Stewart Information Services Corporation Aktie

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.

Hello, and thank you for joining the Stewart Information Services Second Quarter 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 Kath Bass, Director of Investor Relations. Please go ahead.

Thank you for joining us today for Stewart's Second 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. Thank you for joining us today for Stewart's Second Quarter 2025 Earnings Conference Call. Yesterday, we released the financial results for the quarter, which David will review with you shortly. I will open the call with some thoughts on current housing market conditions, followed by a dive into our second quarter results and some insight into the progress we are making on our strategic growth initiatives.

Before discussing these initiatives, I want to express our sincere sympathies to those affected by the recent weather events across the country. Our hearts go out to those affected by the July 4 flooding in Texas, our home state. While our employees were not directly impacted by this monumental flood, we know that countless families were. We have and will continue to find ways to support rebuilding efforts in Central Texas.

We are very pleased with our second quarter results as they demonstrate our ability to significantly grow both revenue and earnings in a stubbornly challenged housing market. Market uncertainty and affordability challenges have kept buyers at bay as they wait further clarity on near-term economics.

The spring selling season has fallen flat with existing home sales down roughly 1% compared to the second quarter of 2024. Inventories have improved in volume and quality over the past several months, which could be a precursor to some improvement in the market. The improved inventory is allowing buyers to be more selective, and we are seeing that homes are sitting on the market longer and more homes are trading below listing price.

All of these levers are helping cool price appreciation, which was around 1.5% for the quarter as compared to about 3% for the first quarter and over 4.5% for the fourth quarter in '24. While the current market outlook is difficult to predict, given the current market activity, we expect to see some improvement in the second half of the year relative to 2024. However, the magnitude and timing of this improvement remains unclear.

In a largely flat housing market, I am very pleased with the strong results for the second quarter and our continued momentum across all of our businesses. We grew revenues by 20% and adjusted EPS by 48% compared to the second quarter of '24. In the direct operations, a business which most immediately feels the effects of a challenged residential housing market, we grew 6% overall, and we remain focused on growing share in target MSAs and micro markets, both organically and inorganically.

We expect acquisitions will be a big driver of our growth plans for this business going forward and maintain a warm pipeline of targets. In addition, we are focused on expanding small commercial within direct operations, and our investments are having significant impact as we delivered 36% growth rate in this quarter over last year in small commercial and direct operations.

Growth in our national commercial services business continued to be strong, driven by increasing penetration in a number of geographic markets and asset classes. Our continued growth will be driven by targeted investments in talent. Thoughtful investments in our talent will allow us to expand our network and deepen our capabilities in more geographies and asset classes in order to leverage our distinctive underwriting capability. We have made great progress in expanding our commercial teams with industry-leading talent and will continue to strategically do so in the foreseeable future.

In the second quarter, we grew our domestic commercial business by 46% relative to the second quarter of last year. Year-to-date, domestic revenue has grown 43% when compared to the first half of '24. While energy continues to be a strong asset class for us, we have also experienced solid growth across most of our asset classes, and we are steadfast in our pursuit of growth across all commercial asset classes.

Our agency services business also delivered very strong results. Our team remains focused on expansion through share gains in attractive markets through additional new agents and expanded share with existing agents. We pursue growth across all states, but we are laser-focused on 15 states that would allow us to capture significant scale and growth. We have also enhanced our agency commercial capabilities and are seeing strong traction in supporting our agents in their commercial work.

Our agent servicing team delivered strong second quarter results, growing 25% when compared to the second quarter of '24. Again, that's at in a relatively flat residential market, which likely demonstrates continued share gains in agency residential and commercial. We will continue to build the momentum we have made in the recent years in our -- for our agents in order to differentiate our services and better our offerings for our agent partners.

Our real estate solutions business continues to gain traction, growing revenue 22% when compared to the second quarter of last year, primarily due to higher revenues from our credit information evaluation services business. Our margins improved sequentially and were slightly down relative to the second quarter of '24. We expect margins in our lender services to normalize in the low teens range for the remainder of the year. We expect to grow the real estate solutions business line by gaining share with top lenders and cross-selling our products as we leverage our improved portfolio of services.

Cross-selling in this kind of current market conditions poses some challenges. However, we are pleased to see share gains with both existing clients and new client introductions, and we expect continued momentum in this space as the market improves. We are also proud to announce that PropStream, a real estate data and analytics platform in our real estate solutions segment, acquired BatchLeads and BatchDialer in early July.

This acquisition allows us to combine PropStream's property data engine and marketing tools with BatchLeads' advanced AI-driven tools and contact dialer. This combination will offer customers best-in-class nationwide real estate data intelligence and enhanced lead targeting and unified outreach platform, all in one place.

Moving to our international business. We are focused on broadening our geographic presence in Canada and increasing our commercial penetration -- we grew both noncommercial direct and commercial direct revenue by 6% compared to the prior year. We believe we can continue to build our strong position in these markets and continue to grow share. Overall, we remain dedicated to strengthening our businesses by improving our scale and improving our competitive position in each business.

We remain focused on growth even in a challenged market, and we feel poised to capitalize on improvements when the market returns to normal levels. We continue to be thoughtful about our investments in ourselves and in pursuit of smart growth for each of our business lines.

I want to close by thanking our employees for their dedication and focus. It's interesting that over the last few weeks, I've been able to visit a large number of offices and met with over 1,000 of our colleagues in person. And I was struck by the positivity and energy everywhere I visit, especially given the difficult market conditions we all compete in. And I want to thank them for driving our journey to be the premier title service provider.

And finally, to our many new and long-term customers, I want to thank you for trusting us to deliver with consistency and excellence.

So with that, David, I'll turn it over to you to provide the update on results.

Good morning, everyone, and thank you, Fred. I appreciate our employees and thankful for our customers. I share Fred's sympathies for those affected by recent weather events. The real estate market remains challenged with mortgage rates in the high 6s and existing single-family home sales around 15-year lows.

Yesterday, Stewart reported second quarter net income of $32 million or $1.13 per diluted share based on revenues of $722 million. Appendix A of our press release shows adjustments primarily related to net realized and unrealized gains and losses and acquired intangible asset amortization that we use to measure operating performance.

On an adjusted basis, second quarter net income was $38 million or $1.34 per diluted share compared to $25 million or $0.91 per diluted share last year. In the Title segment, operating revenues in the second quarter improved $96 million or 19%, driven by both our direct and agency title operations. This resulted in a title pretax income improvement of $16 million or 48%. After adjustments for purchase intangible amortization and other expenses, the Title segment's adjusted pretax income was $52 million, which was $14 million or 35% better than last year, while adjusted pretax margin improved 1% to 8.5%.

On our direct title business, second quarter total open and closed orders improved due to higher commercial refinancing and real estate investor activity. Domestic commercial revenues increased $24 million or 46% due to strength and breadth in the energy, data center, hospitality, industrial, land development and multifamily asset classes. Domestic commercial average fee per file increased 25% to $16,900 compared to $13,500 last year.

Domestic residential fee per file slightly declined to $2,900 compared to $3,000 last year, primarily due to a higher mix of refinancing and real estate investor orders. International results improved modestly. While our agency -- with our agency operations, gross agency revenues increased $61 million or 25% on improved volumes in our key agency states, while net agent or 21%.

On title losses, our total title loss expense in the second quarter increased slightly to $22 million due to increased title revenues, partially offset by our overall favorable claims experience. The title loss ratio for the second quarter improved to 3.6% compared to 4.2% last year. We expect our title losses to average around 4% for the full year 2025.

Regarding the real estate solutions segment, operating revenues improved $20 million or 22%, driven by increased revenue from our credit information and valuation services operations. Excluding acquisition intangible amortization, adjusted pretax income was $2 million or 15% higher. We continue to manage the higher credit information cost of service and are focused on deepening and expanding customer relationships.

Adjusted pretax margin for the second quarter was 10.9%, which has improved sequentially and from Q4's low point. 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 30% versus 31% last year, while our other operating expense ratio improved to 25% from 26%, primarily due to higher operating revenues.

On other matters, our financial position remains solid to support our customers, employees and the real estate market during this challenging environment. Our total cash and investments were approximately $390 million in excess of our statutory premium reserve requirements, while we also have a fully available $200 million line of credit. Total Stewart stockholders' equity at June 30 was approximately $1.4 billion with a book value of $51 a share. Net cash provided by operations improved by $32 million in the second quarter compared to last year.

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] We will take our first question from Bose George with KBW.

So first, just on commercial. You obviously had another very good commercial quarter. Can you discuss what you're seeing in terms of the commercial pipeline in July? And also last year in the second half of the year, obviously, commercial ramped quite a bit. Just given that the year-over-year comps, obviously, get a little bit harder, just curious how we should think about your expectations for the back half of this year and commercial revenues year-over-year.

Yes. Thanks. So I feel good about the pipeline. There's a lot of activity. And so again, do I think we're going to sustain 45% growth? No. But do I think we can grow and grow up more than the market? Yes. And we have good visibility to the pipeline and the breadth of the pipeline is good, too. So I feel pretty good about it. The other thing bodes about us for commercial, we're also very focused on it, what I call main Street commercial, small commercial within the direct operation. And we've seen nice growth there, too, which is a segment that we kind of gave up on almost during some of the troubled times of the company. And so that's coming back nicely.

So I'm pretty comfortable that we will continue to see growth in commercial, but you're absolutely right to see -- to talk about the comparisons from last year. And we're at a very hefty number, which will probably come in a little bit. But I feel confident that the momentum will continue.

Okay. Great. And then actually switching over to the residential. On the agent premiums, they were up 25% versus direct, up 14%. Can you remind us, is there any timing issue there, agent versus direct? Or is it just...

No, the agency, again, I think what's happened on agency is twofold. One is we've been able -- we've been resourcing up a little bit. Now that our value proposition has been good, both our servicing and some of these capabilities on commercial, we've added staff in some of these targeted states, which has started to get some traction. And also, if you remember, we weren't very good at delivering commercial to the agents outside of New York really.

And so we created both an ability to do what we call kind of a concierge service for agents to really help them, particularly on things that might be multistate and some direct issue capability for them in places they don't have licenses, and that's taken off. So we have both nice geographic growth because of our resource, and we have the commercial penetration that's increased.

So I like the momentum there. We had -- I think net growth of 14% last quarter, announced 21%. So again, are we going to be at that 25% level? It could bounce around. It could be a little bit less than that. But I like our momentum because of the initiatives we're taking to grow our position.

Okay. Great. That's helpful. And actually just one more on the agent. The agent retention rate, it looks like that, I guess, declined about 1 point. Is that -- like is that just geography that's driving that? Or...

Yes. It's 100% geography. And if you look at us versus everybody else, it is really driven by Florida. And that is -- we've made some progress, but we're still in the 5%, 6% share range where our competitors are the 20-plus. All of the 3, the big 3 are all 20-plus share. And that drives that retention. There's a couple of other states that are more. But the profitability of every state is good.

So I don't -- I'm not worried about it. It's just the splits kind of drive. In Texas, for instance, is we've had nice growth in Texas, which is good attractive, but it's a much lower split. It's like 15%. So again, it's just the geographic mix. Same with Ohio, we've had really good growth. So I'm comfortable where that is because we've had increased -- that the margin has gotten better as we've grown because remember, that's also a business where there's more fixed cost.

So growth is very helpful to your margin because so much of the work is beared by the agent. And so really good continued margin profile as we grow. So I'm good with the mix, but I'd like to see more Florida in the mix, too. So...

And your next question comes from Geoffrey Dunn with Dowling & Partners.

I've got a couple of questions for you. I guess, first, what is the rough breakdown of your domestic commercial business between what you're labeling small versus national commercial?

Yes. About $19 million in this quarter, about $19 million of the total would be what I call small, right? So of the $74 million [indiscernible], about $19 million. And what I'm excited about that is that basically, when our capital is short when the company was troubled, we basically centralized what the commercial we did and we did very little in the offices. So we were advocating kind of the -- we're giving to the big guys all, what I would say, $20 million and down kind of business that you have in the single state mixed-use projects in some of these places and particularly in offices outside the big cities, right?

So the Austin of the world or the Columbus of the world. So what's happened now is we've done a really nice job investing and setting and providing skills. Now what's interesting is we had some of the skills so present in the offices, but we haven't really kind of focused on it. And so that's really starting to get some nice traction for us. And I really think that's an important part of our go-forward plan because it helps dramatically kind of our margin profile in the direct operations as well, right, so -- because you're using your excess capacity more effectively, and it gives you some higher-margin business.

Got you. And then on the residential business, can you remind us the premium relationship between a purchase deal and a refi deal as well as the margins that typically go with those?

Sure. So a retail deal is kind of somewhere about $3,000. Refi is somewhere between $1,000 and $1,400 it differs whether it's centralized or distributed or whatever, which state it's in. And the margin on residential is pretty consistent, whereas refi is -- bounces all over the place because it depends on your capacity in the office, right? You're doing it with excess capacity because the margin is going to be lower if you have excess capacity for refi.

So again, and think about refi for us. So refi is just upside for us. Unlike everybody else in the industry, we only have 3% of our revenue in refi and less in earnings. It's all upside. And so we've grown a little bit in centralized as the lender business has grown, but I haven't really focused on it because it's more -- a little bit more cyclical than our other businesses. And so we've really primarily invested in things like commercial and purchase and frankly, even centralized. We've gone after niche like reverse and investor and -- because I felt that those were the priorities for us to get our margins up, our consistency of earnings up and our growth up.

So I look at refi as just future upside. And by the way, I don't need it to get to 15% share that I talked about. I don't need it to get to 12% returns. So as other people kind of think about that's -- it's coming and going, it doesn't -- for me, it doesn't really affect our profile. Now this quarter is a great example where some of our big competitors are going to get a little bit boost -- more boost for refi. You can see it in the numbers where we're not going to get that because we don't -- there's a whole segment of some of the big players that we're not present in and I haven't really focused on it.

But again, over time, we'll get more of it, but I'll be -- it'll be from a position of a more stable company with higher margins, and I'll be happy to do it. But that's kind of where we are with refi, which is why, by the way, when people talk about the pilot, the impact on us is kind of nothing. And by the way, the pilot -- the latest announcements are actually very positive to me because what it looks like is they're refining as an option in the model that includes a title policy, maybe cheaper, maybe with different coverages with curative, which is what we recommended at the beginning, which they went to a more tech only.

And if that pilot works and there's margins in it with that approach, we could do that because we have the same technology and the same workflows that we could triage that stuff like that, too. So for me, refi is just a potential additional positive thing for us in the future if we want to pursue it more aggressively. So I'm feeling good about what we have, but I'm fine that it's a small percentage of our business, too. So...

Given the pilot comments you just made, I know it's been bumping around a little bit, not a lot of traction at this point, but do you have any sense as to how the pilot is pricing loans that go through without a -- with waived title insurance versus your product?

Yes. I don't. We're not that close. And obviously, the waived, in my view, is not the best solution for the lenders, right, because it kicks a lot of issues around -- if you're not going to do any curative, there's going to be some real issues at transaction -- later transactions. And so again, I don't -- I know what the tech pricing is, and I don't -- frankly don't even know on this new model what the whole pricing is, which is something that we'd have to come out of it and they have to prove that they could actually do that successfully.

But I do like -- to me, anything that retains the policy and retains the curative, that's probably going to be highly automated, right, because it's a segment of the policies that is less risky, if you will, or -- but again, that's a much better solution for lenders in my view. And it probably gets to the same, and you can get a little bit of a lower price, right, to that. So -- but I don't -- we don't -- we're not participating in it. We just know about it, and we are watching it closely and try to pay attention to it to make sure if we want to participate later, if it gets through to know if we would do it.

Okay. And then the last question is another mix question. Can you update us on the mix of the primary segments within RES being PropStream, infill research and the core offerings and the margins that go with those 3 buckets?

Yes. So with that business, you have the data kind of business, what we call IR data business and that's got the verification waterfall and all the tri-merge credit stuff in it. We have appraisal, which is a big piece of the business.

Those are the 2 biggest revenue.

Right. Those are really the 2 big ones. And PropStream is much smaller, but it's a nice value-added product. But those all, we believe, can get to that 12% consistent in a down market that could get to that 12% kind of cash margin. And in a good market, that should get more closer to 14%, 15% if we had a little bit more volume because they also have -- they all have some fixed cost coverage issues when you're at this low volume.

So again, the whole business, in my view, can carry that. We had a little bit of bumpiness with the data costs and how we priced some of this in a bundled fashion to capture some value. And what's going to end up happening, we'll end up this year right around where we ended up last year between 11% and 12%, I guess, when it's all said for the year. So I like the businesses. They generate a nice profile. They are cyclical. They all are affected by the cycle. It's just that we've been able to have enough margin on a cash basis to sustain a little bit higher margin in those businesses.

And we will take the next question from Bose George with KBW.

Just a quick follow-up. The investment income line was up a decent amount. Was there anything unusual there?

Yes, Bose, I mean we're still running about 6% of that a quarter is the escrow earnings and then the rest -- and you see this in other places, too, right? As you're rolling investments into the higher yield environment, you get a little bit more on that. So that's mainly the reason it's going up as well as we had a little bit of increase in balances.

And Bose, over time, again, we're not seeing the impact yet. But this commercial as a percentage of our business, if that gets bigger, that's helpful, right, because of the flow that comes with that, right? And we have to capture it. But we've gone from about 10% of our business in title being commercial to 13%, which is helpful. And I would tell you, the other place we need to push on is where that should be able to grow our 1031 business, which we haven't recognized that yet.

But we need to get after that and grow that business because that should be connected to this growth in commercial as a part of our business. So as David said, mostly what we had to do is we had to recapture escrow with these partnerships with banks that they value the deposits, and we've got to keep doing that. And as we grow, obviously, those balances grow, and so there's a little bit. But the other piece here is making sure we capture because the additional kind of it's a little bit disproportionate on commercial. So we should -- if we can do a good job there, we should, over time, see a little bit of growth there, too, which hasn't materialized yet, but could.

Okay. And but that number -- I mean, we should think of that number as kind of base case and kind of grow from there when we think...

Obviously, it yields -- it's very yield driven, right?

Right. I mean if you have 2 rate cuts, let's just say, for the rest of the year, you're going to feel that a little bit in the escrows. But ours are hair trigger because they're more negotiated, but you're definitely going to have some downward pressure. But then as you roll your investment portfolio, that's going into things that are a lot better than during COVID years.

And it appears that we have no further questions at this time. I will now turn the meeting back to Fred Eppinger.

Yes. Thank you for the call. Again, one of the things that I would close by saying is there was a great question 2 quarters ago by one of the analysts that said, if the market doesn't grow at all, like what can the company do? And I think the way I answered is I said, I think because of our momentum, we could grow 10% top line and 20% bottom line in that kind of environment.

If you look at the 6 months so far, we're up about 16% and about 49% of earnings. I don't know if we can sustain something like that. But what I know is that our businesses have some nice momentum right now. And if we stay focused on what we're trying to accomplish, we should be able to grow a little bit more than the market and continue to leverage our earnings.

And I'm really proud of what this quarter was, not because of this quarter, but because of the work that our folks did to build our capabilities over the last couple of years to get to this point where I think we can sustain a little bit more than the market, not probably what this quarter was, but sustain a little bit better than the market.

So I'm very pleased with where we are positioned as a company. So thank you so much for your attention today, and thank you.

Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.