Schedule I - Financial Information of the Registrant (Parent Company)

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Schedule I - Financial Information of the Registrant (Parent Company)

SCHEDULE I

STEWART INFORMATION SERVICES CORPORATION

(Parent Company)

STATEMENTS OF INCOME AND RETAINED EARNINGS

	For the Years Ended December 31,
	2019		2018		2017
	($000 omitted)
Revenues
Merger termination fee	50,000		—		—
Investment income	—		25,000		20,000
Other income	753		665		784
	50,753		25,665		20,784
Expenses
Interest	4,106		3,511		3,123
Other operating expenses, including $276 each year to affiliates	12,787		15,174		5,840
	16,893		18,685		8,963
Income before taxes and income from subsidiaries	33,860		6,980		11,821
Income tax (expense) benefit	(15	)	(126	)	776
Income from subsidiaries	44,770		40,669		36,062
Net income	78,615		47,523		48,659
Retained earnings at beginning of year	514,248		491,698		471,788
Cash dividends on Common Stock	(28,471	)	(28,565	)	(28,749	)
Cumulative effect adjustments on adoption of new accounting pronouncements	—		3,592		—
Retained earnings at end of year	564,392		514,248		491,698

See accompanying notes to financial statement information.

See accompanying Report of Independent Registered Public Accounting Firm.

STEWART INFORMATION SERVICES CORPORATION

(Parent Company)

BALANCE SHEETS

	As of December 31,
	2019		2018
	($000 omitted)
Assets
Cash and cash equivalents	36,849		24,823
Receivables:
Notes - due from subsidiaries	5,193		6,609
Receivables from affiliates	260		7
	5,453		6,616
Property and equipment, at cost:
Furniture and equipment	88		2,662
Accumulated depreciation	(83	)	(2,449	)
	5		213
Investments in subsidiaries, on an equity-method basis	802,994		737,273
Operating lease assets	8,931		—
Goodwill	8,470		8,470
Other assets	15,810		17,469
	878,512		794,864
Liabilities
Accounts payable and other liabilities	21,417		22,464
Operating lease liabilities	10,914		—
Notes payable	98,875		98,875
	131,206		121,339
Contingent liabilities and commitments	—		—
Stockholders’ equity
Common Stock – $1 par, authorized 51,500,000; issued 24,061,568 and 24,071,508; outstanding 23,709,407 and 23,719,347, respectively	24,062		24,072
Additional paid-in capital	164,217		162,642
Retained earnings	564,392		514,248
Accumulated other comprehensive (loss) income (AOCI):
Foreign currency translation adjustments	(13,027	)	(19,505	)
Net unrealized investment gains (losses)	10,328		(5,266	)
Treasury stock – 352,161 common shares, at cost	(2,666	)	(2,666	)
Total stockholders’ equity	747,306		673,525
	878,512		794,864

See accompanying notes to financial statement information.

See accompanying Report of Independent Registered Public Accounting Firm.

STEWART INFORMATION SERVICES CORPORATION

(Parent Company)

STATEMENTS OF CASH FLOWS

	For the Years Ended December 31,
	2019		2018		2017
	($000 omitted)
Reconciliation of net income to cash provided (used) by operating activities:
Net income	78,615		47,523		48,659
Add (deduct):
Depreciation	8		4		5
(Increase) decrease in receivables – net	(253	)	922		(81	)
Decrease (increase) in other assets – net	1,659		853		(1,576	)
Increase (decrease) in payables and accrued liabilities – net	2,698		(4,476	)	563
Income from subsidiaries	(44,770	)	(40,669	)	(36,062	)
Other – net	1,530		(5,124	)	1,705
Cash provided (used) by operating activities	39,487		(967	)	13,213
Investing activities:
Dividends from subsidiary	—		25,000		20,000
Collections on notes receivables	1,416		24,900		23,375
Increases in notes receivables	—		(5,193	)	(16,000	)
Contributions to a subsidiary	—		—		(7,184	)
Cash provided by investing activities	1,416		44,707		20,191
Financing activities:
Proceeds from notes payable	—		—		16,000
Payments on notes payable	—		—		(10,000	)
Dividends paid	(28,345	)	(28,263	)	(28,135	)
Repurchases of Common Stock	(532	)	(1,175	)	(727	)
Purchase of remaining interest of consolidated subsidiary	—		(1,101	)	(1,810	)
Other – net	—		—		—
Cash used by financing activities	(28,877	)	(30,539	)	(24,672	)
Increase in cash and cash equivalents	12,026		13,201		8,732
Cash and cash equivalents at beginning of year	24,823		11,622		2,890
Cash and cash equivalents at end of year	36,849		24,823		11,622
Supplemental information:
Income taxes paid	—		—		—
Interest paid	4,009		3,849		3,128

See accompanying notes to financial statement information.

See accompanying Report of Independent Registered Public Accounting Firm.

STEWART INFORMATION SERVICES CORPORATION

(Parent Company)

NOTES TO FINANCIAL STATEMENT INFORMATION

The Parent Company operates as a holding company, transacting substantially all of its business through its subsidiaries. Its consolidated financial statements are included in Part II, Item 8 of Form 10-K. The Parent Company financial statements should be read in conjunction with the aforementioned consolidated financial statements and notes thereto and financial statement schedules.

Merger agreement. On March 18, 2018, the Company entered into an agreement and plan of merger (Merger Agreement) with Fidelity National Financial, Inc. (FNF), A Holdco Corp. and S Holdco LLC, pursuant to which, subject to the satisfaction or waiver of certain conditions, the Company was to be acquired by FNF. On September 9, 2019, the Company and FNF mutually terminated the Merger Agreement. In connection with the termination and as stipulated in the Merger Agreement, FNF paid the Company a merger termination fee of $50 million, which was presented as such in the 2019 statement of income and retained earnings.

Investment income. During 2018 and 2017, Stewart Title Guaranty Company paid to the Parent Company dividends of $25.0 million and $20.0 million, respectively, and none in 2019.

Other operating expenses. Other operating expenses included $6.8 million, $12.7 million and $2.9 million of expenses related to the Mergers and strategic alternatives review in 2019, 2018 and 2017, respectively. Also included in the 2019 other operating expenses were $2.2 million of executive insurance policy settlement expenses.

Operating lease assets and liabilities. Beginning in 2019, we adopted the new lease accounting standard which resulted in the balance sheet recognition of assets and liabilities related to our operating leases of office space. Operating lease assets represent the right to use the underlying assets over the corresponding lease terms. This adoption did not result in any impact to our statements of operations and cash flows. Refer to Note 1-Q to the audited consolidated financial statements for details.

Stockholders' equity. In 2018, the Parent Company adopted two new accounting standards which resulted in a reclassification of $1.0 million of net tax expense and $4.6 million of net unrealized investment gains from AOCI to retained earnings. Refer to Note 12 to the audited consolidated financial statements for details for these equity adjustments.

Income taxes. The Parent Company consistently generates losses, exclusive of dividends or equity earnings from its subsidiaries, and is not expected to generate future income without its subsidiaries. On December 22, 2017, the United States (U.S.) enacted the Tax Cuts and Jobs Act (the 2017 Act), which revised the U.S. corporate income tax regime by, among other things, lowering the corporate tax rate from 35% to 21% effective on January 1, 2018. As a result of the 2017 Act, the Parent Company recorded an income tax benefit of $1.2 million related to the remeasurement of its deferred tax assets and liabilities at December 31, 2017.