Stewart is shifting its focus back to title insurance for acquisitions

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Just because Stewart Information Services Corp. Developing an end-to-end platform for real estate services and technology, that doesn’t mean it isn’t tacitly expanding its title business as well.

On Thursday, Stewart announced that it had acquired one of Michigan’s largest title agencies, Devon Title Agency. This transaction follows the acquisition of Seattle-based Rainier Title Company in November and Title First Agency Inc., based in Westerville, Ohio, in July.

In executing CEO Fred Eppinger’s vision of transforming the company’s business beyond the confines of title insurance, Stewart made headlines by acquiring a number of companies to fill in gaps in its ancillary service offerings, valuation management services, search and Assessment include, and online authentication and graduation solutions.

Most notable of those moves include a $ 192 million deal to acquire data and analytics company Informative Research, which closed in September, and Stewart’s $ 175 million acquisition of property data aggregator PropStream in November.

Stewart’s campaign to expand its ancillary services began last year with the acquisition of United States Appraisals, Pro-Teck Services Ltd. and NotaryCam. Other recent acquisitions include the purchases of Signature Closers in February and Cloudvirga, a digital mortgage lending platform, in May.

These acquisitions have helped Stewart drive review management, abstract, and other ancillary services revenue up 188 percent this year, from $ 81.5 million in the first nine months of 2020 to $ 234.7 million for the same period this year to increase, according to the company’s last quarterly report to investors.

But it is title insurance that generates the lion’s share of Stewart’s revenue and profits. In a conference call with investment analysts, Stewart CEO Fred Eppinger said the company may be more “selective” in acquiring side businesses going forward.

Fred Eppinger

“We don’t necessarily need more in the portfolio,” says Eppinger. “If you remember, a year ago we had some glaring problems and gaps because we weren’t scaling our service business and some of our skills were really missing. And we really needed what we did with the notary and the valuation to really solidify this business. “

That’s not to say Stewart is “blind to opportunity,” said Eppinger – especially acquisitions that can improve the delivery of services to lenders. But “the urgency on this side of the business is very different than before.”

On the title insurance side, Eppinger said Stewart is trying to “be prudent” and targeting acquisitions by geographic region, Eppinger said.

“When we started we had a few significant gaps, of course,” said Eppinger. “Now there could be more fill-ins as part of that mix.”

Announcing the acquisition of Troy, Michigan-based Devon Title, Stewart said the deal highlights “an ongoing focus on investing in key markets across the country.”

Prior to Stewart’s acquisition in July, Title First was one of the largest independent title agencies in the country, with offices in Ohio, Illinois, Indiana, Michigan, Texas and West Virginia. Title First is licensed to operate in 34 states and strategic partnerships allow it to do business in all 50 states.

With mortgage refinancing demand expected to decline over the next year due to rising interest rates, Eppinger said Stewart’s acquisitions of title insurance will help generate more mortgage-related business.

“I think we are in a good place, but I would tell you that the [acquisition] The pipeline is still robust for us and part of our effort, ”said Eppinger. “Because we are firmly convinced that this is about a consistent implementation for the customer, and the scaling enables you to survive the cycle and seasonality so much better, to deliver in a local market. And as you digitize the business and make your operating model more efficient, scaling helps too. It therefore makes a lot of sense for us to continue on this path. “

Stewart’s efforts to grow his title business appear to be paying off. Thanks to a refinancing boom fueled by low interest rates, title insurers will have an excellent year in 2021: premiums for the third quarter rose 32 percent year-on-year to a record high of 6.8 billion US dollars.

Of the four major title insurers, the Stewart family of companies, which includes Stewart Title Guaranty and Stewart Title Limited, had the highest annual growth rate over the period, with premiums written up 52 percent to $ 641 million.

Though Stewart’s market share of written rewards was still just 9.4 percent in the third quarter, that was up 9.1 percent a year ago, according to an analysis by the American Land Title Association.

While Stewart is showing strong results – net income for the three months ended September 30 increased 55 percent year over year to $ 93.4 million, while sales rose 40 percent to $ 836.7 million – It also benefits from the low interest rates to finance acquisitions.

On November 24, the company issued $ 450 million senior notes maturing in 2031 at an interest rate of 3.6 percent. Stewart announced that it intends to use the net proceeds of $ 444.2 million to repay or buy back any debt or other debt, repurchase of share capital and other investments. “

On December 1, Stewart announced that its board of directors has approved an increase in the company’s annual cash dividend from $ 1.32 to $ 1.50 per share, with a dividend of $ 0.375 per share the shareholders of record on December 15 is payable.

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