Stewart Information Services Corporation Stock

Hello, and thank you for joining the Stewart Information Services Second Quarter 2026 Earnings Call.

[Operator Instructions]

Please note, today's call is being recorded. [Operator Instructions]. 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 Stewart's Second Quarter 2026 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 Hisey. 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 on 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.

Thank you for joining us today for Stewart's Second Quarter 2026 Earnings Conference Call. Yesterday, we released the financial results for the second quarter. I will kick off today's call with an overview of our performance, followed by our outlook on the housing market. I will then cover our results and strategic direction by business. After my remarks, I'll then turn it over to David for additional commentary on the results.

I am very pleased with the second quarter results. We sustained our growth momentum in each of our business lines and strengthen our future earnings outlook by significantly investing in some additional business opportunities. Our results for the first half of the year reflects the efforts we have made to grow the company and improve earnings. Our year-to-date results demonstrated our success at growing both top and bottom lines. Year-to-date, we have grown revenues by 26% and grew adjusted pretax income by 45%, all while the housing market remains at multi-decade lows.

Our momentum continued in the second quarter as we saw very strong revenue growth of over 24%. Earnings growth for the quarter was 13% with slower growth driven by a decision to make some significant additional investments in individuals and teams to boost our organic growth initiatives in 3 of our title businesses. In the quarter, we made additional investments in individuals and teams of around $8 million to capture these targeted business opportunities. I'm excited about these opportunities and believe we should see the full impact of these hires over the next 2 to 4 quarters.

Even with those investments, I believe we can deliver earnings growth that will outpace revenue growth over the second half and for the full year for the overall company.

I am very encouraged by our strong momentum in '26 when considering current housing market conditions. Growth in the existing home sales has been very modest again year-over-year, up 2% for the first half of '26, but still hovering around the 4 million annual units, continuing the multiyear slump. At the onset of '26, we expect the existing home sales to improve around 6% to 8%. However, given the position of interest rates as a result of the macro and geographical conditions, we now anticipate a much softer improvement with growth more likely topping around 2% when compared to last year, keeping us solidly in the low 4 million existing house sales range.

While May and June saw some positive existing home sales momentum year-over-year, at the annualized numbers remain in that 4 million to 4.1 million range. Home prices continue to hold and slightly increase by around 1.5% for the quarter. Even as we see more inventory coming into place, reflecting the demand still built into the system. The charge of owners of under 3% rates continues to slowly shrink coming in about 19.5% from the high of 25% of outstanding mortgages several years ago. This implies that life events are slowly inciting some buyers into the marketplace. Interest rates remain a critical factor for potential homebuyers consider determining when they enter the market.

And in the first quarter, we felt the positive effects of rates moving down towards 6% range and felt the dynamic shift as they move back up around 6.5%, which is where we are hovering throughout the second quarter. Turning to our business results. Our National Commercial Services business continued to deliver strong growth in the quarter. Total domestic commercial premiums grew 20% year-over-year and up 30% in the first half of the year when compared to '25. Energy continues to be our largest asset class, followed by strength in some of our larger asset classes such as data centers, multifamily and industrial properties.

We are proud of how we have built this business over the last 2 to 3 years and are laser-focused on the continued expansion in this space. The acquisition of industry-leading talent is a critical activity for us to continue to grow our footprint, and we continue to seek opportunities to expand our talent base. In the second quarter, we made some significant investments in hiring additional teams to address some regional and sector opportunities, spending an additional $3 million to $4 million this quarter to do so. We believe in these personnel investments and anticipate we feel the full impact of these hires over the next 2 to 3 quarters as they settle into their seat and begin to convert business.

Our direct operations business unit grew consolidated residential refinance and Main Street commercial revenues by 7% in the second quarter compared to the same time frame last year. Residential transactions grew 3% in the quarter, slightly better than the growth in existing home sales for the quarter. Main Street Commercial delivered solid growth with revenue up more than 20% due to both transaction volumes and size. We remain focused on strengthening our position in attractive MSAs through organic and inorganic efforts and have begun to see more opportunities become available in our target geographies.

In the second quarter, we invested approximately $2 million in incremental organic opportunities to acquire individuals and teams in support of our growth strategy in direct operations. Our centralized title operations, which includes centralized refinance and our bulk business confronted some tough comparables when compared to the second quarter last year as our bulk businesses particularly can be very bumpy. These headwinds impacted our overall noncommercial direct business and drove results down about 1% when compared to the second quarter of '25. Our Agency Services business delivered 25% revenue growth for the second quarter in a row, which we are especially pleased with given our agents confront the same headwinds as our direct operations offices.

We are focused on growing this business through winning the business of new agents and expanding wallet share of existing agents with the emphasis on 15 target states. We are also committed to expanding our commercial footprint in agency, and we continue to make good progress on both these priorities with residential premiums up 30% and commercial net premiums up 16% in the second quarter when compared to the same time frame last year. In the second quarter, we were also proactive in making additional investments in talent to take advantage of some disruptions we saw in a handful of our target markets.

We invested another $2 million to $3 million in additional customer-facing talent, which should enable us to build significant share in these target states. Our Real Estate Solutions business grew revenues by 75% and adjusted pretax margins by 24% in the second quarter compared to last year, ending the quarter with a 13.6% margin. The year-over-year comparables in this segment benefit from the acquisition of MCS, our property preservation business as well as our acquisition of NAN, our National Appraisal Network.

When removing those contributions to our revenue, our legacy RES business grew roughly 18%. We remain focused on continuing to expand our coverage and servicing of the top 300 lenders, and our suite of products and services is in a good position and is giving us even better ability to cross-sell and win business. Moving to our international operations. We are focused on profitably growing across our footprint of Canada, Australia and the U.K. In the second quarter, we grew our noncommercial revenue by 4% and commercial revenue by 7% in challenged housing markets. We believe we can build on our strong position in these markets and continue to grow profitable share. On the topic of inorganic growth initiatives, in '26, we have been -- we have seen a meaningful pickup in attractive opportunities in our acquisition pipeline.

In late 2025, we conducted a capital raise to put ourselves in a position in '26 to strengthen our competitive position and increase our earnings power. The vast majority of that capital has yet to be deployed. However, we are currently working on transactions that we anticipate will close in the next 60 to 120 days and will be funded by the proceeds from our excess capital. Our significant growth in real estate solutions and commercial activity throughout the business lines has resulted in an increase in our operating expense ratios. The real estate solutions -- our other operating expenses are the largest expense category and are a higher percent of our mix due to the mix of outside services, cost of data and our appraisal and property preservation contract workforce. Similarly, the commercial transactions often come with higher operating expenses given the cost of data and search fees. Throughout our journey, we have prioritized thoughtful investment in ourselves and our talent to position Stewart well for the marketplace.

We have some of the best leaders and employees in the industry, and we continue to add to our roster with a relentless focus on adding personnel that will help us grow the company for the future. We believe strongly in these investments. These investments are necessary to propel the company to the next phase and are continuing to see real momentum for ourselves in the marketplace. We have increased our staffing in all our segments in line and with our organic growth initiatives and have grown our headcount via acquisition, which has resulted in an increase of our employee costs of about 17% year-to-date.

Even with this increased investment year-to-date, we have grown revenues by 26% and adjusted pretax income by 45%. We continue to anticipate earnings growth in excess of revenue growth for the full year but could see the ratio of revenue to earnings come in, in the second half without the benefit of improved market conditions, given our increased investment in the title segment. We continue to prioritize shaping the company for 12% adjusted margins when we get back to a 5 million unit existing homes market and are focused on improving margins as we grow in a challenged market.

Thank you for your time, attention and interest in Stewart. As an enterprise, we are dedicated to being the premier title services company. We are focused on strengthening the company for lasting success through targeted multipronged growth plans by business to further fortify our position. To our customers and agent partners, thank you for your trust and dedication to Stewart. We are committed to serving you with excellence. And to our Stewart team, thank you for your dedication and focus on growing this company together. We have made great progress, and I look forward to seeing what we can do together. David, I will now turn it over to you to provide an update on our results.

Good morning, everyone, and thank you, Fred. Thank you to our employees and customers for their continued support and partnership as we navigate a residential real estate market that remains challenging. Yesterday, Stewart reported solid second quarter results with both revenue and profitability growth. Second quarter total revenues increased $177 million or 25%, while net income improved $5 million or 17%. Diluted EPS was $1.21 compared to $1.13. On an adjusted basis, net income was $43 million or diluted earnings per share of $1.39 compared to $38 million and $1.34. Appendix A of our press release shows adjustments to our consolidated and segment results, primarily related to net realized and unrealized gains, acquired intangible amortization and acquisition integration expenses.

In our Title segment, operating revenues increased $91 million or 15%, driven by strong performance from our agency and domestic commercial business. Title operating expenses increased 17%, primarily due to expenses related to revenue growth and higher employee costs, as Fred noted, resulting from our continued investment in talent. As a result, Title pretax income was comparable to last year. On our direct title business, direct title revenues increased $15 million or 5%, primarily driven by higher commercial and refinancing transactions, while purchase orders were comparable to last year. Domestic commercial revenues grew $15 million or 20%, driven by higher transaction volume across energy and other asset classes with continued data center benefit. Our average domestic commercial fee per file was comparable to last year at $16,900. Average domestic residential fee per file increased to 10% to $3,200, primarily due to a higher weighting of purchase transactions.

Total international revenues increased 5%, primarily driven by higher transaction volumes. On our agency operations, gross agency revenues increased 25% to $377 million from $301 million last year, driven by improved residential and commercial activity across our key agency states. After agent retention, net agency revenues increased $13 million or 26% compared to last year. On title losses, the title loss ratio improved to 3.2% in the second quarter compared to 3.6%, primarily due to continued overall favorable claims experience.

We expect our title losses for the year to average from the mid-3% to 4% range. On our Real Estate Solutions segment, total revenues increased 75% to -- or $85 million, primarily driven by our recently acquired MCS business and growth in our credit information and valuation services business.

Real Estate Solutions adjusted pretax income more than doubled to $27 million from $12 million, while adjusted pretax margin improved to 14% from 11%. On our consolidated expenses, our employee cost ratio improved to 27% compared to 30%, primarily due to revenue growth. Our other operating expense ratio increased to 27% from 25%, primarily due to higher costs associated with increased revenues in the Real Estate Solutions segment.

Due to our Real Estate Solutions segment growth, we expect our other operating expense ratio to be in the 27% to 28% range going forward. Our financial position remains strong and well positioned to support our customers' employees in the real estate market. Total cash and investments were approximately $400 million in excess of statutory premium reserve requirements. Total Stewart stockholders' equity at June 30 was approximately $1.66 billion, representing a book value of approximately $55 per share. Net cash provided by operations increased to $60 million from $53 million, primarily driven by higher net income. Again, thank you to our customers' employees for their continued support. We remain confident in our ability to serve the real estate markets. I will now turn the call over to the operator for questions.

[Operator Instructions]

And we'll take our first question from Bose George with KBW.

Actually, first, just on expenses. So you guys noted a few factors that drove the expenses higher. But just stepping back and looking at it more broadly, can you just talk about the annualized margin outlook, especially if you remain in this higher for longer with mortgage rates at like 6.5%?

Thanks, Bose. So I think what -- if I look at the whole year, right, I've told you I've given some guidance on the whole year, how to think about the changes -- if we stay flat, which I think we will, I don't think we'll see any growth in the RES market for the rest of the year. I believe that we'll grow earnings -- revenue probably 20% and earnings 30%. That's kind of the range, I think. There's some comparisons in the back half of the year, we had such extraordinary growth in commercial that will tighten some things. I think -- so the improvement in margin, I see is about 0.5 point for the company year-over-year, might be 0.4, might be 0.6.

Again, it has something to do with the comparisons because we had such outsized growth in commercial. Last year, so particularly in the fourth quarter. It's that kind of improvement. So I'm right on track. It's right where I wanted us to be. We outperformed a little bit in the first half of the year, which was great. And we've reinvested a bunch of that because I want to sustain it. We think about one of the things to think about, our commercial business at the end of ( 2003 ) was $208 million.

Our last 4 quarters is $450 million. We've doubled that business. And so it's important for us. That's a people-driven business, and we really need to make sure we're covering sectors and geographies. The other thing you're seeing is really significant step-up in our agency business. We've had some nice movement. And we've seen a couple of markets that there's disruption. So we've gone for it. We're kind of making investment in customer-facing to really kind of shift share and you can imagine where they are, where the best markets. But I still think with all that, as I look at our momentum and even with the earn-in, I think we'll pick up another 0.5 point.

So we're right on. I think title will be tighter. I think it will be kind of the same as last year, but this overall company will be about 0.5 point. And it could be better than that depending on how quickly we ramp up some of these opportunities. I also -- by the way, those numbers do not include what I expect in the next 60 to 90 days. We have a number of these acquisitions we're going through due diligence that we've talked about. And obviously, that would be additive likely to the equation. But I think we're right on track to what we thought.

Okay. Great. That's helpful. And actually, just on the acquisitions, when we think about the scale, is it similar to MCS? Is it a lot of small ones? Just any color there would be great.

Yes, sure. So when I talked about it, the categories we had talked about, there's a little bit of consolidation I'd like to continue to focus on in some of the RES services because it's quite very good incremental margin improvement for us to do that. So we did demand, which was in that category and is likely to be another one over the next 12 months. Not necessarily an appraisal, but in the RES services. There are also on the agency side, as I said, a lot more activity. And so I would see a couple 3 in that category, and they could be a combination of RES or commercial depending on the transaction.

And so they're in those categories that we've talked about. None of them are huge. So none of them are in the MCS size kind of category. We're at the point now where this is about MSI local by local market, trying to change the economics, and we're in kind of the business by business, whether it's our data business, our appraisal business or our property pres to really just build scale in some of those areas. So they're all active, as I said, I would guess that we'll be able to deploy the full amount of what we raised plus some in the next probably by the end of the year is what I would say.

Okay. Great. Actually, just a quick one on commercial. Was there any slippage of like large deals within your fee per file was flat year-over-year, but obviously down a decent amount just over the last couple of quarters. Are you just want to need those big deals?

Yes. It is very lumpy, and we had some -- a comparison. We had a couple of really big ones last year. So I don't -- a mix of us and where we are, when I look at the data center mix or I look at the energy mix, it's similar, right? But we've had a couple -- same in the fourth quarter of last year.

We had just a tremendous big one in Mexico. So there's going to be a little bit bumpy. I don't see any momentum shift. The pipeline is good. What I would tell you, though, it's just -- the comparatives are tough. I mean we grew 30% first 6 months. We grew 46% or 47% last year at the same time. We're building on big numbers. If you recall, we grew a lot faster than the rest of the industry early. And so the comparison, some of these -- last year was a big year. As I said, frankly, it started at the end of '23. We've been cranking. So I'm very, very comfortable with the 30% sitting on top of the 47%. But I do would also say that's a place I've said time and time again, we're under-clubbed in geographies.

We're under-clubbed in sectors. I got to -- we've got to keep hiring talent in commercial if we want to keep closing the gap.

We've gone from about -- I haven't done, obviously, the numbers this quarter, but we've gone from about 9% to we were about 13.5%, 14% share. And so that's a pretty big jump. I'd like to believe if we keep our focus and keep investing in that business over the next couple of years, we can get it to 20%. Now there will be -- again, it's bumpy. So our competitors are going to have great quarters, too, and they're very, very good competitors. So I look at that business as really about coverage and resource and our team. The other thing I want to do is I don't want to take on so much so fast that we can't digest it. So it's kind of balancing that. But I think our team has done an excellent job doing that, and I continue to see a good, strong pipeline and potential.

We'll move next to Oscar Nieves with Stephens Inc.

Hey Oscar.

My first one is on the Title segment. When we look at the revenue trends in title, agency continues to outgrow direct. So is that still consistent with the share gain story in your target MSAs? Or are you starting to see competitive or mix pressure show up in the amounts retained by agents? Because if we look at that ratio this quarter, it came in at a little bit higher than the prior quarters. So just wanted to see...

Good observation. So the way of thinking about it in our direct operations, we've now been, what, 4 years in a flat market on res, which is a vast majority of our of what's in our direct operation. We're trying to expand the what I call mainstream commercial. They've done a pretty good job. They've grown at 15%. But I would argue our direct operations is probably under-penetrated in commercial still. So if you look at -- I think we grew 3.5%, something like that in res. So we're holding our own. And our growth in direct has mostly been on the commercial side that gets us to that 7%. And so we've done a pretty good job, but we haven't share shifted as much on the res side on direct ops.

Now two things are changing. One, we're getting good commercial traction. But the thing I mentioned in my call, we're starting to see disruption. We're starting to hire and take teams organically. And so we spent another couple of million dollars this quarter at that, and I can see the shift. The other thing that's happening in direct is the inorganic opportunities that I keep talking about by MSA are emerging. We just announced one a great brand in Texas on Fort Worth side of Dallas where we were weak. And I'm really excited about this great brand, great company. Not huge, but those kind of opportunities are starting. And as I said, in our pipeline, we have another three or four of those. So we'll start seeing kind of that MSA-grade growth shift a little bit with res. Now I don't see the market helping us, right? Because I was hoping that I'd see 6%, 8%, 9%, kind of a little bit of res growth, which would really shift for us. That's also a big margin lever because we have excess capacity in our direct operations. But to your point, compared to agency, the team has done an amazing job, right? In a 1% or 2% or 3% growth res, we grew 30%. I mean what we're seeing is shifting share and a lot of significant agents in some really attractive markets. And I think that's going to come down a little bit? Sure. I think we're probably in the -- that business will probably grow in the teens.

The other thing they've done a really good job is on the commercial side in agency. But it is -- we are shifting share nicely on the agency side. I don't see the dynamic within the agents changing anything. I just think we're kind of shifting our share. But I would tell you, again, the inorganic activity there's a lot more discussions right now.

Even though the market is flat, I think because commercial is a little better, people's outlook is a little bit better. And so we've made a little bit more money, and so we can come to an agreement on a price that's fair for both. But that is actually starting. But it's a great observation because it's -- for me, the direct operation swings, if commercial is outsized, it changes the dynamics. If we can get a little bit more res growth in direct, it would change the dynamics. So there are -- those are the things that are moving it around. And -- but I'm really pleased with the progress everywhere. I just -- and I think that direct is emerging because we're seeing this activity, and we've done on management, data management. And so we've been able to hold or increase our margins over the last 3 years because of good hard work they've done, even though there's been no growth. So I think we're pretty good in both.

That's super helpful. I have a couple -- I want to double click on a couple of the things that you just mentioned. One is on commercial activity, which obviously has remained very strong. And one of your peers that reported yesterday mentioned on their press release that they are on track for a record year in commercial. So on that, can you give us your outlook for commercial revenue for the rest of the year and into '27? And also, if you can share how the underlying drivers, what are you seeing right now in terms of fee per file versus order counts?

Yes. They're both -- they're solid. So Again, my whole thing is just the comparisons for me because we had a bunch of quarters, as you know, in the last 2 years, we grew 50%, 47%, 50%. And so that's a hard comparison, but we have a nice pipeline. We grew 30% in the first 6 months this year. I don't -- I believe we continue to grow. I'm a little bit suspicious about the fourth quarter because we had such a big year in the fourth quarter last year. But we -- to your point, we had 2 record years in a row, right? Like -- and with this last 4 quarters, we doubled the business. So we see the same thing. The market is attractive. We hit our stride and our skill set got better at the right time. We were fortunate, call it lucky. So we've been seeing this for the last couple of years. But we don't see -- again, it's bumpy for us because we're smaller. So if you have all these mega deals like we had in New Mexico, we had another in Louisiana, it affects us a little bit. But I don't -- I like the breadth of our pipeline.

I like what's happening. I would say kind of what we did in the -- could I see the percent growth be a little less because of the comparisons? Yes, but it's not because the market is not good. It's not because of the pipeline. And you can see our order count in our numbers. Now the one unknown always with commercial, you just have to keep in mind is if there's a disruption in the marketplace and the financing costs change, sometimes they'll kick it for the next quarter or they'll accelerate or something. So it tends to be -- these tend to be longer deals.

They tend to be a little bit fickle about kind of timing of closing. But I'd be surprised if this year is not the best year we ever had after last year being the best year we've ever had. And so we just got to keep after it. But I do think a little bit of difference with us and some of the 2 big competitors are very big. And for me, I'm building capacity as fast as I can build capacity. So there's a little bit of a gate for us because I don't want to be stupid. I want to do it well. I want to be considered excellent. And so there is the staffing that we got to continue to do because we're a lot bigger than we were, but I feel really good about the market. There's nothing about the market that I'm worried about. The early estimates in the market were about a 12% growth in commercial that you see the forecast. Obviously, the first half is way out -- is much bigger than that. And I don't see anything changing the trends, right? I just kind of think they're all kind of similar. So we'll see. But it's not going to kind of report to say I'm worried about it.

And Oscar, that $17,000 fee per file is probably more indicative. As Fred said, we had some really big deals in prior, but the $17,000 is probably more indicative.

Right. All right. That was going to be my next one because yes, it was a significant step down versus the prior 2 quarters. And I do have one last one is you recently announced the Rattkin acquisition. And I just wondered if you could share some details on the size of that deal.

Small it's what I call a micro deal a little bit because it's basically -- it's a small deal. It's not a big deal. The reason we announced it nationally is because their brand is amazing. And it's one of the oldest and best known agents in Texas. It has an amazing commercial position. And so we felt it was important to recognize the family and make the announcement nationally. But it is what I would call it a small. It's -- again, it fills in Dallas is the way for us to think about that. And the ones we're doing following are bigger, a little bit bigger. So a little bit different nature. But I'm really pleased with it because Fort Worth has been a real -- we have a really good position in Dallas, but it's been a hole. And this is about as great as it could be as filling out that city for us.

if you just think about the industry data, right, most agents are under $10 million in revenue. And so when you have a single market agent, right, that's probably the area that they're in.

And we'll take a question from Michael Rindos with Stone X

Just drilling further into the commercial, can you talk about your win rate and the direction of win rate over the past couple of quarters? And how competitive is the market on pricing? And which direction is that going?

Yes. Again, so we don't -- typically, you have a lead player in those deals and you achieve those. There's not really a competitive on a particular deal. They typically get referred. And as you get better in certain categories, you tend to lead more. And then what ends up happening in some of the big deals is you share the deals given the scale and the size and the need for the surplus. As far as the price sensitivity, there really isn't a lot of price sensitivity. There is some segments of the market where there'd be joint venture businesses between kind of the generators of the business and the underwriters, right?

So there's some kind of sharing, if you will, of those deals that occur in pockets in different cities, say, in a New York City is one place you might have that. But there isn't -- we don't see that business being overly competitive. It has a lot to do with kind of your skill set, particularly on some of the rural land stuff. And like we tend to be very good in places like energy because it's a lot of rural stuff and it's in Mexico or Indian reservations or whatever. So they tend to skew towards the people with skill. So -- and again, for all of us, I would guess, I don't know, but it's a higher-margin business for everybody, for us, it used to be subscale, so it wasn't, but we're now in the same category with all the others. Because the other thing that comes with commercial is float, right? So you have the escrow and the float and the investment income as well. So again, that tends to be a little bit on higher-margin business. It tends to be a very stable market.

I would tell you right now, the issue is we're skewing to larger accounts just because of the nature of what's happening with data centers, energy development, et cetera. And in those, you're seeing more shared accounts, right? They're just big. So you have to have more shared. And so there's a lead and then there's following. And so we're doing a lot more leading than we've had historically because we're bigger. But there's a lot more shared transactions because of the nature of the business and the size of the business. So again, I like the business.

It's very attractive. And again, I feel like for us, it's really important to be a bigger presence in commercial, and I mean in all our sectors. So more in our direct operations, I want more Main Street commercial, I want more international commercial, I want more agency commercial because, again, in that business, the three of us, the oligopoly is even tighter. Obviously, Old Republic has got some of it, too, but it's -- as our skill sets are unique and our capital base is strong, that tends to be a business that's -- the vast majority is going to be the three of them. And we need to be more present across the spectrum.

Got you. Okay. And how long did it take from an order open to an order close in commercial on average? And how is -- what's the direction there? And what does that tell us, if anything?

Not much. It's tough to call. So I tell you like in commercial, you could have a 2-year deal, right? So the complexity, the size, you don't have a lot of 60-day deals, right? These are -- these deals are kind of going to be 3 quarters or so to a year. But again, we've had some of these complicated ones can take multiple quarters. And as I said, the other thing about them is they're very business oriented. So there's a trigger when they're doing the business case, if something happens with their carrying costs and stuff, they might take it forward or they might take it back. They might want to close the quarter with it. So they tend to be a little fickle about exactly when they close. But this is why, by the way, our growth, we sometimes have excess expenses as we're -- a lot of the search fees and stuff like that, what happens is you do a lot of that work and you don't get compensated until those deals close. So there can be a lag in those businesses of a lot of costs and expenses that you have while you're doing the work before they close, it's just the nature of the business.

Now over time, that evens out. But for somebody like us, that's been challenging because we're growing like -- when you're growing 40%, revenue, you're chasing all that work you're doing for the revenue that hasn't landed. So we've had to manage ourselves properly to kind of to do that with staffing and stuff like that. But again, it could be all over. That's why I tell people, if you look at the ratios of open to closed, right? You can -- if you look at refi, you can almost call it, right, 65, 75 days. Res will take about the same. And so the commercial, it's all over, right? You can have a rush of orders and then closes get kicked back.

That particularly was true for us in early days with alternative energy, where it was the signing of the bill that incented it, we had all these opens and a lot of those deals took a very long time and the nature of what the project was changed over time. So it's not an easy straightforward answer, but they tend to be longer. kind of, I would say, the year is not a bad way to think about it, but they're all over the map. So.

And it seems like in some states, the political environment is becoming more difficult around permitting for data centers. Can you comment a little bit about how that is affecting you currently, what the outlook might be for some of the markets where you are?

Yes, it's a good question. And it's something we all read all about whether it's Maine or other communities that said that in my community. It may have some impact. It's hard to know. We're such above average right now that could have been -- could we be more robust than we have, but it's hard to really say. My prediction is that if we need it, they'll work it out, like cell towers, right? They'll find places to locate. And if we need the demand, it will happen.

As a matter of fact, in my view, some of the readings about people going on-premise and having smaller data centers to kind of control security that trend could take off and we could continue to -- we could see a different profile of these data centers. So again, it could, but I don't -- because it's so robust and it's more than we've ever historically seen, and we don't see stuff slowing down per se, it's hard to say for me. And again, it's -- I look at it and say if the demand is there, they're going to figure out how to address it. And so we're just prepared to kind of respond to the opportunity. Again, it -- again, I would say, as David said, the average size, I think there's some chance that it reduces and you see those mega, mega deals and the size gets a little bit more distributed, but I don't know that for a fact. I just kind of read what you read, trying to understand all that. So I feel good about where we are and the trends that we see.

So for some of these inorganic transactions that you're looking at over the next year, can you comment a little bit about how these deals are priced on either revenue or profits?

Sure. So typically, a title thing is somewhere between 4 to 6 EBITDA, right? If you have higher-margin service businesses that can get all the way to 8 EBITDA. We -- as we think about them, they're all the IRRs for us where we think about a 15% plus. And when we price these deals, we tend not to include the underwriting. And so what's really advantageous to us by agents is our competitors have much higher share in the agency channel. So they -- if they buy an agent, they're buying their own underwriting back. We actually get that for free and shift share in a high-margin part of the business.

So again, the economics for us are relatively attractive for these kind of transactions. And the other thing I said when we talked about raising the money in December, I just could see all the activity. I mean the amount of activity is significant. There was a lot of people outside the industry in '21 and '22 that we either doing roll-ups and services or they were trying to thought they could do roll ups of agencies, which is not a practical thing with no renewals. And a lot of those people have all said, I'm getting out, right? And you can see it. And so what's happening now, in my view, is we started getting to conversations where pricing got realistic. It wasn't high prices that they may have paid. And so I just -- you can see all this activity right now. And so what we have to do is be very selective and very thoughtful. But again, we have opportunities to enhance our portfolio and improve our margins. And so I could -- we could see it now.

I will tell you that these have taken a little bit 60 or so days longer to get the close than I thought. So could we have raised the money in March instead of December? Probably I would have had the overhang, but it's all come through. We're going to going to deploy the excess capital nicely, and I'm very comfortable with kind of what we did and what we're doing now with it. And so -- but I do think this it's not going to stop. By the way, I just -- I mentioned -- I just think there's going to be some really interesting properties likely to be on the market in the next 18 months. And again, I just -- you can see how people are thinking about it. And some of these are very attractive. And so we just got to be prepared to assess and understand whether that makes sense for us. But there's some really positive opportunity.

The other thing I would tell you is that we're in a phase because of this -- the rate long kind of down market. I do not see a lot of capital from outside of the industry coming in. This is one of those situations. If you're in the business, it's really good. The economics are great. If you're not in the business, I'm not sure it's that attractive. And that's why this is an interesting time, in the industry, and we'll see how these things play out. Because I just -- everybody that put their toe in the water, I can't see any of them putting more money in water. I might be wrong, maybe AI changes that in some areas, but I don't see it. And so we should just be paying attention and thoughtful and try to take advantage of some of these.

I understand that you're not seeing any outside bidders. Are you seeing any competitive bidders from the other three large players in this group?

Typically...

At all.

The competitive nature of these transactions is very light. Let me just say that.

We'll take a follow-up from Bose George with KBW.

Just a quick follow-up. Fred, you mentioned the centralized title and some challenges there. Can you just elaborate on that a little bit?

Sure. So we have a centralized unit where we have the place where we have our centralized refi, which is a small business for us. We also have our specialty businesses. So we have our reverse business in there, and we have our bulk business, both of those Yes, the investor business that we talked about, we bought them. That bulk business is very bouncy. And so last second quarter, you can see like you just look at the orders, we closed a lot of orders in the second quarter. But it's just -- it's the nature of that business will get big deals that will come. And if you look at our open orders, you see that it way up for the next quarter. So it's kind of bumpy. It's kind of the nature of that business.

I think it's important for us to build the skill of centralized transaction given potential technology affecting trends and having more centralized purchase. And so we built that. We built it around specialty businesses, and it's a good business, but it is bumpy, right? So we probably saw a 20% reduction kind of in that business, which had some -- obviously some impact on earnings growth, too, in the $2 million or $3 million range. But it's the nature of that business, and I see it coming right. Again, you can see the orders come back.

Bose, remember, in that investor business, that executive order limiting institutional buying and then also that's included in the Road to Housing Act. So the market is normalizing for all that.

I show no further questions at this time. I would now like to turn the call back to Fred for any additional or closing remarks.

I want to thank everybody for their interest. As I said earlier, I'm just thrilled about our momentum as a company. I think we're investing in the right places. I want to thank our folks for their effort because it's been very, very busy. But I'm very encouraged about our progress, and we will continue to be very thoughtful of making sure that we're trying to increase our earnings more than our revenue, and we will continue to do that as we march forward. Thank you very much. Appreciate it.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Hello, and thank you for joining the Stewart Information Services First Quarter 2026 Earnings Call. [Operator Instructions] Please note, today's call is being recorded.

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 Stewart's First Quarter 2026 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 Hisey. 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.

Thank you for joining us today for Stewart's First Quarter 2026 Earnings Conference Call. Yesterday, we released the financial results for the first quarter. I will kick off today's call with an overview of our results and our current macro housing outlook, followed by a review of our results and strategic direction by business line. After my remarks, I will turn the call back over to David so he can further cover our results for the quarter.

I am very pleased with the results of the first quarter this year. As you know, the first quarter is typically the most impacted by seasonality. And on top of that, the residential transaction activity continued to be at historically low levels. In that environment, we delivered one of the best quarters in the company's history with adjusted EPS of $0.78 and revenue growth of 28%.

In the first quarter, each of our businesses showed strong revenue growth and improved earnings as we executed on our strategic priorities. Though first quarter existing home sales were muted, our direct operations, agency services and national commercial services benefited from strong commercial growth.

Our Real Estate Services segment also delivered strong results year-over-year, bolstered by our recent acquisition of MCS. In the first quarter, along with a 28% adjusted revenue growth, we delivered adjusted net income growth of $24 million, up from $7 million in the same quarter last year. It allowed us to deliver a 4.3% margin for the quarter, up from 1.8% in the first quarter of '25.

On our last call, I shared that we expected existing home sales to improve around 6% to 8% in 2026, beginning our journey back to a more normal existing home sales. While we anticipate some growth in the housing market, we foresee the potential for growth to be a bit more muted this year given the broader macro and geopolitical conditions and where we have seen interest rates move as a result. We anticipate that we will continue to maintain our business momentum in the second quarter, but we could see the residential market continue to bounce along the bottom of around 4 million existing home sales for the next quarter if ongoing geopolitical tensions prolong.

In the first [ cap ] quarter, housing signals were mixed. As mentioned, existing home sales were relatively flat, down 1% compared to 2025. Median sale price growth was a bit weaker than in the past few quarters. However, it was positive, up just under 1% for the quarter. The pricing story currently varies very significantly by market, and we are seeing more price negotiations, which may be helping homebuyers to balance rates.

Interest rates remain a critical gauge for homebuyers entering the market. And though we were confronted by difficult weather across the country in January, early in the quarter, we saw rates move closer to 6% and felt both momentum both in purchase and refinance activity. March, however, saw the impact of rising global tensions, and rates exited the month around 6.3%, cooling activity a bit due to the increase itself, but also because of the quick shift in rate and sentiment.

We do anticipate some momentum will continue into the second quarter as rates remain below -- kind of at or below 2025 levels heading into the spring selling season. All in, our view of the residential market growth will be closer probably to 3% to 5% for the year. We believe commercial, on the other hand, will remain more resilient and continue to have solid growth.

Turning to our business line results. Our direct operations business grew 10% in the first quarter compared to the same time frame last year. The growth came from improved transaction activity. We have not deviated from our long-standing focus on gaining share in target MSAs through organic and inorganic efforts. We continue to see positive momentum in our strategic initiatives to grow commercial business out of direct operations, which we often refer to as main street commercial.

In the first quarter, our direct operations grew main street commercial by more than 20% year-over-year. Looking forward, we believe we will grow this operation in part through targeted acquisitions. And we have seen a pickup in opportunities in our pipeline for direct operations as well as opportunities that benefit our other business lines. We are thoughtful in our assessment of opportunities and expect to continue to grow the company in part through being acquisitive.

Our national commercial services business delivered another impressive quarter of results. Energy continues to be our largest asset class, but other notable gains in the quarter were our industrial, site development, data center and retail asset classes. In total, we grew national commercial services by 40% in the first quarter. We remain focused on growing all of our asset classes through geographic expansion and acquisition of leading industry talent.

Our agency services business delivered a very strong first quarter, with revenues up 25% compared to the first quarter of 2025. Our agency partners confront the same housing headwinds as we do, so we consider this growth to be especially solid considering conditions. We are focused on growing this business through ramping up new agents and wallet share expansion of existing agents, with the emphasis on 15 target states. We saw strong progress towards our goals this quarter with solid year-over-year premium gains across most of our states.

In addition to geographic growth, we are focused on expanding our commercial offering for agents, and we are seeing success there, growing 46% in the first quarter compared to last year. This goes along with a 15% residential growth as well. We will continue to build on the momentum we have made in recent years for our agents to differentiate our service and better our offerings for our agent partners.

Our Real Estate Solutions business grew revenues by 56% in the first quarter compared to last year. Our recent transaction of MCS helped to strengthen our results for the first quarter. However, all of our other operations combined to grow over 20% when compared to the first quarter for 2025. The addition of MCS allows us to further our strategic priority for this segment, which is to win more share across the top 300 lenders and further our cross-selling efforts across our expanded product lines with existing customers.

In the first quarter, we added to our Real Estate Solutions segment once more with the acquisition of National Appraisal Network into Stewart Valuation Intelligence. Our appraisal company, National Appraisal Network, also known as NAN, helped strengthen our appraisal growth scale and deepen our talent base.

In the first quarter, we delivered 12.5% adjusted margins, up from 9% last quarter. For the full year, we fully expect to improve margins and deliver in the low teen range for this segment and expect that our recent acquisition of MCS will help us improve our historical margin outlook.

Moving to our international operations. We are focused on broadening our geographic presence in Canada, increasing our commercial penetration as well. In the first quarter, we grew our noncommercial revenue by 9% and our commercial revenue by 14% in a very challenged housing market. We believe we can build on our strong position in these markets and continue to grow share.

As an enterprise, we are dedicated to being the premier title and real estate services company. We are focused on strengthening the company for lasting success through targeted multipronged growth plans by business to further fortify our position. We thank our customers and agent partners for your trust and dedication to Stewart. We are committed to doing our best to continually improve our services for your benefit.

To the Stewart team, thank you for your dedication and focus on growing this company together. We are able to execute at this level because of your steadfast commitment to our journey. In the first quarter, we celebrated our inclusion on the Forbes American's Best Large Employers list. We thank our employees for this recognition and are committed to being a destination for industry-leading talent.

I'm very proud of the progress we have made on our journey. I feel that progress is visible in the results we delivered this quarter in spite of both macro and housing headwinds. David, I will turn it over to you to [indiscernible].

Good morning, everyone, and thank you, Fred. I appreciate our employees and customers for their steadfast support amid a continuing challenging residential real estate market. Yesterday, Stewart reported strong first quarter results with both revenue and profitability improvement.

Total first quarter revenues were $781 million, resulting in net income of $17 million or diluted earnings per share of $0.55. On an adjusted basis, net income was $24 million or diluted earnings per share of $0.78 compared to $7 million and diluted earnings per share of $0.25 last year. Appendix A of our press release shows adjustments to our consolidated and segment results, primarily related to net realized and unrealized gains, acquired intangible asset amortization, acquisition-related expenses and severance costs, which we use to evaluate operating performance.

In our Title segment, operating revenues increased $104 million or 21%, driven by strong results from our direct and agency title operations. As a result, Title pretax income increased $13 million or over 100%. On an adjusted basis, Title pretax income increased $14 million and also over 100% with adjusted pretax margin of 4% compared to 2% last year.

On our direct title business, direct title revenues increased $38 million or 17%, while total opened and closed orders improved from last year. Domestic commercial revenues increased $25 million or 35%, driven by higher transaction size and volume with growth across asset classes, led by energy, industrial, site development, data centers and retail. Average domestic commercial fee per file improved 33% to $21 million compared to $15.8 million last year -- or $21,000, I'm sorry, compared to $15,800 last year. Average domestic residential fee per file in the first quarter was $3,300, consistent with last year. Total international revenues increased 10%, primarily driven by higher volumes.

On our agency operations, gross agency revenues increased 25% to $333 million compared to $268 million last year, driven by improved volumes across our key agency states, including New York, Florida, Ohio, Pennsylvania and also helped by commercial transactions. After agent retention, net agency revenues increased $11 million or 23%.

On title losses, the first quarter title loss ratio improved to 3.1% compared to 3.5% last year, reflecting our continued favorable claims experience. We expect our title losses in 2026 to average in the 3.5% to 4% range.

On our Real Estate Solutions segment, total revenues increased $64 million or 66%, driven by growth in our credit information services operations and our MCS business, as Fred noted. RES adjusted pretax income improved $11 million to $20 million or over 100%, and adjusted pretax margin improved to 12.5% compared to approximately 10% last year. We continue to focus on managing our overall cost of services and strengthening customer relationships. We expect our margins to trend higher as those relationships mature.

On our consolidated operating expenses, our employee cost ratio improved to 29% compared to 31% last year, primarily due to increased revenues. Our other operating expense ratio increased slightly to 28% due to higher expenses in the RES segment.

Our financial position remains solid and well positioned to support our customers' employees in the real estate market. Total cash and investments were approximately $420 million in excess of statutory premium requirements. Total stockholders' equity at March 31 was approximately $1.64 billion, representing a book value of $54 a share. And net cash used by operations improved to $4 million compared to $30 million in the prior year quarter due to higher net income.

Again, thank you to our customers and employees for their continued support. We remain confident in our ability to serve the real estate markets. And I will now turn the call over to the operator for questions.

[Operator Instructions] We'll take our first question from Bose George with KBW.

So I just wanted to start on commercial. Obviously, the fee per file was up very nicely year-over-year. When you think about the trends over the next few quarters, how do you see the cadence of that year-over-year growth? Is it -- could it persist for a little while? When do the comps get a little more challenging?

That's a great question, Bose. What's happened is our pipeline is really quite good. And what we're obviously seeing across the industry is the frequency of very large deals have increased. The other thing for us is we're leading more deals as we've had a good 2-year run here of growing scale and capabilities. And so I think it's natural for our average to kind of hover at this higher level.

The other interesting thing for us, if you compare us to others, because we were small 4 or 5 years ago, our refi percentage is less. So we are a little bit bumpier on size of deal because it tends to be less refi kind of softening the numbers. And so I'm pretty confident that the business will continue.

It will jump around. The growth year-over-year will jump around, I think, on us a little bit. Just because if you recall a couple of quarters last year, we grew like 50-plus percent and within a market that was growing half that. So I think there might be some comparisons, but I'm pretty bullish on our continued success as we go through the year on commercial.

And I would say the commercial in our direct operation, part of that is generated by our own staffing, if you will, putting skills back into the direct offices. So I believe that has some momentum both continuing but could increase over time for us because of the investments we're making there. So that's the other thing that's a little different by us because we were underpenetrated of commercial, what I call main street, the smaller end of commercial than probably the big guys.

Okay. Great. And then actually switching over to the ancillary. Can you just talk about the year-over-year growth rate outlook there, just with MCS now is kind of what we saw in the first quarter kind of a reasonable level for the rest of the year? And just -- and you -- I think you guided to a margin in the low teens for that segment for the rest of the year?

Yes. So exactly. So before I -- on the margin first, I would say 11% to 12% was good. Now it's 12%, 13%, maybe even a little more. We got some work to do on some consolidation stuff, but it's going to tick up to that 12.5% to 13%, maybe a little 13% plus. So I feel good about the trends there, and it's a nice solid book of business.

And then your other question was growth. So again, we grew most of the businesses outside of MCS -- in total, I think there were 21 or something [ growth ]. And so there's good penetration expectations in that business. I think it could soften a little bit, but you're going to see pretty strong growth coming out of that. There's a lot of momentum in those businesses. So I'm pretty good about it.

And again, the question overall, to me, given my view that the RES growth is going to be marginal, particularly for the next quarter or 2, I feel we can sustain with our momentum, somewhere around the 15% growth rate for the overall company. Might be a little less, a little more. But I feel like when I look under the hood in all of these businesses, even with a low RES, our share growth is good like an agency, and the trends feel pretty good. So that's how I think about it in total, too. It's -- I think we have -- we've established a little bit of momentum right now.

Yes. Okay. Great. That's helpful.

And Bose, just real quick on that to give a little more color. So we had mentioned that MCS was a little over $160 million a year. So it's roughly $40 million a period on revenue. So you can sort of -- when you take that effect out, you can sort of get to that 20% that Fred was talking about.

And it's slightly seasonal, so it was a little less than that in the first quarter, but the $40 million is good for the rest of the quarter.

Our next question comes from Geoffrey Dunn with Dowling & Partners.

First, could you share what the mix of commercial is in your agency line?

In agency? Yes. I would -- it's going to be parallel to kind of what we have, but it won't have like a lot of energy and big stuff. Agents don't have -- typically don't have those mega kind of business. They'll have some small in the data center. But -- so it's a pretty broad CRE kind of mix, but without kind of the energy on top, right? Because again, energy and the huge tend to be direct business mixes.

And I'm really -- feel good about it in agency. If you recall, we've always been a strong kind of underwriter for agents, but our commercial was very skewed to New York. I mean, that's historically -- the company was very good in New York, and that's -- but our ability to reach our commercial capacity to other big kind of commercial-oriented agents across the country was much weaker. And we also didn't have the facility when we had big multi-location deals to kind of facilitate that. So we created something called a concierge service that facilitates that.

We also have instituted what we call direct issue capability. So in certain places where they don't have licenses, we can finish the account. And so we don't have as good as anybody's capabilities in that space. So in my view, that's been one of those -- we've been growing now for, geez, now 6 quarters at a very high rate and because people have kind of started shifting parts of their book to us because we are a credible offering.

Okay. And then I wanted to dig a little bit more into the RES margin. If I remember correctly, PropStream has a very strong margin. MCS, I think you're talking close to 20%, and then you're double digit in informative. And the challenge, I think, has been the rest of the businesses. So what is the margin -- first, is that correct? And then what is the margin opportunity on those other businesses? Maybe [indiscernible].

Yes. I mean, so the margin is a little bit more consistent than you think. So again, so PropStream is teeny. So yes, it has a little bit higher margins, but it's a very small business. But MCS, IR, MCS is higher, but the others hover around that kind of 12% target that we have, right?

So again, is there an opportunity to improve that? Yes. So I'll give you an example. Appraisal, in my view, we got some platform work we're still doing because of the acquisition. And so that could, say it's high single digits, low double digits, that could go up a little bit. But I'm shooting for, in most of the businesses, around that 12% margin. And those are the ones we have our volume in.

We don't really have -- we have like -- our remote online notary tool is a very teeny business. It's really a tool for our business. We do a little bit of outsized sales, but it's really for delivering for ourselves and our agent partners. So it's not really a core of the growth we're talking about or the margin. So I feel pretty good about the breadth.

What I would also say is the seasonality, obviously, in the appraisal and the notarization business, the signature, the kind of scheduled business, those are very cyclical, right? They're just like the rest of our businesses, where MCS is a tad countercyclical to that because it's the default area and it's less volatile quarter-to-quarter. And so the pattern of that is helpful to us, too.

But again, that -- I said -- I think I said, we'll get this 12.5 overall to the 13, 14 range. And if the market comes back, right, if the market is at $5 million, just like our other businesses, that thing can get to 15 to 60, right? Because they have some cyclical nature to them because of the volume. So it's a very solid kind of portfolio now, and it's a lot stronger now that we've got the scale up in appraisal and we get MCS to the mix.

[Operator Instructions] We will move next with Oscar Nieves with Stephens Inc.

You mentioned earlier, the acquisition of Nationwide Appraisal Network, which was announced right after the end of the first quarter. So what details can you share about that transaction in terms of the purchase price and how it was financed? And also the expected contributions to the financials, both in terms of revenue and margins?

Yes. So NAN is small. It's about a $40 million thing. So you probably got $30 million going to run through the 3 quarters or so. It's kind of the incremental margin is what I described. We should get in the double-digit, kind of low double digits. There's going to be some integration costs and transition costs that you're going to have out of the gate here. So it's not big.

As far as the proceeds, if you recall in December, what I said when we raised $150 million, what I said is that I saw some real promising interesting things that I wanted to pursue to complement our business. And so there's a half a dozen or so things that were quite warm that helped both in the RES area and in the direct operations area. And so that's what we're pursuing. And so we had free cash on hand, free cash on hand that we use for that. And we have other dry powder for the other transactions I'm talking about.

So again, it's -- what I'm trying to do is in each of these businesses, particularly on the services side, they are relatively fragmented businesses that are kind of rolling up. And what you're seeing is the financial buyers in a lot of those businesses, they bought in '21, they overpaid, et cetera. They're withdrawn, right? And so it's made a lot of people pause.

And so what you're going to be able to do, at least I think in some of these businesses, is build a leadership position, which we've done in property RES. And again, it sets up nicely for us to get the kind of the scale in these businesses. And then in the direct side, what's happened is because the commercial market is a little bit better and because there's a little bit more light at the end of the tunnel, agents are making a little bit of money. And they're much more -- these folks that we've been talking to for months, we're getting at trading prices that are -- kind of makes sense for both of us with an earnout.

And there's -- we have our target list, and there's a couple in particular that I feel are higher probability in the next 6 months. That's why we raised the money. That's why we have available for these transactions available to us.

So we'll see how it happens. But one of the things that we do is we spend a lot of time kind of reaching out, making contacts, developing a pipeline, figuring out how these things fit and how they help our talent base. And things are going to start -- my view is there's a chance here that things are going to start happening, and I want to make sure that we're [ battle ] enough to take advantage of it because we don't like competing or auctions or any of that stuff. Most of what we do is we try to make this happen just on a one-one basis.

That's very helpful. So I have a couple of follow-ups related to that. So do you have an updated expectation on -- given what you mentioned about the pickup in the pipeline, about how much capital you could be deploying through the end of the year? And also if you can share some of the -- your learnings so far related to the MCS integration process?

Yes. On the MCS, I'm thrilled. I think, as you know, MCS was a leader in their space, and I couldn't be more pleased with the leadership team and their ability to continue to grow and set us up with a high reputation in that space. And so I'm thrilled. It also completed a little bit of -- there's some other places I'm looking for [ default ] capabilities, but it really rounds out kind of our presence in the [ default ] marketplace.

Because of the nature of that business, there isn't a lot of integration with the rest of the company, except for the normal things you think about, financial stuff. And so it's a pretty stand-alone business model. But there is, I believe, going to be cross-sell opportunity, relationship opportunities that are going to come from it. So as I said, it's doing everything we expected it to do, and I'm thrilled by it.

As far as capital, again, the things that I talked about in December are well within our excess capital availability. And so it's within the money we raised, and probably, we had $70 million on top of that available. So it's in that range of availability as we go forward. What's the probability of it happening? I don't know. These things are -- I just want it to be out there to be truthful. So I don't know.

Now I would also tell you that I think in the next 2 or 3 years, say, 2 years, I think there's going to be -- a few of the gems in our marketplace are going to come available, right? There's only a handful of things in the title business, 5, 6, 7 significant, a little bit bigger, say, the 200, 300 range assets that are going to be -- and somewhere in the next couple of 3 years, my feeling is they could become available. But I don't think -- I don't do capital planning for those because they're so rare, and it's not -- it's one of those things that if it happens, it happens and it will stand on its own and will justify the returns, we do it. But in a normal course, as you know, most of the deals we do are in that $20 million to $50 million range. And again, we have really good line of sight to the pipeline. So I don't think in the normal course that we're going to use anything but our available capital.

Thank you. And at this time, there are no further questions in queue. I will now turn the meeting back to Fred for closing remarks.

Thank you so much for your interest in Stewart. I just have to summarize, I feel very good about the company. I don't think we've ever been this strong as far as talent and position in the marketplace. And hopefully, even with a difficult market, we can continue our momentum, and I'm pleased with the progress we're making so far. So again, I just want to thank everybody for their interest in the company.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Hello, and thank you for joining the Stewart Information Services Corporation's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note today's call is being recorded. [Operator Instructions]

It is now my pleasure to turn today's conference over to Kat Bass, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us today for Stewart's Fourth Quarter and Full Year 2025 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 Hisey.

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.

Thank you for joining us today for Stewart's Fourth Quarter and Full Year Earnings Conference Call. Yesterday, we released the financial results for the fourth quarter and full year, which David will review with you shortly. I'd like to open today's call with some remarks on the overall progress we made in '25 and before shifting -- and then shifting to market conditions a little bit and then our fourth quarter results and strategic outlook for each of the businesses.

We are very pleased with the progress we made in '25, strengthening and growing the earnings power of all our businesses. While commercial markets saw some awakening, in '25, we remained in a multiyear slump for existing home sales with 2 years in a row of the lowest existing home sales in 30 years. Despite this market headwind, we grew revenues by 18%, net income by 48% and adjusted EPS by 46% full year '25. That growth has allowed us to gain share and improve margins.

We grew the company's adjusted pretax margin to 6.8%, up from 5.8% a year prior. We have created momentum for the company through continued execution of our targeted growth plans and have strengthened our position in each business. We delivered more distinctive products and services for our customers and made good progress on becoming a destination for the best talent in the industry. At the end of '25, we also rounded out our lender services portfolio with the acquisition of Mortgage Contracting Services, also known as MCS.

And in 2025, virtually all of our growth was organic, but we will continue to set our sights on additional profitable growth through targeted acquisitions, and we enhanced our financial flexibility to capitalize on potential opportunities in the near term by successfully upsizing our credit facility by $100 million to $300 million and executing an equity offering of 2.2 million shares of stock, raising $140 million to provide additional dry powder. In 2025, we also increased our dividend for the fifth year in a row, moving from $2 to $2.10 a share annually.

Moving towards some highlights for our businesses. In 2025, we grew all domestic commercial revenues by 34% year-over-year. This growth can be attributed to continued success in the expansion of our national commercial services business and growth in our small commercial growth initiative in our direct operations business unit. Our national commercial services business grew 43% year-over-year with significant growth across all of our asset classes.

In our real estate solutions business, we grew revenues by 22% year-over-year and continue to have a very robust pipeline of opportunities. We have made significant progress on our expansion of this business line since beginning the journey in the late 2019 and look forward to seeing how recently acquired MCS will expand our breadth and client coverage for top lenders and services. Our agency services business also made strong progress in '25, growing revenue by 21% overall. And our strategy to drive more commercial to our agents was also very successful, delivering 34% growth for the year.

Now I'd like to turn to the broader housing environment and our fourth quarter results. In the fourth quarter, we were able to maintain and in most of our businesses improve on our momentum. For the fourth quarter, we grew revenue 20% and adjusted net income by 52% compared to the fourth quarter of '24. This growth is meaningful for us given the existing home sales grew in the quarter just under 1% in the same time frame. While existing home sales purchases improved very slightly in the quarter, we will see signs for cautious -- we see signs for cautious optimism for housing in '26.

In the fourth quarter, 30-year mortgage rates hovered between 6.1% and 6.35% range, showing a bit more stability than more recent short-term trends. We have also seen a shift in the composition of mortgage holders with the population of mortgage holders with rates of 6% or higher, exceeding the population of those below 3%. This implies that we are seeing people continue to buy and sell for life events and that the market is beginning to accept we are unlikely to return to 3% rates in the future.

In the beginning of '26, we have seen rates remain in the low 6% range, and housing inventory has continued to be a little bit better than last year. And it was up 8% for the quarter compared to fourth quarter of '24. Looking forward, we believe we have rounded the corner and are heading in the right direction to get back to a more normalized existing home sales environment in the coming years. We do not anticipate existing home sales getting all the way back to their long-term historic average of 5 million units in '26, but we believe we will begin to see modest market improvements in '26.

Our direct operations business unit grew 3% -- I'm sorry, 8% in the fourth quarter compared to the same period last year, which we feel is strong given that this business is the most impacted by the effects of the challenged residential housing market. We remain focused on prioritizing share gains in target MSAs, both organically and inorganically, and we continue to make strides in our strategic initiative to grow our main street commercial business that runs through our direct office.

Our main street commercial business grew 17% for the full year and 16% in the fourth quarter in direct operations. We continue to expect a portion of our future growth in this business to come from targeted acquisitions, and we maintain a growing pipeline of targets that should begin to develop as the market signals a return to normal levels. Our national commercial services business delivered another solid quarter of growth. Success for this group is largely due to increased coverage in a number of geographic markets and asset classes, expansion of our team and our ability to underwrite larger transactions over the past several years given our improved surplus.

We are focused on continuing to invest in best-in-class talent to grow share as relationships are especially important in this space and will allow us to expand on our network and deepen our expertise. Because of the work we have done to continually improve this unit, in the fourth quarter, we benefited from underwriting some sizable transactions. We grew national commercial services business unit by 49% in the quarter. We are pleased with the progress here, and it really represents the improved competitive position we have built for ourselves in the commercial market.

Energy continues to be a point of strength, but for the year, energy growth was less than overall growth in this sector. In '25, energy grew 34% for the year and all other classes grew 46%. We remain focused on growing all asset classes and target geographies to expand our overall footprint. Our agency services business had another strong quarter with revenues up 20% year-over-year for the quarter. This amount of growth is strong when considering that the overall housing market is near flat to last year, which affects our agency partners.

We remain focused on growing this business through the expansion of wallet share with existing agents and onboarding new agents in all states with an emphasis on 15 states that are most attractive from an agency perspective. We are seeing sustained growth year-to-date agency across all our target markets and most notably, Florida, Texas and New York. Our commercial initiative with agents have also been a big part of our success as we continue to build on the momentum we have had in recent years and for our agents to differentiate our service and better our offerings to our agent partners, and we saw 34% growth in this important initiative in 2025.

Our real estate solutions business grew by 29% in the fourth quarter compared to last year. We also improved our margin in the fourth quarter over last year, but our full year margin of 10.1% was a bit short of our target for the full year '25 due to some isolated pricing issues and expansion costs. For the full year '26, we fully expect to improve margins and deliver in the low teen range for this segment and expect that our recent acquisition of MCS will help us improve our historical margin outlook.

As mentioned in late December, we closed our acquisition of MCS, a property preservation service provider, allowing us to expand our default services offering and cross-sell customers across our expanded product lines. We expect continued progress in this business line as the market improves.

Moving to our international operations. We are focused on broadening our geographic presence and depth in Canada, increasing our commercial penetration and expanding our presence in the refi market. In the fourth quarter, we grew our noncommercial revenue by 20% for the year, and we grew total international revenue by 11%. We believe we can build on our strong position in these markets and continue to grow share.

Overall, we remain dedicated to strengthening our company throughout geography, customer and channel expansion in each business to set the company up for continued long-term success. I'm proud of the work we did in '25 to further the company and look forward to seeing how we can capitalize on the potentially improving market conditions and opportunities in '26. I want to thank our customers and our agent partners for their continued trust. We are committed to doing our best to serve you with excellence.

And finally, to the Stewart team, I want to thank you for the loyalty and continued dedication to excellence. We are committed to being a destination for best-in-class talent. This year, I had the opportunity to meet with thousands of employees across many different cities in the U.S. and Canada as part of my year-long roadshow. My time with you all during this series was powerful as it showed me that we have a very dedicated team that is aligned and focused on the strategic objective of becoming the premier title services company.

We point to this dedication and alignment as a key component of why we received several employment awards this year, including the USA Today's Top 25 Workplaces Award, Forbes' America's Best Employers for Company Culture and ranking #1 per Forbes America's Best Employer for Women in Business Services. We are also proud that we were able to support our employees by donating $1.2 million to the Stewart Foundation to their local communities. We stood up the foundation together in '21, and we've made a significant impact on our community since the inception. I cannot be prouder of the progress we have made on our journey, which we all know that much remains to be done to accomplish our goals, but I look forward to seeing where we grow together.

David, I will now turn it over to you to provide an update on our results.

Good morning, everyone, and thank you, Fred. I appreciate our employees and customers for their steadfast support in the slow residential real estate market. Yesterday, Stewart reported strong fourth quarter results with both revenue and profitability improvements. Fourth quarter net income was $36 million or diluted earnings per share of $1.25 on revenues of $791 million.

Appendix A of our press release shows adjustments to our consolidated and segment results, primarily related to net realized and unrealized gains and losses, acquired intangible asset amortization and office closure and severance expenses that we use to measure operating performance. On an adjusted basis, fourth quarter net income was 50% higher at $48 million or $1.65 diluted earnings per share compared to $32 million or $1.17 diluted earnings per share.

In our Title segment, operating revenues improved $106 million or 19%, driven by strong results from both our direct and agency title operations. As a result, title pretax income increased $13 million or 28%. On an adjusted basis, title pretax income improved 35% to $68 million from $51 million. Adjusted pretax margin improved to 10% compared to approximately 9% last year. In our direct title business, total fourth quarter open and closed orders for commercial and residential transactions improved compared to last year.

Domestic commercial revenues increased $32 million or 38% with growth in all asset classes led by data centers and energy. Transaction size increased as our average domestic commercial fee per file improved 39% to approximately $27,000 compared to approximately $20,000 last year. Average domestic fee per file improved 13% to $3,300 compared to $2,900 last year, primarily as a result of transaction mix.

Total international revenues increased modestly. Our agency operations were robust with gross agency revenues of $334 million, 20% higher than last year. This increase was primarily driven by improved volumes in our key agency states such as Florida, New York and commercial transactions. After agent retention, net agency revenues increased $11 million or 22%.

On title losses, total title losses in the fourth quarter increased slightly due to increased title revenues. The fourth quarter title loss ratio improved to 3.4% from 3.7% last year due to our continued overall favorable claims experience. We expect our title losses in 2026 to average in the 3.5% to 4% range. On our Real Estate Solutions segment, total revenues improved 29% by $25 million, primarily driven by our credit information services business.

As Fred mentioned, we recently added MCS and expect it to be a major contributor to the segment's revenues and profits going forward. The segment's adjusted pretax income improved 47% to $10 million compared to $6 million last year. We are focused on the overall cost of services and strengthening customer relationships. Adjusted pretax margin was 8.5%, 1% better than last year's fourth quarter, and we expect our margins to normalize in the low teens as these relationships mature.

On consolidated expenses, our employee cost ratio improved 29% compared to 31% last year, primarily due to increased revenues, while our other operating expense ratio was 25% comparable to last year. On other matters, our financial position remains solid to support our customers, employees and the real estate market. Our total cash and investments were approximately $480 million in excess of statutory premium reserve requirements.

As Fred noted, our line of credit and December common share equity offering provide us financial flexibility. Total Stewart stockholders' equity at December 31, 2025, was approximately $1.6 billion with a book value of $54 per share, which is $4 better than last year. Net cash provided by operations improved by $22 million or 32%, primarily due to higher net income. Again, thank you to our customers and employees, and we remain confident in our service to the real estate markets.

I'll now turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from Bose George with KBW.

I just wanted to start with the commercial. Just given the strong commercial activity in 2025, can you talk about your expectations for commercial revenue growth in '26? And then just related question, usually, there's been meaningful seasonality in 1Q. But given what you see in the commercial pipeline, on the commercial side, do you think 1Q could be sort of a little better than usual?

Yes. Great question, Bose. So I feel very confident in our kind of our pipeline activity. It's pretty broad. It's pretty good. I do think there is seasonality -- will continue to be seasonality in commercial. And the fourth quarter, in particular, this year, I think, was very robust. I think you're going to see that for a lot of people in the industry for some reasons. But -- so I do think it's -- we got -- our first quarter in general should be a little bit better than last year, but we'll still have the difficulties of the first quarter in my view.

And the commercial in general, I think, is going to -- it will be a good year for us next year, looking at the activity and the breadth of the activity. Some of the comparisons, it will be interesting to see on growth. So do I think we can grow commercial next year? Yes. I just think 49% is not -- like there's going to be some comparisons here given how quickly we're going to grow into our skin that we might see some kind of moderating of growth, of course, and some comparisons that might be kind of not as robust on the growth side.

But again, it's going in the right direction in every class, and we're hiring and trying to really get after it. And I feel good about the depth. The other thing that's really interesting qualitatively is we're leading more deals. Like some of these big deals, right, historically, we would participate, but we control more now, and you can just feel it and see it, which gives me comfort that we're moving in the right direction. So even if we went a little sideways this year and digested the growth in the next 2 years, I'm as confident as I've always been on being able to go forward. We're probably 14% share right now in the market. I think over the next 2, 3 years, we're going to get closer to 20%, right? So I can't time that, but the momentum and our ability to get after it is there. And I do think the market in general is going to be relatively strong this year as well. So hopefully, that's helpful...

Yes, that's great. That's very helpful. And then actually, can you remind us what percentage of your agent premiums are commercial?

That's a great question. So we've been obviously trying to grow that business. And let me just -- I have some of the information on that. But we grew in -- of the 20% growth, we grew purchase about 16% for the quarter and 15% for the year. We grew refi with the real estate -- with the agents about 40%, but that's only about 3% -- $3 million of growth because it's such a small percentage of our business. And then we grew -- see, the commercial was about 34% for the year. And so you can look at the mix. I don't have the specific percentages of each, but it's very small refi.

Again, of the growth in the purchase, it represent about $125 million of the growth. And so you can kind of back in the percentages. But it's -- but again, it's heavy purchase. It's probably somewhere around 15% to 20% commercial now. And the rest is refi. But it's -- what's nice about it to me is that when you look at the 15% -- excuse me, 16% growth for the quarter in purchase, the market is somewhere between 1% and 2%, right? So I know this year, we're going to get the data. We're going to have another share movement in most of these markets that is pretty robust.

And on commercial, I would say we're playing catch up. if I was a guessing man and I looked at my competitors, their numbers of commercial and their agency would be closer to 15% to 20% of the business. And so we're still catching up of our penetration of commercial in the agency. So I wouldn't be surprised if we -- our percentage of growth in commercial doesn't continue because we're catching up, right? We're not -- I would say our competitors are probably in the 20% to 22% range, and we're probably in that 15% range.

Okay. Great. Actually, just one last one on commercial. Have you talked about commercial, the direct margins versus the residential direct margins? Is that something -- I can't remember if you discussed that?

They're a little better. Again, it has a lot -- the costs are more variable in commercial because of the way the commission structures work and the arrangements with involved and stuff. So -- but it's a tad better. It's probably 1/3 better. And again, the other thing about it is the float is also better. So there's an investment income portion of commercial that is quite important. And there is a -- and for us, I don't know -- I can't tell you what the competitors' numbers are, but scale matters because of the nature of the work.

And so as we get bigger, the margins get better, right, because of the critical mass we see in some of these asset classes and skill sets. So it's a good margin enhancer, and it's a margin grower if we can continue to grow this business. We are probably somewhere -- probably the fourth quarter, 18% of our revenue was commercial. But over the year, my guess is the average was like 14% to 15%. But if I look at my best competitors, the big guys, they're probably in the low to mid-20s, if I was guessing. It's hard to back into it because it goes through the various channels.

But we are, again, short there, too. So it's not just our share in that business, but even relative to our business mix, we were short. And that's why this has been an important initiative, and this progress for us is very helpful as a company.

[Operator Instructions] We'll now move on to Geoffrey Dunn with Dowling & Partners.

A couple of questions. First, what are the plans for the line of credit? Do you have an aggressive paydown schedule there? Or do you think it's just the plan to let that leverage come down gradually with equity growth?

Jeff, it's David. I would say the latter. I mean we could pay it off at any point. I think we're just trying to keep flexibility, as Fred talked about. And so I think we're about $200 million drawn. We may bring it down a little, but you may see that for the year.

Okay. And then bigger picture, I wanted to ask you about AI and the effect you feel it's had on your business and if that's still accelerating. But also the effect it's had on the broader business. It looks like there's been some capital investment coming into the space for data collection, data mining, data organization. Curious if you view those as M&A opportunities? Or is that something we should think about in terms of a longer-term competitive consideration?

Yes. It's a great question. It's obviously -- as I said previously, because of the way we have so much unstructured documents, there's a big benefit both on efficiency, customer satisfaction, quality because what we -- our losses are because you make a mistake, right? We're a warranty. And so the more efficient you can examine the documents and get to the right points quickly, the better you are.

We have, gosh, probably 75 individual initiatives, right -- going on right now that have AI to apply in our businesses around customer service or efficiency or data consolidation and management. My view from a competitive point of view is an enormous advantage of the bigger people. It's not going to eliminate our business or anything. It's going to make us better, higher quality, better kind of throughput and consistency. It's a lot of little singles is the way I'd describe it, but important.

There are tools, you are exactly right. There are innovation and tools. There's one tool in one of our businesses right now, to your point, that I'm likely to buy, so -- which is -- can get plugged in and make our service better in one of our businesses. And again, because our business is so unique and weird, this isn't a revolution. This is kind of, in my view, a way to make so many parts of your business better. And title is weird. So the opportunities tend to be smallish in these -- the market opportunity. And so there will be some of that tool thing.

Just if you remember, in the P&C world after the crisis, the dot-com, same exact thing happened as all these companies failed, but some of the solutions, the models were extracted by the bigger companies to accelerate some of their innovation. And I think there will be some of that. Is it going to be massive? No. But I'm pretty excited about what's happening. And again, it's just another thing that's going to -- we have a really interesting oligopoly, right, because of the scale and size and the data and the reach.

And if the big players are using this kind of tool, it's going to increase the quality of our delivery. So it's a great -- it is a really good, interesting observation. And I would also say there's characteristics in our business that are very similar between us and other kind of insurance delivery through independent channels. And so there are some of these things that are kind of repetitive.

And so there'll be people that will be able to kind of accelerate your advancement because they can take something from another industry and kind of slide it over. So again, it's -- I tell our folks, what I like about it is that it's not about technology, right? It's about businesses driving improvements by using a tool that makes a more consistently -- consistent delivery of data. And it's helpful.

I would also say that some of the -- what people talk about is overblown a little bit. I mean this is a world still of -- you can get to 90% of the solution, but the last 10% is the hardest, and we're still in that range. And so human intervention is going to be really -- remains really critical, particularly in our business. And again, so that's kind of how I see it developing.

Okay. And then, David, just an accounting question related to this. Given the digitization at the municipal level and the increased ease of collecting data, is there any implication for the title plant assets, particularly the more legacy plants because it's now cheaper to create those?

No. I mean, as you probably know, title plants vary in access. The title data varies across the country. And the plants are needed in the markets that we're in to access data, so there shouldn't be any issues if you're talking about recoverability.

What is happening -- right. Again, what is happening is we're able through the way we've set up the centralized processing and management, the enhancing of the value of those plants has been kind of really helpful, right, because we can supplement the data in those plants more efficiently. And it's becoming kind of more helpful in our business, particularly as we grow.

We'll now move on to Oscar Nieves with Stephens.

Earlier, you mentioned seeing signs of cautious optimism for housing as we look into '26. Can you talk a bit more about the specific industry [ direction ] and whether those are broad-based or concentrated in certain [ regions? ]

Yes, it's a good question. So last year, everybody said -- this time last year or earlier, say, in the fourth quarter, when we had that little downturn in rates, and we had a nice little spurt in December orders and market ended up translating into some March close orders, people were saying, oh, by the end of the year, we're going to see 8% to 10% improvement. I didn't see any of that, right? Because your under 3% mortgage was still really high, and the inventory quality was not great.

And a matter of fact, I think we got to a point where 20% of all transactions were really old, were flippers because it was old inventory. Now what I see is the under 3% has ticked down a little bit. The quality of inventory has gotten a little bit better and has increased and people say it goes up and down, and there's some seasonality in the inventory.

But it's 8% up in the fourth quarter year-over-year, and we're seeing more activity. Do I think it's going to be more than 6% to 7% or 8% growth? No. It's modest. But I was -- it's hard to guess, but it feels like that this year. Whereas last year, right from the get, I think it was going to be flat, even though the estimates from some of the economists were up. This year, I could feel it. And you saw our open orders, right? You can see some of the open order data and how it's getting a little bit better.

And so again, I don't think it's going to be over the top, but I believe we're going to start seeing some movement this year. Again, the first quarter is always hard for us for geography reasons. And as far as the breadth, I think there is some breadth to it. Again, some of the places that didn't go up as much, don't move as much like the Midwest kind of has less variability in it. And so the South tends to be the swing a lot of times. But I feel pretty good about modest improvement. So what we're trying to make sure we're on top of and planning for is that kind of how do you capture that...

And touching on rates, looking at data from the ICE Mortgage Monitor, I can see that once rates go below, say, 6%, the number of people with in-the-money mortgages increases significantly. Could you give some color and maybe quantify the impact that would have in your revenues if that were to happen and ultimately in earnings?

Yes. Again, there's a lot of talk about it. I don't know how scientific any of that is. But again, I look at last October, and we had a cup of coffee, a little bit under 6% and things jumped, right? So there is some optics around that 6%. What I would tell you about our economics, our big swing of our economics is really existing home sales, as we've said. And we're -- we've been sitting at $4 million for 3 years, right, with 0 growth. And the reason it's such a swing for us is because it's the fixed cost base for us with 500 locations.

And particularly in the first quarter, when you're at that level, you've got so little volume going through the system, it's a real drag on your returns. And what I've said is if we got to $5 million, our margins go to 12%, right? But I don't have 12% because you're filling the excess capacity. And particularly if you want to go -- if you can't sleep one night, look at the first quarter results in '23 and '22 and '21 when things were still really strong, it's an enormous swing for us, right?

Now we try to fill the bucket in direct through small commercial growth and some organic attempts around micro markets, et cetera. So you can think about a straight line almost between the $4 million and the $5 million of leverage of our business. And again, it's a little seasonal because, again, the volumes are so low in the first quarter. But that's the way we think about it. And again, it's tied -- so that's the big portion, but it's everywhere, right? Like appraisal -- you go through the businesses, there's a fixed cost portion of all those businesses. And when you're at a 30-year low, you strain kind of on the margin. That's why what I say in our lender services business, I think we're 11% to 12%. Now I think we're 12% to 13% is kind of the -- where we're going for this kind of year.

But if we got back to $5 million, that thing is going to get to mid-teens because all those businesses are affected too, right? A little less, but it's part of our equation. And one of the things that are most interesting about us is if you look at '19 to '24, for example, in the volumes, all our competitors' margins went down more than ours because of the volume decrease and ours went up, but that's because we started bad. So we've made improvements, but we're still very tied to that core metric and trying to give less metrics.

The other thing I would say, and I've mentioned this a number of things in public settings, because I think there's some chance that it's a journey beyond 4.5% is going to take longer. I mean, I think we're going to get some improvement, but it could get stalled for various reasons. We're working hard to make that -- try to get to double digit at 4.5%. A lot of work to do, but with geographic focus, some product portfolio stuff we're doing, some operating model because I'd like us to be able to show kind of improvement if we get stalled at that kind of 4.5% because there is some chance it's just going to take a little bit longer to get to 5%. So I'm kind of -- I'm optimistic on an improvement, but I'm cautious about how quickly it gets to that $5 million, $5.5 million and really focusing on continuing earnings growth while we get there.

Yes. And maybe a last one, and I'll get back in the queue. You've highlighted efforts to grow agency in a few targeted MSAs, including Texas. With the Texas Department of Insurance finalizing the reduction in title premium rates effective March 1, if you can walk us through how that change will flow through your financials and how you're thinking about the impact on the business, both near term and longer term?

Yes. So the rate, again, is like 6%, what that agreed to is a 6% reduction, and it's like July or something. And so that's much less of an issue than it was when it was 10%, first of all. But what we've done is we've addressed this through reviewing all our fees and services and stuff in Texas. And so it's less -- it's low single-digit impact on earnings this year. So we managed it well.

Now I'm concerned for some of our agent partners in rural places in particular, because they don't make a lot of money, and that's a meaningful change. And so I do think it's going to cause some disruption in the agency -- some of the agencies, particularly small agents in parts of Texas because there is a -- in my view, right now, there's not a ton of margin for agents given the rate structure. What's weird about our world, right, is that people think about it as a cyclical world. So they take a 3-year average or a 5-year average or whatever.

The problem is that '21 and '22 are once in a lifetime, never happen again kind of event. And if you weigh them too much, you overreact to the excess earnings that were made in those 2 years. And I think Texas is a perfect example where that reduction is overstated given what today's environment is, and it's going to have an impact on agents. But for us, it's not. Financially, I don't think it's going to be much, if anything -- like I don't -- we put it in our plan, everything, but it doesn't change my expectations of growth of earnings or anything in our businesses.

[Operator Instructions] And we do have a follow-up from Oscar.

All right. I guess this will be my last one. You highlighted efforts to grow -- you talked about prioritizing share gains in those key MSAs, both organically and through M&A. Can you give us a bit more color on how you're thinking about that strategy today, including whether that -- you have a target level of capital that you plan to deploy this year and how that might be split between the title business and the Real Estate Solutions business?

Great question. So in direct, to me, the direct, as I said, is more of a kind of a fixed cost minimum scale way to think about direct in MSA levels. And early on, the problem we had is we were an inch deep and a mile wide. So we had a lot of offices that were chronically unprofitable unless the market was at its peak. And so we shut some stuff down, reallocated capital. We actually purchased in about 30 MSAs, some business because of the scale difference, if you get over 10% share locally is -- the margins are much better. The ability to manage the ups and down is better. Your service consistency is better, your ability to centralize things and variabilize the cost of them.

So we have this -- we reviewed the 140 MSAs. We said which ones are mostly agent oriented, which ones are we strong, which ones we like the market, but we're not where we need to be. And we have 30 or so MSAs in particular that we think we can move the dial, and it'd be good for the company to get to a higher share level in those areas. We also have what I call micro markets, which is the markets, the suburbs of Nashville, the difference between Austin and San Antonio, the growth in between where we can do fill-ins and acquisitions and tie it to the bigger offices in those locations.

So we have these targets that would materially both improve top line and bottom line for the company. For the last 3 years, we've got -- we kind of didn't do really any because what happened is agents weren't making any money. And so their price expectations -- they weren't going to get enough to be comfortable or happy about that. So they can kind of talk to us and communicate with us, but there was a price point even with an earn-out.

What has happened is as people have reengineered their operations through -- getting through the tough times, they're making a little bit more money. They're seeing the improvement that I'm seeing. All of a sudden in these target markets, those conversations are becoming more constructive, right, for those that are deciding this is one of the alternatives they want to consider. And so for me, I've said over the next 3 years -- I said a bunch of times, over the next 3 years, I see $300 million roughly of acquisitions in the direct channel against these kind of markets that would structurally improve our margin regardless of cycle in that business.

And so what I'm saying and what I said in my script, I am much more optimistic that this year, some of that can start to happen. And I don't know when. And again, I only want people that want to be here. I only want it to work for both of us. So it's getting to that right trading price, so there's no risk for us and no risk for them. And I think we're getting closer. And so that $300 million in my mind over the next 3 years is kind of the way I've thought about it. As you know, most of the transactions in that space are small, $10 million to $30 million. It's what -- because you're geared to a market or a market opportunity.

And that, by far, if you look at our overall capital plan, I would say the other businesses I'm in -- are in, we don't need to do acquisitions. What I have said out loud recently is that in lender services, there's a couple of spots where we've got really good traction that it might make sense to consolidate some of the competitors. Again, those won't be -- they wouldn't be big transactions. But what's emerging is we've got so much momentum with some of the big lenders that filling in our network or buying some of those customer relationships could make some sense.

So again, that's a little bit more opportunistic. And again, it's not -- I don't think you're going to see a $300 million opportunity. Those again are -- will there be a $20 million or $30 million opportunity. The other thing I would say is what Jeff just said, there are a handful of really teeny like $3 million, $4 million of tool sets that I do think will be available in some of these businesses that accelerate some of the development we want to do to make our service better and our delivery better because of what's happening with not just AI, there's a bunch of things happening with certain development.

So that's where our capital is. I don't think it's going to be a huge number. I think what happens quickly as the market comes back and we improve margins, we generate a lot of cash. So I believe the majority of what we're going to be doing is self-funded. I still believe that. And it was just a timing thing here that I wanted to give ourselves some flexibility because of what I saw happening over the next 6, 9 months. But I think in general, we should be able to self-fund what I'm talking about over the next 3 years.

I'm going to stick to my word. You answered the follow-up that I would have but...

Thanks a lot. Appreciate it.

We'll go next to Geoffrey Dunn with Dowling & Partners.

Just a couple of number questions. David, could you update us on what you saw January trend-wise for orders and also share your thoughts for investment income in the coming year relative to '25?

Yes, Jeff, I mean with respect to orders, I think Jeff -- or Fred just covered it a little bit. Things have been opening up a little, particularly relative to last year's quarter, they're up a bit. We just have to see how things play out here because rates have been a little volatile as you've seen. But right now, things seem to a little bit better than last year.

With respect to interest income, and this also goes to Fred's comment on the flow benefit of getting commercial. So as it stands now, if you plan on maybe 1 or 2 rate cuts and assume most escrow earnings are tied to short-term rates, we may come down a little bit, but most -- we don't expect it to come down that much. And the main reason is because the escrow balances will grow and offset it.

Okay. So largely a volume offset to rate cut impact?

Yes. I mean I would say it could come down a bit, like several million or so, but it's really a function of how quickly -- like if they don't drop rates until the fall, right, and volume continues to pick up, then you're sort of holding, maybe increasing a little, right? If volume doesn't pick up as quickly and they drop rates like at the next meeting or 2, right, then you could go down a little bit.

We'll now move to Bose George with KBW.

One more for me as well. The -- actually, can you give us an idea about the revenue contribution from MCS? And is there much seasonality there as that comes in?

Yes, both good questions. So there is a little seasonality, particularly in the first quarter, okay, for that business. It's -- and we -- I think when we bought the company, we talked [indiscernible].

Yes. Bose, I think we had covered this a little bit in different forms, but it's about $165 million a year revenue company sort of in the $40 million EBITDA or so range. And we'll just have to see where it goes from there because foreclosures have been increasing as you've seen, FHA delinquencies have been increasing, but that's about how they're running now.

Yes. So a little lower in the first quarter...

At this time, there are no further questions in queue. I will now turn the meeting back to management for closing remarks.

I just want to thank everybody for their interest in Stewart. As I said earlier, I'm very pleased with '25. We've made good progress, and we have good momentum. And I believe that momentum will continue into '26 if we stay focused. So thanks for -- thank you for all your attention and interest in the company. Thanks.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Hello, and thank you for joining the Stewart Information Services Third Quarter 2025 Earnings Call. [Operator Instructions] Please note today's call is being recorded. It is now my pleasure to turn the conference over to Kat Bass, Director of Investor Relations. Please go ahead, ma'am.

Good morning. Thank you for joining us today for Stewart's Third Quarter 2025 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 Hisey. 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.

Thank you for joining us today for the third quarter earnings conference call. Yesterday, we released the financial results for the quarter, which David will review with you shortly. I'd like to start today's call with a discussion of our perspective on current housing market conditions, followed by a review of our third quarter results and strategic progress by business. I am proud of our third quarter results. Our 19% revenue growth and 40% earnings growth reflect the efforts we have made to continue to grow the company even while facing prolonged headwinds from the historically low housing market we continue to be in. There continues to be both a blend of positive and negative economic headlines related to housing. In the third quarter, we experienced some rate relief, exiting September with mortgage rates around 6.35%.

While there is some softening of rates in the third quarter, we did not see rates quite as low as the quick dip we experienced in September of last year, where rates hovered momentarily right around 6% and caused a flurry in purchase and refinance activity to close out 2024. I am more confident in the market's ability to improve over the next 12 months this year than I was last year at this time.

The housing market continues to become a bit friendlier for buyers as inventory has been growing. Builders continue to offer incentives and an increasing portion of homes are being sold below list price, indicating the cooling of house price appreciation. We have also seen price improvement in more of the MSAs. That said, home prices still remain a hardship for many buyers as the median sales price of existing for homes sold is still increasing year-over-year, though at a lesser rate than we have experienced for most of '24. So far this year, existing home sales are hovering right around 4 million annual units as many buyers continue to sit on the sidelines awaiting less volatility in the macro market conditions and in anticipation of future rate cuts into the next year. September existing home sales data will be published later this morning.

However, we expect around 1% to 2% increase in existing home sales relative to the third quarter of '24 this quarter. Looking ahead, we believe the housing market will continually to gradually improve over the coming year, and '26 will be the beginning of a transition back towards a more normal existing home sales environment, which we characterize as 5 million existing homes sold. From a commercial market perspective, we have benefited from and capitalized on recovery seen in the commercial real estate markets across various asset classes.

We expect this recovery to continue into '26 and beyond. Given these market headwinds and volatility, we are proud of the results that we have delivered in the third quarter as they reflect our momentum. In the third quarter, as I said, we grew total revenues by 19% and adjusted earnings per share by 40% when compared to the same period last year. Our direct operations unit grew 8% in the third quarter relative to the same period last year. We see this as solid progress given that this business unit most immediately feels the effects of challenged residential housing market. Our direct operations leadership remains focused on the charge and growth share in target MSAs and micro markets, both organically and inorganically.

They are also focused on picking up share in small commercial transactions that run through this business unit, and we are seeing real progress on that initiative with commercial growing 18% in direct this quarter. We continue to expect a significant portion of our future growth in this business to come from targeted acquisitions, and we maintain a warm pipeline of targets that will develop as the market signals a return to more normal market levels. Our National Commercial Services business delivered another solid quarter of growth. Success for this group is largely due to our increased penetration in the number of geographic markets and asset classes.

We have brought on best-in-class talent, and we'll continue to invest in talent in this space to grow our share. Thoughtful investment in our talent will allow us to expand our network and deepen our capabilities in more geographies and asset classes in order to leverage the distinctive underwriting capability we currently have. We grew domestic commercial revenues by 17% in the quarter. And through the third quarter, we have grown domestic commercial revenues by 33%. I'm proud of our performance here as it really represents the momentum we have built for ourselves on the commercial front. The energy asset class continues to be a point of strength. data centers, hospitality and self-storage were also areas of growth for us in the quarter.

We are focused on growing all asset classes and target geographies to expand our overall footprint. Our Agency Services business had another strong quarter with revenues up 28% year-over-year in the third quarter. This amount of growth is exciting for us when considering the overall housing market is near flat for the year. We are on a mission to grow this business through share gains in attractive states, onboarding new agents and wallet share expansion with existing agents. While we see growth across all states, there are 15 states that we are targeting for share shift and growth. We are seeing sustained growth year-to-date in agency in several of our target states, most notably Florida, Texas and New York.

Our commercial initiatives with agents has also been a big part of our success, and we continue to build out momentum that we have made in recent years to our target agents to differentiate our services and better our offerings for agent partners. Our agent -- our Real Estate Solutions business delivered another strong quarter of results as well, generating revenue of 21% higher than the third quarter of '24. The increase was led by our credit information business.

Our margins again improved sequentially and are now in the low teens range, which we would consider our normal range. We are focused on growing this business line by gaining share with top lenders and cross-selling our products as we leverage our improved portfolio of services. We expect continued progress in this business line as the market improves. Moving to our international operations. We are focused here on broadening our geographic presence within Canada and increasing our commercial penetration. In the third quarter of '25, we grew revenue by 21% versus '24 due to noncommercial growth of 12% and outsized commercial growth due to a handful of larger transactions.

We believe we can build on our strong position in these markets and continue to grow share. Overall, we remain dedicated to strengthening our company through thoughtful geographic, customer and channel expansion in each business to set the company up for continued long-term success. I am pleased to share that in September, we announced an increase in our annual dividend from $2 per share to $2.10 per share. This is the fifth year in a row we have increased our dividend to shareholders. We continue to invest in ourselves and our shareholders as we pursue smart growth for each of our business lines. Thank you to our customers and agent partners for your continued trust.

We are committed to doing our best to serve you with excellence. And I'd like to close by saying thank you to our employees for their dedication, loyalty and drive. It has been a privilege this year to visit so many of our office this year and see and experience the energy that you have all shared with me. It is contagious. We have never had a better talent as we do today. I'm so proud of how far we have come on our journey to become a destination for industry-leading talent. Earlier this year, we were recognized as a top workplace by USA Today. And in the third quarter, we were named by Forbes list of America's Best Employers for company culture. We also ranked in the business services category by Forbes of America as the Best Employer for Women in 2025. I want to thank you all for what you're doing to build upon the company's legacy and set up the company for enduring success. David, I will now turn it over to you to provide an update on our results.

Good morning, everyone, and thank you, Fred. I would also like to thank our employees and customers for their continued support as we navigate the residential real estate market, which remains around 15-year lows. Yesterday, Stewart reported strong third quarter results with growth in both revenue and profitability. Third quarter net income was $44 million or $1.55 per diluted share based on revenues of $797 million. Appendix A of our press release shows adjustments primarily related to net realized and unrealized gains and acquired intangible amortization that we use to measure operating performance.

On an adjusted basis, third quarter net income improved 41% to $47 million or $1.64 per diluted share compared to $33 million or $1.17 per diluted share in the third quarter of 2024. In the Title segment, operating revenues grew $107 million or 19%, driven by our improved direct and agency title operations. As a result, title pretax income increased $17 million or 38%. After adjustments for net realized and unrealized gains and losses on purchased intangible amortization, adjusted title pretax income was $61 million, which was $17 million or 40% higher than the prior year quarter. Adjusted pretax margin improved to 9% compared to 7.7% last year. On our direct title business, total third quarter open and closed orders related to commercial and residential transactions improved. Domestic commercial revenues improved $12 million or 17% across various asset classes, including data centers. Domestic commercial average fee per file was $17,700, which was similar to last year.

Domestic residential average fee per file increased 6% to $3,200 compared to $3,000 last year as a result of higher purchase orders. Total international revenues increased $9 million due to increased volumes and large commercial deals. On agency operations delivered strong performance with gross revenues of $360 million, increasing 28%, primarily driven by improved volumes in key states, as Fred noted, and commercial. Similarly, net agency revenues increased $12 million or 25% compared to the prior year quarter.

On title losses, total title loss expense decreased slightly due to our continued overall favorable claims experience. The title loss ratio for the third quarter was 3% compared to 3.8% last year. We expect our title losses to average 3.5% to 4% over the coming period. On the Real Estate Solutions segment, total revenues improved $20 million or 21%, primarily driven by our credit information and valuation services operations. The segment's adjusted pretax income was slightly higher than the prior year quarter. We continue to manage the higher credit information costs and are expanding and strengthening customer relationships.

Adjusted pretax margin for the third quarter was 11.3%, which is better than the prior 3 sequential quarters. We expect our margins to be in the low teens as these relationships mature. On our consolidated operating expenses, our employee cost ratio improved to 27% compared to 30% last year, primarily due to higher revenues, while our other operating expense ratio was comparable to last year. Our financial position remains solid to support our customers and employees in the real estate market. Our totally cash and investments were approximately $390 million in excess of our statutory premium reserve requirements. We recently renewed and upsized by $100 million to $300 million, our line of credit facility, which is fully available. Total Stewart stockholders' equity at June -- at September 30, 2025, was approximately $1.5 billion with a book value of $52.58 per share. Net cash provided by operations improved by $17 million or 22% compared to last year. Again, thank you to our customers and employees, and we remain confident in our service of the real estate markets. I'll now turn the call over to the operator for questions.

[Operator Instructions] Our first question will come from Bose George with KBW.

So first wanted to ask about the strength in agent premiums. Can you -- it looks like you're continuing to grow there. Are you taking share? And if so, is that like coming from the larger players? Or just color on what's going on there?

Sure. Great. So there's really 2 components of it. So in the res side, what we're seeing, particularly within the 15 states we're focused on, we're seeing pretty good share shift. And I think this quarter, we saw about a 16.5%, and again, primarily in those targeted states and both -- it's pretty interesting, also deepening of penetration with existing. Part of it is because our -- we now can service all the states, and there's a bunch of things about our technology that's a little bit better than it had been historically. The second thing is this quarter, we had a little bit of really good traction on commercial. We probably grew commercial 40% in the agency channel.

And again, that's been -- if you've heard me talk about -- historically, we were very good in, say, the New York area for commercial agents. But outside of New York, we weren't as good. Our service wasn't as good or capable. And now it's been a big push for us over the last couple of years, and it's really taken off. So again, I feel like both the commercial strength, and that will do with both a lot of the bigger agents that have more commercial, although we're doing commercial with smaller agents, too. But that -- those 2 pieces, kind of the geography piece and then the focus on commercial-oriented agents and providing better service outside of New York is really the 2 things. I'd like the traction on both right now. It's good.

Okay. Great. And then just sticking to the commercial, can you talk about the pipeline into year-end? How is that looking? And how much is office starting to contribute as well?

Yes. I feel good about it. So you see our order stuff, I feel good about the commercial. The pipe is good. Again, we've had a heck of a year. It's been -- I think we're up whatever it was 35%. And for large accounts, we're probably up 39%, the larger centralized commercial. And the growth has been pretty broad by class. Office has not been one that's been -- had significant growth for us. And I don't see that necessarily changing. But pretty much -- it's interesting. Most every other class is pretty good.

So I feel good about the breadth of it, as a percentage has gone down, which is good. Probably 5, 6 quarters ago, I mentioned how we really -- the energy was a growing portion, and it's now evened out as we grow in other categories. But I feel pretty good about the back half. Now the comparisons for us, I have to sit down and think about the comparisons. We took -- we started taking off about 5 quarters ago and the fourth quarter of last year was very strong for us. So we'll see how that plays out. But if you look at, as I said, our orders and our -- I look at what's in the pipe, I feel very good about the fourth quarter.

Okay. Great. That's helpful. And then just one more quick one. The investment income line was a little bit lower than last quarter. Anything to call out there? Because I assume the rate cut was late in the quarter.

Nothing significant. I mean, we will have some variability with short-term rate cuts because that's where all the escrows and everything are invested. So I think you may be seeing a little bit of that, but we haven't seen a whole lot of impact so far. And so far, the balances have been able to offset the rate cuts, but we'll just have to monitor that going forward.

Our next question will come from Jeffrey Dunn with Dowling & Partners.

I wanted to follow up on the expectation for a low teens margin in RES once relationships mature. Is there a critical revenue level that goes with that expectation?

No. I mean, again, what -- in the RES services, that's low teens, and again, what I said for the last couple of calls is we had that hiccup in the beginning of the year because of the rate increase -- the large rate increases that came kind of late from the data players, and we were kind of migrating those rate increases into our contracts as well as kind of we changed the way we did some of the pricing to more value-added approach with them. And so we had to catch up a little bit. And what I've said is once that kind of works its way into the system, we'll go back to what we've been doing in the last couple of years, which is that low teens margin. Where it gets a lot better, again, I think that's kind of the normal rate.

Where it gets a lot better is when the market comes back, right? Because a lot of our services businesses are tied to volume. And there's leverage from the normal -- more of a normal flow of business, and so I think in a $5 million purchase market kind of experience, that will get to mid-teens. We'll get into the 14%, 15% instead of the 12% area. And so it's kind of a direct line of improvement from here to there above the 12% is what I would say. But again, they're all -- it's like a lot of businesses, right? It's got a fixed variable portion and you've got to -- the growth helps a lot with the margins in those businesses.

And Jeff, the other thing is that if you just look at the sequential, so we sort of bottomed at like 7% something in fourth quarter of last year, and then we've been slowly getting back up to the low teens. And so that's what we're talking about, right? It's having worked through all that and now being at the level that we would expect.

And it was really about the data contract opportunity. It wasn't really the volume or anything. It was really just a onetime event, which we -- as I said, we were going to recapture it. We just had to get it built into our contracts.

Okay. And then just following up on the NII question. Can you just remind us how you think about the sensitivity to that NII line 2 Fed rate cuts?

Yes. Jeff, we don't have the same FA where they do the 25 basis point because our rates are negotiated. And so we've been able to -- we haven't had a direct drop with our rates because we were never at like money market. And so really going forward, it's going to be the offset of, do the rates get cut because rates are going down. And then how does that compare to balances, right? So as volume comes back, balances grow. And so I think it's probably better to think about interest income being maybe more consistent over the next year, slightly down. But then it's really going to depend on those 2 dynamics. And once we see the effect of rate cuts for the rest of the year, we'll probably have a better perspective on that.

It appears we have no further questions at this time. I'd now like to turn the conference back over to our presenters for any additional or closing remarks.

Yes. Thanks for joining today. I want just to summarize where I think we are right now. So I believe that while the market is kind of still bouncing on the bottom, we're more confident looking forward over the next 12 months that we're going to start to see improvement. I think we're at the beginning of the improvement. There's enough indication that that's true. And the other thing I would say is, as a company, I feel very confident in our capabilities, and we're well poised to take advantage of that improvement. And one of the things that I think is kind of showing up nicely for us is we talked about at the beginning of the year, if the market didn't grow, what did we expect? We said, well, if the market doesn't grow, we believe we can generate about 10% revenue growth and about 20% earnings growth because of the improvements we've made in our operating model.

And I think what we've done year-to-date is we've grown roughly 17% and about 45% earnings growth. And so it shows that we have some momentum in being able to grow in this market, and we're operating in a way that we get leverage from the growth. And I feel pretty good about that. And as the market improves, I think we are positioned to continue on that. Will it be as good as it's been in the first quarter? I don't know, right? The last 3 quarters are very good. It might even out a little bit, but I can tell you that we continue to have momentum in our ability to grow share and our ability to improve earnings. So I feel like even though the market I feel is relatively difficult, I think we're well positioned. So I appreciate people's interest and attention to the company. And again, I thank our employees for their commitment to what we're doing because I know how hard it is. So thank you, everybody, for your time and attention.

Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.