First American Financial Corporation (FAF) Earnings Call Transcript & Summary

Everyone, good morning. My name is Bose George. Thanks, everyone, for joining us. And thanks to the management team at FAF. From FAF, we have Ken DeGiorgio, the CEO; Mark Seaton, the CFO; and Craig Barberio, the Head of Investor Relations. Before I get into some questions, let me just hand it off to Ken for a few opening remarks.

Great. Thanks, Bose. I appreciate you hosting this, and thanks, everyone, for joining our fireside chat here. Just an opening, I think it probably goes without saying that 2023 has been a challenging year. And notwithstanding that, we've been able to post good results, and that's largely because of our efficient operations, our expense management, our strong investment income, which is driven by our bank, which is a unique asset in the title industry. And then lastly, we have the best people in the business. And ultimately, the title and settlement business is a people business. And that's not just -- we're just -- that's not just an empty gesture. The fact that we have the best people in the business is reflected in the numerous awards we receive year in and year out, recognizing our people and our world-class culture. The good news is, 2023 appears to be a trough year in all of our major lines of business. The big question is for how long. On the whole, I think we expect some modest growth in 2024. In refi, we don't expect much movement. It's highly interest rate sensitive, even if we get 3 to 4 cuts, we really feel like rates have to be below 5% to have a meaningful impact on the refi business. In purchase, affordability is at a multi-decade low -- lower rates. If we do get those 3 to 4 cuts next year, they should help. The prices are still high, there's low supply. So we expect the pressure on purchase to continue into 2024. On the commercial side, our revenue in the first 3 quarters this year was down 39%, but we expect a normal seasonal pattern going into Q4, which is pretty strong relative to pre-pandemic years. And the good news on the commercial side is that it appears that price discovery is well underway. So for 2024, we expect more transactions, albeit at lower prices. But as always, commercial is really hard to predict. Fortunately, for us, we have the financial strength to continue to invest in our business, to continue to lead the digital transformation of our industry, to continue to invest in expanding our title data assets, which is critical. It's critical to both the traditional title business and also to the transformative efforts we've undertaken. We have the financial strength to be opportunistic on M&A and of course, as we have done extensively in the past and have increased this year, return capital to shareholders. In closing, before I turn it back over to you, Bose, I'll note that First American is the leading pure-play title company because, again, we have a focus on efficiency and expense management. We have a commitment to invest for the long term, including in title automation and digitization efforts. We have extensive title data assets, in fact, the largest collection of title data assets in the industry that makes those efforts possible. We have unique assets like our bank, which enables us to maximize our investment income. We have a strong capital position and the best people in our world-class culture. In short, we're well positioned to capitalize on the market when it ultimately turns.

Great. Well, thanks very much, Ken. So actually, you touched on this a little bit, but let's just start by digging into some of the trends, the volume trends you're seeing in 4Q? And maybe just start out with what you guys are seeing on the residential side, just both on purchase and refi.

I will take that one, Bose. In terms of refi, I mean, it's been troughed for almost the entire year. We've -- really all year long, we've been running around 300 to 350 orders per day, and that hasn't changed. In October, we did 322 orders per day. And in November through 19 days, we are -- we're still running at about that same level, about low 300s. So it's really been a flat volume profile all year. And we -- as Ken said, we don't expect that to change anytime soon. We got to see rates below 5% for that to occur. More importantly, on the purchase side, we're starting -- we've been anniversarying the difficult -- the easier comparisons from last year as rates and volumes -- rates went higher and volumes went lower last year. In October, we were down 1.4% year-over-year on open orders per day. And in November through yesterday basically with one day left, we're down about 0.4% and -- so we've improved a little bit. And really what gives us some comfort that we're at the bottom on purchases that we've seen a normal seasonal pattern, and that's continued in November. So really, it's the same pattern we've been seeing all year have persisted into the fourth quarter.

Great. That's helpful. And then how about the residential fee per file trends? Anything of note there?

Yes. Overall, our fee per file was down about 2% in the third quarter overall, and it was driven by declines in commercial. The residential side is holding up very well. The irony of this market is high rates are not only affecting demand, but it's also affecting supply. So we're seeing prices stand pretty firm. Refi ARPU was flat in the third quarter, and it continues to be flat in October. Purchase was up 3% in the third quarter, and we're seeing a similar upward trend in -- through -- in the fourth quarter through October. So it feels like we're still getting a little bit of lift in price. A little hard to break out the pure price impact from the mix impact. But basically, we're seeing very small, moderate growth in fee per file on the purchase side.

Okay. Great. That's helpful. And then actually, similarly on the commercial, can you just talk about volume trends there and the fee per file trends?

Do you want to talk about the commercial, Ken? Help me there.

I'll talk a little bit, Craig, about the pipeline, if you want to hit the fee per file in more detail. But I think on the pipeline, I mean, it looks good compared with pre-pandemic years. Obviously, the pandemic years were frothy in commercial. In Q4, we've got some large deals, which, as you know, Bose, drives revenue to a certain -- or drives performance to a certain degree in the commercial business. We've had the strongest number of large deals in Q4 all year compared to the other quarters, and we expect some of that to spill into the first quarter. The first quarter will be a challenge though. But again, commercial is always hard to predict. I mean the one encouraging thing is that price discovery appears to be ongoing. And Craig can hit on it, but we're seeing that in our ARPU, our average revenue per order is down, which tells us that price discovery is ongoing. I don't know, Craig, if you want to hit some more around the numbers.

Yes, we were -- fee per file in the third quarter was down 15%, and that's about what we're seeing so far in the fourth quarter through October. Sequentially, we do expect -- we typically would see fourth quarter being the peak period, and we still expect to see sequential growth, although we'd expect the fourth quarter to be down year-over-year. Just that's kind of the trends we're seeing.

Great. And then can you talk about margin expectations? So this year, you guys essentially guided to being able to do a double-digit margin. Any thoughts on looking out into '24 sort of margin expectations, trends, any thoughts that would be great.

I'll take that one, Bose. A few thoughts on margins for next year. I mean that's the key question. And we're kind of in the process of putting our budget together for next year. But -- the short answer is it's going to look a lot similar to this year. I think given the fact that the market is so challenged, I think to have a 10% margin in trough like this, we feel pretty good about that. We've got some things that are tailwinds for us and we got a few things that are headwinds. We just lowered the loss ratio to 3%. And it's always hard to exactly know where the loss ratio is going, but claims are very much under control. We've got a very strong reserve. So our expectation, at least at this moment is to continue to book at 3%. That would just -- that in itself would be [indiscernible] for margins next year. We've done a lot of expense management this year. I mean -- and we haven't gotten the full run rate of that. So we're going to get that next year. And then it's hard to -- I'll tell them on the margin, but we think things could be very slightly, incrementally better. I mean, refi can't get any worse. We think purchase is at the bottom. Commercial is a little bit harder to tell as we talked about. But even if things were flat to slightly up, that would be incremental okay market for us. The downside, the headwind that we have is, there's a couple of things. One is we've got -- we're going to have more depreciation next year just because of the investments we've made in primarily technology the last couple of years, including this year. I will -- I'll also say that CapEx has peaked. This was a big year for CapEx. We've been kind of increasing it and it's going to definitely go down next year. So we'll definitely see CapEx go down, but we'll see D&A go up just because of some of the investments we've been making. And the other thing that we'll have reset next year is just our benefits. So we're going to pay a lower 4K match this year. We're going to pay lower bonuses this year. And those things kind of get reset at the beginning of the year. So that will be a slight headwind, but you mix that all together and we're going to -- we'll be double-digit margins. And the question is how high and it's not going to be that much higher than 10%, but you think it will be a little bit higher than we posted this year.

Okay. Great. That's helpful. And then can you just remind us of the impact of ServiceMac and Endpoint on the margin and just the outlook for that, especially for Endpoint, how that kind of plays out?

So we -- for several quarters now, as you know, we've talked about 3 strategic initiatives that we've got, Endpoint, ServiceMac. So it was really an acquisition. But when we bought it, it was losing money. Now it's profitable. And the third one is what we call instant decisioning for purchase transactions. And so cumulatively, we've talked about the margin drag that we have with these 3 initiatives. Last quarter, it was 110 basis points margin drag in the title segment, 2 quarters ago, it was 130 basis points, 3 quarters ago, it was 150 basis points. So we've been trimming it like 20 basis points a quarter, and it's going to continue to come down. Endpoint is going to continue to get better. ServiceMac will be more profitable next year than it is this year. And then instant decisioning for purchase transactions, we're seeing really good signs there. We might ramp that up. So there might be more expenses there. But when you net that all together, we're going to continue to see that come down, that margin drag come down. It's not going to go to 0 next year, but it will come down from where it is.

Okay. And then just one more sort of on margin related. Your success ratio has remained pretty steady, I guess, it's around 50%. Can you just talk about how you look at that in up and down markets and kind of roughly what percent of your costs are fixed?

So many years ago, we kind of came up with success ratio. And really what it is, is it's kind of a measure -- it's like an internal measure we use to determine if we're being successful in managing our expenses in an up market or down market. And so we look at our -- and we reconcile this in all of our press releases. But if you look at our -- we call it net operating revenue. So you take our -- our operating revenue, which is like revenue less investment income, and you net out our agent retention expense on our expense line. And that's sort of the net revenue dollars that flow to us. And if net revenue rises $1, we only want to spend $0.60 on our personnel costs and our other operating expenses. And if it falls $1, we want to cut $0.60 of personnel and other operating expenses. In addition to that, you got claims ratios and premium tax. But -- so that's the metric we look at. And -- the 60%, we've been holding to that or managing that for 10-plus years now. If you're getting 60%, you're getting more efficient, right? Now there's some limit. I mean for a couple of years now, we've thought about, hey, do we need to change the target now because we're not -- our margins aren't just going to go to infinity, right? If you're hitting 60%, you're getting more and more efficient. There's only some limit to how efficient you can get. We're not a 50% margin business. That's not going to happen. But every quarter this year, and we will also, for the full year, hit 50%. So we haven't quite hit 60%, but there's a few quirky things about the success ratio. The first thing is it doesn't really make sense when revenue is flat, right? So if you've got like a really flat revenue quarter or year, you can have some crazy things to happen with the success ratio. And the other thing I would say is that when there's very quick changes, either up or down, right, when we see a big refi bill take off, our success ratio looks really good because we just kind of can't hire people fast enough. And it kind of works the other way. When volumes fall really fast, it's hard to cut as fast as the market is falling, right, because you got to close out your order pipeline. And so we've seen a big drop in the market in the last year. And yes, we've hit 50%. So we feel good about 50%, and we think we'll continue to be on that for the next quarter or 2 here. So that's kind of how we think about the success ratio.

Okay. Great. That's very helpful. Actually, let me just remind people, if you have questions, you can submit them online or e-mail me at [email protected]. And actually, one more on the operational side, just on investment income. Can you just discuss your outlook there? And then how that kind of ties in, if the Fed is on hold, should that be fairly stable? And is that kind of the main driver here?

What was that last part, Bose?

Sort of sensitivity to what the Fed does.

So investment income has been a big operational hedge in this market. I mean that's been a big -- and it's an advantage that we have more than our peers because we have a bank. All title companies can benefit from rising rates, but we benefit more because of our bank, and we can basically monetize all our deposits when all of our other peers can monetize a portion of their deposits. So the outlook for investment income. I mean, we've talked about how every time the Fed raises rates 25 basis points that we will get $15 million to $20 million of annualized investment income in the title segment. And we've really seen that. I mean when you look at like this last Fed cycle that we've seen over these last couple of years, I mean we've gotten the high end of that, $20 million. I would say now because balances have fallen, right, the transactions have fallen, our balances are down, we're at the low end of that, $15 million, I would say. Nobody thinks the Fed is going to raise. But when the Fed starts to cut, we expect to lose $15 million of investment income just because balances have fallen. It's going to work both ways. Now, we -- longer term, I would say, we have a strategy to help mitigate that by growing our bank. Historically, our bank, it just had one customer, First American Title and a couple of years ago, we've started to sell our banking services to title agents out there. We're never going to be JPMorgan, that's never going to happen. But there are a lot of -- there's 20,000 title agents out there, they all manage their own escrow deposits. They all have different banks out there. And not all of them are going to want to use First American Trust, but there's a lot of them that are going to want to use First American Trust because they want to get in tighter with us, and we can make it very easy for them because we're -- our bank is integrating into their systems. So they could just push a button to open up account of First American Trust. So it's a really great customer experience for them. Today, we've got somewhere between $250 billion and $300 billion of deposits at our bank from these title agents. And a couple of years ago, it was 0. So when you talk about, let's say, $250 million on $5 billion to $6 billion of liability, it's not that material, but there's a big growth potential there. And over time, we feel like the more that, that grows, the more we can offset the -- when the Fed lowers interest rates. So obviously, that hurts our bank, but we could help offset it because of these reasons that I'm talking about. And the nice thing is, just last point on this is, in this market, I mean, every month, we're signing up agents and balances are low now. So we're having a lot of success signing up new agents every single month. And when the market returns, we think we're going to get definitely some -- those balances at the bank will increase just because of the customers we have. But every month, we sign new customers. So we're optimistic long term about we call it agent banking.

Interesting. And is your investment income similar for escrow that you have at the bank versus escrow that you have with other financial institutions? Or is it more efficient for the escrow that you have at the bank?

So there's -- I think about it as two basic types of deposits. There's -- as a general statement, there's checking deposits that we get -- so that we can earn interest on. And we give those checking deposits to third-party banks. And we give it to third-party banks that are off balance sheet that will be disclosed in our Q, those, we really just get -- we get Fed funds on those. And every time the Fed raises, we call our banks and say we need 125 basis points and they give that to us. So we really get Fed funds when we get to third-party banks. There's another type of deposit called the savings deposit where a customer wants to earn interest. If a customer wants to earn interest, that's what we have an advantage because if Fidelity or a Stewart gets a savings deposit, they got to give it to Wells Fargo and they can't earn anything. It's just all passed on to the customer. But we have the advantage of our bank, we can give that savings deposits to our bank and say, "Hey, we'll pay you interest," and then our banking earning spread. So the escrow deposits that we put to our bank, the average yield that we get is in a normalized market is about -- it's like the 5-year treasury rate is kind of how we think about it. So we will earn more on new money that we put in, like if a customer gave us a deposit, we put to our bank, we'll earn something higher than Fed funds just because we can take a little bit of duration and a little bit of risk on it.

Okay. And in terms of the customer deciding whether they want it in one or the other, like how does that process work in terms of -- is it sort of statutory stuff in terms of what the customer ends up getting paid on this escrow?

As a general statement, I would say, on the residential side, customers are not price sensitive, right? So if you're going to buy a house, you're not -- you're just going to put your good faith deposit down. You're not really shopping for who's paying the highest interest rate. So those are checking -- we call those checking deposits, which I just talked about. Typically, we'll give those to third-party banks. A lot of times on the commercial side, now if you're going to give a $25 million deposit, $50 million deposit, you're going to want earn interest on that. And sometimes these deposits could be held for long periods of time. So as a general statement, commercial customers want to earn interest, and therefore, we will accommodate that. But to -- it's more cumbersome to open up a savings account than a checking account. So if you want to -- an individual can open up a savings account too, but it's a $50 account opening fee and a lot of people, it's just not worth it to pay the $50 to open up a savings account, but commercial will do that.

Yes. Okay. That makes sense. Okay. So switching over to a couple of other topics. Can you talk about just capital return priorities? How are you kind of thinking about that right now?

Yes. Bose, I'll take this one. I mean our capital priorities remain unchanged. First and foremost, we want to invest in the business. This is endpoint. This is our automation -- automated underwriting efforts that Mark discussed earlier in response to one of your earlier questions and then also expanding our title data assets, which are important, as I mentioned in my opening remarks, those are important to our innovation efforts, our automation efforts, in particular, and then driving the traditional title business. I think secondly, M&A is important to us. But as we've been talking about the last several quarters, there aren't a lot of great M&A opportunities out there. There are some attractive assets out there, but they're not for sale. And we just haven't seen the opportunities like we did in the last real estate downturn. And then thirdly, we want to return capital to shareholders. And we've been fairly aggressive about that. We increased our dividend this year. And as we mentioned in the -- on our third quarter earnings call, we've accelerated our repurchases going into the fourth quarter.

Okay. Great. And then can you talk about your target or debt-to-capital ratio? And then how do you kind of think about the negative OCI when you think about the capital ratio and your -- and the capital return?

Debt-to-cap used to be easy. And now we have like 3 different ways we calculate it because our business has evolved. I mean when you -- we call it like our GAAP debt-to-capital ratio. When you look at all of our debt, including the debt from our warehouse lender, last quarter, our debt-to-cap on a GAAP basis was 29.7%. But that's not a metric that's meaningful to us. Like we don't look at that other than technically, our warehouse lending, borrowing or debt. So we have to publish that in our Q. Our preferred metric to look at is debt-to-cap excluding secured financings payable because we have an asset that mirrors that. It's kind of an operating gross up. So we kind of exclude the debt from secured financings payable. And when you do that, you get to 23.5% as of 9/30. That's our preferred metric to look at, that's kind of an apples-to-apples and how we've always looked at it. And we talk about how our target debt to cap has been 18% to 20% and we're 23.5%. We're still very comfortable at 23.5%. We're at the trough of the market. There's no question about that. So I think to be at a higher debt-to-cap than your target at trough is we're very -- we feel very comfortable in terms of where our debt-to-cap is. When interest rates really started to rise, we went back to our banks and got an amendment on our credit facility. So our credit facility used to debt-to-cap, which is one of our companies that used to include the AOCI. Now it excludes AOCI. Now if you exclude AOCI, our debt-to-cap is 20.0%. And that's how the banks look at it. That's really kind of what really matters. I mean -- so our covered is 35%. The debt-to-cap excluding AOCI is 20%. Very comfortable place to be. And so we really look at both. We look at the 23.5% and then we look at it in terms of what the banks will get. So we really look at both, but our preferred metric is including AOCI.

And how about the rating agencies? Do they kind of look at both of them or...

I would say it's similar. They don't look at the gross up one, the 29.7%, the GAAP one. They don't look at that. They look at it in both ways. They look at it, including AOCI and excluding AOCI. They look at it both ways.

Okay. Great. Actually, there's a question, so let me go to that. Okay. The question is, is the percentage of escrow deposits being sent to third-party banks 45% to 50% of deposit, which matches the percentage of consolidated agent premiums or is there more behind those -- is it more behind those as per deposits being sent to third-party banks?

The deposits that are sent to third-party banks are about 50%. So of all the deposits we have, roughly half of them are third party, half of them in our own bank. That's a high percentage. Typically, we have a higher percentage of our deposits in third-party banks. But for different reasons in this market, one of which, when the regional banking crisis happened, we had a lot of deposits at regional banks and we just pulled them all and moved them to our bank because we felt safe and we knew where the funds were. So we haven't reallocated to those regional banks yet, and we're still at this 50-50, but I would say it doesn't really have anything to do with our agent direct split. It has nothing to do with agency revenue. We don't -- it's just more of -- it has nothing to do with that. It has nothing to do with our split of agent revenue.

Yes. Actually, just a related question there. I mean, obviously, when you put more deposits at the bank, you need capital at the bank. How do you kind of balance that -- that sort of -- that part of the equation?

There's a few things that go in it. First of all, our bank has adequate capital. They have regulatory capital, they've got GAAP capital. A lot of our unrealized losses are in the bank. But from a regulatory capital perspective, today, our Tier 1 leverage ratio is 9%, and our target is 7%. So we've got plenty of capital in the bank. And the bank is something that we really -- over time, we want to grow, right? We want to capitalize the bank because we feel like it's a good return on capital for us. When we moved all these regional deposits to the bank at the beginning of the year, we didn't really have to capitalize the bank. We had enough cushion there to do that. So we did that really quickly. So -- but I would say, unlike title where you could really double the size of your premium and you really wouldn't have to put any more capital in title business. We have that luxury that a lot of insurance lines don't have. The bank, we have that. And then the metric is for every dollar of assets we put in our bank, we're going to have $0.07 of capital. It's a 1:1 ratio.

Okay. Great. And then switching over to a couple of other topics. Can you talk about how you're thinking about just market share in the industry? I know it kind of bounces around, but is there opportunity to grow share over time?

Yes, Bose, I mean, even though I think we've grown share over the last year or so, it is hard to move market share, but there are opportunities. We feel the real opportunity for us is to leverage our competitive strengths to improve the customer experience, make the process much more efficient. And this involves leveraging the strengths that I mentioned earlier, our extensive data assets, which makes automation possible. And with automation, of course, comes greater efficiency and effectiveness and speed in the transaction. Our effort with endpoint on automating and digitizing the settlement process, which, again, in addition to making us more efficient, we think will drive market share because it will improve the customer experience. And then the bank as well, and Mark hit on this topic earlier, which obviously drives investment income, but there is an opportunity to provide banking services to agents which may also have the effect of increasing our agent market share. So hard to move, but really do -- there are opportunities, and that's -- we're focused on seizing on those opportunities.

Okay. We've got a couple more questions. The first one is just about the realtor situation. So there are meaningful changes happening in the realtor landscape, specifically in terms of buyer agent compensation. What are your thoughts on what's happening there? Are there things that are -- that could change the way your sort of operations potentially work over time?

Yes. I mean there's definitely changes coming. I mean NAR clarified months ago that the buyer's agent commission wasn't required. They said you could have always set that at a $0.01 or -- and even now at $0. And even after that clarification, we haven't really seen an impact on the marketplace or on our business. But of course, it's early days. For the foreseeable future, I think there will be a role for a buyer's agent. But I do think that we're likely to see some changes in how real estate is transacted in the United States. And we have some experience with this. There are no buyer agents in the U.K., there are no buyer agents in Australia, and we have substantial businesses there. So we know what that looks like. One thing I do know, though, there will always be a role for title and settlement in the real estate process. The referral sources may just change. If there are no buyer's agents or if the influence of the buyer's agent has waned, the seller's agents will be a referral source or maybe the lender will be a referral source or mortgage brokers. So the referral sources may change, and we may need to adapt to that. And there may also be an opportunity that hasn't really existed in our industry to go -- for title and settlement to go direct-to-consumer, which is what you see in Australia and the U.K. So we're watching it carefully, and we're ready to make the adjustments as necessary.

Great. Just one more question on the banks. Is the bank's book value, including -- if the bank's book value, including AOCI, goes below 0, will you put more capital into the bank? And is it currently close to 0?

The answer is yes. If the book value goes below 0, we would put more capital in, and it's currently above 0. I don't know what it is at this moment, but it's somewhere between 0 and $100 million today at this moment. So if it goes below 0, we have to put capital in, yes. It's something we've checked with our regulators on. I mean, when you talk to like the -- our capital requirements, it's all about the Tier 1 leverage ratio. And we -- there's other ratios we have. We got liquidity ratio. But in terms of capital, the Tier 1 leverage ratio is 7%. And the regulators have really never -- the OCC, they've never really looked at the GAAP capital. And we got -- we were kind of dipping closer to it, and we asked them and they said, "Yes, you don't want to go below 0." So that's not a significant problem for us. Again, we've seen a huge run-up in rates, and we're still, still positive. But if we were to dip closer, yes, we had to put more capital.

Okay. Great. I wanted to just switch over and talk a little bit about endpoint. What -- can you just talk about what you're trying to sort of accomplish within Endpoint and what the long-term goals are there?

Yes. And I've hit on this a couple of times or at least suggested an answer to this. But the Endpoint is focused on automating what would be the road or maybe the routine parts of the transaction, so the escrow officer and our people can focus on the customer, on the people-intensive part of the transaction. And when it comes to an escrow transaction, there will always be people involved. These are large transactions from any individual spaces. They're always going to want to talk to a person. But ultimately, there's a -- there's a customer service aspect to Endpoint, as I mentioned, but there's also an efficiency play for us. We think that ultimately, we could reduce the number of people hours spent on closing a transaction by 75%. Again, that's not today, that's not tomorrow, but we think ultimately, we could get to that number. And as we've done and have talked about in the past, like with the mobile notary management platform, which we call Jot, part of the goal at Endpoint is to take this technology that makes us more efficient and improve the customer experience and deploy it into the broader title business. And Endpoint, of course, is also developing its own customer base. It's focused on institutional customers. These are the types of customers who are demanding more automation and are interested more in a sort of a centralized escrow transaction because they have multiple properties they're dealing with or what have you. So it is also pursuing its own customer base, but there are, again, are opportunities to deploy the technology into other parts of the business to make it more efficient and ultimately improve the customer experience.

And there's -- over the last couple of years, there's obviously been a few companies that have come in and tried to disrupt the title business or sort of change how things are done. What are your thoughts there? And is that -- how does sort of that play into what you're doing at Endpoint or just kind of thinking about the future of the industry?

Yes. It hasn't really changed our focus on Endpoint. At Endpoint, we've been less about responding to disruptors. We actually feel like we are the disruptor in our business. It's been more about giving customers what we think they want. And certainly, it will develop more and more over time, but they want a more automated and more digital experience. And then as I mentioned before, part of it is about efficiency. We want to make our business as efficient as possible. So that's been a big goal of Endpoint and these disruptors don't change that. But one of the things -- one of the great things -- I mean, not great, but one of the interesting things about the failures of the disruptors is they've sort of shown just how hard our business is. These disruptors have come in, and I think they felt it was going to be easy to change the way real estate is transacted, and it's not. It's not that easy. You need capital, you need data, you need expertise, and you need people, good people. And we have all of those elements. And these disruptors are lacking, I think, in one or more, if not all of those areas, which is why ultimately, they're failing.

And then switching over to M&A. And you kind of -- you talked about this briefly, but can you just talk about M&A, like what areas you would like to potentially grow in if the opportunities were there through acquisition? I mean you noted there weren't sort of things you were seeing at the moment, but just where -- what would kind of fit if the opportunities were there?

Yes. I mean, first and foremost, obviously, in the title insurance space, there are opportunities there, particularly to plug holes where we have -- don't have a strong market share as we would like or in growing areas of the country. I think where there are opportunities to cross-sell to our existing customer base, lenders in particular, the ServiceMac acquisition might be an example of that or the Docutech deal we did. And then also where there are opportunities to drive deposits to our bank and ServiceMac was one of those opportunities. We like ServiceMac as a stand-alone business, we think it is very attractive, but there are opportunities for -- to drive deposits to our bank with ServiceMac. And there are also title opportunities with ServiceMac as well.

Okay. Great. And then how about acquisitions just on the venture side? Like are there things -- how are you kind of looking at that -- those opportunities now?

Well, I think there are a lot of opportunities to buy venture-stage companies, but not many of them are very attractive. Almost all of them or most of them are struggling to survive. We'd be interested in one if they could help accelerate our own innovation efforts, but we haven't seen any. And we don't think there are any. So we've really been focused on investing and supporting the winners in our current portfolio. And when it comes to M&A and venture capital stage, we're even making new investments at the venture capital stage firms, there's a much, much higher bar there.

Okay. Great. I just wanted to -- we have a couple of minutes left. I wanted to ask on the regulatory front, I guess earlier there was some discussion about, if any, rolling out a title pilot and there was the attorney opinion letter issue. Just curious, and I guess the Journal reported that the Fannie pilot, I guess, is good. But just wanted to get your thoughts on sort of all of the above -- any regulatory steps that you guys are keeping an eye on?

Well, I mean, we're regulated across all states and certain foreign jurisdictions because we have a bank, we're regulated by the Federal Reserve and the OCC. So there's always something going on in the regulatory front. We watch it very closely, obviously, but at this time, there's nothing really concerning, but that obviously can change at any moment given with the blowing of the political winds or some other event. As far as the title waiver pilot. It's -- and as you noted, I think it's been -- the Wall Street Journal noted anyway that it's been canceled. I think ultimately, that's probably a good thing and maybe good for the industry because it's never good when the GSEs increase their scope and come into someone's industry or in particular for us, the title industry. But I think ultimately, it's the end of the waiver, was good for the consumer. My understanding of the waiver pilot was there was going to be minimal title work done, if any. If any, curative work was likely going to be done after the transaction. And it wasn't clear who was going to do the curative work. I mean the title industry spends a lot of money on curative work, and that's done before the transaction closes by and large. I don't think I would want to know when I'm buying a transaction that needed curative work after I closed. And then this waiver was supposed to reduce cost to the consumer, but as we've seen in some instances with the AOLs, there likely would have been loan level price adjustments to compensate for the risk with title waivers. There's certainly going to be the case with some originators with AOLs, and I wouldn't be surprised if the same thing would have happened with the title waiver. But again, we didn't have a lot of detail on that. But the reality is the real cost is in other parts of the transaction. Title and settlement is a small part of the cost. There's other costs that are much more substantial if we're looking for opportunities to reduce cost to the borrower.

Okay. Great. So we got about a minute left. So actually, Ken, I'll hand it back to you just to make some closing remarks.

Yes. Well, I want to thank you, again, Bose, for hosting this fireside chat and thank everyone for listening in and for the good questions we received. I'll just recap real quick. I mean, we believe we're at the bottom of the market. It's uncertain as to how long we're going to be bouncing around the bottom, but we know when the market turns that First American is well positioned to capitalize on it because of our focus on efficiency and cost management, our commitment to making investments for the long term in our business, including in automation and digitization, our leadership in title data, which makes that automation and digitization possible as well as fueling the traditional title business. Our bank, which enables us to capitalize on deposits, and as Mark mentioned, gives us opportunities to provide other services to agents and our people. We have the best people in the business and they foster a world-class culture. And I guess I'd add lastly, our singular focus on title and settlement. We're not distracted by other ventures. We're singularly focused on being the premier title and settlement company.

Great. Well, thanks very much to FAF management for joining us, and thanks to all the investors who joined us as well. Have a good day.

Thanks a lot, Bose.