Stewart Information Services (ticker: NYSE:STC) reported its fourth quarter 2023 earnings, outlining a period of decreased revenues and adjusted net income amid challenging market conditions. CEO Fred Eppinger discussed the company's strategic improvements and the expectation of a more normalized market in 2024. CFO David Hisey highlighted the company's solid financial position, with a focus on expense management and technological investments. Despite a decline in transaction volumes and fees, the company anticipates improved margins and a stronger performance in the latter part of 2024.
Key Takeaways
- Stewart Information Services experienced a decrease in total operating revenues and adjusted net income in Q4 2023.
- CEO Fred Eppinger expressed optimism for market normalization in 2024 and confidence in the company's strategic positioning.
- The company reported a solid financial position with excess cash, investments, and a fully available line of credit.
- Stewart sees potential in technology and data initiatives to improve efficiency and services to agents.
- The first quarter of 2024 is expected to be challenging, but improved margins are anticipated as the market improves.
Company Outlook
- Expectation of transitioning towards a more normalized market in 2024.
- Anticipation of a challenging first quarter but improved results throughout the rest of the year.
Bearish Highlights
- Decline in domestic commercial and residential revenues due to lower transaction volumes and fees.
- Total international operating revenues also decreased.
- Agency revenues decreased compared to the prior year.
Bullish Highlights
- Title loss expense was lower than the prior year.
- Improved pre-tax income in the real estate solutions segment, driven by increased revenues from the credit-related data business.
- Net cash provided by operations improved compared to the prior year.
Misses
- The company's employee cost ratio increased, though other operating expenses remained stable.
- A higher effective tax rate for the fourth quarter compared to historical levels.
Q&A Highlights
- Eppinger discussed the company's long-term position as one of the "big four" title insurance companies and its strong balance sheet.
- The company has invested in an agency tech platform and cybersecurity, expecting share growth in the agency market.
- Eppinger mentioned that despite market challenges, the company has made significant progress in cost management.
- If the market in 2024 mirrors 2023, the results would improve slightly due to better investment income and operational efficiency.
Stewart Information Services' latest earnings call revealed a company grappling with a tough market but poised for recovery. CEO Fred Eppinger and CFO David Hisey outlined a future where strategic investments in technology and data, coupled with a robust financial foundation, could lead to improved margins and a stronger position in the market. Despite the near-term headwinds expected in the first quarter of 2024, the company's leadership remains focused on leveraging its market position and operational capabilities to navigate through the challenges and emerge more resilient.
InvestingPro Insights
Stewart Information Services (STC) has navigated a complex financial landscape, as evidenced by the recent earnings report. With a focus on the company's future prospects and financial data, let's delve into some insights that could provide additional context for investors.
The company's Market Cap stands at $1.65 billion, indicating a significant presence in its sector. Despite the challenges faced in the last quarter of 2023, Stewart Information Services is trading at a high earnings multiple with a P/E Ratio of 54.21. This suggests that investors may have confidence in the company's future earnings potential, despite the current pressures on net income.
InvestingPro Tips indicate that Stewart Information Services has raised its dividend for three consecutive years, a sign of commitment to returning value to shareholders even in tough times. This is further supported by the company's ability to maintain dividend payments for 21 consecutive years, showcasing its long-term stability and reliability as an income stock.
On the liquidity front, the company's liquid assets exceed short-term obligations, which is a reassuring signal of financial health and the ability to meet immediate liabilities. This is particularly pertinent given the expectation of a challenging first quarter in 2024, as mentioned by the company's leadership.
For more detailed analysis and additional InvestingPro Tips, investors can explore the full suite of insights available on InvestingPro. For instance, there are tips indicating that analysts predict the company will be profitable this year and that it has been profitable over the last twelve months. To access these insights and more, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
In summary, while Stewart Information Services faces near-term challenges, the InvestingPro data and tips highlight areas of strength and potential for the company moving forward. With strategic investments and a focus on operational efficiency, STC is poised to leverage its market position in the coming year.
Full transcript - Stewart Information Services Corp (STC) Q4 2023:
Operator: Hello, and thank you for joining the Stewart Information Services Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. Instructions will be given at that time. Please note today's call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Brian Glaze, Chief Accounting Officer. Please go ahead.
Brian Glaze: Thank you for joining us today for Stewart's fourth quarter 2023 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.
Fred Eppinger: Thanks, Brian, and thank you for joining us today for Stewart's fourth quarter 2023 earnings conference call. Yesterday we released financial results for the quarter and Dave will review these in a minute. Before doing so though, I'd like to update you on my view of the market and our continued progress on important initiatives that we believe will set Stewart up for long-term success. While we have thoughtfully managed through this very difficult economic [Technical Difficulty] expenses and invested carefully, we have continued to invest in a number of critical areas to materially improve our business. Our focus has been on creating a stronger and more resilient enterprise that will thrive over a full real estate site cycle. As we close 2023, we are operating in an environment that saw mortgage interest rates reach a high of 8% during the fourth quarter before falling to around mid 6% near the end of the year. Mortgage rates and rate volatility continue to impact transaction volumes and we find ourselves at historic lows for sale of existing homes. At an industry level, the historically low purchase volumes combined with low existing home listing inventory has kept home prices elevated. As I have said before, we see 2024 as a transition year towards a more normal market for existing home sales during 2025 and believe the next six months will likely be very challenging given the macroeconomics laid on top of a typical seasonal impact. While the current environment has been difficult, I am very pleased with the progress our teams have made in improving the underlying financial and operating performance of the company during 2023. There is more work to be done and it is critical we remain focused on improving margins, growth, and resiliency through improved scale and attractive markets and enhancing our operation capabilities, but I want to thank our teams for their dedication to making significant progress on these enterprise initiatives during the last twelve months. During the year and continuing this quarter, we successfully strengthened our financial position, giving us the flexibility to continue investing in the long-term success of Stewart and to take advantage of opportunities as they arise. During the fourth quarter, we continue to manage costs thoughtfully and have taken targeted actions where appropriate. We continually evaluate our cost structure to ensure that we are making sound long-term decisions on expenses. We have also been very careful not to take actions that we felt would threaten our competitive position and long-term value creating opportunities. The most prudent path forward for Stewart as the market begins to normalize in late 2024 and into 2025 is to continue investing in our people and remaining focused on our long-term improvement plan. I believe we've done a good job of balancing strong financial discipline with targeted investments and we will continue to be very diligent with our expense management during this difficult moment in the cycle. We remain focused on enhancing our operating model, investments in technology to enhance our customer experience, and improve efficiency of our operations, and building scale in targeted areas. Some of the investments in technology have focused on improving our title production processes as well as our data management and access. These strategic investments are resulting in cost ratios that are somewhat elevated given we are in a market with historically low transaction volumes. However, we are setting Stewart up for better overall performance in the future. We believe that these long-term investments coupled with thoughtful near-term expense management will improve our structure and financial performance in the long term. During the current environment, we have been prudent with our acquisition-related investments and have been routinely reevaluating markets in our direct operations where we have the opportunity to increase share and enhance our leadership capabilities. This has ensured that our deployment of capital provides acceptable long-term returns. We will maintain this cautious approach to investments through the first half of 2024. During the fourth quarter and throughout 2023, our commercial operations have performed well in a challenging market. While certain sectors were and will be challenged in the near term due to challenging financial markets, sectors such as energy remain extremely strong for us and we see ongoing challenges in sectors like office. Growth in all sectors of our commercial operations remains an important component of our overall strategy, and positioning our commercial operations for growth across all our business lines has been key focus of our journey. We are making investments in talent, so that we have the leadership in place to achieve these objectives. We are also investing in technology to support the commercial operations to allow us to better serve our customers and more efficiently manage our business. We believe our strategies will create long-term growth in the commercial markets for us. Our agency business finished the fourth quarter with another solid performance as we have been leveraging our agency technology to drive market share gains. During the fourth quarter and throughout the year, we have made excellent progress on our deployment of technology and services that provide a significantly improved customer experience for our agents. This enhanced experience includes greater connectivity, ease of use, and risk reduction for our agent partners. We are pleased that our platform of services for agents is as strong as it has ever been and we will continue to focus on growing share in our target markets such as Florida, Pennsylvania, and the overall commercial market. Our real estate solutions maintained solid financial results in the fourth quarter and throughout '23, particularly given the market headwinds. We are focusing on driving share gains as we leverage our improved portfolio of services to better and more deeply serve our lender clients. While we are not immune to the market during downturn in these businesses, we've been able to offset some of the challenges with share gains. An important achievement during 2023 was our focus on improving our technology for the title production process automation and centralization to improve operational efficiency and capabilities. Our investments have already resulted in significant progress toward improving the customer experience across all the channels. And another area of priority work, as we work to improve our operating efficiency is the centralization and digitization of our title data. We are pleased with the progress that we made on that this year. This progress at more normal production levels will result in considerable improvement in our delivery costs. Improving our financial strength by growing margin has been a significant focus of our journey. We have made good progress in our effort and we are aware that the returns remain depressed during this phase of the cycle. Our investments should allow us to achieve low double-digit pre-tax margins as we turn to a more normal 5 million unit purchase market. While we are encouraged by our improvements in talent, technology, customer experience, and our financial model, we know that our journey is not complete. We remain focused on our strategic plan of building an improved competitive position by being more efficient and having a disciplined operating model that functions well throughout all the real estate cycles. We have emphasized growing scale and attractive markets across all the lines of business and we have made great strides in improving the customer experience in all our channels. Attracting and retaining key talent is always important and we've been even more focused on retaining talent through this market, so that we have the right team in place as the cycle improves. I am pleased with our efforts -- that our efforts are yielding results through increased year-over-year market share gains in each of our direct agency, commercial, and real estate service businesses. Let me conclude by reiterating that we have been managing the balance of our expenses and investments throughout -- thoughtfully to be mindful of necessary operating discipline for the current market challenges, while also dedicated to strengthening Stewart for long-term growth and performance. Our solid financial footing should best position us to take advantage of the opportunities that this cycle will provide. Finally, I remain positive on the long-term view of the real estate market and the ability of Stewart to become the premier title services company. Our associates have worked diligently throughout these challenging times and I appreciate all they have accomplished. I also want to thank our customers and our agency partners for their continued loyalty and support. David will now update everyone on the results.
David Hisey: Good morning, everyone, and thank you, Fred. As always, I'm thankful of our associates for their outstanding service and our customers for their continued support, more so during the challenging current market. Although mortgage rates dropped after the Fed's December meeting, comments in the January meeting caused rates to rise through today, causing a continuation of a choppy market. 2023 had the lowest existing single-family home sales in over 15 years and commercial real estate activity was also challenged. As a result, operating results were lower than the prior year. Yesterday, Stewart reported fourth quarter 2023 net income of $9 million or $0.32 per diluted share on total revenues of $582 million. After adjustments for net realized and unrealized gains and losses, acquired intangible asset amortization, and other expenses, detailed in expenses [indiscernible] our press release, fourth quarter adjusted net income was $17 million or $0.60 per diluted share compared to adjusted net income of $23 million or $0.84 per diluted share in the fourth quarter of 2022. In the title segment, total operating revenues in the fourth quarter decreased $79 million or 14%, while fourth quarter pre-tax income slightly improved primarily due to higher investment income and expense management. After adjustments for purchase intangible amortization and other items, the title segment's pretax income was $31 million compared to $35 million for the fourth quarter 2022. Adjusted pretax margin was about 6% for both quarters. On our direct title business, total opened orders in the fourth quarter increased by 10% primarily due to acquisitions in 2023, while closed orders decreased by 3% compared to the prior year. Domestic commercial revenues decreased by $11 million or 16%, primarily due to lower commercial transactions. Average commercial fee per file was approximately $14,800 compared to $15,100 from the prior year quarter. Domestic residential revenues decreased $18 million or 10% as a result of 5% lower purchase and refinancing volumes and lower fee per file. Average residential fee per file in the fourth quarter was $3,200 compared to $3,500 last year, primarily due to transaction mix. Total international operating revenues declined $1 million or 4% primarily due to overall lower transaction volumes. Similar to the lower commercial and residential activity in the market, agency revenues in the fourth quarter decreased by $49 million or 16% compared to the prior year, while the remittance rate was roughly comparable. On title losses, total title loss expense in the fourth quarter was 5% lower compared to prior year primarily from lower title revenue. As a percentage of title revenues, the fourth quarter title loss expense was 4.1% compared to 3.7% in the fourth quarter of 2022 which benefited from 2022's favorable claims experience. For the year, title loss expense averaged 4.1% compared to 3.8% last year. We expect title losses to be in the low to mid 4% range in 2024. Regarding the real estate solutions segment, fourth quarter pre-tax income improved $1 million compared to last year, primarily due to increased revenues from our credit-related data business, which more than offset declines from our transactional businesses. Pre-tax margin was 2.3% compared to 0.7% last year. On an adjusted basis, pre-tax income and margin was comparable to the prior-year quarter at roughly 12%. On our consolidated expenses, our employee cost ratio was 32% compared to 30% last year, primarily driven by lower operating revenues. Other operating expenses were 23%, which was comparable to last year. Regarding income taxes, the effective tax rate for the fourth quarter was 39%, which was higher than our historical tax rate, primarily due to the effect of non-deductible expenses on lower domestic pretax income. We expect our tax rate to return to historical levels as domestic operations normalize. On other matters, our financial position remains solid to support our customers, employees, and the real estate market. Our total cash and investments at December 31, 2023, was approximately $415 million in excess of statutory premium reserve requirements. We also have a fully available $200 million line of credit facility. Total stockholders’ equity at December 31, 2023, was approximately $1.38 billion with a book value of approximately $50 per share similar to last year. Net cash provided by operations in the fourth quarter improved to $41 million compared to $25 million last quarter -- last year quarter, primarily as a result of lower payments on claims and accounts payable, partially offset by lower net income in this year's quarter. Lastly, we greatly appreciate our customers and associates and remain confident in our service to the real estate markets. I'll now turn the call back over to the operator for questions.
Operator: [Operator Instructions] We'll take our first question from Soham Bhonsle with BTIG. Your line is open.
Soham Bhonsle: Hey, guys, good morning. Hope you're all well.
Fred Eppinger: Good morning. Good morning.
Soham Bhonsle: Wanted to maybe just start with January and February orders, where there was a trending for the first few weeks here. Are you sort of seeing comps turn positive year-over-year or anything on a month-over-month basis on the resi and commercial side would be great.
Fred Eppinger: Yes. The way we think about the market, as I said before is, it's a little bit of a tale of two cities, like the -- this will be the transition year towards a more normal market in '25. And I think the first six months are going to be quite challenging. So the way I think about the first quarter is kind of bouncing off the bottom. So the first quarter is getting closer of not being worse than last year. But I think the first quarter, we're going to still be worse than the previous year in orders, but closer together. And that trend you can see in what we disclosed here in purchase order trends from October, November, December, right. So again, what I think we're going to see is things coming together a little bit in the first quarter, but still the first quarter being worse than the previous year and then hopefully bouncing from there and starting to improve. Now, seasonality helps you as well, obviously going towards the second quarter. But I think that's where we are. And one of the challenges, by the way, to answer your question, just the volatility that shot up to 8% and that has really made havoc kind of with some of the order results, because what you've seen is more cancellations. When you see that kind of rapid change, you'll see an uptick, at least for us, the greater cancellation from orders, which affects the closed orders. And so that volatility has affected kind of the trends a little bit right now. But there's nothing -- again, I feel like that transition, notion of a transition next year is still a relatively good bet that hopefully the second half of the year, we're going to see some light.
David Hisey: Yeah. It's David. Real quick, I mean, you also have to look at it in the context of what rates have been doing. So if you think about the first quarter of 2023, they were in the 6.2%, 6.3% area, they came down to 6.6% at the end of this year, and then they've come back up as a result of those Fed comments in the last meeting. And so you sort of start this year with a little bit of a choppier environment.
Soham Bhonsle: Yeah, okay, understood. And I guess second one, I wanted to get a sense for where margins could potentially land this year. But maybe attack it a little differently. So I think most forecasts are calling for originations up 15% to 20%. We'll see where rates go and everything, but 15% to 20% in that sort of scenario, can you maybe just give us a sense of how you're thinking about managing the core employee and other OpEx lines, right? Like, should we expect you to sort of stay at this current fourth quarter run rate for at least the first half and then maybe there's an increase in the back half, but how would you sort of expect that to ramp up with volumes?
Fred Eppinger: Yeah. So I've mentioned this a couple of times. It's an interesting thing, right, because we've had a wild last two or three years. The way I think about our margins is that in about '21, if all things being equal, we took a company that was averaging about 2% over the decade before the journey. We got it up to about 9.5% and 10%. And my view is in '21 we had better margins, obviously, but it was because it was so much excess volume, I had a lot of offices at over 100% capacity. So it wasn't a sustainable thing but it was top of the margin. And what we've done -- the work we've done over the last year in particular, we broke the camel's back a little bit on a couple of things. I believe we picked up a couple of hundred basis points. So in a normal market that we think about at about 5 million purchase homes, I think we're instead of 9.5%, 10%, we're probably 11% to 11.5% something like that now. So we’re -- so that's kind of the general way to think about our economics. The problem is we're in one of the worst markets in 15 years and at a very low level. So I look at the numbers, that improvement I just talked about doesn't show up in the numbers, but what we've done is created what I call excess capacity, right? So as volume comes back, we won't be adding a lot of resources because of the way we've now with the operating model that we've created, part of this savings that you don't see is the fact that we have excess capacity like in our search and clear areas and some of the data management areas. So I feel like as things improve, our margins will as well. Now, again, the seasonality and the challenge in the first quarters, in my view, is going to be worse than last year. But again, I see as we come out of the year, we should have improving margins, but we're not going to be anywhere close to a normal market probably next year. But I think we're in a pretty good shape. And again, I look at this fourth quarter and this is one of the worst quarters in 17 years, 18 years and we were able to make money, right, which was not historically true. So I feel like we're in a really good position to improve margins as the market improves. If that's helpful.
Soham Bhonsle: So, if I could just follow up. So, David, I guess for you, should we just think about sort of the employee and OpEx line sort of run rate that where it is today and take that forward for the rest of the year? How should we think about that?
David Hisey: Well, I think what Fred was saying is that we wouldn't really be adding a lot of headcount, right? But what's going to end up -- what will end up happening is just because the first period is the seasonally slowest period, right? You're not going to have as much revenue and so you're probably on a percent basis, you might have a little bit of a spike and that's going to be the time [indiscernible] and then as volume starts to come back, right, you'll be getting the benefit of not adding people. There'll always be some variable costs because there's sales, expenses and things like that, right? But it won't go up at the same rate as it's gone up historically, right? So you'll see a margin improvement over the period as the volume comes.
Soham Bhonsle: Okay. Yeah, that makes sense. And then just last one, your peers had cyberattacks and I guess, have you seen any sort of discernible change in just customer behavior or anything out there?
Fred Eppinger: No, I don't think in the short term, there isn't any material impact. In the long term, I think it's quite helpful in that we're one of the big four. We have one of the strong balance sheets. I think if you talk to agents today, they're more kind of thoughtful about, boy, I got to spread my risk a little bit. And so -- and that's true, going to be true in commercial too. And the good ones, I think, always thought about it that way. But disproportionately, that should help us just because of our share position and how many -- we don't have a ton of agents that are fully dedicated to us or anything like that. So I think that people are going to be thoughtful about spreading their risk. And it's a normal thing to think about, particularly in a business that's such an oligopoly around four strong players.
Soham Bhonsle: Yeah. All right, thanks a lot, guys.
Operator: Thank you. We'll take our next question from Bose George with KBW. Your line is open.
Fred Eppinger: Good morning, Bose.
Bose George: Hey, good morning. Wanted to ask just in terms of your margin expectations for the back half of this year, is that sort of looking at the year-over-year sort of improvement, or is that thinking sort of incorporating some potential pickup in macro? Just how are you thinking about later this year?
Fred Eppinger: It's the macros, but it's also both leveraging some of the work we've done, right? This excess capacity I talked about, it's kind of sitting on the sidelines, right? And so, it's both leveraging the volume increase, but also the kind of new profile of the business. And so it's a little bit of both, but it's driven by law. I mean, the issue is we just have so little purchase volume in the system right now versus a normal year that we're kind of at the bottom as far as what we can do with expenses and managing our resources. I'm very proud of what we've done. But you would want to cut much more out of system. And that's why this first quarter is challenging because we are going to be bouncing on the bottom in this first quarter.
Bose George: Okay. Yeah, that makes sense. And then actually the other orders number again had a pretty good jump. Is there sort of bulk activity? And can you just remind us what's in there, is that mostly for the purchase?
Fred Eppinger: Sure. This is the last quarter where the BCHH acquisition comparison helps us, right, because we bought them at the beginning…
David Hisey: At the end of 2022. So they weren't in last year, much in last year.
Fred Eppinger: Right. So it's driven by that business, which is doing very well.
Bose George: Okay. So that order count for the quarter is kind of a reasonable run rate. And is there seasonality in there or is that more just sort of transaction based?
David Hisey: Yeah, it's a transaction-based business, Bose. You think about that as sort of the buy-to-rent, built-to-rent business, and then there's securitizations and the like. And so there's property aggregation and then there's disposition and securitization. So it's a lumpy business and tends to move in chunks.
Bose George: Okay, great. Thanks.
Operator: Thank you. We'll take our next question from John Campbell with Stephens Inc. Your line is open.
Fred Eppinger: Good morning, John.
John Campbell: Hey, guys. Good morning. So you guys, in the past, you've talked to -- and Fred, I think you've talked specifically to maybe $20 million of ongoing investment or kind of discretionary spend around the long-term strategic initiatives. But Fred, in your prepared remarks, you talked to kind of a cautious approach for the first half, kind of from the macro standpoint. And then the prior question you talked to not really needing to add many heads from here because you've kind of built that excess capacity. So I think you might have somewhat answered this question, but the question here is, do you feel like that $20 million spend from last year is going to kind of hold steady this year? And will that be the case that the market recovers as much as the forecasters have pegged, or might you kind of glean into that possible market strength?
Fred Eppinger: No, it's a great question. It's roughly ironically -- it's roughly about the same, probably more close to $19 million than $20 million. But there is some really important data initiatives we got going on, particularly kind of access to data that would make us more efficient. And then I have some operating technologies, just like in commercial, we have a dated operating kind of system, and so we are upgrading that. So it's roughly the same amount of money this year, there is also some additional cyber investment in there as well. So again, one of the things we did do to your question is we went through each of those investments, though, and thought about the sequence of it, giving the challenge of the first six months of the year and what gives a quicker payback, et cetera, and trying to be thoughtful about the timing and the starting of those as well. But it's really important that we do invest in those things because we just -- the company got a little bit behind on its invest -- capital investments in some areas before this journey started. And we're trying to sequence and make those investments and catch up in some of those base areas. And then some of these are us things we think that will create a better kind of, whether it's an experience for our people or experience for the customer on how we access data and kind of make decisions. And so it's good. Again, I feel like the teams -- we made good progress this year on them. The ones coming up are equally important. They're a little bit less transparent to the customer than the ones we've been doing in the past. They're a little bit more back office and operating model stuff, but it all moves us forward in a pretty good way.
John Campbell: Okay, that's helpful. And then kind of sticking with the growth initiatives, I mean, on the rollout of the agency tech platform, Fred, I think you'd mentioned that was actually -- you pointed to that as a driver of share growth. I was hoping if we could maybe get a little bit more color on the platform itself. If you could maybe walk through what's differentiated about it? And maybe from a bigger picture standpoint, the goals you're attempting to achieve in agency and how that tech platform fits into that strategy.
Fred Eppinger: So, again, one of the things that we got behind on a little bit is kind of when you deal with the agents, right, it's combined economics. And so it's really about the efficiency of the end to end process. So it has a lot to do with you integrating kind of seamlessly into their TPS and providing the kind of information they need to kind of do their business. And the other part of what we -- so we've done a lot of investments on both the integrations and with the kind of information we pass back and forth and the decisions that we can make instantly back and forth. But on top of that, we created -- when we started, we only had three states where we could provide services -- search services, and we now have the equivalent of the full country, just like the big guys services. And that's important to agents because they want to variableize their cost a little bit in a down market, so they're using more of our services to supplement the work they're doing. So what's happening now is we have a legitimate -- when we go into an agent in Florida or whatever, we have a platform that is as efficient, if not a little bit more efficient, than their other players and we have these services provider. On top of that, what we've done is provided for select agents, a concierge service to access to commercial, which makes it really efficient for an agent to be able to get access to commercial, that's probably broader geographically, perhaps, than where he is. And so that's the other part of this. So, it's an efficient way to work with them and then provide these additional services. One other point I would make, and it's one of the investments we're currently making, there's 13 states that are attorney based and they have a different TPS type thing. We're launching kind of as we speak, in the next few weeks or months, a new TPS offering for those attorney agents that make their workflows kind of efficient and easier to work with, which is a unique thing. That's different than a regular agent, and it requires different things. And so, what we constantly are thinking about, John, is how we kind of can be efficient in our integrations and interface with them. And we believe what then happens is agents, we went back to the cyber point, agents -- most agents are going to say, hey, it's safer for me to split my business a little bit and give a fair share to Stewart, they now provide as good, if not better than the others. And so that's why we're encouraged. We've had, I think, six or seven quarters of share increase in agency and we had one weird number, as you remember, in the second quarter. But other than that, it's pretty constant. We've had steady share growth in some really good states. And as kind of these improvements really get solidified geography by geography, that should continue. I feel pretty good about that.
John Campbell: Okay, that's very helpful. Thanks for the color.
Operator: [Operator Instructions] We will take our next question from Geoffrey Dunn with Dowling & Partners. Your line is open.
Fred Eppinger: Hey, good morning.
Geoffrey Dunn: Good morning. So, I wanted to go back to the expense side here. Fred, a year ago you had a chunk of expense for office closures and you [Technical Difficulty] you weren't going to cut too deep into expenses. You're investing for the future. Here we come this quarter, there's another chunk of office closures. How do you identify these opportunities? And kind of leads into my second question. I think there's an emerging debate here on what '24 actually ends up being. If we don't get rate cuts towards the end of the year and mortgage rates stay higher than what Fannie and certainly the NBA are forecasting. I'm starting to wonder what the risk is of maybe only 5% type of market rather than a 20% growth market. So, I know you said you kind of bounced off the bottom, there's not much more you can do with expenses. But year over year, obviously we saw that you could find more. It doesn't sound like the company is positioned for a flat or 5% type of growth market in 2024. So can you talk a little bit more about how you go about identifying expense saves and what are your actions if we are looking at a 5% market?
Fred Eppinger: Yeah, so again, Geoff, really good question. So there's a couple ways to think about this. So we look at this kind of MSA by MSA. And within the MSA kind of this geographic pockets, and we've made a lot of improvement in say 30 markets or something in the last couple of years to get share and so our margins are good. But we still have kind of what I would call these sub-geographies where we were trying to get them to the scale and that we felt we needed to get them to. And at some point, you just feel like you can't given the market and to your point, the slowness of the comeback, that it was going to be kind of really hard to get there in some kind of time frame that was fair. Also, we have some consolidation opportunities from the acquisitions we've done, where you have duplicate kind of locations that are closed together, that you can kind of do some things geographically with real estate to manage the business. The other thing that has happened is some of these operational initiatives obviously have freed up our ability to not have to hire folks if people leave, et cetera, because of the efficiency that we've been gaining through our investment. So we try to be really thoughtful. My point is that we've done a lot and there isn't a lot left to do. And so I do believe seasonality is going to help us, even if the market isn't as robust as some of the scenarios are. So the first quarter is going to be quite challenging, but I think the seasonality is going to help us in the second quarter. So this is why when I talked about the first six months, we're being really prudent and sequencing investments and stuff, because I think we do have to manage ourselves like it could be what you just described, that's the way we're going to have to manage ourselves and be really thoughtful and careful. There isn't a lot more -- we don't have a lot of excess here. It doesn't mean that we are not thoughtful about managing our business and looking at under every rock and being thoughtful about sequencing, timing, and stuff. But I don't see a lot and I'm not planning a lot.
Geoffrey Dunn: If -- I said the market was going to look exactly like it did in 2023, is your 2024 result better?
Fred Eppinger: Yes. So not the first quarter, but it would be a tad better because we're going to bed up the spot, right? And again, so we've done a better job on investment income on escrow right through the whole year. We've got our operating [Technical Difficulty] a little bit more efficient. So all things being equal, be a tad better, it's just going to be clouded by the first quarter.
Geoffrey Dunn: Got it. Okay. Thank you.
Operator: We have no further questions on the line at this time. I will turn the program back over to our presenters for any additional or closing remarks.
Fred Eppinger: Okay. And I want to thank everybody for joining us for this quarter's call. I really appreciate the interest in Stewart. Thank you so much.
Operator: This does conclude today's program. Thank you for your participation. And you may disconnect.
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