STEWART INFORMATION SERVICES CORP Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Housing Market: Spring selling season flat, existing home sales down ~1% Y/Y; inventories improved, expecting market improvement in H2 2025.
• Segment Performances: Direct operations focus on growing share in target MSAs/micro markets; national commercial services driven by talent investments; agency services expanding via share gains and enhanced commercial capabilities; real estate solutions growing from credit info services and PropStream acquisition; international business focusing on broadening Canada presence.
• Employee Appreciation: CEO visited many offices, noted positivity and energy from employees despite market challenges.

Segment Performance

• Title Segment: Operating revenues in Q2 improved $96 million or 19%, with Title pretax income up $16 million or 48%. Direct title business saw higher commercial refinancing and real estate investor activity; domestic commercial revenues increased $24 million or 46%, with domestic commercial average fee per file up 25% to $16,900. Agency services had gross agency revenues up $61 million or 25%, net agent revenues up 21%, and agent servicing team grew 25% Y/Y. International business grew noncommercial direct and commercial direct revenue by 6% Y/Y.
• Real Estate Solutions Segment: Operating revenues improved $20 million or 22% due to higher credit information evaluation services. PropStream acquired BatchLeads and BatchDialer in early July, and margins in lender services are expected to normalize in the low teens range for the remainder of the year.

Guidance

• Market Outlook: Expect market improvement in H2 2025 vs 2024, though magnitude/timing unclear.
• Commercial Growth: Confident in continued commercial growth, with momentum from small commercial and national commercial despite comps.
• Real Estate Solutions: Expect margins in lender services to normalize in low teens, and growth via share gains with top lenders.

Risks

• Market Uncertainty: Housing market remains challenged with high mortgage rates and low existing home sales.
• Pilot Impact: Uncertainty around pilot program for waived title insurance and its pricing impact on Stewart's business.

Question and Answer

Q: Discuss commercial pipeline in July and expectations for back half of 2025 for commercial revenues.

A: Fred Eppinger states the pipeline is strong, confident in continued growth though year-over-year comps are higher, with momentum from small commercial and national commercial.

Q: Agent premiums: agent up 25% vs direct up 14%. Timing or other factors?

A: Fred Eppinger says agency growth is due to resourcing up in targeted states and increased commercial penetration for agents.

Q: Agent retention rate decline, cause?

A: Fred Eppinger says it's 100% geography, driven by Florida and other states with lower market share.

Q: Breakdown of domestic commercial between small vs national commercial.

A: Fred Eppinger says ~$19 million of domestic commercial in Q2 2025 is small commercial, with growth from investing and resourcing.

Q: Residential premium mix, refi vs purchase, margins.

A: Fred Eppinger explains refi is a smaller percentage of business, with lower margins due to excess capacity, but potential for growth with automated, curative-included solutions.

Q: Pilot pricing for loans without waived title vs Stewart's product.

A: Fred Eppinger says not close to details, but prefers solutions that retain policy and curative.

Q: Mix of primary segments within RES (PropStream, infill research, core offerings) and margins.

A: Fred Eppinger and David Hisey say data/IR and appraisal are biggest revenue drivers, with margins expected to be around 11-12% Y/Y.

Q: Investment income increase, unusual factors?

A: David Hisey says it's due to escrow earnings and higher yield environment, with balances increasing.