Stewart Information Services Corporation

Hello, and thank you all for joining this Stewart Information Services second quarter 2024 earnings call. At this time, all participants are in a listen-only mode, but later you will have the 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 and zero. It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Please go ahead.

Thank you for joining us today for the Steward's second quarter 2024 earnings conference call. We will be discussing results that were released yesterday after the close. Joining me today are CEO Fred Eppinger and CFO David Heide. To listen online, please go to the steward.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 reconciliation of these non-GAAP measures, please refer to the appendix in today's earnings release, which is available on our website at steward.com. Let me now turn the call over to Brenton.

Thank you for joining us today for Stewart's second quarter 2024 earnings conference call. Yesterday, we released financial results of the quarter, which David will review shortly. I'd like to kick off the call by sharing our outlook on the current housing market, followed by an update on the progress we're making on each of our businesses. I am very pleased with the results this quarter. We have continued to make great progress on our strategic initiatives and are winning share in multiple businesses. These things are difficult to pull off in a normal market, much less an environment that we're in now. The housing market has remained depressed much longer than most people anticipated, but Stewart has maintained our competitive edge by improving our financial and operational positions. We remain confident that we are well positioned to capitalize on improving market conditions. Our view of the current housing market has not materially changed this quarter. We continue to experience a very suppressed housing market through a combination of factors such as the continuation of elevated mortgage rates, rising hope prices, and low but slowly returning housing inventory. The market continues to bounce on the bottom, where existing home sales every month for the last year have been worse, except for one, than the prior. The only exception was January of this year, which was flat relative to last year. To further illustrate how choppy the market conditions are, recent Data shows that the overwhelming majority of the top 25 MSAs in the country are experiencing increased inventory year over year, yet pending sales are down. In June, we saw a feasibly adjusted run rate of 3.98 million existing homes for sale, a 5% reduction from the prior year. There has been a very recent improvement in sentiment around interest rates, and inventory continues to enter the market, but buyers are still exercising extreme caution. There are, of course, some transactions occurring as homes are being bought and sold given various life events, but many consumers continue to remain in a holding pattern given current headwinds. We expect 2025 will be the transitional year, helping shepherd us back to a more normal market, which we see is characterized as around 5 million existing homes annually. So we're poised to capitalize on an improving market, but are diligently manning ourselves like the year will be flat to down. We do believe that the next three quarters will be interesting as we monitor things like CPA reports and rate cuts and the results of the upcoming election. So we will be prepared to capitalize on any improvement. Turning towards our operations, we remain focused on building an improved competitive position by executing upon a disciplined operating model while also identifying efficiencies to prepare ourselves for market rebounds. We are dedicated to growing scale and attractive markets across all our lines of business, and we have made great advances on improving our customers' experience in all channels through upgrades to our technology, capabilities, and operations. We've implemented technology to enhance our title production processes and are working on utilizing technology to improve our data management and access. We continue to focus on attracting and retaining key talent, and we know that Stuart is the best home for industry-leading talent as to grow with us as the market improves. Our direct operations segment is focusing their expansion efforts on targeted MSAs, and we expect to utilize both acquisitions and thoughtful organic growth to drive share gains. We routinely evaluate markets to ensure we have a view of the most attractive markets for growth and leadership, and we have limited our acquisition-related investments in the current environment, but have maintained a warm pipeline to prepare ourselves for improving markets. Even though we are currently cautious about acquisitions, we are still very positive about the outlook for opportunities as the market normalizes, and we have not deviated from our long-term goals for this business, which is to grow, share, and scale in attractive MSAs. In commercial, our results for the last two quarters reflect our focus on increasing share in our commercial operations. This quarter, we introduced our dedicated hospitality team and our new national affordable housing team through the acquisition of all New York title agencies. We are making investments in talent across our commercial operations so that we have the leadership, operations, and sales teams in place to achieve our goals. We are also investing in technology to support our commercial operations to allow us to better serve our customers and manage our business more efficiently. We expect our commercial transaction momentum to continue, but we know the near-term commercial market challenges may present themselves depending on the outcomes, on outcomes with rate cuts and the upcoming election. Our agency team remains focused on driving share gains in attractive agency markets. We are focused on our 14 target states and are seeing very good progress in a number of states, even in the current market conditions. Specifically, we have seen good leverage from our improved support services as well as our enhanced ability to serve commercial agencies. While success comes from a lot of basic blocking and tackling, we see the opportunity for continued momentum. The real estate solutions team is focused on gaining share with the top lenders through new innovative solutions and cross-selling of our products as we leverage our significantly improved portfolio of services to better serve our lender clients. Our real estate solution businesses maintain solid financial results and growth in the second quarter, particularly given the market We have seen significant growth in new clients as compared to the second quarter of last year, mostly coming from some innovative solutions in our credit information evaluation services. In our pre-tax income results, you can see that we are experiencing an increase in customer acquisition expenses as we have onboarded a significant number of new clients. These expenses will normalize toward the end of the year. The current market makes cross-selling our business in this space a bit challenging, We've been able to offset some of the challenges by gaining share from our existing clients and with new client introductions. Our momentum should continue as we have significant cross-sell opportunities available to build upon over the next couple of years as the market improves. We are thoughtfully managing all our lines of business and remain intentional On our investments in expense management, we have been careful not to take expense actions that we feel would threaten our competitive position or take away from the critical initiatives that help us meet our long-term goals. We are confident that we are focused on growth across all businesses and work where we are doing to invest in our capabilities that will allow us to achieve low double-digit pre-tax margins as we return to a more global 5 million unit purchase mark. We maintain a positive long-term outlook for the real estate market and are confident that Stuart is on a journey to become what we call the premier title services company. We believe in the strength of the company and are committed to fortifying Stuart for long-term growth and performance. Our solid financial footing should best position us to take advantage of the opportunities that we believe that this cycle will continue to provide. Thank you for our customer and agent partners for your continued trust. We are committed to doing our best to serve you with excellence. Finally, I'd like to express my gratitude to our employees. I am thankful for your dedication to Stewart as we work together to create a more resilient company that continually delivers for our customers. And I am particularly grateful to our Houston area employees that have maintained our standard level of service excellence by person going through a very difficult period and with the recent weather events. David, I will now turn it over to you to provide the update on our results.