How did STC's operating profit surge in Q4 2024 despite rising expenses?

Stewart Information Services Corp (STC) experienced a notable increase in operating profit in Q4 2024, reaching $35.37 million, which can be attributed to several key factors:

1. **Revenue Growth**: STC's revenue for the quarter was $667.94 million, surpassing analyst estimates and reflecting a 11.0% year-over-year growth. This increase was driven primarily by higher revenues from domestic commercial and agency title operations, which improved by 6% to $553.3 million. The strong commercial growth, particularly in the energy and multifamily sectors, and the successful adaptation to market changes through rebranding, have contributed significantly to the revenue surge.
2. **Cost Management**: Despite rising expenses, STC managed to protect its profit margins. The company's focus on cost management and operational efficiencies likely helped offset the impact of increased expenses. This was evident in the third quarter where Stewart reported a significant increase in net income, with adjusted net income rising to $33 million, compared to $24 million in the same quarter last year.
3. **Strategic Investments**: The company's investment in technology and talent to enhance operational efficiency likely led to improved productivity and reduced costs per transaction. This strategic focus on leveraging technology and talent has been crucial in maintaining profitability amidst rising expenses.
4. **Dividend Increase**: STC increased its annual dividend for the fourth consecutive year, reflecting confidence in its financial stability and commitment to returning value to shareholders. This decision suggests that the company had sufficient financial cushion to sustain both dividend payments and profit growth.

In conclusion, STC's operating profit surge in Q4 2024 was driven by robust revenue growth, effective cost management, strategic investments in technology, and a strong financial strategy that included dividend increases, despite rising expenses. These factors combined to enable the company to achieve strong financial performance during the quarter.