þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 74-1677330 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) |
1980 Post Oak Blvd., Houston TX | 77056 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Common, $1 par value |
18,246,785 | |||
Class B Common, $1 par value |
1,050,012 |
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
($000 omitted, except per share) | ||||||||||||||||
Revenues |
||||||||||||||||
Title insurance: |
||||||||||||||||
Direct operations |
165,841 | 171,200 | 305,070 | 300,705 | ||||||||||||
Agency operations |
213,829 | 230,453 | 405,638 | 433,024 | ||||||||||||
Real estate information |
22,564 | 26,659 | 53,949 | 38,201 | ||||||||||||
Investment income |
3,882 | 5,434 | 7,742 | 10,216 | ||||||||||||
Investment and other (losses) gains net |
(1,233 | ) | 7,795 | (1,101 | ) | 10,708 | ||||||||||
404,883 | 441,541 | 771,298 | 792,854 | |||||||||||||
Expenses |
||||||||||||||||
Amounts retained by agencies |
177,301 | 191,820 | 335,748 | 360,555 | ||||||||||||
Employee costs |
116,587 | 119,532 | 234,513 | 233,635 | ||||||||||||
Other operating expenses |
64,249 | 67,694 | 123,375 | 132,081 | ||||||||||||
Title losses and related claims |
34,984 | 37,449 | 66,185 | 63,786 | ||||||||||||
Depreciation and amortization |
4,762 | 5,677 | 9,592 | 11,613 | ||||||||||||
Interest |
1,294 | 1,394 | 2,572 | 2,952 | ||||||||||||
399,177 | 423,566 | 771,985 | 804,622 | |||||||||||||
Earnings (loss) before taxes and noncontrolling interests |
5,706 | 17,975 | (687 | ) | (11,768 | ) | ||||||||||
Income tax (benefit) expense |
(1,942 | ) | 5,863 | 1,189 | 4,325 | |||||||||||
Net earnings (loss) |
7,648 | 12,112 | (1,876 | ) | (16,093 | ) | ||||||||||
Less net earnings attributable to noncontrolling interests |
1,708 | 2,684 | 2,477 | 3,442 | ||||||||||||
Net earnings (loss) attributable to Stewart |
5,940 | 9,428 | (4,353 | ) | (19,535 | ) | ||||||||||
Comprehensive earnings (loss): |
||||||||||||||||
Net earnings (loss) |
7,648 | 12,112 | (1,876 | ) | (16,093 | ) | ||||||||||
Other comprehensive earnings, net of taxes of $1,734
$1,385, $2,895 and $2,869 |
2,380 | 1,843 | 1,990 | 3,833 | ||||||||||||
Comprehensive earnings (loss) |
10,028 | 13,955 | 114 | (12,260 | ) | |||||||||||
Less comprehensive earnings attributable to
noncontrolling interests |
1,708 | 2,684 | 2,477 | 3,442 | ||||||||||||
Comprehensive earnings (loss) attributable to Stewart |
8,320 | 11,271 | (2,363 | ) | (15,702 | ) | ||||||||||
Basic average shares outstanding (000) |
19,216 | 18,320 | 19,024 | 18,289 | ||||||||||||
Basic earnings (loss) per share attributable to Stewart |
0.31 | 0.51 | (0.23 | ) | (1.07 | ) | ||||||||||
Dilutive average shares outstanding (000) |
24,326 | 22,957 | 19,024 | 18,289 | ||||||||||||
Diluted earnings (loss) per share attributable to Stewart |
0.28 | 0.45 | (0.23 | ) | (1.07 | ) | ||||||||||
- 1 -
As of | As of | |||||||
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
($000 omitted) | ||||||||
Assets |
||||||||
Cash and cash equivalents |
115,151 | 144,564 | ||||||
Cash and cash equivalents statutory reserve funds |
7,534 | 9,926 | ||||||
122,685 | 154,490 | |||||||
Short-term investments |
39,838 | 33,457 | ||||||
Investments in debt and equity securities available-for-sale, at fair value: |
||||||||
Statutory reserve funds |
395,347 | 396,317 | ||||||
Other |
64,820 | 54,007 | ||||||
460,167 | 450,324 | |||||||
Receivables: |
||||||||
Notes |
10,252 | 10,747 | ||||||
Premiums from agencies |
42,054 | 45,399 | ||||||
Income taxes |
5,818 | 651 | ||||||
Trade and other receivables |
37,401 | 41,323 | ||||||
Allowance for uncollectible amounts |
(19,079 | ) | (19,438 | ) | ||||
76,446 | 78,682 | |||||||
Property and equipment, at cost |
||||||||
Land |
6,466 | 6,445 | ||||||
Buildings |
23,836 | 23,769 | ||||||
Furniture and equipment |
252,960 | 250,355 | ||||||
Accumulated depreciation |
(222,871 | ) | (219,000 | ) | ||||
60,391 | 61,569 | |||||||
Title plants, at cost |
77,406 | 77,397 | ||||||
Real estate, at lower of cost or net realizable value |
2,431 | 3,266 | ||||||
Investments in investees, on an equity method basis |
17,202 | 17,608 | ||||||
Goodwill |
206,861 | 206,861 | ||||||
Intangible assets, net of amortization |
7,706 | 8,228 | ||||||
Other assets |
57,725 | 49,324 | ||||||
1,128,858 | 1,141,206 | |||||||
Liabilities |
||||||||
Notes payable |
7,321 | 8,784 | ||||||
Convertible senior notes |
64,425 | 64,338 | ||||||
Accounts payable and accrued liabilities |
75,598 | 95,666 | ||||||
Estimated title losses |
498,514 | 495,849 | ||||||
Deferred income taxes |
26,838 | 28,236 | ||||||
672,696 | 692,873 | |||||||
Contingent liabilities and commitments |
||||||||
Stockholders equity |
||||||||
Common and Class B Common Stock and additional paid-in capital |
151,931 | 143,264 | ||||||
Retained earnings |
278,314 | 282,666 | ||||||
Accumulated other comprehensive earnings |
15,600 | 13,610 | ||||||
Treasury stock 352,161 and 476,227 common shares, at cost |
(2,666 | ) | (4,330 | ) | ||||
Stockholders equity attributable to Stewart |
443,179 | 435,210 | ||||||
Noncontrolling interests |
12,983 | 13,123 | ||||||
Total stockholders equity (19,296,835 and 18,375,058 shares outstanding) |
456,162 | 448,333 | ||||||
1,128,858 | 1,141,206 | |||||||
- 2 -
For the Six Months | ||||||||
Ended June 30, | ||||||||
2011 | 2010 | |||||||
($000 omitted) | ||||||||
Reconciliation of net loss to cash (used) provided by operating activities: |
||||||||
Net loss |
(1,876 | ) | (16,093 | ) | ||||
Add (deduct): |
||||||||
Depreciation and amortization |
9,592 | 11,613 | ||||||
Provision for bad debt |
1,144 | 2,946 | ||||||
Investment and other losses (gains) net |
1,101 | (10,708 | ) | |||||
Payments for title losses in excess of provisions |
(972 | ) | (10,979 | ) | ||||
Insurance recoveries of title losses |
2,605 | 5,802 | ||||||
Decrease in receivables net |
4,930 | 34,168 | ||||||
Increase in other assets net |
(3,350 | ) | (4,454 | ) | ||||
Decrease in payables and accrued liabilities net |
(17,680 | ) | (10,500 | ) | ||||
(Decrease) increase in net deferred income taxes |
(4,293 | ) | 609 | |||||
Net earnings from equity investees |
(653 | ) | (637 | ) | ||||
Dividends received from equity investees |
1,110 | 1,231 | ||||||
Other net |
1,832 | 2,645 | ||||||
Cash (used) provided by operating activities |
(6,510 | ) | 5,643 | |||||
Investing activities: |
||||||||
Proceeds from investments available-for-sale matured and sold |
140,560 | 119,513 | ||||||
Purchases of investments available-for-sale |
(148,407 | ) | (91,675 | ) | ||||
Proceeds from redemptions of investments pledged |
| 217,225 | ||||||
Purchases of property and equipment and title plants net |
(11,108 | ) | (3,828 | ) | ||||
Increases in notes receivable |
(174 | ) | (285 | ) | ||||
Collections on notes receivable |
617 | 537 | ||||||
Change in cash and cash equivalents due to sale and deconsolidation of
subsidiaries (see below) |
| (1,844 | ) | |||||
Cash paid for loan guarantee obligation |
(3,928 | ) | | |||||
Net cash received for other assets, cost-basis investments, equity investees and other |
10 | 4,744 | ||||||
Cash (used) provided by investing activities |
(22,430 | ) | 244,387 | |||||
Financing activities: |
||||||||
Payments on notes payable |
(1,639 | ) | (5,458 | ) | ||||
Payments on line of credit |
| (216,141 | ) | |||||
Proceeds from notes payable |
500 | 134 | ||||||
Distributions to noncontrolling interests |
(2,613 | ) | (2,879 | ) | ||||
Cash used by financing activities |
(3,752 | ) | (224,344 | ) | ||||
Effects of changes in foreign currency exchange rates |
887 | (853 | ) | |||||
(Decrease) increase in cash and cash equivalents |
(31,805 | ) | 24,833 | |||||
Cash and cash equivalents at beginning of period |
154,490 | 116,100 | ||||||
Cash and cash equivalents at end of period |
122,685 | 140,933 | ||||||
- 3 -
For the Six Months | ||||||||
Ended June 30, | ||||||||
2011 | 2010 | |||||||
($000 omitted) | ||||||||
Supplemental information: |
||||||||
Settlement of wage and hour litigation through issuance of Common Stock |
7,582 | | ||||||
Settlement of note payable through issuance of Common Stock held in treasury |
1,299 | | ||||||
Changes in financial statement amounts due to sale and deconsolidation of subsidiaries: |
||||||||
Note receivable |
| 2,500 | ||||||
Investments in investees, on an equity method basis |
| 5,316 | ||||||
Goodwill |
| (5,831 | ) | |||||
Title plants |
| (1,048 | ) | |||||
Property and equipment, net of accumulated depreciation |
| (1,560 | ) | |||||
Intangible asset, net of amortization |
| 2,827 | ||||||
Other net |
| (878 | ) | |||||
Liabilities |
| 1,344 | ||||||
Noncontrolling interests |
| 336 | ||||||
Investment and other gains net |
| (1,162 | ) | |||||
Change in cash and cash equivalents due to sale and deconsolidation of
Subsidiaries |
| 1,844 | ||||||
- 4 -
June 30, 2011 | December 31, 2010 | |||||||||||||||
Fair | Fair | |||||||||||||||
Amortized costs | values | Amortized costs | values | |||||||||||||
($000 omitted) | ||||||||||||||||
Debt securities: |
||||||||||||||||
Municipal |
36,242 | 37,318 | 39,589 | 40,185 | ||||||||||||
Corporate and utilities |
229,832 | 232,324 | 228,270 | 229,972 | ||||||||||||
Foreign |
162,367 | 164,630 | 155,977 | 157,745 | ||||||||||||
U.S. Government |
19,406 | 21,053 | 20,792 | 22,422 | ||||||||||||
Equity securities |
5,005 | 4,842 | | | ||||||||||||
452,852 | 460,167 | 444,628 | 450,324 | |||||||||||||
- 5 -
June 30, 2011 | December 31, 2010 | |||||||||||||||
Gains | Losses | Gains | Losses | |||||||||||||
($000 omitted) | ||||||||||||||||
Debt securities: |
||||||||||||||||
Municipal |
1,215 | 139 | 1,235 | 639 | ||||||||||||
Corporate and utilities |
4,749 | 2,257 | 4,574 | 2,872 | ||||||||||||
Foreign |
2,349 | 86 | 1,861 | 93 | ||||||||||||
U.S. Government |
1,647 | | 1,634 | 4 | ||||||||||||
Equity securities |
| 163 | | | ||||||||||||
9,960 | 2,645 | 9,304 | 3,608 | |||||||||||||
Amortized | Fair | |||||||
costs | values | |||||||
($000 omitted) | ||||||||
In one year or less |
15,798 | 15,945 | ||||||
After one year through five years |
240,360 | 243,792 | ||||||
After five years through ten years |
151,569 | 154,283 | ||||||
After ten years |
40,120 | 41,305 | ||||||
447,847 | 455,325 | |||||||
Less than 12 months | More than 12 months | Total | ||||||||||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | |||||||||||||||||||
($000 omitted) | ||||||||||||||||||||||||
Debt securities: |
||||||||||||||||||||||||
Municipal |
139 | 9,065 | | | 139 | 9,065 | ||||||||||||||||||
Corporate and utilities |
2,257 | 100,513 | | | 2,257 | 100,513 | ||||||||||||||||||
Foreign |
86 | 53,786 | | | 86 | 53,786 | ||||||||||||||||||
U.S. Government |
| | | | | | ||||||||||||||||||
Equity securities |
163 | 4,842 | | | 163 | 4,842 | ||||||||||||||||||
2,645 | 168,206 | | | 2,645 | 168,206 | |||||||||||||||||||
- 6 -
Less than 12 months | More than 12 months | Total | ||||||||||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | |||||||||||||||||||
($000 omitted) | ||||||||||||||||||||||||
Debt securities: |
||||||||||||||||||||||||
Municipal |
638 | 14,391 | 1 | 25 | 639 | 14,416 | ||||||||||||||||||
Corporate and utilities |
2,868 | 95,354 | 4 | 235 | 2,872 | 95,589 | ||||||||||||||||||
Foreign |
93 | 55,773 | | | 93 | 55,773 | ||||||||||||||||||
U.S. Government |
4 | 3,711 | | | 4 | 3,711 | ||||||||||||||||||
3,603 | 169,229 | 5 | 260 | 3,608 | 169,489 | |||||||||||||||||||
| 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. |
- 7 -
Fair value | ||||||||||||
Level 1 | Level 2 | measurements | ||||||||||
($000 omitted) | ||||||||||||
Short-term investments |
39,838 | | 39,838 | |||||||||
Investments available-for-sale: |
||||||||||||
Debt securities: |
||||||||||||
Municipal |
| 37,318 | 37,318 | |||||||||
Corporate and utilities |
| 232,324 | 232,324 | |||||||||
Foreign |
164,630 | | 164,630 | |||||||||
U.S. Government |
21,053 | | 21,053 | |||||||||
Equity securities |
4,842 | | 4,842 | |||||||||
230,363 | 269,642 | 500,005 | ||||||||||
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
($000 omitted) | ||||||||||||||||
Realized gains |
2,741 | 8,309 | 3,591 | 11,538 | ||||||||||||
Realized losses |
(3,974 | ) | (514 | ) | (4,692 | ) | (830 | ) | ||||||||
(1,233 | ) | 7,795 | (1,101 | ) | 10,708 | |||||||||||
- 8 -
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
($000 omitted) | ||||||||||||||||
Proceeds from sales of
investments
available-for-sale |
94,971 | 50,681 | 110,759 | 101,425 | ||||||||||||
Weighted- | ||||||||
average exercise | ||||||||
Options | prices ($) | |||||||
December 31, 2010 |
183,700 | 23.80 | ||||||
Forfeited |
(28,000 | ) | 19.68 | |||||
June 30, 2011 |
155,700 | 24.54 | ||||||
- 9 -
For the Three Months Ended | ||||||||
June 30, | ||||||||
2011 | 2010 | |||||||
($000 omitted, except per | ||||||||
share) | ||||||||
Numerator: |
||||||||
Net earnings attributable to Stewart |
5,940 | 9,428 | ||||||
Interest expense, net of tax effects |
785 | 785 | ||||||
If-converted net earnings attributable to Stewart |
6,725 | 10,213 | ||||||
Denominator (000): |
||||||||
Basic average shares outstanding |
19,216 | 18,320 | ||||||
Dilutive average number of shares relating to convertible senior notes |
5,047 | 4,600 | ||||||
Dilutive average number of shares relating to restricted shares grant |
63 | 37 | ||||||
Dilutive average shares outstanding |
24,326 | 22,957 | ||||||
Diluted earnings per share attributable to Stewart |
0.28 | 0.45 | ||||||
- 10 -
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
($000 omitted) | ||||||||||||||||
Revenues: |
||||||||||||||||
Title |
382,319 | 414,882 | 717,349 | 754,653 | ||||||||||||
REI |
22,564 | 26,659 | 53,949 | 38,201 | ||||||||||||
404,883 | 441,541 | 771,298 | 792,854 | |||||||||||||
Intersegment revenues: |
||||||||||||||||
Title |
69 | 123 | 103 | 185 | ||||||||||||
REI |
692 | 630 | 1,351 | 1,183 | ||||||||||||
761 | 753 | 1,454 | 1,368 | |||||||||||||
Depreciation and amortization: |
||||||||||||||||
Title |
4,023 | 5,031 | 8,244 | 10,248 | ||||||||||||
REI |
739 | 646 | 1,348 | 1,365 | ||||||||||||
4,762 | 5,677 | 9,592 | 11,613 | |||||||||||||
Earnings (loss) before taxes
and noncontrolling interests: |
||||||||||||||||
Title |
(4,320 | ) | 5,438 | (27,630 | ) | (25,761 | ) | |||||||||
REI |
10,026 | 12,537 | 26,943 | 13,993 | ||||||||||||
5,706 | 17,975 | (687 | ) | (11,768 | ) | |||||||||||
2011 | 2010 | |||||||
($000 omitted) | ||||||||
Identifiable assets: |
||||||||
Title |
1,070,309 | 1,082,083 | ||||||
REI |
58,549 | 59,123 | ||||||
1,128,858 | 1,141,206 | |||||||
- 11 -
For the Three Months | For the Six Months | |||||||||||||||
Ended June 30, | Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
($000 omitted) | ||||||||||||||||
United States |
374,200 | 405,560 | 720,649 | 739,407 | ||||||||||||
International |
30,683 | 35,981 | 50,649 | 53,447 | ||||||||||||
404,883 | 441,541 | 771,298 | 792,854 | |||||||||||||
- 12 -
- 13 -
- 14 -
- 15 -
- 16 -
- 17 -
| mortgage interest rates; | ||
| ratio of purchase transactions compared with refinance transactions; | ||
| ratio of closed orders to open orders; | ||
| home prices; | ||
| volume of distressed property transactions; | ||
| consumer confidence; | ||
| demand by buyers; | ||
| number of households; | ||
| availability of loans for borrowers; | ||
| premium rates; | ||
| market share; | ||
| opening of new offices and acquisitions; | ||
| number of commercial transactions, which typically yield higher premiums; and | ||
| government or regulatory initiatives, including tax incentives |
- 18 -
- 19 -
- 20 -
- 21 -
- 22 -
2011 | 2010 | |||||||
(dollars in millions) | ||||||||
Net cash (used) provided by operating activities |
(6.5 | ) | 5.6 | |||||
Net cash (used) provided by investing activities |
(22.4 | ) | 244.4 | |||||
Net cash used by financing activities |
(3.7 | ) | (224.3 | ) |
- 23 -
- 24 -
- 25 -
- 26 -
- 27 -
- 28 -
August 3, 2011 |
Stewart Information Services Corporation
|
||||||
By: | /s/ J. Allen Berryman | |||||
Chief Financial Officer, Secretary, Treasurer | ||||||
and Principal Financial Officer |
- 29 -
Exhibit | ||||||
3.1
|
- | Amended and Restated Certificate of Incorporation of the Registrant, dated May 1, 2009 (incorporated by reference in this report from Exhibit 3.1 of the Current Report on Form 8-K filed May 5, 2009) | ||||
3.2
|
- | Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Registrant, dated April 30, 2010 (incorporated by reference in this report from Exhibit 3.2 of the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010) | ||||
3.3
|
- | By-Laws of the Registrant, as amended March 13, 2000 (incorporated by reference in this report from Exhibit 3.2 of the Annual Report on Form 10-K for the year ended December 31, 2000) | ||||
4.1
|
- | Rights of Common and Class B Common Stockholders (incorporated by reference to Exhibits 3.1 and 3.2 hereto) | ||||
4.2
|
- | Indenture related to 6.0% Convertible Senior Notes due 2014, dated as of October 15, 2009, by and between the Registrant, the Guarantors party thereto, and Wells Fargo Bank, N.A., as trustee (incorporated by reference from Exhibit 4.1 to the Current Report on Form 8-K filed October 15, 2009) | ||||
4.3
|
- | Form of 6.0% Convertible Senior Note due 2014 (incorporated by reference from Exhibit 4.2 to the Current Report on Form 8-K filed October 15, 2009) | ||||
31.1
|
* | - | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.2
|
* | - | Certification of Co-Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
31.3
|
* | - | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
32.1
|
* | - | Certification of Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
32.2
|
* | - | Certification of Co-Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
32.3
|
* | - | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
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 |
Exhibit | ||||||
101.PRE
|
** | - | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith | |
** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the securities Exchange Act of 1934 and otherwise are not subject to liability under those sections. |
(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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants 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 registrants 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 registrants internal control over financial reporting. |
/s/ Malcolm S. Morris |
||||
Chairman of the Board of Directors |
(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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants 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 registrants 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 registrants internal control over financial reporting. |
/s/ Stewart Morris, Jr. |
||||
President and Director |
(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 registrants 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 registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants 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 registrants 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 registrants internal control over financial reporting. |
/s/ J. Allen Berryman |
||||
Chief Financial Officer, Secretary, Treasurer, | ||||
and Principal Financial Officer |
/s/ Malcolm S. Morris |
||
Title: Co-Chief Executive Officer and |
||
Chairman of the Board of Directors |
/s/ Stewart Morris, Jr. |
||
Title: Co-Chief Executive Officer, |
||
President and Director |
/s/ J. Allen Berryman |
||
Title: Executive Vice President, |
||
Chief Financial Officer, Secretary, Treasurer |
||
and Principal Financial Officer |
Condensed Consolidated Statements of Operations and Comprehensive Earnings (Loss) (Parenthetical) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Comprehensive earnings (loss): | Â | Â | Â | Â |
Tax effects on other comprehensive income | $ 1,734 | $ 1,385 | $ 2,895 | $ 2,869 |
Document and Entity Information (USD $)
|
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jul. 29, 2011
Common Stock [Member]
|
Jul. 29, 2011
Common Class B [Member]
|
|
Entity Registrant Name | STEWART INFORMATION SERVICES CORP | Â | Â | Â |
Entity Central Index Key | 0000094344 | Â | Â | Â |
Document Type | 10-Q | Â | Â | Â |
Document Period End Date | Jun. 30, 2011 | |||
Amendment Flag | false | Â | Â | Â |
Document Fiscal Year Focus | 2011 | Â | Â | Â |
Document Fiscal Period Focus | Q2 | Â | Â | Â |
Current Fiscal Year End Date | --12-31 | Â | Â | Â |
Entity Well-known Seasoned Issuer | No | Â | Â | Â |
Entity Voluntary Filers | No | Â | Â | Â |
Entity Current Reporting Status | Yes | Â | Â | Â |
Entity Filer Category | Accelerated Filer | Â | Â | Â |
Entity Public Float | Â | $ 156,200,000 | Â | Â |
Entity Common Stock, Shares Outstanding | Â | Â | 18,246,785 | 1,050,012 |
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Earnings Per Share
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Earnings Per Share [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share |
NOTE 6
Earnings per share. The Company’s basic earnings per share attributable to Stewart was calculated
by dividing net earnings (loss) attributable to Stewart by the weighted-average number of shares of
Common Stock and Class B Common Stock outstanding during the reporting periods.
To calculate diluted earnings per share, net earnings and number of shares are adjusted for the
effects of any dilutive shares. Using the if-converted method, net earnings is adjusted for
interest expense, net of any tax effects, applicable to the convertible senior notes. The number
of shares is adjusted by adding the number of dilutive shares, assuming they are issued, during the
same reporting period. The treasury stock method is used to calculate the dilutive number of shares
related to the Company’s stock option plan.
For the three months ended June 30, 2011 and 2010, the Company did not have any dilutive shares
under the treasury stock method mentioned above since the exercise prices of the options were
greater than the weighted-average market value of the shares, which excludes them from the diluted
earnings calculation.
Also, since the Company reported a net loss after adjustments related to the if-converted method
for the six months ended June 30, 2011 and 2010, there were no calculations of diluted per share
amounts for these periods.
The calculation of the diluted earnings per share using the if-converted method is as follows for
the three months ended June 30, 2011 and June 30, 2010:
|
Investments in Debt and Equity Securities
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Investments in Debt and Equity Securities [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in debt and equity securities |
NOTE 2
Investments in debt and equity securities. The amortized costs and fair values follow:
Gross unrealized gains and losses were:
Debt securities as of June 30, 2011 mature, according to their contractual terms, as follows
(actual maturities may differ due to call or prepayment rights):
As of June 30, 2011, gross unrealized losses on investments 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, were:
The unrealized loss positions were primarily caused by interest rate fluctuations. The number of
investments in an unrealized loss position as of June 30, 2011 was 54. Since the Company does not
intend to sell and will more-likely-than-not maintain each debt security until its anticipated
recovery, and no significant credit risk is deemed to exist, these investments are not considered
other-than-temporarily impaired.
As of December 31, 2010, gross unrealized losses on investments 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, were:
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. Foreign debt securities primarily include Canadian government bonds
and United Kingdom treasury bonds.
|
Segment Information
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Segment Information [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information |
NOTE 8
Segment information. The Company’s two reportable segments are title insurance-related services
(Title) and real estate information (REI). Selected statement of operations information related to
these segments follows:
Selected balance sheet information as of June 30 and December 31, respectively, related to these
segments follows:
Revenues generated in the United States and all international operations follows:
|
Regulatory and Legal Developments
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
|
Regulatory and Legal Developments [Abstract] | Â |
Regulatory and legal developments |
NOTE 9
Regulatory and legal developments. Stewart Title Guaranty Company (STGC) and Stewart Title
Guaranty de Mexico, S.A. de C.V. (STGM) were defendants in a lawsuit in the State District Court of
Harris County, Texas, Citigroup Global Markets Realty Corp. v. Stewart Title Guaranty Company. The
lawsuit was filed in 2008 and concerns 16 owners’ and 16 lenders’ title insurance policies on 16
parcels of land in Mexico issued by STGM and reinsurance agreements by STGC. Citigroup Global
Markets Realty Corp. asserted claims against STGC under reinsurance of the lenders’ policies as
well as extra-contractual claims under Texas law. K.R. Playa VI, S de R.L. de C.V., the owner of
the parcels, asserted claims against STGC and separate claims against STGM under the owners’
policies as well as extra-contractual claims under Texas law. The State District Court dismissed the extra-contractual claims against STGC and STGM based
on application of Mexican law.
After a 10 week trial, the jury returned a verdict of no damages, favorable to STGC and STGM, on
April 29, 2011. Judgment was entered on June 30, 2011, and post-judgment motions are scheduled for
hearing during the week of August 22, 2011. The Company does not believe that the outcome will materially affect its
consolidated financial condition or results of operations.
* * *
In January 2009, an action was filed by individuals against Stewart Title Guaranty Company, Stewart
Title of California, Inc., Cuesta Title Company and others in the Superior Court of California for
the County of San Luis Obispo alleging that the plaintiffs have suffered damages relating to loans
they made through Hurst Financial Corporation to an individual named Kelly Gearhart and entities
controlled by Gearhart. Thereafter, several other lawsuits making similar allegations, including a
lawsuit filed by several hundred individuals, were filed in San Luis Obispo Superior Court, and one
such lawsuit was removed to the United States District Court for the Central District of
California. The defendants vary from case to case, but Stewart Information Services Corporation,
Stewart Title Company and Stewart Title Insurance Company have also each been sued in at least one
of the cases. Each of the complaints alleges some combination of the following purported causes of
action: breach of contract, negligence, fraud, aiding and abetting fraud, constructive fraud,
breach of fiduciary duty, breach of implied covenant of good faith and fair dealing, financial
elder abuse, violation of California Business and Professions Code Section 17200, negligent
misrepresentation, conversion, conspiracy, alter ego, specific performance and declaratory relief.
The Company has demurred to or moved to dismiss the complaints in the actions where responses to
the complaints have been due. Although the San Luis Obispo Superior Court has sustained demurrers
to certain causes of action and certain individuals and entities and dismissed Stewart Information
Services Corporation from one case without leave to amend, the Court has overruled the demurrers as
to some causes of action. The United States District Court for the Central District of California
granted the Company’s motion to dismiss the First Amended Complaint as to the claim for violation
of the Racketeer Influenced and Corrupt Organizations Act, with prejudice, and remanded the
remainder of the case to the San Luis Obispo Superior Court. Discovery has commenced. On May 27,
2011, the Court entered an Order Coordinating Related Cases for Pre-Trial Purposes and a First Case Management Order for the
Related Cases which applies to all of the pending actions. No trial dates have been set. The
Company is vigorously defending itself against the allegations and does not believe that the
outcome of these matters will materially affect its consolidated financial condition or results of
operations.
* * *
In February 2008, an antitrust class action was filed in the United States District Court for the
Eastern District of New York against Stewart Title Insurance Company, Monroe Title Insurance
Corporation, Stewart Information Services Corporation, several other unaffiliated title insurance
companies and the Title Insurance Rate Service Association, Inc. (TIRSA). The complaint alleges
that the defendants violated Section 1 of the Sherman Antitrust Act by collectively filing proposed
rates for title insurance in New York through TIRSA, a state-authorized and licensed rate service
organization.
Complaints were subsequently filed in the United States District Courts for the Eastern and
Southern Districts of New York and in the United States District Courts in Pennsylvania, New
Jersey, Ohio, Florida, Massachusetts, Arkansas, California, Washington, West Virginia, Texas and
Delaware. All of the complaints make similar class action allegations, except that certain of the
complaints also allege violations of the Real Estate Settlement Procedures Act (RESPA) and various
state antitrust and consumer protection laws. The complaints generally request treble damages in
unspecified amounts, declaratory and injunctive relief and attorneys’ fees. To date, 78 such
complaints have been filed, each of which names the Company and/or one or more of its affiliates as
a defendant (and have been consolidated in the aforementioned states), of which seven have been
voluntarily dismissed.
As of July 8, 2011, the Company has obtained dismissals of the claims in Arkansas, California,
Delaware, Florida, Massachusetts, New Jersey, New York, Ohio, Pennsylvania (where the court
dismissed the damages claims and granted defendants summary judgment on the injunctive claims),
Texas and Washington. The Company filed a motion to dismiss in West Virginia (where all
proceedings have been stayed and the docket closed). The plaintiffs have appealed the dismissal in
Ohio to the United States Court of Appeals for the Sixth Circuit and the dismissals in Delaware,
New Jersey and Pennsylvania to the United States Court of Appeals for the Third Circuit. The
dismissals in New York and Texas have been affirmed by the United States Courts of Appeals for the
Second and Fifth Circuits, respectively, and on October 4, 2010, the United States Supreme Court
denied the plaintiffs’ petitions for review of those decisions. The plaintiffs have appealed to
the Second Circuit the dismissal of the RESPA claims by the court in New York. Although the
Company cannot predict the outcome of these actions, it is vigorously defending itself against the
allegations and does not believe that the outcome will materially affect its consolidated financial
condition or results of operations.
* * *
The Company is also subject to other 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 proceedings will have a material adverse effect on its consolidated financial condition or
results of operations. Along with the other major title insurance companies, the Company is party
to a number of class action lawsuits concerning the title insurance industry. The Company believes
that it has adequate reserves for the various litigation matters and contingencies discussed above
and that the likely resolution of these matters will not materially affect its consolidated
financial condition or results of operations.
The Company is subject to administrative actions and litigation relating to the basis on which
premium taxes are paid in certain states. Additionally, the Company has received various other
inquiries from governmental regulators concerning practices in the insurance industry. Many of
these practices do not concern title insurance. The Company 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 also 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.
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Contingent Liabilities and Commitments
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6 Months Ended |
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Jun. 30, 2011
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Contingent Liabilities and Commitments [Abstract] | Â |
Contingent liabilities and commitments |
NOTE 7
Contingent liabilities and commitments. As of June 30, 2011, the Company was contingently liable
for guarantees of indebtedness owed primarily to banks and others by certain third parties totaling
$0.7 million. Additionally, in the ordinary course of business, the Company guarantees the
third-party indebtedness of certain of its consolidated subsidiaries, which aggregated $3.5 million
as of June 30, 2011, and related primarily to unused letters of credit for workers’ compensation
self-insurance coverage. These guarantees expire no later than 2019. The maximum potential future payments for the indebtedness guarantees were
not more than the related notes payable recorded in the condensed consolidated balance sheet. 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.
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Fair Value Measurements
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Jun. 30, 2011
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Fair Value Measurements [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements |
NOTE 3
Fair value measurements. The Fair Value Measurements and Disclosures Topic of the FASB 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. The Fair Value
Measurements Topic 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, 2011, financial instruments measured at fair value on a recurring basis are
summarized below:
As of June 30, 2011, Level 1 financial instruments consist of short-term investments, U.S. and
foreign government bonds and equity securities. Level 2 financial instruments consist of municipal
and corporate bonds. The municipal bonds are valued using a third-party pricing service, and the
corporate bonds are valued using actual transaction levels, independent broker/dealer quotes or
information, or a combination thereof. When no relevant broker/dealer information can be obtained,
the third-party service price will be used. The third-party pricing service for both municipal and
corporate bonds determines a consensus price derived from prices provided by various broker/dealers
that meet certain statistical requirements within a predefined statistical deviation. If a
consensus price cannot be determined, then the third-party providing service, by using a recognized pricing model, a theoretical
value, based on where similar bonds, as defined by credit quality and market sector have traded, is
used.
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Investment Income
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Jun. 30, 2011
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Investment Income [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment income |
NOTE 4
Investment income. Gross realized investment and other gains and losses follows:
Expenses assignable to investment income were insignificant. There were no significant investments
as of June 30, 2011 that did not produce income during the year.
Proceeds from the sales of investments available-for-sale follows:
For the six months ended June 30, 2011, investment and other (losses) gains — net included
realized losses on a loan guarantee obligation of $3.9 million. The realized losses were partially
offset by realized gains of $2.5 million from the sale of debt investments available-for-sale.
For the six months ended June 30, 2010, investment and other (losses) gains — net included
realized gains of $6.3 million primarily from a transfer of the rights to internally developed
software, $2.9 million from the sale of debt investments available-for-sale and $1.2 million from
the sale of interests in subsidiaries.
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Share-Based Incentives
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Share-Based Incentives [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based incentives |
NOTE 5
Share-based incentives. The Company accounts for its stock option plan in accordance with the
Compensation — Stock Compensation Topic of the FASB ASC and uses the modified prospective method
under which share-based compensation expense is recognized for new share-based awards granted, and
any outstanding awards that are modified, repurchased or canceled subsequent to January 1, 2006.
Compensation expense is based on the fair value of the options, which is estimated using the
Black-Scholes Model. All options expire 10 years from the date of grant and are granted at the
closing market price of the Company’s Common Stock on the date of grant. There are no unvested
awards since all options are immediately exercisable.
There were no options granted for option awards during the six months ended June 30, 2011 and 2010
and, accordingly, no compensation expense has been reflected in the accompanying condensed
consolidated financial statements.
A summary of the Company’s stock option plan follows:
As of June 30, 2011, the weighted-average remaining contractual life of options outstanding was 2.2
years and there was no aggregate intrinsic value of dilutive options.
In March 2011, the Company granted 51,000 shares of fully vested, unrestricted Common Stock with a
fair value of $0.6 million, which was recorded as compensation expense. During the same period, the
Company also granted 37,000 shares of restricted Common Stock with a fair value of $0.4 million.
The restricted Common Stock awards will vest at 20% over five years
beginning March 10, 2011.
Compensation expense associated with restricted stock awards will be recognized over this vesting
period.
In March 2010, the Company granted 51,000 shares of fully vested, unrestricted Common Stock with a
fair value of $0.7 million, which was recorded as compensation expense. During this same period,
the Company also granted 37,000 shares of restricted Common Stock with a fair value of $0.5
million. The restricted Common Stock awards will vest at 20% over five years beginning March 10,
2010. Compensation expense associated with restricted stock awards will be recognized over this
vesting period.
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Condensed Consolidated Balance Sheets (Parenthetical)
|
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Stockholders' equity | Â | Â |
Treasury stock at cost | 352,161 | 476,227 |
Total stockholders' equity, shares outstanding | 19,296,835 | 18,375,058 |
Interim Financial Statements
|
6 Months Ended |
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Jun. 30, 2011
|
|
Interim Financial Statements [Abstract] | Â |
Interim financial statements |
NOTE 1
Interim financial statements. The financial information contained in this report for the three and
six months ended June 30, 2011 and 2010, and as of June 30, 2011, 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, 2010.
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 from those
estimates.
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. Reclassifications. Certain amounts in the 2010 interim financial statements have been
reclassified for comparative purposes. Net losses, as previously reported, were not affected.
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Condensed Consolidated Statements of Operations and Comprehensive Earnings (Loss) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Title insurance: | Â | Â | Â | Â |
Direct operations | $ 165,841 | $ 171,200 | $ 305,070 | $ 300,705 |
Agency operations | 213,829 | 230,453 | 405,638 | 433,024 |
Real estate information | 22,564 | 26,659 | 53,949 | 38,201 |
Investment income | 3,882 | 5,434 | 7,742 | 10,216 |
Investment and other (losses) gains - net | (1,233) | 7,795 | (1,101) | 10,708 |
Total revenues | 404,883 | 441,541 | 771,298 | 792,854 |
Expenses | Â | Â | Â | Â |
Amounts retained by agencies | 177,301 | 191,820 | 335,748 | 360,555 |
Employee costs | 116,587 | 119,532 | 234,513 | 233,635 |
Other operating expenses | 64,249 | 67,694 | 123,375 | 132,081 |
Title losses and related claims | 34,984 | 37,449 | 66,185 | 63,786 |
Depreciation and amortization | 4,762 | 5,677 | 9,592 | 11,613 |
Interest | 1,294 | 1,394 | 2,572 | 2,952 |
Total expenses | 399,177 | 423,566 | 771,985 | 804,622 |
Earnings (loss) before taxes and noncontrolling interests | 5,706 | 17,975 | (687) | (11,768) |
Income tax (benefit) expense | (1,942) | 5,863 | 1,189 | 4,325 |
Net earnings (loss) | 7,648 | 12,112 | (1,876) | (16,093) |
Less net earnings attributable to noncontrolling interests | 1,708 | 2,684 | 2,477 | 3,442 |
Net earnings (loss) attributable to Stewart | 5,940 | 9,428 | (4,353) | (19,535) |
Comprehensive earnings (loss): | Â | Â | Â | Â |
Net earnings (loss) | 7,648 | 12,112 | (1,876) | (16,093) |
Other comprehensive earnings, net of taxes of $1,734 $1,385, $2,895 and $2,869 | 2,380 | 1,843 | 1,990 | 3,833 |
Comprehensive earnings (loss) | 10,028 | 13,955 | 114 | (12,260) |
Less comprehensive earnings attributable to noncontrolling interests | 1,708 | 2,684 | 2,477 | 3,442 |
Comprehensive earnings (loss) attributable to Stewart | $ 8,320 | $ 11,271 | $ (2,363) | $ (15,702) |
Basic average shares outstanding (000) | 19,216 | 18,320 | 19,024 | 18,289 |
Basic earnings (loss) per share attributable to Stewart | $ 0.31 | $ 0.51 | $ (0.23) | $ (1.07) |
Dilutive average shares outstanding (000) | 24,326 | 22,957 | 19,024 | 18,289 |
Diluted earnings (loss) per share attributable to Stewart | $ 0.28 | $ 0.45 | $ (0.23) | $ (1.07) |