Stewart Information Services Corporation

Hello, and thank you for joining the Steward Information Services fourth quarter 2023 earnings call. At this time, all participants are in your listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. Instructions will be given at that time. Please note, today's call is being recorded. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the conference over to Brian Glaze, Chief Accounting Officer. Please go ahead.

Thank you for joining us today for Stewart's fourth quarter 2023 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO Brad Eppinger and CFO David Heisey. To listen online, please go to the stewart.com website to access the link for this conference call. This conference call may contain forward-looking statements that involve a number of risks and uncertainties. Please refer to the company's press release and other filings with the SEC for a discussion of the risks and uncertainties that could cause our actual results to differ materially. During our call, we will discuss some non-GAAP measures. For a reconciliation of these non-GAAP measures, please refer to the appendix in today's earnings release, which is available on our website at stewart.com. Let me now turn the call over to Fred.

Thanks, Brian. And thank you for joining us today for Stewart's fourth quarter 2023 earnings conference call. Yesterday, we released financial results for the quarter, and Dave will review these in a minute. Before doing so, though, I'd like to update you on my view of the market and our continued progress on important initiatives that we believe will set Stewart up for long-term success. While we have thoughtfully managed through this very difficult economic environment and its expenses and invested carefully, we have continued to invest in a number of critical areas to materially improve our business. Our focus has been on creating a stronger and more resilient enterprise that will thrive over a full real estate cycle. As we close 2023, we are operating in an environment that saw mortgage interest rates reach a high of 8% during the fourth quarter before falling to around mid-6% near the end of the year. Mortgage rates and rate volatility continue to impact transaction volumes, and we find ourselves at historic lows for sale of existing homes. At an industry level, the historically low purchase volumes combined with low existing home listing inventory has kept home prices elevated. As I have said before, we see 2024 as a transition year towards a more normal market for existing home sales during 2025 and believe the next six months will likely be very challenging given the macroeconomics laid on top of a typical seasonal impact. While the current environment has been difficult, I am very pleased with the progress our teams have made and improving the underlying financial and operating performance of the company during 2023. There is more work to be done, and it is critical we remain focused on improving margins, growth, and resiliency to improve scale and attractive markets and enhancing our operation capabilities. But I want to thank our teams for their dedication to making significant progress on these enterprise initiatives during the last 12 months. During the year and continuing this quarter, We successfully strengthened our financial position, giving us the flexibility to continue investing in the long-term success of Stewart and to take advantage of opportunities as they arise. During the fourth quarter, we continued to manage costs thoughtfully and have taken targeted actions where appropriate. We continually evaluate our cost structure to ensure that we are making sound long-term decisions on expenses. We have also been very careful not to take actions that we felt would threaten our competitive position and long-term value-creating opportunities. The most prudent path forward for Stewart as the market begins to normalize in late 2024 and into 2025 is to continue investing in our people and remaining focused on our long-term improvement plan. I believe we've done a good job of balancing strong financial discipline with targeted investments, and we will continue to be very diligent with our expense management during this difficult moment in the cycle. We remain focused on enhancing our operating model, investments in technology to enhance our customer experience and improve efficiency of our operations, and building scale in targeted areas. Some of the investments in technology have focused on improving our title production processes as well as our data management and access. These strategic investments are resulting in cost ratios that are somewhat elevated given we are in a market with historically low transaction volumes. However, we are setting Stewart up for better overall performance in the future. We believe that these long-term investments, coupled with thoughtful near-term expense management, will improve our structure and financial performance in the long term. During the current environment, we have been prudent with our acquisition-related investments and have been routinely re-evaluating markets in our direct operations where we have the opportunity to increase share and enhance our leadership capabilities. This has ensured that our deployment of capital provides acceptable long-term returns. We will maintain this cautious approach to investments through the first half of 2024. During the fourth quarter and throughout 2023, our commercial operations have performed well in a challenging market. While certain sectors were and will be challenged in the near term due to challenging financial markets, sectors such as energy remain extremely strong for us, and we see ongoing challenges in sectors like office. Growth in all sectors of our commercial operations remains an important component of our overall strategy, and positioning our commercial operations for growth across all our business lines has been key focus of our journey. We are making investments in talent so that we have the leadership in place to achieve these objectives. We are also investing in technology to support the commercial operations to allow us to better serve our customers and more efficiently manage our business. We believe our strategies will create long-term growth in the commercial markets for us. Our agency business finished the fourth quarter with another solid performance as we have been leveraging our agency technology to drive market share gains. During the fourth quarter and throughout the year, we have made excellent progress on our deployment of technology and services that provide a significantly improved customer experience for our agents. This enhanced experience includes greater connectivity, ease of use, and risk reduction for our agent partners. We are pleased that our platform of services for agents is as strong as it has ever been, and we will continue to focus on growing share in our target markets, such as Florida, Pennsylvania, and the overall commercial market. Our real estate solutions maintain solid financial results in the fourth quarter and throughout 23, particularly given the market headwinds. We are focusing on driving share gains as we leverage our improved portfolio of services to better and more deeply serve our lender clients. While we are not immune to the market downturn in these businesses, we've been able to offset some of the challenges with share gains. An important achievement during 2023 was our focus on improving our technology for the title production process automation and centralization to improve operational efficiency and capabilities. Our investments have already resulted in significant progress toward improving the customer experience across all the channels. And another area of priority work as we work to improve our operating efficiency is the centralization and digitization of our title data. We are pleased with the significant progress that we made on that this year. This progress at more normal production levels will result in considerable improvement in our delivery costs. Improving our financial strength by growing margin has been a significant focus of our journey. We have made good progress in our effort, and we are aware that the returns remain depressed during this phase of the cycle. Our investments should allow us to achieve low double-digit pre-tax margins as we turn to a more normal 5 million unit purchase market. While we are encouraged by our improvements in talent, technology, customer experience, and our financial model, we know that the journey is not complete. We remain focused on our strategic plan of building an improved competitive position by being more efficient and having a disciplined offering model that functions well throughout all the real estate cycles. We have emphasized growing scale and attractive markets across all the lines of business, and we have made great strides in improving the customer experience in all our channels. Attracting and retaining key talent is always important, and we've been even more focused on retaining talent through this market so that we have the right team in place as the cycle improves. I am pleased that our efforts are yielding results through increased year-over-year market share gains in each of our direct, agency, commercial, and real estate service businesses. Let me conclude by really reiterating that we have been managing the balance of our expenses and investments thoughtfully to be mindful of necessary operating discipline for the current market challenges while also dedicated to strengthening Stewart for long-term growth and performance. A solid financial footing should best position us to take advantage of the opportunities that this cycle will provide. Finally, I remain positive on the long-term view of the real estate market and the ability of Stewart to become the premier title services company. Our associates have worked diligently throughout these challenging times, and I appreciate all they have accomplished. I also want to thank our customers and our agency partners for their continued loyalty and support. David will now update everyone on the results.