Appreciate you guys joining us and toughing it out through this long day. This is still day one of the Stephens Conference. We're coming to you live from Nashville. For our last session of the day is Stewart Information Services, Stewart Title as it goes by sometimes, that's ticker STC. We've got the CEO, Fred Eppinger, and the CFO, David Hisey, representing us. This is a story we have liked for a long time. We've covered title insurance as a firm for a long, long time. I have covered it personally myself for a little bit over a decade. Stewart has been the number four player in what is somewhat an oligopoly type market. And to us, it feels like it has the greatest opportunity to transform, to be something much larger than it is today.
I think the others are very interesting models, but feel like they're maybe a little bit more capped out on growth. I think Stewart's got the opportunity to get much larger, which I'm sure we're going to talk about today. Fred is one of my favorite CEOs to talk to. He is always a funny, funny guy. He makes doing this job more and more fun as the years go by. So I'm glad to have him here. Fred, let's start off with the macro. This is something we do where we kind of poll the companies each year. It's more of a tradition for us. So let's start off with your views on U.S. housing. Do you think for 2025 that it's going to be up sharply, up modestly, neutral, down modestly, or down sharply?
I actually think we're going to start turning. So I've been talking about bouncing on the bottom and that's what it's felt like. And as you know, we've had what, 37 months in a row with existing homes down year- over- year. We saw a little bit of glimpse when the interest rates went down, went back up. But I think we'll go sideways a little bit for the next couple of quarters. But I do see the market turning. And I would say somewhere in the 8%-10% increase next year. I think it'll start kind of the second quarter on. But I'm a little bit more optimistic. And part of it is just looking at the installed number of mortgages that are under 5%. That number has ticked down pretty kind of slowly but steadily.
I think what we're going to see is a kind of an unfreezing of the market a little bit and a comeback. I would say that the next year, 2026, is kind of where we get into the ballpark of the five million existing homes that we think about as normal. That's, you know, so I'm not negative about it, but I'm also, I don't think I'm not euphoric, if you will, about it. It's been a long slug here.
Yeah, for sure. So this might, I don't know if your outlook hinges on mortgage rates, but maybe if you give us your view on the 30-year mortgage rate, what do you think that looks like next year?
Yeah, everybody can guess. But I think that we're going to be somewhere in the mid-sixes, in my view, maybe get a little bit lower than that. But I actually think the market can unfreeze at that. So to me, it's more about the inventory and availability and kind of the ability to kind of have more availability to good transactions. And again, you know, I saw some of the exits. You know, can 6.25 be possible? Absolutely. I don't think we need to be in the fives at all to have the market come back, particularly if the yield curve is more normal and people can have adjustable rate mortgages. So I'm pretty encouraged that we'll get there.
It's been, you know, the pattern has been very strange because the, you know, when the Fed went down, we had that brief euphoria for what felt like an hour and a half, and then it bounced right back up with the fear of inflation. But I think that'll get more stable. You know, our biggest issue for the last couple of years is not just the absolute rate, it's the rapid change of the rate, which has made our business really hard because people freeze, right? And you have more cancellations and they can't, they don't know how to judge the market. And it's had a bunch of the segments of the market, in my view, freeze in place, particularly the first-time buyers, you know, they're sitting in their homes at 2.5%-3% mortgages.
And so when they have children and they're ready to trade up, right, the difference between what they're in and what the current cost is has just stopped them, which has stopped the first-time buyers to have exit or entrance. So that has to work its way through. And I see it getting better as those percentages change, but it's been the sticky point to me much more than the mortgage rates.
Yeah. And making a call on all this stuff is almost impossible. I mean, like, I feel like from my side of the table, I'm often graded on accuracy. Certainly the investors out here are absolutely graded on accuracy. If you don't want to be graded on accuracy, become an MBA Fannie Mae or Freddie Mac forecaster or become a weatherman. You know, like they're not, I feel like it's been all over the board. So we're not going to hold you to.
Yeah, and again, I would say one of my observations of coming into the industry, a lot of the economists in our space are optimistic.
Yeah.
And so you've got to just by their nature. And so they adjust slow. And so you've got to manage your business in a way that is a tad more conservative, at least my last five-year experience.
Yeah. And but to their defense and what you said earlier, I 100% agree with, it's the velocity of change that has made things really difficult, right? Peak to trough of not necessarily peak to trough, but the degree at which rates move was at a record rate, right, from 3% - 7.5%, right? So it's been difficult. What do you feel about home prices? I know that it's a partial driver of your fee profile for purchase, but any kind of rough views on home prices?
Yeah. Again, a couple of things that we see actually is I think, you know, in general, people talk about up slowly and have that steady. But one of the interesting things we see is kind of the separation of the locations, the MSAs. You're starting to see it matter a little bit where you are and what the supply and demand is in a particular market. So in general, I think we'll see up a little. It's not a big driver of our revenue growth because it's typically just tied to a portion of the order. But it also is very different by location because we've seen, as you know, in the last three years-five years, incredible spikes in some of the various cities.
So you've got to really look at the mix of your business and kind of get a sense of what's happening, at least for us. That's what we see. Because if you see the velocity of the transactions of the more expensive homes in a lot of cities are much better than the lower, so our average ticket is going up a lot in places where the volume is going down, which is interesting, and it's this mix of what kind of things are moving in a particular city, but pretty much across the board, the higher end of the home prices is better than the lower, at least in the places we are.
Okay. So the conversation on politics, I hate. I absolutely hate. It's so polarizing that like you're not going to convince the other side. So it just ends up being a heated debate. So let's take all the personal feelings out of it. The political environment shift as you think about the impacts to housing, whether that's going to be positive, negative, or neutral in 2025.
I think just stopping talking about it.
Yeah.
The election being over at some level helps. Hopefully we can get just some stability into the market because again, my view is if you look at the next three years, the demographics are really good for our space. If you get this again, and I think this low interest rate, it's a once in a lifetime event, right? The notion that we went through a period of 2% mortgages and stuff, that's just, it's not a thing that's going to, it's not our cycle. It's a weird event that happened. As that works out of the system, I think just the stability of the market and the stability of the 10-year is just going to help. Because again, the underlying demographics are quite attractive. I feel the same about commercial too. So it's just the quiet. Like I want it just a little bit.
It's just so, again, just think about the volatility that we've gone through both in attitude and in kind of the economy and how people talk in the last couple of years. You know, I've been fortunate enough to be a CEO for 19 years, and in P&C, the investment portfolio is everything, but the notion that the 10-year would move like it moves now, nobody thought about it. Like it's just that volatility changes everything on how people make choices, and again, homes are a long-term choice, right? And so that quiet, I'm encouraged. You know, I'm encouraged that we'll have a little bit more stability, because again, the policies, I don't see anybody coming out and saying I'm against good housing. I think everybody wants more homes as fast as we can get it and more capacity.
And there, you know, there'll be lots of attempts to try to do that. And for us, that's great, right? If you have more home builders, more affordable housing, more housing in general, that just helps our industry and it's necessary. So I can't imagine that there's going to be this, you know, a policy that's going to be against it. So I'm not, I don't lose a lot of sleep about housing policy, frankly.
Yeah. So Trump has, I mean, I guess the popular view, at least some of the economist stuff we follow, I mean, some of the actions could be inflationary, right? Like tariffs clearly, increasing the budget, you know, the federal deficit. You know, so it seems like you've got that on one hand, but on the other side, you've had Trump talking about taking over the Fed. You've talked about 3% rates, right? Mortgage rates. And he's actually said that, I don't think it's an official policy or agenda, but it's something he's commented on. David, you spent time on the mortgage finance side of things in the GSE world. Is that even possible?
Well, I think the big thing on the GSE world is whether they come out of conservatorship or not, right? And so what does that ultimately mean? And I think until we really see who gets put into Treasury and some of that, because if you think about the last time when Mnuchin was put in, that was something that he was interested in. And so they put Calabria in as FHFA director and that was his initiative. I mean, he's out on the speaking tour right now, Calabria, talking about all the great things that could happen with the conservatorship exit. But I think until you appoint the Treasury Secretary, it's going to be hard to tell what the plan is.
And then I think just more generally, what you could, what seems to be developing is a lot of the negative regulatory stuff, whether it was CFPB, Treasury Office of Insurance, or even some of the pilots. At least two of those are probably done with changes in leadership, CFPB and Treasury. And let's see what happens on the pilot. Probably there was a letter sent from Congress to Director Thompson yesterday, basically calling for it to be ended because it needs to follow a program approval process and it's not viewed as safe and sound. So we'll just have to see how it plays out.
Okay. Makes sense. And then I know you guys aren't directly involved on the residential broker side of things. You are going through the escrow process, closing process. So you get to see fees, you get to see some activity there. So as best you can tell, has there been any changes to real estate agent commissions thus far from the rule changes? And do you expect that over the next year or so there's going to be any impacts?
You know, for us, I mean, again, it hasn't really changed the way we do business because the 80% of the volume that goes through the 20% of the strongest agents is just, it just makes that even clearer, right? The people that control the market control the market, and so does it affect, to me, over time, does it affect the people getting into the business that come through the buy side, getting less sure? But a lot of the markets, what we're seeing is people know what the underlying kind of split is going to be or what various people are going to go, and so it hasn't really changed a lot of the flow of the work to date.
But as I said, I think long term, there's a lot of, as you also know, it's a strange industry anyways where 50% of the people turn very often in real estate agents. They come in, they come in, they leave. And most of the business is really the people at the top. And this doesn't affect them at all except for give them a stronger hand. So, you know, for us, that's kind of how it seems to be playing off in local markets. And again, there's some subtleties in MLS world as far as, you know, access to money, if you will, that will be interesting. But to me, even on the MLS side, MLS is really important to the business because it's the honest broker versus everybody else that's got to wait. You know, these other portals either use that data or they have their own data.
But the MLS has, you know, the accuracy and stuff, that notion that it's the database of record is a very powerful thing that most countries don't have. And so when people do the comparisons between us and them, they miss the point that most every country would love to have an MLS system at the core. And so to me, I kind of look at this and I say, I don't see a massive structural change except for the better agents are going to get stronger. Like it's just, it's clear that their ability to control the market is going to get clearer.
Does that impact your business at all?
It does and it doesn't. So, you know, for us, the big key is the relationship at the direct side is the relationship between the escrow folks and those real estate agents. And what happens with real estate agents is they want certainty that that deal gets through and all the complexities of it gets done when they need it to get done. So a lot of the real estate agents, what they'll do is they'll have their two favorites, right? Some will go with one, but because just in case one's busy or there's a problem or something, they'll kind of play that game. And that relationship is everything. And if we deliver consistently, you can retain that thing. So the more control those folks have, the more important it is that you have those relationships, right?
If you're living off the bottom of the food chain, and I apologize, but if you're folks that don't do one transaction a year, right, you don't have a very stable business. And so for us, that's never been our focus. It's always the focus on those that have more business. And again, when you have multiple transactions, the service makes that much more difference, right? Because they have to keep, you know, that consistency of the way they present themselves to their market. And so it really plays to our strength if you do a good job. So again, I don't, for us, we've done a lot on more scientific sales reach outs. We're a little bit more focused on growth than some of our competitors.
And so one of the things we've been doing is call outs to the best real estate agents in each MSA and talking to them about who is their best escrow partner and why. And we do that for a couple of reasons. One, to learn to make sure we're doing the right things. But the second is to go hire those escrow officers to say, who are the people that do such a great job that are building relationships locally? And it's clear as when you listen to those calls and you go to the, it is such an 80/20 world. Like it's the professionals and kind of the semi-professionals of the industry.
So I want to get into this. I'm going to jump ahead a little bit with this question. But when you think about the growth potential, I think you're right. You guys are much more growth-minded than your peers. And that's something I talked about earlier as well. When you go get that talent, when you go get that escrow officer, you go get that commercial agent, you go get, you know, whoever's leading a large MSA in a certain target market for you, how do you take those away from a pedigree? What is the pitch? Is it a pay situation or?
Yeah. So every one of our businesses has a little bit different shtick about like what the leverage is to grow. In direct, because we come at it from a different place. We're 10.5% share instead of 30% share or 20% share. Critical mass at a local market really matters to us. Because go back to the service point I made. If you are 4% share in a local MSA, the chance that one person being out sick or, you know, one little thing going wrong that your service goes to hell is really great. So it's just a little bit like retail banking. If you get over 10% deposits in retail banking, if you get over 10% share in our business, everything's better. Your service is better. Your ability to consolidate things, the ability to use automation is better.
So for us, our whole MSA thing has been, how do I make whether an acquisition or a transaction to get to critical mass? But to your point, the other part of our strategy is, okay, so you're in a local market. How can I bring capabilities? So one of the capabilities might be commercial capabilities in a direct office. Do I have enough capabilities so that I could satisfy the needs of the local people, the local developers or investors to develop commercial? So we're trying to build that commercial skill. And because there's only really three of us that have the capital to provide commercial, you're already in a small oligopoly situation. And so we can basically attract people that may be attached to a regional company or whatever that have to use reinsurance and don't have a cost-effective solution.
So for us, we're a pretty good home for people that are in that kind of camp. What we do, we do the other thing we do is micro markets, I'll call them, which is if you're sitting in Nashville and you have a good concentration, good share of Nashville, think about the growth there, the urban nodes, if you will, the suburbs. Our ability to go hire a team and say, be part of the bigger picture. Again, you get access to more cost-effective search capabilities, you get better kind of commercial capabilities, et cetera. And so either buying the agent or buying the team is quite attractive. But I will tell you, John, this is one of the, running a service firm is an interesting thing. I have very good competitors that are very big.
It is very hard to have a value proposition to employees of being world-class and great opportunity if you don't grow. And our industry, most people don't grow. And so for me to go to any employee and say, the career opportunity, the upside financially, the opportunity is tremendous. Because in every territory, every market, every segment, we're outgrowing the market. That is a value proposition that most employees care about, right? We also probably, because of our growth, probably invest more things like in mentoring programs for underwriters. Why? Because they need more capacity. So to me, our value proposition to our employees is at the heart and soul of what we do. Now, your question of buying, it is a dangerous thing to overpay talent in our space. There's only 140,000 people in the entire title industry. And most people are related, almost, right?
It is a very closed industry. So that is a losing game of using money to get people to flip back and forth. Sometimes it happened? Absolutely. You see it in commercial, primarily large commercial. But it's not something that for us, we could sustain because you destroy your margins as you try to grow your business, right? So, you know, do I want people to do well? Yes. Do I want a few people fairly? Yes. But we talk about our value proposition to our employees constantly. And one of the interesting things is part of the talent sources we have is agents. And so if you think about most agents, our benefits are better, our stability is better. Like so we have a really interesting way to compare and contrast for those folks that might be a great escrow folks for an agent in a local territory.
So again, it's a long, it's a good question because it's something that I personally think a lot about. And it's one of the things that has happened in our last 18 months. I mean, we've been at this pretty hard for four and a half years improving the company. And in the last 18 months, we've pretty much every quarter consistently grown share in almost every one of our business. And at the core of it is really low turnover and more hiring of good people that want to be here. And it's, and again, I, you know, there's no silver bullet, but it is an important part of what we've got to do and we've got to think about. And we do this employee survey every year. And I had about a 70% participation. There was about 17,000 written comments.
Our employees know that we read, I read every single one. We do stuff. We improve what we do, how we give flexible time, how we invest in them. Again, most people don't care about this, but for me, having run two service big service organizations, professional service organizations that are smallish, this is the game. This is the game for us, right? Because our economics can't handle turnover like the big guys can. So it's important for us to stay on top of it.
Yeah. It's all, it's a great kind of segue into the rest of the business. I mean, you guys are older than the automobile, right? I mean, the brand.
131 years old.
Right. And it's got a tremendous amount of potential. And it felt like you guys kind of underpunched your weight for a period of time. Then you went to this period of, you know, activism and potential takeout. You had the crisis. Like there's been things that kind of set you back here and there, but you constantly use the word, the term journey, right? And what's important is I feel like M&A has been a big driver of you guys, like expediting some of the process, but 18 months, you haven't really done much of anything, right? And so this is organic share game. This is some of the strategies starting to play out. So maybe leading into the rest of the strategy, when you talk about journey, what all areas do you mean just broadly?
Yeah. So we talk about trying to build the most respected company in the industry. And it comes from having value-added products and, in my view, distinctive underwriting, because you have to solve the damn problem, right? That's at the heart of what we do. We solve the problem to get these transactions to occur. And so again, you're exactly right. We're 130 years old, but we lost our way after the financial crisis. It was very kind of mismanaged. We went from 15% share to 8% share after the Fidelity transaction failed. And so we were sitting there in a company that was going from 15% - 8% on its way to 0%. And our view is we had to change the place and say, how do we create an institution that's going to win, that's going to be the best and most respected?
And so in every business, we rebuilt it from the customer in. So in agency, our technology and our ease of use was horrible. So it was all about building the integrations. We only covered extra services for agents in three states. We now have 45, which is most of anybody in the industry. We didn't give commercial concierge capability to agents the best way we could. And now we do. So we rebuilt the value proposition. And in every business, I can tell that story, right? In commercial, we had great underwriting, but we didn't have capacity. When the company got in trouble, it got down to $400 million of capacity of surplus. And it was for sale. So what kind of risk transfer is that going to be when you're dealing with big commercial transactions when you're for sale and you have $400 million capital?
We now have $850 million of capital. We're in business and we're kicking it a little bit, right? We're growing. We've gone from 9% share to 14.5% share in that space. And I think we can do more. In direct, it was this notion of lack of capital allocation. So we had lots. We tried to copy what the big boys did with no volume. So we had all these subscale locations. We had to reallocate capital, close a bunch of locations, and then recommit to a bunch of MSAs. We restructured at least 40 of them where we jumped in share dramatically. And we need to do 30 more. But our value proposition on top of that improved dramatically because of the way we managed data. So again, I think our competitors were ahead of us. We had remote data management.
We now have one platform that's centrally managed and updated. We bought a company in India so that we can triage the data and do very efficient search and curative work. And so our economics of direct and our consistency of service is a lot better. And by the way, our value proposition to agents that may want to be bought by us is terrific because if you look at the agents we've bought and you look at our top 150 people, a lot of those people that were running those agents we bought are now running the company. So again, our value proposition to agents who are to buy as well as the customers on that side are better. And then finally, the lender services, again, that journey was really the two F's had a big, big businesses, billion-dollar business.
We had a $60 million business to the lender world. The lender world cares about counterparty risk, and so what you saw is you have very fragmented appraisal and notarization businesses and data businesses. What we did is we assembled those skills, those capabilities, those services, and all of a sudden, they had another counterparty that was significant to deal with, so I can go to the top 300 lenders and say, you don't need to have this private little company. You can have the F's and us, so I can get on every shelf space. Now, we were fortunate enough to, when we got into the data business, which is always the hardest thing for valuation reasons, when we got into the credit business, we were lucky enough to really find the gem in form of Informative Research that had a really good flexible platform.
And we've knocked it out of the park a little bit because of the flexibility of that platform. We added some data elements and we were able to create a capability called a Verification Waterfall, which helps save mortgage folks money. So it's not just a commodity tri-merge data business. And what's happened is we doubled that business this year. Because in a world where economics matter to these guys, we're solving a problem. But what's interesting about the lender business is go back to what I was saying. We had two of the top 300 when we started. And we had like five or something of the broader group that had more than one product with us. That number is now over 100 and something, 130. And we have a good 50, 60 that have multiple products.
So if you think about that, we've gone from $60 million -$ 400 million this year. And we aren't even close to cross-selling and upselling the vast majority of the 300. So I look at that and say, you know, I don't have to eliminate them. I can just share the shelf space. So most of the, again, they want three players. So we built a credible alternative to the only two they had. So in each of the businesses, when I talk to our folks, if we want to be the most respected, part of it is the value proposition, which we now kind of have solidified in most of the businesses. But for us, scale matters. The more experience we have, the more scale we have in these businesses, like commercial, you know, we should be as good as they are on an underwriting side.
But I'll tell you, our capabilities would be even better if I could get to 25% share instead of the 14%. So we're on this journey of really the six things we talk about. And it starts with the value proposition to our customer, but it's all about products and service. And the foundation elements are the alignment and attraction of great talent and the financial stability to invest in a down market, which is the other thing that's helping us right now. Others in our space, we're spending a lot of money right now. I mean, the market's been down 37 months in a row and we're spending money to grow.
And that counter kind of flex, if you will, gives a lot of people in the industry comfort because it says we're finally strong enough to get through a cycle and not have to cut back so much that we put the company at risk. And so those are the things that are coming together for us. Is it hard? Yes. Are we the smallest of the four? Still, sure. But again, you know, 130 years ago, we were the leader. We were the one that was the most respected for years and years and years because we were technically good. And we're still technically good on the underwriting side. We literally are the company that wrote the rules. And so our right to get back to where we were is there. Now, again, is it hard? Sure, it's hard.
And to your point on acquisitions, I would say we needed to get critical mass and some capabilities, but a lot of it now is organic. So you've seen this year, we've grown with the market being down. We've grown 10% and our earnings have grown probably 30%. So we have momentum in each of the businesses. And my view on, by the way, on share shift is that in this business, share shift in a down market is very difficult because everybody already has a market and everybody's been in the market for 25 years. So when you don't have a lot of business to share with new players, it's hard to shift share.
But for us to be shifting share when it's down means that when the market comes back, the share shift will go up because there'll be more food to spread around, if you will, to feed other new partnerships. So the journey to me is just the way to show our employees to understand that we're not all the way there, but every day we focus on getting better. And again, do I wish the market would help a little bit? Yes. It's a pain in the neck to every day wake up and have minus three is what you're competing against. But as it gets flat and a little bit of benefit, I think the company will continue to kind of take off.
Yeah. That's a good frame up. So the term journey like implies that there's a destination at this point, which really in the case, right? So maybe the checkpoints, if you think about like if there's internal battle cries, like rallying cries, we're going to double share in this market or reach this many MSAs. What are some of the.
It goes exactly. So what I've said to our folks is that I believe we can get back to 15%.
15% share.
On the margin side, you've heard me talk about it. I think we'd have to be that 11.5%-12%. So that's a multiplied difference between where we used to be in a normal market. Those are the kind of financial positions I think we can be. I think it's real. Again, you know, people hear me, there's a person in the company that doesn't know those points. By the way, each of the businesses has a right to grow, right? You know, again, we bottomed out at eight. I think every business is going to double. You know, we're at 10.5% and we have momentum. We just got to keep it going. Again, the market's going to help us look better. There's no question. But that's not enough. That's not enough.
I mean, we have to take our position back that we had before. And by the way, the industry will be better if we're a higher share. We'll keep everybody, the competition a little bit more stable and a little bit more honest. The last thing I will talk to you about this kind of share shift and stuff, when the cyber events happened in our industry, this industry, in my view, talked the least about risk management of any insurance industry I've ever seen. And there were agents and commercial players that would give 70% or 80% of their business to one underwriter. That's nutty. And after that happened, people are listening. I mean, there should be much more balance among the three of us. The four of us is weird because Old Republic doesn't really have a lot of direct business and it's mostly agency business.
But in most of these businesses, it should be much more fair distribution just for the safety of the people we're dealing with. They shouldn't be tied to one or the other completely. And I think we've learned that when those events, and I'm saying that it's, you know, those events could have happened to everybody. They're all good companies in our industry and we're all going to be at some point under that problem. But it just teaches you that there should be a more equal spread of risk. And we have an unfair advantage of that trend just from where we're coming from and our reputation and our brand and our underwriting capability and our balance sheet. So we're the ones that have the room to actually take advantage of that. But it is a real thing.
I mean, that whole risk management thing is much more on the top of people's minds than it was three years ago, four years ago.
All right. So just putting a kind of bow on that, 15% share, you're assuming maybe 5 million kind of normalized housing market gets you 11.5% pre-tax margin. That's kind of the target. But if you're doing a normalized market with a 15% share, that 11.5% is probably higher. Is that fair to say?
It'd be a nice thing.
Yeah. The additive.
Yeah. Again, I tell our folks is that, you know, when I try to guide on that margin because we've kind of modeled this because of all the work we did on the operating model and all the work we did on capital allocation and scale in the various businesses and kind of the excess, what I consider excess capacity in the system. And the question is, do you hold that share gain as the market comes back? And if you do, you know, if you do math, it could be better. So but it's not easy. So I'll give you an example. So commercial, we've grown incredibly over the last year and a half. I think we're really good. I think we've attracted some amazing talent. I think we have great leadership. But we also have a really good spike of skill in energy.
Alternative energy has taken off and we have benefited from that. Will that normalize over time? Is 14 a little overstated? Will we come back before we go forward? There are things like that that I'm cautious to go further than what we've talked about. I feel confident that, you know, we have started to really move forward in our businesses. I think in direct, I talk about holding our own a little bit more because we've been cautious about a lot of organic investment in direct just because of the startup costs of some of that organic stuff. That market is going to be a combination of organic and acquisitions. We've been very cautious about kind of where we're spending money there because it is a very distributed fragmented business.
And I don't want to get ahead of ourselves because if you can imagine having 500 offices and make a bet on all 500 of adding incremental people, the startup of that is quite challenging. So we've been cautious in that business. But I think the share gains are real and we'll be able to hold them. But that's the concern that I would have.
Okay. Looking out to next year, I mean, obviously, who knows what U.S. housing does, what the mortgage market in general does. But you guys have talked about $20 million or so of discretionary investment spend. Maybe they hold that flat. Maybe that comes down. Maybe you increase it. I don't know. But like assuming that kind of holds flat, you get a little bit of top line leverage. Maybe talk about the excess capacity you've built in because this is something you've been talking about. Like smaller MSAs, like you don't want to cut costs because you're going to lose shares. So you have to just kind of eat that margin, right? A difficult time. So maybe talk about excess capacity.
Yeah. So it's a weird business. Like our business is really small. I mean, it's why it doesn't, you know, attract capital from outside America. I mean, it's really there's four of us that make up 85% and it's been like that for 25 years. And then there's 15% that swaps around with some regional companies and some people that are captive to builders, etc. And again, it's a controlled kind of universe that you live in. And so for the investment, when you ask me about kind of the opportunities of should I invest more or not, for us, I've got to just be careful that I spend enough to catch up because we're still behind in some things. We're building a general ledger because the company didn't do it when it had its issues. We're modernizing that. We have stuff like that that I have to spend.
But I also have to spend growth capital a little bit, right? And so the whole notion of this, do you lose people or whatever, go back to this, there's 140,000 people. Escrow people are everything. Escrow people are very unique people. They've grown up in the industry. They're probably a high school graduate. They've built these skills that are based on county by county by county. If I let them walk, right? If I let that capacity walk, when the growth comes back, I'm not going to be able to get it, right? Because there's only six of us or four of us that are big. Where are those people going to go? Right? They're going to go to an agent. They're going to go like, and so that's my growth capacity. And so part of what you do is you invest in retention.
But do I have excess capacity? Yes. Now, some of the excess capacity is the curative and the data capacity that we now have dual-sourced it offshore, which is not that expensive. It just provides a lot of capacity for us. But I have, you know, again, I would say that the capacity is mostly in direct right now, a little bit in services, but not a lot because we're growing a lot of those services. But again, you can feel the leverage with a little bit of growth, right? But it's, again, it's, you know, this, you go back and forth to this $20 million you talk about. The reason I say that, I talk about that is because I want people to understand that we're not done yet and we still have things that we're catching up on, right?
You know, some of the data stuff and the data management, what I'm doing is trying to make it more efficient. I'm trying to use our data cleaner so we don't have to buy outside data. Those things are things we need to keep doing. AI, I got to invest in AI capabilities because of the need to structure more of these unstructured data to keep, you know, up to the best players as far as being efficient. Obviously, cyber is another place. So I got to make sure that I'm investing upfront. But I say it out loud because I want people to understand I'm not going to cut to the, I'm not going to cut to the bone. Just not going to do it. Now we're going to try to manage earnings, like manage our investments so that, you know, we're not being silly.
So like in commercial right now, we're doing really well. But what I don't want to do is bring on so many new people that there's a startup that I drag the margins down so much that it doesn't show the impact of what growth is. And so I want people to see that there's leverage to our growth, but you're kind of moderating the acquisition of talent. Now, what's interesting about a couple of our businesses, Lender and Commercial, that assumption is being tested right now because we're having so much opportunity. So the question is, do you go for it and, you know, kind of take some expense risk and hire some more? But it is the, it's the, when you're the smallest of the four, we have to do this better than they do. We just do, right?
They all have to do it and they do it well, but you know, they're 3x our size or 5x our size. Like you have to be managing this investment versus kind of controlling expenses, so again, I'll go back to your 20 because I think I've said this to you a couple of times. What I did last year and what we're going to do this year is we're going to think hard about the sequencing of the 20 because the first quarter is always very difficult in our industry, right, and I think the next two quarters are going to be challenging, and so do you kick some of that stuff into the second quarter so that we get through and we can continue to show progress? And that's what you do, but it's a great question.
I mean, it's, again, it's what everybody does that's good at service businesses. But for us, because we're catching up still on some things and we're also trying to invest in growth, we have a couple of extra dimensions that you just got to balance through. You just got to, and it's why one of the things that I love about our team, our senior team are probably in general a little bit younger than others in the industry, they work incredibly well together, and we have to work across businesses and across functions more than others because we have capital choices that maybe the big guys don't have to trade off.
And it's why I love the way the dynamic of the team is working right now because we get a lot done and we kind of pitch in and share resources and help each other get through it. And it's one of the things that I, you know, had the fortune to have some luck with that at Hanover too. And I can see it here, which I think is what the magic of the last 18 months, just part of the magic is that.
I think we've got quite some time for questions, maybe one or two more questions if you guys have any in the audience. All right. That's a wrap. I appreciate the time, guys, and the audience. Thank you to the Stewart team as well.
Thanks, guys. Appreciate it.