STC - Earnings call transcript Q3 2021 | Stewart Information Services Corporation

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Operator

Hello and thank you for joining the Stewart Information Services Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask a question during the question-and-answer session. Instructions will be given at that time. Please note, this call is being recorded. now Otis, to Head is over today's It Nat to of Instructions] my turn pleasure conference [Operator Investor Relations. ahead. go Please

Nat Otis

Thanks for you third conference morning. today Good call. Stewart’s earnings quarter joining for XXXX Leo. us Thank

will day the yesterday close. were after be discussing We that released results

may listen to risks I Joining me and call but access on are and with the Form to of statement not involve this for in and are conference other information, financial subject SEC. statements call. To factors not and future the remind that Fred go published are company's participants statements to yesterday conference uncertainties evening operating and CFO, David expectation in sections of materially Eppinger; an Because link forward-looking of fact, today please actual and the The may will a forward-looking that and include with results are results to, of risks based press filings Hisey. the such CEO, statements release online, XX-K detailed differ risk contain other other stewart.com the website the limited this are our factors, risks statements and number uncertainties. forward-looking projected. from regarding those

to Let over now me turn the Fred. call

Fred Eppinger

details interest the all Stewart. through In Stewart, joining started a the quarter's years we Thanks Nat. strategy. brand, quarter historic time, real David execution your us it take here long-term company. to Stewart's at and impact. balance of and momentum. thank Two of to you results, discuss the premier ready strong operational had but evolution valued And financial in to sheet before continued a become continues to-date a take for life, some and earnings estate for a then but have like as this have make I'd ago, an you journey dramatic for to today's services impacts call market third We associates now Between will COVID-XX of minute, navigated and were as also knew have and we that the we that journey well knew to then willing title we will our

on are areas been and improvement and the injecting on have essential markets, augmenting the business We've we operational and adding energy and company. with and technology old and into main made real where progress. of a greater priority talent journey what our XXX focus capabilities core by our So estate scale significant new services year

we been Initial say, double-digit year robust goals exceeded a margin startup. very the albeit help achieving to XXX like are old of I market. of have As met and with

quarter last discuss a operating XX% or year-over-year almost and $XX up XX% David overall $XXX And mortgage in Stewart's the operating have XX% originations Mortgage Bankers was or which year. down As Association forecast are million million XX%. will up revenues over from purchased income in originations down

we would We have hindered the have be profitability forward acquisitions, cyclical. force going So our but size to we challenges we transaction centers and that scale and of efficient we flexibility our we done. and At believe say volume. seasonal activity estate real in accelerated structured, both and heavy managing we more closed added some the We midst daily operations, to where in of are of many value. comfortably grown work the can offices of critical a in the business is markets, are and this our stage restructuring much creating where changed and future. our Through has safely the market scale journey, critical we and outperforming real markets once we feel prevented improved, be

we of On special some for talent. a destination talent, very becoming are topic the

XX% are have team, at Stewart, people been top promoted. the On new we senior or leadership what our call

estate actions across leaders our but spectrum great the in aggressive real estate Our real nimbleness, investment, just entrepreneurial services our operations, and years talent, have talent become not support title the given in ease to and our will importantly, talented have technology, to attracted by journey from we into for many customer Most and have joined experience. improving come. more commitment customers investment our the us. This building valuable

of digitally current larger we lender our that market in as usefulness the and partners, bring more greater services as For that both transformed have marketplace. technology and efficiency well and the

component is see and daily become easier with importance critical we the in value our they a I technology, Certified. with reason has make security. a to will to the lives couple leave of issue thoughts. being last ability customers, smaller very you wire have their vital fraud Our of agents and The partnered tools, service for

further intensely to technology while when a advantage and closing benefited also to building process. us focused on process able First, are from required the cycles, I and the current for be real the investments estate we thrive a market closing the Stewart, that has take historic business we into future innovation And future. performance estate confident driving positioned our at have and success. real am digital here through and digitization the in, on our today full side are We transforms focused superior the deliver operational will and

very its is customers in technology a in Second, now business future vision removes and closing clearing digitized title of of driven from is risk largest insurance but title the are reality. to making ultimately which enabled, process toward the critical fully remains of execution while it core, who lifetime. purchase at important for the build a automated This a their

all results. As their for hard always, on them our congratulate associates work I and to their want thank

our and now you journey update the goal. David Thank on results then we will are of and closer Our continues, quarter to everyone the core.

David Hisey

morning. Fred and Thank you, good

their loyal Let their and service amazing me also for customers our thank associates support. our for

of Consistent on with durable the we and Fred’s our long-term good including seasonally the on scaling operating service geographic performance. markets, recovery, have driven multifamily. our showing impact business, continue entering slower commercial better supply is to provide and most particularly could estate focus policy chains. real scale performance, scale action, and capabilities by period, and and business focus we that virus, experience. demand delinquency continue yet throughout and remain government use and and rates. to watch attractive inflation industrial and and estate slower lingering are interest meaningful favorable impact that agency areas comments, fed high energy and future in improving operations, in strategy several and broadening our and direct will Although historically forbearance services Gaining rising improving real lender and Commercial markets ease and and user improving a There mortgage offerings, strong, be to items digital

results last an fee earnings result for of quarter disclosed per total to the gain of compared million of $XX volumes was million, approximately last XX% to liability For transactions quarter per reported revenues focus. or residential as Domestic margin increased yesterday driven and improved XX% orders XX% trend. generated consistent year the $XXX the operations. to net XXXX, our $X.XX for were due $X,XXX With quarter Pre-tax and revenues $XXX in continued million was The our pre-tax revenues last to third million year’s and improving The due year's of XX% also income is third to title revenues and adjustment. of of improved $XX net Appendix respectively total million. of primarily improvement $XX compared revenue fee versus segment Compared to higher operating last average higher quarter in last by a XX% an fee income purchase income due year's refinancing Total last to open year’s improved management share relating million with an and to file acquisition X,XXX million, decreased Canadian million our Stewart and in and $XX A of quarter On or from the XX,XXX million increased and to XX% which the solid adjusted revenues in XX higher due higher to segment title this transactions Total compared than agency direct $XX scale. third income contingent residential volume points or commercial net the and basis X% $XX third quarter. or $XX closed year. due lower or XX% increase file, basis purchase a per XX% was as driven respect press commercial release. increased million average adjustments file $XXX international to business, a Residential to primarily to mix. increased quarter market Title growth per transaction operations. quarter which diluted by

line to last generated quarter XX.X both experience. The higher remittance quarter third increased direct by expense with result compared improving basis, million $XXX and was On X%, XX.X% On title XX% and agency the increased orders XX% quarter a closed revenues, purchase partially business and versus of revenues primarily as year. In XX.X X% the for for year-to-date title claims XXXX a loss year. was compared losses, third last commercial a title million $XXX rate XXXX. title $X million it total operations favorable to XXXX. offset respectively with strong to or of agency However, our

to primarily in percentage of and In X% As loss regard as expenses while the compared operating year operating third increased to prior quarter XX% year, title to which of last expense in operating revenues due consists XX% was other Employee title increase in operating total employee higher and improved a of to primarily XX% costs, expenses other to pass-through of revenues, costs. the quarter. from X% last year, expenses, appraisal to relation percentage the increased from service costs revenues. operating XX%

good operating other company bottom-line other informative top Excluding matters margin $XX the expense our new million XX onboarded the regarding the On point, these should a plus a At grow the at been that going pipeline, future would've be a customers forward. in costs, closed year. and revenues to to transaction end run of both and ratio September. percent last that research, overall and had similar pre-tax with business rate

in very support remains our customers, employees position real the estate financial strong Our market. to

total to XXXX at requirements. attributable share. credit on about $XXX of $XX facility. sheet Our Shareholders' of increased with our were line equity investments XX million balance value on book cash September approximately existing a approximately million $XX Stewart regulatory the we billion $X.X a to And and of had

$XXX now markets. improved provided $XX turn million to cash quarter. inspired year's in the the by third for quarter and to safety prosperity, associates, operations for net grateful advocates and for questions. by remain operator compared everyone's estate real last We over and the the I'll increased back confident supportive for our Lastly, and to customers call from million our

Operator

Thank Bose George first from KBW. you. [Operator question Instructions] We'll take our of

Fred Eppinger

Good morning, Bose.

Bose George

first terms things of anything there, on commercial, of about Good of obviously when sort couple lumpy in premium quarter. of the morning. think Great high, about of think really was should that sort in we we curious rate that just Actually perspective? run a number terms in that

David Hisey

Hi of It's starting the across some Bose. with was I to really Thanks like No, be good, think more here. the segments multifamily strong wise. that Yes, in for the a question. breath the growth it's industrial the so bounced and a board strong mentioned energy. of it right. emotional benefit David I back,

Operator

Our Campbell with Inc. next question from John is Stephens,

Unidentified Analyst

morning. Hi, good

Fred Eppinger

Good John. Hey morning.

Unidentified Analyst

this for stepping Campbell. [ph] Hey, Hawley is John AJ in

Fred Eppinger

AJ. Hey, Okay.

Unidentified Analyst

had on informative I a research. Hey, quick question

frame be this and help accretion up potential? impact? First revenue maybe captured And going ancillary if income you can to the second expected potential segment. overall the in And what's just the services is

Fred Eppinger

be segment. It in ancillary will Yes. the

we my right. margin. comments, of XX% XX that run rate pre-tax think gave revenue, I in some

you should infer So that. be from able

Unidentified Analyst

Yes.

M&A buybacks? And dividends your rank What's then follow-up I from if that relative appetite may. and one does to how here Okay.

Fred Eppinger

us So of think still us. from opportunities as our opportunity economics number we structural assessment significant to markets. of of our various see in beginning, there's MSAs, a indirect for we've enhance kind said the There, for the we

– actually to the think We us various there's make some value enhance for for some we again to about think ability lender in data there's think market. offering our continue for frankly greater deliver also capabilities to services the to opportunities, our sense think that area, additional And to us to segments.

still are front in we So that our of us. growth thinking is opportunity

quarters of an As far since dividend. stock as price a increase think risen. thing We other that's as our capital think you our particularly about has couple the options saw us appropriate to back

others. good yield well, So think important to to – shareholders. is assess as a But for lot it's we I consider us that continue growth of right the do a our and our now growth and first, to us will capital first maintain for because then for it's

Operator

and Dowling Geoffrey Partners. [Operator is next Instructions] Dunn Our from question of

Fred Eppinger

morning. Good

Geoffrey Dunn

you. Good Thank morning.

Fred Eppinger

good Yes, morning.

Geoffrey Dunn

Yes.

First, the [ph] fully doesn't shift number in sequentially suggests file question, the resi geography. pretty mix big by fee which maybe necessarily HPA, jump per supported seem

investing MSA up areas. MSA You've in areas, more in been bulking certain

that I'm you've shifted in So bump get beyond trying impact this the is gotten purchase if geography has idea shift in up a HPI. just meaning mix an of sustainable, to this the that enough refi

Fred Eppinger

there's think but that's have I'll David anything don't abnormal the I us, in the – it's follow numbers. right. like absolutely you're for up,

rate, where based little on mix our shifted grown a bit our growth So significantly. geography and we've has

most our kind far of now, refi as the us like and market, shifted of some our but say shift places as the and have well growth geography as So Arizona pretty stability dramatic would for materially. the I price in we is the markets. versus increased mix market Colorado purchase pretty to There's as increases that

where pricing material side a we seen too, had increase. in You've our from that impact international

I again, from he David, sustainable, is guess way abnormal I anything not it was don't what it. the see or So raising is

David Hisey

Yes.

sequential think residential sort just And the think little XXX in up it's driven a around our by was I mix of the a I right. of everything, X%, a really under little file.

bit percentage. purchase higher there was a think I little

has is HPI then think been geography probably thing. I a think I up. it And

you significant, are. we different sort all some put of than that together, you're at that X% looking really stuff when So, is numbers unless

Geoffrey Dunn

All right.

Fred, in I price increases, these thinking is Just that, not conditions. of about to market up something mentioned you would type follow to which be

increase is various to what in driving So markets? ability your pricing

Fred Eppinger

if robust phenomenon has phenomenon year. environment, Canadian the so our Canada, at that's most mix, And affected you that has quarters That's for this the pricing many very primarily the will in revenue been was XX%, but it – infected you material. like growth international us, and look really in where if

Geoffrey Dunn

And annualized numbers. to rate I the I research. run then Okay. assume really I focus David? those wanted are appreciate on numbers, informative

David Hisey

Correct.

Geoffrey Dunn

static those point I'm the time. are numbers in Okay. But guessing kind of

growth mentioned You opportunity here.

platform about Stewart hole growth of sum was opportunity the probably the talk more on you had you the than with the probably felt opportunity wrapped the research of a can So think this than I because obviously the more parts where growth just it's area that the informative front? also but platform, through an is you and

David Hisey

quarter a of Yes. Well, the the they end. which I October right time, mean in at those numbers of were acquisition, we were of date beginning point the as at closed after

to platform just things I to itself, with few respect think the a think about.

the the front everybody lead in on So have knows side, is things the first ordering also first right. of of that's the loan on done all, generation the as they like. one There's it’s process, analytical and capabilities that

a process. capabilities go And by, to into the the significant. you so process, when services services up on ordering where kind so you be our the it as a title in going position the of in. of you're I like of you’re also can think one we're fit market, can on puts is the come other at position order a some So business that right? you are be mortgage, position of beginning go then those in puts you It notary all harder the upfront, And into beginning right in a you to ordering, with at appraisal

plugged certainly right. alone. you’re so, there a are underwrite the I that’s want business network. stand as overall are But always I it’s buy mean, of we the gave into that it how Stewart once numbers to businesses we then stands. benefits transactions. And We And number the

Fred Eppinger

of do data they’ve to there’s use, process opportunities the they kind And of about things products. enhanced platform customers what Yes. we’re trying them. the of the they improving The done of they process, between some of will the the have, and really and both And do. that’s integrations objectives meet the some what for do the be that they the efficiency David’s things our to broadly, of some synergy obviously enhancing and closed We economics we by the process point, and in will enhanced be economics. that believe liked us effectiveness the because the

So for And well. add we was the think we it important company. like very do them an

Geoffrey Dunn

opportunity, is volumes? a platform growth this kind trend to is that expected not a to with But be of Okay. clear,

Fred Eppinger

We growth Yes, that opportunity. absolutely. it’s a would hope Yes.

Geoffrey Dunn

Thanks. Okay.

Operator

We have KBW. of a Instructions] [Operator George Bose follow-up from

Bose George

to on both the title side, would months in just you now ago? guys. ask acquisition a businesses, sort in Hey, also wanted landscape about I of you’re six seeing and compare follow-up the how the ancillary but ago or what versus year

Fred Eppinger

the way, it’s find we’re refis But we’re of same us been more we’ve that’s for be going by Well, for that easier significant taking to you there be the more here. trying of as again, the mix. part thoughtful like We the and when go necessarily more feel purchase and kind in holes through. more that us core matches thoughtfulness of we more see trying And back don’t the I kind might by it’s right drop The had value kind the more ancillary and are to the Clearly is because same day to title that kind as any think geographies. side than we on every of the what fill-ins I we’re what economic now, as of of started selective. some business the approach after portfolio. is of obviously need

continuing As and we do ago holes a in on some I build. didn’t to scale if have problems focus said, we services have is – before, that that some year our I business. remember, some you But we’re had and there capabilities glaring one

really And we appraisal in we needed that some really lacking in did of did notary we really to what and what and our were business. capabilities solidify

different that lender our improve that we is the don’t eyes before. on urgency it side we our was much Not for to delivery in the have to of so that can clients – open particular. opportunities of the And than say don’t business

So of And we’re is would this get the and again, too. about part consistent we’re execution a the I you to for to in that for I robust. what that helps to deliver. very pipeline the good you move scale in and so allows and what in strongly model trying us local just that And seasonality to place, your more operating a through still you is do, think the but – I tell efficiencies it’s business we is believe customer better digitize also as market cycle much scale you because the

it road. to for lot a that so us continue just of And down sense makes

Bose George

Thanks. Great. Okay.

Operator

And does session. I’d the presenters question-and-answer happy for our this to our conclude be remarks. return to any call concluding

Fred Eppinger

to thank you joining to want Just next talking to for us you quarter. everybody say to look and forward

Operator

This does conclude today’s call.

your and a may disconnect day. everyone lines You now great have

Stewart Information Services (STC) 28 Oct 212021 Q3 Earnings call transcript