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SI

STEWART INFORMATION SERVICES CORP (STC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid year-over-year growth: total revenues $665.9M (+14%), GAAP EPS $0.80 (+150%), and adjusted EPS $1.12 (+87%); adjusted pretax margin improved to 7.1% from 5.0% YoY .
  • Title segment strength was notable: operating revenues +12% YoY, adjusted pretax income +61% YoY, and domestic commercial revenues +50% with average fee per file +33% to $19,600; residential average fee fell 8% to $2,900 on mix .
  • Real Estate Solutions revenue rose 42% YoY, but margins compressed on vendor price hikes and start-up costs; management expects low-teens cash margin with 2025 improvement as repricing flows through .
  • Street consensus from S&P Global was unavailable due to API limits, so we cannot assess beats/misses; dividend held at $0.50 for Q4 2024, a modest support for total return .
  • Near-term stock catalysts: stronger commercial momentum (energy/data centers, multifamily) and clarity on Real Estate Solutions margin normalization; management guides to choppy H1'25 and improving H2'25, with long-term target of low double-digit pretax margins in a normalized $5M purchase market .

What Went Well and What Went Wrong

  • What Went Well

    • “I am very pleased with the earnings and revenue growth we saw in the fourth quarter” — CEO; adjusted EPS up to $1.12 and adjusted pretax margin to 7.1% .
    • Domestic commercial title momentum: revenues +50% YoY; average fee per file $19,600 (+33%); closed orders improved 15% on commercial/refi strength .
    • Title loss ratio improved to 3.7% in Q4 (vs. 4.1% prior year), with favorable claim experience offsetting higher revenue; employee cost ratio improved to 30.7% .

  • What Went Wrong

    • Real Estate Solutions pretax margin fell to 1.1% GAAP (7.4% adjusted) on vendor price increases ahead of customer repricing and start-up costs for new clients .
    • Other operating expense ratio rose to 24.5% (from 22.5% YoY), reflecting higher third-party service costs in Real Estate Solutions and commercial search fees .
    • Residential average fee per file declined 8% to $2,900 (mix shift away from purchase), pressuring direct-title economics .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenues ($USD Millions)$602.23 $667.94 $665.93
Net Income attributable to Stewart ($USD Millions)$17.34 $30.10 $22.74
Diluted EPS (GAAP) ($)$0.62 $1.07 $0.80
Adjusted EPS ($)$0.91 $1.17 $1.12
Pretax Margin (%)4.8% 6.4% 5.3%
Adjusted Pretax Margin (%)6.6% 7.1% 7.1%
YoY vs Prior Year (Q4 2023 → Q4 2024)Q4 2023Q4 2024
Revenues ($USD Millions)$582.17 $665.93
Net Income ($USD Millions)$8.82 $22.74
Diluted EPS (GAAP) ($)$0.32 $0.80
Adjusted EPS ($)$0.60 $1.12
Pretax Margin (%)3.2% 5.3%
Adjusted Pretax Margin (%)5.0% 7.1%
Segment PerformanceQ2 2024Q3 2024Q4 2024
Title Operating Revenues ($MM)$496.2 $553.3 $562.7
Title Pretax Income ($MM)$33.4 $45.0 $45.2
Title Adjusted Pretax Income ($MM)$38.4 $43.4 $50.5
Title Pretax Margin (%)6.5% 7.9% 7.8%
Title Adjusted Pretax Margin (%)7.5% 7.7% 8.8%
Real Estate Solutions Operating Revenues ($MM)$92.2 $96.3 $87.0
Real Estate Solutions Pretax Income ($MM)$5.1 $7.4 $0.9
Real Estate Solutions Adjusted Pretax Income ($MM)$10.6 $12.9 $6.5
Real Estate Solutions Pretax Margin (%)5.5% 7.7% 1.1%
Real Estate Solutions Adjusted Pretax Margin (%)11.5% 13.4% 7.4%
Direct Title Revenues ($MM)Q2 2024Q3 2024Q4 2024
Non-Commercial Domestic$169.4 $168.2 $162.5
Non-Commercial International$28.1 $29.0 $25.9
Commercial Domestic$51.0 $67.4 $84.1
Commercial International$7.0 $6.1 $11.1
Total Direct Title Revenues$255.5 $270.7 $283.6
KPIs and Cost RatiosQ2 2024Q3 2024Q4 2024
Avg Domestic Commercial Fee per File ($)$13,500 $17,700 $19,600
Avg Domestic Residential Fee per File ($)$3,000 $3,000 $2,900
Title Loss Ratio (%)4.2% 3.8% 3.7%
Employee Cost Ratio (% of operating revenue)30.5% 29.8% 30.7%
Other Operating Expense Ratio (%)25.9% 24.0% 24.5%
Net Cash Provided by Operations ($MM)$21.1 $76.1 $68.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Title Loss Ratio (%)FY 2025“Low-to-mid 4%” commentary historically (analyst framing; mgmt previously conservative) Low 4% range Maintained/tightened (clarified lower end)
Investment Income ($ per quarter)Q1–Q2 2025~$13M recent run-rate Expect to “hold” near ~$13M barring large rate drops Maintained
Commercial Revenue GrowthFY 2025N/ALow single-digit YoY growth; sector-dependent (energy, data centers) Initial outlook
Real Estate Solutions Cash MarginFY 2025Low-teens cash margin over last couple years Improve ~1 point in 2025 as repricing/start-up costs normalize Raised modestly
Consolidated Pretax Margin TargetLong-term normalized marketN/ALow double-digit pretax margins at ~$5M purchase market Strategic target reiterated
DividendQ4 2024Prior quarterly cadence$0.50 per share (paid Dec 30, 2024) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Macro housingContinued difficult housing market Residential purchase conditions remain difficult Choppy H1’25; improvement expected in H2’25; strong demand despite rates/inventory Improving in H2’25
Commercial titleDomestic commercial +23% YoY; avg fee $13.5k Domestic commercial +30% YoY; avg fee $17.7k Domestic commercial +50% YoY; avg fee $19.6k; modest FY25 growth outlook Strengthening; moderating growth FY25
Real Estate SolutionsRevenue +29%; adj margin 11.5% Revenue +41%; adj margin 13.4% Revenue +42%; adj margin 7.4%; vendor prices/start-up costs pressured margins; repricing underway Near-term margin pressure; normalizing in 2025
Technology/operationsInvesting in enterprise systems and capabilities Continued investment and operational leverage noted Tech upgrades, global centralization centers building leverage Building leverage
Agency networkRemittance rate mix shift; state mix effects Agency retention aligned with gross agency revenues Focus on 15 target states; adding partners; launch of Connect Close for attorney agents Expanding share/offerings
Regulatory/legalNo specific changes notedNo specific changes notedCautionary forward-looking statements; no new regulatory events Stable

Management Commentary

  • CEO: “I am very pleased with the earnings and revenue growth we saw in the fourth quarter… These annual results show we are making real progress on our growth plans and have created leverage… when the market returns to normal levels.”
  • CEO: “In 2025, we expect the housing… to remain very choppy [first half]… transition to more normal existing home sales… second half… Commercial… growth… much lower than we saw in ’21 and ’22.”
  • CEO: “We believe… we will achieve low double-digit pretax margins with the macro market [back to] a $5 million purchase market.”
  • CFO: “Adjusted pretax margin [Title] improved to ~9%… Domestic Commercial average fee per file increased 33%… Title loss ratio improved to 3.7% [Q4]; expect low 4% range for 2025.”
  • CFO: “Vendor price increases occurred prior to customer contract renewals… pricing changes… started [to be] imported this week… expect relatively rapid improvement [Real Estate Solutions].”

Q&A Highlights

  • Commercial outlook: Management expects low single-digit FY25 growth given uncertainty; pipeline visibility is good, with sector strength in energy/data centers .
  • Real Estate Solutions margins: Near-term compression from start-up costs and vendor pricing; repricing underway and expected to improve quickly; cash margins targeted in low/mid-teens as market normalizes .
  • Title loss ratio: Management tightening to low-4% range for 2025; favorable macros and fewer large claims recently but jumbo claims risk persists .
  • Investment income: Run-rate around ~$13M per quarter; not highly rate-sensitive due to negotiated bank rates rather than money market trading .
  • Market share in Commercial: Mix shift favoring energy/infrastructure; management believes share up materially (from ~9% to ~14% over time), aided by capital and talent investments .

Estimates Context

  • S&P Global consensus for Q4 2024 revenue and EPS was unavailable due to an API limit error; as a result, we cannot assess beats/misses versus Street for this quarter. Where estimates are referenced in narrative, they are noted as unavailable and should not be used for comparison at this time. Values retrieved from S&P Global were not available due to rate limit constraints.

Key Takeaways for Investors

  • Commercial title momentum is a clear bright spot: domestic commercial revenues +50% YoY and average fee +33% to $19,600; expect modest FY25 growth with sector strength in energy/data centers .
  • Real Estate Solutions growth remains strong (+42% YoY), but margin headwinds from vendor pricing and start-up costs should ease as repricing takes effect; look for sequential margin improvement through 2025 .
  • Title profitability improved with a 3.7% Q4 loss ratio (vs. 4.1% prior year) and management guiding to low-4% for 2025, supporting more stable underwriting results .
  • Consolidated profitability trajectory is improving: adjusted pretax margin 7.1% (vs. 5.0% YoY) and long-term target of low double-digit pretax margins in a normalized market—watch housing trajectory into H2’25 .
  • Cost mix shifts matter: higher third-party service costs (Real Estate Solutions, commercial search fees) pushed other operating expense ratio to 24.5%; monitor margin mix as high-growth segments expand .
  • Cash generation improved: Q4 operating cash flow $68.0M (vs. $39.5M prior year), helped by higher net income; supports dividend continuity ($0.50 in Q4) and balance sheet flexibility .
  • Near-term trading: Expect headline sensitivity to macro housing prints and any updates on repricing progress in Real Estate Solutions; medium term, commercial mix and operational leverage are core drivers of margin expansion .