Stewart Information Services Corp (STC) 2016 Q2 法說會逐字稿

Good day and welcome to the Stewart Information Services' second-quarter 2016 earnings conference call and webcast.

(Operator Instructions)

I would like to now turn the call over to Nat Otis, Director of Investor Relations. Please go ahead Sir.

Thank you Erica. Good morning. Thank you for joining us for our second-quarter 2016 earnings conference call. We will be discussing results that were released earlier this morning. Joining me today are CEO Matt Morris and CFO Allen Berryman. To listen online please go to the stewart.com website 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. The risks and uncertainties of the forward-looking statements are subject to include but are not limited to the risks and other factors detailed in our press release that was 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.

Thanks Nat. We appreciate everyone joining us today. This morning we reported a clean second-quarter 2016 where our improved cost structure resulted in a higher profit margin even as we saw decline in revenues. Our title segment delivered improved profitability and our ancillary services and corporate segment continued to show better results. Given the significant changes we have made in restructuring our business to reduce risk and enhance the scalability of our operations, we are approaching historically low title losses while seeing a quicker reduction of cost in response to changing top-line revenue.

At the consolidated level, we reported pretax income of $41.9 million, an increase of more than $10 million from the $31 million reported in the second quarter of last year, while our second-quarter 2016 total revenues fell 8%.

We continue to benefit from the cost management program completed in the third quarter of 2015, as well as enhanced financial discipline with our core operations. This resulted in total expenses for the quarter falling 11%, more than offsetting the decline in operating revenues.

As we maintain our focus on our core business, our title segment continues to show year-over-year improvement in pretax margins, improving 120 basis points over second quarter of 2015. Total title revenues decreased 6%, primarily due to lower refinance volumes and lower independent agency revenue, and ancillary services' revenues declined 38% percent as a result of our strategic exit of the loan servicing activities in the first quarter of 2016.

Looking forward, we are continuing investments to lower our unit production costs and enhance margins. We are also investing in revenue growth through targeted marketing programs, and hiring new sales associates while establishing more rigorous goals and accountability within our sales culture. Over the next few years we expect to continue to realize improving margins through further outsourcing, technology rationalization and title and escrow [simplizations] and automations, moving us toward our 10% pretax margin goal.

I would also like to take a moment to address recent public statements about our company made by one of our shareholders. As many of you are aware, the Stewart Board of Directors has taken significant actions and instituted a number of important changes over the last several years. We have long sought to maintain an open and productive relationship with our shareholders and have stayed committed to improving the Company's governance profile and driving value for all of our shareholders.

To that end, we've added three new directors over the last three years, including shareholder representatives, which we believe helps ensure strong alignment between the interests of our directors and all of our investors. We eliminated the Company's dual-class structure and now have a single-class [stock]. We've improved core title margins and reduced expenses by $30 million from centralization, optimization, offshoring and technology rationalizations, and we've increasingly engaged in shareholder-friendly initiatives including completing a $70 million capital return program and increasing the dividend from $0.10 per share to $1.20 per share in 2015.

We believe strongly in our strategic plan and think Stewart is well-positioned to deliver meaningful shareholder value over the coming years. We have completed significant restructuring initiatives here at Stewart, and we believe the go-forward business will reflect the positive impact of the actions we have taken, resulting in continued growth and enhanced profitability.

Our board values the opinions of our shareholders and we welcome open dialogue with the shared goal of driving value. I can assure you that our Board and Management will continue to take actions that we believe are in the best interest of all shareholders. We believe that over the next year and beyond, the business will generate strong margin and earnings growth that will translate into tangible shareholder value. At the same time I want to stress that as a matter of course, the Board considers a wide range of strategic options to maximize shareholder value.

So now I will turn it over to Allen for more detail on the financial results.

Thank you Matt, and good morning everyone. The title segment generated pretax income of $52 million or an 11% margin compared to second-quarter 2015 pretax income of $49 million or an approximate 10% margin. Our title segment revenues were $468 million for the second-quarter 2016, a decrease of 6% from second-quarter 2015.

With respect to our direct title operations, overall revenues decreased 3% from second-quarter 2015. Revenues from purchased transactions increased 1%, while centralized revenues fell 34%. Residential fee per file in the quarter was 1,986, up 6% from second quarter of 2015 and up 4% from first quarter of 2016, due principally to the shift in mix to more purchased transactions. Total commercial revenues for the quarter decreased 3% to $45 million.

Title orders opened in the second quarter declined 7% from the prior-year quarter, with opened refinance orders decreasing 17% and opened commercial orders decreasing 3%. Title orders closed declined 9% from the second-quarter 2015 primarily due to a decline of 23% in refinancing of orders closed. Second-quarter 2016 total international revenues increased 8% due to increased volumes on a local currency basis, partially offset by the impact of a stronger US dollar.

Revenues from independent agency operations decreased 10% in the second-quarter 2016, while 7% net of agent retention as a result of several factors including changing our geographic focus, as well as from longer closing cycles impacting agents with relatively high concentrations of commercial business. We have also been adversely influenced to a lesser degree by the loss of certain agents through the acquisitions over the last 12 months.

We've increased our overall independent agency count since the beginning of the year and continue to seek new, high-quality independent agent relationships. We anticipate our ongoing remittance ratio to be in the mid-18% range.

With respect to title losses, title losses were $17 million in the second-quarter 2016, or 3.7% of title revenues compared to $20 million, or 4.6% of title revenues in the prior-year quarter. The decrease in title loss expense is a result of a reduction in our current-year reserving rights for general and large claims due to operational improvements yielding continued favorable policy loss experience, as well as a positive mid-year actuarial review of balance sheet reserves.

As mentioned earlier, second-quarter 2016 and 2015 included $5 million and $7 million respectively of net policy loss reserve reductions pertaining to prior-policy years. Excluding the reserve releases, this quarter's loss ratio was 4.9% and we expect to maintain an accrual rate at the lower end of the 5% to 5.5% range on a full-year basis going forward. Our total balance sheet policy loss reserves were $463 million at quarter end and remained above the actuarial midpoint of total estimated policy loss reserves.

Looking at our ancillary services in corporate segment. Revenues for the segment decreased 39% to $21 million compared to the year-ago quarter, primarily due to our strategic decision to exit the delinquent loan servicing operation. The segment reported a pretax loss of $10 million in the second quarter of 2016 which included approximately $7 million of expense attributable to parent company and corporate operations. We recognize that it is taking longer to restore the business lines in this segment to acceptable margins.

On a year-over-year basis we were able to reduce costs commensurate with a decline in revenues. The ancillary services of operations reduced employee counts significantly a bit again during the second quarter and the full effect of those reductions will be seen in the third quarter. Excluding the cost of corporate operations, our run rate goal for the combined businesses within this segment remains in the mid to high single-digits range, with EBITDAR margins in the low double digits. However, if that goal does not appear achievable within a reasonable timeframe, we will consider other options for certain products within those segments.

With respect to operating expenses, employee costs for the second quarter of 2016 decreased 11% from second quarter of 2015, while average employee counts decreased approximately 10% from the second quarter of 2015 due to our cost management program, as well as reductions in employee counts tied to volume declines.

While we had expected the additional work stemming from TRID to taper down we were still seeing higher-than-anticipated overtime in temporary staff in our direct operations to handle the workload, and we are currently enhancing systems to reduce excessive manual processes.

During the second quarter of 2015 we incurred $3 million of severance expense which we did not incur in the second quarter of 2016. Other operating expenses for the second-quarter 2016 increased 12%. During the second-quarter 2015 we incurred in aggregate $5 million of other operating expenses related to the cost management program, and preparations for the new integrated disclosure rules, as well as $4 million of litigation settlement expense. We did not incur any significant non-operating charges during the second-quarter 2016.

Lastly, a couple comments on other matters. Cash provided by operations was $50 million in the second-quarter 2016 compared to $32 million for the same period in 2015. The increase in cash provided by operations was primarily due to higher net income and lower payments of claims, partially offset by lower collections on accounts receivables for the second half of 2016. As of quarter end $1 million of cash was held at the parent holding company.

With regard to continued cost management we're focused on actions that will lower unit cost to production, thus further improving margins. Our plans to improve margins also include further outsourcing, additional automation of manual processes and continued consolidation of our various symptoms and production operations. We are currently investing in the technology necessary to accomplish these goals.

As this multi-year effort is deployed we expect to begin achieving a lower cost per file beginning in 2017, with further improvement through 2019. We expect to provide additional information as to percent savings achieved on a cost-per-file basis in the second quarter of 2017.

And with that I will turn the call back over to the operator to take questions.

(Operator Instructions)

Patrick Kealey, FBR.

Good morning everyone. Thanks for taking my question. First I would love to get your thoughts here on the commercial market. Obviously a lot of headlines there. Maybe talk about what you saw inter-quarter, maybe a little color around the numbers and then maybe give us your expectations as they look toward the second half of this year.

Absolutely. It's something that we watch closely obviously. And we will be looking into analytics for the quarter. I will note -- well, analytics noted commercial deal activity in the second quarter was down 20%. Our open orders were down only 3%. We have good transaction activity in a variety of geographies and deal types. We have a pretty solid pipeline.

No real major transactions for us other than normal, and actually saw some transactions slip into Q3. We remain positive on the macro market at least through 2017, and we are positive on our continued growth and presence in the space. Certainly our refinancings play a role in the view and we do expect them to slow at some point. But we also are favorable towards a more normalized mix of business.

Great. That's helpful. Second, you talked about in ancillary services achieving your target margins there, but if you can't hit it, obviously, value it options in certain lines. Can you give us a little bit of color on any specific lines that you may be looking at and what you're optionality would be there, and then maybe if there's any optionality to maybe add on specific businesses that may help out on the margin, I think that would be helpful as well.

I would say that, that business today is really a relatively small handful of products and that, a little early to speculate as to what the optionality might be on it. We just acknowledged that it's not achieving the margins that we would like it to achieve, and we think that there's work that we can and are doing in that area. T

here's probably a point in time, at which you start evaluating your other options as you go through that process of improving your back office services and some of your operational operations there. So I hesitate to speculate at this stage at what the optionality might be.

Not reading into your question, but on the notion of other products, we do feel like the products that are in here are very strategic to our core title operations. Same customers, but we are not looking to expand the services right now, so we're not looking at other acquisitions to increase profitability at this stage.

We do see paths forward and are making progress, just not at the pace we would have liked for improving the margins of our current offerings, but we are not looking to expand or add to the market to those offerings at this point.

Great. Thank you.

John Campbell, Stephens Inc.

Good morning. Just back to the mortgage services segment. Can you guys walk back through what exactly happened in the quarter? We were thinking once you rolled off the default-related services, you gravitate back towards the margin of the remaining businesses, or just those acquired businesses.

You're correct in that. The principal reason that the revenues fell off in the quarter is because of the exit of that delinquent loan servicing operation. That was a fairly significant contributor in the second quarter of 2015. Then beginning in third quarter 2015, going all the way through first quarter 2016, we are slowly rolling that business off.

As I've said, we were able to lower costs in that operation to -- commensurate with the overall decline in revenues. But obviously not at the pace that we were shooting for and as a result the overall revenue decline and the overall cost decline matched each other off. So again, work to do there. We've got a good team looking at it and they're working hard at it. Just not quite where we want it to be now.

And the agency channel, FNF and FAF, I think they grew their agency business pretty nicely, but you guys were down a fair amount. I think you touched on this a second ago but can you give a little more color there, would you characterize that as more of voluntary conceding of market share? Are you guys losing out share or is it a geographic mix?

I would say that when I look at the piece parts of the decline state-by-state, we did see a decline in California that was what I would characterize as a different geographic focus and less emphasis on agent business there.

The other weakness that we had in the quarter was specific to our northeastern area, and specifically New York. The agents there are -- have a high concentration of commercial business and we believe that some of that business just elongated in the closing cycles and as we've seen in the second quarter of the overall commercial businesses, as Real Capital Analytics pointed out we are down about 20%. It's really sort of two pockets of weakness, one, sort of a self- (technical difficulty) designed weakness if you will, and the other we think more temporary in nature.

That's helpful. And then on the loss reserves, can you give us an update on where you are with reserve levels? Do you feel like you're still fairly conservative or are you in line with your actuary estimates?

I think we lowered the core accrual rate in the second quarter and we will maintain that lower accrual rate going forward because we did come in obviously, with the reserve at least, we came in a little better than we thought we would on the actuarial estimate. I don't see it going down a lot further from where we are today in terms of just your core accrual rate of, call it 5%.

We are at pretty much historically low cash claims payments right now. The new claims coming in as well as the severity of the claims are probably as good as -- certainly as good as they've been here in my tenure at Stewart. I just don't see that accrual rate really declining meaningfully from here.

Just for modeling purposes that 5% to 5.5% range is still good?

Yes.

Geoffrey Dunn, Dowling & Partners.

Good morning. I wanted to revisit this -- the margin result in the other corporate segment again. Are you, on a revenue basis, out of the default product at this point?

Yes.

Okay. So it sounded to me like there may be some lingering expense related to that product. Is that correct and it's just a timing issue? I did not quite understand the commentary of the revenue's down, which I think was down as we expected, but the expenses did not come down commensurately. Can you hash that out a little bit more for me?

There probably was some lingering expense relative to that in the second quarter, but to be fair I would not call that as a huge contributor to the quarter. I think it was really some weakness in other areas -- other lines within that business that was probably more meaningful to the quarter results then just pure default -- over-delinquent loan servicing operations.

Then maybe to clear it up, can you call out what the corporate expense item is in that line versus the operating bottom line of your mortgage services?

The corporate expense is about $7 million. We've said that on an annualized basis -- I'm assuming, let me make sure I understand your question. You're talking about what you would call the public company and corporate operations-type overhead, right?

If I break that segment into two segments, meaning your MS segment and your corporate, so corporate is a $7 million drag bottom line, leaving us with a $3 million drag bottom line --

$3 million, exactly.

So what is it about those other businesses, when you bought them I believe they were all profitable. Is it that there's been revenue decline in those businesses as well that has pressured that margin? What has changed since you bought those businesses that those are now a net negative on the bottom line?

I would say that there has been some revenue decline in those businesses. That's probably the predominant factor.

Okay. And then on the title side, you beat us on the margin, and I think there is still -- obviously there's market questions about what you can do on a margin basis given your size and some of the expense history. FAF has the success ratio they do. Have you ever considered something like that so we have a more specific metric with which to judge you as you make progress toward your margin goals?

We have. I don't know that we've come out with a number, but I think it's similar to what we've seen -- that competitors have talked about. To date I think we been cutting costs at a faster rate. Obviously this quarter we saw 100% -- more than 100% in cost reductions for the reduction in revenue.

So I think you could say it's consistent with what we've seen from what our competitors have stated. To date, we've been over-performing from that standpoint just due to the number of structural changes we've been making.

If you look sequentially in terms of the overall change in net revenues first quarter to second quarter, and of course you'd see a -- expect and you do see an increase in revenue sequentially from first quarter. What I would point out is that the vast majority of that revenue increase ended up as pretax earnings in the second quarter, so I think that speaks a little bit or is something of an indication of the power of the additional revenue.

Last question, it sounds like you pulled back purposely on some California agency business. How do you think about -- that is a structural difference for both you and FAF versus FNF and its margins. How do you think about the California agent business and how much you want to participate in that as you do aim for these bottom-line results in the 10% plus margin?

Obviously we are looking much more at profit margins. That West Coast business has been a challenge from a risk profile as well as the retention rates that are predominant in that market, so we are much more careful. I will say we are done with our vetting right now, so we're looking at agency relationships. We actually had some growth in the number of agencies this quarter which we had not seen for a while.

The last several years we've still been reducing more agencies than we've been adding, and that has flipped that switch. I think we are probably where we want to be in California right now, and don't have necessarily any plans to add a lot of volume at the current market pricing of remittance rates in that area.

Thank you.

Bose George with KBW.

This is Chas Tyson on for Bose. You said that you're targeting a 10% pretax margin in the normalized market. It seems like this market is probably as close to normalized as we're going to get for a while. What do you think that you need to do to get there, and do the recent activist comments on the stock make you think about moving up the timeline for announcing potential cost savings from Q2 2017, considering it's about a year away.

Thanks for bringing it up. I do think it's important that we get some clarity on that question. First and foremost, I want to clarify that we've always had 10% as our target. To provide further color, that target was set when the default loan services business was still providing significantly accretive margins for our title operations, which significantly offset corporate expenses.

After deciding to leave the default loan servicing business, we did maintain this 10% goal, but we will require additional reductions on our cost per file and some higher revenue to offset the loss default services margin. As we've discussed in our press release, we are on the right track to improving profitability and we remain committed to reaching that goal in the future.

Lastly, the other thing I would point out is that we are returning to a normal market mix. We have kind of defined that as 75% purchase and 25% refi. It's probably more critical to our margin target than the actual mortgage origination 1.5% number, since our business model is more heavily weighted to purchase transactions than it is to refis. I hope that provides a little clarity.

Definitely does. Is it an issue of just changing the mix if the current volume was at 75%, 25% of purchase refi, do you think it would be at 10% or do you think you need to add revenue inorganically to scale up?

We've got several missions that we talked about that we continue to reduce our cost per file. And there are some revenue gains that are needed in that. I don't think we are comfortable at this point saying you have the perfect market, whatever that would be, that we would be at the 10% margin.

I think given the reduction in volume and the changes in the mortgage services side, it requires additional efforts on our part, which we have in place and we're working on right now. I don't think there's methods to expedite that going forward. But we do have meaningful strategies in place and work streams to reduce our cost per file moving forward to get to that target.

On mortgage services, you said you're evaluating whether or not the margin targets are achievable. Do you expect them to be achievable, with your current knowledge? And when do you think that you will come to a point where you know whether or not they are achievable? Is that on the same time frame as announcing some of these other potential cost savings in the fee per file?

I would say there's multiple work streams going on within the mortgage deal -- well, ancillary services now, in terms of lowering the operating costs and adapting that operating cost structure to be more flexible and more variable, relative to the revenues that we were experiencing the other day.

As to timing, as to some sort of announcement, as I said earlier, probably a little early to speculate on what the optionality might be, but I don't expect it to be protracted decision-making process. I think this is something that we are very, very focused on and realize that we want to make a smart decision as soon as possible.

Do expect that decision this year?

Too early to say.

Okay. And do you have any -- with your current knowledge do you think single, high single-digit, low double-digit margins are achievable, or can you not say that either?

I don't think I'm ready to pronounce that just yet.

I think you guys said that employee costs or headcount was down in that segment. How much were headcount costs down quarter over quarter and was that -- was that not necessarily reflected in Q2?

The numbers are in our press release in terms of the employee costs, at the segment level. As I noted, we did cut some considerable headcount within the quarter, May and June timeframe. So you don't have that full effect of those headcount reductions baked into the numbers yet. You'll see those in Q3.

Got it. Is there a way to quantify that or just say how much headcount was reduced quarter over quarter?

I honestly don't have that at my fingertips.

Okay. Last one on centralized refi, you said in the press release that it was down 34% year over year. That seems like down more than maybe competitors are down from a refinance standpoint, and down more than most forecasters are calling for on refi volumes year over year as well. Can you shed some color on what's going on with the centralized products?

Open orders in our supervised operations are increasing the first weeks of -- two weeks of July, compared to the last months we are seeing some growth. Obviously it relates to refinancing orders the last quarter. The primary drivers are centralized business, I believe we mentioned this last quarter.

Our largest customers in the centralized business are seeming to have declines greater than the overall market, which negatively impacted us even though we continue to maintain as consistent percentage of their business. It does mean, as rates drop, we expect to participate and an increase in order activity, just potentially not at a rate comparable to our larger peers given our client mix.

But you are maintaining the same wallet share with those clients, just they are for some reason declining more than the overall market?

Yes.

Is there reason for why they are declining more than the overall market?

I think just focus. You're seeing a shift in mortgage origination as we're capturing share in that space, and some larger regional players seem to be making greater strides than some of the largest players.

Okay. Thanks a lot. I appreciate it.

Ryan Byrnes, Janney.

Thank you. Good morning everybody. I had a question on -- the California agency repositioning. My question is how long is -- or when did that start? I'm trying to figure out how long that could be a pressure on agent revenue.

I don't think it will be a pressure on agent revenue for more than another couple quarters to be honest. I think we've been pretty focused in on getting the footprint relative to our agency base in California for a while now. I don't think that's going to be a big drag on us too much longer.

Great. You're shifting over to the ancillary services, can you help us or just remind us of how much of your goodwill -- how much good will is in those businesses, if something were to happen there? I know there was a charge last year on the delinquency business, but just wanted to see how much good will remains in the ancillary businesses.

Again I'm sorry I don't have that at my fingertips. It will be in our 10-Q. I think we file next week. It's not a lot. It's pretty nominal.

Move onto my last one. Maybe just your thoughts on capital management. Again, it seems like the title market seems fairly stable right now. You've got over $500 million in statutory capital for commercial businesses. Very solid dividend, but just wanted to get your thoughts going forward, buyback thoughts or how we should think about you guys using -- getting cash flows improving. Just wanted to get your rough philosophy or thoughts there.

I think we have to look at our options on -- we do have commercial activity and it's something we really said we were committed to supporting, and maintaining that. We do have our buyback in place should we see that there is a time in which it makes sense to do a stock buyback.

We've also stated that there's acquisitions going on in the market right now, and potentially not at a pace that we had thought at this point. I think we are looking at potentially very accretive title acquisitions that could support our revenue increase as well. And given that our revised cost structure, and again reiterate we're always looking at things in the title space with our revised centralization and platform that those could be highly accretive. Also looking at that as options.

Great. Thanks. That's all.

John Campbell, Stephens.

One quick follow-up. How much cash is at the Hold Co now?

It was $1 million at quarter end.

Obviously with the share conversion I guess the dividend payout will increase a little bit. Is there any risk to the dividend as you guys see it at this point?

No. As you saw there in the earnings release we are generating good cash flow. We don't keep, as a matter of course we don't keep a lot of cash at the Holding Company, because frankly it's not an operating entity. Except for dividend payments it's not a lot of cash demand on it.

Right. That makes sense. Is there particular dividend payout ratio you're looking at?

Obviously we talk about those sorts of things with our board, but we have not stated publicly a goal at this point.

That's helpful. Thanks guys.

(Operator Instructions)

Kevin Kaczmarek, Zelman & Associates.

Hi guys. Question on margin improvement. How important do you think scale is versus improved efficiency at your current size? Do you think you might need to increase your market share by a couple hundred basis points to get a little bit of operating leverage, or can you get there with the current market share you have?

We're definitely looking at increasing market share. We've alluded to this in the press release and in our opening comments as well. We have definitely made the shift, whether it's agency or whether it's direct, or even on the commercial side, that we've spent several years restructuring a platform and really think that it's time for growth right now. We see some good opportunities out there.

It's definitely an area of focus right now where in previous years it's been highly cost-focused. We still have those cost programs going on, and we're leveraging the expertise that we've developed, and some outsourcing and centralization and have those programs in place. Those can be running at the same time, we can start capturing some share -- in the markets because we want to, that's another point of clarification.

I think our mix of business wasn't necessarily optimal and I think as we have rationalized our footprint both on the direct side and agency side, we really have now -- are able to focus and target that certain markets progress going forward, and what we've seen in that has been very fruitful thus far.

Okay. If you think about the acquisitions that you guys seem to have been taking a look at, can you give us a sense of what you're looking at and who are you competing against? I know there have been a couple, at least one maybe $50 million agent sale, are you looking at deals of that size, or are you looking more in the single-digit millions, can give us a sense there?

We've been looking at a lot right now. I don't know that I would say we are in one here or the other. I will say what we've seen -- some of the pricing has been a little less higher than what we would have expected. We've been interested in some of the additional players that are looking to make acquisitions.

Again, in our strategy it's not something that is required for us. We do see there is opportunities and I think we are a known entity that people come to us. We are able to have a lot of visibility in everything. We're also going to be very careful in making sure that any acquisition we make is highly accretive to our shareholders.

Who are you competing against for these transactions? Just the publicly traded peers, or are there other players that are looking at these?

There are other players as well. Publicly traded and there's a lot. There's competition among the independent agents, they need to seek growth. They have higher regulatory burden, and so some larger independent agents are also in this space, and we are also seeing some private equity in the space as well, which is driving up some of those prices.

Okay. Lastly, on a potential buyback is there a valuation or stock price that you would start to consider a buyback? Increased use of a buyback?

Again, that's something we talk about with our board. We do have a method by which we evaluate the appropriate purchase price for a buyback. The board has agreed to that and we challenge that from time to time. So there are metrics and some discipline around that.

Thanks. That's all I had.

At this time we have no further questions and I would like to turn the call back over to Nat Otis.

Thanks Erica. That concludes this quarter's conference call. Thank you for joining us today in your interest in Stewart. Our third quarter earnings call will be on October 20.

We would like to thank everybody for your participation on the conference call. Please feel free to disconnect your line at any time and have a great day.