Stewart Information Services Corp: Form 10-K for the period ended Dec 31, 2024

Founded in 1893, Stewart Information Services Corporation (NYSE:STC) (Stewart) is a customer-focused, global title insurance and real estate services company offering products and services through our direct operations, network of approved agencies and other companies within the Stewart family. One of the largest title companies in the industry, Stewart provides services to homebuyers and sellers, residential and commercial real estate professionals, mortgage lenders and servicers, title agencies, real estate attorneys and home builders. Stewart also provides credit and real estate data services, valuation management services, online notarization and closing services, search services, home and personal insurance services, tax-deferred exchanges, and technology services to streamline the real estate process. Stewart is headquartered in Houston, Texas and operates primarily throughout the United States (U.S.) and has regional offices in Australia, Canada and the United Kingdom.

Our companies are industry leaders in the spaces they operate in and while each is unique in service offerings, they all share a common belief in providing highest level of services through team focus and customer-centric mindset. For more information on various Stewart companies and brands, refer to our website, www.stewart.com/en/about-stewart/stewart-brands.html (http://www.stewart.com/en/about-stewart/stewart-brands.html).

We currently report our business in three segments: title insurance and related services (title), real estate solutions, and corporate. Refer to Note 18 to our audited consolidated financial statements and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) for financial information related to our segments.

Title Segment

Title insurance and related services include the functions of searching, examining, closing and insuring the condition of the title to real property. The title segment also includes home and personal insurance services, Internal Revenue Code Section 1031 tax-deferred (Section 1031) exchanges, and digital customer engagement platform services.

Examination and closing. The purpose of a title examination is to ascertain the ownership of the property being transferred, debts that are owed on it and the scope of the title policy coverage. This involves searching for and examining documents such as deeds, mortgages, wills, divorce decrees, court judgments, liens, assessments and tax records.

At the closing or settlement of a sale transaction, the seller executes and delivers a deed to the new owner. The buyer typically signs new mortgage documents and closing funds are disbursed to the seller, the prior lender, real estate brokers, the title company and others. Certain documents, such as the deed and mortgage or deed of trust, are then recorded in the public records. A title insurance policy is generally issued to both the new lender and the owner at the closing of the transaction.

At the closing or settlement of a refinance transaction, the borrower executes and delivers a mortgage or deed of trust to the lender. The borrower typically signs the mortgage documents and closing funds are ordinarily disbursed to the prior lender, the title company and others. Certain documents are then recorded in the public records. A title insurance policy is generally issued to the new lender at the closing or recording of the transaction.

Title insurance policies. Lenders in the United States generally require title insurance as a condition to making a loan on real estate, including securitized lending, as this assures lenders of the priority of their lien position on the real estate property. Also, the purchasers of the real estate property want insurance to protect against claims that may arise against the title to the property. The face amount of the owner's policy is normally the purchase price in a purchase transaction, while the face amount of the lender's policy is the amount of the related loan when financing is involved in either purchase or refinance transaction.

Title insurance is substantially different from other types of insurance. Fire, auto, health and life insurance policies protect against future losses and events. In contrast, title insurance generally insures against losses from past events and seeks to protect the policyholder or lender by eliminating covered risks through the examination and settlement process. In essence, subject to its exceptions, conditions and exclusions, an owner's title insurance policy provides a warranty to the policyholder that the title to the property is free from defects that might impair ownership rights, or in the case of a lender's policy, that there is priority of lien position. Most other forms of insurance provide protection for a limited period of time and, hence the policy must be periodically renewed. Title insurance, however, is issued for a one-time premium and the owner's policy provides protection for as long as the owner owns the property, or has liability in connection with the property, or a lender under its policy has its insured lien on the property. Also, a title insurance policy does not have a finite contract term, whereas most other lines of insurance have definite beginning and ending dates for coverage. Although an owner's title insurance policy provides protection for as long as the owner owns the property being covered, the title insurance company generally does not have information about which policies are still effective. Most other lines of insurance receive periodic premium payments and policy renewals thereby allowing the insurance company to know which policies are effective. In certain circumstances, we may provide post-policy coverage and we may provide coverage against certain known risks after analyzing the underwriting risks.

Losses. Losses on policies occur when a title defect is not discovered during the examination and settlement process and the policyholder makes a claim under the policy. Reasons for losses include, but are not limited to, forgeries, misrepresentations, unrecorded or undiscovered liens, the failure to pay off existing liens, mortgage lending fraud, mishandling or defalcation of settlement funds, issuance by independent agencies of unauthorized coverage and defending policyholders when covered claims are filed against an owner's or lender's interest in the property. Losses may also occur for coverage that we may provide under closing protection letters.

Some claimants seek damages in excess of policy limits. Those claims are based on various legal theories. We vigorously defend against spurious claims and provide protection for covered claims up to the limits set forth in the policy. We have from time-to-time incurred losses in excess of policy limits. Experience shows that most policy claims and claim payments are made in the first eight years after the policy has been issued, although claims can also be reported and paid many years later. By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions, the specific facts of the individual claim and the legal environment existing at the time claims are processed.

Our liability for estimated title losses comprises estimates of both known claims and incurred but unreported claims expected to be paid in the future for policies issued as of the balance sheet date. The amount of our loss reserve represents the aggregate future payments (net of recoveries) that we expect to make on policy losses and in costs to settle claims. In accordance with industry practice, these amounts have not been discounted to their present values. Estimating future title loss payments is difficult due to the complex nature of title claims, the length of time over which claims are paid, the significant variance in dollar amounts of individual claims and other factors. The amounts provided for policy losses are based on reported claims, historical loss payment experience and the current legal and economic environment. Estimated provisions for current year policy losses are charged to income in the same year the related premium revenues are recognized. Annual provisions for policy losses also include changes in the estimated aggregate liability on policies issued in prior years.

Amounts shown as our estimated liability for future loss payments are continually reviewed by us for reasonableness and adjusted as appropriate. We have consistently followed the same basic method of estimating and recording our loss reserves for more than 30 years. As part of our process, we also obtain input from third-party actuaries regarding our methodology and resulting reserve calculations. While we are responsible for determining our loss reserves, we utilize this actuarial input to assess the overall reasonableness of our estimated reserves.

See Critical Accounting Estimates - Title Loss Reserves under Item 7 - MD&A for information on current year policy losses and consolidated balance sheet reserves.

Factors affecting revenues. Title insurance revenues are closely related to the level of activity in the real estate markets we serve and the prices at which real estate sales are made. Real estate sales are directly affected by the availability and cost of money to finance purchases. Other factors include consumer confidence, demand by buyers, foreign currency exchange rates, supply chains, inventory and weather. In periods of low interest rates, loan refinancing transactions are also an important contributor to revenues. These factors may override the seasonal nature of the title business. Generally, our first quarter is the least active and our second and third quarters are the most active in terms of title insurance revenues. Refer to Item 7 - MD&A, Results of Operations - Industry Data for comparative information on home sales, mortgage interest rates and loan activity, and Critical Accounting Estimates - Factors Affecting Revenues for additional details on principal factors affecting revenues.

Customers. The primary sources of title insurance business are attorneys, builders, developers, home buyers and home sellers, lenders, mortgage brokers, and real estate brokers and agents. Titles insured include residential and various asset classes of commercial properties, including but not limited to, energy-related projects, office, hotel, multi-family, industrial, retail, data centers, undeveloped acreage, farms and ranches.

Service, location, financial strength, company size, relationships and related factors affect customer orders. Increasing market share is accomplished primarily by providing superior service. The parties to a closing are concerned with accuracy, expertise, responsiveness, timeliness and cost. The rates charged to customers vary from state to state, and are regulated, to varying degrees and in different ways, in most states.

The financial strength and stability of the title underwriter are important factors in maintaining and increasing our business, particularly commercial business. We are rated as investment grade by the title industry’s leading rating agencies. Our wholly-owned and principal underwriter, Stewart Title Guaranty Company (Guaranty), is currently rated "A-" by Fitch Ratings Ltd., "A- " by A.M. Best, and “A Double Prime” by Demotech Inc. Similarly, our wholly-owned and second largest underwriter, Stewart Title Insurance Company (STIC), is also highly rated by such rating companies. These ratings are not credit ratings. Instead, the ratings are based on quantitative, and in some cases qualitative, information and reflect the conclusions of the rating agencies with respect to our financial strength, results of operations and ability to pay policyholder claims. Additionally, our parent company's outstanding senior unsecured debt is rated "BBB" by Fitch Ratings Ltd. These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency.

Market share. Title insurance statistics are compiled quarterly by the American Land Title Association (ALTA), the title industry’s national trade association. Based on 2024 statutory premiums written through the nine months ended September 30, 2024, Guaranty is one of the leading title insurers in the United States. Our largest competitors are Fidelity National Financial, Inc. (Fidelity National Financial) whose principal underwriters are Fidelity National Title Insurance Company and Chicago Title Insurance Company, First American Financial Corporation (First American) which includes First American Title Insurance Company, and Old Republic Title Insurance Group (Old Republic) which includes Old Republic National Title Insurance Company. We also compete with other title insurer companies, as well as abstractors, attorneys who issue title opinions and attorney-owned title insurance funds. A number of homebuilders, financial institutions, real estate brokers and others own or control title insurance agencies, some of which issue policies underwritten by Guaranty.

Refer to "Title revenues by geographic location" within the Results of Operations discussion under Item 7 - MD&A for the breakdown of title revenues by major geographic location.

Regulations. Title insurance companies are subject to comprehensive state regulations covering premium rates, agency licensing, policy forms, trade practices, reserve requirements, investments and the transfer of funds between an insurer and its parent or its subsidiaries and any similar related party transactions. Kickbacks and similar practices are prohibited by most state and federal laws. See Item 1A - Risk Factors: Our Insurance Subsidiaries Must Comply With Extensive Government Regulations.

Real Estate Solutions Segment

The real estate solutions segment supports the real estate mortgage industry by primarily providing credit and real estate information services, valuation management services, online notarization and closing solutions, and search services. We provide these services through Informative Research, Equimine (which operates as PropStream), Stewart Valuation Intelligence, NotaryCam, Inc., and Signature Closers, LLC. These companies are integral to our goal of streamlining the real estate and loan transaction lifecycle through end-to-end, customer-focused and technology-based solutions.

Factors affecting revenues. As in the title segment, real estate solutions revenues are closely related to the level of activity in the real estate market, including interest rates, new or refinancing origination activity, and home sales volumes. Companies that compete with our real estate solutions businesses vary across a wide range of industries and include the major title insurance underwriters mentioned under “Title Segment - Market share” as well as other title agents, appraisal management companies, and real estate technology and business process outsourcing providers.

Customers. Customers for our real estate solutions products and services primarily include mortgage lenders and servicers, mortgage brokers, realtors, and mortgage and real estate investors. Many of the services and products offered by our real estate solutions business are used by professionals and intermediaries who have been retained to assist consumers with the sale, purchase, mortgage, transfer, recording and servicing of real estate transactions. To that end, timely, accurate and compliant services are critical to our customers since these factors directly affect the service they provide to their customers. Financial strength, scale, robust processes to ensure legal and regulatory compliance, marketplace presence, high quality customer support, and reputation as a reliable, compliant solution are important factors in attracting new business.

Corporate Segment

The corporate segment is primarily comprised of the parent holding company and our centralized support services departments. During 2022, the corporate segment included results of a real estate brokerage company that was acquired in late 2021 and subsequently sold during the second quarter 2022.

General

Investment policies. Our investment portfolios primarily reside in Guaranty and STIC, both of which are domestic underwriters, and two of our other international regulated insurance underwriters. These underwriters maintain investments in accordance with certain statutory requirements for the funding of premium reserves and deposits, or, in the case of our international operations, for the maintenance of certain capital ratios required by regulators. The activities of the portfolios are overseen by investment committees comprised of certain senior executives. Their oversight includes such activities as policy setting, determining appropriate asset classes with different and distinct risk/return profiles so as to prudently diversify the portfolio, and approving and managing service vendors (investment managers and custodians). We also utilize the expertise of third-party investment advisors to maximize returns while managing risk. Our investment policies are designed to comply with regulatory requirements as applicable law imposes restrictions upon the types and amounts of investments that may be made by our regulated insurance subsidiaries. Further, our investment policies require that investments are managed with a view to balancing profitability, liquidity, and risk (interest rate risk, credit risk, currency rate risk and liquidity risk) and consideration of negative impacts to earnings per share and income taxes.

As of December 31, 2024, approximately 88% of our combined debt and equity securities investment portfolios consisted of fixed income securities. Also as of that date, approximately 94% of the fixed income investments are held in securities that are A-rated or higher, and substantially all of the fixed income portfolios are rated investment grade (percentages are based on the fair value of the securities). In addition to our debt and equity securities investment portfolios, we maintain certain money-market and other short-term investments. For more details on market risks related to our investment securities portfolio, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk.

Trademarks. We have developed and acquired numerous automated products and processes that are crucial to both our title and real estate solutions operations. These systems automate most facets of the real estate transaction. Among these trademarked products and processes are AIM+®, AgencySecure®, PropertyInfo®, SureClose®, TitleSearch®, eTitleSearch®, Virtual Underwriter®, StewartNow®, Valuation Intelligence®, NotaryCam®, Cloudvirga® and PropStream®. We consider these trademarks, which can be renewed every ten years, to be important to our business.

Human capital resources. As of December 31, 2024, we employed approximately 7,000 people, with approximately 5,500 employees located in the U. S. and approximately 1,500 employees located internationally. We consider our relationship with our employees to be critical to both our operations and performance. We are committed to developing, retaining, and motivating our employees, and we do so in a variety of ways.

Recruiting

Stewart is committed to recruiting strategies – policies, practices, decision-making and more – grounded in fairness, equity, and inclusivity. Stewart is an equal employment opportunity employer, and our commitment extends to all facets of employment.

Inclusion and belonging

Stewart is committed to an inclusive workplace that values all employees by providing a supportive professional work environment that is free of unlawful harassment and discrimination against any applicant or employee as protected by federal, state and local laws. All phases of employment, including, but not limited to, recruiting, selection, placement, promotion, transfer, benefits, training, rates of pay or other forms of compensation, and other terms and conditions of employment are guided by these laws and Company policies regarding conduct, including, but not limited to, Stewart’s Equal Opportunity Employer statement, Anti-Harassment policy, Human Rights policy and our Code of Business Conduct and Ethics. Stewart's Code of Business Conduct and Ethics is reviewed and acknowledged annually by our employees and our Board of Directors.

With guidance and support from our Global Inclusion Council, we continue our commitment to providing all employees with opportunities to be heard and for advancement. Our goal is to treat all of our employees with respect and ensure they feel that they belong. In doing so, we strive to establish an inclusive environment, both in the workplace and in the communities in which we operate. Our Council meets regularly to discuss critical topics, advise on important challenges our employees are facing, and ensure we are focused on strategic priorities grounded in our commitment.

Learning and development

Stewart’s approach to talent development encourages continuous learning and professional development for all employees across the organization through transparency around job expectations, supported by deliberate goal setting, performance, coaching and feedback, which allows Stewart employees to take ownership of their career and provides them with the resources needed to be successful in their current and future roles.

Compensation, benefits and well-being

Stewart cares about the health, safety, and well-being of our employees and their families, and provides a variety of valuable programs to improve and maintain their overall health, including physical, mental, social, emotional and financial wellness. Highlights of the key programs include, but are not limited to, health and welfare benefits, life and disability insurance, 401(k) plan match, employee stock purchase plan (ESPP) with a discount, wellness initiatives, paid sick, vacation, holidays and volunteer time off, local community based charitable programs, including employee volunteer opportunities, through The Stewart Title Foundation, Inc., and global employee appreciation and recognition.

Engagement and recognition

In partnership with an outside firm, we continued our commitment to listening and acting on employee feedback and conducted a global employee engagement survey in 2024 to better understand employee sentiment and gain actionable feedback on culture and engagement. The results have continued to guide our path forward in keeping employees engaged, feeling valued, ensuring Stewart is a place where our employees are proud to work, and strengthening our relationship with the communities we serve. Based on the survey feedback received from our employees, we were recognized in the Top Workplaces program as a 2024 Top Workplace by the Houston Chronicle and the recipient of three Culture Excellence Awards for employee well-being, appreciation and professional development. Additionally, U.S. News & World Report recognized Stewart as one of the Best Companies to Work for 2024-2025.

Available information. We electronically file annual, quarterly and other reports and information with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended (Exchange Act). Our electronic filings can be accessed at the SEC's website at www.sec.gov (http://www.sec.gov). We also make available upon written request, free of charge, or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Code of Ethics and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The references in this annual report on Form 10-K to our website address or any third party’s website address, including the SEC’s website, do not constitute incorporation by reference of the information contained in those websites and should not be considered part of this document unless otherwise expressly stated.

Transfer agent. Our transfer agent is Computershare, which can be contacted via regular mail at P.O. Box 43078, Providence, RI 02940-3078 and via its website (https://www-us.computershare.com/investor).

CEO and CFO certifications. The CEO and CFO certifications required under Section 302 of the Sarbanes-Oxley Act are filed as exhibits to our 2024 Form 10-K. During 2024, Stewart completed its annual CEO Certification under Section 303A.12(a) of the New York Stock Exchange (NYSE) Listed Company Manual.

You should consider the following risk factors, as well as the other information presented in this report and our other filings with the SEC, in evaluating our business and any investment in Stewart. These risks could materially and adversely affect our business, financial condition and results of operations. In that event, the trading price of our Common Stock could decline materially.

Strategic Risk Factors

Acquisitions or strategic investments we have made or may make could turn out to be unsuccessful.

As part of our investment and growth strategy, we frequently monitor and analyze opportunities to acquire or make a strategic investment in new or other businesses where we believe we can have sustained success and improve Stewart’s scale and profitability. The negotiation of potential acquisitions or strategic investments as well as the integration of an acquired business or new personnel, could result in a substantial diversion of management resources. Future acquisitions could likewise involve numerous additional risks such as potential losses from unanticipated litigation or levels of claims and inability to generate sufficient revenue to offset acquisition costs. Additionally, certain of the investments that we frequently make are in regulated entities that are required to comply with various governmental regulatory requirements, which may impose significant costs on such entities or otherwise impact the value of our investments therein. As we pursue or consummate a strategic transaction or investment, we may value the acquired or funded company or operations incorrectly, fail to integrate the acquired operations appropriately into our own operations, fail to successfully manage our operations as our product and geographical diversity increases, expend unforeseen costs during the acquisition or integration process, or encounter other unanticipated risks or challenges. If we succeed in consummating a strategic investment, we may fail to value it accurately or divest it or otherwise realize the value which we originally invested or have subsequently reflected in our consolidated financial statements. Any failure by us to effectively limit such risks or implement our acquisitions or strategic investment strategies could have a material adverse effect on our business, financial condition or results of operations.

Innovations and title insurance waivers and alternatives introduced by real estate industry participants, including our competitors, lenders and investors may be potentially disruptive and could adversely affect Stewart.

Various initiatives and alternatives to traditional title insurance and settlement products and services are or may be introduced by real estate industry participants, including our competitors, lenders and investors, which may change the demand for our products and services, the manner our products and services are ordered or fulfilled, and the revenue or profitability derived from our products and services. Innovation initiatives include implementing advanced technologies, processes and techniques to automate and streamline certain manual processes during title search, insurance policy issuance and real estate transaction settlement to improve the manner and timeliness of delivering products and services, increase efficiency, reduce costs, improve product and service quality and customer experience, and enhance risk management. The title insurance industry may experience increased competition and disruption from alternative title products and government initiatives. Title insurance waivers and alternatives to title insurance policies, such as an attorney opinion letter which may not provide the same level of protection as traditional title policies but may be a more cost-effective option, may become widely used and accepted which can affect the demand for our products and services.

Further, in developing and implementing our own innovation initiatives, we have made and will likely continue to make significant investments. Depending on factors relating to our operations, the real estate industry and the macroeconomic environment, these innovative investments may not be successful, may result in increased claims, damage to our reputation or other material impacts on Stewart, or could disrupt our business operations by significantly diverting management's attention.

Rapid changes in our industry require secure, timely and cost-effective technological responses. Our earnings may be adversely affected if we are unable to effectively use technology to address regulatory changes and increase productivity.

We believe that our future success depends, in part, on our ability to anticipate changes in the industry and to offer products and services that meet evolving standards on a timely and cost-effective basis. To do so requires a flexible and secure technology architecture, such as title production systems, which can continuously comply with changing regulations, improve productivity, lower costs, reduce risk and enhance the customer experience. Inability to meet these requirements and any unanticipated downtime in our technology may have a material adverse effect on our earnings.

Stewart’s risk management program may not effectively assess, identify, and manage risks, which could negatively impact our business, financial condition and results of operations.

Stewart has an enterprise risk management (ERM) program to assess, identify, and manage risks. Our ERM program involves risk management policies and procedures that operate in various functions across our organization. The risk management function is overseen broadly by our cross-functional ERM committee, but the nature of our business requires us to also rely, to some degree, on localized risk mitigation efforts. This is particularly true with respect to certain risks inherent in the process of underwriting title insurance policies and providing certain related services, which may involve a significant degree of individual judgment. Although we have policies, procedures and tools in place to mitigate these and other identified risks, these aspects of our ERM may not be sufficient to address the risks inherent in our business. Additionally, while we regularly update and evaluate our risk management policies and procedures, our existing ERM program may not successfully identify and mitigate emerging risks to our business. If our ERM program does not adequately address the risks related to our business, our financial condition and results of operations may be adversely impacted.

Operational Risk Factors

Adverse changes in economic conditions, especially those affecting the levels of real estate and mortgage activity, may reduce our revenues.

Our financial condition and results of operations are affected by changes in economic conditions, particularly mortgage interest rates, credit availability, real estate prices and consumer confidence. Our revenues and earnings have fluctuated in the past due to the cyclical nature of the housing industry, and we expect them to continue to fluctuate in the future.

The demand for our title insurance-related and real estate solutions offerings is dependent primarily on the volume of residential and commercial real estate transactions. The volume of these transactions historically has been influenced by such factors as mortgage interest rates, inventory, affordability, availability of financing and the overall state of the economy. Typically, when interest rates are increasing or when the economy is experiencing a downturn, real estate activity declines. As a result, the title insurance industry tends to experience decreased revenues and earnings, and potentially increased claims experience.

Our revenues and results of operations have been and may in the future be adversely affected by a decline in home prices, real estate activity and the availability of financing alternatives. Deterioration in the macroeconomic environment generally causes weakness or adverse changes in the level of real estate activity, which could have a material adverse effect on our consolidated financial condition or results of operations, including impairment of our goodwill and long-lived assets. Also, we may not be able to accurately predict the effects of periods or expectations of high or rapidly rising inflation rates, and governmental responses thereto, and may not respond in a timely or adequate manner to mitigate the negative effects of such inflation, such as decreases in the demand for our products and services and higher labor and other expenses.

Our claims experience may require us to increase our provision for title losses or to record additional reserves, either of which would adversely affect our earnings.

We estimate our future loss payments (net of recoveries), and our assumptions about future losses may prove inaccurate. Provisions for policy losses on policies written within a given year are charged to income in the same year the related premium revenues are recognized. The amounts provided are based on reported claims, historical loss payment experience and the current legal and economic environment. Losses that are higher than anticipated are an indication that total losses for a given policy year may be higher than originally calculated. Changes in the total estimated future loss for prior policy years are recorded in the period in which the estimate changes. Claims are often complex and involve uncertainties as to the dollar amount and timing of individual payments. Claims are often paid many years after a policy is issued. From time-to-time, we experience large losses, including losses from independent agency defalcations, wire fraud, title policies that have been issued or worsening loss payment experience, any of which may require us to increase our title loss reserves. These events are unpredictable and may have a material adverse effect on our earnings.

The issuance of our title insurance policies and related activities by title agents, which operate with substantial independence from us, could adversely affect our operations.

Our title insurance subsidiaries issue a significant portion of their policies through independent title agents. There is no guarantee that these title agents will fulfill their contractual obligations to us as contemplated, although such contracts include limitations that are designed to limit our risk with respect to their activities. In addition, regulators are increasingly seeking to hold title companies responsible for the actions of these title agents and, under certain circumstances, the Company may be held liable directly to third parties for actions (including defalcations) or omissions of these agents. Case law in certain states also suggests that the Company is liable for the actions or omissions of its agents in those states, regardless of contractual limitations. As a result, the Company’s use of title agents could result in increased claims on the Company’s policies issued through agents and an increase in other costs and expenses.

Competition in the title insurance industry may affect our revenues.

Competition in the title insurance industry is intense, particularly with respect to price, service and expertise. Larger commercial customers and mortgage originators also look to the size and financial strength of a title insurer. Although we are one of the leading title insurance underwriters based on market share, Fidelity National Financial, First American and Old Republic each has substantially greater gross revenues than we do and their holding companies have significantly greater capital. Further, other title insurance companies, collectively, hold a considerable share of the market. Although we are not aware of any current initiatives to reduce regulatory barriers to entering our industry, any such reduction could result in new competitors, including financial services firms or institutions, entering the title insurance business. From time-to-time, new entrants enter the marketplace with alternative products to traditional title insurance, although many of these alternative products have been disallowed by title insurance regulators. Further, advances in technologies could, over time, significantly disrupt the traditional business model of financial services and real estate-related companies, including title insurance. These alternative products or disruptive technologies, if permitted by regulators, could have a material adverse effect on our revenues and earnings.

Information technology (IT) systems present potential targets for cybersecurity attacks.

Our operations are reliant on technology and data. Our IT systems and our vendors' IT systems are used to store and process sensitive information regarding our operations and financial position as well as any information pertaining to our customers and vendors. While we take strong precautions, we cannot guarantee safety from all cyber threats, IT system or software vulnerabilities, wire fraud and attacks to our systems, or our ability to timely detect cyber incidents. Any successful breach of security could result in loss of sensitive data, spread of inaccurate or confidential information, disruption of operations, theft of escrowed funds, endangerment of employees, damage to our assets and increased costs to respond. Although we maintain cyber liability insurance to help protect us financially, there is no assurance that the instances noted above would not have a negative impact on cash flows, litigation status and/or our reputation, which could have a material adverse effect on our business, financial condition and results of operations. Refer to Part I, Item 1C. Cybersecurity for our policies and procedures in place to address cybersecurity risks.

Errors and fraud relating to fund transfers may adversely affect us

The Company relies on its systems, employees and banks to transfer its own funds and the funds of third parties. These transfers are susceptible to user input error, fraud, system interruptions and other similar errors that, from time to time, result in lost funds or delayed transactions. Our email and computer systems, and systems used by other parties involved in a transaction have been subject to and are likely to continue to be the target of, fraudulent attacks, including attempts to cause us or the other parties to improperly transfer funds. Funds transferred to a fraudulent recipient are often not recoverable and in certain instances, we may be liable for those unrecovered funds. Our controls and procedures in place to prevent transfer errors and fraud may prove inadequate and may result in financial losses, harm to our reputation, loss of customers or other adverse consequences which could be material to Stewart.

It may become difficult to acquire necessary data used in our business, or we may experience increased costs related to acquiring and utilizing such data.

The nature of our business requires us to obtain and utilize certain data. Such data is often subject to laws and regulations that govern its use, which impose significant compliance burdens on us and the suppliers of such data. To the extent additional laws and regulations impacting the data we use are implemented, we may experience increased costs of compliance, and it could become more difficult for us to obtain such data in the future. Additionally, if we fail to adequately secure and store the data that we use, we may suffer reputational harm or become subject to litigation or regulatory action, which could have a material adverse effect on our business, financial condition and results of operations.

Climate change and extreme weather events could adversely affect our operations and financial performance

Our operations and financial performance could be adversely impacted by climate change and extreme weather events, especially if these occurrences negatively impact the overall real estate market and the broader economy. With respect to our investment portfolio, both individual corporate securities, as well as securities issued by municipalities could also see their value affected by such events. Given the unpredictable and uncertain nature of climate change and weather with respect to size, severity, frequency, geography, and duration, we are unable to quantify the true impact these events would have on our business and operations. As part of our emergency response management, we have an enterprise-wide business continuity program and disaster recovery plan to ensure continued operations of critical services in the event of a disruption to regular operations. Also, as a result of the growing importance that climate change has on both the Company’s operations as well as society in general, Stewart is committed to caring for the health of the global environment. The Company will also continue to update investors on the progress it is making to positively contribute to environmental preservation through its annual sustainability reports. These and other environmental-related documents can be found in the Investor Relations - Governance section of the Company's website.

Widespread health crises could adversely impact our business operations

Widespread health crises and responses to such events could adversely affect the Company. Although the title insurance industry has been deemed essential in the United States, health crises and measures to address them may cause disruptions in the real estate market and on our business operations. These disruptions, which may include, among others, decreased volume of orders and other business activity, delayed closing of real estate transactions, office closures, and decreased value of investments and other assets, may significantly impact our future results of operations and financial position.

Regulatory and Compliance Risk Factors

A downgrade of our underwriters by rating agencies may reduce our revenues.

Ratings are a significant component in determining the competitiveness of insurance companies with respect to commercial title policies. Our domestic underwriters, Guaranty and STIC, have historically been highly rated by the rating agencies that cover us. These ratings are not credit ratings. Instead, the ratings are based on quantitative, and in some cases qualitative, information and reflect the conclusions of the rating agencies with respect to our financial strength, results of operations and ability to pay policyholder claims. Our ratings are subject to continual review by the rating agencies, and we cannot be assured that our current ratings will be maintained. If our ratings are downgraded from current levels by the rating agencies, our ability to retain existing customers and develop new customer relationships may be negatively impacted, which could result in a material adverse impact on our consolidated financial condition or results of operations.

Our insurance subsidiaries must comply with extensive government regulations. These regulations and the enforcement environment could adversely affect our ability to increase our revenues and operating results.

The Consumer Financial Protection Bureau (CFPB) is charged with protecting consumers by enforcing federal consumer protection laws and regulations. The CFPB is an independent agency and funded by the United States Federal Reserve System. Its jurisdiction includes banks, credit unions, securities firms, payday lenders, mortgage servicing operations, foreclosure relief services, debt collectors and other financial companies. The nature and extent of these regulations include, but are not limited to: conducting rule-making, supervision, and enforcement of federal consumer protection laws; restricting unfair, deceptive, or abusive acts or practices; marshalling consumer complaints; promoting financial education; researching consumer behavior; monitoring financial markets for new risks to consumers; and enforcing laws that outlaw discrimination and other unfair treatment in consumer finance.

Governmental authorities regulate our insurance subsidiaries in the various states and international jurisdictions in which we do business. These regulations generally are intended for the protection of policyholders rather than stockholders. The nature and extent of these regulations vary from jurisdiction to jurisdiction, but typically involve:

• approving or setting insurance premium rates;
• setting standards of solvency and minimum amounts of statutory capital and surplus that must be maintained;
• placing limits on types and amounts of investments;
• establishing reserves, including statutory premium reserves, for losses and loss adjustment expenses;
• regulating underwriting and marketing practices;
• regulating dividend payments and other transactions among affiliates;
• approving the acquisition and control of an insurance company or of any company controlling an insurance company;
• licensing of insurers, agencies and, in certain states, escrow officers;
• regulating reinsurance;
• restricting the size of risks that may be insured by a single company;
• requiring deposits of securities for the benefit of policyholders;
• approving policy forms;
• approving and prescribing methods of accounting; and
• filing of annual and other reports with respect to financial condition and other matters.

These regulations may impede or impose burdensome conditions on rate increases or other actions that we might want to take to enhance our operating results. In addition, state regulators perform periodic examinations of insurance companies, which could result in increased compliance or legal expenses.

We may also be subject to additional state or federal regulations prescribed by legislation such as the Dodd-Frank Act or by regulations issued by the CFPB, Department of Labor, Office of the Comptroller of the Currency, Occupational Safety and Health Administration, Department of the Treasury or other agencies. Additionally, we have in the past and may in the future be subject to investigations or inquiries from regulators, including state attorneys general. We incur costs as a result of such investigations or inquiries, including increased compliance costs, which may impact our operating results.

Finally, changes in regulations or new regulations in our industry may be introduced that could have a material adverse effect on our business or result in increased costs of compliance.

Dividends from our insurance underwriting subsidiaries are an important source for capital planning.

We are a holding company and we receive dividends from our insurance subsidiaries and unregulated subsidiaries to pay our parent company's operating expenses, debt service obligations and dividends to our common stockholders. While we may have adequate cash available in our parent company and unregulated subsidiaries to fund these obligations, we may depend on dividends from our insurance underwriting subsidiaries to meet cash requirements for acquisitions and other strategic investments. In regard to our insurance subsidiaries, which include Guaranty and STIC, the insurance statutes and regulations of some states require us to maintain a minimum amount of statutory capital and restrict the amount of dividends that our insurance subsidiaries may pay to us. Refer to Note 3 to our audited consolidated financial statements and Item 7 - MD&A - Liquidity and Capital Resources for details on statutory surplus and dividend restrictions.

Financial Risk Factors

Availability and cost of credit may reduce our liquidity and negatively impact our ability to fund operations.

We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, pay our claims and fund operational initiatives. To the extent that these funds are not sufficient, we may be required to borrow funds on less than favorable terms or seek funding from the equity market, which may be on terms that are dilutive to existing shareholders. Increases in interest rates also increase the costs associated with borrowing on our floating rate line of credit facility. Refer to Note 9 to our audited consolidated financial statements for details on our existing line of credit facility.

Unfavorable economic or other business conditions could cause us to record an impairment of all or a portion of our goodwill, other intangible assets and other long-lived assets.

We perform annual impairment tests of the carrying values of our goodwill, other intangible assets and other long-lived assets. We may also perform an evaluation whenever events may indicate an impairment has occurred. In assessing whether an impairment has occurred, we consider whether the performance of our reporting units may be below projections, unexpected declines in our market capitalization, negative macroeconomic trends or negative industry and company-specific trends. We also perform reviews, at the asset group level, if carrying values of our long-lived assets are not recoverable. If we conclude that the carrying values of these assets exceed the fair value or are not recoverable, we may be required to record a noncash impairment of these assets. Any substantial impairment that may be required in the future could have a material adverse effect on our results of operations or financial condition.

Our investment portfolio is subject to interest rate and other risks and could experience losses.

We maintain a substantial domestic and foreign investment portfolio, primarily consisting of fixed income debt securities and, to a lesser extent, equity securities. Our portfolio holdings are subject to certain economic and financial market risks, including credit risk, interest rate risk, foreign exchange rate risk and liquidity risk. Instability in credit markets and economic conditions can increase the risk of loss in our portfolio. Periodically, we assess the recoverability of the amortized cost of our debt securities investments. If the amortized cost of such investments exceeds the fair value, and we conclude the decline is other-than-temporary, we are required to record an impairment. The impairment could have a material adverse effect on our results of operations or financial condition.

Claims by large classes of claimants may impact our financial condition or results of operations.

We are involved in litigation arising in the ordinary course of business. In addition, we may be, and have been in the past, subject to claims and litigation from large classes of claimants seeking substantial damages not arising in the ordinary course of business. Material pending legal proceedings not in the ordinary course of business, if any, would be disclosed in Part I, Item 3—Legal Proceedings. To date, the impact of the outcome of these proceedings has not been material to our consolidated financial condition or results of operations. However, an unfavorable outcome in any litigation, claim or investigation against us could have a material adverse effect on our consolidated financial condition or results of operations.

Failures at financial institutions at which we deposit funds could adversely affect us.

We deposit substantial fiduciary funds, which are third-party funds, and operating funds in many financial institutions in excess of insured deposit limits. In relation to fiduciary funds, we perform appropriate account titling and management which leaves the majority of accounts within insured limits. Those above the limits, which typically relate to large residential or commercial settlement transactions, are generally placed in well-capitalized financial institutions. In the event that one or more of these financial institutions fail, there is no guarantee that we could recover the deposited funds in excess of federal deposit insurance, and, as such, we could be held liable for the funds owned by third parties. Under these circumstances, our liability could have a material adverse effect on our results of operations or financial condition.

General Risk Factor

Our business could be disrupted as a result of a threatened proxy contest and other actions of activist stockholders.

We have previously been the subject of actions taken by activist stockholders. When activist activities occur, our business could be adversely affected because we may have difficulty in attracting and retaining customers, agents, mortgage lenders, servicers, employees and board members due to perceived uncertainties as to our future direction and negative public statements about our business; such activities may materially harm our relationships with current and potential customers, investors, lenders, and others; may otherwise materially harm our business, may adversely affect our operating results and financial condition; responding to proxy contests and other similar actions by stockholders is likely to result in our incurring substantial additional costs, including, but not limited to, legal fees, fees for financial advisors, fees for investor relations advisors, and proxy solicitation fees; significantly divert the attention of management, our Board of Directors and our employees; and changes in the composition of our Board of Directors due to activist campaigns may adversely affect our current strategic plan.

We cannot predict, and no assurances can be given as to, the outcome or timing of any matters relating to actions by activist stockholders or the ultimate impact on our business, liquidity, financial condition or results of operations.

Stewart recognizes the importance of protecting our customers', employees' and partners’ confidentiality and data integrity. To that end, we continuously and methodically evaluate cyber risks, how they evolve and how they may affect us. We utilize considerable resources in our cybersecurity efforts, and we are committed to continuous cybersecurity education and training across our entire organization as well as our partners and customers. We continuously evaluate and monitor third-party risk relating to the protection of sensitive data. Our program focuses on a broad area of security domains, including, but not limited to: risk management, data protection, incident response, identity and access management, threat and vulnerability management, disaster recovery, business resiliency, and continuity.

Risk assessment and management

Stewart has an enterprise risk management (ERM) program to assess, identify, and manage risks. Cybersecurity risks are evaluated alongside other critical business risks under the ERM program to align cybersecurity efforts with Stewart’s broader business goals and objectives. The cybersecurity risk is assigned to the Vice President, Information Technology (IT), who is a member of the ERM committee, for monitoring. The cybersecurity risk is also under the management oversight of Stewart's Senior Leadership Team.

Stewart takes a risk-based approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks that could affect Stewart’s operations, finances, legal or regulatory compliance, or reputation. Once identified, cybersecurity risks and related mitigation efforts are prioritized based upon their potential impact and likelihood. Risk mitigation strategies are developed and implemented based upon the specific nature of each cybersecurity risk. These strategies include the application of cybersecurity policies, procedures, and technologies, and employee training, education, and awareness. Additionally, Stewart’s cybersecurity program provides mechanisms for employees to report any unusual or potentially malicious activity.

Stewart is regularly assessed against the cybersecurity frameworks of the National Institute of Standards and Technology (NIST CSF) and also evaluated for compliance with the SSAE-18 Systems and Organization Controls (SOC) standards of the American Institute of Certified Public Accountants (AICPA).

Vendor risk management is an essential part of Stewart’s Enterprise Governance Risk and Compliance (GRC) program. Critical vendors, which includes vendors that have access to personal information, are assessed and measured against standard security frameworks. Critical vendors are monitored for performance and compliance, and vendor security requirements are well defined and included with all master service agreements and contracts.

Incident response

In the event of a material breach or an information technology disruption, management has an incident response team in place to take immediate action, work with local and national law enforcement, and notify the appropriate regulators, our Board of Directors and impacted parties. In addition, we would work with the NYSE to disclose the scope and effect of the breach or disruption through an appropriate Form 8-K filing, without providing information that could affect any law enforcement investigation.

Cybersecurity governance and board oversight

The Board is responsible for overseeing management’s assessment of significant risks facing Stewart. The Board approves management’s strategy to manage these risks and monitors management’s performance in implementing the strategy. The Board’s oversight of cybersecurity risks occurs at both the full Board level and at the Board committee level through the Audit Committee.

The Board receives, at each regularly scheduled meeting, a risk report which includes an updated cybersecurity risk exposure assessment, a summary of existing cybersecurity controls and risk mitigations, and further planned controls and risk mitigation activities.

Our Chief Information Security Officer (CISO) reports quarterly to the Audit Committee concerning Stewart’s cybersecurity program, operations, and other ad hoc updates. On a regular basis, management conducts a third-party assessment of Stewart's cybersecurity controls, the results of which are reported to the Audit Committee.

Management’s role

Stewart’s cybersecurity function is led by Stewart’s CISO, who reports to the Group President, Technology and Operations. The Group President, Technology and Operations, is responsible for all areas of Stewart’s digital business strategy, enterprise technology solutions, innovation, and global information technology. The CISO leads a holistic security program to defend enterprises against emerging threats. He has served in various roles in information technology and security leadership for over 30 years.

Management uses third party consultants, as necessary, to assist in assessing, identifying and managing risks from cybersecurity threats. Annually, senior management participates in tabletop exercises to assess its readiness responding to cybersecurity incidents. Our cybersecurity team routinely challenges our employees and the effectiveness of existing controls.

Risk from cybersecurity threats

While Stewart regularly defends against, responds to and mitigates risks from IT systems and software vulnerabilities, broader cybersecurity threats and data security incidents, as of the date of this report, Stewart has not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the organization, however, there can be no guarantee that we will not experience such an incident in the future. Stewart experienced no known material cyber breaches during the three-year period ending December 31, 2024. For additional information concerning Stewart’s risks related to cybersecurity, see Item 1A. Risk Factors.

We currently sub-lease under a non-cancelable operating lease that expires at the end of the first quarter 2025, approximately 110,000 square feet of space in an office building in Houston, Texas, which is used for our corporate offices and for offices of several of our subsidiaries. Additionally, we previously executed a new lease agreement directly with the owner of the building that extends our occupancy of such office space from the second quarter 2025 through the year 2036. We also lease space at approximately 460 locations for business operations, administrative and technology centers. These additional locations include significant leased facilities in Arizona (Phoenix, Scottsdale and Tucson), New York (New York City), Colorado (Denver), Nevada (Las Vegas), Canada (Toronto), California (Roseville), and Georgia (Atlanta).

Our current leases expire through 2036 and we believe we will not have any difficulty obtaining renewals of leases as they expire or, alternatively, leasing comparable properties. The aggregate rent expense under all office leases was approximately $44.4 million in 2024.

We also own office buildings in Arizona, Texas, New Mexico, California, New York, Florida and the United Kingdom. These owned properties are not material to our consolidated financial condition. We consider all buildings and equipment that we own or lease to be well maintained, adequately insured and generally sufficient for our purposes.

Information regarding our legal proceedings can be found in Note 16 to our audited consolidated financial statements, included in Part IV, Item 15 of this annual report on Form 10-K and is incorporated herein by reference.

MANAGEMENT'S OVERVIEW

Net income attributable to Stewart for the year 2024 was $73.3 million, or $2.61 per diluted share, compared to $30.4 million, or $1.11 per diluted share, in 2023. Pretax income before noncontrolling interests in 2024 was $114.3 million (4.6% pretax margin) compared to $60.9 million (2.7% pretax margin) in 2023. During 2024, total operating revenues increased 10% to $2.42 billion compared to $2.21 billion in 2023, while total expenses increased 8% to $2.38 billion, compared to $2.20 billion in 2023, primarily driven by higher revenues in title and real estate solutions services operations. Refer to "Results of Operations" for detailed year-to-year income statement discussions, and "Liquidity and Capital Resources" for an analysis of Stewart's financial condition.

For the fourth quarter 2024, we reported net income attributable to Stewart of $22.7 million ($0.80 per diluted share), compared to net income attributable to Stewart of $8.8 million ($0.32 per diluted share) for the fourth quarter 2023. Fourth quarter 2024 pretax income before noncontrolling interests was $35.4 million compared to pretax income before noncontrolling interests of $18.8 million for the prior year quarter.

Fourth quarter 2024 included $1.7 million of pretax net realized and unrealized gains, primarily related to net gains from fair value changes of equity security investments and an acquisition liability adjustment, partially offset by losses from a sale of an office and an investment impairment. Fourth quarter 2023 results included $4.8 million of pretax net realized and unrealized gains primarily driven by net gains on fair value changes of equity securities investments and an acquisition liability adjustment.

Title segment. Summary results of the title segment are as follows (in $ millions, except pretax margin and % change):

Segment operating revenues in the fourth quarter 2024 increased $59.8 million, or 12%, driven by increased revenues from our direct and agency title operations, while total segment operating expenses increased $41.0 million, or 8%, compared to the fourth quarter 2023. Agency retention expenses in the fourth quarter 2024 increased $13.7 million, or 6%, consistent with the $16.6 million, or 6%, increase in gross agency revenues compared to the prior year quarter.

Total title segment employee costs and other operating expenses in the fourth quarter 2024 increased $27.1 million, or 11%, compared to the prior year quarter, primarily due to increased incentive compensation expenses related to higher title revenues, higher outside search expenses resulting from higher commercial revenues, and increased severance expenses, primarily related to an executive retirement announced in September 2024. As a percentage of operating revenues, total segment employee costs and other operating expenses slightly improved to 48.7% in the fourth quarter 2024 compared to 49.1% in the prior year quarter. Title loss expense in the fourth quarter 2024 was $20.7 million, which was comparable to the fourth quarter 2023, primarily as a result of our overall favorable claim experience offsetting the incremental title loss expense related to increased title revenues. As a percentage of title revenues, title loss expense was 3.7% in the fourth quarter 2024 compared to 4.1% in the prior year quarter.

Direct title revenue information is presented below (in $ millions, except % change):

Total non-commercial domestic revenues in the fourth quarter 2024 improved by $8.7 million, or 6%, primarily due to increased total non-commercial domestic transactions compared to the fourth quarter 2023. Domestic commercial revenues in the fourth quarter 2024 increased by $28.0, or 50%, primarily due to a higher average transaction size and a 13% increase in commercial transactions compared to the prior year quarter. Fourth quarter 2024 average domestic commercial fee per file was $19,600, or 33% higher compared to $14,800 in the fourth quarter 2023, while average domestic residential fee per file was $2,900, which was 8% lower compared to $3,200 from the prior year quarter, primarily due to a lower purchase transaction mix during the fourth quarter 2024. Total international revenues in the fourth quarter 2024 increased by $6.5 million, or 21%, primarily due to higher transaction volumes compared to the prior year quarter.

Real estate solutions segment. Summary results of the real estate solutions segment are as follows (in $ millions, except pretax margin and % change):

The segment’s fourth quarter 2024 operating revenues improved $25.6 million, or 42%, primarily due to increased revenues from credit information and valuation management services operations compared to the fourth quarter 2023. On a combined basis, the segment's employee costs and other operating expenses increased $26.2 million, or 49%, primarily driven by higher vendor prices for credit information services and increased employee count in anticipation of new customers and related revenue. The segment's pretax income included acquisition intangible asset amortization expenses of $5.5 million and $5.8 million in the fourth quarters 2024 and 2023, respectively.

Corporate segment. The segment's fourth quarter 2024 results included net expenses attributable to corporate operations of $9.7 million, which were comparable to the prior year quarter, and a $1.1 million unrealized loss related to an investment impairment.

CRITICAL ACCOUNTING ESTIMATES

Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. The discussion of critical accounting estimates below should be read in conjunction with the related accounting policies disclosed within Note 1 to our audited consolidated financial statements in Part IV of this annual report.

Title loss reserves

Provisions for title losses, as a percentage of title operating revenues, were 3.9%, 4.1% and 3.8% for the years ended December 31, 2024, 2023 and 2022, respectively. Actual loss payment experience, including the impact of large losses, is the primary reason for increases or decreases in our title loss provision. A 100 basis point change in the loss provisioning percentage, a reasonable scenario based on our historical loss experience, would have increased or decreased our provision for title losses, and affected pretax income by approximately $20.6 million for the year ended December 31, 2024.

We consider our actual claims payments (net of recoveries) and incurred loss experience, including the frequency and severity of claims, compared to our actuarial estimates of claims payments and incurred losses in determining whether our overall loss experience has improved or worsened relative to prior periods. We also consider the impact of economic or market factors on particular policy years to determine whether the results of those policy years are indicative of future expectations. In addition, large claims (those exceeding $1.0 million on a single claim), including large title losses due to independent agency defalcations, are analyzed and reserved for separately due to the potential higher dollar amount of loss, lower volume of claims reported and sporadic reporting of such claims. We evaluate the frequency and severity of large losses in determining whether our experience has improved or worsened. Our method for recording the reserves for title losses on both an interim and annual basis begins with the calculation of our current loss provision rate which is applied to our current premium revenues, resulting in a title loss expense for the period, except for large claims and escrow losses. This loss provision rate is set to provide for losses on current year policies and is primarily determined using moving average ratios of recent actual policy loss payment experience (net of recoveries) to premium revenues.

Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by our management and our third-party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or lower than current reserves and/or our third-party actuary’s calculated estimates.

Provisions for known claims arise primarily from prior policy years as claims are not typically reported until years after policies are issued. Provisions - Incurred But Not Reported (IBNR) are estimates of claims expected to be incurred over the next 20 years; therefore, it is not unusual or unexpected to experience changes to those estimated provisions in both current and prior policy years as additional loss experience on policy years is obtained. This loss experience may result in changes to our estimate of total ultimate losses expected (i.e., the IBNR policy loss reserve). Current year provisions - IBNR are recorded on policies issued in the current year as a percentage of premiums earned (loss provisioning rate). As claims become known, provisions are reclassified from IBNR to known claims. Adjustments relating to large claims may impact provisions either for known claims or for IBNR.

In 2024, total provisions for known claims decreased $5.2 million, or 6%, compared to 2023, primarily as a result of changes to existing large and non-large claims related to prior policy years, while total provisions - IBNR increased $1.7 million, or 3%, primarily due to increased title premiums in 2024. In 2023, total known claims provisions decreased by $17.1 million, or 16%, primarily as a result of changes to existing large and non-large claims related to prior policy years, while total provisions - IBNR decreased $19.1 million, or 23%, primarily due to lower title premiums compared to 2022. As a percentage of title operating revenues, current year provisions - IBNR were 2.7%, 2.6% and 3.8% in 2024, 2023 and 2022, respectively.

In addition to title policy claims, we incur losses in our direct operations from escrow, closing and disbursement functions. Escrow losses typically relate to errors or other miscalculations of amounts to be paid at closing, including timing or amount of a mortgage payoff, payment of property or other taxes and payment of homeowners’ association fees, and wire fraud. In those cases, the title insurer incurs the loss under its obligation to ensure that an unencumbered title is conveyed. These losses are recognized as expenses when discovered or when contingencies associated with them (such as litigation) are resolved and are typically paid less than 12 months after the loss is recognized.

Large title losses due to independent agency defalcations typically occur when the independent agency misappropriates funds from escrow accounts under its control. Such losses are usually discovered when the independent agency fails to pay off an outstanding mortgage loan at closing (or immediately thereafter) from the proceeds of the new loan. These incurred losses are typically more severe in terms of dollar value compared with traditional title policy claims since the independent agency is often able, over time, to conceal misappropriations of escrow funds relating to more than one transaction through the constant volume of funds moving through its escrow accounts. In declining real estate markets, lower transaction volumes result in a lower incoming volume of funds, making it more difficult to cover up the misappropriations with incoming funds. Thus, when the defalcation is discovered, it often relates to several transactions. In addition, the overall decline in an independent agency’s revenues, profits and cash flows increases the agency’s incentive to improperly utilize the escrow funds from real estate transactions. For each of the three years ended December 31, 2024, our net title losses due to independent agency defalcations were not material.

Internal controls relating to independent agencies include, but are not limited to, periodic audits, site visits and reconciliations of policy inventories and premiums. The audits and site visits cover examination of the escrow account bank reconciliations and an examination of a sample of closed transactions. In some instances, the scope of our review is limited by attorney agencies that cite client confidentiality. Certain states have mandated annual reviews of agencies by their underwriter. We also determine whether our independent agencies have appropriate internal controls as defined by ALTA's best practices and us. However, even with adequate internal controls in place, their effectiveness can be circumvented by collusion or improper override of the controls by management at the independent agencies. To aid in the selection of independent agencies to review, we have developed an agency risk model that aggregates data from different areas to identify possible issues. This is not a guarantee that all independent agencies with deficiencies will be identified. In addition, we are typically not the only underwriter for which an independent agency issues policies, and independent agencies may not always provide complete financial records for our review.

Goodwill impairment

Goodwill is not amortized, but is reviewed for impairment annually and whenever occurrences of events indicate a potential impairment at the reporting unit level. Refer to Note 1-L and Note 8 to our audited consolidated financial statements for details about our goodwill impairment review process and goodwill balances, respectively.

The valuation techniques performed in our quantitative analysis make use of our estimates and assumptions related to critical factors, which include revenue and operating margin growth rates, future market conditions, determination of market multiples and comparative companies, assignment of a control premium, and determination of risk-adjusted discount rates. Forecasts of future operations are based, in part, on actual operating results and our expectations as to future market conditions, which are inherently uncertain and difficult to project. In performing our analysis, we make assumptions and apply judgments to estimate industry economic factors and the future profitability of our businesses. Due to the uncertainty and complexity of performing the goodwill impairment analysis, future results related to market conditions and our business operations and other inputs to the analysis may be worse than estimated or assumed. In such cases, we may be exposed to future material impairments of goodwill.

For our annual goodwill impairment test for all our reporting units, we utilized the quantitative approach during 2024 and 2023 and concluded that there is no impairment of goodwill for any of our reporting units.

RESULTS OF OPERATIONS

We discuss in this section the consolidated results of operations for the years 2024 and 2023, as compared to each corresponding prior year. Factors contributing to fluctuations in our results of operations are presented in the order of their monetary significance, and significant changes are quantified, when necessary. Segment results are included in the discussions and are discussed separately, when relevant.

Industry data. Published U.S. mortgage interest rates and other selected residential housing data for the three years ended December 31, 2024 are shown below (amounts shown for 2024 are preliminary and subject to revision). The amounts below may not relate directly to or provide accurate data for forecasting our operating revenues or order counts. Our statements on home sales, mortgage interest rates and loan activity are based on averaged published industry data as of December 31, 2024 from sources including Fannie Mae and the Mortgage Bankers Association (MBA), when available.

After reaching a 23-year high of 7.79% during the fourth quarter 2023, the average 30-year mortgage interest rate dipped during 2024, influenced by several interest rate reductions by the federal government in late 2024. The average 30-year mortgage interest rate was 6.85% at the end of 2024, compared to 6.61% at the end of 2023. Total loan originations in 2024 improved 10% compared to 2023, primarily due to a 52% increase in refinancing transactions, with purchase lending volume improving by 1%. However, existing home sales in 2024 remained subdued, primarily as a result of continued relatively elevated interest rates, accompanied by low housing inventory, affordability challenges caused by rising home prices, and weather events in 2024.

Fannie Mae and MBA expect the 30-year mortgage interest rate in 2025 to average similar to 2024 and slightly improve to 6.40% in 2026. Total mortgage originations are expected to increase 18% in 2025 compared to 2024, with refinancing and purchase transactions increasing 41% and 10%, respectively, while existing and new homes sales are expected to improve to 4.21 million (4%) and 0.77 million (10%), respectively, compared to 2024.

Factors affecting revenues. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, agencies and centralized title services centers. Our real estate solutions operations include credit and real estate information services, valuation management services, online notarization and closing services, and search services. The corporate segment includes our parent holding company and centralized support services departments, along with other businesses not related to title or real estate solutions operations. Refer to Item 1. Business for details.

The principal factors that contribute to changes in our operating revenues include:

• interest rates;
• availability of mortgage loans;
• number and average value of mortgage loan originations;
• ability of potential purchasers to qualify for loans;
• inventory of existing homes available for sale;
• ratio of purchase transactions compared with refinance transactions;
• ratio of closed orders to open orders;
• home prices;
• consumer confidence, including employment trends;
• demand by buyers;
• premium rates and related state regulations;
• foreign currency exchange rates;
• market share;
• ability to attract and retain highly productive sales associates;
• independent agency remittance rates;
• opening and integration of new offices and acquisitions;
• office closures;
• number and value of commercial transactions, which typically yield higher premiums;
• government or regulatory initiatives;
• acquisitions or divestitures of businesses;
• volume of distressed property transactions; and
• seasonality and/or weather.

Premiums are determined in part by the values of the transactions we handle. To the extent inflation or market conditions cause increases in the prices of homes and other real estate, premium revenues are also increased. Conversely, falling home prices cause premium revenues to decline. Home price changes may override the seasonal nature of the title insurance business. Historically, our first quarter is the least active in terms of title insurance revenues as home buying is generally depressed during winter months. Our second and third quarters are typically the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of year. On average, title premium rates for refinance orders are lower compared to a similarly priced purchase transaction.

Title revenues. Direct title revenue information is presented below:

Direct title revenues in 2024 improved 6% compared to 2023, primarily driven by increased commercial revenues resulting from increased commercial transactions and higher average transaction size in 2024. Total non-commercial domestic revenues in 2024 declined 3% compared to 2023, primarily as a result of lower total residential transactions influenced by the continued elevated interest rates and weaker existing home sales in 2024. Purchase closed orders during 2024 declined 8%, partially offset by an 8% improvement in refinancing closed orders compared to 2023. Average domestic commercial fee per file in 2024 was $16,300, which was 34% higher compared to 2023, while average residential fee per file in 2024 was $3,000, which was 7% lower compared to 2023, primarily due to lower purchase transaction mix in 2024. Total international revenues in 2024 improved $8.6 million, 7%, primarily due to higher transaction volumes in our Canadian and Australian operations compared to 2023.

Direct title revenues in 2023 decreased 23% compared to 2022, primarily due to reduced transaction volumes driven by the elevated interest rate market environment. Total non-commercial domestic revenues in 2023 declined 21%, primarily due to 20% and 51% lower residential purchase and refinancing transactions, respectively, compared to 2022. Domestic commercial revenues decreased 27% in 2023, primarily driven by 19% lower commercial transactions and smaller transaction sizes compared to 2022. Average domestic commercial fee per file in 2023 was $12,200, which was 11% lower compared to 2022, while average residential fee per file in 2023 was $3,200, which was 6% higher compared to 2022, primarily due to transaction mix in 2023. Total international revenues decreased $40.3 million, or 24%, in 2023 primarily due to lower transaction volumes in our Canadian and United Kingdom operations compared to the prior year.

Closed and opened orders information is as follows:

Gross revenues from independent agency operations (agency revenues) improved $57.2 million, or 6%, in 2024, while they decreased $480.3 million, or 33%, in 2023, compared to corresponding prior years, which were consistent with the performance of our direct title operations and trends of the overall real estate market during 2024 and 2023. Net agency revenues (which are net of agency retention) increased $5.9 million, or 3%, in 2024 and decreased $85.5 million, or 33%, in 2023, compared to respective prior periods, primarily consistent with the gross agency revenues trend. Refer further to the "Retention by agencies" discussion under Expenses below.

Title revenues by geographic location. The approximate amounts and percentages of consolidated title operating revenues for the last three years ended December 31, 2024 were as follows:

Real estate solutions and other revenues. Real estate solutions and other revenues are primarily comprised of revenues generated by our real estate solutions operations. These revenues also included $39.2 million of 2022 revenues generated by a real estate brokerage company which was sold in the second quarter 2022. Excluding the real estate brokerage company, real estate solutions revenues increased $95.0 million, or 36%, in 2024 compared to 2023, primarily due to increased revenues from our credit information and valuation management services operations, while these revenues decreased $33.1 million, or 11%, in 2023 compared to 2022, primarily due to the slow market activity influenced by higher interest rates.

Investment income. Investment income improved $10.2 million, or 23%, and $22.7 million, or 101%, in 2024 and 2023, respectively, compared to the corresponding prior periods, primarily due to higher interest income resulting from earned interest from eligible escrow balances which started mid-2023. Higher interest rates also contributed to the increased investment income in 2023 compared to 2022. Refer to Note 6 to our audited consolidated financial statements for additional details.

Net realized and unrealized gains. Refer to Note 6 to our audited consolidated financial statements for details.

Expenses. Our employee costs and certain other operating expenses are sensitive to inflation. An analysis of expenses is shown below:

*Amounts change may not add due to rounding.

Retention by agencies. Amounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged 82.9%, 82.5% and 82.4% during each of the three years ended December 31, 2024. The average retention rate slightly increased in 2024, primarily as a result of increased revenues from states with relatively higher retention rates in 2024. The average retention percentage may vary from period to period due to the geographical mix of agency operations, the volume of title revenues and, in some states, laws or regulations. Due to the variety of such laws or regulations, as well as competitive factors, the average retention rate can differ significantly from state to state. In addition, a high proportion of our independent agencies are in states with retention rates greater than 80%. We continue to focus on increasing profit margins in every state, increasing premium revenue in states where remittance rates are above 20%, and maintaining the quality of our agency network, which we believe to be the industry’s best, in order to mitigate claims risk and drive consistent future performance. While market share is important in our agency operations channel, it is not as important as margins, risk mitigation and profitability.

Selected cost ratios (by selected segment). The following table shows employee costs and other operating expenses as a percentage of operating revenues for each of the title and real estate solutions segments for the years ended December 31:

Employee costs. Consolidated employee costs in 2024 increased $32.6 million, or 5%, compared to 2023, primarily driven by increased incentive compensation on overall improved revenues and higher salaries and benefits expenses on higher average employee count in 2024. Consolidated employee costs in 2023 decreased $89.2 million, or 11%, compared to 2022, primarily driven by lower salaries and benefits expenses, temporary labor and overtime costs, and incentive compensation resulting from lower average employee count and transaction volumes in 2023.

Our total employee counts at December 31, 2024, 2023 and 2022 were approximately 7,000, 6,800 and 7,100, respectively. Average cost per employee for 2024 increased 6% compared to 2023, primarily driven by higher incentive compensation and benefits expenses, while it decreased 2% in 2023 compared to 2022, primarily due to lower incentive compensation, temporary labor and overtime costs driven by reduced 2023 transaction volumes.

Employee costs in 2024 for the title and real estate solutions segments increased $28.5 million, or 4%, and $5.3 million, or 11%, respectively, primarily driven by higher average employee counts and increased incentive compensation compared to 2023. Employee costs in 2023 for the title and real estate solutions segments decreased $86.9 million, or 12%, and $1.1 million, or 2%, respectively, compared to 2022, primarily driven by lower average employee counts and transaction volumes in 2023.

Other operating expenses. Other operating expenses include costs that are primarily fixed in nature, costs that follow, to varying degrees, changes in transaction volumes and revenues (variable costs) and costs that fluctuate independently of revenues (independent costs). Costs that are primarily fixed in nature include rent and other occupancy expenses, equipment rental, insurance, repairs and maintenance, technology costs, telecommunications and title plant expenses. Variable costs include appraiser and service expenses related to real estate solutions operations, outside search fees, attorney fee splits, credit losses (on receivables), copy supplies, delivery fees, postage, premium taxes and title plant maintenance expenses. Independent costs include general supplies, litigation defense, business promotion and marketing, and travel.

Consolidated other operating expenses in 2024 increased $96.3 million, or 19%, primarily driven by increased transactions from commercial services and real estate solutions operations compared to 2023, while other operating expenses in 2023 decreased $140.3 million, or 22%, primarily due to reduced transaction volumes in 2023 compared to 2022. Total other operating expenses, as a percentage of total operating revenues (other operating expenses ratio), were 24.9%, 22.9% and 21.3% during 2024, 2023 and 2022, respectively, with the higher other operating expenses ratios in 2024 and 2023 primarily driven by the increased size of our real estate solutions operations which typically have higher other operating expenses.

During 2024, total variable costs increased $99.5 million, or 37%. compared to 2023, primarily driven by higher appraiser and service expenses and outside search expenses resulting from improved revenues from real estate solutions and commercial services, respectively. Costs that are primarily fixed in nature in 2024 were comparable with 2023, while independent costs decreased $3.1 million, or 5%, primarily due to lower office closure and litigation settlement expenses, partially offset by higher business promotion and marketing, and travel costs.

During 2023, total variable costs decreased $109.6 million, or 29%, compared to 2022, primarily due to lower appraisal and outside search expenses tied to lower overall operating revenues. Costs that are primarily fixed in nature decreased $11.8 million, or 6%, primarily driven by reduced outsourcing and rent and other occupancy expenses, while independent costs decreased $19.0 million, or 25%, primarily due to lower litigation settlement, business promotion and marketing, and office closures expenses.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were 3.9%, 4.1% and 3.8% in 2024, 2023 and 2022, respectively. The title loss ratio in any given year can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.

Title losses in 2024 were $80.4 million, which was comparable to 2023, primarily due to the effect of higher title premiums being offset by overall favorable claim experience in 2024. Title losses in 2023 decreased $22.5 million, or 22%, compared to the previous year, primarily as a result of lower title premiums in 2023. Title losses paid were $85.4 million, $104.3 million and $93.1 million in 2024, 2023 and 2022, respectively. Total claims payments in 2024 decreased $18.9 million, or 18%, compared to 2023, primarily due to decreased payments for both large and non-large claims related to prior policy years, while total claims in 2023 increased $11.2 million, or 12%, compared to 2022, primarily as a result of increase in payments for non-large claims related to prior policy years. Claims payments made on large title claims, net of insurance recoveries, during 2024, 2023 and 2022 were $14.9 million, $26.3 million and $23.1 million, respectively.

Our liability for estimated title losses as of December 31, 2024 and 2023 comprises both known claims and our IBNR. Known claims reserves are reserves related to actual losses reported to us. Our reserve for known claims comprises both claims related to title insurance policies as well as losses arising from escrow closing and funding operations due to fraud or error (which are recognized as expense when discovered). The amount of the reserve represents the aggregate, non-discounted future payments (net of recoveries) that we expect to incur on policy and escrow losses and in costs to settle claims.

Total title policy loss reserve balances at December 31 were as follows:

The actual timing of estimated title loss payments may vary since claims, by their nature, are complex and paid over long periods of time. Based on historical payment patterns, approximately 85% of the outstanding loss reserves are paid out within eight years. As a result, the estimate of the ultimate amount to be paid on any claim may be modified over that time period. Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary’s calculated estimates. As of December 31, 2024 and 2023, our reserve balance was above the actuarial midpoint of total estimated policy loss reserves. Refer to Note 10 (Estimated title losses) to our audited consolidated financial statements for details.

Depreciation and amortization. Depreciation and amortization expense in 2024 decreased $0.8 million, or 1%, compared to 2023, primarily due to lower acquisition intangible amortization expenses resulting from several assets becoming fully amortized, partially offset by increased depreciation expenses related to new internal-use systems placed into operation. Depreciation and amortization expense in 2023 increased $5.3 million, or 9%, compared to 2022, primarily due to increased depreciation expenses related to internal-use systems placed into operation starting in late 2022. Acquisition intangible asset amortization expenses in 2024, 2023 and 2022 were $32.1 million, $34.6 million and $33.0 million, respectively.

Income taxes. Our effective tax rates for 2024, 2023 and 2022 were 26%, 33% and 24%, respectively, based on income before taxes (after deducting noncontrolling interests) of $99.5 million, $45.7 million and $213.2 million, respectively. The higher effective tax rate for 2023 was primarily due to the effect of non-deductible expenses on lower pretax income and higher foreign income contribution (which is taxed at a higher rate than domestic income) in 2023. Refer to Note 7 to our audited consolidated financial statements for details on the effective tax rates and income tax accounts.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to shareholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of December 31, 2024, our total cash and investments, including amounts reserved pursuant to statutory requirements, aggregated $926.6 million. Of our total cash and investments at December 31, 2024, $523.4 million ($259.1 million, net of statutory reserves) was held in the United States (U.S.) and the rest internationally, principally in Canada.

As a holding company, the parent company is funded principally by cash from its subsidiaries' earnings in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. Cash held at the parent company and its unregulated subsidiaries (which totaled $32.1 million at December 31, 2024) is available for funding the parent company's operating expenses, interest payments on debt and dividend payments to common stockholders. The parent company also receives distributions from Guaranty, its regulated title insurance underwriter, to meet cash requirements for acquisitions and other strategic investments.

A substantial majority of our consolidated cash and investments as of December 31, 2024 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty uses its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and real estate solutions operations) for their operating and debt service needs.

We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory premium reserves are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claims payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $535.5 million at December 31, 2024. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $9.5 million at December 31, 2024. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. As of December 31, 2024, our known claims reserve totaled $66.9 million and our estimate of claims that may be reported in the future, under U.S. generally accepted accounting principles, totaled $444.6 million. In addition to this, we had cash and investments (excluding equity method investments) of $289.2 million which are available for underwriter operations, including claims payments.

The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The Texas Department of Insurance (TDI) must be notified of any dividend declared, and any dividend in excess of the greater of the statutory net operating income or 20% of surplus (which was approximately $173.0 million as of December 31, 2024) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI (see Note 3 to our audited consolidated financial statements for details). Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and liquidity, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. Guaranty paid $30.0 million in dividends to its parent during 2024, while it paid no dividends during 2023.

Contractual obligations. Our material contractual obligations at December 31, 2024 are composed primarily of our unsecured senior notes (and the related semi-annual interest payments), operating leases, and reserves for estimated title losses. Refer to Note 9 (Notes payable) and Note 14 (Leases) to our audited consolidated financial statements for details on the unsecured senior notes and operating leases, respectively. Refer to the Note 10 (Estimated title losses) to our audited consolidated financial statements and the Title losses section under Results of Operations for details on title losses.

Cash flows. As the parent company conducts no operations apart from its wholly-owned subsidiaries, the discussion below focuses on consolidated cash flows. Refer to the Consolidated statements of cash flows in the audited consolidated financial statements.

Operating activities. Our principal sources of cash from operations are premiums on title policies and revenue from title service-related transactions, real estate solutions and other operations. Our independent agencies remit cash to us net of their contractual retention. Our principal cash expenditures for operations are employee costs, operating costs and title claims payments.

Net cash provided by operations in 2024 increased by $52.6 million compared to 2023, primarily due to higher net income and lower payments on claims, while net cash provided by operations in 2023 declined by $108.8 million compared to the prior year, primarily due to the lower net income and higher payments on claims. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We continue to thoughtfully manage expenses, especially in light of the current slow residential real estate market due to elevated mortgage interest rates, specifically focusing on lowering unit costs of production and improving operating margins in our direct title and real estate solutions operations. Our plans to improve margins include additional automation of manual processes, further consolidation of our various systems and production operations, and full integration of acquisitions. We continue to invest in the technology necessary to accomplish these goals.

Investing activities. Cash used and provided by investing activities is primarily driven by proceeds from matured and sold investments, purchases of investments, capital expenditures and acquisition of businesses. During 2024, 2023 and 2022, total proceeds from securities investments sold and matured were $130.6 million, $132.2 million and $103.8 million, respectively; while cash used for purchases of securities investments was $121.5 million, $78.0 million and $207.5 million, respectively.

We used $14.4 million, $25.1 million and $142.9 million of cash during 2024, 2023 and 2022, respectively, for acquisitions of various title and real estate solutions businesses, consistent with our strategy of increasing scale, growth in key markets and broader technology and service offerings. We used $40.5 million, $37.8 million and $47.9 million of cash for purchases of property and equipment and other long-lived assets during 2024, 2023 and 2022, respectively, while we used cash of $31.6 million and $1.0 million during 2024 and 2023, respectively, for cost-basis and other investments. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.

Financing activities and capital resources. Total debt and stockholders’ equity were $445.8 million and $1.4 billion, respectively, as of December 31, 2024. As of December 31, 2024, our total debt-to-equity and debt-to-capitalization ratios, excluding short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business, were approximately 32% and 24%, respectively.

During 2024, 2023 and 2022, payments on notes payable of $3.4 million, $5.7 million and $74.3 million, respectively, and notes payable additions of $3.4 million, $3.5 million and $39.5 million, respectively, were related to our Section 1031 business, which had an outstanding balance of $0.2 million at December 31, 2024. As of December 31, 2024, the outstanding balance of our Senior Notes was $445.7 million, while we have an unused $197.5 million borrowing capacity on our existing line of credit facility (refer to Note 9 to our audited consolidated financial statements for details).

During 2024, we paid dividends of $1.95 per common share, compared to $1.85 and $1.65 per common share paid during 2023 and 2022, respectively. Beginning in the third quarter 2024, our annual cash dividend was increased to $2.00 per share. In aggregate, we paid total dividends of $53.9 million, $50.5 million and $44.7 million in 2024, 2023 and 2022, respectively.

Effect of changes in foreign currency rates. The effect of changes in foreign currency rates on the consolidated statements of cash flows was a net (decrease) increase in cash and cash equivalents of $(4.5 million), $1.0 million and $(5.5 million) in 2024, 2023 and 2022, respectively. Our primary foreign currencies are the Canadian dollar and British pound, and, relative to the U.S. dollar, the value of the Canadian dollar and British pound generally declined in 2024 and 2022, while it appreciated during 2023.

We believe we have sufficient liquidity and capital resources to meet the cash needs of our ongoing operations, including consideration of the current economic and real estate environment created by the increasing mortgage interest rates. However, we may determine that additional debt or equity funding is warranted to provide liquidity for achievement of strategic goals or acquisitions or for unforeseen circumstances. Other than scheduled maturities of debt, operating lease payments and anticipated claims payments, we have no material contractual commitments. We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, including claims payments. However, to the extent that these funds are not sufficient, we may be required to borrow funds on terms less favorable than we currently have or seek funding from the equity market, which may not be successful or may be on terms that are dilutive to existing stockholders.

Other comprehensive (loss) income. Unrealized gains and losses on available-for-sale securities investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive income (loss), a component of stockholders’ equity, until realized. Refer to Note 1-H and Note 19 to our audited consolidated financial statements for details.

In 2024, net unrealized investment gains of $6.6 million, net of taxes, which decreased our other comprehensive loss, were primarily related to net increases in the fair values of our corporate and foreign bond securities investments, primarily influenced by the federal government's reduction of interest rates. Also in 2024, we recorded foreign currency translation losses of $14.8 million, net of taxes, which increased our other comprehensive loss, which was primarily driven by the decline in value of the Canadian dollar and British pound against the U.S. dollar.

In 2023, net unrealized investment gains of $10.9 million, net of taxes, which increased our other comprehensive income, were primarily related to net increases in the fair values of our corporate and foreign bond securities investments, primarily influenced by inflation improvements and expected government actions to lower interest rates. Also in 2023, we recorded foreign currency translation gains which increased our other comprehensive income by $5.3 million, net of taxes, which was primarily driven by the appreciation in value of the Canadian dollar and British pound against the U.S. dollar.

Off-balance sheet arrangements. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements, other than our contractual obligations under operating leases. We also routinely hold funds in segregated escrow accounts pending the closing of real estate transactions and have qualified intermediaries in tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code. The Company holds the proceeds from these transactions until a qualifying exchange can occur. In accordance with industry practice, these segregated accounts are not included on the balance sheet. See Note 15 to our audited consolidated financial statements included in Item 15 of Part IV of this report for details.

Cautionary statements regarding forward-looking statements. Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as “may,” "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the following:

• the volatility of economic conditions;
• adverse changes in the level of real estate activity;
• changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing;
• our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems;
• the impact of unanticipated title losses or the need to strengthen our policy loss reserves;
• any effect of title losses on our cash flows and financial condition;
• the ability to attract and retain highly productive sales associates;
• the impact of vetting our agency operations for quality and profitability;
• independent agency remittance rates;
• changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products;
• regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees;
• our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services;
• our ability to realize anticipated benefits of our previous acquisitions;
• the outcome of pending litigation;
• our ability to manage risks associated with potential cybersecurity or other privacy or data security breaches;
• the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services;
• our dependence on our operating subsidiaries as a source of cash flow;
• our ability to access the equity and debt financing markets when and if needed;
• effects of seasonality and weather; and
• our ability to respond to the actions of our competitors.

All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

The discussion below about our risk management strategies includes forward-looking statements that are subject to risks and uncertainties. Management’s projections of hypothetical net losses in the fair values of our market rate-sensitive financial instruments, should certain potential changes in market rates occur, are presented below. While we believe that the potential market rate changes are possible, actual rate changes could differ from our projections. Although we are exposed to a currency exchange rate risk for our foreign operations, this risk is not material to Stewart’s financial condition or results of operations.

The material market risk in our investments in financial instruments is related to our debt securities investments, which represent approximately 88% of our total securities investment portfolio at December 31, 2024, with the remainder invested in equity securities. We invest primarily in corporate, foreign, municipal and U.S. government debt securities. We do not invest in financial instruments of a derivative or hedging nature. We have established policies and procedures to minimize our exposure to changes in the fair values of our investments. These policies include retaining an investment advisory firm, an emphasis upon credit quality, management of portfolio duration, maintaining or increasing investment income through high coupon rates and actively managing our risk profile and security mix depending upon market conditions. We have classified all of our debt securities investments as available-for-sale.

Investments in debt securities at December 31, 2024 mature, according to their contractual terms, as follows (actual maturities may differ because of call or prepayment rights):

We believe our investment portfolios are diversified and do not expect any material loss to result from the failure to perform by issuers of the debt securities we hold. Our investments are not collateralized. Foreign debt securities primarily include Canadian government and corporate bonds, United Kingdom treasury and corporate bonds and Mexican government bonds. Refer to Note 4 to our audited consolidated financial statements for details.

Based on our foreign debt securities portfolio and foreign currency exchange rates at December 31, 2024, a 100 basis-point increase (decrease) in foreign currency exchange rates would result in an increase (decrease) of approximately $3.0 million in the fair value of our foreign debt securities portfolio. We do not currently employ hedging strategies with respect to foreign currency risk as we do not consider this risk as material to the Company. In addition, our international businesses conduct substantially all of their operations in their respective local currencies. Changes in foreign currency exchange rates may affect the fair value of the debt securities portfolio and may result in unrealized gains or losses.

Based on our debt securities portfolio and interest rates at December 31, 2024, a 100 basis-point increase (decrease) in interest rates would result in a decrease (increase) of approximately $20.1 million, or 3.4%, in the fair value of our debt securities portfolio. Changes in interest rates may affect the fair value of the debt securities portfolio and may result in unrealized gains or losses.

Unrealized gains or losses on investments from changes in foreign currency exchange rates or interest rates would only be realized upon the sale of such investments. Fair value changes relating to equity securities and other-than-temporary declines in fair values of debt securities are charged to operations.

Management's annual report on internal control over financial reporting. Our principal executive officer and principal financial officer are responsible for establishing and maintaining disclosure controls and procedures. They evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2024 and have concluded that, as of such date, our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)). Our internal control over financial reporting is a process, under the supervision of our principal executive officer and principal financial officer, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management, with the participation of our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management believes that, as of December 31, 2024, our internal control over financial reporting is effective based on those criteria.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Due to such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

See page F-4 for the Report of Independent Registered Public Accounting Firm on our effectiveness of internal control over financial reporting.

Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting during the quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a result, no corrective actions were required or undertaken.