þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 74-1677330 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1980 Post Oak Blvd., Houston TX | 77056 | |
(Address of principal executive offices) | (Zip Code) |
(Former name, former address and former fiscal year, if changed since last report) |
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ (Do not check if smaller reporting company) | Smaller reporting company ¨ | |||
Emerging growth company ¨ |
Item | Page | |
PART I – FINANCIAL INFORMATION | ||
1. | ||
2. | ||
3. | ||
4. | ||
PART II – OTHER INFORMATION | ||
1. | ||
1A. | ||
2. | ||
5. | ||
6. | ||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted, except per share) | |||||||||||
Revenues | |||||||||||
Title revenues: | |||||||||||
Direct operations | 224,240 | 231,662 | 409,752 | 419,091 | |||||||
Agency operations | 247,257 | 234,407 | 484,111 | 467,756 | |||||||
Ancillary services | 13,732 | 15,118 | 25,563 | 32,422 | |||||||
Operating revenues | 485,229 | 481,187 | 919,426 | 919,269 | |||||||
Investment income | 5,247 | 4,941 | 9,951 | 9,613 | |||||||
Investment and other gains (losses) – net | 2,393 | (676 | ) | 722 | (389 | ) | |||||
492,869 | 485,452 | 930,099 | 928,493 | ||||||||
Expenses | |||||||||||
Amounts retained by agencies | 203,793 | 192,558 | 399,000 | 383,733 | |||||||
Employee costs | 146,278 | 139,346 | 285,101 | 279,131 | |||||||
Other operating expenses | 85,953 | 88,786 | 166,220 | 167,103 | |||||||
Title losses and related claims | 18,697 | 24,462 | 37,678 | 45,163 | |||||||
Depreciation and amortization | 6,154 | 6,441 | 12,388 | 12,819 | |||||||
Interest | 673 | 712 | 1,646 | 1,529 | |||||||
461,548 | 452,305 | 902,033 | 889,478 | ||||||||
Income before taxes and noncontrolling interests | 31,321 | 33,147 | 28,066 | 39,015 | |||||||
Income tax expense | 5,602 | 10,993 | 4,307 | 10,850 | |||||||
Net income | 25,719 | 22,154 | 23,759 | 28,165 | |||||||
Less net income attributable to noncontrolling interests | 3,342 | 3,586 | 5,161 | 5,508 | |||||||
Net income attributable to Stewart | 22,377 | 18,568 | 18,598 | 22,657 | |||||||
Net income | 25,719 | 22,154 | 23,759 | 28,165 | |||||||
Other comprehensive (loss) income, net of taxes: | |||||||||||
Foreign currency translation adjustments | (4,038 | ) | 3,204 | (5,630 | ) | 4,529 | |||||
Change in net unrealized gains and losses on investments | (2,428 | ) | 355 | (10,434 | ) | 2,822 | |||||
Reclassification adjustment for net gains included in net income | (231 | ) | (94 | ) | (480 | ) | (461 | ) | |||
Other comprehensive (loss) income, net of taxes: | (6,697 | ) | 3,465 | (16,544 | ) | 6,890 | |||||
Comprehensive income | 19,022 | 25,619 | 7,215 | 35,055 | |||||||
Less net income attributable to noncontrolling interests | 3,342 | 3,586 | 5,161 | 5,508 | |||||||
Comprehensive income attributable to Stewart | 15,680 | 22,033 | 2,054 | 29,547 | |||||||
Basic average shares outstanding (000) | 23,546 | 23,444 | 23,527 | 23,438 | |||||||
Basic earnings per share attributable to Stewart | 0.95 | 0.79 | 0.79 | 0.97 | |||||||
Diluted average shares outstanding (000) | 23,625 | 23,620 | 23,607 | 23,613 | |||||||
Diluted earnings per share attributable to Stewart | 0.95 | 0.79 | 0.79 | 0.96 |
As of June 30, 2018 (Unaudited) | As of December 31, 2017 | ||||
($000 omitted) | |||||
Assets | |||||
Cash and cash equivalents | 121,128 | 150,079 | |||
Short-term investments | 23,642 | 24,463 | |||
Investments in debt and equity securities, at fair value | 673,333 | 709,355 | |||
Receivables: | |||||
Premiums from agencies | 30,242 | 27,903 | |||
Trade and other | 50,282 | 51,299 | |||
Income taxes | 2,477 | 1,267 | |||
Notes | 3,088 | 3,203 | |||
Allowance for uncollectible amounts | (4,842 | ) | (5,156 | ) | |
81,247 | 78,516 | ||||
Property and equipment, at cost: | |||||
Land | 3,991 | 3,991 | |||
Buildings | 22,806 | 22,849 | |||
Furniture and equipment | 233,154 | 226,461 | |||
Accumulated depreciation | (193,128 | ) | (186,279 | ) | |
66,823 | 67,022 | ||||
Title plants, at cost | 74,237 | 74,237 | |||
Investments on equity method basis | 8,985 | 9,202 | |||
Goodwill | 242,736 | 231,428 | |||
Intangible assets, net of amortization | 11,138 | 9,734 | |||
Deferred tax assets | 4,222 | 4,186 | |||
Other assets | 50,408 | 47,664 | |||
1,357,899 | 1,405,886 | ||||
Liabilities | |||||
Notes payable | 107,657 | 109,312 | |||
Accounts payable and accrued liabilities | 94,057 | 117,740 | |||
Estimated title losses | 475,460 | 480,990 | |||
Deferred tax liabilities | 14,488 | 19,034 | |||
691,662 | 727,076 | ||||
Contingent liabilities and commitments | |||||
Stockholders’ equity | |||||
Common Stock and additional paid-in capital | 184,301 | 184,026 | |||
Retained earnings | 499,656 | 491,698 | |||
Accumulated other comprehensive (loss) income: | |||||
Net unrealized investment (losses) gains on investments available-for-sale | (6,336 | ) | 7,526 | ||
Foreign currency translation adjustments | (14,647 | ) | (8,373 | ) | |
Treasury stock – 352,161 common shares, at cost | (2,666 | ) | (2,666 | ) | |
Stockholders’ equity attributable to Stewart | 660,308 | 672,211 | |||
Noncontrolling interests | 5,929 | 6,599 | |||
Total stockholders’ equity (23,744,939 and 23,719,522 shares outstanding) | 666,237 | 678,810 | |||
1,357,899 | 1,405,886 |
Six Months Ended June 30, | |||||
2018 | 2017 | ||||
($000 omitted) | |||||
Reconciliation of net income to cash provided by operating activities: | |||||
Net income | 23,759 | 28,165 | |||
Add (deduct): | |||||
Depreciation and amortization | 12,388 | 12,819 | |||
Provision for bad debt | 69 | 634 | |||
Investment and other (gains) losses – net | (722 | ) | 389 | ||
Amortization of net premium on investments available-for-sale | 3,116 | 3,421 | |||
Payments for title losses in excess of provisions | (1,175 | ) | (467 | ) | |
Adjustment for insurance recoveries of title losses | 1,448 | 793 | |||
Increase in receivables – net | (4,363 | ) | (9,792 | ) | |
Increase in other assets – net | (2,626 | ) | (6,526 | ) | |
Decrease in payables and accrued liabilities – net | (26,326 | ) | (18,868 | ) | |
Change in net deferred income taxes | (457 | ) | 2,329 | ||
Net income from equity investees | (768 | ) | (977 | ) | |
Dividends received from equity investees | 985 | 1,237 | |||
Stock-based compensation expense | 1,979 | 3,372 | |||
Other – net | 60 | 2 | |||
Cash provided by operating activities | 7,367 | 16,531 | |||
Investing activities: | |||||
Proceeds from sales of investments in securities | 25,722 | 49,655 | |||
Proceeds from matured investments in debt securities | 10,355 | 22,834 | |||
Purchases of investments in securities | (26,220 | ) | (88,381 | ) | |
Net sales (purchases) of short-term investments | 221 | (182 | ) | ||
Purchases of property and equipment, and real estate – net | (5,690 | ) | (9,328 | ) | |
Cash paid for acquisition of businesses | (11,978 | ) | (18,080 | ) | |
Other – net | 458 | 410 | |||
Cash used by investing activities | (7,132 | ) | (43,072 | ) | |
Financing activities: | |||||
Payments on notes payable | (5,993 | ) | (17,917 | ) | |
Proceeds from notes payable | 26 | 25,897 | |||
Distributions to noncontrolling interests | (5,751 | ) | (5,300 | ) | |
Repurchases of common stock | (672 | ) | — | ||
Cash dividends paid | (14,127 | ) | (14,065 | ) | |
Payment of contingent consideration related to an acquisition | — | (1,298 | ) | ||
Purchase of remaining interest in consolidated subsidiary | (1,112 | ) | (1,013 | ) | |
Cash used by financing activities | (27,629 | ) | (13,696 | ) | |
Effects of changes in foreign currency exchange rates | (1,557 | ) | 1,670 | ||
Decrease in cash and cash equivalents | (28,951 | ) | (38,567 | ) | |
Cash and cash equivalents at beginning of period | 150,079 | 185,772 | |||
Cash and cash equivalents at end of period | 121,128 | 147,205 | |||
Common Stock ($1 par value) | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Noncontrolling interests | Total | ||||||||||||||
($000 omitted) | ||||||||||||||||||||
Balances at December 31, 2017 | 24,072 | 159,954 | 491,698 | (847 | ) | (2,666 | ) | 6,599 | 678,810 | |||||||||||
Cumulative effect adjustments on adoption of new accounting standards (Note 1-D) | — | — | 3,592 | (3,592 | ) | — | — | — | ||||||||||||
Net income attributable to Stewart | — | — | 18,598 | — | — | — | 18,598 | |||||||||||||
Dividends on Common Stock ($0.60 per share) | — | — | (14,232 | ) | — | — | — | (14,232 | ) | |||||||||||
Stock-based compensation and other | 42 | 1,937 | — | — | — | — | 1,979 | |||||||||||||
Stock repurchases | (17 | ) | (655 | ) | — | — | — | — | (672 | ) | ||||||||||
Purchase of remaining interest in consolidated subsidiary | — | (1,032 | ) | — | — | — | (80 | ) | (1,112 | ) | ||||||||||
Net change in unrealized gains and losses on investments, net of taxes | — | — | — | (10,434 | ) | — | — | (10,434 | ) | |||||||||||
Net realized gain reclassification, net of taxes | — | — | — | (480 | ) | — | — | (480 | ) | |||||||||||
Foreign currency translation adjustments, net of taxes | — | — | — | (5,630 | ) | — | — | (5,630 | ) | |||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | 5,161 | 5,161 | |||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (5,751 | ) | (5,751 | ) | |||||||||||
Balances at June 30, 2018 | 24,097 | 160,204 | 499,656 | (20,983 | ) | (2,666 | ) | 5,929 | 666,237 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted) | ($000 omitted) | ||||||||||
Title insurance premiums: | |||||||||||
Direct | 158,947 | 159,488 | 291,708 | 290,489 | |||||||
Agency | 247,257 | 234,407 | 484,111 | 467,756 | |||||||
Escrow fees | 35,468 | 39,447 | 63,335 | 72,210 | |||||||
Search, abstract and valuation services | 25,114 | 28,030 | 46,901 | 56,200 | |||||||
Other revenues | 18,443 | 19,815 | 33,371 | 32,614 | |||||||
485,229 | 481,187 | 919,426 | 919,269 |
June 30, 2018 | December 31, 2017 | ||||
($000 omitted) | |||||
Investments in: | |||||
Debt securities | 637,883 | 671,441 | |||
Equity securities | 35,450 | 37,914 | |||
673,333 | 709,355 |
June 30, 2018 | December 31, 2017 | ||||||||||
Amortized costs | Fair values | Amortized costs | Fair values | ||||||||
($000 omitted) | |||||||||||
Municipal | 62,837 | 62,831 | 71,581 | 72,669 | |||||||
Corporate | 347,379 | 342,595 | 351,477 | 357,933 | |||||||
Foreign | 222,740 | 219,932 | 229,750 | 228,237 | |||||||
U.S. Treasury Bonds | 12,947 | 12,525 | 12,838 | 12,602 | |||||||
645,903 | 637,883 | 665,646 | 671,441 |
June 30, 2018 | December 31, 2017 | ||||||||||
Gains | Losses | Gains | Losses | ||||||||
($000 omitted) | |||||||||||
Municipal | 463 | 469 | 1,263 | 175 | |||||||
Corporate | 2,372 | 7,156 | 6,953 | 497 | |||||||
Foreign | 1,320 | 4,128 | 1,742 | 3,255 | |||||||
U.S. Treasury Bonds | 1 | 423 | — | 236 | |||||||
4,156 | 12,176 | 9,958 | 4,163 |
Amortized costs | Fair values | ||||
($000 omitted) | |||||
In one year or less | 55,856 | 55,917 | |||
After one year through five years | 359,043 | 355,605 | |||
After five years through ten years | 190,383 | 186,494 | |||
After ten years | 40,621 | 39,867 | |||
645,903 | 637,883 |
Less than 12 months | More than 12 months | Total | |||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | ||||||||||||
($000 omitted) | |||||||||||||||||
Municipal | 198 | 21,849 | 271 | 5,756 | 469 | 27,605 | |||||||||||
Corporate | 6,916 | 268,573 | 240 | 4,755 | 7,156 | 273,328 | |||||||||||
Foreign | 897 | 73,483 | 3,231 | 88,709 | 4,128 | 162,192 | |||||||||||
U.S. Treasury Bonds | 157 | 5,732 | 266 | 6,686 | 423 | 12,418 | |||||||||||
8,168 | 369,637 | 4,008 | 105,906 | 12,176 | 475,543 |
Less than 12 months | More than 12 months | Total | |||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | ||||||||||||
($000 omitted) | |||||||||||||||||
Municipal | 58 | 17,023 | 117 | 5,784 | 175 | 22,807 | |||||||||||
Corporate | 386 | 81,632 | 111 | 4,926 | 497 | 86,558 | |||||||||||
Foreign | 1,528 | 116,130 | 1,727 | 39,031 | 3,255 | 155,161 | |||||||||||
U.S. Treasury Bonds | 53 | 5,830 | 183 | 6,772 | 236 | 12,602 | |||||||||||
2,025 | 220,615 | 2,138 | 56,513 | 4,163 | 277,128 |
• | Level 1 – quoted prices in active markets for identical assets or liabilities; |
• | Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and |
• | Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
Level 1 | Level 2 | Fair value measurements | ||||||
($000 omitted) | ||||||||
Investments in securities: | ||||||||
Debt securities: | ||||||||
Municipal | — | 62,831 | 62,831 | |||||
Corporate | — | 342,595 | 342,595 | |||||
Foreign | — | 219,932 | 219,932 | |||||
U.S. Treasury Bonds | — | 12,525 | 12,525 | |||||
Equity securities | 35,450 | — | 35,450 | |||||
35,450 | 637,883 | 673,333 |
Level 1 | Level 2 | Fair value measurements | ||||||
($000 omitted) | ||||||||
Investments in securities: | ||||||||
Debt securities: | ||||||||
Municipal | — | 72,669 | 72,669 | |||||
Corporate | — | 357,933 | 357,933 | |||||
Foreign | — | 228,237 | 228,237 | |||||
U.S. Treasury Bonds | — | 12,602 | 12,602 | |||||
Equity securities | 37,914 | — | 37,914 | |||||
37,914 | 671,441 | 709,355 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted) | |||||||||||
Realized gains | 603 | 279 | 1,166 | 845 | |||||||
Realized losses | (38 | ) | (955 | ) | (68 | ) | (1,234 | ) | |||
Net unrealized investment gains (losses) recognized on equity securities held | 1,828 | — | (376 | ) | — | ||||||
2,393 | (676 | ) | 722 | (389 | ) |
June 30, 2018 | |||||
Three Months Ended | Six Months Ended | ||||
($000 omitted) | |||||
Total net investment gains (losses) recognized on equity securities during the period | 1,612 | (614 | ) | ||
Less: Net realized losses on equity securities sold during the period | (216 | ) | (238 | ) | |
Net unrealized investment gains (losses) recognized on equity securities still held | 1,828 | (376 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted) | |||||||||||
Proceeds from sales of debt securities | 8,003 | 33,776 | 21,149 | 48,826 | |||||||
Proceeds from sales of equity securities | 2,353 | 36 | 4,573 | 829 | |||||||
Total proceeds from sales of investment in securities | 10,356 | 33,812 | 25,722 | 49,655 |
Title | Ancillary Services and Corporate | Consolidated Total | ||||||
($000 omitted) | ||||||||
Balances at December 31, 2017 | 225,699 | 5,729 | 231,428 | |||||
Acquisitions | 11,308 | — | 11,308 | |||||
Balances at June 30, 2018 | 237,007 | 5,729 | 242,736 |
2018 | 2017 | ||||
($000 omitted) | |||||
Balances at January 1 | 480,990 | 462,572 | |||
Provisions: | |||||
Current year | 41,372 | 43,850 | |||
Previous policy years | (3,694 | ) | 1,313 | ||
Total provisions | 37,678 | 45,163 | |||
Payments, net of recoveries: | |||||
Current year | (5,263 | ) | (5,966 | ) | |
Previous policy years | (33,590 | ) | (39,664 | ) | |
Total payments, net of recoveries | (38,853 | ) | (45,630 | ) | |
Effects of changes in foreign currency exchange rates | (4,355 | ) | 3,189 | ||
Balances at June 30 | 475,460 | 465,294 | |||
Loss ratios as a percentage of title operating revenues: | |||||
Current year provisions | 4.6 | % | 4.9 | % | |
Total provisions | 4.2 | % | 5.1 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted, except per share) | |||||||||||
Numerator: | |||||||||||
Net income attributable to Stewart | 22,377 | 18,568 | 18,598 | 22,657 | |||||||
Denominator (000): | |||||||||||
Basic average shares outstanding | 23,546 | 23,444 | 23,527 | 23,438 | |||||||
Average number of dilutive shares relating to grants of restricted shares and units | 79 | 176 | 80 | 175 | |||||||
Diluted average shares outstanding | 23,625 | 23,620 | 23,607 | 23,613 | |||||||
Basic earnings per share attributable to Stewart | 0.95 | 0.79 | 0.79 | 0.97 | |||||||
Diluted earnings per share attributable to Stewart | 0.95 | 0.79 | 0.79 | 0.96 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted) | |||||||||||
Title segment: | |||||||||||
Revenues | 479,125 | 470,449 | 904,536 | 896,246 | |||||||
Depreciation and amortization | 5,249 | 5,321 | 10,566 | 10,547 | |||||||
Income before taxes and noncontrolling interest | 37,737 | 39,467 | 42,862 | 51,744 | |||||||
Ancillary services and corporate segment: | |||||||||||
Revenues | 13,744 | 15,003 | 25,563 | 32,247 | |||||||
Depreciation and amortization | 905 | 1,120 | 1,822 | 2,272 | |||||||
Loss before taxes and noncontrolling interest | (6,416 | ) | (6,320 | ) | (14,796 | ) | (12,729 | ) | |||
Consolidated Stewart: | |||||||||||
Revenues | 492,869 | 485,452 | 930,099 | 928,493 | |||||||
Depreciation and amortization | 6,154 | 6,441 | 12,388 | 12,819 | |||||||
Income before taxes and noncontrolling interest | 31,321 | 33,147 | 28,066 | 39,015 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($000 omitted) | |||||||||||
United States | 460,529 | 451,766 | 873,833 | 871,019 | |||||||
International | 32,340 | 33,686 | 56,266 | 57,474 | |||||||
492,869 | 485,452 | 930,099 | 928,493 |
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | ||||||||||||
Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | ||||||||
($000 omitted) | |||||||||||||
Net unrealized (losses) gains on investments: | |||||||||||||
Change in net unrealized gains and losses on investments | (3,074 | ) | (646 | ) | (2,428 | ) | 548 | 193 | 355 | ||||
Less: reclassification adjustment for net gains included in net income | (292 | ) | (61 | ) | (231 | ) | (145 | ) | (51 | ) | (94 | ) | |
(3,366 | ) | (707 | ) | (2,659 | ) | 403 | 142 | 261 | |||||
Foreign currency translation adjustments | (4,575 | ) | (537 | ) | (4,038 | ) | 4,334 | 1,130 | 3,204 | ||||
Other comprehensive (loss) income | (7,941 | ) | (1,244 | ) | (6,697 | ) | 4,737 | 1,272 | 3,465 | ||||
Six Months Ended June 30, 2018 | Six Months Ended June 30, 2017 | ||||||||||||
Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | ||||||||
($000 omitted) | |||||||||||||
Net unrealized (losses) gains on investments: | |||||||||||||
Change in net unrealized gains and losses on investments | (13,208 | ) | (2,774 | ) | (10,434 | ) | 4,343 | 1,521 | 2,822 | ||||
Less: reclassification adjustment for net gains included in net income | (607 | ) | (127 | ) | (480 | ) | (710 | ) | (249 | ) | (461 | ) | |
(13,815 | ) | (2,901 | ) | (10,914 | ) | 3,633 | 1,272 | 2,361 | |||||
Foreign currency translation adjustments | (6,854 | ) | (1,224 | ) | (5,630 | ) | 6,014 | 1,485 | 4,529 | ||||
Other comprehensive (loss) income | (20,669 | ) | (4,125 | ) | (16,544 | ) | 9,647 | 2,757 | 6,890 |
For the Three Months Ended June 30, | ||||||||
2018 | 2017 | % Change | ||||||
Total operating revenues | 471.5 | 466.0 | 1 | % | ||||
Investment income and other net gains | 7.6 | 4.4 | 73 | % | ||||
Pretax income | 37.7 | 39.5 | (4 | )% | ||||
Pretax margin | 7.9 | % | 8.4 | % |
For the Three Months Ended June 30, | ||||||||
2018 | 2017 | % Change | ||||||
Total revenues | 13.7 | 15.0 | (8 | )% | ||||
Pretax loss | (6.4 | ) | (6.3 | ) | (2 | )% |
• | mortgage 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; |
• | number of households; |
• | premium rates; |
• | foreign currency exchange rates; |
• | market share; |
• | ability to attract and retain highly productive sales associates; |
• | independent agency remittance rates; |
• | opening of new offices and acquisitions; |
• | number and value of commercial transactions, which typically yield higher premiums; |
• | government or regulatory initiatives, including tax incentives and the implementation of the new integrated disclosure requirements; |
• | acquisitions or divestitures of businesses; |
• | volume of distressed property transactions; and |
• | seasonality and/or weather. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||
($ in millions) | ($ in millions) | ||||||||||||||||
Non-commercial | |||||||||||||||||
Domestic | 145.7 | 153.1 | (5 | )% | 261.5 | 276.1 | (5 | )% | |||||||||
International | 22.8 | 27.2 | (16 | )% | 41.0 | 45.5 | (10 | )% | |||||||||
168.5 | 180.3 | (7 | )% | 302.5 | 321.6 | (6 | )% | ||||||||||
Commercial: | |||||||||||||||||
Domestic | 48.2 | 46.5 | 4 | % | 95.7 | 88.2 | 9 | % | |||||||||
International | 7.5 | 4.9 | 53 | % | 11.6 | 9.3 | 25 | % | |||||||||
55.7 | 51.4 | 8 | % | 107.3 | 97.5 | 10 | % | ||||||||||
Total direct title revenues | 224.2 | 231.7 | (3 | )% | 409.8 | 419.1 | (2 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | Change | % Change | 2018 | 2017 | Change | % Change | ||||||||||
Opened Orders: | |||||||||||||||||
Commercial | 8,353 | 10,788 | (2,435 | ) | (23 | )% | 17,327 | 22,238 | (4,911 | ) | (22 | )% | |||||
Purchase | 66,074 | 67,823 | (1,749 | ) | (3 | )% | 122,565 | 129,065 | (6,500 | ) | (5 | )% | |||||
Refinance | 21,615 | 24,183 | (2,568 | ) | (11 | )% | 44,747 | 47,639 | (2,892 | ) | (6 | )% | |||||
Other | 2,531 | 4,423 | (1,892 | ) | (43 | )% | 5,544 | 9,019 | (3,475 | ) | (39 | )% | |||||
Total | 98,573 | 107,217 | (8,644 | ) | (8 | )% | 190,183 | 207,961 | (17,778 | ) | (9 | )% | |||||
Closed Orders: | |||||||||||||||||
Commercial | 6,968 | 8,167 | (1,199 | ) | (15 | )% | 13,488 | 15,493 | (2,005 | ) | (13 | )% | |||||
Purchase | 49,069 | 52,362 | (3,293 | ) | (6 | )% | 85,750 | 92,564 | (6,814 | ) | (7 | )% | |||||
Refinance | 14,582 | 16,298 | (1,716 | ) | (11 | )% | 29,461 | 35,506 | (6,045 | ) | (17 | )% | |||||
Other | 2,536 | 4,135 | (1,599 | ) | (39 | )% | 5,651 | 7,333 | (1,682 | ) | (23 | )% | |||||
Total | 73,155 | 80,962 | (7,807 | ) | (10 | )% | 134,350 | 150,896 | (16,546 | ) | (11 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2018 | 2017 | % Change | 2018 | 2017 | % Change | ||||||||||||
($ in millions) | ($ in millions) | ||||||||||||||||
Amounts retained by agencies | 203.8 | 192.6 | 6 | % | 399.0 | 383.7 | 4 | % | |||||||||
As a % of agency revenues | 82.4 | % | 82.1 | % | 82.4 | % | 82.0 | % | |||||||||
Employee costs | 146.3 | 139.3 | 5 | % | 285.1 | 279.1 | 2 | % | |||||||||
As a % of operating revenues | 30.1 | % | 29.0 | % | 31.0 | % | 30.4 | % | |||||||||
Other operating expenses | 86.0 | 88.8 | (3 | )% | 166.2 | 167.1 | (1 | )% | |||||||||
As a % of operating revenues | 17.7 | % | 18.5 | % | 18.1 | % | 18.2 | % | |||||||||
Title losses and related claims | 18.7 | 24.5 | (24 | )% | 37.7 | 45.2 | (17 | )% | |||||||||
As a % of title revenues | 4.0 | % | 5.2 | % | 4.2 | % | 5.1 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||
($ in millions) | ($ in millions) | ||||||||||
Provisions – known claims: | |||||||||||
Current year | 6.0 | 2.1 | 7.5 | 4.2 | |||||||
Prior policy years | 15.5 | 15.9 | 30.2 | 34.7 | |||||||
21.5 | 18.0 | 37.7 | 38.9 | ||||||||
Provisions – IBNR | |||||||||||
Current year | 16.5 | 21.3 | 33.9 | 39.7 | |||||||
Prior policy years | (3.8 | ) | 1.1 | (3.7 | ) | 1.3 | |||||
12.7 | 22.4 | 30.2 | 41.0 | ||||||||
Transferred from IBNR to known claims | (15.5 | ) | (15.9 | ) | (30.2 | ) | (34.7 | ) | |||
Total provisions | 18.7 | 24.5 | 37.7 | 45.2 |
June 30, 2018 | December 31, 2017 | ||||
($ in millions) | |||||
Known claims | 68.6 | 69.8 | |||
IBNR | 406.9 | 411.2 | |||
Total estimated title losses | 475.5 | 481.0 |
For the Six Months Ended June 30, | |||||
2018 | 2017 | ||||
($ in millions) | |||||
Net cash provided by operating activities | 7.4 | 16.5 | |||
Net cash used by investing activities | (7.1 | ) | (43.1 | ) | |
Net cash used by financing activities | (27.6 | ) | (13.7 | ) |
• | we may be required, under certain circumstances, to pay FNF a termination fee of $33 million if the Merger Agreement is terminated under qualifying circumstances, as described in the Merger Agreement; |
• | we will be required to pay certain costs relating to the Mergers, whether or not the Mergers are completed, such as legal, accounting, financial advisor and printing fees; |
• | under the Merger Agreement, we are subject to certain restrictions on the conduct of its business prior to completing the Mergers which may adversely affect its ability to execute certain of its business strategies; |
• | time and resources committed by our management to matters relating to the Mergers could otherwise have been devoted to pursuing other beneficial opportunities; |
• | the market price of our Common Stock could decline below current market prices to the extent that such current market prices reflect a market assumption that the Mergers will be completed; and |
• | if the Merger Agreement is terminated and our board seeks another business combination, our stockholders cannot be certain that we will be able to find a party willing to enter into a business combination or other strategic transaction on terms equivalent to or more attractive than the terms that FNF has agreed to in the Merger Agreement. |
Exhibit | ||||
2.1 | - | |||
3.1 | - | |||
3.2 | - |
31.1* | - | |||
31.2* | - | |||
32.1* | - | |||
32.2* | - |
101.INS* | - | XBRL Instance Document | ||
101.SCH* | - | XBRL Taxonomy Extension Schema Document | ||
101.CAL* | - | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF* | - | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB* | - | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE* | - | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith |
† Management contract or compensatory plan |
August 6, 2018 |
Date |
Stewart Information Services Corporation | ||
Registrant | ||
By: | /s/ David C. Hisey | |
David C. Hisey, Chief Financial Officer, Secretary and Treasurer |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Matthew W. Morris | ||
Name: | Matthew W. Morris | |
Title: | Chief Executive Officer |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ David C. Hisey | ||
Name: | David C. Hisey | |
Title: | Chief Financial Officer, Secretary and Treasurer |
/s/ Matthew W. Morris | ||
Name: | Matthew W. Morris | |
Title: | Chief Executive Officer |
/s/ David C. Hisey | ||
Name: | David C. Hisey | |
Title: | Chief Financial Officer, Secretary and Treasurer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 01, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | STEWART INFORMATION SERVICES CORP | |
Entity Central Index Key | 0000094344 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Trading Symbol | STC | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 23,744,381 |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Revenues | ||||
Investment income | $ 5,247 | $ 4,941 | $ 9,951 | $ 9,613 |
Investment and other gains (losses) – net | 2,393 | (676) | 722 | (389) |
Revenues | 492,869 | 485,452 | 930,099 | 928,493 |
Expenses | ||||
Amounts retained by agencies | 203,793 | 192,558 | 399,000 | 383,733 |
Employee costs | 146,278 | 139,346 | 285,101 | 279,131 |
Other operating expenses | 85,953 | 88,786 | 166,220 | 167,103 |
Title losses and related claims | 18,697 | 24,462 | 37,678 | 45,163 |
Depreciation and amortization | 6,154 | 6,441 | 12,388 | 12,819 |
Interest | 673 | 712 | 1,646 | 1,529 |
Total expenses | 461,548 | 452,305 | 902,033 | 889,478 |
Income before taxes and noncontrolling interests | 31,321 | 33,147 | 28,066 | 39,015 |
Income tax expense | 5,602 | 10,993 | 4,307 | 10,850 |
Net income | 25,719 | 22,154 | 23,759 | 28,165 |
Less net income attributable to noncontrolling interests | 3,342 | 3,586 | 5,161 | 5,508 |
Net income attributable to Stewart | 22,377 | 18,568 | 18,598 | 22,657 |
Net income | 25,719 | 22,154 | 23,759 | 28,165 |
Other comprehensive (loss) income, net of taxes: | ||||
Foreign currency translation adjustments | (4,038) | 3,204 | (5,630) | 4,529 |
Change in net unrealized gains and losses on investments | (2,428) | 355 | (10,434) | 2,822 |
Reclassification adjustment for net gains included in net income | (231) | (94) | (480) | (461) |
Other comprehensive (loss) income, net of taxes | (6,697) | 3,465 | (16,544) | 6,890 |
Comprehensive income | 19,022 | 25,619 | 7,215 | 35,055 |
Less net income attributable to noncontrolling interests | 3,342 | 3,586 | 5,161 | 5,508 |
Comprehensive income attributable to Stewart | $ 15,680 | $ 22,033 | $ 2,054 | $ 29,547 |
Basic average shares outstanding (000) | 23,546 | 23,444 | 23,527 | 23,438 |
Basic earnings per share attributable to Stewart (in usd per share) | $ 0.95 | $ 0.79 | $ 0.79 | $ 0.97 |
Diluted average shares outstanding (000) | 23,625 | 23,620 | 23,607 | 23,613 |
Diluted earnings per share attributable to Stewart (in usd per share) | $ 0.95 | $ 0.79 | $ 0.79 | $ 0.96 |
Title - Direct operations | ||||
Revenues | ||||
Revenues | $ 224,240 | $ 231,662 | $ 409,752 | $ 419,091 |
Title - Agency operations | ||||
Revenues | ||||
Revenues | 247,257 | 234,407 | 484,111 | 467,756 |
Ancillary services | ||||
Revenues | ||||
Revenues | 13,732 | 15,118 | 25,563 | 32,422 |
Operating revenues | ||||
Revenues | ||||
Revenues | $ 485,229 | $ 481,187 | $ 919,426 | $ 919,269 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Treasury stock, common shares | 352,161 | 352,161 |
Common stock, shares outstanding | 23,744,939 | 23,719,522 |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) (Parenthetical) |
6 Months Ended |
---|---|
Jun. 30, 2018
$ / shares
| |
Statement of Stockholders' Equity [Abstract] | |
Common stock, par value (in usd per share) | $ 1 |
Cash dividends on common stock (in usd per share) | $ 0.6 |
Interim financial statements |
6 Months Ended |
---|---|
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Interim financial statements | Interim financial statements. The financial information contained in this report for the three and six months ended June 30, 2018 and 2017, and as of June 30, 2018, is unaudited. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. A. Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP), including management’s best judgments and estimates. In the opinion of management, all adjustments necessary for a fair presentation of this information for all interim periods, consisting only of normal recurring accruals, have been made. The Company’s results of operations for interim periods are not necessarily indicative of results for a full year and actual results could differ. B. Consolidation. The condensed consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. All significant intercompany amounts and transactions have been eliminated and provisions have been made for noncontrolling interests. Unconsolidated investees, in which the Company typically owns 20% through 50% of the equity, are accounted for by the equity method. C. Restrictions on cash and investments. The Company maintains investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds, which approximated $482.4 million and $490.8 million at June 30, 2018 and December 31, 2017, respectively, are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $13.6 million and $14.2 million at June 30, 2018 and December 31, 2017, respectively. 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. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease. D. Cumulative effect adjustments on adoption of new accounting standards. In February 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amended its standard on comprehensive income to provide a one-time option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the 2017 Act) that was passed in December 2017 from accumulated other comprehensive income/loss (AOCI) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. The Company adopted ASU 2018-02 effective on January 1, 2018 and reclassified $1.0 million of net tax expense from AOCI to retained earnings in the consolidated statement of equity. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which, among others, (i) required equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplified the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminated the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and (iv) required separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. The Company adopted ASU 2016-01 effective on January 1, 2018, which resulted in a reclassification of the outstanding net unrealized investment gains, net of taxes, of $4.6 million relating to investments in equity securities previously carried in AOCI to retained earnings in the consolidated statement of equity. E. Recent significant accounting pronouncement. In February 2016, the FASB issued ASU 2016-02, Leases, which updated the current guidance related to leases. The new guidance includes the requirement for the lessee to recognize in the balance sheet a liability equal to the present value of contractual lease payments with terms of more than twelve months and a right-of-use asset representing the right to use the underlying asset for the lease term. Disclosures will be required by lessees to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for annual and interim periods beginning after December 15, 2018 and early adoption is allowed. The Company expects to adopt ASU 2016-02 on January 1, 2019 using the modified retrospective method of adoption. The Company expects the adoption of ASU 2016-02 will result in material increases in the assets and liabilities reported on its consolidated balance sheets as indicated by the approximately $167.1 million of undiscounted future minimum lease payments with terms of more than twelve months as of December 31, 2017 (as disclosed in Note 16 of the Company's consolidated financial statements included in the Company's 2017 Annual Report on Form 10-K). The Company expects the new ASU will likely have an insignificant impact on its consolidated statements of operations and cash flows. The Company is currently in the process of system implementation and data migration and expects the transition to be completed during the fourth quarter 2018. F. Merger Agreement. On March 18, 2018, the Company entered into an Agreement and Plan of Merger (the Merger Agreement) with Fidelity National Financial, Inc., a Delaware corporation (FNF), A Holdco Corp., a Delaware corporation and a wholly-owned direct subsidiary of FNF (Merger Sub I), and S Holdco LLC, a Delaware limited liability company and a wholly-owned direct subsidiary of FNF (Merger Sub II and, together with Merger Sub I, the Merger Subs). Upon the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time (as defined below), Merger Sub I will merge with and into the Company (Merger I), with the Company surviving Merger I as a direct wholly-owned subsidiary of FNF, and at the Subsequent Effective Time (as defined in the Merger Agreement), the Company will merge with and into Merger Sub II (Merger II and, together with Merger I, the Mergers), with Merger Sub II surviving Merger II as a direct wholly-owned subsidiary of FNF. Subject to the terms and conditions of the Merger Agreement, at the effective time of Merger I (the Effective Time, each share of the Company's Common Stock outstanding immediately prior to the Effective Time (other than (i) shares owned by the Company, its subsidiaries, FNF or the Merger Subs and (ii) shares in respect of which appraisal rights have been properly exercised and perfected under Delaware law) will be converted into the right to receive cash consideration of $25.00 and 0.6425 shares of FNF common stock, par value $0.0001 per share (FNF Common Stock), subject to potential adjustment as described below. Pursuant to the terms of the Merger Agreement, the Company's stockholders have the option to elect to receive the merger consideration in all cash (the Cash Election Consideration), all FNF Common Stock (the Stock Election Consideration) or a mix of 50% cash and 50% FNF Common Stock (the Mixed Election Consideration), subject to pro-rata reductions to the extent either the election for the Cash Election Consideration or the election for the Stock Election Consideration is oversubscribed. Stockholders that elect to receive the Cash Election Consideration will receive is $50.00 per share, subject to potential adjustment as described below and proration to the extent the cash option is oversubscribed. The Stock Election Consideration and the stock portion of the Mixed Election Consideration will be calculated using a fixed exchange ratio that is based on the average of the volume weighted average prices of FNF Common Stock for each of the twenty (20) trading days prior to the signing of the Merger Agreement, or $38.91 (the Parent Share Price). The exchange ratio for the Stock Election Consideration will be equal to 1.2850 shares of FNF Common Stock per share of Common Stock (the Exchange Ratio), subject to potential adjustment described below and proration to the extent the stock option is oversubscribed. Under the terms of the Merger Agreement, if the combined company is required to divest assets or businesses with 2017 annual revenues in excess of $75 million in order to receive required regulatory approvals (up to a cap of $225 million of 2017 annual revenues), the per share purchase price will be adjusted downwards on a sliding scale between such amounts of divestitures up to a maximum reduction of $4.50 in value in the event that businesses or assets with 2017 annual revenues of $225 million are divested, with such adjustment to consist of (i) in the case shares of Common Stock with respect to which Cash Election Consideration has been elected, a reduction of the amount of cash paid in respect of each share, (ii) in the case shares of Common Stock with respect to which Stock Election Consideration has been elected, a reduction in the Exchange Ratio based on the Parent Share Price, and (iii) in the case of shares of Common Stock with respect to which Mixed Election Consideration has been elected, a reduction in both the amount of cash and the Exchange Ratio to be paid to the holders of such shares, with 50% of the aggregate value of such reduction to consist of a reduction of the cash consideration and 50% of the aggregate value of such reduction to consist of a reduction in the Exchange Ratio based on the Parent Share Price. The consummation of the Mergers, which is expected during the first or second quarter of 2019, is subject to the satisfaction or waiver of customary conditions, including, among other things, (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of Common Stock entitled to vote on the Mergers (the Company Stockholder Approval), (ii) the absence of any injunction or court or other governmental order (with respect to applicable antitrust or insurance laws, solely with respect to the Required Antitrust Regulatory Filings/Approvals and the Required Insurance Regulatory Filings/Approvals (each as defined in the Merger Agreement)) enjoining, prohibiting or rendering illegal the consummation of the Mergers, (iii) obtaining certain Required Antitrust Regulatory Filings/Approvals, (iv) obtaining certain Required Insurance Regulatory Filings/Approvals, (v) the Securities and Exchange Commission (SEC) declaring the Registration Statement (as defined in the Merger Agreement) on Form S-4 effective, (vi) the shares of FNF Common Stock to be issued in the Mergers having been approved for listing on the New York Stock Exchange, (vii) the representations and warranties made by each of the Company and FNF being true at and as of the Closing Date (as defined in the Merger Agreement), subject to the materiality standards contained in the Merger Agreement, (viii) the performance, in all material respects, by each of the Company, FNF and the Merger Subs of all of their respective obligations under the Merger Agreement and (ix) no Company Material Adverse Effect or Parent Material Adverse Effect (each as defined in the Merger Agreement) having occurred since the signing of the Merger Agreement. The Merger Agreement contains certain customary representations, warranties and covenants made by the Company and FNF. The Merger Agreement also contains customary covenants for each of the parties, including the obligation for the parties to refrain from taking specified actions without the consent of the other party, and, in the case of the Company, conduct its business in the ordinary course and use commercially reasonable efforts to preserve intact its business organizations and relationships with third parties. Under the Merger Agreement, each of the Company and FNF has agreed to use its reasonable best efforts to take all actions and to do all things necessary or advisable under applicable law to consummate the Mergers, including preparing and filing as promptly as practicable with any governmental authority or other third party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any governmental authority or other third party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement. Notwithstanding such obligation, in connection with obtaining any required regulatory approval, (a) FNF is not required to sell, divest, dispose of, license or hold separate (i) title plants and rights to title plants, businesses, product lines or assets to the extent that such title plants, rights to title plants, businesses, product lines or assets generated 2017 revenues in excess of $225 million in the aggregate, or (ii) any of its own brands in full and (b) FNF and its affiliates are not required to litigate in order to avoid or have terminated any legal restraint that would prevent the Mergers from being consummated. The Merger Agreement contains certain customary termination rights in favor of either the Company or FNF, which are exercisable (i) by mutual consent, (ii) upon the failure to complete the Mergers by March 18, 2019 (the End Date), subject to certain exceptions and subject to up to two (2) extensions of up to three (3) months each upon the election of either the Company or FNF if, as of such date, all closing conditions (other than the receipt of the Required Antitrust Regulatory Filings/Approvals, the receipt of the Required Insurance Regulatory Filings/Approvals and the absence of any law or court or other governmental order relating thereto) having been met or being capable of being satisfied as of such time, (iii) in the event of a final and non-appealable law or order that prohibits the consummation of the Mergers or (iv) if the Company’s stockholders do not vote to approve the Mergers. The Merger Agreement contains certain customary termination rights in favor of the Company, which are exercisable (i) for a breach of any representation, warranty, covenant or agreement made by FNF under the Merger Agreement that would result in failure to satisfy a closing condition (subject to certain cure periods) or (ii) if, prior to the Company Stockholder Approval being obtained, the Company’s board of directors authorizes the Company to enter into, and the Company enters into, an alternative acquisition agreement in connection with a superior proposal. Under the Merger Agreement, the Company will be obligated to pay a termination fee of $33 million to FNF if the Merger Agreement is terminated due to the Company’s board of directors changing its recommendation or if the Company terminates the Merger Agreement to enter into an agreement for a superior proposal. The Merger Agreement also contains certain customary termination rights in favor of FNF. If the Merger Agreement is terminated due to (i) the failure to complete the Mergers by the End Date because of a failure to obtain the Required Antitrust Regulatory Filings/Approvals or Required Insurance Regulatory Filings/Approvals, and all other closing conditions have been or are capable of being satisfied at the time of such termination, or (ii) an injunction or governmental or other court order enjoining, prohibiting or rendering illegal the consummation of the Mergers that is based on the failure to obtain the Required Antitrust Regulatory Filings/Approvals or Required Insurance Regulatory Filings/Approvals, then FNF will be obligated to pay a reverse termination fee of $50 million to the Company. The Merger Agreement was included as Exhibit 2.1 to the Form 8-K filed with the SEC on March 19, 2018. |
Revenues |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | Revenues. The Company's operating revenues, summarized by type, are as follows:
Direct premiums - Premiums from title insurance policies directly issued or issued by affiliate offices are recognized at the time of the closing of the related real estate transaction. Agency premiums - Premiums from title insurance policies written by independent agencies (agencies) are recognized when the policies are reported to the Company. In addition, where reasonable estimates can be made, the Company accrues for policies issued but not reported until after period end. The Company believes that reasonable estimates can be made when recent and consistent policy issuance information is available. Estimates are based on historical reporting patterns and other information obtained about agencies, as well as current trends in direct operations and in the title industry. In this accrual, future transactions are not being estimated. The Company is estimating revenues on policies that have already been issued by agencies but not yet reported to or received by the Company. The Company has consistently followed the same basic method of estimating unreported policy revenues for more than 10 years. Escrow fees - An escrow is a transaction pursuant to an agreement of a buyer, seller, borrower, or lender wherein an impartial third party, such as the Company, acts in a fiduciary capacity on behalf of the parties in accordance with the terms of such agreement in order to accomplish the directions stated therein. Services provided include, among others, acting as escrow or other fiduciary agent, obtaining releases, and conducting the actual closing or settlement. Escrow fees are recognized upon closing of the escrow, which is generally at the same time of the closing of the related real estate transaction. Search, abstract and valuation services - These services are primarily related to establishing the ownership, legal status and valuation of the property in a real estate transaction. In these cases, the Company does not issue a title insurance policy or perform duties of an escrow agent. Revenues from these services are recognized upon delivery of the service to the customer. Other revenues - Other revenues consist primarily of fees related to tax-deferred property exchange services, information technology products related to real property records and closing settlement services, income from equity investees, and other services performed to facilitate the closing of real estate transactions. For those products and services that are delivered at a point in time, the related revenue is recognized upon delivery based on the unit price of the product or service. For those products and services where delivery occurs over time, the related revenue is recognized ratably over the duration of the contract. |
Investments in debt and equity securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in debt and equity securities | Investments in debt and equity securities. The total fair values of the Company's investments in debt and equity securities are detailed below:
Investments in debt securities are classified as available-for-sale and the net unrealized gains and losses on such investments, net of applicable deferred taxes, are included as a component of AOCI within stockholders' equity. As a result of the Company's adoption of ASU 2016-01 (as discussed in Note 1-D), fair value changes relating to investments in equity securities are recognized as part of investment and other (losses) gains - net in the statement of operations beginning on January 1, 2018. Previously, the investments in equity securities, which consist of common stocks and master limited partnership interests, were accounted for similar to investments in debt securities. As of June 30, 2018 and December 31, 2017, the net unrealized investment gains relating to investments in equity securities held were $4.9 million and $5.8 million, respectively. The amortized costs and fair values of investments in debt securities are as follows:
Foreign debt securities consist of Canadian government and corporate bonds, United Kingdom treasury bonds, and Mexican government bonds. Gross unrealized gains and losses on investments in debt securities are as follows:
Debt securities as of June 30, 2018 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2018, were:
The number of specific debt investment holdings held in an unrealized loss position as of June 30, 2018 was 313. Of these securities, 64 securities were in unrealized loss positions for more than 12 months. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery, and no significant credit risk is deemed to exist, these investments are not considered as other-than-temporarily impaired. The Company believes its investment portfolio is diversified and expects no material loss to result from the failure to perform by issuers of the debt securities it holds. Investments made by the Company are not collateralized. Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017, were:
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Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | Fair value measurements. The Fair Value Measurements and Disclosures Topic (Topic 820) of the FASB Accounting Standards Codification (ASC) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous, market for the asset or liability in an orderly transaction between market participants at the measurement date. Topic 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs when possible. The three levels of inputs used to measure fair value are as follows:
As of June 30, 2018, financial instruments measured at fair value on a recurring basis are summarized below:
As of December 31, 2017, financial instruments measured at fair value on a recurring basis are summarized below:
As of June 30, 2018, Level 1 financial instruments consist of equity securities. Level 2 financial instruments consist of municipal, governmental, and corporate bonds, both U.S. and foreign. In accordance with the Company’s policies and guidelines which incorporate relevant statutory requirements, the Company’s third-party registered investment manager invests only in securities rated as investment grade or higher by the major rating services, where observable valuation inputs are significant. The fair value of the Company's investments in available-for-sale securities are primarily determined using a third-party pricing service provider. The third-party pricing service provider calculates the fair values using both market approach and model valuation methods, as well as pricing information obtained from brokers, dealers and custodians. Management ensures the reasonableness of the third-party service valuations by comparing them with pricing information from the Company's investment manager. There were no transfers of investments between levels during the six months ended June 30, 2018 and 2017. |
Investment and other (losses) gains - net |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment and other (losses) gains - net | Investment and other (losses) gains - net. Investments and other (losses) gains are detailed as follows:
Following the adoption of ASU 2016-01 discussed in Notes 1 and 3, net investment losses recognized during the three and six months ended June 30, 2018 related to investments in equity securities still held as of June 30, 2018 are calculated as follows ($000 omitted):
Proceeds from sales of investments in securities are as follows:
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Goodwill and other intangibles |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and other intangibles | Goodwill and other intangibles. The summary of changes in goodwill is as follows.
During the first quarter 2018, the Company acquired certain title businesses which increased goodwill related to the title segment by a total of $11.3 million, which is substantially deductible for income tax purposes over a period of 15 years. Also, in connection with the acquisitions, the Company identified and recorded $3.6 million of other intangibles, primarily related to employment and non-compete agreements, to be amortized over 3 years from the date of acquisition. |
Estimated title losses |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated title losses | Estimated title losses. A summary of estimated title losses for the six months ended June 30 is as follows:
During the six months ended June 30, 2018, the Company decreased its loss provisioning rate due to lower loss experience and reduced prior policy year reserves as a result of the actuarial reserve review. This resulted in a $3.7 million favorable loss development for previous policy years and decreased total title loss provisions for the six months ended June 30, 2018 compared to the same period in 2017. |
Share-based payments |
6 Months Ended |
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Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based payments | Share-based payments. Prior to 2018, the Company granted executives and senior management shares of restricted common stock, consisting of time-based shares, which vest on each of the first three anniversaries of the grant date, and performance-based shares, which vest upon achievement of certain financial objectives over the period of three years. Starting on January 1, 2018, the Company began granting time-based and performance-based restricted stock units, which have vesting conditions generally similar to those restricted common stock shares awarded previously. Each restricted stock unit represents a contractual right to receive a share of the Company's common stock. The aggregate grant-date fair values of these awards during 2018 and 2017 were $4.7 million (109,000 shares with an average grant price per share of $43.39) and $4.7 million (107,000 shares with an average grant price per share of $44.21), respectively. Awards were made pursuant to the Company’s employee incentive compensation plans and the compensation expense associated with restricted stock awards is recognized over the corresponding vesting period. Additionally, during the second quarters 2018 and 2017, the Company granted its board of directors, as a component of annual director retainer compensation, 14,300 and 13,000 shares, respectively, of common stock, which vested immediately. The aggregate fair values of these director awards at the grant dates in 2018 and 2017 were both $0.6 million. |
Earnings per share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | Earnings per share. Basic earnings per share (EPS) attributable to Stewart is calculated by dividing net income attributable to Stewart by the weighted-average number of shares of Common Stock outstanding during the reporting periods. Outstanding shares of Common Stock granted to employees that are not yet vested (restricted shares) are excluded from the calculation of the weighted-average number of shares outstanding for calculating basic EPS. To calculate diluted EPS, the number of shares is adjusted to include the number of additional shares that would have been outstanding if the restricted shares and restricted units were vested. In periods of loss, dilutive shares are excluded from the calculation of the diluted EPS and diluted EPS is computed in the same manner as basic EPS. The calculation of the basic and diluted EPS is as follows:
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Contingent liabilities and commitments |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent liabilities and commitments | Contingent liabilities and commitments. In the ordinary course of business, the Company guarantees the third-party indebtedness of certain of its consolidated subsidiaries. As of June 30, 2018, the maximum potential future payments on the guarantees are not more than the related notes payable recorded in the condensed consolidated balance sheets. The Company also guarantees the indebtedness related to lease obligations of certain of its consolidated subsidiaries. The maximum future obligations arising from these lease-related guarantees are not more than the Company’s future minimum lease payments. As of June 30, 2018, the Company also had unused letters of credit aggregating $5.4 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees. |
Regulatory and legal developments |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Regulatory and legal developments | Regulatory and legal developments. The Company is subject to claims and lawsuits arising in the ordinary course of its business, most of which involve disputed policy claims. In some of these lawsuits, the plaintiff seeks exemplary or treble damages in excess of policy limits. The Company does not expect that any of these ordinary course proceedings will have a material adverse effect on its consolidated financial condition or results of operations. In addition, along with the other major title insurance companies, the Company is party to class action lawsuits concerning the title insurance industry. The Company believes that it has adequate reserves for the various litigation matters and contingencies discussed in this paragraph and that the likely resolution of these matters will not materially affect its consolidated financial condition or results of operations. Additionally, the Company receives from time to time various other inquiries from governmental regulators concerning practices in the insurance industry. Many of these practices do not concern title insurance. To the extent the Company is in receipt of such inquiries, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of these inquiries will materially affect its consolidated financial condition or results of operations. The Company is subject to various other administrative actions and inquiries into its business conduct in certain of the states in which it operates. While the Company cannot predict the outcome of the various regulatory and administrative matters, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of any of these matters will materially affect its consolidated financial condition or results of operations. |
Segment information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information | Segment information. The Company reports two operating segments: title and ancillary services and corporate. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes centralized title services, home and personal insurance services and Internal Revenue Code Section 1031 tax-deferred exchanges. The ancillary services and corporate segment includes search and valuation services, which are the principal offerings of ancillary services, and expenses of the parent holding company and certain other enterprise-wide overhead costs, net of centralized administrative services costs allocated to respective operating businesses. Selected statement of operations information related to these segments is as follows:
The Company does not provide asset information by reportable operating segment as it does not routinely evaluate the asset position by segment. Revenues generated in the United States and all international operations are as follows:
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Other comprehensive (loss) income |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive (loss) income | Other comprehensive (loss) income. Changes in the balances of each component of other comprehensive (loss) income and the related tax effects are as follows:
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Interim financial statements (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Management's responsibility | Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP), including management’s best judgments and estimates. In the opinion of management, all adjustments necessary for a fair presentation of this information for all interim periods, consisting only of normal recurring accruals, have been made. The Company’s results of operations for interim periods are not necessarily indicative of results for a full year and actual results could differ. |
Consolidation | Consolidation. The condensed consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. All significant intercompany amounts and transactions have been eliminated and provisions have been made for noncontrolling interests. Unconsolidated investees, in which the Company typically owns 20% through 50% of the equity, are accounted for by the equity method. |
Restrictions on cash and investments | Restrictions on cash and investments. The Company maintains investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds, which approximated $482.4 million and $490.8 million at June 30, 2018 and December 31, 2017, respectively, are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $13.6 million and $14.2 million at June 30, 2018 and December 31, 2017, respectively. 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. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease. |
Cumulative effect adjustments on adoption of new accounting standards and Recent significant accounting pronouncement | Cumulative effect adjustments on adoption of new accounting standards. In February 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which amended its standard on comprehensive income to provide a one-time option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the 2017 Act) that was passed in December 2017 from accumulated other comprehensive income/loss (AOCI) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. The Company adopted ASU 2018-02 effective on January 1, 2018 and reclassified $1.0 million of net tax expense from AOCI to retained earnings in the consolidated statement of equity. In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which, among others, (i) required equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplified the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminated the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and (iv) required separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. The Company adopted ASU 2016-01 effective on January 1, 2018, which resulted in a reclassification of the outstanding net unrealized investment gains, net of taxes, of $4.6 million relating to investments in equity securities previously carried in AOCI to retained earnings in the consolidated statement of equity. Recent significant accounting pronouncement. In February 2016, the FASB issued ASU 2016-02, Leases, which updated the current guidance related to leases. The new guidance includes the requirement for the lessee to recognize in the balance sheet a liability equal to the present value of contractual lease payments with terms of more than twelve months and a right-of-use asset representing the right to use the underlying asset for the lease term. Disclosures will be required by lessees to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This ASU is effective for annual and interim periods beginning after December 15, 2018 and early adoption is allowed. The Company expects to adopt ASU 2016-02 on January 1, 2019 using the modified retrospective method of adoption. The Company expects the adoption of ASU 2016-02 will result in material increases in the assets and liabilities reported on its consolidated balance sheets as indicated by the approximately $167.1 million of undiscounted future minimum lease payments with terms of more than twelve months as of December 31, 2017 (as disclosed in Note 16 of the Company's consolidated financial statements included in the Company's 2017 Annual Report on Form 10-K). The Company expects the new ASU will likely have an insignificant impact on its consolidated statements of operations and cash flows. The Company is currently in the process of system implementation and data migration and expects the transition to be completed during the fourth quarter 2018. |
Revenues (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of operating revenues | The Company's operating revenues, summarized by type, are as follows:
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Investments in debt and equity securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in debt securities | The total fair values of the Company's investments in debt and equity securities are detailed below:
The amortized costs and fair values of investments in debt securities are as follows:
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Investments in equity securities | The total fair values of the Company's investments in debt and equity securities are detailed below:
Following the adoption of ASU 2016-01 discussed in Notes 1 and 3, net investment losses recognized during the three and six months ended June 30, 2018 related to investments in equity securities still held as of June 30, 2018 are calculated as follows ($000 omitted):
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Gross unrealized gains and losses | Gross unrealized gains and losses on investments in debt securities are as follows:
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Debt securities according to contractual terms | Debt securities as of June 30, 2018 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
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Gross unrealized losses on investments and fair values of related securities | Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2018, were:
Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017, were:
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Fair value measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial instruments measured at fair value on recurring basis | As of June 30, 2018, financial instruments measured at fair value on a recurring basis are summarized below:
As of December 31, 2017, financial instruments measured at fair value on a recurring basis are summarized below:
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Investment and other (losses) gains - net (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross realized investment and other gains and losses | Investments and other (losses) gains are detailed as follows:
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Investments in equity securities still held | The total fair values of the Company's investments in debt and equity securities are detailed below:
Following the adoption of ASU 2016-01 discussed in Notes 1 and 3, net investment losses recognized during the three and six months ended June 30, 2018 related to investments in equity securities still held as of June 30, 2018 are calculated as follows ($000 omitted):
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Proceeds from sale of investments available-for-sale | Proceeds from sales of investments in securities are as follows:
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Goodwill and other intangibles (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of changes in goodwill | The summary of changes in goodwill is as follows.
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Estimated title losses (Tables) |
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Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of estimated title losses | A summary of estimated title losses for the six months ended June 30 is as follows:
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Earnings per share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per share, basic and diluted | The calculation of the basic and diluted EPS is as follows:
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Segment information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected statement of operations and income (loss) information related to segments | Selected statement of operations information related to these segments is as follows:
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Revenues generated in domestic and all international operations | Revenues generated in the United States and all international operations are as follows:
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Other comprehensive (loss) income (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in the balances of each component of other comprehensive income (loss) | Changes in the balances of each component of other comprehensive (loss) income and the related tax effects are as follows:
|
Interim financial statements - Restrictions on Cash and Investments (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Investments restricted for statutory reserve funds | $ 482.4 | $ 490.8 |
Restricted cash and cash equivalent | $ 13.6 | $ 14.2 |
Interim financial statements - Recently Adopted Accounting Pronouncements (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net unrealized investment gains related to equity securities reclassified | $ 1,828 | $ 0 | $ (376) | $ 0 |
Retained earnings | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Tax Cuts and Jobs Act of 2017, Reclassification from AOCI to retained earnings, tax effect | 1,000 | |||
Retained earnings | ASU 2016-01 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net unrealized investment gains related to equity securities reclassified | 4,600 | |||
AOCI | ASU 2016-01 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Net unrealized investment gains related to equity securities reclassified | $ (4,600) |
Interim financial statements - Recent Significant Accounting Pronouncement (Details) $ in Millions |
Dec. 31, 2017
USD ($)
|
---|---|
Accounting Policies [Abstract] | |
Undiscounted future minimum lease payments | $ 167.1 |
Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 492,869 | $ 485,452 | $ 930,099 | $ 928,493 |
Title insurance premiums, Direct | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 158,947 | 159,488 | 291,708 | 290,489 |
Title insurance premiums, Agency | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 247,257 | 234,407 | 484,111 | 467,756 |
Escrow fees | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 35,468 | 39,447 | 63,335 | 72,210 |
Search, abstract and valuation services | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 25,114 | 28,030 | 46,901 | 56,200 |
Other revenues | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | 18,443 | 19,815 | 33,371 | 32,614 |
Operating revenues | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenues | $ 485,229 | $ 481,187 | $ 919,426 | $ 919,269 |
Investments in debt and equity securities - Investments in Debt and Equity Securities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities | $ 637,883 | $ 671,441 |
Equity securities | 35,450 | |
Equity securities | 37,914 | |
Investments in debt and equity securities | $ 673,333 | 709,355 |
Investments in debt and equity securities | $ 709,355 |
Investments in debt and equity securities - Additional Information (Details) $ in Millions |
Jun. 30, 2018
USD ($)
investment
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Net unrealized investment gains on equity securities held | $ | $ 4.9 | $ 5.8 |
Number of investments in an unrealized loss position | 313 | |
Number of investments in an unrealized loss positions for more than 12 months | 64 |
Investments in debt and equity securities - Amortized Costs and Fair Values (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Amortized costs | $ 645,903 | $ 665,646 |
Fair values | 637,883 | 671,441 |
Municipal | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized costs | 62,837 | 71,581 |
Fair values | 62,831 | 72,669 |
Corporate | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized costs | 347,379 | 351,477 |
Fair values | 342,595 | 357,933 |
Foreign | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized costs | 222,740 | 229,750 |
Fair values | 219,932 | 228,237 |
U.S. Treasury Bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized costs | 12,947 | 12,838 |
Fair values | $ 12,525 | $ 12,602 |
Investments in debt and equity securities - Gross Unrealized Gains and Losses (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Gains | $ 4,156 | $ 9,958 |
Losses | 12,176 | 4,163 |
Municipal | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gains | 463 | 1,263 |
Losses | 469 | 175 |
Corporate | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gains | 2,372 | 6,953 |
Losses | 7,156 | 497 |
Foreign | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gains | 1,320 | 1,742 |
Losses | 4,128 | 3,255 |
U.S. Treasury Bonds | ||
Debt Securities, Available-for-sale [Line Items] | ||
Gains | 1 | 0 |
Losses | $ 423 | $ 236 |
Investments in debt and equity securities - Debt Securities According to Contractual Terms (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Amortized costs | ||
In one year or less | $ 55,856 | |
After one year through five years | 359,043 | |
After five years through ten years | 190,383 | |
After ten years | 40,621 | |
Amortized costs, total | 645,903 | $ 665,646 |
Fair values | ||
In one year or less | 55,917 | |
After one year through five years | 355,605 | |
After five years through ten years | 186,494 | |
After ten years | 39,867 | |
Fair values, total | $ 637,883 | $ 671,441 |
Investments in debt and equity securities - Gross Unrealized Losses on Investments and Fair Values of Related Securities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Losses | ||
Less than 12 months | $ 8,168 | $ 2,025 |
More than 12 months | 4,008 | 2,138 |
Total | 12,176 | 4,163 |
Fair values | ||
Less than 12 months | 369,637 | 220,615 |
More than 12 months | 105,906 | 56,513 |
Total | 475,543 | 277,128 |
Municipal | ||
Losses | ||
Less than 12 months | 198 | 58 |
More than 12 months | 271 | 117 |
Total | 469 | 175 |
Fair values | ||
Less than 12 months | 21,849 | 17,023 |
More than 12 months | 5,756 | 5,784 |
Total | 27,605 | 22,807 |
Corporate | ||
Losses | ||
Less than 12 months | 6,916 | 386 |
More than 12 months | 240 | 111 |
Total | 7,156 | 497 |
Fair values | ||
Less than 12 months | 268,573 | 81,632 |
More than 12 months | 4,755 | 4,926 |
Total | 273,328 | 86,558 |
Foreign | ||
Losses | ||
Less than 12 months | 897 | 1,528 |
More than 12 months | 3,231 | 1,727 |
Total | 4,128 | 3,255 |
Fair values | ||
Less than 12 months | 73,483 | 116,130 |
More than 12 months | 88,709 | 39,031 |
Total | 162,192 | 155,161 |
U.S. Treasury Bonds | ||
Losses | ||
Less than 12 months | 157 | 53 |
More than 12 months | 266 | 183 |
Total | 423 | 236 |
Fair values | ||
Less than 12 months | 5,732 | 5,830 |
More than 12 months | 6,686 | 6,772 |
Total | $ 12,418 | $ 12,602 |
Investment and other (losses) gains - net - Gross Realized Investment and Other Gains and Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Realized gains | $ 603 | $ 279 | $ 1,166 | $ 845 |
Realized losses | (38) | (955) | (68) | (1,234) |
Net unrealized investment gains (losses) recognized on equity securities held | 1,828 | 0 | (376) | 0 |
Investments and other (losses) gains | $ 2,393 | $ (676) | $ 722 | $ (389) |
Investment and other (losses) gains - net - Net Gains on Investments in Equity Securities Still Held (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Total net investment gains (losses) recognized on equity securities during the period | $ 1,612 | $ (614) | ||
Less: Net realized losses on equity securities sold during the period | (216) | (238) | ||
Net unrealized investment gains (losses) recognized on equity securities still held | $ 1,828 | $ 0 | $ (376) | $ 0 |
Investment and other (losses) gains - net - Proceeds from the Sale of Investments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Investments, Debt and Equity Securities [Abstract] | ||||
Proceeds from sales of debt securities | $ 8,003 | $ 33,776 | $ 21,149 | $ 48,826 |
Proceeds from sales of equity securities | 2,353 | 36 | 4,573 | 829 |
Total proceeds from sales of investment in securities | $ 10,356 | $ 33,812 | $ 25,722 | $ 49,655 |
Goodwill and other intangibles - Changes in Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2018 |
Jun. 30, 2018 |
|
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 231,428 | $ 231,428 |
Acquisitions | 11,308 | |
Balance at end of period | 242,736 | |
Title | ||
Goodwill [Roll Forward] | ||
Balance at beginning of period | 225,699 | 225,699 |
Acquisitions | 11,300 | 11,308 |
Balance at end of period | 237,007 | |
Ancillary Services and Corporate | ||
Goodwill [Roll Forward] | ||
Balance at beginning of period | $ 5,729 | 5,729 |
Acquisitions | 0 | |
Balance at end of period | $ 5,729 |
Goodwill and other intangibles - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Mar. 31, 2018 |
Jun. 30, 2018 |
|
Business Acquisition [Line Items] | ||
Increase in goodwill | $ 11,308 | |
Intangibles recorded in connection with acquisitions | $ 3,600 | |
Acquired software | ||
Business Acquisition [Line Items] | ||
Acquired intangibles, amortization period | 3 years | |
Title | ||
Business Acquisition [Line Items] | ||
Increase in goodwill | $ 11,300 | $ 11,308 |
Estimated title losses (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Balances at beginning of period | $ 480,990 | $ 462,572 |
Provisions: | ||
Current year | 41,372 | 43,850 |
Previous policy years | (3,694) | 1,313 |
Total provisions | 37,678 | 45,163 |
Payments, net of recoveries: | ||
Current year | (5,263) | (5,966) |
Previous policy years | (33,590) | (39,664) |
Total payments, net of recoveries | (38,853) | (45,630) |
Effects of changes in foreign currency exchange rates | (4,355) | 3,189 |
Balances at end of period | $ 475,460 | $ 465,294 |
Loss ratios as a percentage of title operating revenues: | ||
Current year provisions | 4.60% | 4.90% |
Total provisions | 4.20% | 5.10% |
Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator: | ||||
Net income attributable to Stewart | $ 22,377 | $ 18,568 | $ 18,598 | $ 22,657 |
Denominator (000): | ||||
Basic average shares outstanding | 23,546 | 23,444 | 23,527 | 23,438 |
Average number of dilutive shares relating to grants of restricted shares and units | 79 | 176 | 80 | 175 |
Diluted average shares outstanding | 23,625 | 23,620 | 23,607 | 23,613 |
Basic earnings per share attributable to Stewart (in usd per share) | $ 0.95 | $ 0.79 | $ 0.79 | $ 0.97 |
Diluted earnings per share attributable to Stewart (in usd per share) | $ 0.95 | $ 0.79 | $ 0.79 | $ 0.96 |
Contingent liabilities and commitments (Details) $ in Millions |
Jun. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Guarantee of indebtedness, relating to unused letters of credit | $ 5.4 |
Segment information - Additional Information (Details) |
6 Months Ended |
---|---|
Jun. 30, 2018
segment
| |
Segment Reporting [Abstract] | |
Number of operating segments | 2 |
Segment information - Selected Statement of Operations and Income (Loss) Information Related to Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Segment Reporting Information [Line Items] | ||||
Revenues | $ 492,869 | $ 485,452 | $ 930,099 | $ 928,493 |
Depreciation and amortization | 6,154 | 6,441 | 12,388 | 12,819 |
Income before taxes and noncontrolling interest | 31,321 | 33,147 | 28,066 | 39,015 |
Title segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 479,125 | 470,449 | 904,536 | 896,246 |
Depreciation and amortization | 5,249 | 5,321 | 10,566 | 10,547 |
Income before taxes and noncontrolling interest | 37,737 | 39,467 | 42,862 | 51,744 |
Ancillary services and corporate segment | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 13,744 | 15,003 | 25,563 | 32,247 |
Depreciation and amortization | 905 | 1,120 | 1,822 | 2,272 |
Income before taxes and noncontrolling interest | $ (6,416) | $ (6,320) | $ (14,796) | $ (12,729) |
Segment information - Revenues Generated in United States and All International Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Segment Reporting Information [Line Items] | ||||
Revenues | $ 492,869 | $ 485,452 | $ 930,099 | $ 928,493 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 460,529 | 451,766 | 873,833 | 871,019 |
International | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 32,340 | $ 33,686 | $ 56,266 | $ 57,474 |
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