Q4 2023 First American Financial Corp Earnings Call
Operator: Greetings and welcome to the First American Financial Corporation fourth quarter and full year 2023 earnings conference. At this time, all participants are in a listen-only mode.
Greetings and welcome to the first American Financial Corporation fourth quarter, and full year 2023 earnings Conference call.
Operator: At this time all participants are in a listen only mode.
Operator: 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 keypad. 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 877-660-6853 or 201-612-7415 and entering the conference ID 13743995. We will now turn the call over to Craig Barberio, Vice President and Investor Relations, to make an introduction. Good morning, everyone, and welcome to First American's fourth quarter and year-end earnings conference call for the year 2023. Joining us today on the call will be our Chief Executive Officer, Ken DiGiorgio, and Mark Seaton, Executive Vice President and Chief Financial Officer.
Operator: A brief question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: A copy of today's press release is available on first American's website at Www Dot first a M dot com.
Operator: Forward Slash investor.
Operator: Okay.
Operator: 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 8776606853.
Operator: Or 20161 to 7415 and enter the conference I D.
Operator: 13743 995.
Operator: We will now turn the call over to Craig Barberio, Vice President Investor Relations to make an introductory statement.
Operator: Yeah.
Craig J. Barberio: Good morning, everyone and welcome to first American's fourth quarter and year end earnings conference call for the year 2023, joining.
Craig J. Barberio: Joining us today on the call will be our Chief Executive Officer, Ken to Georgia, and Mark Seaton Executive Vice President and Chief Financial Officer.
Operator: Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current facts. 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 and events that occur after the date on which they are made. Forward-looking statements are, risks and uncertainties exist that may cause results to differ materially from those set forth in these four.
Operator: Some of the statements made today may contain forward looking statements that do not relate strictly to historical or current fact.
Operator: 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 and events that occur after the date.
Operator: Forward looking statements Army risk.
Operator: Risks and uncertainties exist that may cause results to differ materially from those set forth. In these forward looking statements for more information on these risks and uncertainties. Please refer to yesterday's earnings release and the risk factors discussed in our Form 10-K, and subsequent SEC filings.
Craig J. Barberio: For more information on these risks and uncertainties, please refer to yesterday's earnings release and the risk factors discussed in the 10K and subsequent SEC files. Our presentation today also 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-gap financial measures, including presentation width and reconciliation to the most directly comparable gap financial measures, please refer to yesterday's Earnings, which is available on our website at www.firstam.com. I would now like to turn the call over to Ken DiGiorgio. Thank you, Craig.
Ken DiGiorgio: Our presentation. Today also 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.
Craig J. Barberio: Financials. Please refer to yesterday's earnings release, which is available on our website at www.
Ken DiGiorgio: Www Dot first a M dot com.
Ken DiGiorgio: I would now like to turn the call over to Ken.
Ken DiGiorgio: Thank you Craig we were performing well in a challenging market ahead of the cyber security incident that occurred in late December.
Ken DiGiorgio: We were performing well in a challenging market ahead of the cybersecurity incident that occurred in late December. As previously disclosed, we elected to take systems offline while we assessed and remediated the situation. The incident materially impacted the company's operations and, consequently, our fourth quarter financial results. However, our title orders and related product demand appear to have returned to normal levels, however, and we do not expect any significant ongoing impact from the industry. Looking to 2024, we expect challenging market conditions to persist. Housing affordability and lack of inventory will remain headwinds for our purchase business. Refinance activity will also remain subdued, given that most existing mortgages carry interest rates under 5%.
Ken DiGiorgio: As previously disclosed we elected to take systems offline, while we assessed and remediated the situation.
Ken DiGiorgio: The incident materially impacted the company's operations and consequently, our fourth quarter financial results.
Ken DiGiorgio: Our title orders and related product demand appear to have returned to normal levels. However, we do not expect any significant ongoing impact from the incident.
Ken DiGiorgio: Looking to 2024, we expect challenging market conditions to persist housing affordability and lack of inventory will remain headwinds for our purchase business.
Ken DiGiorgio: Refinance activity will also remain subdued given that most existing mortgages carry interest rates under 5%.
Ken DiGiorgio: Transactions in the commercial market should increase, albeit at lower prices, as price discovery continues, while we expect to see modest revenue growth in both our residential and commercial businesses this year. However, this could change depending on the path of mortgage rates. Turning to order trends in our key markets, purchase open orders in January are up 6% compared with last year, refinance open orders in January averaged over 300 per day, consistent with trough levels experienced throughout 2023. Commercial open orders for January are up 7% compared with last year.
Ken DiGiorgio: Transactions in the commercial market should increase, albeit at lower prices is price discovery continues well.
Ken DiGiorgio: While we expect to see modest revenue growth in both our residential and commercial businesses. This year.
Ken DiGiorgio: This could change depending on the path of mortgage rates.
Ken DiGiorgio: Turning to order trends in our key markets purchase open orders in January are up 6% compared with last year.
Ken DiGiorgio: Refinance open orders in January averaged over 300 per day, consistent with trough levels experienced throughout 2023.
Ken DiGiorgio: Commercial open orders for January or up 7% compared with last year.
Ken DiGiorgio: While some of these orders spilled over from December, these trends support our assessment that the cybersecurity incident will not have a significant ongoing impact on our business. Despite the uncertainty of the timing of a sustained recovery in our key markets, the strength of our business, along with our financial discipline and strong balance sheet, allow us to continue to invest for long-term growth while returning capital to our shareholders. We remain active in our share repurchase program, repurchasing $18 million of our shares in the fourth quarter for a total of $73 million for the full year at an average price of $55.18 per share. In closing, I want to acknowledge the significant support provided by our agents and customers and other industry participants during our cyber security incident. I also appreciate the patience our customers demonstrated as we worked through the process of returning to normal operation. In addition, we have consistently highlighted the importance of our people to the success of our business. The incredible dedication and resilience they demonstrated in response to the cybersecurity incident underscores this principle.
Ken DiGiorgio: While some of these orders spilled over from December these trends support our assessment that the cyber security incident will not have a significant ongoing impact on our business.
Ken DiGiorgio: Despite the uncertainty of the timing of a sustained recovery in our key markets the strength of our business along with our financial discipline and strong balance sheet allow us to continue to invest for long term growth, while returning capital to our shareholders. We.
Ken DiGiorgio: We remain active in our share repurchase program.
Ken DiGiorgio: Repurchasing $18 million of our shares in the fourth quarter for a total of $73 million for the full year at an average price of $55 18 per share.
Ken DiGiorgio: In closing I want to acknowledge the significant support provided by our agents and customers and other industry participants during our cyber security incident.
Ken DiGiorgio: I also appreciate the patience our customers demonstrated as we work through the process of returning to normal operations.
Ken DiGiorgio: In addition, we have consistently highlighted the importance of our people to the success of our business.
Ken DiGiorgio: The incredible dedication and resilience they demonstrated in response to the cyber security incident underscores this principle.
Mark E. Seaton: I greatly appreciate their tireless efforts to serve our customers and restore our system. Now, I'd like to turn the call over to Mark for a more detailed discussion of our financial results. Thank you, Ken.
Ken DiGiorgio: I really appreciate their tireless efforts to serve our customers and restore our systems.
Mark E. Seaton: Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.
Mark: Thank you Ken.
Mark E. Seaton: This quarter, we generated earnings of $0.33 per diluted share. Our adjusted earnings per share, which excludes the impact of net investment losses and purchase-related amortization. These results include tax benefits of $5 million, or $0.05 per share, primarily due to the research and development tax credit. As previously disclosed, our earnings this quarter were materially impacted by the cybersecurity incident. However, the exact impact the incident had on our results is unknowable. In our title segment, revenue from certain transactions was transitioned to other providers, while others were delayed into 2024. On December 18th, prior to our systems being taken offline, we produced an internal forecast estimating our adjusted EPS to be $1 per share. This forecast includes our actual results for October and November, our forecast for December, and a tax rate of 24%. Our actual adjusted EPS was $0.69, including the $0.05 tax benefit, implying a 36-cent shortfall relative to our internal estimates.
Mark: This quarter, we generated earnings of <unk> 33 cents per diluted share our adjusted earnings per share, which excludes the impact of net investment losses and purchase related amortization was 69 cents.
Mark E. Seaton: These results include tax benefits of $5 million or five cents per share primarily due to research and development tax credits will be claimed.
Mark E. Seaton: As previously disclosed our earnings this quarter were materially impacted by the cyber security incident.
Mark E. Seaton: However, the exact impact of the incident had on our results is unknowable and our title segment revenue from certain transactions were transitioned to other providers, while others were delayed into 2024.
Mark E. Seaton: On December 18th prior to our systems being taken offline, we produced an internal forecast estimating our adjusted EPS to be one dollar per share.
Mark E. Seaton: This forecast includes our actual results for October and November are forecast for December and a tax rate of 24%.
Mark E. Seaton: Our actual adjusted EPS was <unk> 69 cents.
Mark E. Seaton: Including the five cent tax benefit.
Mark E. Seaton: Flying is 36% shortfall relative to our internal estimate.
Mark E. Seaton: Although we believe most of this difference is related to the cyber incident, as I mentioned, the exact impact the incident had on our fourth-quarter results is unknowable. Included in this $0.36 shortfall was $11 million of direct expenses related to the incident in our corporate sector. It is too early to tell how much of this shortfall will be recouped in the first quarter or how much will ultimately be covered by our insurance program. However, we do not believe the incident will have a significant impact on the company's outlook for 2020. Turning to our title segment, revenue was $1.3 billion, down 18% compared with the same quarter last year. Commercial revenue was $172 million, a 32% decline over last year. Our average revenue per order for commercial transactions declined 20% this quarter to $11,000 due to a combination of fewer large transactions and lower valuations as prices in the commercial market soared. Purchase revenue was down 11% during the quarter, driven by a 14% decrease in the number of orders closed, partially offset by a 4% increase in the average revenue per order.
Mark E. Seaton: Although we believe most of this difference is related to the cyber incident as I mentioned the exact impact of the incident had on our fourth quarter results is unknowable.
Mark E. Seaton: Included in this 36 cents shortfall was 11 million of direct expenses related to the incident in our corporate segment.
Mark E. Seaton: It is too early to tell how much of this shortfall will be recouped in the first quarter or how much will ultimately be covered by our insurance program. We.
Mark E. Seaton: We do not believe the incident will have a significant impact on the company's outlook for 2024.
Mark E. Seaton: Turning to our title segment revenue was 1.3 billion down 18% compared with the same quarter of 2022.
Mark E. Seaton: Commercial revenue was $172 million or 32% decline over last year, our average revenue per order for commercial transactions declined 20% this quarter to $11000 due to a combination of fewer large transactions and lower valuations as prices in the commercial market is awesome.
Mark E. Seaton: Purchase revenue was down 11% during the quarter driven by a 14% decrease in the number of orders closed partially offset by a 4% increase in the average revenue per order.
Mark E. Seaton: Refinance revenue declined 32% relative to last year. Although mortgage rates have fallen 100 basis points from the recent highs, they are still levels materially above what is needed to generate a significant rise in recent income. In the agency business, revenue was $570 million, down 24% from last year. Given the reporting lag in agent revenues of approximately one quarter, these results reflect remittances related to Q3 economic activity. Our information and other revenues were $211 million, down 12% relative to last year. This decline was primarily due to reduced demand for the company's data and property information products in our direct title business.
Mark E. Seaton: <unk> revenue declined 32% relative to last year, although mortgage rates have fallen 100 basis points from their recent highs. They are still at levels materially above what is needed to generate a significant rise in refinance activity.
Mark E. Seaton: In the agency business revenue was 570 million down 24% from last year, given the reporting lag in agent revenues of approximately one quarter. These results reflect remittances related to Q3 economic activity.
Mark E. Seaton: Our information and other revenues were 211 million down 12% relative to last year. This decline was primarily due to reduced demand for the company's data and property information products and our direct title business.
Mark E. Seaton: Investment income within the title, insurance, and services segment was $132 million, unchanged relative to the prior year, as higher interest rates were offset by lower escrow balances. For the full year of 2023, we saw our investment income surge 50% as the Fed raised rates four times. Now, as the Fed prepares to lower rates, we estimate that for each 25-basis point decline in the Fed funds rate, our annualized investment income will decline $15 million, but the ultimate amount will fluctuate depending on the level of cash and escrow balances. The provision for policy losses and other claims was $30 million in the fourth quarter, or 3.0% of title premiums and escrow fees, down from the 4.0% loss provision rate in the prior year.
Mark E. Seaton: Investment income within the title insurance and services segment was 132 million unchanged relative to the prior year as higher interest rates were offset by lower escrow balances.
Mark E. Seaton: For the full year of 2023, we saw our investment income surged, 50% as the fed raise rates four times now as the fed prepares to lower rates, we estimate that for each 25 basis point decline in the fed funds rate our annualized investment income will decline 15 billion.
Mark E. Seaton: But the ultimate amount will fluctuate depending on the level of cash in escrow balances.
Mark E. Seaton: The provision for policy losses, and other claims was $30 million in the fourth quarter or 3.0% of title premiums and escrow fees down from the 4.0% loss provision rate in the prior year.
Mark E. Seaton: The 3.0% loss rate reflects an ultimate loss rate of 3.75% for the current year with an $8 million release for prior policy. Over the last several quarters, we have highlighted the margin drag in the title segment related to three strategic initiatives, ServiceMack, Endpoint, and Instant Decisioning for Purchase Transactions. We have seen significant earnings improvement in ServiceMack since we acquired the company in October of 2021, and this quarter, the pre-tax margin of ServiceMack was in line with our overall title segment results, and no longer in Washington. Therefore, we are removing ServiceMac from our commentary and only including endpoint and instant decision for purchase transactions.
Mark E. Seaton: The 3.0%.
Mark E. Seaton: Loss rate reflects an ultimate loss rate of 375% for the current year with an $8 million release for prior policy years.
Mark E. Seaton: Over the last several quarters, we have highlighted the margin drag in the title segment related to three strategic initiatives service Mac endpoint and instant decisioning for purchase transactions.
Mark E. Seaton: We have seen significant earnings improvement and service Mac since we acquired the company in October of 2021, and this quarter. The pre tax margin of Servicemaster was in line with our overall title segment results and no longer a margin drag and therefore, we are removing service Mac from our commentary and only including endpoint and.
Mark E. Seaton: Instant decisioning for purchase transactions.
Mark E. Seaton: Together, these two strategic initiatives reduced our pre-tax margin in the title segment by 130 basis points. Pre-tax margin in the title segment was 4.5% or 7.5% on an adjusted... Total revenue in our home warranty business totaled $99 million, a 9% decline compared with last year. In 2022, we recognized a favorable deferred revenue adjustment of $8 million. Excluding this adjustment, revenue in our home warranty business would be flat relative to last year. Pre-tax income in the home warranty business was $15 million, down 6% from the prior year.
Mark E. Seaton: Together these two strategic initiatives reduced our pre tax margin in the title segment by 130 basis points.
Mark E. Seaton: Pre tax margin in the title segment was four 5% were seven 5% on an adjusted basis.
Mark E. Seaton: Total revenue in our home warranty business totaled $99 million.
Mark E. Seaton: 9% decline compared with last year and 2022, we recognized a favorable deferred revenue adjustment of $8 million. Excluding this adjustment revenue in our home warranty business would be flat relative to last year.
Mark E. Seaton: Pre tax income and home warranty was $15 million down 6% from the prior year the loss ratio and home warranty was 44% down from 47% in 2022, driven by lower frequency and severity of claims adjusted pre tax margin in the homework assignment was 19, 9% up from $18 eight in 2020.
Mark E. Seaton: The loss ratio in home warranty was 44%, down from 47% in 2022, driven by lower frequency and severity of crime. Adjusted pre-tax margin in the home warranty segment was 19.9%, up from 18.8% in 2020. The effective tax rate for the quarter was 10.7%, lower than our normalized tax rate of 24%, due primarily to research and development tax credits we recognized during the quarter.
Mark E. Seaton: Two.
Mark E. Seaton: The effective tax rate for the quarter was 10, 7% lower than our normalized tax rate of 24% due primarily to research and development tax credits, we recognized during the quarter.
Mark E. Seaton: In the fourth quarter, we repurchased 329,000 shares for a total of $18 million at an average price of $53.85. Our debt-to-capital ratio as of December 31st was 28.6%. Excluding secured financings payable, our debt-to-capital ratio was 22.3%.
Mark E. Seaton: In the fourth quarter, we repurchased 329000 shares for a total of $18 million at an average price of $53.85.
Speaker Change: Our debt to capital ratio as of December 31 was 28, 6% excluding secured financings payable our debt to capital ratio was 22, 3% now I would like to turn the call back over to the operator and take your questions.
Operator: Now, I would like to turn the call back over to the operator and take your question. Thank you. We will now be conducting the 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.
Operator: 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 that your line is in the question queue.
Operator: You May press Star two if you would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2. One moment, please, while we pull for questions. Our first question comes from Boza George with KBW. Please state your question. Hey, everyone. Good morning.
Operator: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Operator: Okay.
Bose George: Our first question comes from Bose, George with VW. Please state your question.
Bose George: Hey, everyone. Good morning, Kevin.
Mark E. Seaton: I wanted to ask, in terms of your margin expectation for 2024, you know, if the NBA is right, we have a modest improvement in purchase. And as you noted, commercial gets a little better. You know, NII, maybe a little bit worse.
Operator: Yeah.
Bose George: Terms of your margin expectation for 2024.
Bose George: If the MBA is right we have a modest improvement in purchase and as you noted commercial gets a little better.
Bose George: You know NII.
Mark E. Seaton: Like, where do you think everything kind of shakes out in terms of your margin in 2024 versus 2024? Thanks for the question, both. You know, there are a lot of factors, obviously. But the good news is we do feel like there'll be modest growth in our core business. We talk about commercial and purchase, perhaps maybe not quite as much as the NBA is suggesting, but we do feel like we'll have some modest growth. We also feel like our 3% loss rate that we booked this quarter is sustainable from what we can see now. So that should be a little bit of a tailwind.
Bose George: A little bit worse, like where do you think everything kind of shakes out in terms of your margin in 24 versus 23.
Speaker Change: Thanks for the question Bose.
Mark E. Seaton: Yeah, there's a lot of factors, obviously I mean, the good news is we do feel like there'll be modest growth in our core business and we talked about commercial and purchase perhaps maybe not quite as much at the MBA, suggesting but we do feel like we'll have some modest growth.
Mark E. Seaton: We also feel like you know our 3% loss rate that we booked this quarter is sustainable from what we can see now so that should be a little bit of a tailwind.
Mark E. Seaton: The downside for next year is if the Fed starts to lower rates, that's going to have an impact on our investment income. I just talked in my script here about losing $15 million of annualized investment income every time the Fed lowers rates. So we'll have to see how that plays out, but that would be a headwind.
Speaker Change: The downside for next year is you know if the fed starts to lower rates, yeah, that's going to have an impact on our investment income I just talked to my script here, how we're gonna lose $15 million of annualized invested investment income every time the fed lowers rates. So we'll have to see how that plays out but that would be.
Mark E. Seaton: But right now, as we look at everything, we feel like our margins in 2024 are going to be very similar to what they were in 2023, where we had double-digit margins this year. We feel like we can hit double-digit margins in 2024 as well. So, okay, great, that's helpful. Thanks, and then, actually, I just wanted to ask you, the cash balance went up a lot in the quarter. What was
Mark E. Seaton: A headwind, but right now is as we look at everything we feel like our our margins in 'twenty four going to be very similar to what they were in 2023.
Mark E. Seaton: Well you know we had double digit margin. This year, we feel like we can hit double digit margins in 'twenty four as well.
Speaker Change: Okay, Great. That's helpful. Thanks, and then actually I just wanted to ask the cash balance went up a lot.
Mark E. Seaton: In the quarter.
Mark E. Seaton: What's driving that.
Mark E. Seaton: It was really a function of the incident. We had a lot of cash in our bank. Typically, we wouldn't hold that much cash. We would push it out to third-party banks. But it was incident-related, and we just held a lot of cash at our bank because we just didn't quite have the ability to push it out to third-party banks like we typically do at that time of year. Okay, great. And then actually, one more on NII.
Speaker Change: It was really a function of a the incident, we had a lot of cash are at our bank typically we wouldnt hold that much cash we would push it out to third party banks, but it was incident related and we just held a lot of cash or bank because we just didn't quite have the ability to push it out to third party banks.
Mark E. Seaton: Like we typically do at that time of year.
Speaker Change: Okay, Great and then actually one more on NII.
Mark E. Seaton: Do you think the balances will be roughly flat year over year? Any reason to think it'll be different? Well, I would say we think balances really track our commercial business. So, you know, I would say that they should be up modestly in 2024. Roughly about 60% of our escrow balances are commercial related. So they're really going to track commercial.
Mark E. Seaton: Do you think the balances will be escrow will be roughly flat year over year and any reason to think it'll be different.
Mark E. Seaton: Well I would say, we think balances they really track or commercial business. So you know I would say that they should be up modestly in 2024, roughly about 60% of our escrow balances are commercial related so they're really going to track commercial sort of you think commercial is going to be.
Mark E. Seaton: So if you think commercial is going to have modest improvement, we should have modest improvement in our escrow balance. Okay, great. Thank you. Thank you. Our next question comes from Terry Mao with Barclays. Please state your question. Hey, thanks. Good morning.
Mark E. Seaton: Modest improvement, we should have modest improvement in our escrow balances as well.
Terry Mao: Okay, great. Thank you.
Terry Mao: Thanks, Bob.
Terry Mao: Our next question comes from Terry MA with Barclays. Please state your question.
Terry Mao: Hey, Thanks, good morning, so on the 130 basis point margin drag from endpoint and instant decision is there any color you can provide on how that kind of trends throughout.
Mark E. Seaton: So on the 130 basis point margin drag from endpoint and instant decision, is there any color you can provide on how that kind of trends throughout the year? I think with ServiceMack, it's kind of been abating by about 20 basis points a quarter. We think it's going to improve throughout the year. Our endpoint results have improved. We think they're going to get better and better.
Mark E. Seaton: Throughout the year I think with service smack it had kind of been abating by about 20 basis points a quarter.
Mark E. Seaton: Yeah.
Mark E. Seaton: We think it's going to improve throughout the year you know our end point results have improved and we think theyre going to get better and better we've been talking about instant decisioning from purchase transactions for a few quarters now and those expenses, we feel like are going to ramp up this year as we.
Mark E. Seaton: We've been talking about instant decisioning for purchase transactions for a few quarters now, and those expenses we feel like are going to ramp up this year as we. I think it'll improve a little bit, but it'll still be a drag even as we get to the end of the year, but probably less than 130 basis points we're experiencing now. Okay.
Mark E. Seaton: You know rollout that and so you know I think you don't improve a little bit, but it'll still be a drag even as we get to the end of the year, but probably less than 130 basis points, we're experiencing now.
Speaker Change: Okay got it.
Mark E. Seaton: And then on investment income, is there, I guess, any more color you can provide just based on where the forward curve is right now? Um... Well, when we checked yesterday, the forward curve, I think, had five big decreases. One of those would be in December, which wouldn't really have an effect on us.
Mark E. Seaton: And then on the investment income is there I guess any more color you can provide just based on where the forward curve is right now.
Mark E. Seaton: Yeah.
Mark E. Seaton:
Mark E. Seaton: Well when we checked yesterday the forward curve I think had five rate decreases one of those would be in December which wouldn't really have an effect on us.
Mark E. Seaton: And so, I would just, I mean, the guidance that we look at internally, again, is, you know, every time the Fed cuts, we're going to lose 15 million of investment income in our title segment. And so, you know, if the Fed were to cut five times, one of those, again, in December, which wouldn't really have an effect on investment income, we'd lose, you know, 60 million of annualized investment income. That wouldn't all hit, obviously, next year, but you can sort of model that out, given the guidance we've provided. Got it. That's helpful.
Mark E. Seaton: And so I would just I mean, the guidance that we look at internally again as you know every time the fed cuts. We're at least 15 million of investment income in our title segment and so you know if the fed's going to cut five times one of those again in December which wouldn't really have an effect on investment income.
Mark E. Seaton: We'd lose $60 million of annualized investment income that wouldn't I'll hit obviously next year, but you can sort of model that out given the guidance we've provided.
Mark E. Seaton: Okay.
Mark E. Seaton: Thank you. Okay, thanks, Terry. Our next question comes from Soham Bansal with BTIG Police. Good morning, guys. Hope you're doing well.
Speaker Change: Got it that's helpful. Thank you.
Speaker Change: Okay. Thanks Terry.
Soham Bansal: Our next question comes from so harm bunzl with B T. I G. Please state your question.
Soham Bansal: Good morning, guys hope you're doing well.
Mark E. Seaton: Just to follow up on the margin, I guess you talked through some of the puts and takes here. But is there any additional CapEx that we should be thinking about to maybe, you know, shore up any of your systems with the cyber incident or any sort of investment that you would have to make this year that we should be thinking about? Um, I would just say that, in terms of CapEx specifically, our CapEx is going to come down next year. So in 2023, we had $263 million in CapEx. And it'll come down somewhere between 10% and 15% next year. Some of that is because we've finished some projects that we no longer need. Other parts of the decline are just because we feel like we can do things more efficiently than we have in the past. We're hiring a lot of engineers to do the work for us, as opposed to using more third parties, which is saving us on CapEx.
Soham Bansal: Just a follow up on the on the margin I guess you talked through some of the puts and takes here, but is there any additional capex that we should be thinking about to maybe you know shore up any of your systems with the with the cyber incident or any sort of investment that you would have to make this year that we should be thinking about.
Mark E. Seaton: I would just say that we're.
Mark E. Seaton: Well in terms of Capex, specifically, our capex is going to come down next year. So in 2023, we had $263 million of Capex and it'll come down somewhere between 10 and 15% next year some of that is because.
Mark E. Seaton: We finished some projects that we no longer need other parts of the the decline is just because we feel like we can do things more efficiently than we have in the past we're hiring a lot of our engineers to do the work for us as opposed to using more third parties, which is saving us on capex. So capex is going to come down next year somewhere around 10% to 15% and <unk>.
Mark E. Seaton: So CapEx is going to come down next year somewhere around 10% to 15%. And that's despite some, you know, I'd say enhancements we need to make to our information security program, but it's not going to have a material impact on our earnings or capex. Got it.
Mark E. Seaton: Despite some you know I'd say enhanced since we need to make to our information security program, but it's not going to have a material impact on our earnings where Capex next year.
Mark E. Seaton: Okay. And can I just get sort of an update on, you know, the roll-off of your subservicing assets here? You know, how should we think about that impacting the investment income line potentially through the year? Um, so we've talked about in the past these home point loans. It's unclear exactly when the home point loans would leave.
Speaker Change: Got it Okay, and then can I, just get sort of an update on you know the roll off of your sub servicing assets here you know how should we think about that impacting the investment income line potentially through the year.
Mark E. Seaton: So we've talked about in the past. These these home point loans, it's unclear exactly when the home point loans.
Mark E. Seaton: Would leave right now you know are our expectation is that they would be somewhere in mid year, but you know one thing I would say is that again is not going to have a material impact certainly to our investment income because we generate investment income from those loans, but we also pay out interest expense in those loans. So even if we lost them, it's not going to have.
Mark E. Seaton: Right now, you know, our expectation is that they will leave somewhere in mid-year. But, you know, one thing I would say is that, again, it is not going to have a material impact, certainly on our investment income, because we generate investment income from those loans, but we also pay out interest expense on those loans. So even if we lost them, it's not going to have – you'll see fluctuations for interest income and interest expense, but from a pre-tax perspective, it's not going to be significant at all. But to answer your question, right now, the expectation is that we hold on to those assets for the mid-year, but that could change depending on circumstances. I got it.
Mark E. Seaton: Have you you will see fluctuations for interest income and interest expense, but from a pretax perspective, it's not going to be it's not going to be significant at all but to answer. Your question right. Now the expectation is we hold onto those mid year, but that could change depending on circumstances.
Mark E. Seaton: And then just last one, Mark, you guys have talked about, look, the $15 million is better than the $20 million historically because, you know, you're trying to sort of, you know, bring folks to the bank and maybe bank with you guys. I guess I was wondering, have you seen any sort of discernible movement in agent behavior in a market like New York, you know, where we're sort of hearing just the likes of NYCB and these folks having some issues? Are you seeing some of that business come to you or any sort of other banks in that market specifically? You know, are you talking about deposits for our agent banking industry? Yes, bro.
Speaker Change: Got it and then just last one I think you know Mark you guys have talked about look the $15 million is better than the 20 million historically, because you know you're trying to sort of.
Mark E. Seaton: Bring folks to the bank and maybe bank with you guys. I guess I was wondering have you seen any sort of discernible movement and agent behavior in a market like New York, you know, where we're sort of hearing just the likes of N Y C. B and these folks having some issues are you seeing some of that business come to you or any sort of other banks in that market specifically.
Mark E. Seaton: Yeah.
Mark E. Seaton: Yeah, you're talking about like deposits for our agent they are going to see Astro yeah.
Mark E. Seaton: Yeah. Yeah. We haven't seen a big influx in deposits because of the issues you're referring to here, but I would just say that, you know, long-term, we are really positive on agent banking. When we started in January of 23, we had basically 110 million deposits for agent banking. At the end of the year, we had 271 million deposits.
Mark: We havent seen a big influx in deposits because of the issues, you're referring to here, but I would just say that you know long term we are a real positive on Egypt banking. When we started when we started in January of 'twenty. Three we had basically $110 million of deposits for Asian banking at the end of year.
Mark E. Seaton: We had $271 million of deposits. So we're we're growing it really nicely. It's just from a very small base right. You don't want to on a on a bank deposit base of 6 billion I mean 270 million isn't material, but we're very optimistic about the growth we feel like we've got a good product market fit we just need a little bit more time to execute so we're very optimistic but the growth of them.
Operator: So we're growing it really nicely; it's just from a very small base, right? You know, on a bank deposit base of 6 billion, 270 million isn't much, but we're very optimistic about the growth. We feel like we've got a good product-market fit; we just need a little bit more time to execute. So we're very optimistic, but the growth that we're seeing isn't because of, you know, any troubles with any other banks; it's mostly because we can provide a really, you know, efficient product and service to our agent banking clients. Understand? All right. Thanks a lot, guys. Thank you. Thank you. And just a reminder to the audience, to ask a question, press star 1 on your telephone keypad; press star 2 to remove yourself.
Operator: We're seeing isn't because of you know any troubles or any other banks is it's mostly because we can provide a really efficient product and service to our agent banking clients.
Operator: Understood Alright, thanks, a lot guys.
Operator: Yeah.
Operator: Yes.
Operator: Thank you and just a reminder to the audience to ask a question press Star one on your telephone Keypad Press star two to remove yourself from the queue.
Mark E. Seaton: Our next question comes from Mark Hughes with Truist Securities. Please state your question. Yeah, any thoughts on capital management outlook for? Well, capital management, there's a couple different components we think about. You know, one is M&A, and I would just say that, You know, we would have thought the acquisition pipeline would have been a little bit more robust when the market fell. It really hasn't, as we've talked about on these calls, but we feel like the longer this kind of market malaise lasts, the more M&A opportunities there will be. So that'll always be something we look at.
Operator: Our next question comes from Mark Hughes with <unk> Securities. Please state your question.
Mark Hughes: Any thoughts on the capital management outlook for 'twenty 'twenty four.
Mark E. Seaton: Ah well capital management Theres, a theres a couple of different components. We think about you know one is M&A and I would just say that.
Mark E. Seaton: You know, we would've thought the acquisition pipeline would've been a little bit more robust when the market fell it really hasnt as we've talked about on these calls, but we feel like the longer this kind of market malaise lasts the more M&A opportunities would be so that will always be something we.
Mark Hughes: We look at in terms of the buyback I mean, we've been.
Mark E. Seaton: In terms of the buyback, I mean, we've been very active in the buyback for the last two or three years, and that's always something we'll look at. You know, at the end of the day, if we've got excess capital, we feel like the stock is undervalued, and we don't have better uses for the capital, we'll buy it back. And so that's always something we'll continue to evaluate. And then, of course, the dividend. We're not committed to raising a dividend every year, come hell or high water, but we have pretty much raised the dividend, and that's something we want to continue to do.
Mark E. Seaton: Very active in the buyback the last two or three years and that's always something that we'll we'll look at you know at the end of day, if we've got excess capital we feel like the stock is undervalued and we don't have better uses for the capital well by well buy it back and so that's always something we will continue to evaluate and then of course the dividend I'm we're not.
Mark E. Seaton: Committed to raising the dividend every year come hell or high water, but we pretty much have raised the dividend and that's something we want to continue to do so the fortunate part is that we've got a really good balance sheet at the trough of the cycle here and were looking to actively.
Mark E. Seaton: So the fortunate part is that we've got a really good balance sheet at the trough of the cycle here, and we're looking to actively put it to work where we can. And then, not to try to cut it too finely, but you've mentioned that the January purchase was up 6%, and commercial up 7%. I think you suggested there could be some spillover from December. If you look at the kind of recent trends, maybe late January or early February, do you see any difference relative to those numbers? gave us.
Mark E. Seaton: Put it to work, where we where we can where we can.
Mark E. Seaton: And then not to try to cut it too finely but you'd mentioned that the January purchase up 6% commercial up 7% I think you suggested there could be some spillover from December if.
Mark E. Seaton: If you look at the kind of recent trends may be late January early February do you see any difference relative to those numbers you you.
Mark E. Seaton: Thanks for the question, Mark. I think we saw a larger uptick in the early weeks, the first week of January, and it tailed off as we went through the month, which suggests, yes, there was some spillover. But I think on the whole, we feel pretty good about where the numbers came out in January. Yeah, well, I guess they didn't immediately shift the order somewhere else, so spillover has some meetings as well. Okay, thank you very much. Our next question comes from John Campbell with Stevens. Please state your question. Hey guys, good morning.
Mark E. Seaton: Gave us.
John Campbell: Yeah excuse me. Thanks, Thanks for the question Mario.
John Campbell: We saw you know probably a larger uptick.
John Campbell: In the you know the early weeks of the first week of January and then it tailed off as you went through the month.
John Campbell: Suggest yes, there there was a there was some some spillover, but I think on the whole we feel pretty good about where the where the where the numbers came out in January.
John Campbell: Yeah, well I guess, they didnt immediately ship the order somewhere else the spillover has some more.
John Campbell: Meaning are as well.
John Campbell: Okay. Thank you very much.
Mark E. Seaton: Yes.
Mark E. Seaton: Yeah.
Mark E. Seaton: Our next question comes from John Campbell with Stephens. Please state your question.
John Campbell: Hey, guys good morning.
Mark E. Seaton: All right. Hey, Mark, in your prepared remarks, you highlighted that it's impossible to fully size up the exact impact of the cyber incident. I think that's definitely understandable. There's obviously a lot of moving parts there, but I'm going to see if we can get a little bit more color, at least on what was visible for you guys.
John Campbell: Good morning.
John Campbell: Hey, Mark in your in your prepared remarks, you highlighted that it's impossible to fully size up that you know the exact impact of the cyber incident I think that's definitely understandable. There's obviously a lot of moving parts, there, but I'm gonna see if we'd get a little bit more color at least on what was visible for you guys. So you caught up to $11 million expense.
Mark E. Seaton: So you called out the $11 million expense. But as far as, you know, maybe what else is visible, you guys, maybe it's orders that got pushed into OneQ, like you just mentioned, or maybe it's orders you had in the mix that pulled out and went to competitors. Do you have any rough sense for what, you know, just broadly what the degree of the impact was from that standpoint? Yeah, you know, it's really impossible, it's impossible to tell, it's extremely difficult to tell.
Mark E. Seaton: But as far as you know maybe what else is this what you guys. Maybe it's orders that got pushed into <unk> like you just mentioned or maybe its orders you have in the mix that pulled out and went to competitors do you have any rough sense for what you know.
Mark E. Seaton: Just broadly what the degree of the impact was from that standpoint.
Speaker Change: Yeah, you know what.
Mark E. Seaton: It's really impossible, it's impossible to tell it's extremely difficult to tell I mean, certainly.
Mark E. Seaton: I mean, certainly some orders that, you know, might have been open with us in the last couple of weeks of December might have opened somewhere else, though, again, we saw some of the spillover, which maybe they were holding the orders and sent them to us as soon as our systems got back online. I think where the real issue is our orders that would have closed with us at the end of December, and either the customer moved them, or, in many instances, we moved those orders. But keep in mind, that's behind us now; those things are behind us now. So, you know, we're focused on the orders we got, and again, I think a lot of them, if not all of them, or most of them, spilled over into January, and we'll realize the benefit of those orders in the ordinary course, under the ordinary timeframes, be they a purchased refi or a commercial order. Okay, that makes sense.
Mark E. Seaton: Some orders that might've been open with us in the last couple of weeks in December might have opened somewhere else, though again, we saw some of the spillover, which maybe they were holding me orders and send them to us as soon as our systems got back online I think where the real issue is the issue is our orders that would've closed with us at the end of December and they need or the customer moved them or.
Mark E. Seaton: Or in many instances, we moved to those orders, but keep in mind, that's behind US now those things are behind US now. So you know we're focused on the orders, we got and again I think a lot of them if not all of them or most of them spilled over into January.
Mark E. Seaton: We will realize the benefit of those orders in the ordinary course under the ordinary timeframes be they had purchased refi or a commercial order.
Speaker Change: Okay that makes sense and then mark on the investment income and you mentioned the 15 million sensitivity to every 25 basis point cut.
Mark E. Seaton: And then, Mark, on investment income, you mentioned the $15 million sensitivity to every 25 basis point cut. I wanted to see if you could give us your latest sensitivity or, I guess maybe, a rule of thumb on the interest expense offset. So for every $15 million, how much would you be able to offset an interest expense?
Mark E. Seaton: I wanted to see if you'd give us your latest sensitivity or I guess, maybe a rule of thumb on the interest expense offset so for every 15 million how much you would you would be able to offset in interest expense.
Mark E. Seaton: That's something we can tighten up, but I would say, first of all, it's a good point because if we lose investment income, we are going to lose interest expense. The high-level rule of thumb is, you know, if we lose a dollar of investment income, we'll lose about 50 cents of interest expense. I mean, that's kind of what I would use for maybe modeling purposes.
Mark: That's something we can tighten up but I would say first of all it's a good point because if we lose investment income we are going to lose it.
Mark E. Seaton: Our interest expense by the high level of rule of thumb is you know we lose a dollar of investment income will lose about 50 cents of interest expense I mean, a lot of that that's kind of what I would use for maybe modeling purposes, a lot of it depends on.
Mark E. Seaton: A lot of it depends on... um, you know, the mix of where our investment economy is coming from, how much they have to bank versus the non-bank, but that's the high-level rule of thumb, I think. Okay, okay. And then if I could squeeze in one more here on the success ratio, I think you guys had talked about maybe a kind of similar 50% or so in 2024. Obviously, you're recapping this week or quarter.
Mark E. Seaton:
Mark E. Seaton: You know the mix of where our investment income is coming from how much that's the bank versus the non bank.
Mark E. Seaton: But that's that's the high high level of somebody who's.
Speaker Change: Okay, Okay, and then if I could squeeze in one more here on the success ratio I think you guys had talked to maybe kind of similar 50% or so in 2024.
Mark E. Seaton: Obviously, you're lapping this weaker quarter.
Mark E. Seaton: And for next year, you're going to have, you know, maybe a pair of limited losses out of the investments. You've obviously got some impact from investment income, but maybe if you could talk to me about whether you feel like that's still kind of a target that you can manage. Yeah, John, yeah, I mean, we're definitely managing to the 50-60 success ratio. But keep in mind, though, when we talk about modest revenue growth, the success ratio is less meaningful. But no, we're absolutely still managing to keep it at that level. Okay, thank you guys. And John, I just want to follow up on your first question. So when I said, you know, for every dollar of investment income we lose, we lose 50 cents of interest expense. That's in the title segment only. I mean, obviously, the corporate segment. We have our, you know, the interest expense from our bonds that are outstanding. So my commentary was the title segment.
Mark E. Seaton: For next year Youre going to have you know, maybe a pair of whether the losses out of the investments.
Mark E. Seaton: You've obviously got you know some some impact from investment income, but maybe if you could talk to whether you feel like that's still kind of a target that you would manage to.
Mark E. Seaton: Okay.
Mark E. Seaton: Yeah.
Mark E. Seaton: John Yeah, I mean, we're definitely managing to the you know the 50, 60% success ratio keep in mind that when we talk about modest revenue growth and success ratios.
Speaker Change: It's less meaningful.
Speaker Change: But no we're absolutely still managing to that to that level.
Mark E. Seaton: Yeah.
Speaker Change: Okay. Thank you guys.
Speaker Change: And John I, just wanted to follow up on your first question. So when I said you know for every dollar of investment income we lose we lose 50 cents of interest expense. That's in the test segment only I mean, obviously the corporate segment. We have our you know the interest expense from our our bonds that are outstanding. So my my commentary was titled segment only.
Mark E. Seaton: Okay, that makes sense. Thanks, John. Our next question comes from Geoffrey Dunn with Dowling and Partners; please go ahead. Morning. My first question is with respect to the automated title and endpoint, how much insight do you have into the timeline of both those initiatives remaining a drag on your margin? Well, I mean, I don't think...
Speaker Change: Okay makes sense. Thanks.
Speaker Change: Thanks, John.
Mark E. Seaton: Our next question comes from Geoffrey Dunn with Dowling and partners. Please go ahead.
Geoffrey Murray Dunn: Thanks morning.
Geoffrey Murray Dunn: My first question is with respect to the automated title and endpoint how much insight do you have it to the timeline of that remaining of both of those initiatives remain a drag on your margin.
Geoffrey Murray Dunn: Well I mean, I don't think.
Ken DiGiorgio: I mean, it's not going to last forever. I think endpoint 2023 was probably a peak year for the losses of endpoint, and I think those are going to gradually come down over the next couple of years. On instant decisioning for purchase transactions, as Mark mentioned, the expenses are probably going to ramp up, but it's early days on that initiative, very early days.
Geoffrey Murray Dunn: I mean, it's it's it's not going away, it's not going to last forever I think endpoint at 2023 was probably a peak year in the losses in endpoint and I think those are going to gradually come down over that over the next.
Ken DiGiorgio: Couple of next couple of years.
Ken DiGiorgio: Yeah on an instant decisioning for purchase transactions, you know as Mark mentioned, where the expenses are probably going to ramp up but it's early days on that initiative very very early days.
Ken DiGiorgio: And while I think the expense and the whole scope of the thing is fairly modest, it will increase modestly over time until we start to realize the benefits of that. That one's much harder to predict, but I would anticipate, again, with endpoint, that the drag is starting to decrease, and it'll decrease over time over the next couple of years, and then, More macro question: I think it sounded like maybe you thought the NBA was a bit aggressive on their forecast. As you go into 24, are you positioning the company more for somewhere in the range of the Fannie and NBA forecasts? Or are you maybe more cautious? You know, I'm particularly interested in your thoughts on this scenario where maybe we see one to three cuts, but late in the year. 23 ends up, or 24 looks like it looks more like 23 than it does 25.
Ken DiGiorgio: And you know, while I think the expansion the whole scope of things fairly modest it will increase modestly over time until we start to realize the benefits of that that was much harder to predict but I would anticipate again with endpoint that does the drag is starting to decrease then it'll decrease overtime over the next couple of years.
Ken DiGiorgio: Okay.
Ken DiGiorgio: And then.
Ken DiGiorgio: Sorry, more macro question you know I think you it sounded like maybe you thought the MBA was a bit aggressive on their forecast.
Ken DiGiorgio: As you go into 24 are you positioning the company more for a like somewhere in the range of the Fannie and MBA forecast or are you maybe more cautious.
Ken DiGiorgio: I'm, particularly interested in your thoughts of.
Ken DiGiorgio: The scenario, where maybe we say one to three cuts, but late in the year and.
Ken DiGiorgio: In 'twenty three 'twenty four it looks up like looking more like 23 that does 25.
Ken DiGiorgio: Well, I think 25 is going to look a lot better than 24 and 23. So I guess I view 24 as a transition year. So yeah, we think the MBA is pretty optimistic, and we think the GSEs are probably a little optimistic as well. We're probably coming in a little lighter than them. And again, as we mentioned earlier, we see modest revenue growth. But I do see 24 as a transition year.
Speaker Change: Well I I think 25 is going to look a lot better than 24 and 23. So I guess I view 24 at a as a transition year. So yeah. We think the M. B a is pretty optimistic.
Ken DiGiorgio: We think you know the GSE or probably a little optimistic as well, we're probably coming in a little a little light of them and again, we see them as we mentioned earlier, we see modest revenue growth, but I do see 24, as a transition year and if we get the rate cuts that the forward curve expects.
Mark E. Seaton: And if we get the rate cuts that the forward curve expects, or even if we get one or two less, I think it's setting us up for a great 2025. Thank you. Our next question comes from Mark DeVries with Deutsche Bank. Please state your name and where you're from. Yeah, thanks. One more question for you about the impact of the cybersecurity incident. Mark, as you pointed out, there is a lag in reporting on the agent channel. Should we not expect to see that kind of flow through to 1Q agent premiums? We will definitely have some that trickles over in the first quarter. There's no question about that, but it's just it's not going to be material. I wouldn't say it's material at all.
Mark C. DeVries: Or even if we get one or two last I think its setting us up for a great 2025.
Mark C. DeVries: Alright, thank you.
Mark C. DeVries: Our next question comes from Mark Devries with Deutsche Bank. Please state your question.
Mark C. DeVries: Yeah. Thanks, one more question for you about the impact of the cybersecurity incident, Mark as you pointed out there's a lag in reporting.
Mark C. DeVries: And the agent channel should we not expect to.
Mark C. DeVries: To see that kind of flow through the <unk> agent premiums.
Mark E. Seaton: Yeah.
Mark C. DeVries: We will definitely have some that trickles over into first quarter. There's no question about that but it's just it's not going to be material I wouldn't say it's material. So there there will be you know remittances that we get because our agents just couldn't like remit the last a week or two of them.
Mark E. Seaton: So there will be, you know, remittances that we get because our agents just couldn't send the last week or two of the year, and so we're getting those now, but typically, you know, it's a fairly slow time for agent remittances anyways, and it won't be material in Q1. Okay, fair enough. And then, you know, I was just hoping to get a little bit more context about what kind of gives you comfort that there won't be, you know, a significant ongoing impact from the incident. Is there anything you can kind of share about, you know, the nature or frequency of any kind of regulatory conversations or inquiries around it? And also just discuss, kind of, you know, what efforts you're making to identify and fix vulnerabilities in your systems there.
Mark E. Seaton: Of the year and so we were getting those now but typically.
Mark E. Seaton: It's a fairly slow time for agent remittance is anyway and it just it won't be material in Q1.
Mark E. Seaton: Okay Fair enough and then.
Mark E. Seaton: You know it was just hoping to get a little bit more context about what kind of gives you comfort that there.
Mark E. Seaton: Won't be a significant ongoing impact from the incident is there anything you can kind of share about you know the nature of frequency of any kind of regulatory conversations or inquiries around it and also just discuss.
Mark E. Seaton: You know what efforts you're doing to identify and fix vulnerabilities in your systems there.
Mark E. Seaton: Yeah, I mean, you know, I think the big thing about, you know, kind of getting back to normal or, you know, no ongoing impact is just, you know, first of all, the orders we saw, the order counts we saw come in in January, and then the feedback we've gotten from our customers. I think, by and large, our customers have indicated that they've put the incident behind them. And, unfortunately, in this day and age, these types of things are becoming more and more commonplace, as we've seen with, you know, competitors and other participants in the industry. You know, obviously, when you have an incident like this, there are regulatory inquiries and potential litigation, you know, but because our information security program really was, you know, probably best in class, I don't anticipate, but again, you never know with regulators, but I don Obviously, plaintiff's lawyers are different, you know; they always come out of the woodwork in instances like this, but I don't anticipate that any of that would be material. I would add, as well, that we also have a fairly robust, you know, legal system.
Speaker Change: Yeah, I mean, I think the big thing about you know kind of kind of getting back to normal or you know no ongoing impact is just you know first of all the orders we saw that the order counts we saw come in in January and then and then the feedback we've gotten from our customers.
Mark E. Seaton: By and large our customers have indicated that Dave.
Mark E. Seaton: They put the incident behind them and I you know Unfortunately in this day and age. These types of things are becoming more and more are more and more commonplace as we've seen with competitors and other other participants in the in the industry.
Mark E. Seaton:
Mark E. Seaton: Obviously, when you have an incident like this there is you know regulatory inquiries and potential potential litigation.
Mark E. Seaton: But because our information security program really was you know probably best in class I don't anticipate but again, you never know with regulators, but I don't anticipate to have no fines or or the light coming out of regulators now obviously plaintiffs' lawyers are are different you know they always come out.
Mark E. Seaton: The woodwork in in instances like this but I don't anticipate that any of that would be material in ohio that layer in as well that we also have a fairly robust.
Mark E. Seaton: Cyber insurance program.
Mark E. Seaton: The Cyber Insurance Program, which would help mitigate the impact of some of those expenses as well. Okay, that's helpful. And then just one last follow-up on that last point, I think you, you know, Mark, is there any sense you can give us for, you know, if you do get insurance coverage, what it might look like? I'm sorry, Mark, you broke up there.
Mark E. Seaton: Which would help mitigate the impact of the.
Mark E. Seaton: Of of you know some of those expenses as well.
Speaker Change: Okay. That's helpful. And then just one last follow up on that last point of thank you.
Mark E. Seaton: Mark is there any sense you can give us for you know if you do get insurance.
Mark E. Seaton: What what those might look like.
Speaker Change: I'm sorry, you broke up there can you repeat the question.
Mark E. Seaton: Can you repeat the question? Yeah, it's just, is there any sense you can give us for the insurance recoveries and what, you know, if you receive them, what those might look like? Well, we have a $5 million deductible that we booked in Q4, and so we'll have expenses that hit in, you know, in 2000 related to the incident. But as long as we feel like those are probable in terms of recoveries, then we won't see them hit the P&L. So we don't see any significant impact in terms of the P&L in 2024 because the incident we felt like was all kind of booked in Q4. Okay, I got it.
Mark E. Seaton: Just is there any any sense you can give us for for the insurance recoveries and what you know if you're if you receive them what those might look like.
Mark E. Seaton: Well, we have a $5 million deductible that we booked in Q4.
Mark E. Seaton: And so we'll have a you know expenses that hit in you know in 2000.
Mark E. Seaton: 24 related to the incident, but as long as we feel like those or probable in terms of recoveries and we won't see them hit the P&L. So we don't we don't see any significant impact in terms of the P&L in 2024 because of the incident, we felt like it was all kind of booked in Q4.
Speaker Change: Okay got it thank you.
Mark E. Seaton: Thank you. Thanks, Mark. Our next question comes from Soham Bansal with BTIG. Please state your question.
Speaker Change: Thanks Mark.
Mark E. Seaton: Our next question comes from so harm Bansal with B T. I G. Please state your question.
Mark E. Seaton: Hey, Mark, I just wanted to quickly follow up on your comment on the margins for 24. So I think I think you said something along the lines of, you know, it's going to be similar to 23. But then you also said low double digits. I mean, a low double digits could be a pretty wide range there.
Soham Bansal: Hey, Mark I just wanted to quickly follow up on your comment on margins by 24. So I think you said something along the lines of you know it's going to be similar to 'twenty. Three but then you also said low double digits I mean, low double data, it's going to be a pretty wide range there.
Mark E. Seaton: So could you maybe just put a little bit of a finer point there for this year? Well, our adjusted margin in 23 and title was 9.9%. So I mean, our margins in 24, given all the commentary I gave earlier, are more like, I'll call it a 10% margin. Now listen, if the NBA is right, and originations are up 15 to 20%, we're going to do a lot better than that. So we've got more scale in our business, and we're running it more efficiently than we ever have.
Mark: So could you maybe just put a little bit of a finer point there for this year.
Mark E. Seaton: Well, our our adjusted margin in 'twenty, three and title was was nine 9%. So I mean, it's right.
Mark E. Seaton: You know.
Mark E. Seaton: So our margins in 'twenty four given all the commentary I gave I gave earlier is more like a I'll call. It a 10% margin now listen if the M B a.
Mark E. Seaton: <unk> is right and you know originations are up 15% to 20%, we're gonna do a lot better than that so we've where we've got more kind of scale in our business and we're running it more efficiently than we ever have I mean, they have a 10% margin here at the trough in the cycle was pretty good for us given historical standards. So we just and you know again, if we see modest improvement in 2024 well.
Mark E. Seaton: I mean, to have a 10% margin here at the trough of the cycle is pretty good for us, given historical standards. So we just – again, if we see modest improvement in 2024, we'll still be in that 10% range. So should we think about a 10% sort of like if volumes are up, you know, mid-singles? Right, versus sort of 10 to 15%. Is that the right way to think about it? Yeah, I'd say, you know, low to mid single digits will be a 10.
Mark E. Seaton: Still be at that 10% range.
Mark E. Seaton: So should we think about a 10% sort of like in volumes.
Mark E. Seaton: Mid singles.
Mark E. Seaton: Right versus sort of 10% to 15% is that the right way to think about it yeah. I'd say you know loaded low to mid single digits will be at 10, now obviously, there's a lot of moving pieces, but that's our expectation is early on here.
Mark E. Seaton: Now, obviously, there's a lot of moving pieces, but that's our expectation as early as now. All right. Thanks a lot. Thank you. Thank you. There are no additional questions at this time. That concludes this morning's call. We'd 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 entering the conference ID. 137, 43995. The company would like to thank you for your participation. This concludes today's conference call; you may disconnect.
Mark E. Seaton: Alright, Thanks, a lot.
Mark E. Seaton: Thank you.
Mark E. Seaton: Thank you there are no additional questions at this time.
Mark E. Seaton: That concludes this morning's call, we'd like to remind listeners that today's call will be available for replay on the company's website or by dialing 870 76606853.
Mark E. Seaton: Or 20161 to 7415.
Mark E. Seaton: And enter the conference I D.
Mark E. Seaton: 13743.
Mark E. Seaton: Nine five.
Mark E. Seaton: The company would like to thank you for your participation.
Mark E. Seaton: This concludes today's conference call you may disconnect now.