EX-99.1 2 e18557ex99_1.txt PRESS RELEASE Exhibit 99.1 Stewart Reports Earnings for Second Quarter HOUSTON, July 27 /PRNewswire-FirstCall/ -- Stewart Information Services Corporation (NYSE: STC) reported net earnings of $30.0 million, or $1.65 per diluted share, for the three months ended June 30, 2004, versus net earnings of $41.0 million, or $2.29 per diluted share, for the second quarter of 2003. Revenues in the second quarter increased 1 percent to $565 million from $558 million for the same period last year. Total revenues for the first half of 2004 were $1.0 billion, up 3 percent from the same period a year ago. Earnings for the first six months totaled $41.1 million, or $2.26 per diluted share, versus $60.9 million, or $3.40 per diluted share, for the first six months of 2003. "We continue our strategies to grow stockholders' wealth -- resulting in book value per share increasing from $34.47 at December 31, 2003 to $36.27 at June 30, 2004," said Malcolm S. Morris, chairman of the board and co-chief executive officer. "We have grown our balance sheet, added key personnel and strategic major-market offices for a nationwide push to expand significantly the higher-margin commercial business. Our prior investment of stockholders' capital into our commercial title operations is generating returns exceeding our expectations. Our year-to-date commercial revenues and profitability are the best in our history and key additions to this segment, such as Title Associates in New York, have continuing potential for growth." "We continue to grow both organically and through targeted acquisitions in our lines of business -- we focus on investments that we believe will be accretive to earnings and increase book value," added Morris. Representative title agency acquisitions this past quarter included operations in Santa Cruz, California; Marin, California and Pullman, Washington, as well as other offices in Kentucky and Wisconsin. New startup offices included Stewart Insurance Solutions, a property and casualty insurance agent operating initially in five states and Stewart Default Solutions, offering an array of default management and technology to the mortgage and consumer services industry. We also opened a new title agency in Spokane, Washington. "SureClose, our transaction management platform, is now available in more than 70 percent of our affiliate offices and branches in addition to more than 100 independent agents," said Stewart Morris, Jr., president and co-chief executive officer. "This on-line transaction folder provides access for customers to view the status and documents involving their real estate transactions. We continue investing in technology to reach our goals to increase revenues, productivity and future profit margins. "Our new office in Istanbul, Turkey, which provides escrow, title guaranty and closing services to foreign buyers, continues Stewart's systematic international expansion," added Morris. "Stewart International's new Land Projects Division targets municipal and national governments with services and products including land registries, mapping and GIS services and property taxation systems. This division provides a one-stop shop and cross-selling group in offering our expanding array of services and products." Title orders per working day for the second quarter of 2004 were down 29 percent from the same period in 2003. For the month of June 2004, orders per working day declined 42 percent compared with the same period in 2003. The decrease in orders was primarily attributable to a decline in refinancing transactions beginning in the third quarter of 2003, when mortgage interest rates increased. Rates rose above prior-year levels in May 2004. While current rates have retreated to the 6 percent level, in June rates were more than 100 basis points higher than a year ago. Total revenues increased slightly in the second quarter of this year primarily because of increased acquisitions, commercial business and home prices. Revenues from direct operations also increased slightly while order counts declined primarily because refinancing transactions represented a larger portion of orders in 2003. However, the company generally earns less revenue on a refinancing transaction. The pretax profit margin for the quarter declined from 11.8 percent to 8.4 percent. Periods of record order volumes, such as those that occurred in 2003, resulted in higher margins given the fixed-cost nature of the title business. In addition, technology costs, an increase in policy losses and litigation reserves, opening new offices and rising occupancy costs contributed to lower margins. Stewart Information Services Corporation is a technology driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services through more than 7,700 issuing locations in the United States and several international markets. Stewart meets the needs of the real estate and mortgage industries through the delivery of information services required for settlement using e-commerce. These services include title reports, flood determinations, document preparation, property reports and background checks. Stewart also supplies post-closing services to lenders, automated county clerk land records, property ownership mapping, and geographic information systems for governmental entities. Stewart provides expertise in tax-deferred exchanges. More information about Stewart can be found at www.stewart.com. This press release may contain forward-looking statements, which include all statements other than statements of historical facts. Forward-looking statements are not guarantees of performance and no assurance can be given that Stewart's expectations will be achieved. In particular, historical order counts do not necessarily indicate future revenues because Stewart cannot predict the number of orders that will result in closings. Stewart Information Services Corporation Three months ended June 30 2004 2003 Revenues $ 565,456,000 $ 558,075,000 Net earnings $ 29,961,000 $ 41,030,000 Average shares - diluted 18,192,000 17,951,000 Earnings per share: Basic $ 1.66 $ 2.30 Diluted $ 1.65 $ 2.29 Six months ended June 30 2004 2003 Revenues $ 1,030,348,000 $ 998,999,000 Net earnings $ 41,101,000 $ 60,905,000 Average shares - diluted 18,187,000 17,895,000 Earnings per share: Basic $ 2.27 $ 3.42 Diluted $ 2.26 $ 3.40 STEWART INFORMATION SERVICES CORPORATION STATEMENTS OF EARNINGS (In thousands of dollars, except per share amounts) Three months Six months Ended June 30 ended June 30 2004 2003 2004 2003 Revenues Title insurance: Direct operations 241,578 240,145 424,112 431,875 Agency operations 300,595 292,019 558,482 517,584 Real estate information services 17,711 20,834 35,326 39,884 Investment income 5,170 4,535 10,322 9,318 Investment gains - net 402 542 2,106 338 565,456 558,075 1,030,348 998,999 Expenses Amounts retained by agencies 245,403 239,035 455,455 423,784 Employee costs 152,453 147,178 286,803 279,180 Other operating expenses 81,747 72,599 155,728 139,447 Title losses and related claims 25,807 22,711 45,087 40,667 Depreciation 8,282 6,168 15,258 12,077 Interest 272 146 490 361 Minority interests 3,860 4,144 6,008 6,482 517,824 491,981 964,829 901,998 Earnings before taxes 47,632 66,094 65,519 97,001 Income taxes 17,671 25,064 24,418 36,096 Net earnings 29,961 41,030 41,101 60,905 Average number of diluted shares (000) 18,192 17,951 18,187 17,895 Earnings per share - diluted 1.65 2.29 2.26 3.40 Segment information: Title revenues 547,745 537,241 995,022 959,115 Title pretax earnings 46,417 61,520 63,070 89,416 REI revenues 17,711 20,834 35,326 39,884 REI pretax earnings 1,215 4,574 2,449 7,585 Selected financial information (000): Cash flow from operations 58,273 62,373 83,524 84,911 Title loss payments - net of recoveries 20,039 12,186 32,979 23,776 Other comprehensive income (loss) - net of taxes (10,046) 5,770 (8,373) 6,642 Average number of basic shares 18,101 17,833 18,086 17,788 Number of title orders opened 222 314 445 577 June 30 December 31 2004 2003 Stockholders' equity 656,538 621,389 Number of shares outstanding (000) 18,102 18,026 Book value per share 36.27 34.47 STEWART INFORMATION SERVICES CORPORATION BALANCE SHEETS (condensed) (In thousands of dollars) June 30 December 31 2004 2003 Assets Cash and cash equivalents 119,824 114,202 Short-term investments 171,307 153,322 Investments - statutory reserve funds 375,379 375,421 Investments - other 59,995 59,035 Receivables 69,625 79,025 Property and equipment 78,363 74,174 Title plants 49,798 43,216 Goodwill 109,187 79,084 Other assets 63,336 54,388 1,096,814 1,031,867 Liabilities Notes payable 41,501 24,583 Accounts payable and accrued liabilities 82,673 82,147 Estimated title losses 280,197 268,089 Deferred income taxes 22,061 22,440 Minority interests 13,844 13,219 Contingent liabilities and commitments Stockholders' equity Common and Class B Common Stock and additional paid-in capital 143,589 141,168 Retained earnings 510,208 469,107 Accumulated other comprehensive earnings 6,646 15,019 Treasury stock (3,905) (3,905) Total stockholders' equity 656,538 621,389 1,096,814 1,031,867 July 27, 2004 SOURCE Stewart Information Services Corporation -0- 07/27/2004 /CONTACT: Ted C. Jones, Director - Investor Relations of Stewart Information Services Corporation, +1-713-625-8014/ /Web site: http://www.stewart.com / (STC) CO: Stewart Information Services Corporation ST: Texas IN: FIN RLT SU: ERN