Hello and thank you for joining the Stewart Information Services Fourth Quarter and Fiscal Yearend 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, you’ll have an opportunity to ask questions during the question-and-answer session. Instructions will be given at that time. Please note this call may be recorded. It is now my pleasure to turn today’s conference over to Nat Otis, Head of Investor Relations. You may begin.

Thank Aaron. Good morning. Thank you for joining us today for Stewart’s fourth quarter 2020 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.

Thanks, Nat. And thank you for joining us today for Stewart's fourth quarter 2020 earnings call and for your interest in Stewart. I'll have to really go through the details of this quarter's results in a minute, but first, let me take a little time to reflect on 2020. This was a tremendously challenging year would be a vast understatement. Companies faced unchartered territory. People everywhere stepped up and carried on. I couldn’t be more proud of how everyone here Stewart navigated to accomplish personal and professional challenges brought by COVID-19. Our employees brought up superior service to our coworkers while keeping family core customers safe. Our sincere focus that 2021 starts everyone back on the road to personal, professional and economic security. At Stewart, the year started off as our finishing my first 100 days as CEO. We've begun to lay the foundation of our journey to become the premier title services company with an intense focus on meaningful improvement in 2020. We began with a strong improvement in the first quarter, but very quickly the market was ended by COVID-19 before recovering and then thriving and changing demographics, strong underlying fundamentals and low interest rates brought about a historic jump in transaction volumes. As the pandemic has caused it is a value of home and safety have never been long fought. In conjunction with a significant increased transaction activity was the acceleration and acceptance of remote and virtual closings due to pandemic-related follow-ups and safety concerns. Stewart met those challenges head-on. That said, instead of simply putting our long terms plans on hold, we were able to take advantage of the elevated market activity while still putting in place critical building blocks for our future.

Thank you, Fred and good morning. Let me also thank our associates for their amazing and inspirational service and our customers for their support during these unique times. The fourth quarter saw continued strong residential real estate market driven by strong purchase and refinance demand as the 30-year mortgage rate exited the quarter along 3%. Commercial saw strong customer activity around yearend although the outlook remains challenged by economic conditions. Economic stress increased around year-end as virus cases and hospitalization trended up and appear to be moderating. As we await the calming effects mass vaccinations, we continue to be mindful of the impact of these challenged economic conditions including high levels of mortgage, which when lifted will result in increased pitfalls and may elevate title losses.

We will take our first question from Bose George with KBW. Your line is open.

I just wanted to start up with a question which I asked last quarter as well, but given how things have gone this year, clearly you’ve been very successful. Are there any changes to your expectations for normalized margin going forward?

Again when we started, overall company, we preferred this but, we were about half of these shipment. We were in the 5% margins. I believe we can double that. I talked about high single digits net low double that 10% range and I continue to believe that's kind of what our goal is. The question I think is are we a little bit ahead of schedule and I'd say we probably are on some of our journey getting there and I am confident that we made significant improvement. I think obviously this year boosted by extraordinarily attractive market makes us look maybe a little better than a normalized world, but we're still on track to what I think we can do and again, I think for us right, I think the game is that we're too far . We have the opportunity to improve our margins but we also I believe will outgrow the market as well and that's really what our focus will be.

Okay. That makes sense, thanks. And can you just talk about the acquisition landscape just obviously the one you did this year, the larger one seems to be very successful in terms of what it has done for the company and it would seem like that's the other way to get your margin longer-term above that 10% say the target that you noted earlier. So can you just talk about how you're thinking about acquisitions?

Yeah again I think one of our things I talked about from the beginning is that and what we would do and if we weren’t managing our capital investment and our expense investment in a appropriate way, so we shed a lot of things and we've also gobbled down in some areas and one of the most important things in our business around the execution is having critical mass at the local market level because we own the direct business and so we need to make sure we position ourselves in every market to be a leader and that means that we need to get critical mass this year that we can execute effectively through a cyclical business. And so we have a very solid pipeline as we're looking at the local markets and where we think we have to do things. We've literally done that with view of the 140 MSAs. We have a point of view on our strategic position in every market with our channel where we want to be share wise where we think we can be effective and we're focusing our investment in our efforts there both organically and in acquisitions. But I totally expect that you'll see continued targeted acquisition to change our structural position in a lot of markets and so far, it's done well and as I said, we have excellent conversations with a number of people. So I am comfortable what we can advance the agenda in that way.

And our next question comes from John Campbell with Stephens, Inc. Your line is open.

Hey guys. So $6 in EPS over $6 of EPS this year just incredible. I remember that management team and the board was once dreaming of $5 in EPS and I know you’ve had some big kind of comp targets in the current type. On the building out of the additional scale and the nontitle business, I know that one of your key, I know you guys have integration costs right now. You’ve got kind of a RevPAR housing market and helping lift transactions, but I don’t know maybe David what do you think is kind of a normalized margin for that ancillary services business if you kind of strip out commercial? Is it a kind of low double digits, is that a good way to think about it?

Yeah I think John durable real services business across the cycle I think for the company overall, I think if you're trying to understand, if you think about the cycle of why you got origination servicing and so in this quarter, originations obviously was up. It wasn’t a lot of capital markets activity because that typically lags originations where there is loan quality issues and distress loan sales and the like and then of course with forbearance and delinquency impacting that, there really wasn't a lot of distress loan sales and there wasn't default title work.

It looks to me from a timing standpoint you guys think that you're right ahead of a couple try to have a big surge in the market. So I imagine some of them have already taken themselves. So nice work there. I've just one quick question there was that more -- I don’t know how you categorize that, was that kind of paying, anywhere you kind of break that out?

Well I think it's appropriate. I am going to ask David can answer this more specifically, but as somebody who has lived their life running a big reserve balance sheet type businesses, my view is always when we go into a period like this and you look at the potential risks ahead, you have to be conservative and my view is completely prudent and appropriate for us. I've imagined about an insurance company to be prudent about our reserve position during this period and obviously it's not what's happening today that you're thinking about. It's what could potentially happen in the future. So I think our consumer stance is the right thing for the company right now and as said next year, we'll be about the same level we were this year, but it made all the sense in the world to us to make sure we made some assumptions that were both conservative and position us well for the future.

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

So Fred and David, I wanted to revisit the M&A topic on a couple of different angles. First, given what happened in 2020, I have to imagine that potential acquisition targets have a key opinion of their valuations. So is it something where you are seeing real opportunities now or is that something that may be just delayed a little bit as value opinions become a bit more realistic? And then on the other side of the equation, how are you thinking about financing future M&A? Have your line of credit obviously your debt to capital, but you also continue to have a pretty good equity multiple here and you turn around and spent your last equity raise immediately. Is it worse exploring another equity raise to establish dry powder in anticipation of your pipeline?

It's a really great question frankly about people's expectations. We walk away and say now a lot more than we say yes. Let me just be clear. So we have lots of conversations with very proactive, we understand the outfit is really leadership as part of the equation for us as we grow our business and so there is always a sensitivity because this is a strong market right and so you got to come to agreement on what the multiple run rate for the business and how does it work. We have not had problems to date. We have doing things that make sense for both parties and want to make sense for both parties. To your point being patient is that we're not any big part to do something that we need to do tomorrow. So we're going to be selective and again we're going to be thoughtful about the valuations. I'd tell you I am encouraged though because of the strategic fit we have with a number of these parties that the conversations continue to be positive and we'll find the right things over time in the right areas to build our business. And the other thing about because of who we are, why we require entities have better offside in their careers and their future by being part of us because of who we are and how they will become part of us. So that is really helpful in having some of these conversations is particularly we just help our local market opportunities. So Dave is there a capital…

Yeah Geoff thanks for the question. As everybody knows, markets are open right now and so we obviously think about all the options. I think on the equity side that is well matching against the right opportunity. I think as I mentioned we have about $600 million of our statutory and regulatory right now, obviously not all of that is available because you need some operating buffers and the like, but primarily just a couple hundred million there. You got the line of credit available and then debt and equity markets and so I think we feel good about available capital first and then other markets are open and just trying to match those against the right opportunity.

And there are no additional questions at this time. I'd like to turn the program back over to CEO, Fred Eppinger.

Well thank you everyone for joining us this quarter and appreciate your interest in Stewart. Thank you.

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