STEWART INFORMATION SERVICES CORP Q4 FY2025 earnings call

• In 2025, grew revenues by 18%, net income by 48%, and adjusted EPS by 46% full year. Adjusted pretax margin increased to 6.8% from 5.8% prior year.
• Acquired Mortgage Contracting Services (MCS) in late 2025 to expand default services offering. Increased dividend for fifth year in a row.
• Commercial markets: Domestic commercial revenues grew 34% Y/Y; national commercial services grew 43% Y/Y; agency services commercial initiative grew 34% in 2025.
• Real Estate Solutions: Grew 29% in Q4 2025; margin expected to improve to low teens in 2026 with MCS acquisition.
• International operations: Focused on broadening presence in Canada and increasing commercial penetration.

Title Segment

• Operating revenues improved $106 million or 19%, title pretax income increased $13 million or 28%. Adjusted pretax margin improved to 10% from ~9% last year.
• Direct title business: Domestic commercial revenues increased $32 million or 38%, average domestic commercial fee per file improved 39% to ~$27,000. Total international revenues increased modestly.
• Agency operations: Gross agency revenues $334 million, 20% higher than last year; net agency revenues increased $11 million or 22%.

Real Estate Solutions Segment

• Grew by 29% in Q4 2025. Adjusted pretax income improved 47% to $10 million compared to $6 million last year. Full year margin was 10.1% but expects low teens in 2026 with recent acquisition of MCS.

International Operations

• Focused on broadening geographic presence in Canada, growing noncommercial revenue 20% for the year, total international revenue grew 11%.

• Expect commercial revenue growth in 2026, with first quarter likely better than prior year but some moderation in growth due to comparisons. Confident in overall growth trajectory.
• Anticipate modest improvement in housing market in 2026, though not expecting existing home sales to return to long-term historic average of 5 million units.
• Expect Real Estate Solutions segment margins to improve to low teens in 2026 with MCS acquisition.
• AI adoption seen as a way to improve efficiency, customer satisfaction, and quality across businesses, with some potential M&A in AI tools.

• Market headwinds from multiyear slump in existing home sales. Competition from AI adoption by larger players could impact competitive position.
• Impact of interest rate changes on revenues, particularly related to existing home sales volumes. Texas rate reduction could impact small agents in rural areas.
• Seasonality in certain business segments, particularly in the first quarter, which can impact financial results.

Q: Could you talk about your expectations for commercial revenue growth in '26 and seasonality in 1Q?

A: Fred Eppinger said confident in pipeline activity, expects 1Q to be better than prior year but still have difficulties, expects commercial to be a good year with growth but some moderation in growth due to comparisons.

Q: What percentage of your agent premiums are commercial?

A: Fred Eppinger said commercial was about 34% for the year, with purchase growth representing a larger portion and refi growth being a smaller percentage.

Q: What are the plans for the line of credit?

A: David Hisey said plan is to keep flexibility, with about $200 million drawn and may bring it down gradually with equity growth.

Q: How does AI impact your business and are there M&A opportunities?

A: Fred Eppinger said AI has numerous initiatives for efficiency, customer service, etc., with some potential tool acquisitions to improve service, not a revolution but incremental improvements.

Q: Can you quantify the impact of rates below 6% on revenues and earnings?

A: Fred Eppinger said existing home sales are a big driver, with a swing in margins depending on sales volume, and a move from $4 million to $5 million in existing home sales would significantly impact margins.

Q: How will Texas rate reduction impact the business?

A: Fred Eppinger said low single-digit impact on earnings this year, concerns for small agents in rural areas but not a major impact on company's growth expectations.

Q: How are you thinking about share gains in key MSAs through M&A?

A: Fred Eppinger said targeting 30 or so MSAs for share gains, with plan to deploy capital organically and through M&A, expecting self-funding with majority of growth being organic.