Q4 2021 Stewart Information Services Corp Earnings Call

Speaker 1: to begin.

Okay.

Speaker 2: Hello, and thank you for joining the Stewards Information Services fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen only mode. Later, you have an opportunity to ask questions during the question answer session. Instructions will be given at that time. Please note this call is being recorded. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn today's program over to Nat Otis, head of investor relations. Please go ahead.

Hello, and thank you for joining the Stewart information services fourth quarter and full year 2021 earnings call. At this time all participants are in a listen only mode. Later, you'll have an opportunity to ask questions. During the question answer session and instructions will be given at that time.

Please note. This call is being recorded lastly, if you should require operator assistance. Please press star Zero. It's now my pleasure to turn today's program.

Over to Nat Otis head of Investor Relations. Please go ahead.

Thanks Sandra.

Good morning, Thank you for joining us today for Stewart's fourth quarter 2021 earnings conference call.

Speaker 3: Good morning. Thank you for joining us today for Stewart's fourth quarter 2021 earnings conference call. We will be discussing results of a release yesterday after the close. Joining me today are CEO Fred Eppinger and CFO David Heise. To listen online, please go to the Stewart.com website to access the link for this conference call.

We'll be discussing our results were released yesterday after the close joining me today are CEO , Fred Eppinger, and CFO , David Hiseq to listen online. Please go to the Stewart Dot Com website to access the link for this conference call I will remind participants that this conference call may contain forward looking statements that involve a number of risks and uncertainties because such statements are based on.

Speaker 3: I will remind participants this conference call may contain forward-looking statements that involve a number of risks and uncertainties. Because such statements are based on the expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected.

Station of future financial operating results and are not statements of fact actual results may differ materially from those projected the risks and uncertainties with forward looking statements are subject to include but are not limited to the risks and other factors detailed in our press release published yesterday evening and then the statement regarding forward looking information risk factors and other sections of the <unk>.

Speaker 3: The risks and uncertainties with forward-looking statements are subject to include but are not limited to the risks and other factors details in our press release published yesterday evening. And then the statement regarding forward-looking information, risk factors, and other sections of the company's 110-K and other filings with the SEC. Let me now turn the call over to Fred.

Company's Form 10-K , and other filings with the SEC, Let me now turn the call over to Fred.

Speaker 4: Thank you for joining us today for Stewart's fourth quarter 2021 earnings conference.

Thank you for joining us today for Stewart's fourth quarter 2021 earnings conference call.

Speaker 4: David, we'll take you through the course financial results in a minute. But before then, I would like to touch on Stuart's 2021 results and what we see in front of us for 2022 and beyond.

David will take you through the quarters financial results in a minute, but before that I would like to touch on Stewart 2021 results and what we see in front of us for 2022 and beyond.

Speaker 4: We are now two full years into what we call the journey to become the premier title services company.

We are now two full years into what we call the journey to become the Premier title services company.

Speaker 4: 20 and 21 were two of the best, as well as the most challenging years in the title industry as a whole, given tremendous changes in the market, historically low rates, and an ongoing impact and uncertainty caused by COVID. For Stewart specifically, it has been a period filled with significant change and increased focus, a focus on significant structural improvement with enhanced operating discipline and a renewed commitment to the customer experience.

2020 , one or two of the best as well as the most challenging years in the title industry as a whole given tremendous changes in the market historically low rates and an ongoing impact of uncertainty caused by COVID-19 .

Specifically it has been a period filled with significant change in increased focus and focus on significant structural improvement with enhanced operating discipline and a renewed commitment to the customer experience what.

Speaker 4: More remains to be done in our journey, but we are encouraged by our progress as we have materially improved from 2019 to 21. We have significantly improved in every aspect of our business and have demonstrated our ability to materially improve our margins while significantly growing our business.

What remains to be done in our journey, but we are encouraged by our progress as we get materially improve from 2019 in 'twenty one.

We are significantly improving every aspect of our business and have demonstrated our belief materially improve our margins while significantly growing our business.

Speaker 4: We are pleased with the results in all our lines this quarter across residential and commercial where we are building a strategy to take advantage of what looks like a very positive commercial market that lies ahead.

We are pleased with the results in all our lives this quarter across residential and commercial we are building in Australia should take advantage of what looks like a very positive commercial market that lies ahead we.

Speaker 4: We have enhanced our core business by leveraging added scale and targeted geographies, while also placing a greater focus on minutiae more effectively and efficiently.

We have enhanced our core business by leveraging added scale in targeted geographies, while also placing a greater focus on managing more effectively and efficiently.

Speaker 4: We have built scale and target services, and we continue to benefit from an influx of industry talent that sees Stewart as a destination for forward-thinking leaders offering a significant long-term opportunity.

Adult scale targeted services and we continue to benefit from an influx of industry talent that Stewart is a destination for forward thinking leaders offering a significant long term opportunity.

Speaker 4: In the area of technology, we understand that the real estate transaction will continue to evolve, becoming less paper intensive, more remote and more digital.

The area of technology, we understand that the real estate transaction will continue to evolve becoming less paper intensive more remote and more digital.

Speaker 4: As we have done with many of our recent transactions, we will continue to invest, when appropriate, in technologies and services that help facilitate this change and therefore improving the customer's ease of use and experience.

As we have done with many of our recent transactions, we will continue to invest when appropriate and technologies and services that help facilitate this change should therefore, improving the customer ease of use and experience.

While we are proud of our accomplishments to date, we recognize there's more to be done in the face of higher interest rate environment and a further evolution of the market.

Speaker 4: While we are proud of our accomplishments to date, we recognize there is more to be done in the place of higher interest rate environment and a further evolution of the market. The long term outlook for the residential real estate market remains encouraging as purchase segment trends are projected to continue to be strong and demographic realities such as first time millennial home buying add to the opportunity of an increasing favorable mixture.

But long term outlook for the residential real estate market remains encouraging as purchase segment trends are projected to continue to be strong and demographic realities, such as first time home buying after the opportunity and an increasingly favorable mix shift.

Speaker 4: That said, our industry and our company will likely need to navigate a near-term horizon of greater interest rate uncertainty as the Fed acts more aggressively to curb inflation by taking actions that may lead to a further pullback of the refinance and activity.

Our industry and our company will likely need to navigate the near term horizon of greater interest rate uncertainty as the fed acts more aggressively to curb inflation by taking actions that may lead to a further pull back with the refinancing activity.

Speaker 4: At Stewart, we have been preparing for this market transition by reconstructing a title company that is better able to sustain the ups and downs of full wheel estate cycles.

We have been preparing for this market transition like could be constructing a title company that is better able to sustain the ups and downs of fault real estate cycle are.

Speaker 4: A key part of building a resilient foundation is the work we continue to do to gain adequate local scale.

A key part of building a resilient foundation as is the work we continue to do to gain adequate local scale the priority markets as part of this process. We continue to Opportunistically add new title agencies in teams, where Stuart family, increasing talent and leadership in those market segments, along the way.

Speaker 4: As part of this process, we continue to opportunistically add new title agencies and teams for our Stewart family, increasing talent and leadership in those market segments along the way.

Historically <unk> has been less weighted to refinancing volumes and as we have grown we have looked to acquire companies and talent that aligns with our view of future mix. We can she need to reconstruct stewart to be resilient under all conditions by focusing on our business mix deeper agency relationships additional commercial opportunities.

Speaker 4: Historically, story has been less weighted to refinancing volumes and as we have grown we have looked to acquire companies and talent that align with our view of future events and the business environment in our hearts.

Speaker 4: We continue to reconstruct Stuart to be resilient under all conditions by focusing on our business mix, deeper agency relationships, additional commercial opportunities, and investing in technology and operating model improvements to deliver the enhanced customer experience.

And investing in technology and operating model improvements should deliver the enhanced customer experience.

Let me finish by thanking our associates for all their hard work and customers for their continued support.

Speaker 4: Let me finish by thanking our associates for all their hard work and customers for their continued support. We are on a journey together to make the company more successful and resilient. David will now...

We are on a journey together to make the company more successful and resilient.

David will now update everyone on our results.

Speaker 5: Thank you, Fred. Good morning. Let me also thank our associates for their amazing service and our customers for their steadfast support.

Thank you Fred and good morning, Let me also thank our associates for their amazing service that our customers for their steadfast support although we are in a seasonally slower residential period and the market has adjusted to fed commentary and rising rates. The residential purchase market remains active driven by demand commercial real estate.

Speaker 5: Although we are in a seasonally slow residential period and the market is adjusting to Fed commentary and rising rates, the residential purchase market remains active, driven by demand.

Speaker 5: Commercial real estate continues to recover, particularly in the industrial and multi-family segments.

<unk> continues to recovery recover, particularly in the industrial and multifamily segments offices increasingly active in energy is poised to benefit from continued economic recovery in environmental focus there are several watch items that could impact future business performance, including pet and garden Red policy interacts.

Speaker 5: Office is increasingly active and energy is poised to benefit from continued economic recovery and environmental focus.

Speaker 5: There are several watch items that could impact future business performance, including Fed and government policy in action, improving yet historically high mortgage delinquency and forbearance, consumer pullback, lingering virus, an uncertain jobs environment, rising inflation and slow supply chain.

Improving yet historically higher mortgage delinquency and forbearance consumer pullback lingering virus without a certain jobs environment rising inflation and support slow supply chains.

Speaker 5: Consistent with our strategy, we are focused on the areas that will have the most meaningful and durable impact on our long-term operating performance, gaining scale and attractive direct markets, improving scale and geographic focus in our agency and commercial operations, broadening our lender services offerings and throughout our business improving service and digital capabilities to provide seamless end-to-end user experience. During the quarter we added...

With our strategy, we are focused on the areas that will have the most meaningful and durable impact on our long term operating performance gaining scale in attractive direct markets improving scale and geographic focus at our agency commercial operations broadening our lender services offerings throughout our business improving service.

<unk> and digital capabilities to provide seamless end to end user experience.

During the quarter, we added great American.

Speaker 5: Greater Illinois Devon, Homeland, Las Cruces, and Rainier to key direct operations markets. Our lender services and data businesses added informative research to provide our credit data and PropStream will provide our real estate data.

Greater Illinois, Devin Homerun, Las Cruces sudden rainier to key direct operations markets, our lender services and data businesses added informative research provider credit data and props dream a provider of real estate data credit and property data to provide the business generation and <unk>.

Speaker 5: Credit and property data provide the business generation and improvement information so critical to our customers in a transitioning market. We are excited about these businesses, their possibilities and their teams and welcome them to Stewart.

<unk> information so critical to our customers in a transitioning market. We are excited about these businesses the possibilities and their teams and welcome them to Stuart for.

Speaker 5: For the fourth quarter of 2021, Stewart yesterday reported net income of $85.5 million and diluted earnings per share of $3.12 of operating revenues of $951 million.

For the fourth quarter 2021 store yesterday, we reported net income of $85 5 million and diluted earnings per share of $3 12 says operating revenues of 951 million on an adjusted basis fourth quarter. Net income was 84 5 million an improvement of 24 million or <unk>.

Speaker 5: On an adjusted basis, fourth quarter net income was $80.5 million, an improvement of $24 million, or 43%, compared to last year's quarter. The adjustments to our quarter net income were primarily due to net unrealized gains on equity securities and debts.

43% compared to last year's quarter, the adjustments to our quarter and net income were primarily due to net unrealized gains on equity securities investments.

Speaker 5: Compared to last year's quarter, total title revenues increased $178 million or 26% due to strong results from our residential agency and commercial operations. The title segment generated pre-tax income of $118 million, which is $23 million or 25% higher as a result of increased revenues and continued management costs.

Compared to last year's quarter total title revenues increased 178 million or 26% due to strong results from our residential agency and commercial operations. The title segment generated pretax income of $118 million, which is 23 million or 20.

5% higher as.

As a result of the increased revenues and continued management focus pre.

Speaker 5: Pre-tax margin for the segment was comparable to last year.

Pretax margin for this segment was comparable to last year with respect to our direct title business domestic residential revenues increased 43 million or 18% due to higher purchase transactions and improving scale residential fee per file for the fourth quarter was approximately 27.

Speaker 5: With respect to our direct title business, domestic residential revenues increased 43 million or 18% due to higher purchase transactions and improving scale. Residential fee for five for the fourth quarter was approximately $2,700, which was 38% better than last year's quarter due to higher purchase.

Hundred, which was 38% better than last year's quarter due to higher purchase mix domestic commercial revenues improved $35 million driven by increased volume and have average fee per file of 19400 total international revenues improved 4 million.

Speaker 5: Domestic commercial revenues improved $35 million, driven by increased volume and average fee profile of $19,400.

Speaker 5: Total international revenues improved 4 million or 10% compared to last year's quarter due to increased transaction volumes in our Canadian operation. Total open and closed orders in the fourth quarter decreased 22% and 14% respectively, primarily due to low refinancing transactions as expected with the market trend.

Or 10% compared to last year's quarter due to increased transaction volumes at our Canadian operation.

Total opened and closed orders in the fourth quarter decreased 22% and 14%, respectively, primarily due to lower refinancing transaction as expected with the market trend.

Speaker 5: However, commercial and purchase closed orders increased 7% and 3% respectively compared to last year's quarter.

Our commercial and purchase closed orders increased 7% and 3% respectively compared to last year's quarter.

Speaker 5: Similar to our direct title operations, our agency operations generated a solid quarter with revenues of $445 million or 27% higher than last year. The average agency remittance rate during the quarter was 18% roughly in line with last year's quarter.

Similar to our direct title operations, our agency operations generated a solid quarter with revenues of $445 million or 27% higher than last year. The average agency remittance rate during the quarter was 18% roughly in line with last year's quarter.

So title losses total title loss expense decreased $13 million or 28% due to favorable claims experience as a percentage of title revenues. The title loss expense in the fourth quarter was 4% compared to 7% in last year's quarter, while for the year was 4%.

Speaker 5: On title losses, total title loss expense decreased 13 million or 28% due to favorable claims experience. As a percentage of title revenues, the title loss expense in the fourth quarter was 4% compared to 7% in last year's quarter, while for the year was 4% in 2021 compared to 5% in 2020.

In 2020 , one compared to 5% in 2020.

Speaker 5: In regard to operating expenses, which consists of employee and other operating costs, total operating expenses increased primarily due to higher employee count, increased variable costs tied to higher revenues, state failed tax assessments, and office consolidation costs.

In regard to operating expenses, which consist of employee and other operating costs total operating expenses increased primarily due to higher employee count increased variable cost tied to higher revenues state sales tax assessments in office consolidation costs employee costs as a percentage of operating.

Speaker 5: Employee costs as a percentage of operating revenues improved to 23% from 25 last year, while other operating expenses increased to 22% from 18% last year, primarily due to the increased size of our ancillary and other real estate services operations.

<unk> revenues improved to 23% or 25 last year, while other operating expenses increased to 22% from 18% last year, primarily due to the increased size of our ancillary and other real estate services operations.

Our other banners, we completed our $450 million senior notes offering and used the proceeds to repay outstanding credit facility borrowings and through acquisitions to maintain liquidity flexibility. We obtained a 200 million dollar unsecured revolving line of credit which is fully in.

Speaker 5: On other matters, we completed our 450 million senior notes offering and used the proceeds to repay outstanding credit facility borrowings and for acquisitions. To maintain liquidity flexibility, we obtained a 200 million dollar unsecured revolving line of credit, which is fully available for future drawings.

Available for future drawings, our financial position remains on a solid foundation to support our customers employees and the real estate market, our total cash and investments other than I'll cheat or approximately 620 million over regulatory requirements and we have the new available line of credit facility.

Speaker 5: Our financial position remains on a solid foundation to support our customers, employees, and the real estate market. Our total cash and investments on the Dow sheet are approximately $620 million over regulatory requirements. And we have the new available wider credit facility. Stockholders' equity attributable to Stewart increased to $1.3 billion. Our book value per share was approximately $48, an increase of 27% from last year.

Stockholders' equity attributable to Stewart increased to $1 3 billion, our book value per share was approximately $48 an increase of 27% from last year, well actually net cash provided by operations for 2020 , one was 319 billion compared to net cash.

Speaker 5: Lastly, net cash provided by operations for 2021 was $390 million compared to net cash provided by operations of $276 million last year.

Provided by operations of 276 million last year, we are grateful for and inspired by our customers and associates and advocates for everyone's improves safety and prosperity carpeting, our support our real estate markets and now I'll turn it back to the operator for questions.

Speaker 5: We are grateful for and inspired by our customers and associates, advocates for everyone's improved safety and prosperity, company and our supported real estate markets, and now I'll turn it back to the operator for questions.

Speaker 2: At this time, if you would like to ask a question, please press star 1 on your touch tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and 1 to ask a question. And our first question is coming from both George with KMBW.

At this time, if you'd like to ask a question. Please press star one on your Touchtone phone E Mail, maybe self mccune at any time by pressing the pound key.

Again that is star and wanted to ask a question and our first question is coming from Bose, George with <unk> B W.

Good morning, Bob.

Yeah.

Yeah.

<unk> to the earnings this quarter after the deal closed and just how we should think about accretion next year.

Speaker 6: To the earnings this quarter after the deal closed and just how we should think about it next year. We missed the beginning both. Could you do that again? I just missed. Yeah, sure. Yeah, just on the prop stream acquisition. I just wanted to how we should think about accretion from that.

We missed the beginning both could you do that again.

Yeah sure Yeah, just on the stream acquisition.

How we should think about accretion from that.

Yeah.

Speaker 5: So do you want to repeat what we used? Yeah, hey folks, it's David here. So on PropStream, we've been thinking about that as about a $40 million run rate revenue business at 40% pre-tax margins.

So do you want to repeat what we yeah, Hey, Bose its David here, so on prop stream.

No we've been thinking about that it's about a $40 million run rate revenue business at 40% pretax margins.

Okay perfect. That's helpful. Thanks, and then actually switching over to commercial.

Speaker 6: Okay, perfect. That's helpful. Thanks. And then actually switching over to commercial, you know, obviously there's a big jump in the commercial premium this quarter, you know, anything unusual to call out there or just reflecting a very strong commercial market.

He was a big jump into commercial premium this quarter.

Thing unusual to call out there or just reflecting a very strong commercial market.

[laughter] gigawatt.

Speaker 5: Yeah, I gave a little bit of that in my remarks. I think we've seen both on the product side, multi-family industrial office coming back a little, and then also a number of the geographies, particularly in the Northeast.

Okay.

Yeah, I gave a little bit of that in my in my remarks, but it's I mean, I think we've seen both on the product side.

Multifamily industrial office coming back a little and then you'd also number of other geographies, particularly in the northeast Boston, New York and it really started to pick up so yeah. They.

Speaker 5: Boston, New York, and it really started to pick up. So Yeah, they just sort of a cross-the-board product and geographies. Yeah, we're much better We're pleased we have a bullish outlook of commercial like I think others do as well It's always lumpy for us, you know, if you have a few big ones, but we're very confident. This is a

Could you just sort of across the board product and geographies.

So we're pleased we have a bullish outlook of commercial Mike I think others do as well its always lumpy for us if you have a few big ones, but we're very confident this is.

Speaker 4: a strong commercial market right now. And you saw, we also have been making some investments internationally. We've had some opportunity I think there too, as we look forward.

A strong commercial market right now and you saw that we also have been making some investments internationally and we've got some.

The opportunity I think there too because we look forward. So it's good.

Okay, great. Thanks, a lot.

Our next question comes from John Campbell Stephens incorporated.

Speaker 2: Our next question comes from John Campbell with Stevens Incorporated.

Speaker 5: Hey, John . Good morning. Hey, guys. Good morning. Congrats on a great quarter and a great year.

Hey, John Good morning, Hey, guys. Good morning, Congrats on a great quarter and a great year.

Yeah great.

Speaker 7: Great. Yeah, I wanted to see if we could maybe dive in the M&A side of things for just a second. So David, I guess first, if you could maybe talk to the M&A capital deployed last year, and roughly how much of that was tied to kind of ancillary services versus the platform build out, or excuse me, against the title business. And then Fred, maybe if you could talk to just the broader strategy around the platform. And as you kind of step back from what was a obviously a busy year, how much of the heavy lifting you feel like there's left on that kind of platform build out?

I wanted to see if we could maybe dive in the M&A side of things for just a second David I guess first if you could maybe talk to the M&A capital deployed last year and roughly how much of that was tied to kind of ancillary services versus the platform build out.

Our excuse me against the title business and then Fred maybe if you could talk to just the broader strategy around the platform and as you kind of step back from what was obviously a busy year how much of the heavy lifting if you feel like Theres last one that kind of platform build out.

Great go ahead.

Yeah sure John So yeah.

Speaker 5: Yeah, sure, John . So, you know, a lot of stuff in the fourth quarter and then, you know, throughout the year, some other activity. But, you know, it's probably a few hundred million in services, right, between PropStream and IOR as we disclosed. And then, you know, I think we did about 600 or 600 plus total, so the rest would have gone to the, you know, sort of the core platform, you know, the title agency type activity.

Yeah, a lot of stuff in the fourth quarter and then throughout the year some other activity, but yes.

There's probably a few hundred million in services right between props Dream and I are as we as we disclosed and then yeah. I think we did about 600 or 600, plus total so the rest would have gone to the you know.

Sort of a core platform.

The title agency type activity.

Speaker 4: Yeah, I think as we, as you look at our business, you know, it's been a pretty interesting couple of years. You know, we went from about a billion eight company to three, three, right? So we grew over a billion and a half dollars and obviously the market was good, but we've.

Yeah, I think as we as you look at our business you know it's been a.

Pretty interesting couple of years, you know we went from about 1 billion eight company two or three three Reits, we grew over 1 billion and a half dollars and obviously the market was good but we've.

Kind of repositioned ourselves and as we've talked you know we we looked at all the Msas in I would say there is still a 15 or 20, msas I'd like to see a material change in our share position, but it's a lot less volatile than it was and you saw we took some additional actions this quarter awesome.

Speaker 4: kind of reposition ourselves and as we've talked, you know, we

Speaker 4: We looked at all the MSAs and I would say there's still 15 or 20 MSAs I'd like to see a material change in our share position, but it's a lot less vulnerable than it was. And you saw we took some additional actions this quarter on some.

Speaker 4: consolidations, leasing, elimination, closing some offices, there's not a lot of that stuff left to do, but I think there's opportunity in a material way in some of our MSAs. And then the other thing, a point I would make is that if you look at our 90 markets essentially, our leadership is so much better and well-positioned.

It's all patients leasing or elimination closing some offices is not a lot of that stuff left to do but I think theres opportunity in a material way in some of our Msas and then the other thing I would point I would make is that if you look at our 90 markets essentially our leadership is so much better and well.

Positioned.

Speaker 4: that there's an ability to do tuck-ins and microgeographies and stuff if it makes sense. So I think there's opportunities that continue to be in front of us. I think there's a, if I use the word platform a little broader, we still also,

The ability to do tuck ins and micro geographies and stuff. If it makes sense. So I think there's opportunities that continue to be in front of us I think if I use the word plateau a little abroad. We still also you know when we started the journey I said that three years of work here to really get some catch up but we still have some work.

Speaker 4: When we started the journey, I said it's three years of work here to really get some catch up, and we still have some work.

Speaker 4: On our data management, we still have some work on some of the technology investments. We want to make this system work on our operating model, as far as workflows goes, that we're making good progress on, but we have still improvement in front of us that we've got to focus on. So I like the combination for us, that there's opportunities to grow as well as continue to improve. And it's going to be in ... Our view of the market is ...

Our data management, we still have some work on some of the technology investments, we want to make the system work on our operating model as far as workflows goes that we're making good progress on but you know.

We're still we have still improvement in front of us that we got to focus on so I liked the combination for us that there's opportunities to grow as well as continued to improve and and you know it's gonna be in our view of the market is.

Speaker 4: You know, while it's now seasonal again, and it's not as good as last year, it's going to be a very good market. I mean, our outlook for the next couple of years is that we think these are going to be two of the better years.

While it is now seasonal again.

As good as last year, it's gonna be a very good market I mean, our outlook for the next couple of years is that when you think these are going to be two of the better years.

Speaker 4: in history, in the industry, if the purchase holds up. And there's some uncertainty coming into the first quarter, but we feel pretty good about where we are in total. So I think we have more work to be done, but I feel we're in a good place as we continue to move forward.

And history in the industry if the purchase holds up.

And uncertainty coming into the first quarter, but we feel pretty good about where we are on top of it. So I think we have more work to be done.

But I feel in a good place.

As we continue to move forward.

Speaker 7: That makes sense. That's helpful. You know, I saw the office consolidation cost that you guys called out in the press release. It doesn't look like you backed that out of your adjusted numbers. Is there a way to frame up? Was that a meaningful cost?

That makes sense that's helpful.

I saw the the office consolidation cost that you guys called out in the press release. It doesn't look like you back that out of your adjusted numbers is there a way to frame up or was that a meaningful cost or.

Any kind of color there.

Speaker 5: Yeah, it was in the $5 million range. We always look, John , to try to improve the business when we can, and so that's an example.

Yes, it was in the 5 million range.

Well John to try to improve the business win when we can and so.

That's an example, just to get it ready for the longer term in the cycles. Yeah. As you know when we started I described it as an inch deep and a mild why and we have a lot of stocking a lot of places in our whole view is if we can't see clarity to winning at a local market level, we should really keep investing there.

Speaker 4: just get it ready for the longer term of the cycles. Yeah, and you know when we started, I described it as an inch deep and a mile wide, and we had a lot of stuff in a lot of places, and our whole view is, if we can't see clarity to winning at a local market level, we shouldn't really.

And so again most of that is behind us but.

Speaker 4: And so, again, most of that is behind us, but we still have some work to do in a number of markets to gain, you know, a level of share that I, you know, that we feel comfortable we can deliver a consistent service.

We still have some work to do on a number of markets to gain us.

Our level of share that we feel comfortable we can deliver consistent service and great margins through the cycle. So.

Speaker 4: and great margins from the side, so, you know, a little bit of work.

A little bit of work to do.

Speaker 7: Makes sense. Last one, just if I can squeeze in one more. On the reserves...

Last last one just if I could squeeze in one more on the on the reserves.

Yes.

It looks like it came down to maybe three 9% or so this quarter.

Speaker 7: It looks like it came down to maybe 3.9% or so this quarter. Obviously, it was down last quarter as well. So I don't know if you're seeing better trends in the back half. You're feeling better about that. But just give us an idea or a sense of how we should be thinking about that for 2020.

Obviously was down last quarter as well.

So I don't know if youre seeing better trends in the back half, we're feeling better about that but just give us an idea or a sense of how we should be thinking about that for 2022.

Speaker 4: Yeah, we've got it at mid-fours. I would leave that guidance the same. Maybe it'll be a couple ticks higher than that or a couple ticks below that, but that mid-four number, I think, is a solid number. If you remember what happened.

Yeah, we guided mid fours I would leave that guidance.

Same maybe it'll be a couple of ticks higher than that or a couple of ticks below that but that mid four number I think is a solid number if you remember what happened during some of the turmoil we were very thoughtful about reserves. So if you look at where we are.

Speaker 4: During some of the turmoil, we were very thoughtful about reserves, so if you look at where we are on our range, we're kind of the most conservative.

Range, where we're kind of.

Most conservative.

Speaker 4: Point in our range. So if things happen, well, it kind of gets thrown into the earnings, you know Because we have been reserving quite strongly, which I think is appropriate given the uncertainty But the mid-fours is the right. I mean, I don't again whether it's two tenths above that or two tenths below that But it's that's the right number. So there's nothing material that we see that would make us take that down Okay, that's helpful. Thank you guys

<unk> in a range so if things happened well at target throw into the earnings because we have been reserving quite strongly which I think is appropriate given the uncertainty.

But the mid force the right I mean.

Whether it's two tenths above that or two tenths below that but that's the right number. So there is nothing material that we see that would make us take that down.

Okay. That's helpful. Thank you guys.

Our next question comes from Geoffrey Dunn, Dowling and partners.

Hi, good morning.

Speaker 7: All right. Good morning. Doing well, thanks. I got a few questions here. As you noted, I mean, the outlook is strong for 22, 23, but you are facing seasonality for the first time in a year or two with this Q1, and you also got some great headwinds. Can you give us an idea of how January trended for open and closed, and just remind how you think about a Q1 in a typical year since it seems like we're maybe back to the normal pattern?

Thanks, I've got a few questions here.

As you noted I mean, the outlook is strong for 'twenty two 'twenty three but you are facing.

Seasonality for the first time in a year or two with this Q1 and you also got some rate headwinds.

Can you give us an idea of how January trended for open and closed in and just remind how you think about a Q1 in a typical year since it seems like we're maybe back to the normal pattern.

Okay.

Speaker 5: I think we saw, you know, continued decline a little bit in January , you know, from where we were in December , and then still a little bit below January of last year.

Yeah, Hey, Jeff It's David here.

Yeah, I mean, I think we saw.

<unk> continued to decline a little bit in January .

You know from where we were in and in December and then it's good.

A little bit below January of last year, I think but you know what's really going on in May we've seen what since the December fed meeting.

Speaker 5: you know, what's really going on. I mean, we've seen, what, since the December Fed meeting, you know, through the January Fed meeting, you know, just a tremendous increase in the 10-year and the mortgage rate itself.

Through the January fat Fed meeting just a tremendous increase in the 10 year and in the mortgage rate itself.

Speaker 5: And so, you know, a month of sort of negative activity there, and we've seen that a little bit on the order. So, but purchase continues. Most of that's in refinance. Purchase continues to be strong, probably at similar levels to last year, if not a little

And so you know a months of a sort of negative activity, there and we've seen that a little bit on the orders so.

But purchase considering the most of that has been refinanced purchase continues to be strong probably bill yet.

Similar levels to last year, if not a little off.

Speaker 4: But, you know, that's generally what's going on, but refinances are getting hit pretty hard. And you can see, well, you can, in the data that's in the release, you know, you see our December open orders, you can see the drop, right? And, and what's interesting is last year there was no seasonality. It's one of the unique things of last year was.

But that's generally what's going on but refinances are getting hit pretty hard.

And the data that's in the release you see our December Ultimate orders, you can see the drop off right and and what's interesting is last year. There was no seasonality, it's rather unique things of last year.

Speaker 4: We didn't see any, and to your point, I think it is back to normal.

We didn't see any and to your point I think it is back to normal.

Speaker 4: And so it'll be a little choppy probably in the first quarter back where, you know, you know, returning to what the normal cycle is. I would also say that.

And so it'll be a little choppy tab.

Probably in the first quarter back.

Now returning to the normal cycle is I would also say that.

Speaker 4: Early January had a bunch of bad weather and we've also had what was interesting last year is the weather was great across the country. So you didn't have any hiccups. I think it's going to be fine, but it's going to be just we're going back to more seasonal outlook. And that's why I look at the whole year and I feel really good. As I said, you know, I think it's going to be a fine year, but it's going to be less than last year.

Early January had a bunch of bad weather wheelhouse of what was interesting last year as the weather was great across the country. So you didn't have any pick up so I think it's gonna be fine, but it's going to be just going back to a more seasonal outlook and that's why I look at the whole year and I feel really good as I said.

Ed.

It's going to be a five year, but it's getting less than last year.

Speaker 7: Right. And on that outlook, I mean, if you erase the last two years, the forecast from the NBA for 22-23 seemed almost ideal for title, given a strong purchase market. So is success in 22-23, based on the existing forecast, a double-digit margin for title? Yeah. I mean, again, I've said this a couple of times. I

Right.

And on that outlook I mean, if you raise the last two years, our forecast from the M. B a for 'twenty two 'twenty three seem almost ideal for title given a strong purchase market. So.

Success in 'twenty, two 'twenty three based on the existing forecast a double digit margin.

Yeah, I mean again I've said this a couple of times.

Speaker 4: I think what happens in our business, it was so good last year that your same store, basically you're at 100% capacity and then you have refi on top of it, you use overtime, but your marginal margin, if you will, in this industry is quite high when you have what you've had in the last year.

I think what happens in our business. It was so good last year that your same store basically you're at 100% capacity and then you have refi on top of it you use overtime, but your marginal mark your marginal margin. If you will in this industry is quite high and you have what you that last year and a lot of people did hire for that excess volume makers.

Speaker 4: And a lot of people didn't hire for that excess volume, they just ran over time.

Ramp overtime, that's getting out of a system. So there's a couple of points of margin for everybody.

Speaker 4: That's getting out of the system. So there's a couple of points of margin for everybody.

Speaker 4: in the industry as that comes down. And so, you know, again, but we believe we are better, right? We think we've managed, you know, we've positioned ourselves so.

Industry.

As that comes down and so.

But we believe we are a better right. If you take we manage.

Positioning ourselves. So we believe we can maintain double digit margins is what we're shooting for.

Speaker 4: We believe we can, you know, maintain the double-digit margin as we're shooting.

Speaker 7: All right, and just two more here. In terms of the MS and corporate segment, can you...

And just two more here in terms of the MFS and corporate segment can you.

Give us an idea of a bit of the run rates there it looks like corporate might be in like an $8 million to $9 million run rate when you factor in a full quarter of that expense.

Speaker 7: Give us an idea of a bit of the run rates there. It looks like corporate might be in like an eight to nine million run rate when you factor in a full quarter of debt expense. And then you got your informative research around 15 percent margin, PropStream at 40.

And then you got your informative research around 15% margin prop stream at 40.

Hum.

Speaker 7: If I assume that the kind of core MS businesses is a negligible margin there, is this a double digit margin on the mortgage services operations once PropStream is integrated?

If I assume that the kind of core EMS businesses is a negligible margin. There you know is this a double digit.

Margin on the mortgage services operations once prop streams integrated.

Speaker 4: Yeah, so our goal in that area is low double digits, right? So, and I think we're right on track to do what we need to do to do that. And it's a combination of a couple of things. One is to your point, there's a mix thing going on there where we didn't have kind of what I would say data type assets and services. And so that mix is enhancing it a little bit. But we're also, I mentioned last call and a couple of other times.

Yes, so our goal in that area is low double digits right so and.

And I think we're right on track to do what we need to do to do that and it's a combination of a couple of things. One is to your point, there's a mix thing going on there where we didn't have kind of what I would say data type assets and services.

And so that mix is enhancing a little bit, but we're also I've mentioned last call or a couple of other times.

Speaker 4: The assembly of all the assets, particularly around appraisal, there was some real important platform work we need to do to get that to where our target kind of returns and to, you know, I didn't want to minimize some customer disruption, so we kicked that work into this year. And so it's going to carry forward into this year, but it's all coming together nicely. And so I feel very confident that that business

The assembly of all of the assets.

Particularly around appraisal there were some real important platform work, we need to do to get that to where we are target kind of returns and.

To everyone I wanted to minimizing customer disruption. So we kicked that work into this year and so it's going to carry forward into this year, but it's all coming together nicely and so I feel very confident that that business is going to be able to be by whatever.

Speaker 4: is going to be able to be by, you know, whatever, bid to the year low double digits and sustain that.

For the year.

Double digits and sustain that so I think we've got a nice business there it could establish and we're right on track, where we want to be.

Speaker 4: I think we've got a nice business there and it's established and we're right on track to where we want.

And then just two number questions what was holding company cash at year end and also.

Speaker 7: Okay, and then just two number questions. What was holding company cash at year end? And also, I think it was 5.6 million of purchase price amortization in Q4. What's the full Q1 run rate for PropStream, including PropStream?

I think it was $5 6 million of purchase price amortization in Q4, what's the full Q.

Q1 run rate for prop stream.

Including powertrain.

Yeah.

Yeah on the amortization, Jeff, we're still going through all the purchase accounting and stuff.

Speaker 5: Yeah, on the amortization, Jeff, you know, we're still going through all the purchase accounting and stuff, so I think, you know, that's probably in the area, but it could go up a little bit with once we finish everything. And in terms of whole code cash,

I think you know.

That's probably in the area, but it could go up a little bit with once we finish everything.

And in terms of Holdco cash.

Yeah, I think we are probably in the $50 million to $70 million range.

Speaker 5: Yeah, I think we were probably in the $50 million to $70 million range.

Alright, thank you.

Thanks.

Our next question comes from Ryan Gilbert and B P. I G.

Speaker 2: Our next question comes from Ryan Gilbert and BTIG. Morning.

Morning.

Hi, Good morning, guys. Thanks for taking my questions.

Speaker 8: Hi, good morning guys. Thanks for taking my questions first. One is on competition in the title business. I'm just wondering if you had any thoughts around competitive dynamics in the 4th quarter and then what your expectations are for 2022.

First one is on competition in the title business.

I'm wondering if you had any thoughts around competitive dynamics.

In the fourth quarter and then what your expectations are for 2022.

Speaker 4: I don't think there's much of a change. What's interesting, I think, is going to happen, there is a number of competitors that are very skewed towards refi, regional, etc. And so there's some...

Yeah, I don't think that much of a change what's interesting I think when it happened there was a number of competitors that are very skewed towards refi.

Regional et cetera.

And so there's some.

Action, starting to take that you're going to create opportunities for us.

Speaker 4: actions starting to take that are going to create opportunities for us, you know, whether it's staffing or resource allocation, stuff like that. So we're getting back to what I would consider a more normal market, and I think the strong players will have some advantage during this time.

Whether it's staffing or resource allocation and stuff like that so we're getting back to what I would consider a more normal market and I think the strong players will pass an advantage during this time.

Speaker 4: And so, again, I'm looking forward to actually, you know, there's challenges with this transition, but in my view, it's a more normal market where a local market share and kind of your position on the purchase side is going to drive your success.

And so again I'm looking forward to actually you know these challenges with this transition but.

In my view, it's a more normal market, where local market share and kind of your position on the purchase side is going to drive your success and.

Speaker 4: And so I feel pretty good about what's transpiring.

So I feel pretty good about what's.

What's transpiring there.

Speaker 4: But again, it's the commercial, you've already mentioned, I think the commercial is back, you know, from where it was, and so that's a really good market, again, leading the larger players with capital and underwriting skill have a huge advantage with that in that world.

But again.

The commercial we've already mentioned I think the commercial is back.

From where it was and so that's a really good market again, leading that FIFA larger players with capital and underwriting skill have a huge advantage with that in that world.

Speaker 4: So, again, there's some interesting things, what I would say, for getting back to a more normal mixed market, but still very attractive, and so it creates some opportunity, I think, for everybody that's got some size and scale.

So again, there's some interesting things what I would tell you is we're getting back to a more normal mix block it but still very attractive and so it.

Create some opportunity I think for everybody that's got some size and scale.

So.

Good.

Okay got it that's helpful.

Speaker 8: Okay, got it. That's helpful. Second question on refinance volume, you know, down 30 in the quarter and it looked like open orders were maybe closer to down 40. You know, that's, that's

Second question on refinance volume.

Down 30 in the quarter and it looked like the open orders were maybe closer to down 40.

That's that.

I think better than on a year over year decline rate than what certainly what I was expecting and I think the market is maybe closer to down 60. So.

Speaker 8: I think, better on a year-over-year decline rate than...

Speaker 8: what, certainly what I was expecting, and I think the market is maybe closer to down 60. So, do you feel like you picked up share in refi in the quarter? Or are there any, you know, specific dynamics around refinance that you wanted to call out that benefited Stewart relative to the market overall? Yeah, I don't, that's a great question. What's interesting, we have less refi than anybody in the top six or seven competitors.

Do you feel like you picked up share in refi in the quarter or are there any specific dynamics around refinance that you wanted to call out that benefited Stewart relative to the market overall, yeah I don't have a great question.

What's interesting we have less refis as anybody in the top six or seven competitors, we didn't focus on a centralized offering historically, we don't have a lot of the national agents that drive refi, we have some great relationships with great people, but.

Speaker 4: We didn't focus on a centralized offering historically. We don't have a lot of the national agents that drive refi. We have some great relationships with great people, but if you look at the national agents, we're a weak player historically because of some ease of use questions that occurred a couple years ago. But, so we, our mix of refi is more distributed than our competitors. What I mean by that, it is more the direct offices.

If you look at the National agents were weak player.

Historically because of some ease of use questions has occurred a couple years ago, but.

So we are a mix of refi is more distributed than our competitors, what I mean by that is <unk>.

More of the direct offices.

Speaker 4: And so it's a piece of our business versus with these huge national agents that are dedicated to it or a centralized title. We don't have a big centralized title office.

And so it's a piece of our business versus with these huge national agents that are dedicated to it or a centralized title. We don't have a big centralized title operation and so on.

Speaker 4: And so I think we have, there might be a lag here for some reason because of that. I'm not sure we're immune, if you will, to the Trans-Lat Re-Pi, but it is interesting and it is a different profile. And because it's less to us, it's a less meaningful change to our revenue stream.

I think we haven't there might be a lag here for some reason because of that I'm not sure where you if you will.

Refi.

But it is interesting and it is a different profile and because of the last to us.

It's a less meaningful change to our revenue stream, but it is an interesting observation because I think you're right I don't I haven't seen all the data reported but we would.

Speaker 4: But it is an interesting observation, because I think you're right, I haven't seen all the data reported, but we would...

Speaker 4: Anticipate that the market's down in the 50s, and that's what we're planning for, if you will, 50s.

We anticipate that the market is down in the fifties.

That's what we're planning for if you will <unk>.

Speaker 5: And Craig, we're not as big out on the West Coast or in California, I mean, the other guys are a lot bigger in California and that's a big refi market. That's very true.

So in fact, we're not we're not as figure out on the west coast or California.

The other guys are a lot bigger in California, and that's a big refi market, that's very true very true.

Speaker 8: Okay, got it. That's really helpful. Last one for me, just a point of clarification. I think you mentioned in response to one of the other questions there was some uncertainty in 1Q22. Is that just a function of the increase in mortgage rates that we've seen year to date or any other, you know, areas of uncertainty?

Okay got it that's really helpful.

Last one for me just a point of clarification I think you mentioned in response to one of the other questions. There was some uncertainty in amongst 22 is that just a function of the increase in mortgage rates that we've seen year to date or any other.

Areas of uncertainty.

I think that's the question right.

Speaker 4: I think that's the question, right? I mean, everybody has anticipated all you guys as you thought through your models. I mean, everybody's been talking about we all use, we all look at the same forecast.

Everybody has anticipated all you guys as you thought through your models I mean everybody's been talking about we all use that we all look at the same forecasts, we're very comfortable that there's going to be a pretty good year, but if something happens beyond that because of the.

Speaker 4: We're very comfortable that it's going to be a pretty good year, but if something happens beyond that because of the

Speaker 4: Inflation is obviously that would that would change a little bit. So that's why there's some uncertainty in it But the rest of it to me is kind of what we see is kind of on track to where our views are so

Inflation, you've obviously that that would change a little bit. So that's why it has some uncertainty in it.

But the rest of it to me is kind of what we see is kind of on track to what our views are.

So.

Speaker 4: Again, we feel that this could be a very good year for us and for the industry, those particularly that are purchase focused.

Again, we feel like there should be a very good year for us and for the industry those particularly that are purchased.

Okay, great. Thanks very much.

Thanks.

Speaker 2: That does conclude the question and answer session. I'll turn the program back over to Fred for closing remarks.

That does conclude the question answer session I'll turn the program back over to Brad for closing remarks.

Again, thank everybody for joining us.

Speaker 4: Again, I want to thank everybody for joining us on our Stuart fourth quarter call. Thank you so much for your interest.

Our fourth quarter call. Thank you so much for your interest.

Speaker 2: This does conclude today's program. Thank you for your participation. You may disconnect at any time.

This does conclude today's program. Thank you for your participation you may disconnect at any time.

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