if the five five or so increases that's implied by the forward curve is accurate that by the end of the year you could have almost somewhere between 75 million and $100 million of incremental run rate investment income.
So on an annualized basis in the title business and again, it'll be a little bit less at the beginning it a little bit more at the end, but overall, yes, I think it's fairly linear.
Speaker 5: I think so on an annualized basis, yeah, in the title business. And again, it'll be a little bit less at the beginning and a little bit more at the end. But overall, yeah, I think it's fairly linear. Okay. Great.
Okay, great. Thank you.
Thanks, Mark it's Mark.
Our next question is with Andrew <unk> with Credit Suisse. Please proceed with your question.
Speaker 1: Our next question is with Andrew Klugerman with Credit Suites. Please proceed with your question.
Hey, good morning, maybe just sort of staying on the incremental investment income I know that you have.
Speaker 2: Hey, good morning. Maybe just sort of staying on the incremental investment income. I know that you've undergone some efforts to build out your bank to
Under constant efforts to build out your bank two to make.
Speaker 3: make it available for agents to make deposits.
Make it available for agents to make deposits.
Yes.
Yeah.
Speaker 7: How could that affect that 15 to 20 million? I mean, how soon do you think you'll have that component of the bank up and running? And how much in deposits do you think you could garner in 2023?
How could that affect that.
That 15% to $20 million and how much how soon do you think youll have that component of the bank up and running.
And.
How much in deposits do you think you could garner.
In 2023 and beyond.
Yeah. Thanks, Thanks for that question, Andrew So the 15% to $20 million that we've been talking about here, that's assuming again deposit levels stay the same now you pointed out the fact that we're growing our bank and we're growing it through our agency deposits as of the end of the year, we had about $250 million of agency.
Speaker 5: Yeah, thanks for that question, Andrew. So the 15 to 20 million that we've been talking about here, that's assuming, again, deposit levels stay the same. Now, you've pointed out the fact that we're growing our bank and we're growing it through our agency deposits. As of the end of the year, we had about 250 million of agency deposits.
Deposits.
And we had almost $7 billion of deposits at our bank. So its growing we think it will double this year.
Speaker 5: And we had almost 7 billion of deposits at our bank. So it's growing. We think it'll double this year. It's not going to have a huge impact. But over time, we think that's a big growth area for the bank is having agents deposit their funds for us. But I don't think that will be material for 2022, maybe even 2023.
It's not going to have a huge impact but over time, we think that's a big big growth area for the bank as is having agents deposit their funds for us, but I don't think that will be material for 2022, maybe even 2023.
Got it and.
Speaker 7: And you know with personnel costs up approximate, what was it, 19% versus the fourth quarter of last year.
With personnel costs up approximate what was it 919% versus the fourth quarter of last year.
Maybe just a little more color.
Speaker 7: Maybe just a little more color on the outlook for personnel costs.
On.
The outlook for personnel costs and.
What what's driving it up so much year over year.
Speaker 7: you know, what's driving it up so much year over year.
Why don't I'll chime in.
Speaker 4: Well, I don't know, I'll chime in, Andrew, and then Mark can, you know, Mark can finish off with more, some more definitive numbers, but, you know, on personnel costs, I think we expect personnel costs to, you know, remain steady, but I will note that I don't think it's any mystery that we're going to have inflation pressure, so we're going to, you know, there is some risk of increased personnel costs.
Andrew in that market.
Mark can finish off with more since more definitive numbers, but.
On personnel costs I think we expect personnel cost to remain steady, but I will note that I don't think theres any any.
Mystery that we're going to have inflation pressure. So we're going to there is some risk of increased personnel costs.
Going into the going into the year.
Speaker 4: you know, going into the year. And then, you know, obviously as we've done historically, we watch our personnel costs, in fact our entire cost structure very closely can adjust as necessary to the market.
And then obviously as we've done historically, we watch are we watch our personnel costs in fact, our entire cost structure very closely and adjust as necessary to the market.
So maybe just other than inflationary cost on wage.
Speaker 7: So maybe just other than inflationary cost on wage, it should hold pretty steady.
It should hold pretty steady.
Yes, I think I think.
Speaker 5: Yeah, I think, you know, the current headcount that we have now, we think is appropriate. I mean, one dynamic that we had in 2021 is that we were hiring throughout the year. And so when you just look at it on a run rate basis, we were going to have higher personnel costs in 22 than we did in 21 because of the fact that we were hiring through the year. And also we have acquisitions too that have
The current head count that we have now we think is appropriate I mean, one dynamic that we had in 2021 is that we were hiring throughout the year.
And so when you just look at it on a run rate basis, I mean, we're going to have higher personnel costs in 'twenty two than we did in 'twenty one because of the fact that we were hiring through the year and also we have acquisitions too that have.
They're going to do.
Speaker 5: they're going to increase our headcount even more. But we think we're, as Ken said, we're probably staffed, and we're going to have higher personnel cuff next year, just because of the run rate dynamic.
Theyre going to increase our head count even more but we think we're as Ken said, we're appropriately staffed and we're going to have higher personnel costs next year, just because of the run rate dynamic.
Got it thanks, so much.
Thank you.
Yes.
Our next question comes from Mark Hughes with Suntrust. Please proceed with your question.
Speaker 1: Our next question comes from Mark Hughes with Truist. Please proceed with your questions.
Yes. Thank you good morning, just to follow up on that when you say steady personnel costs.
Speaker 8: Yeah, thank you. Good morning. And just to follow up on that, when you say steady personnel cost, are you talking in absolute terms? Are you talking as a ratio?
Are you talking in absolute terms are you talking as a ratio.
Well really really both I mean, we're going to have higher personnel costs on an absolute basis and when you look at our our personnel cost as a percentage of our net operating revenue, which is a metric we look at that that's going to rise as well next year.
Speaker 5: Well, really both. I mean, we're going to have higher personnel costs on an absolute basis. And when you look at our personnel costs as a percentage of our net operating revenue, which is a metric we look at, that's going to rise as well.
Okay.
Speaker 8: And then, can I hear you properly? The purchase orders in January were 2,000 per day. And what would that year over year change?
Did I hear you properly the purchase orders in January were 2000 per day.
What was that year over year change.
It was yes it was.
Speaker 5: It was, yeah, it was 2000 a day, and it was down roughly about 7% versus the prior year. But remember, January of last year was a very strong January because we had all this pen of demand because of the pandemic. So it's certainly down from last year, but when you've got a two-year trend, it's a lot more favorable.
It was 2000 a day.
And it was down roughly about 7% versus the prior year, but remember January of last year was a very strong January because we had this pent up demand because of the pandemic. So it's it's certainly down from last year, but when you got into two year trends.
It's a lot more favorable.
Yeah.
The commercial revenue per order are quite strong you talked about large orders.
Speaker 8: The commercial revenue per order quite strong. You talked about the large orders. Is that kind of unusual pent up demand or is that the new reality?
Is that kind of unusual pent up demand or is that the.
Reality.
Well I'd say, we had an extraordinary fourth quarter. This is the best fourth quarter, we've ever had and as I mentioned on my in my remarks on the script I mean, this was by far a record year for commercial so.
Speaker 5: Well, I'd say we had an extraordinary fourth quarter. This is the best fourth quarter we've ever had. And as I mentioned in my remarks on the script, I mean, this was by far a record year for commercials. So.
On the one hand, we've never experienced anything like what we experienced in fourth in the fourth quarter on the other hand, we have a good pipeline heading into this year I mean for the first six months, we know that we're going to have very strong.
Speaker 5: On the one hand, we've never experienced anything like what we experienced in the fourth quarter.
Speaker 5: On the other hand, we have a good pipeline heading into this year. I mean, for the first six months, we know that we're going to have very strong...
Commercial activity as evidenced by the fact that our escrow deposits, which are a leading indicator of commercial activity Hasnt really declined very much from the fourth quarter. So we know that we're going to have a good six months in commercial after that it's hard to tell.
Speaker 5: commercial activity as evidenced by the fact that our escrow deposits, which are a leading indicator of commercial activity, haven't really declined very much from the fourth quarter.
Speaker 5: We know that we're going to have a good six months, and commercially after that, it's hard to tell. But in our conversations with our customers, there's a lot of capital out there.
But in our conversations with our customers, there's a lot of capital out there and we've seen this.
Speaker 5: And we've seen this rise in commercial transactions that we think can continue.
Rising commercial transactions that we think can continue.
And then one more if I could the mother Lode acquisition is that just.
Speaker 8: Then one more if I could, the motherload acquisition, is that just a
Good opportunity or does that represent some sort of.
Speaker 8: good opportunity or does it represent some sort of a not shift in strategy but growing preference for similar deals.
Not shift in strategy, but a growing preference for similar deals.
Yes.
Speaker 4: Yeah, well, this is Ken and thanks for the question. I think, first and foremost, it was a fantastic opportunity. Opportunities like that don't come along very often. And by that, I mean a company of their size and scope.
As Ken and thanks for the question I think first and foremost it was that it was a fantastic opportunity opportunities like that don't come along very often and by that I mean, a company of their size and scope.
Their reputation in the industry and then on top of all of that just the quality of their people and their compatible culture. So I think yes.
Speaker 4: their reputation in the industry, and then on top of all that, just the quality of their people and their compatible culture. So I think, yeah, A, it was an opportunity.
It was an opportunity but b.
Speaker 4: But B, as I suggested earlier, it is a foray for us into a multi-brand strategy. That's not to say we don't have other brands in our title company. We do, including like Republic Title Texas, which is a premier brand. But we see Motherload as an opportunity to penetrate markets that for whatever reason we haven't been able to penetrate yet or for that matter, others have been able to penetrate. upcoming
I had suggested earlier.
Is it is a foray for us into a multi brand strategy. That's not to say, we don't have other brands in our title company, we do including like Republic title, Texas, which is a premier brand, but we see mother load as an opportunity to penetrate markets that for whatever reason we have.
<unk> been able to penetrate yet or for that matter others have been able to penetrate.
And to take advantage of really their unique approach to the market I think I think every one of the title company is it has a different approach to the market and we're going to be able to add that approach to to our own.
Speaker 4: and to take advantage of really their unique approach to the market. I think every one of the title companies has a different approach to the market and we're going to be able to add that approach to our own.
Thank you very much.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Our next question is from Bose George with <unk>. Please proceed with your question.
Speaker 1: Our next question is from Bose George with KBW. Please proceed with your question.
Hey, everyone. Good morning, Thanks, just to follow up on mother load and have you said anything about accretion from that acquisition.
Speaker 3: Hey, everyone. Good morning. Actually, just to follow up on Motherlode, have you said anything about accretion from that acquisition?
No, we havent, yet and the transaction is subject to regulatory approval. So it's not going to close probably for a couple of months at least and.
Speaker 4: No, we haven't yet, and the transaction is subject to regulatory approval, so it's not going to close probably for a couple of months at least, and once it does close, we'll provide some additional information, hopefully on our next call to you.
Once that does close we'll provide some additional information hopefully at the next on our next call to you.
Okay.
Okay, great. Thanks, and then actually just in terms of your other investments obviously, that's been a pretty big selloff in the prop tech public stocks at least.
Speaker 4: Okay, great. Thanks. And then actually just in terms of your other investments, obviously, there's been a pretty big sell off in the PropTech public stocks, at least. Has that created opportunities for you? Like, you know, what's going on there on the private market side?
That created opportunities for you like you know whats going on there on the private market side.
Yes, I think there are opportunities I will say, we haven't seen a decline in valuations in the types of companies, we look at but yes, I would anticipate that there will be more opportunities for us it probably more favorable pricing going forward.
Speaker 4: Yeah, I mean, well, I think there are opportunities. I'll say we haven't seen a decline in valuations in the types of companies we look at. But yeah, I would anticipate that there will be more opportunities for us at probably more favorable pricing going forward. You know, and I'll note on our venture portfolio, I mean, it's, you know, as Margaret indicated, it's performing well financially. I mean, we've, you know, we've booked gain of $355 million at year end.
And I'll note on our venture portfolio.
As Mark indicated performing well financially I mean, we've we.
Booked gain of $355 million at year end.
Speaker 4: But you know, I'll remind you we're not just doing these investments for financial returns. We're doing them for strategic reasons You know We like we want to invest in prop tech companies that you know Give us give us insights into what what companies like that need so we can adapt and adjust our product
But I'll remind you we're not just doing these investments for financial returns we're doing it for strategic reasons. We liked we want to invest in prop tech companies that give us give us insights into what what companies like that need so we can adapt and adjust our products.
And also they might ultimately become customers are good customers of ours, and we've actually seen that in the past. So when we talk about the opportunities. We look at it not just from a valuation or a financial perspective, but from a strategic perspective, and probably first and foremost from a strategic perspective. So we think those opportunities will continue to pursue.
Speaker 4: And also they might, you know, ultimately become customers or good customers of ours, and we've actually seen that in the past. So, you know, when we talk about the opportunities, we look at it not just from a valuation or a financial perspective, but from a strategic perspective, and probably first and foremost from a strategic perspective. So we think those opportunities
Zent themselves.
Okay, great. Thanks, I guess, just one more just swinging back to expenses can you just talk about your success ratio with that.
Speaker 4: Okay, great. Thanks. I guess just one more, just swinging back to expenses. Can you just talk about your success ratio, you know, was that, you know, versus your expectations this quarter?
Versus your expectations this quarter.
Yes, well so.
Speaker 5: Yeah, so we've always talked about a target success ratio of 60%, but we've been talking about that for probably about 15 years now, and we've hit it most of those years.
We've always talked about.
Target success ratio of 60%, but we've been talking about that for probably about 15 years now and we've hit it most of those years.
Just not it's not sustainable I mean, if you hit a 60% success ratio every every year your margins keep going up and open up so.
Speaker 5: And it's just not sustainable. I mean, if you hit a 60% success ratio every year, your margins keep going up and up and up. So this quarter, well, first of all, I'll point out that for the year in 2021, we had a 59% success ratio. So we hit it for the year. For the fourth quarter, it was higher. We were at 87.5%.
This quarter well first of all point out that for the year in 2021, we had 59% success ratio. So we hit it for the year for the fourth quarter. It was higher we were at 87, 5%.
Yes, there's a few things I mean, I wouldn't say we had any like.
Speaker 5: You know, there's a few things. I mean, I wouldn't say we had any, like, you know, significant one-time expenses, but our 401k expenses for the quarter were $8 million higher than last year because we, our 401k plan is, you know, we pay our employees more depending on, you know, the profitability of the company. So we matched it at $1.50 versus $0.75 last year. We also had $9 million for like a healthcare true up at the end of the year.
Significant one time expenses, but are our 401K expenses for the quarter were $8 million higher than last year. Because we are four one K plan as we pay our employees more depending on the profitability of the company. So we match the $1 50 versus 75 since last year. We also had $9 million for like a health care true up at the.
End of the year and then we also have some entities like endpoint like service Mac that have losses and that puts pressure on the on the success ratio. So overall I think we're happy with how we manage expenses for the year for the quarter, but the success ratio it looks like for those those factors that I just mentioned.
Speaker 5: And then we also have some entities like Endpoint, like ServiceMac, that have losses and that puts pressure on the success ratio. So overall, I think we're happy with how we manage expenses for the year, for the quarter, but the success ratio looks high for those factors that I just mentioned. Okay, great. Makes sense.
Okay, Great makes sense. Thank you.
Our next question is from Geoffrey Dunn with Dowling and partners. Please proceed with your question.
Speaker 1: Our next question is from Jeffrey Dunn with Dowling and Partners. Please proceed with your question.
Thanks, Mark I guess.
Speaker 9: thanks uh... mark i guess i'm actually really surprised by your outlook for personnel expense
I'm actually really surprised by your outlook for personnel expense.
Speaker 9: when you consider how much of that line is commissions, bonuses, temp, and other variables.
When you consider how much of that line as commissions bonuses Tampa and other variables.
So.
As you think about an absolute increase year over year can you frame that relative to revenue I mean, it would seem to me very unusual type.
Speaker 9: As you think about an absolute increase year over year, can you frame that relative to revenue? I mean, it would seem to me very unusual type of outlook, unless you're expecting revenue to only be down maybe 5% or something like that. Otherwise, it seems like more compression than I would have expected in a slowing economy.
Type of outlook, unless you're expecting revenue to only be down maybe 5% or something like that otherwise it seems like more compression than I would've expected in a falling environment can you just.
Speaker 5: Can you just call? Sorry, Jeff. I cut you off there. But last call, we talked about how we thought we could have flat revenue in 22 versus 21. And now, on this call, I think we still stand by that.
Sorry, if I cut you off there, but last call.
We talked about how we.
We thought we could have flat revenue in 'twenty two versus 21.
And now on this call I think we still stand by that.
So we.
Speaker 5: So, you know, we don't know. I mean, as we talked about, there's a lot of, you know, things that are happening in 22. We never really know. But based on where we're sitting right now, we don't see a decline in revenue. And that could happen, but we think we'll be closer to flat.
We don't know again as we've talked about there's a lot of things are happening in 'twenty. Two we never really know, but based on where we're sitting right now we don't see a decline in revenue then it could happen, but we think it will be closer to flat.
Okay that makes more sense for them.
Speaker 9: Okay, that makes more sense. And then if you are in a flat, your success ratio is designed for year over year increase in revenue. So if we're in a flat or down revenue scenario, how do we think about judging your expense management against that framework?
And then if you are in a flat your success ratio is designed for year over year increase in revenue. So if we're in a flat or down revenue scenario, how do we think about judging your expense management against that framework.
Yeah, so or how do you think about it yes, so the success ratio itself.
Speaker 5: Yeah, so the success ratio itself, you know, it's really a metric that we came up with a long time ago to determine, you know, are we doing a good job of managing expenses when the markets up or down? It's less relevant if you
Really a metric.
Came up with a long time ago to determine are we doing a good job of managing expenses, when the market's up or down.
It's less relevant if you.
If you have flat revenue right because you can get some pretty well numbers for the success ratio I think at the end of the day, we want to have strong margins. We look at each one of our businesses that have different margin dynamics and we want to make sure that we have good returns on capital good margins and in a flat revenue environment again to your point the success ratio isn't as meaningful.
Speaker 5: you know, if you have flat revenue, right? Because you can get some pretty wild numbers for the success ratio. I think at the end of the day, we want to have strong margins. We look at each one of our businesses that have different margin dynamics and we want to make sure that we have good returns on capital, good margins.
Speaker 5: And in a flat revenue environment, again, to your point, the success ratio is meaningful.
Okay alright. Thanks.
Thanks, Jeff.
Yes.
Our next call comes from Ryan Gilbert with <unk>. Please proceed with your question.
Speaker 1: Our next call comes from Ryan Gilbert with BTIG. Please proceed with your question.
Hi, Thanks, Good morning, guys.
Speaker 10: Hi, thanks. Good morning, guys. First question for me is on just competitive dynamics in the core title business. Any details or color you can add on what you saw on the market in the fourth quarter and how you think about competition developing over the course of 2022.
First question for me is on <unk>.
Competitive dynamics in the core title business.
Any details or color you can add on what you saw in the market in the fourth quarter and how you think about competition developing over the course of 2022.
Yes.
Speaker 4: Yeah, you know, I don't think we anticipate seeing dramatic change in the competitive environment. You know, obviously interest rates are going to have a headwind.
Don't think we anticipate seeing dramatic change in the competitive environment, obviously interest rates are going to have.
A headwind and I think a lot of the upstart title companies that our refinance driven are going to.
Speaker 4: And I think a lot of the upstart title companies that are refinance driven are going to
Have a.
Speaker 4: you know, have a critical inflection point for them. But I think in terms of the larger competitors in particular, I don't see that dynamic changing too dramatically.
Credit there'll be a critical inflection point for them, but I think in terms of the larger competitors in particular, I don't see that dynamic changing too dramatically.
Okay.
Okay got it second question could you just update us on.
Speaker 10: Okay, got it. Second question, could you just update us on Endpoint and your progress expanding into new markets, maybe the customer pipeline as you see it now?
And point and the progress expanding into new markets and maybe your customer pipeline as you see it now.
Yes, I think listen I think on the whole that endpoint.
Speaker 4: Yeah, I think on the whole, that Endpoint is doing well. You know, they're maintaining their market share and their test market, which is in Seattle.
Is doing well.
They're maintaining their market share in their test market in which is in Seattle.
<unk> been expanding into new markets that are currently in 20 markets across seven.
Speaker 4: uh... you know they've been expanding into a new market they're currently in twenty market across uh... yet seven state and i think one of the one of the telling indicators for me is uh... our net promoter score within endpoint immediate above our target which tells me that uh... we're gaining traction with that with the customer base uh... you know i i think we're
Seven states and I think one of the one of the telling indicators for me is our net promoter score within endpoint I mean, it's above our target, which tells me that we're gaining.
<unk> traction with with the customer base.
I think we are.
Speaker 4: the it's being received well with customers.
It's being received well with with customers.
Okay. Great last question for me just on share repurchases. It looks like you picked up the.
Speaker 10: Okay, great. Last question for me just on share repurchases. It looked like you picked up the volume pretty significantly in January . Just how are you balancing share repurchases with other investment opportunities and maybe how we should be forecasting repurchases in 2022 and 2023?
The volume pretty significantly in January just how are you balancing share repurchases with other investment opportunities and maybe how we should be forecasting repurchases in 'twenty two 'twenty three.
Well, it's always something we look at I mean, we're we've been very active in the M&A market. The last certainly last year and and more we're very active in terms of investing in our core business is to develop software and tools to make it easier for us to digitally connect with our customers. So we're making a lot of investments.
Speaker 5: Well, you know, it's always something we look at. I mean, we're, you know, we've been very active in the M&A market, you know, the last, certainly last year and more. We're very active in terms of investing in our core business just to, you know, develop software and tool to make it easier for us to digitally connect with our customers. So we're making a lot of investments. And we're fortunate in the fact that we can make those investments and still repurchase your shares.
And we're fortunate in the fact that we can make those investments and still repurchase our shares.
Speaker 5: You know we we think that our stock is undervalued, and that's why we're buying our shares I mean when you look at our multiple on my Bloomberg this morning. We were trading at 11 times earnings But we kind of ask yourself where our stock is.
We think that our stock is undervalued and that's why we're buying our shares I mean, when you look at our multiple on my Bloomberg. This morning, we were trading at 11 times earnings.
But we kind of ask yourself, where are we in the cycle at 11 times earnings that would kind of imply were at the peak of the cycle, but we're certainly not peak when it comes to refis or at the trough. When it comes to Refis were certainly certainly not peak when it comes to investment income were at the trough. When it comes to investment income. So you balance all of those and I think on a on a standalone basis or multiple.
Speaker 5: at 11 times earnings, that would kind of imply we're at the peak of the cycle, but we're certainly not peak when it comes to refis, or at the trough when it comes to refis. We're certainly not peak when it comes to investment income. We're at the trough when it comes to investment income. So you balance out those, and I think on a standalone basis, our multiples maybe should be a little bit higher. But then when you layer in some assets that we have at First American that maybe aren't completely reflected in our public market value, including
Maybe it should be a little bit higher but then when you layer in some assets that we have at first American that maybe arent completely reflected in our in our public market value, including Ken mentioned are.
Our project portfolio of the carrying value of the portfolio was $673 million at the end of the year and when you trade on a p/e basis.
Speaker 5: Our PropTech portfolio, the carrying value of the portfolio, was $673 million at the end of the year. And when you trade on a PE basis, you know, at least I would argue that that's not being fully reflected in the value of our shares. And then certainly we have some assets that we have losses at First American. You know, we're very excited about Endpoint. Endpoint has losses. Same thing for ServiceMac, same thing for our property and casualty business, but we feel like all those...
I would argue that thats not being fully reflected in the value of our our shares and then certainly we have some assets.
That we have losses Firstmerit, we're very excited about endpoint endpoint has losses same thing for service Mac same thing for our property and casualty business, but we feel like all of those have value to them that are being reflected and so for those reasons.
Speaker 5: have value to them that aren't being reflected. So for those reasons, we've been in the market these last couple of months, and we'll kind of see what happens for the rest of the year. I don't have a forecast for you, but as we mentioned earlier calls, we're going to be more likely to buy back in the future than we have in the past. So we've started to show that.
We've been in the market. These last couple of months and we'll kind of see what happens for the rest of the year I don't have a forecast for you, but as we mentioned earlier calls we're going to be more likely to buy back in the future than we have in the past and I think we've started to show that.
All of that makes sense, thanks very much.
Our next question is from John Campbell with Stephens. Please proceed with your question.
Speaker 1: Our next question is from John Campbell with Stevens. Please proceed with your question.
Hey, guys. Good morning, Dennis Congrats on the outstanding Ron Happy Youre still going to be around the chairman seat and then Ken Congrats to you as well we're looking forward to working with you.
Speaker 7: Hey guys, good morning and Dennis congrats on an outstanding run. Happy you're still going to be around at the chairman's seat and then Ken congrats to you as well. We're looking forward to working with you. Thanks.
Thank you John sure.
You guys were going to get this question so.
Title pretax margin I mean, you guys, obviously in the past I've talked to I think a 11% to 13% range obviously the past few years.
Really good mortgage macro backdrop, you guys, you know, 15% 16% margins.
You've got the refi headwinds this year, you've got what seems like a pretty steady business from purchasing commercial you guys talk to maybe flattish routes I think we certainly see that as well you've got the investment income pick up with all that said I'm just I'm curious about how to think about pre tax margins I know that it's going to probably be hard to keep it at 21 levels with the white with wages.
Pressure, but it.
It seems like you've got enough things cooking that maybe kind of keep it closed so just curious about commentary there.
Let me chime in real quick on the on the outlook and Mark can chime in as necessary. Obviously this morning, the inflation number wasn't great, which I think.
Seals the deal.
On the on the fed raising rate raising rates, but I think there is some cause for optimism at least going into the first half of this this year.
On the on the purchase side.
Speaker 4: You know, rates are staying there. They're still relatively, mortgage rates are still relatively low. You know, they're rising, but they're still low.
Rates are staying there still relatively mortgage rates are still relatively low they are rising but they are still low.
And we've got some demographic benefits millennials for example, coming into the market and of course theres been low inventory, but I think we remain hopeful and expect to see some inventory coming onto the market, which I think bodes well for our for our purchase business and then as you noted on the commercial business and we're coming off a record setting year.
Speaker 4: And we've got, you know, some demographic benefits, Millennials, for example, coming into the market. And of course, there's been, you know, low inventory, but I think we remain hopeful and expect to see some inventory coming onto the market, which I think, you know, bodes well for our purchase business.
So we'll have some momentum coming into this year and as you know as Mark mentioned the pipeline looks really good so we're.
We're optimistic on the on the commercial market again, because rates are still relatively low and as Mark also mentioned.
There's a lot of capital chasing deals.
The refinances I think we've all been talking about here today on this call is.
Speaker 4: You know, the refinance, as I think we've all been talking about here today on this call, is, you know, there's a strong correlation with rates, so, you know, we expect it to wane as rates go up, but, you know, we're in a great position to offset that with investment income, you know, particularly given, you know, given our, you know, the one really unique asset we have in the industry, and that is our bank.
<unk> correlation with rates. So we expect it to wane as rates go up but we're in a great position to offset that with investment income.
Particularly given.
Given already.
The one really unique asset we have in the industry and that is our bank. So I feel good but I guess from my perspective, I feel good about our margin going into <unk>.
Speaker 4: So, you know, I feel, I guess from my perspective, I feel good about our margin going into, as we go into 2022, but, you know, we're ever conscious of the headwinds of increasing rates. And as I suggested earlier, we will watch the cost structure very, very carefully.
We go into 2022, but we.
We're ever conscious of the the headwinds are increasing rates and as I suggested earlier, we will watch the cost structure very very carefully.
Okay. That's helpful. I appreciate that and then in Europe .
Speaker 9: Okay, that's helpful, I appreciate that. And then in your prepared remarks around Motherlode, you guys talked to the multi-brand strategy. Seems like that's a fairly big pivot for you guys. I mean, it seems like a single-brand strategy that's probably more cost-efficient, but maybe there's that growth benefit that kind of trumps that. So maybe if you could talk to that, and then why you're exploring that now, what triggered the change?
Prepared remarks around mother load you guys talked to the multi brand strategy. It seems like that's a fairly big pivot for you guys. I mean, it seems like a single franchise, that's probably a more cost efficient, but maybe there is that growth benefit the kind of trumps that so maybe if you could talk to that and then why youre exploring that now what triggered the change.
Well I think.
Yes, well I think part of it was the opportunity that presented itself and mother load has.
Speaker 4: Yeah, well, I think part of it was the opportunity that presented itself. And Motherlode has really 10 top-notch brands, and I think it would be imprudent of us to roll that into a single brand, just because they've made such great inroads with those brands.
Really 10 top notch brands and I think it would be.
Imprudent for us to roll that roll that into a single brand just because they've made such great inroads with those brands. So I guess I don't really see it as a pivot as more of a shift because as I had indicated we do have some other brands. We have Republic title, we have titled Best There are some other brands in our portfolio.
Speaker 4: So I guess I don't really see it as a pivot, as more of a shift, because as I indicated, we do have some other brands. We have Republic Title, we have TitleVet. There are some other brands in our portfolio. So I think we more view it as a pivot.
So I think we more view it as a shift and an opportunity to approach the market in a in a in.
Speaker 4: and an opportunity to approach the market in a new way.
In a new way.
Okay. Thank you guys.
Mr. Kilmer, there are no additional questions at this time that concludes this morning's call we would like to remind listeners that today's call will be available for replay on the company's website or by dialing 870 766068.
Speaker 1: Mr. Gilmour, there are no additional questions at this time. That concludes this morning call. We would like to remind listeners that today's call will be available for replay on the company's website or by dialing 877-660-6853 or 201-612-7415 and enter the conference ID 13726034.
It's three or 20161 to 7415 and enter the conference I'd 1372603 for.
The company would like to thank you for your participation. This concludes today's conference call you may now disconnect.
Speaker 1: The company would like to thank you for your participation. This concludes today's conference call. You may now disconnect.
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