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spk00: Greetings and welcome to the First American Financial Corporation fourth quarter and full year 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator 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 877-3255. 660-6853 or 201-612-7415 and enter the conference ID 137-26034. We will now turn the call over to Craig Barbario, Vice President, Investor Relations, to make an introductory statement.
spk03: Good morning, everyone, and welcome to First American's fourth quarter and year-end 2021 earnings conference call. Joining us today on the call will be Dennis Gilmore, former chief executive officer and recently appointed chairman of the company's board of directors, Ken DiGiorgio, First American's new chief executive officer, and Mark Seaton, executive vice president and chief financial officer. Some of the statements made today may contain forward-looking statements that do not relate strictly to historical or current fact. These forward-looking statements speak only as of the date they are made and the company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Risk and uncertainties exist that may cause results to differ materially from those set forth in these forward-looking statements. For more information on these risk and uncertainties, please refer to this morning's earnings release and the risk factors discussed in our Form 10-K and subsequent SEC filings. Our presentation today contains certain non-GAAP financial measures that we believe provide additional insight into the operational efficiency and performance of the company relative to earlier periods and relative to the company's competitors. For more details on these non-GAAP financial measures, including presentation width and reconciliation to the most directly comparable GAAP financials, please refer to this morning's earnings release, which is available on our website at www.firstam.com. I will now turn the call over to Janice Gilmore. Thanks, Craig. Good morning, and thank you for joining our call.
spk07: In addition to our record earnings, we recently announced that our company's president, Ken DiGiorgio, has been promoted to chief executive officer. Over his 23 years of service to First American employees, customers, and shareholders, Ken has acquired an in-depth understanding of our business and demonstrates that he has the vision, strategic insight, and skill to lead our company. Under Ken's leadership, First American will continue to lead the digital transformation of the title insurance and settlement industry. Ken and his team will continue to capitalize on the many opportunities the company has to grow our business. At the request of our board of directors, I am honored to continue to serve on the board now as its chairman. Immediate past chairman, Parker Kennedy, will remain on our board as chairman emeritus and lead director. During my 12 years as CEO, I've had the incredible privilege to work alongside First America's great people. Our company culture that puts people first has driven our success. As I've said many times, when we put our people first, they'll take care of our customer, and when they do and we run the business efficiently, we will deliver superior results to our shareholders. I know that Ken and his leadership team and all of our employees will maintain our exceptional culture will continue to raise the bar on our performance. I'd now like to turn the call over to Kim. Thank you, Dennis. On behalf of First American's 22,000 employees, I want to recognize and thank you for your inspirational leadership and dedication over your nearly three decades with our company. Your focus on fostering a world-class culture while delivering an annualized total shareholder return of 18.2% during your 12-year tenure as CEO has set the bar high. Your vision for our company to be the premier title insurance and settlement services company, the vision that has guided us to where we are today, will continue to guide our future success. And the strategy we developed to achieve that vision, a strategy that has served us well for over a decade, will not change. We will continue to strive to profitably grow our core title and settlement business including through innovation and the acquisition of companies that are compatible with our culture and advance our vision. We will continue to strengthen our business by leveraging data and process advantage. And where we have a strategic advantage, we will continue to manage and actively invest in businesses that are complementary to our title and settlement business. Thank you again, Dennis. Your impact on First American will be lasting. Turning to our financial results, 2021 capped off record revenue of $9.2 billion, record title margin of 16.3%, and record earnings per share of $11.14. Even excluding net investment gains, EPS was $8.17, yet another record. While we are proud of these achievements, our focus continues to be on the things that will drive future growth. At the beginning of 2021, we announced our intention to expand our title plant footprint from 500 counties to 1,500 by the end of that year. Leveraging our proprietary data extraction technology, we are currently maintaining more than 1,600 title plants, covering nearly 80% of the US population. This data is critical as it fuels our operational efficiency initiatives, our title automation efforts, and our ongoing efforts to digitize the real estate closing experience. You can't automate unless you have data, and we are the industry's undisputed leader in title data. Last month, we announced an agreement to acquire Motherlode Holding Company, a title company with 92 offices across 11 states, including the key markets of California, Texas, and Arizona. Motherload is an important transaction for us in many ways. First, we have the opportunity to welcome amazing talent to our organization. Second, we further expand our distribution network as Motherload's 10 brands are among the best within their respective real estate communities. Lastly, Motherload is a key step in a multi-brand strategy for our title company that will accelerate our growth efforts. The transaction is awaiting regulatory approval and is expected to close in the coming months, after which we will provide additional detail. We are excited to welcome Motherlode to the First American family and look forward to growing together in the future. In terms of the outlook for 2022, it will be a year of transition we are well positioned for. We expect market conditions in our purchase and commercial businesses which account for approximately 80% of our direct revenue, to remain favorable. Refinance volumes will continue to wane as mortgage rates tick up, but we believe increased investment income due to a rise in short-term rates will help offset the decline. As short-term rates rise, we will benefit from higher investment income from our cash and escrow balances, 1031 exchange deposits, and bank portfolio. We believe our bank is a competitive advantage and serves as a natural hedge when higher mortgage rates drive refinance volumes lower. In January, we opened 2,000 purchase orders per day, a 7% decline from a strong January 2021, and a 9% increase relative to January of 2020. Our refinance orders were 1,200 per day, steady with what we experienced in December. Now I'd like to turn the call over to Mark for a more detailed discussion of our financial results.
spk05: Thank you, Kent. We are pleased to report excellent results this quarter. We earned $2.33 per diluted share, included in this quarter's results for $0.05 of net investment gains. Excluding these gains, we earned $2.28 per diluted share. I'll start with our title business. Revenue in our title segment was $2.3 billion, up 13% compared with the same quarter of 2020 due in part to a record quarter in our commercial business. Commercial revenue was $377 million, a 66% increase over last year. We experienced strength across the board in terms of geography, asset class, and deal size. We closed 117 transactions in the U.S. with premium greater than $250,000. up from 58 last year. For the year, our commercial business generated over $1 billion of revenue, eclipsing our prior record achieved in 2019 by 34%. Purchase revenue was up 2% during the quarter, driven by a 7% increase in the average revenue per order, partially offset by a 3% decline in the number of orders closed. our purchase orders declined from an unusually strong quarter in Q4 of 2020, which experienced the release of pennant demand due to the pandemic. Looking at a more normalized two-year trend, our closed purchase orders this quarter were up 15% relative to the fourth quarter of 2019. Refinance revenue declined 46% relative to last year due to the increase in mortgage rates. In the agency business, revenue was a record $1 billion, up 20% from last year. Given the reporting lag in agent revenues of approximately one quarter, we are experiencing growth in remittances related to Q3 economic activity. Our information and other revenues were $322 million, up 15% relative to last year. Revenue growth was primarily due to the recently completed acquisition of ServiceMac and higher demand for the company's loss mitigation products. Investment income within the title insurance and services segment was $49 million, down 8%, primarily due to lower interest income from the company's warehouse lending business and other cash balances. If the Federal Reserve raises rates, we expect to generate additional investment income from our escrow deposits, cash balances, 1031 exchange deposits, and our bank investment portfolio, where we have over $1 billion of floating rate securities. We estimate, based on current deposit balances, that a 25 basis point increase in the federal funds rate will equate to a $15 to $20 million increase to our annualized investment income in the title segment. Pre-tax margin in the title segment was 16.3%. Turning to the specialty insurance segment, revenue in our home warranty business totaled $104 million, up 1% compared with last year. pre-tax income and home warranty was $17 million, down from $21 million the prior year, primarily due to elevated claims activity, as the loss rate rose to 52.0% from 50.5%. Our property and casualty business had a pre-tax loss of $6 million this quarter. At year-end, our policies and force had declined by 71% since the beginning of the year, and we expect a full wind-down of the property and casualty business to be completed in the third quarter of this year. The effective tax rate for the quarter was 21.6%, lower than our normalized tax rate of 24%, due primarily to reduced state taxes as a result of larger than forecasted insurance income in the quarter, which is generally not subject to state income tax. This quarter, we recorded $7 million of net investment gains on a consolidated basis. We generated $52 million of gains related to three PropTech investments and $26 million of gains from our public equities portfolio. Those gains were offset by a $75 million decline in the market value of our stake and offer pad. Cash flow from operations was $344 million in the fourth quarter, down 15% from the prior year due to a change in working capital accounts. In the fourth quarter, we repurchased 270,400 shares for a total of $20 million at an average price of $74.38. So far in Q1, we've repurchased approximately 345,000 shares for a total of $27 million. Our debt-to-capital ratio as of December 31st was 27.4%. or 22.2% excluding secured financings payable, slightly higher than our target ratio of 18 to 20%. Now I would like to turn the call back over to the operator to take your questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star key. One moment, please, while we poll for questions. Our first question comes from Mark DeVries with Barclays. Please proceed with your question.
spk09: Yeah, thank you. And congratulations, Dennis and Ken, on your new roles. So, Ken, you know, I appreciate you've been there for a long time, and also we're kind of joining at a time when FIF is doing quite well. So I'm sure there's a sense of, like, if anything broke, don't fix it. But interested to get your thoughts on kind of your early priorities, you know, kind of whether there's anything different or any new levels of emphasis or investment that you're kind of focused on.
spk07: Yeah, thanks, Mark, for your kind initial comments. And, you know, listen, I've been working with Dennis for 23 years and, you know, at his side for the, you know, the last 12 as CEO. And, you know, so I don't anticipate any dramatic shift in our strategy. You know, Dennis's vision that he initiated for our company is going to remain to be our vision, and that is to be the you know, the premier title and settlement services company. And obviously, as, you know, demonstrated by the results, you know, that has worked well for us. And, you know, and to execute on that vision, we're going to execute on the same strategy, you know, to grow our core title and settlement business to, you know, leverage data and process advantage to the benefit of the business and, you know, to invest in our complementary business. So I don't really see the need to to initiate any dramatic change. Obviously, there's going to be things we're going to focus on going forward as the market changes, but I don't think we're going to be doing anything dramatically different than what Dennis has done. And the other thing I'll add is that, you know, one of Dennis' many lasting legacies here is the team he built, and he built an incredible team. And that team, which, by the way, includes, you know, Mark Seaton, who I know you know well and, you know, in my opinion is probably the best CFO in any public company. We built this strategy, and so it's all of our strategy, including mine.
spk09: Okay, great. And then turning to Mark. Mark, I just have a question on the sensitivity of the investment income to rising rates. First of all, I think you said $15 million to $20 million of incremental annual for every 25 bps. Kind of wide, what kind of gets you the difference between the $15 million outcome and the $20 million?
spk05: Yeah, thanks, Mark. You know, there's a lot of moving pieces to come up with that. That's our best estimate right now. But we've got, you know, our bank floaters. We've got our escrow deposits. We've got our operating cash. We've got our 1031. There's a lot of moving pieces. You know, we think that, you know, in our discussions with our banks, certainly maybe the first one or two rate increases, we might be at the lower end of that range. But I think as the Fed continues to raise, which we all expect, we'll probably be more at the high end of that range of $20 million as banks make more loans. And right now, they just don't really need our deposits. Most of the banks we have, they don't really value the deposits, and that's why the rates are so low. So it might take a couple of increases for them to really start to manage the deposits. So I think certainly the initial raises might be the low end of that range, but Over time, we do think we'll be at the high end of that range. And that, of course, assumes our deposit balances kind of stay at current levels.
spk09: Okay, got it. And it sounds like it ramps a little bit with more rates, but is that in general the guidance fairly linear? So, in other words, you know, if the five and a half or so increases that's implied by the forward curve is accurate, that by the end of the year you could have almost, you know, somewhere between $75 million and $100 million of incremental run rate investment income?
spk05: I think so on an annualized basis, yeah, in the title business. And again, it'll be a little bit less, you know, at the beginning and a little bit more at the end. But overall, yeah, I think it's fairly linear.
spk10: Okay, great. Thank you.
spk05: Thanks, Morris.
spk00: Our next question is with Andrew Klugerman with Credit Suisse. Please proceed with your question.
spk08: Hey, good morning. Maybe just sort of staying on the incremental investment income. I know that you've undergone some efforts to build out your, your bank to, to make, uh, make it available for agents to make deposits. Um, how, you know, how could that affect that 15 to 20 million? I mean, how, how much, how soon do you think you'll have that component of the bank up and running and, um, how much in deposits do you think you could garner, uh, in 2023 and beyond.
spk05: Yeah, thanks for that question, Andrew. So the $15 to $20 million that we've been talking about here, that's assuming, again, deposit levels stay the same. Now, you've pointed out the fact that we're growing our bank and we're growing it through our agency deposits. As of the end of the year, we had about $250 million of agency deposits. and we had almost $7 billion of deposits at our bank. So it's growing. We think it will double this year. It's not going to have a huge impact, but over time we think that's a big growth area for the bank is having agents deposit their funds for us. But I don't think that will be material for 2022, maybe even 2023. Got it.
spk08: And with personnel costs up approximately, what was it, 19% versus the fourth quarter of last year, maybe just a little more color on the outlook for personnel costs and what's driving it up so much year over year.
spk07: I'll chime in, Andrew, and then Mark can finish off with some more definitive numbers. But on personnel costs, I think we expect personnel costs to remain steady, but I will note that I don't think it's any mystery that we're going to have inflation pressure. So there is some risk of increased personnel costs. you know, going into the year. And then, you know, obviously, as we've done historically, we watch our personnel costs, in fact, our entire cost structure very closely and adjust as necessary to the market.
spk08: So maybe just other than inflationary cost on wage, it should hold pretty steady?
spk05: Yeah, I think... You know, the current headcount that we have now we think is appropriate. I mean, one dynamic that we had in 2021 is that we were hiring throughout the year. And so when you just look at it on a run rate basis, we're going to have higher personnel costs in 22 than we did in 21 because of the fact that we were hiring through the year. And also, we have acquisitions, too, that are going to increase our headcount even more. But we think we're, as Ken said, we're probably staffed, and we're going to have higher personnel costs next year just because of the run rate dynamic. Thanks so much. Thank you.
spk00: Our next question comes from Mark Hughes with Truist. Please proceed with your question.
spk10: Yeah, thank you. Good morning. And just to follow up on that, when you say steady personnel cost, are you talking in absolute terms or are you talking as a ratio?
spk05: Well, really, really both. I mean, we're going to have higher personnel costs on an absolute basis. And when you look at our personnel costs as a percentage of our net operating revenue, which is a metric we look at, that's going to rise as well next year.
spk10: Okay. And then did I hear you properly? The purchase orders in January were $2,000 per day. And what was that year-over-year change?
spk05: It was, yeah, it was. It was $2,000 a day, and it was down roughly about 7% versus the prior year. But remember, January of last year was a very strong January because we had all this pent-up demand because of the pandemic. So it's certainly down from last year, but when you've got a two-year trend, it's a lot more favorable.
spk10: Yeah. The commercial revenue per order, quite strong. You talked about the large orders. Is that kind of unusual pent-up demand, or is that the new reality?
spk05: Well, I'd say, you know, we had an extraordinary fourth quarter. This is the best fourth quarter we've ever had. As I mentioned in my remarks on the script, I mean, this was by far a record year for commercials. So, you know, on the one hand, you know, we've never experienced anything like what we experienced in the fourth quarter. On the other hand, we have a good pipeline heading into this year. I mean, for the first six months, we know that we're going to have very strong commercial activity as evidenced by the fact that our escrow deposits, which are a leading indicator of commercial activity, haven't really declined very much from the fourth quarter. So we know that we're going to have a good, you know, six months in commercial. After that, it's hard to tell. But, you know, in our conversations with our customers, there's a lot of capital out there and And we've seen this, you know, rise in commercial transactions that we think can continue.
spk10: Then one more, if I could. The mother load acquisition, is that just a good opportunity or does it represent some sort of a not shift in strategy but growing preference for similar deals?
spk07: Yeah, well, this is Ken, and thanks for the question. I think, first and foremost, it was a fantastic opportunity. Opportunities like that don't come along very often, and by that I mean a company of their size and scope, you know, their reputation in the industry, and then on top of all that, just the quality of their people and their compatible culture. So, you know, I think, yeah, A, it was an opportunity. But B, as I suggested earlier, it is a foray for us into a multi-brand strategy. That's not to say we don't have other brands in our title company. We do, including Republic Title Texas, which is a premier brand. But we see Motherlode as an opportunity to penetrate markets that, for whatever reason, we haven't been able to penetrate yet, or for that matter, others have been able to penetrate. and to take advantage of really their unique approach to the market. I think every one of the title companies has a different approach to the market, and we're going to be able to add that approach to our own. Thank you very much.
spk00: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question is from both George with KBW, please proceed with your question.
spk06: Hey everyone. Good morning. Um, actually just to follow up on, um, mother love, have you said anything about accretion from that acquisition?
spk07: No, we haven't yet. And, you know, the transaction is subject to regulatory approval, so it's not going to close probably for, you know, a couple of months at least. And, you know, once it does close, we'll provide some additional information, you know, hopefully at the next – on our next call to you and the other.
spk06: Okay, great. Thanks. And then, actually, just in terms of your other investments, obviously there's been a pretty big sell-off in the PropTech public stocks at least. you know, has that created opportunities for you? Like, you know, what's going on there on the private market side?
spk07: Yeah, well, I think there are opportunities. I'll say we haven't seen a decline in valuations in the types of companies we look at. But, yeah, I would anticipate that there will be more opportunities for us and probably more favorable pricing going forward. You know, and I'll note on our venture portfolio, I mean, it's, you know, as Margaret indicated, it's performing well financially. I mean, we've, you know, we've booked gain of $355 million at year end. But I'll remind you, we're not just doing these investments for financial returns. We're doing them for strategic reasons. We want to invest in prop tech companies that give us insights into what companies like that need so we can adapt and adjust our products. And also they might, you know, ultimately become customers or good customers of ours. And we've actually seen that in the past. So, you know, when we talk about the opportunities, we look at it not just from a valuation or a financial perspective, but from a strategic perspective and probably first and foremost from a strategic perspective. So we think those opportunities will continue to present themselves.
spk06: Okay, great. Thanks. I guess just one more, just swinging back to expenses. Can you just talk about your success ratio? You know, was that, versus your expectations this quarter?
spk05: Yeah, well, so we've always talked about a target success ratio of 60%, but we've been talking about that for probably about 15 years now. We've hit it most of those years. And it's just not sustainable. I mean, if you hit a 60% success ratio every year, your margins keep going up and up and up. So This quarter, well, first of all, I'll point out that for the year in 2021, we had a 59% success ratio, so we hit it for the year. For the fourth quarter, it was higher. We were at 87.5%. You know, there's a few things. I mean, I wouldn't say we had any, like, you know, significant one-time expenses, but our 401K expenses for the quarter were $8 million higher than last year because we our 401k plan is, you know, we pay our employees more depending on, you know, the profitability of the company. So we matched it $1.50 versus 75 cents last year. We also had $9 million for like a healthcare true up at the end of the year. And then we also have some entities like endpoint, like service Mac that, you know, have losses and that puts pressure on the, on the success ratio. So overall, I think we're, We're happy with how we manage expenses for the year, for the quarter, but the success ratio looks high for those factors that I just mentioned.
spk06: Okay, great. Makes sense. Thank you.
spk00: Our next question is from Jeffrey Dunn with Dowling and Partners. Please proceed with your question.
spk02: Thanks, Mark. I guess I'm actually really surprised by your outlook for personnel expense. when you consider how much of that line is commissions, bonuses, you know, temp and other variables. So as you think about an absolute increase year over year, can you frame that relative to revenue? I mean, it would seem to me very unusual type of outlook unless you're expecting revenue to only be down maybe 5 percent or something like that. Otherwise, it seems like more compression than I would have expected in a slowing environment.
spk05: Well, you know, sorry, Jeff, I cut you off there. But, you know, last call, you know, we talked about how we thought we could have flat revenue in 22 versus 21. And, you know, now, you know, in this call, I think we still stand by that. So, you know, we don't know. I mean, as we talked about, there's a lot of, you know, things that are happening in 22. We never really know. But based on where we're sitting right now, we don't see a decline in revenue. That could happen, but we think we'll be closer to the flat.
spk02: Okay, that makes more sense. And then if you are in a flat – your success ratio is designed for year-over-year increase in revenue. So if we're in a flat or down revenue scenario, how do we think about judging your expense management against that framework?
spk05: Yeah, so – Or how do you think about it? Yeah, so the success ratio itself, you know, it's really a metric that we came up with a long time ago to determine, you know, are we doing a good job of managing expenses when the market's up or down? It's less relevant if you have flat revenue, right, because you can get some pretty wild numbers for the success ratio. I think at the end of the day, we want to have strong margins. We look at each one of our businesses that have different margin dynamics, and we want to make sure that we have good returns on capital, good margins. And in a flat revenue environment, again, to your point, the success ratio isn't as meaningful. Okay.
spk04: All right. Thanks. Thanks, Jeff.
spk00: Our next call comes from Ryan Gilbert with BTIG. Please proceed with your question.
spk01: Hi. Thanks. Good morning, guys. First question for me is on just competitive dynamics in the core title business. Any details or color you can add on what you saw in the market in the fourth quarter and how you think about competition developing over the course of 2022?
spk07: Yeah, you know, I don't think we anticipate seeing dramatic change in the competitive environment. You know, obviously interest rates are going to have, you know, a headwind. And I think a lot of the, you know, upstart title companies that are refinance-driven are going to, you know, have a, you know, it'll be a critical inflection point for them. But I think in terms of the, you know, the larger competitors in particular, I I don't see that dynamic changing too dramatically.
spk01: Okay, got it. Second question, could you just update us on endpoint and your progress expanding into new markets, maybe the customer pipeline as you see it now?
spk07: Yeah, I think on the whole, the endpoint is doing well. They're maintaining their market share and their test market, which is in Seattle. They've been expanding into new markets. They're currently in 20 markets across seven states. And I think one of the telling indicators for me is our net promoter score within Endpoint. I mean, it's above our target, which tells me that we're gaining traction with the customer base. You know, I think it's being received well with customers.
spk01: Okay, great. Last question for me just on share repurchases. It looks like you picked up the – the volume pretty significantly in January. Just how are you balancing share repurchases with other investment opportunities and maybe how we should be forecasting repurchases in 22 and 23?
spk05: Well, you know, it's always something we look at. I mean, we're, you know, we've been very active in the M&A market, you know, the last, certainly last year and more. We're very active in terms of investing in our core business just to develop software and tools to make it easier for us to digitally connect with our customers. So we're making a lot of investments, and we're fortunate in the fact that we can make those investments and still repurchase our shares. You know, we think that our stock is undervalued, and that's why we're buying our shares. I mean, when you look at our multiple, I'm at Bloomberg this morning, we were trading 11 times earnings. But we kind of ask ourselves, where are we in the cycle? At 11 times earnings, that would kind of imply we're at the peak of the cycle, but we're certainly not at peak when it comes to refis or at the trough when it comes to refis. We're certainly not peak when it comes to investment income or at the trough when it comes to investment income. So you balance out those, and I think on a stay-along basis, our multiples maybe should be a little bit higher. But then when you layer in some assets that we have at First American that maybe aren't completely reflected in our public market value, including, Ken mentioned, our PropTech portfolio. The carrying value of the portfolio was $673 million at the end of the year. And when you trade on a PE basis, at least I would argue that that's not being fully reflected in the value of our shares. And then certainly we have some assets that we have losses at First American. We're very excited about Endpoint. Endpoint has losses Same thing for ServiceMac. Same thing for our property and casualty business. But we feel like all those, you know, have value to them and aren't being reflected. So for those reasons, we've been in the market, you know, these last couple months, and we'll kind of see what happens for the rest of the year. I don't have, like, a forecast for you. But as we mentioned earlier calls, we're going to be more likely to buy back in the future than we have in the past, and I think we've started to show that.
spk01: All that makes sense. Thanks very much.
spk00: Our next question is from John Campbell with Stevens. Please proceed with your question.
spk04: Hey, guys. Good morning. And, Dennis, congrats on an outstanding run. Happy you're still going to be around at the chairman's seat. And then, Ken, congrats to you as well. We're looking forward to working with you. Thanks, John. Thank you, John. Sure. You know you guys were going to get this question. So on the title pre-tax margin, I mean, you guys obviously in the past have talked, I think, 11% to 13% range. Obviously, the past few years, really good mortgage backdrop. You guys, you know, 15% to 16% margins. You got the reply headwinds this year. You've got what seems like a pretty sturdy business on purchase and commercial. You guys talked to maybe flattish revs. I think we certainly see that as well. You've got the investment income pickup. With all that said, I'm just curious about how to think about pre-tax margins. I know it's going to probably be hard to keep it at 21 levels with the wage pressure, but Seems like you got enough things cooking to maybe kind of keep it close. So just curious about commentary there.
spk07: Let me chime in real quick on the outlook, and Mark can chime in as necessary. And, you know, obviously this morning the inflation number, you know, wasn't great, which I think, you know, sealed the deal, you know, on the Fed raising rates. But, you know, I think there is some, you know, cause for optimism, at least going into the first half of this year here. On the purchase side, rates are still relatively – mortgage rates are still relatively low. They're rising, but they're still low. And we've got some demographic benefits, millennials, for example, coming into the market. Of course, there's been low inventory, but I think we remain hopeful and expect to see some inventory coming onto the market, which I think bodes well for our purchase business. And then as you noted on the commercial business, we're coming off a record-setting year. So we'll have some momentum coming into this year. And as Mark mentioned, the pipeline looks really good. So we're optimistic on the commercial market, again, because rates are still relatively low. And as Mark also mentioned, there's a lot of capital chasing deals. You know, the refinances, I think we've all been talking about here to end this call, is, you know, the strong correlation with rates. So, you know, we expect it to wane as rates go up. But, you know, we're in a great position to offset that with investment income, you know, particularly given, you know, given our, you know, the one really unique asset we have in the industry, and that is our bank. So, you know, I feel, I guess from my perspective, I feel good about our margin going into the as we go into 2022. But, you know, we're ever conscious of the headwinds of increasing rates. And as I suggested earlier, we will watch the cost structure very, very carefully.
spk04: Okay, that's helpful. I appreciate that. And then in your... prepared remarks around Motherload. You guys talked to the multi-brand strategy. It seems like that's a fairly big pivot for you guys. I mean, it seems like a single-brand strategy that's probably more cost-efficient, but maybe there's that growth benefit that kind of trumps that. So maybe if you could talk to that and then why you're exploring that now, what triggered the change?
spk07: Well, I think... I think part of it was the opportunity that presented itself. Motherload has really 10 top-notch brands, and I think it would be imprudent of us to roll that into a single brand just because they've made such great inroads with those brands. So, you know, I guess I don't really see it as a pivot, as more of a shift, because, you know, as I'd indicate, we do have some other brands. We have Republic Title. We have Title Best. There are some other brands in our portfolio. So I think we more view it as a shift and an opportunity to approach the market in a new way.
spk06: Okay. Thank you, guys.
spk00: Mr. Gilmour, there are no additional questions at this time. That concludes this morning call. We would like to remind listeners that today's call will be available for replay on the company's website or by dialing 877-660-6853 or 201-612-7415 and enter the conference ID 1372-6034. The company would like to thank you for your participation. This concludes today's conference call.
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