Good day, and welcome to the Stewart Information Services Fourth Quarter and Full-Year 2017 Earnings Conference Call and Webcast. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] I'd like now to turn the call over to Nat Otis, Director of Investor Relations. Please go ahead, sir.

Thank you, Erika. Good morning. Thank you for joining us for our fourth quarter 2017 earnings conference call. We will be discussing results that were released earlier this morning. Joining me today are CEO, Matt Morris; and CFO, David Hisey. To listen online, please go to the stewart.com Web site to access the link for this conference call. I will remind participants that this conference call may contain forward-looking statements that involve a number of risks and uncertainties. Because such statements are based on an expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected. The risks and uncertainties with forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release published this morning and in the statement regarding forward-looking information, risk factors and other sections of the Company's Form 10-K and other filings with the SEC. Let me now turn the call over to Matt.

Thank you, Nat, and I appreciate everyone at joining us on the call today. You have probably seen the press release and seen that we’re on track with our results this quarter with Title revenues of $550 million, which were up both sequentially as well as from the fourth quarter of 2016. We had a strong commercial quarter combined with the impact from new hires and acquisitions to help offset weaker market volumes, putting us on a good trajectory as we enter 2018. Early in 2017, you recall we discussed headwinds from staff departures in several key important geographies, stemming from some of our change initiatives. Thanks a lot of hard work by our associates, continued alignment around our core operating model, and continued investment in key markets. We are encouraged with our momentum exiting the year with strengthened and reinvigorated quartile operations around the country. I’d also point out that so far in 2018 we have closed -- or are in late discussions with several Title and Escrow companies that will give us greater presence in key MSAs. And we have a good pipeline of additional acquisition opportunities to help supplement our organic growth plans for the year. As we generate capital from our expected growth and to lower corporate tax rate, we will look to deploy it in 2018 and beyond to further expand our presence and scale in priority markets. Before I turn the call over to David to discuss the financial results, let me touch on our company's strategic review. You recall at the time of our third quarter 2017 earnings release, we noted that a strategic committee comprised of members of our Board of Directors had already been formed to assess the full range of available strategic alternatives for the company. While stating that the review would be done in an expeditious manner, we provided no specific timeframe and at present the review is still ongoing. The Board and management are working together to complete this process as soon as possible. I do want to take a moment to thank our associates for their hard work, royalty, and execution in the phase of heightened competitive pressure as we position Stewart to successfully move forward. And with that, let me turn it over to David for more detail on our financial results.

Thank you, Matt, and good morning everyone. Let me reiterate Matt's comments on the hard work and dedication of our associates, I’m impressed by their focus and progress and commend them. They continue to rise to the challenge and embrace Stewart's culture of caring, execution, giving us good momentum as we enter the new year. This morning Stewart reported pre-tax income of $17 million for the fourth quarter 2017, with net income of $15 million or diluted earnings per share of $0.64. Overall revenues of $526 million were in line with last year's fourth quarter results, but as Matt mentioned, our Title segment revenues of $515 million were up from last year. Revenues were driven by strong commercial business, increased premiums per order from a higher percentage of purchase transactions and in part from new hires and acquisitions, which offset lower refinancing volumes and ancillary services revenues due to divested operations. As disclosed in our earnings release this morning, our fourth quarter 2017 results included over $9 million of total charges related to our review of corporate strategic alternatives, office closures, Title365 integration costs, and executive severance and retention expenses. These charges were offset by approximately $7 million of net income tax benefits resulting from the revaluation of our deferred tax liability following passage of new federal tax regulations. The Title segment generated pre-tax income of $27 million or 5.2% margin. With respect to the direct business, although revenues were down 2% from last year, strong commercial business and improving purchase mixed help offset lower order volumes, especially in the centralized business. The residential fee per file increased 11% to $2,100 on the business mix shift. Commercial revenues improved 23% influenced by deal size in the quarter, which also drove a 36% increase in our commercial fee per file to…

Thank you. [Operator Instructions] We will take our first question from Bose George with KBW. Please go ahead.

Hi, guys. Good morning.

Good morning, Bose.

Could you first talk about just the outlook for your commercial premiums? Obviously, nice increase this quarter, do you think that’s sustainable or are you more active now in these larger loan sizes where you can remain active?

Yes. No, I mean, in commercial we continue to be encouraged. We did have good broad-based strength along geography and transaction type this quarter, which we’ve seen now. I think for the last couple of years we’ve growth there. We’ve had -- we did have a couple of sizable transactions as well. Remember last quarter we noted that a few deals were pushed into Q4, and we had some of the close this quarter and we feel really good about our commercial operations as we start 2018. Solid performance and growth across the platform and we believe we’re continuing to gain traction in the commercial arena as a result of the strong balance sheet, continue to increase surplus and the underwriting expertise that we have to get the deals done.

Okay. That makes sense. And then in terms of the expenses when we look out into '18, you guys highlighted a number of sort of transitory expenses. And just when we think about those into '18, how many -- how much of that should we expect also to come up going through the year?

As you mentioned, we try to point out several of the one timer -- one-time items this quarter. There are certainly additional factors that add into the expense headwinds in the quarter like continued recruiting, we had some hiring, technology and training integration costs rolling out, which are covered to parse out. In addition, we have the previously mentioned $10 million of expense saving coming out at the end of both 2018 and another $10 million at the end of 2019 tied to top production. So as we stated I think in the release, they’re somewhat heightened this year related to a lot of the growth initiatives. But we should see that turning down in 2018 in addition to the cost-reduction efforts tied to Title production expense.

Okay, great. Thanks. And then, actually, just one on the strategic review. I know you can't comment on time lines, etcetera, but the -- in terms of the [indiscernible] operations, like recruiting, things like that has there been sort of any impact from the ongoing review on that part of the business?

Yes. No, we appreciate the royalty of our existing associates. I’m not going to say that it doesn’t make it harder to recruit, and due to some of our growth initiatives going forward, but we’ve got a very loyal group here that continues to press forward and I think we will -- we continue to communicate with them and let them know that we’re focused on comprehensive review over any our official deadline, and making sure we’ve a strong platform for growth moving forward.

Okay, great. Thanks.

Yes.

Thank you. We will take our next question from Mackenzie Aron from Zelman & Associates. Please go ahead.

Thanks. Good morning. Matt, you mentioned the various acquisitions that could be in the pipeline. Is there any color that you can give us on the scale or geographies where those might be focused?

Yes, the geographies -- I’m not going to get into specific markets, although I will say these are larger markets and markets that we have less scale in. so they’re definitely target on our side. I mean, in terms of size, they’re definitely kind of your midrange Title and Escrow offices, so nothing that we will have to do a few of these in the year. So I probably hesitate to give much specificity around that.

Okay. Understood. And then on the acquisitions that were made last year, I think last quarter you had mentioned you expected the revenue run rates to get up to kind of where you expected them to be on a normalized basis by the spring selling season. Does that still feel realistic and can you just give us an update on where those integration stand right now?

Yes. So I think we talked last time really on Title365 being the most significant acquisition last year and we do see that in addition to our -- just organic growth and new hiring, continuing to progress and make up the losses that we saw in 2017 -- in early 2017.

Okay. And then just one quick one. On the corporate pre-tax income line, can you just give us the right run rate you should be thinking about there?

David, take that one?

Yes, I think -- I mean, Mackenzie the best way to think about that is just to take out the $3 million of strategic alternative expenses that was really sort of the odd item for this period. As Matt mentioned, the review is ongoing, so we will have some of those for some period of time. But the true run rate of the business would be those expenses without that number.

Okay, perfect. Thank you so much.

Thank you. [Operator Instructions] We will go next to the line of John Campbell from Stephens Inc. Please go ahead.

Hey, guys. Just following up on that last question, with the $6 million a quarter is that the right kind of run rate for corporate growth?

Yes, correct.

Okay. Okay. And then, if we look at the Title segment, I don’t know if I math is right here, but I’m trying to kind of back out the one-timers throughout the year. But I’m getting to about a 6% kind of Title pre-tax margin for the year. As I look at '18, and may be even in the '19, for this year you'll be lapping some integration cost, you got some of the cost saves coming later in the year. Just curious about where you think Title pre-tax margins can go in '18, or maybe, I guess, just directionally what you think margins will do, if you can expand margins this year?

Yes. I mean, we’re definitely looking at expanding those, and I think some of the scale that we’ve seen -- the incremental margin by the new revenues that’s coming into the organization, we’ve been very encouraged by. So I think that in addition to our cost-reduction efforts, in addition to exiting some of these one-time expenses, we continue to have a strong trajectory toward increasing that, that Title margin.

Okay. And then, I guess, back to the Corporate segment, so the ancillary services, kind of revenue line, this might be tough to tell, and I know you guys are doing a lot of -- kind of the backdoor work there, but what is your expectation for the revenue line there? At some point is that flat now and start to maybe grow in the back half of this year? Just any kind of thoughts there.

You know a lot of within that ancillary businesses relates to both default revenue as well as refinance revenue. And so those lines more trend with both default business which we’re seeing a decline as well as refinance business, which has declined. So, I think probably the ability to track that more in line with those markets, makes more sense. So, other than revenue this is definitely a line that we continue to right size the business, because we’ve less control over that top line revenue. So we -- right size the business is evidenced by the drop in expenses this quarter, we will continue to adjust that to current market conditions.

Okay. That’s helpful. And last one for me, on the investment income line. Just curious about thoughts on rising rates, how much that is impacted? Kind of -- how the portfolio is tied?

Yes, I mean, our portfolio is sort of what a couple two, three year average maturity. So, I mean, we shouldn’t have -- we will obviously reinvest as things mature, but we shouldn’t have huge sensitivity there, because of the duration.

Okay. Thanks, guys.

Yes.

[Operator Instructions] We will go next to the line of Geoffrey Dunn with Dowling & Partners. Please go ahead.

Thanks. Good morning.

Good morning.

Matt, I want to be clear what you said about M&A. Are you in the closing process on a couple of deals or in discussions on a couple of deals?

We are -- yes, I would say both.

Okay. And so, I assume these are being done at the Title operating level, just -- it seems unusual to be able to go out and pursue M&A in the middle of a strategic review. So, I guess, how are you finding the negotiations for these platforms given, the situation the overall company is in?

Well, again I think there -- the conversations are definitely at that, Title and Escrow level and usually at the level of a particular market and a market that we are subscale in. So I think looking at the process, they’re very focused on expanding the operations and kind of merging teams in specific markets. And so, I think that’s the focus -- the various components of the review, all support those local operations and those strategic markets, and so gives us the ability to continue kind of the growth plans. And honestly a lot of these discussions were going on prior to the strategic alternatives being announced. And so, I think those that -- we have a lot of clarity on that are highly accretive to that local market, we’ve continued discussions on.

Matt, and it also would be fair to say though that those -- that’s our business, right.

Right.

So growing that business is consistent with any strategic outcome.

Correct.

With respect to the tax rate, are your expectations for that to carry through all the way to the bottom-line or you made any actions with respect to compensation or thoughts on investment to pass through or reinvest some of that gain?

I'm sorry, you’re talking about the 24% to 25% go forward rate?

Correct, yes.

No, that’s our expectation of the effective tax rate. And so the reason it's a little different from the 21% statutory is we’ve got some state taxes on it. We also have to plan for the effects of -- sort of the nondeductible items like you mentioned, potentially some of the compensation and the like. But all that’s built into that number, and so that should be the effective tax rate going forward.

I didn’t ask that correctly. Are you passing, are you doing any action with respect to employee compensation or thinking about incremental investment or is that benefit of the drop in the tax reform flowing completely through the cash flow?

Well, I think as Matt -- yes, sorry if I didn’t answer that correctly. But I think as Matt said in his comments, the additional capital that we will be generating from the tax benefit as well as our growth we are looking to reinvest in the business, primarily in the growth initiatives of the new hires and acquisitions.

Yes, Geoff, so we’re not using that for alternative purposes, it's flowing to the bottom line and being used as capital in a go forward.

Thanks.

Thank you. And at this time, we have no further questions. I’d like to turn it back over to our presenters for any closing comments.

That concludes this quarter's conference call. Thank you for joining us today and your interest in Stewart. Appreciate it.

Thank you.