STEWART INFORMATION SERVICES CORP Q1 FY2025 earnings call

Housing Market

• First quarter housing market was challenging with interest rates in 6.6%-7% range, existing home sales weak, but improved inventory and early April market activity trends. Expected improved second half of 2025 relative to 2024.

Title Segment

• Commercial services growing nicely, domestic commercial up 39% in Q1 2025, strong growth in majority asset classes (retail, mixed-use, energy). Direct business focused on growth in target MSAs, acquisitions key for growth, small commercial grew 16%. Agency services expanding through shared gains, adding new agent partners and growing share with existing agents, gross agency revenue up 11%, net revenue up 14%.

Real Estate Solutions Segment

• Operating revenues increased due to additional revenues from credit information services, but pre-tax income decreased due to higher costs. Adjusted pre-tax margin improved, and expected to be in low-teens as relationships mature.

International Business

• Pursuing growth agenda in Canada, non-commercial international revenue grew 16% in Q1 2025.

Financials

• First quarter net income $3 million, adjusted net income $7 million. Employee cost ratio improved to 31% from 32% last year. Other operating expense ratio increased to 27% due to higher costs in real estate solutions and commercial operations.

The title segment grew 11% and the real estate solutions grew 17% in the first quarter. In the title segment, domestic commercial business grew 39% in Q1 2025 compared to Q1 2024. Direct business saw 16% growth in the small commercial segment. Agency services had gross agency revenue growth of 11% year-over-year and net revenue growth of 14%. Real estate solution segment operating revenues increased $14 million or 7%. Total international revenues increased $2 million or 9% primarily due to improved volumes from Canadian operations. Title segment adjusted pre-tax income improved to $12 million, with adjusted pre-tax margins slightly improved to 2% compared to 1% last year. Real estate solution segment adjusted pre-tax margin improved to approximately 10% from Q4's 7%.

Housing Market

• Expect improved second half of 2025 relative to 2024.

Title Segment

• Expect domestic commercial activity to improve year-over-year; direct business expects acquisitions to be key growth component and activity to increase with improving market; agency services expect continued growth in target states.

Real Estate Solutions Segment

• Expect to grow by gaining share with top lenders and cross-selling products; margins expected to normalize in low-teens range.

Title Losses

• Expect title losses to average in the low 4% range for full year 2025.

Market Uncertainty

• Housing market uncertainty makes it difficult to predict. ### Business Mix Volatility
• International business mix can be more volatile and have higher claim rate. ### Texas Insurance Fee Cut
• Impact of Texas Department of Insurance's 10% fee cut starting July 1 on the business. ### Order Volatility
• Choppiness in orders due to timing of large transactions like batch transactions and syndications.

Q: Bose George asked about commercial activity in April and any slowdown or delays.

A: Frederick Eppinger said it remained relatively robust, expected more double-digit potential growth this year though could be bumpy but no material change in orders yet.

Q: Bose George asked about lower investment income in 1Q.

A: David Hisey said it was primarily off of balances.

Q: John Campbell asked about the low 4% loss provision rate for full year.

A: David Hisey said it's due to monitoring loss development trends and business mix volatility; Frederick Eppinger said they are conservative but nothing developing differently.

Q: John Campbell asked about residential purchase fee per file growth.

A: David Hisey said higher percentage of purchase mix caused the increase.

Q: John Campbell asked about Texas insurance fee cut impact.

A: Frederick Eppinger said the recommendation is inappropriate, they have plans to manage through it with other fees and services.

Q: Bose George asked about order volatility.

A: Frederick Eppinger said business expected to be tad better this year than last but choppy; David Hisey said it's due to reverse and institutional business volatility.

Q: Bose George asked about real estate solutions margin improvement.

A: David Hisey said it was a timing issue with credit cost increases and contracts being worked through, expected margins to normalize and be sustainable.