-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, C+LclBZj3F0yMkbPdY1mRMdIO1+/ykgRLZFoeihGmF+n5M1TDjKUtI+AksA1lHPO iDtSoXNy0CaAKH0mNuspNQ== 0000950129-95-001454.txt : 19951119 0000950129-95-001454.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950129-95-001454 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART INFORMATION SERVICES CORP CENTRAL INDEX KEY: 0000094344 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 741677330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06151 FILM NUMBER: 95592497 BUSINESS ADDRESS: STREET 1: 2200 W LOOP S STREET 2: STEWART TITLE BLDG CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7138711100 10-Q 1 STEWART INFORMATION SERVICES CORPORATION 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended September 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------ --------------------- Commission file number 1-12688 ----------- STEWART INFORMATION SERVICES CORPORATION ---------------------------------------- (Exact name of registrant as specified in its charter) 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) (713) 625-8100 -------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common 5,847,003 Class B Common 525,006 2 FORM 10-Q QUARTERLY REPORT Quarter Ended September 30, 1995 TABLE OF CONTENTS
Item No. Page ------- ---- Part I 1. Financial Statements 1 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II 1. Legal Proceedings 10 6. Exhibits and Reports on Form 8-K 13 Signature 17
3 STEWART INFORMATION SERVICES CORPORATION CONSOLDIATED STATEMENTS OF EARNINGS FOR THE NINE MONTHS AND QUARTER ENDED September 30, 1995 and 1994
THIRD QUARTER NINE MONTHS 1995 1994 1995 1994 ----- ----- ---- ---- ($000 Omitted) ($000 Omitted) Revenues Title premiums, fees and related revenues 73,158 68,611 191,201 225,055 Investment income 3,384 3,072 10,011 9,134 Investment gains (losses) 247 (84) 600 293 Other income 376 186 728 1,563 ------ ------ ------- ------- 77,165 71,785 202,540 236,045 Expenses Employee costs 36,872 35,470 102,724 115,510 Other operating expenses 22,446 21,826 63,250 68,351 Title losses and related claims 9,201 9,520 22,234 32,730 Depreciation and amortization 2,640 2,088 7,319 5,767 Interest 416 134 831 401 Minority interests 403 184 636 732 ------ ------ ------- ------- 71,978 69,222 196,994 223,491 Income before taxes 5,187 2,563 5,546 12,554 Income taxes 1,686 896 1,797 4,143 ------ ------ ------- ------- Net income 3,501 1,667 3,749 8,411 ====== ====== ======= ======= Average number of shares outstanding (000) 6,344 6,204 6,264 6,194 Earnings per share Net income 0.55 0.27 0.60 1.36 ====== ====== ======= =======
-1- 4 STEWART INFORMATION SERVICES CORPORATION CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
SEPT 30 DEC 31 1995 1994 ------- ------ ($000 Omitted) Assets Cash and cash equivalents 19,306 16,214 Investments - statutory reserve fund 119,190 105,642 Investments - other 89,463 90,737 Receivables 30,056 29,440 Property and equipment, net 25,434 24,778 Title plants 19,777 14,369 Deferred taxes 16,864 20,477 Other 28,887 23,519 ------- ------ 348,977 325,176 ======= ======= Liabilities Notes payable 15,893 7,865 Accounts payable and accrued liabilities 21,871 21,968 Estimated title losses 137,402 134,316 Minority interest 4,597 4,674 Contingent liabilities and commitments Stockholders' equity Common and Class B Common Stock and additional paid-in capital 51,965 48,962 Net unrealized investment gains/(losses), less deferred taxes 1,609 (5,363) Retained earnings 115,640 112,754 ------- ------ Total stockholders' equity ($26.56 per share at September 30, 1995) 169,214 156,353 ------- ------ 348,977 325,176 ======= =======
-2- 5 STEWART INFORMATION SERVICES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994 ---- ---- ($000 Omitted) Net cash flow provided by operating activities (Note) 13,052 18,250 Cash flow from investing activities: Purchases of property and equipment and title plants, less capital leases - net (5,781) (6,192) Proceeds of investments matured to sold 52,583 59,649 Purchases of investments, excluding mortgage loans (54,594) (88,081) Increases in mortgages and other notes (1,014) (1,779) Collections on mortgages and other notes 923 1,785 Cash paid in the purchase of subsidiaries - net (5,278) (976) Proceeds from issuance of stock 253 306 -------- ------- Net cash used by investing activities (12,908) (35,288) Cash flow from financing activities: Dividends paid (863) (834) Proceeds of notes payable 6,488 2,944 Payments on notes payable and capital leases (2,677) (3,180) -------- ------- Net cash provided (used) by financing activities 2,948 (1,070) -------- ------- Net increase (decrease) in cash equivalents 3,092 (18,108) ======== ======= NOTE: Reconciliation of net income to above amounts: Net income 3,749 8,411 Add (deduct): Depreciation and amortization 7,319 5,767 Provision for title losses in excess of payments 3,086 15,574 Provision for uncollectible amounts 0 1,097 Decrease in accounts receivable, net 552 838 Decrease in accounts payable and accrued liabilities - net (1,420) (12,392) Minority interest expense 635 732 Equity in net earnings of investees (310) (1,213) Realized investment losses (gains) - net 600 (293) Other, net (1,159) (271) -------- ------- Net cash flow provided by operating activities 13,052 18,250 ======== =======
-3- 6 STEWART INFORMATION SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ Note 1: Interim Financial Statements The financial information contained in this report for the nine month periods ended September 30, 1995 and 1994, and as at September 30, 1995, is unaudited. In the opinion of management, all adjustments necessary for a fair presentation of this information for all unaudited periods, consisting only of normal recurring accruals, have been made. The results of operations for the interim periods are not necessarily indicative of results for a full year. -4- 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations A comparison of the results of operations of the Company for the first nine months of 1995 with the first nine months of 1994 follows: General The Company's dominant segment of operations is the land title business. In general, the principal factors which contribute to increases in title revenues include declining mortgage interest rates (which usually increase home sales), increases in refinancing ("refis") transactions, rising home prices, higher premium rates, increased market share, additional revenues from new offices and increased revenue from non-residential commercial transactions. Although relatively few in number, large commercial transactions usually yield higher premiums. Revenues The Company's revenues from title premiums and fees fell $33.9 million, or 15.0%, in the first nine months of 1995 as compared to the first nine months of 1994. The Company did not benefit in the first quarter of 1995 from a high volume of loan refinancings like the first quarter of 1994. Regular business declined also from the same period a year ago. Volume in the first quarter of 1994 was driven by low mortgage interest rates, which began a steady rise in February 1994, and peaked at the 9.7% level in December 1994. A gradual decline in rates began in the early months of 1995, dropping below and stabilizing at roughly the 8% level in May. The number of closings handled by the Company were down 19.7% primarily because of the reduction in refinancing transactions, as well as regular transactions, resulting from the rise in mortgage rates noted above. Closings decreased in California, Texas, Colorado, Florida and most of the company's other major markets. The average revenue per closing rose 6.8% primarily because regular transactions generate higher premiums than refi transactions. Premium revenues from new and existing agents decreased 22.6% in 1995 over 1994. Investment income was up 9.6% in 1995 due to an increase in the average balance invested and higher market yields. Expenses Employee expenses decreased $12.8 million, or 11.1% in 1995 primarily because of a decrease in the average number of employees from 4,029 a year ago to 3,559 in 1995. The decrease in staff in 1995 was primarily in Texas, California and Florida. While the Company has reduced overall employee expenses, employee expenses of the systems development and programming operations increased. Most of the increase was attributable to developing new, or significantly improving, existing operating processes. These expenditures are expected to add customer revenues and reduce operating expenses and title losses in the future. -5- 8 Other operating expenses decreased by $5.1 million, or 7.5%, in 1995 primarily because of the decrease in volume which reduced supplies, premium taxes, advertising, bad debts and title plant expenses. Other operating expenses include office rent, telephone, policy forms, delivery expenses and travel. Provisions for title losses and related claims were down $10.5 million in 1995. The Company's recent experience in claims has improved significantly as a result of the Company's programs designed to curtail claims and improve recoveries on claims. As a percentage of title premiums, fees and related revenues, provisions decreased to 11.6% in 1995 versus 14.5% in 1994. The ratio was 13.9% for the full year 1994. In December 1994 the California Board of Equalization (the CBOE ) ruled in favor of the Company concerning an assessment previously filed against the Company for certain additional premium taxes for the year 1987. However, an assessment of $1.1 million for retaliatory taxes for that same year was left pending. In August 1995 the staff of the CBOE recommended that the assessment be increased to $2.5 million. These amounts do not include interest and penalties, which can add materially to amounts assessed. A hearing before the CBOE is expected to be scheduled in the near future. Five other states also have premium tax assessments pending against the Company for various years ranging from 1984 through 1994. The aggregate amount of the assessments is $1.8 million, excluding interest and penalties. The Company cannot predict whether additional premium taxes will be assessed by California and these states for years other than those assessed to date. Also the Company cannot predict if other states will make similar assessments. State taxing authorities may be increasingly inclined to seek additional revenues by assessing premium taxes against title insurance companies domiciled outside the assessing state. There are significant differences between Texas, where the Company's principal insurer is domiciled, and California and other states as to the regulation and taxation of the title insurance industry. Numerous complex issues are involved. The Company intends to oppose vigorously these assessments. There can be no assurance about whether the Company will prevail in these controversies or that retaliatory premium tax assessments will not, in the aggregate, materially adversely affect the Company's earnings in future years. The provision for income taxes represented a 32.4% effective tax rate in 1995 and 33.0% effective tax rate in 1994. Liquidity and capital resources Operating earnings represent the primary source of financing, but this may be supplemented by bank borrowings. The capital resources of the Company, and the present debt-to-equity relationship, are considered satisfactory. -6- 9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations A comparison of the results of operations of the Company for the third quarter of 1995 with the third quarter of 1994 follows: General The Company's dominant segment of operations is the land title business. In general, the principal factors which contribute to increases in title revenues include declining mortgage interest rates (which usually increase home sales and refinancing transactions), rising home prices, higher premium rates, increased market share, additional revenues from new offices and increased revenue from non-residential commercial transactions. Although relatively few in number, large commercial transactions usually yield higher premiums. Revenues The Company's revenues from title premiums and fees rose $4.5 million, or 6.6%, in the third quarter of 1995 as compared to the third quarter of 1994. The number of closings handled by the Company were up 7.7% primarily because of a gradual decline in mortgage interest rates that began in the early months of 1995, dropping below and stabilizing at roughly the 8% level in May. Closings increased in Texas, Colorado, Florida and most of the company's other major markets except California. The average revenue per closing rose 4.3%. Premium revenues from new and existing agents decreased 6.7% in 1995 as compared to 1994. Investment income was up 10.2% in 1995, due to an increase in market yields. Expenses Employee expenses increased $1.4 million, or 4.0%, in 1995. While the Company has reduced employee expenses in the title offices, the reduction was more than offset by the addition of new offices and increases in the systems development and programming operations. Most of the increase was attributable to developing new, or significantly improving, existing operating processes. These expenditures are expected to add customer revenues and reduce operating expenses and title losses in the future. Other operating expenses increased by $.6 million, or 2.8%, in 1995 primarily because of increased volume. Other operating expenses include advertising, premium taxes, title plant expenses, rent, supplies, telephone, policy forms, delivery, travel and fees paid to attorneys for examination and closing services. -7- 10 Provisions for title losses and related claims were down $.3 million in 1995. The Company's recent experience in claims has improved significantly as a result of the Company's programs designed to curtail claims and improve recoveries on claims. The first and second quarters of 1995 included larger than usual recoveries. As a percentage of title premiums, fees and related revenues, provisions decreased to 12.6% in 1995 versus 13.9% in 1994. The ratio was 13.9% for the full year 1994. In December 1994 the California Board of Equalization (the "CBOE") ruled in favor of the Company concerning an assessment previously filed against the Company for certain additional premium taxes for the year 1987. However, an assessment of $1.1 million for retaliatory taxes for that same year was left pending. In August 1995 the staff of the CBOE recommended that the assessment be increased to $2.5 million. These amounts do not include interest and penalties, which can add materially to amounts assessed. A hearing before the CBOE is expected to be scheduled in the near future. Five other states also have premium tax assessments pending against the Company for various years ranging from 1984 through 1994. The aggregate amount of the assessments is $1.8 million, excluding interest and penalties. The Company cannot predict whether additional premium taxes will be assessed by California and these states for years other than those assessed to date. Also the Company cannot predict if other states will make similar assessments. State taxing authorities may be increasingly inclined to seek additional revenues by assessing premium taxes against title insurance companies domiciled outside the assessing state. There are significant differences between Texas, where the Company's principal insurer is domiciled, and California and other states as to the regulation and taxation of the title insurance industry. Numerous complex issues are involved. The Company intends to oppose vigorously these assessments. There can be no assurance about whether the Company will prevail in these controversies or that retaliatory premium tax assessments will not, in the aggregate, materially adversely affect the Company's earnings in future years. The provision for income taxes represented a 32.5% effective tax rate in 1995 and 35.0% effective tax rate in 1994. Liquidity and capital resources Operating earnings represent the primary source of financing, but this may be supplemented by bank borrowings. The capital resources of the Company, and the present debt-to-equity relationship, are considered satisfactory. -8- 11 PART II
Page Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4. - Rights of Common and Class B Common Stockholders 27.0 - Financial data schedule 28.2 - Details of Investments as reported in the Quarterly Report to Shareholders (b) There were no reports on Form 8-K filed during the quarter ended September 30, 1995
-9- 12 ITEM 3. LEGAL PROCEEDINGS On August 29, 1989, a purported class action was filed in the Circuit Court of Milwaukee County, Wisconsin against Guaranty, eleven other title insurance companies and nine individuals. The plaintiffs purported to represent a class of all persons and entities in Wisconsin who purchased title insurance and/or search and examination services from 1971 through at least December 31, 1984. The complaint alleges that the defendants violated Wisconsin antitrust and insurance laws by participating in a title insurance rating bureau. Plaintiffs seek declaratory relief, treble damages in an unspecified amount and costs and attorneys' fees. On February 1, 1990, the defendants filed a motion to dismiss the complaint in the Circuit Court of Milwaukee County, Wisconsin on the basis of res judicata, implied repeal of the Wisconsin antitrust laws by the Wisconsin insurance laws, filed tariff doctrine and statute of limitations. The Circuit Court granted the defendants' motion on October 17, 1990. On June 19, 1991, the Circuit Court denied the plaintiffs' motion to amend their complaint to add new plaintiffs. The plaintiffs appealed the Circuit Court's rulings to the Court of Appeals of Wisconsin, which certified the appeal to the Wisconsin Supreme Court on April 1, 1992. On June 9, 1993, the Supreme Court affirmed the Circuit Court's dismissal of the case. The plaintiffs filed a motion for reconsideration in the Wisconsin Supreme Court on or about June 28, 1993, and the defendants filed a response on or about July 7, 1993. On or about August 17, 1993, the Wisconsin Supreme Court denied the plaintiffs' motion. The United States Supreme Court denied the plaintiff's petition for certiorari on February 22, 1994. On April 13, 1990, Walter Thomas Brown and Jeffrey L. Dziewit sued Guaranty and five other major title insurers in a purported class action in United States District Court for the District of Arizona. The complaint alleges that the defendants' participation in a title insurance rating bureau constituted a violation of federal antitrust laws. Plaintiffs seek injunctive relief, treble damages in an unspecified amount, and costs and attorneys' fees. The plaintiffs purport to represent a class consisting of all persons, except officers and directors of the defendants and their immediate families, who purchased title search and examination services from defendants in Arizona and Wisconsin from January 7, 1981, to the present time. The District Court granted the defendants' motion for summary judgment on March 1, 1991. On December 28, 1992, the United States Court of Appeals for the Ninth Circuit affirmed in part the decision of the district court, holding that the federal class action settlement bars the plaintiffs' claims for injunctive relief, but reversed in part the decision of the district court by holding that the federal class action settlement does not bar the plaintiffs' claims for monetary damages. In addition, the court held that the defendants are not protected from the plaintiffs' claims by the state action doctrine or the filed tariff doctrine. The title insurers filed a petition for rehearing in the Ninth Circuit on or about January 11, 1993. On or about March 17, 1993, the Ninth Circuit denied the petition for rehearing. On or about March 24, 1993, the Ninth Circuit granted the title insurers' motion to stay issuance of the Ninth Circuit's mandate for a period of ninety days, pending the title insurers' filing of a petition for certiorari with the United States Supreme Court. On or about June 15, 1993, the title insurers filed their petition for a writ of certiorari. On or about October 1, 1993, counsel for the plaintiffs and counsel for the defendants executed a "memorandum of understanding" regarding a proposed settlement. Under an Agreement of Settlement subsequently executed by the parties, the proposed settlement class would include persons who purchased search and examination services in Wisconsin and Arizona from January 1, 1981 through June 10, 1986. Members of the settlement class who purchased from one of the defendants or their agents from 1981 through 1984 with respect to Wisconsin, or from 1981 through 1982 with respect to Arizona, would be entitled to receive a cash payment equal to 7.7 percent of the amount that each such class member paid for title search and examination services (provided that the total liability of the defendants not exceed $1,587,326 in Wisconsin and that the total liability of the defendants not exceed $1,225,200 in Arizona). Members of the -10- 13 settlement class who are eligible but do not elect to receive the cash option would receive, without additional charge, a policy enhancement designed to reflect the impact of inflation from January 1, 1981 to the date of any final settlement order. Such class members and members of the settlement class who purchased from persons other than the defendants or their agents will receive the last $5,000 of coverage without charge in connection with any new title insurance policy purchased from any of the defendants within one year following any final settlement order with respect to property located either in Arizona or Wisconsin. Members of this settlement class would have the right to "opt out" of the proposed settlement, and the defendants would have the right to reject the settlement if 5,000 or more members elect to opt out. The proposed settlement, which is subject to notice and court approval pursuant to the provisions of Federal Rule of Civil Procedure 23 and other authorities, would result in a judgment dismissing with prejudice all claims of the settlement class under federal and state antitrust laws as to the defendants and their agents, officers, and employees. On October 4, 1993, the Supreme Court granted the title insurers' petition for a writ of certiorari. On or about April 4, 1994, the Supreme Court dismissed the writ as improvidently granted. On June 1, 1994, the parties jointly filed with the district court their Agreement of Settlement and a proposed order that would preliminarily approve the proposed settlement, authorize notice to be given to members of the settlement class, and schedule a hearing on the proposed settlement. On or about July 5, 1994, counsel for the plaintiffs filed "Plaintiffs" Notice of Withdrawal of Joint Request for Entry of Preliminary Settlement Order Lodged June 1, 1994." On or about July 14, 1994, the title insurers filed their response, urging the court to enforce the Agreement of Settlement and to enter the proposed order. On September 19, 1989, the Federal Trade Commission ("FTC") denied Guaranty's appeal of the Administrative Law Judge's decision in In the Matter of Ticor Title Insurance. The FTC ordered Guaranty and the other respondents to cease and desist from discussing, proposing, settling or filing any rates for title search and examination services through rating bureaus in New Jersey, Pennsylvania, Connecticut, Wisconsin, Arizona and Montana, except where such collective activity is engaged in pursuant to clearly articulated state policy and is actively supervised by a state regulatory agency. The Court of Appeals for the Third Circuit reversed the FTC's decision on January 9, 1991 and held that the collective filing of rates for title search and examination services is immune from federal antitrust liability under the state-action doctrine. On June 12, 1992, the Supreme Court determined that state regulators in Wisconsin and Montana failed to actively supervise rating bureau activity in those states and that as a result, state action immunity did not apply. Accordingly, the Court reversed the Court of Appeals' finding with respect to those states. The Court also remanded to the Court of Appeals with instructions to reconsider its findings with respect to Arizona and Connecticut. The Court did not consider defenses raised by the title insurers other than state action immunity. On July 15, 1993, the Court of Appeals held that the state action doctrine did not apply to the title insurers' activity in Arizona and Connecticut. The Court of Appeals also held that the title insurers' activity was not protected by the McCarren-Ferguson Act's exemption for the "business of insurance" or by the exemption for petitioning of the government. On or about August 30, 1993, the Court of Appeals denied the title insurers' petition for rehearing. The title insurers filed a petition for a writ of certiorari with the United States Supreme Court, which denied the petition on March 21, 1994. The FTC's order has been modified to delete references to New Jersey and Pennsylvania and, as modified, has become final. On or about April 22, 1994, Harold Segall and three other plaintiffs sued Guaranty and 10 other title insurance companies in the United States District Court for the Eastern District of Wisconsin. The plaintiffs purport to represent a class consisting of persons who purchased title search and examination services from one or more of the defendants in connection with the sale or refinancing of residential real -11- 14 estate in Wisconsin from January 7, 1981 through at least January 8, 1985. According to the plaintiffs, the defendants violated federal antitrust law by participating in a title insurance rating bureau through which they allegedly agreed upon the process and other terms and conditions of sale for title search and examination services in Wisconsin. The plaintiffs request treble damages in an unspecified amount, costs, and attorney's fees. The plaintiffs also seek an injunction against certain defendants other than Guaranty. On or about June 15, 1994 Guaranty filed its answer to the complaint. On or about July 8, 1994, the plaintiffs filed a Motion to Transfer with the Judicial Panel on Multidistrict Litigation, requesting that it transfer the action to the United State District Court of the District of Arizona for consolidation with the Arizona Federal proceeding, described above. Guaranty filed its opposition to the motion on August 1, 1994. On October 11, 1994, the Panel filed an order granting the Motion to Transfer. On May 18, 1995, the plaintiffs and defendants in the consolidated proceeding presented a proposed settlement to the United States District Court for the District of Arizona. The proposed settlement class would include persons who purchased search and examination services in Wisconsin and Arizona from January 1, 1981, through June 10, 1986 from any title insurance underwriter or agent. Members of the settlement class who purchased from 1981 through 1984 with respect to Wisconsin, or from 1981 through 1982 with respect to Arizona, would be entitled to receive a cash payment equal to 7.7 percent of the amount that each such class member paid for title search and examination services (provided that the total liability of the defendants not exceed $2,070,326 in Wisconsin and $1,996,613 in Arizona). Members of the settlement class who purchased search and examination services between January 1, 1981 and June 10, 1986 but do not receive the cash option would receive, without additional charge, a policy enhancement designed to reflect the impact of inflation from January 1, 1981 to the date of any final settlement order. The same enhancement would be provided to members of the settlement class who did not purchase search and examination services but became insured during the applicable period by any defendant. Class members who purchased search and examination services, and class members who neither purchased search and examination nor become insured by any defendant, would receive the last $5,000 of coverage without charge in connection with any new title insurance policy purchased from any of the defendants within one year following any final settlement order with respect to property located in either Arizona or Wisconsin. Members of this settlement class would have the right to "opt out" of the proposed settlement, and the defendants would have the right to reject the settlement if 5,000 or more members elected to opt out. The proposed settlement, which is subject to notice and court approval pursuant to the provisions of Federal Rule of Civil Procedure 23 and other authorities, would result in a judgment dismissing with prejudice all claims of the settlement class under federal and state antitrust and other laws as to the defendants and their affiliates, agents, officers, and employees. On June 19, 1995, the Court entered an order preliminarily approving the proposed settlement and authorizing the parties to attempt to negotiate an amount of plantiffs' attorneys' fees and expenses to be awarded by the Court and paid by the defendants. The plaintiffs subsequently petitioned the Court to award approximately $7.8 million in such fees and expenses, and the defendants have opposed such an award. The Court conducted a final hearing on the proposed 1995 settlement on October 10, 1995. On October 31, 1995, the Court filed an order certifying the consolidated proceeding as a class action. The Court has taken under advisement the other issues in the proceeding. The Registrant is a party to number routine lawsuits incidental to its business most of which involve disputed policy claims. In many of these suits, the plaintiff seeks exemplary or treble damages in excess of policy limits based on the alleged malfeasance of an issuing agent of the Registrant. -12- 15 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Stewart Information Services Corporation ---------------------------------------- (Registrant) November 10, 1995 Date Max Crisp ----------------------------------------------- Max Crisp (Vice President - Finance, Secretary-Treasurer, Director and Principal Financial and Accounting Officer) -13- 16 EXHIBIT INDEX 4. - Rights of Common and Class B Common Stockholders 27.0 - Financial data schedule 28.2 - Details of Investments as reported in the Quarterly Report to Shareholders EX-4 2 RIGHTS OF COOMMON AND CLASS B COMMON STOCKHOLDERS 1 EXHIBIT 4 STEWART INFORMATION SERVICES CORPORATION RIGHTS OF COMMON AND CLASS B COMMON STOCKHOLDERS SEPTEMBER 30, 1995 ================================================================================ Common and Class B Common stockholders have the same rights, except (1) no cash dividends may be paid on Class B Common Stock and (2) the two classes of stock are voted separately in electing directors. A provision in the by-laws requires an affirmative vote of at least two-thirds of the directors to approve any proposal which may come before the directors. This by-law provision cannot be changed without majority vote of each class of stock. Common stockholders, with cumulative voting rights, may elect five or more of the nine directors. Class B Common stockholders may, with no cumulative voting rights, elect four directors, if 350,000 or more shares of Class B Common stock are outstanding; three directors, if between 200,000 and 350,000 shares of Class B Common Stock are outstanding; if less than 200,000 shares of Class B Commons Stock are outstanding, the Common Stock and the Class B Common Stock shall be voted as a single class upon all matters, with the right to cumulate votes for the election of directors. No change in the Certificate of Incorporation which would affect the Common Stock and the Class B Common Stock unequally shall be made without the affirmative vote of at least a majority of the outstanding shares of each class, voting as a class. Class B Common Stock may, at any time, be converted by its holders into Common Stock on a share-for-share basis. Such conversion is mandatory on any transfer to a person not a lineal descendant (or spouse, trustee, etc. of such descendant) of William H. Stewart. EX-27 3 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE RELATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 SEP-30-1995 174,812 0 0 0 3,445 3,059 208,653 19,306 0 0 348,977 137,402 0 0 0 15,893 6,372 0 0 162,842 348,977 191,201 10,011 600 728 22,234 0 0 5,546 1,797 3,749 0 0 0 3,749 .60 .60 134,316 21,172 1,062 5,109 14,039 137,402 0 Includes short-term investments.
EX-28.2 4 DETAILS OF INVESTMENTS AS REPORTED 1 Exhibit 28.2 STEWART INFORMATION SERVICES CORPORATION DETAILS OF INVESTMENTS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
SEPT 30 DEC 31 1995 1994 ------- ------ ($000 Omitted) Investments, at market, partially restricted: Short-term investments $31,672 $56,363 U.S. Treasury and agency obligations 21,384 10,105 Municipal bonds 91,869 85,267 Mortgage-backed securities 28,003 26,872 Corporate bonds 29,195 11,335 Mortgage loans 3,445 3,309 Real estate and other, at lower of cost or market 3,085 3,128 -------- -------- TOTAL INVESTMENTS $208,653 $196,379 ======== ========
NOTE: The total appears as the sum of two amounts under 'investments' - statutory reserve fund and 'investments' - other in the balance sheet presented on page 2. -----END PRIVACY-ENHANCED MESSAGE-----