-----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, AfPooftIZtqfqxytGrn4xcB3t+Zd9nYvBIP/9aB6gyb2O5nFdq+Qruo+AnLeLHWR 8eYt5BT3iw0RPDzYZbpJvw== 0000950129-03-002595.txt : 20030512 0000950129-03-002595.hdr.sgml : 20030512 20030509180602 ACCESSION NUMBER: 0000950129-03-002595 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030512 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: 001-02658 FILM NUMBER: 03691361 BUSINESS ADDRESS: STREET 1: 1980 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136258100 MAIL ADDRESS: STREET 1: 1980 POST OAK BLVD CITY: HOUSTON STATE: TX ZIP: 77056 10-Q 1 h05733e10vq.txt STEWART INFORMATION SERVICES CORPORATION 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 March 31, 2003 [ ] 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, including 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 30, 2003. Common 16,718,248 Class B Common 1,050,012 FORM 10-Q QUARTERLY REPORT Quarter Ended March 31, 2003 TABLE OF CONTENTS
Item No. Page - -------- ---- Part I - FINANCIAL INFORMATION 1. Financial Statements 1 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 3. Quantitative and Qualitative Disclosures About Market Risk 8 4. Controls and Procedures 9 Part II - OTHER INFORMATION 1. Legal Proceedings 10 5. Other Information 10 6. Exhibits and Reports on Form 8-K 11 Signature 12 Certifications Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 13
As used in this report, "we", "us", "our" and "Stewart" mean Stewart Information Services Corporation and our subsidiaries unless the context indicates otherwise. STEWART INFORMATION SERVICES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 2003 and 2002
THREE MONTHS ENDED -------------------- MAR 31 MAR 31 2003 2002 -------- -------- ($000 Omitted) Revenues Title insurance: Direct operations 193,293 146,405 Agency operations 224,002 180,272 Real estate information services 19,050 16,042 Investment income 4,783 4,903 Investment (losses) gains - net (204) 352 -------- -------- 440,924 347,974 Expenses Amounts retained by agents 184,749 148,289 Employee costs 132,002 104,565 Other operating expenses 66,848 55,204 Title losses and related claims 17,956 14,366 Depreciation 5,909 5,385 Interest 215 255 Minority interests 2,338 1,530 -------- -------- 410,017 329,594 -------- -------- Earnings before taxes 30,907 18,380 Income taxes 11,032 7,036 -------- -------- Net earnings 19,875 11,344 ======== ======== Average number of shares outstanding - assuming dilution (000) 17,831 17,957 Earnings per share - basic 1.12 0.64 Earnings per share - diluted 1.11 0.63 ======== ======== Comprehensive earnings: Net earnings 19,875 11,344 Changes in other comprehensive earnings, net of taxes of $470 and $(1,255), respectively 872 (2,330) -------- -------- Comprehensive earnings 20,747 9,014 ======== ========
See notes to condensed consolidated financial statements. -1- STEWART INFORMATION SERVICES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2003 AND DECEMBER 31, 2002
MAR 31 DEC 31 2003 2002 -------- -------- ($000 Omitted) Assets Cash and cash equivalents 122,813 139,156 Short-term investments 52,117 50,673 Investments - statutory reserve funds 327,042 306,501 Investments - other 74,429 69,260 Receivables 61,360 69,041 Property and equipment 63,851 60,592 Title plants 41,332 40,307 Goodwill 72,779 66,885 Other 40,568 39,858 -------- -------- 856,291 842,273 ======== ======== Liabilities Notes payable 18,373 14,195 Accounts payable and accrued liabilities 62,510 82,248 Estimated title losses 237,624 230,058 Deferred income taxes 11,326 11,284 Minority interests 11,331 10,896 Contingent liabilities and commitments Stockholders' equity Common and Class B Common Stock and additional paid-in capital 135,715 134,927 Retained earnings 373,101 353,226 Accumulated other comprehensive earnings 10,216 9,344 Treasury stock - 325,669 shares (3,905) (3,905) -------- -------- Total stockholders' equity 515,127 493,592 -------- -------- 856,291 842,273 ======== ========
See notes to condensed consolidated financial statements. -2- STEWART INFORMATION SERVICES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
THREE MONTHS ENDED -------------------- MAR 31 MAR 31 2003 2002 -------- -------- ($000 Omitted) Cash provided by operating activities (Note) 22,538 17,115 Investing activities: Purchases of property and equipment and title plants - net (8,650) (5,561) Proceeds from investments matured and sold 48,829 31,205 Purchases of investments (71,436) (30,809) Increases in notes receivable (333) (630) Collections on notes receivable 446 579 Cash paid for the acquisition of subsidiaries - net (9,517) -- -------- -------- Cash used by investing activities (40,661) (5,216) Financing activities: Distribution to minority interests (1,907) (1,320) Proceeds from issuance of stock -- 32 Proceeds of notes payable 5,885 444 Payments on notes payable (2,198) (1,931) -------- -------- Cash provided (used) by financing activities 1,780 (2,775) -------- -------- (Decrease) increase in cash and cash equivalents (16,343) 9,124 ======== ======== NOTE: Reconciliation of net earnings to the above amounts - Net earnings 19,875 11,344 Add (deduct): Depreciation and amortization 5,909 5,385 Provision for title losses in excess of payments 6,384 4,062 Provision for uncollectible amounts - net 1,195 722 Decrease in accounts receivable - net 6,985 6,756 Decrease in accounts payable and accrued liabilities - net (20,483) (11,883) Minority interest expense 2,338 1,530 Equity in net earnings of investees (1,160) (543) Dividends from equity investees 1,321 548 Realized investment losses (gains) - net 204 (352) Stock bonuses 787 634 Change in deferred taxes (427) 841 Increase in other assets (308) (1,756) Other - net (82) (173) -------- -------- Cash provided by operating activities 22,538 17,115 ======== ======== Supplemental information: Assets acquired (purchase method) Goodwill 6,233 -- Title plants 1,000 -- Other 4,902 -- Liabilities assumed (2,618) -- Common Stock acquired (issued) -- -- Debt issued to sellers -- -- -------- -------- Cash paid for the acquisition of subsidiaries - net 9,517 -- ======== ========
See notes to condensed consolidated financial statements. -3- STEWART INFORMATION SERVICES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1: Interim Financial Statements The financial information contained in this report for the three month periods ended March 31, 2003 and 2002, and as of March 31, 2003, is unaudited. In the opinion of our 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. This report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Certain amounts in the 2002 condensed consolidated financial statements have been reclassified for comparative purposes. Net earnings, as previously reported, were not affected. Note 2: Segment Information Our two reportable segments are title and real estate information. Selected financial information related to these segments follows:
Real estate Title information Total ----- ----------- ----- ($000 Omitted) Revenues: - --------- Three months ended 3/31/03 421,874 19,050 440,924 3/31/02 331,932 16,042 347,974 Pretax earnings: - ---------------- Three months ended 3/31/03 27,896 3,011 30,907 3/31/02 17,716 664 18,380 Identifiable assets: - -------------------- 3/31/03 811,762 44,529 856,291 12/31/02 797,854 44,419 842,273
Note 3: Earnings Per Share Our basic earnings per share figures were calculated by dividing net earnings by the weighted average number of shares of Common Stock and Class B Common Stock outstanding during the reporting period. The only potentially dilutive effect on earnings per share relates to our stock option plans. In calculating the effect of the options and determining a figure for diluted earnings per share, the average number of shares used in calculating basic earnings per share was increased by 88,000 and 147,000 for the three month period ended March 31, 2003 and 2002, respectively. -4- Note 4: Stock-based Compensation The Company has two fixed stock-based employee compensation plans. The Company accounts for the plans under the intrinsic value method. Accordingly, no stock-based employee compensation cost is reflected in net earnings, as all options granted under the plans had an exercise price equal to the market value of the underlying Common Stock on the date of grant. The Company applies APB No. 25 and related Interpretations in accounting for its plans. Under SFAS No. 123, compensation cost would be recognized for the fair value of the employees' purchase rights, which is estimated using the Black-Scholes model. The Company assumed a dividend yield of 0%, an expected life of ten years for each option, expected volatility of 37.2% and 40.8% and a risk-free interest rate of 4.3% and 4.8% for the two quarters ended March 31, 2003 and 2002, respectively. Had compensation cost for the Company's plans been determined consistent with SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
THREE MONTHS ENDED --------------------- MAR 31 MAR 31 2003 2002 -------- -------- ($000 Omitted) Net Earnings: - ------------- As reported 19,875 11,344 Stock-based employee compensation determined under fair value method (529) (495) ------- ------- Pro forma 19,346 10,849 Earnings per share: - ------------------- Net earnings - basic 1.12 0.64 Pro forma - basic 1.09 0.61 Net earnings - diluted 1.11 0.63 Pro forma - diluted 1.08 0.60
Note 5: Equity in Investees The amount of earnings from equity investments was $1.2 million and $0.5 million for the three month periods ended March 31, 2003 and 2002, respectively. These amounts are included in "title insurance revenues - direct operations" in the condensed consolidated statements of earnings and comprehensive earnings. Note 6: Contingent Liabilities and Commitments We adopted the disclosure requirements for guarantees required by FASB Interpretation No. 45 effective December 31, 2002. We have also adopted the initial recognition and measurement provision of the non-contingent aspects of guarantees issued or modified after December 31, 2002. On March 31, 2003 the Company was contingently liable for guarantees of indebtedness owed primarily to banks and others by unconsolidated equity investees and other third parties. The guarantees relate primarily to business expansion and generally expire no later than December 15, 2006. The maximum potential future payments on the guarantees amount to $1,868,000 for equity investees and $7,417,000 for other third parties. Management believes that the collateral available, primarily title plants and the guarantees of corporate stock, would enable the Company to recover the amounts paid under the guarantees. The Company believes no provision for losses is needed because no loss is expected on these guarantees. In the ordinary course of business the Company guarantees the third party indebtedness of its consolidated subsidiaries. On March 31, 2003 the maximum potential future payments on the guarantees is not more than the notes payable recorded on the consolidated balance sheets. -5- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL. Our primary business is title insurance. We close transactions and issue policies on homes and other real property located in all 50 states, the District of Columbia, U.S. territories and several foreign countries through more than 6,600 issuing locations. Our direct operations include affiliated agencies while agency operations include nonaffiliated agencies that have underwriting contracts with us. We also sell electronically delivered real estate services and information, as well as mapping products and geographic information systems, to domestic and foreign governments and private entities. Our business has two main segments: title insurance and real estate information (REI). These segments are closely related due to the nature of their operations and common customers. The segments provide services throughout the United States through a network of offices, including both direct operations and agencies. Although we conduct operations in several international markets, at current levels non-USA operations are immaterial with respect to our consolidated financial results. Generally, the principal factors that contribute to increases in our operating revenues for our title and REI segments include: o declining mortgage interest rates, which usually increase home sales and refinancing transactions; o rising home prices; o higher premium rates; o increased market share; o opening of new offices and acquisitions; and o a higher ratio of commercial transactions that, although relatively few in number, typically yield higher premiums. These factors may override the seasonal nature of the title business. CRITICAL ACCOUNTING POLICIES. We believe the accounting policies that are the most critical to our financial statements, and that are subject to the most judgment and estimates, are those relating to title loss reserves, premium revenue recognition and recoverability of long-lived assets, such as goodwill and title plants. Title loss reserves represent the aggregate future payments, net of recoveries, that we expect to incur on policy and escrow losses and in costs to settle claims. Future title loss payments are difficult to estimate due to the complex nature of title claims, the length of time over which claims are paid, the significantly varying dollar amounts of individual claims and other factors. Loss provision amounts are based on reported claims, historical loss experience, title industry averages, the current legal environment and the types of policies written. The title loss reserves are continually reviewed and adjusted, as appropriate. Independent actuaries review the adequacy of the reserves on an annual basis. Premium revenues on title insurance written by our direct title operations are recognized as revenue at the time of the closing of the related real estate transaction. Premium revenues on title insurance policies written by agencies are recognized primarily when policies are reported to us. Revenues are recorded on a total premium basis versus net to the underwriter. We accrue for unreported policies where reasonable estimates can be made based on historical reporting patterns of agencies, current trends and known information about agencies. We review the carrying values of title plants and other long-lived assets if certain events occur that may indicate impairment. Impairment is indicated when the projected undiscounted cash flow over the estimated life of an asset is less than its carrying value. If impairment is determined by management and an independent valuation, the book amount is written down to fair value by calculating the discounted value of the projected cash flow. In accordance with SFAS No. 142 "Goodwill and Other Intangible Assets", goodwill for each reporting unit is tested for impairment annually and goodwill determined to be impaired is expensed to current operations. RESULTS OF OPERATIONS A comparison of the results of operations of the Company for the three months ended March 31, 2003 with the three months ended March 31, 2002 follows. OPERATING ENVIRONMENT. According to published industry data, interest rates for 30-year fixed rate mortgages, excluding points, for the first three months of 2003 averaged 5.8% as compared with 7.0% in 2002. Comparable rates averaged 6.5% in the full year 2002. -6- In 2002 rates were steady at about 7% until April. Rates then declined through December 2002, reaching a low of 5.9%. At the end of March 2003, rates were at a level of about 5.9%. Operating in these mortgage interest rate environments, real estate activity was much stronger in the first quarter of 2003 as compared with the first quarter of 2002. Nationwide, refinancing transactions remained strong in 2003. The ratio of refinancings to total loan applications was 77.0% for the first quarter of 2003, compared with 49.7% for the same period in 2002. Refinancings usually have lower title insurance premium rates than real property sales. Existing home sales increased 1.4% in 2003 over 2002. TITLE REVENUES. Our revenues from title operations increased 27.7% in the first quarter of 2003 over the first quarter in 2002. Revenues from direct operations increased 32.0% in 2003, as the number of direct closings we handled increased 30.6%. The largest revenue increases in both years were primarily in California, Florida, New York and Texas. Direct closings relate only to files closed by our underwriters and subsidiaries and do not include closings by agencies. The average revenue per closing increased 0.3% in 2003. Premium revenues from agencies increased 24.3% to $224.0 million in 2003 from $180.3 million in 2002. The increase in 2003 was primarily due to the increases in both refinancings and real property sales. The largest revenue increases in both years were primarily in New York, California, Florida and Pennsylvania. REI REVENUES. Real estate information revenues were $19.1 million in 2003 and $16.0 million in 2002. The increase in 2003 resulted primarily from an increased number of product and service deliveries resulting from the large volume of real estate transactions. INVESTMENTS. Investment income decreased 2.4% in 2003 primarily because of lower yields, partially offset by increases in average balances invested. Certain investment gains and losses were realized as part of the ongoing management of the investment portfolio for the purpose of improving performance. AGENCY RETENTION. The amounts retained by agencies, as a percentage of revenues from agency operations, were 82.5% and 82.3% in 2003 and 2002. Amounts retained by title agencies are based on contracts between agencies and our title underwriters. The percentage that amounts retained by agencies bears to agency revenues may vary from year to year because of the geographical mix of agency operations and the volume of title revenues. EMPLOYEE COSTS. Employee costs for the combined business segments increased 26.2% in 2003. The number of persons we employed at March 31, 2003 and March 31, 2002 was approximately 8,100 and 7,100, respectively. The increase in staff in 2003 was primarily due to the increased title and REI volume and the acquisition of new offices. In our REI segment, employee costs increased in 2003 primarily due the increase in REI volume. OTHER OPERATING EXPENSES. Other operating expenses for the combined business segments increased 21.1% in 2003. The increase was primarily in new offices, search fees, REI expenses and business promotion. Other operating expenses also include rent, supplies, telephone, title plant expenses, travel and auto. Most of these operating expenses follow, to varying degrees, the changes in transaction volume and revenues. Our employee costs and certain other operating costs are sensitive to inflation. To the extent inflation causes increases in the prices of homes and other real estate, premium revenues are also increased. Premiums are determined in part by the insured values of the transactions we handle. TITLE LOSSES. Provisions for title losses, as a percentage of title operating revenues, were 4.3% in 2003 and 4.4% in 2002. We continue to experience low loss ratios because of our improved practices. Also, increases in refinancing transactions, which generally result in lower loss exposure, have led to lower loss ratios. INCOME TAXES. The provisions for federal, state and foreign income taxes represented effective tax rates of 35.7% and 38.3% in 2003 and 2002, respectively. The effective tax rate for the first quarter of 2003 includes a reduction for foreign taxes that amounts to 2.4%. The annual effective tax rate for 2003 is estimated to be approximately 37.5%. LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operations was $22.5 million and $17.1 million in 2003 and 2002, respectively. Cash flow from operations has been the primary source of financing for additions to property and equipment, expanding operations and other requirements. This source may be supplemented by bank borrowings. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements. -7- A substantial majority of consolidated cash and investments is held by Stewart Title Guaranty Company (Guaranty) and its subsidiaries. Cash transfers between Guaranty and its subsidiaries and the Company are subject to certain legal restrictions. See Notes 2 and 3 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2002. Our liquidity, excluding Guaranty and its subsidiaries, is comprised of cash and investments aggregating $10.2 million and short-term liabilities of $0.4 million at March 31, 2003. We know of no commitments or uncertainties that are likely to materially affect our ability to fund cash needs. We consider our capital resources to be adequate. Our capital resources are represented by a low debt-to-equity ratio, in which notes payable is $18.4 million and stockholders' equity is $515.1 million at March 31, 2003. We are not aware of any trends, either favorable or unfavorable, that would materially affect notes payable or stockholders' equity and we do not expect any material changes to the cost of such resources. However, significant acquisitions in the future could materially affect the notes payable or stockholders' equity balances. FORWARD-LOOKING STATEMENTS. All statements included in this report, other than statements of historical fact, addressing activities, events or developments that we expect or anticipate will or may occur in the future, are forward-looking statements. Such forward-looking statements are subject to risks and uncertainties including, among other things, changes in mortgage interest rates, employment levels, actions of competitors, changes in real estate markets, general economic conditions, legislation (primarily legislation related to title insurance) and other risks and uncertainties discussed in our filings with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in our investment strategies, types of financial instruments held or the risks associated with such instruments which would materially alter the market risk disclosures made in our Annual Statement on Form 10-K for the year ended December 31, 2002. -8- Item 4. Controls and Procedures In Release No. 34-46427, effective August 29, 2002, the Securities and Exchange Commission, among other things, adopted rules requiring reporting companies to maintain disclosure controls and procedures to provide reasonable assurance that a registrant is able to record, process, summarize and report the information required in the registrant's quarterly and annual reports under the Securities Exchange Act of 1934 (the "Exchange Act"). While we believe that our existing disclosure controls and procedures have been effective to accomplish these objectives, we intend to continue to examine, refine and formalize our disclosure controls and procedures and to monitor ongoing developments in this area. Our principal executive officers and our principal financial officer, based upon their evaluation of our disclosure controls and procedures conducted as of a date within 90 days before the filing date of this quarterly report (as defined in Rule 13a-14(c) and Rule 15d-14(c) under the Exchange Act), have concluded that those disclosure controls and procedures are effective. There have been no changes in our internal controls or in other factors known to us that could significantly affect these controls subsequent to their evaluation, nor were any corrective actions necessary with regard to significant deficiencies and material weaknesses. -9- PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS We are a party to routine lawsuits incidental to our 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. We do not expect that any of these proceedings will have a material adverse effect on our consolidated financial condition. ITEM 5. OTHER INFORMATION We paid regular quarterly cash dividends on our common stock from 1972 through 1999. During 1999, our Board of Directors approved a plan to repurchase up to 5 percent (680,000 shares) of our outstanding common stock. Our Board also decided to discontinue our regular quarterly dividend in favor of returning those and additional funds to stockholders' equity through the stock repurchase plan. Under this plan, we repurchased 116,900 shares of common stock during 2000. We did not repurchase any shares of our common stock in 2001, 2002 or in the first three months of 2003. An additional 208,769 shares of treasury stock were acquired primarily in the second quarter of 2002. The majority of these shares were acquired as a result of the consolidation of a majority owned subsidiary that was previously held as an equity method investment. All of these shares were held by our Parent Company at March 31, 2003. -10- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 3.1 - Certificate of Incorporation of the Registrant, as amended March 19, 2001 (incorporated by reference in this report from Exhibit 3.1 of Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 3.2 - By-Laws of the Registrant, as amended March 13, 2000 (incorporated by reference in this report from Exhibit 3.2 of Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 4. - Rights of Common and Class B Common Stockholders * 10.1 - Summary of agreements as to payment of bonuses to certain executive officers (incorporated by reference in this report from Exhibit 10.1 of Annual Report on Form 10-K for the fiscal year ended December 31, 2002) * 10.2 - Deferred Compensation Agreements dated March 10, 1986, amended July 24, 1990 and October 30, 1992, between the Registrant and certain executive officers (incorporated by reference in this report from Exhibit 10.2 of Annual Report on Form 10-K for the fiscal year ended December 31, 1997) * 10.3 - Stewart Information Services Corporation 1999 Stock Option Plan (incorporated by reference in this report from Exhibit 10.3 of Annual Report on Form 10-K for the fiscal year ended December 31, 1999) * 10.4 - Stewart Information Services Corporation 2002 Stock Option Plan for Region Managers (incorporated by reference in this report from Exhibit 10.4 of Quarterly Report on Form 10-Q for the quarter ended March 31, 2002) 99.1 - Details of Investments at March 31, 2003 and December 31, 2002 99.2 - Certificate of Co-Chief Executive Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 99.3 - Certificate of Co-Chief Executive Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 99.4 - Certificate of Chief Financial Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002
* A management compensation plan, contract or arrangement. There were no reports on Form 8-K filed during the quarter ended March 31, 2003. -11- SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, we have duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized. Stewart Information Services Corporation ---------------------------------------- (Registrant) May 9, 2003 - ----------- Date /s/ MAX CRISP ------------------------------------------- Max Crisp (Executive Vice President and Chief Financial Officer, Secretary-Treasurer, Director and Principal Financial and Accounting Officer) -12- CERTIFICATIONS Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 I, Malcolm S. Morris, certify that: 1. I have reviewed the quarterly report on Form 10-Q of Stewart Information Services Corporation (registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed such controls and procedures 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 quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions); (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 /s/ MALCOLM S. MORRIS ------------------------------------ [Signature] Title: Chairman of the Board and Co-Chief Executive Officer -13- CERTIFICATIONS Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 I, Stewart Morris, Jr., certify that: 1. I have reviewed the quarterly report on Form 10-Q of Stewart Information Services Corporation (registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed such controls and procedures 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 quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions); (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 /s/ STEWART MORRIS, JR. ------------------------------------- [Signature] Title: President and Co-Chief Executive Officer -14- CERTIFICATIONS Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 I, Max Crisp, certify that: 1. I have reviewed the quarterly report on Form 10-Q of Stewart Information Services Corporation (registrant); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed such controls and procedures 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 quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions); (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 9, 2003 /s/ MAX CRISP ------------------------------------ [Signature] Title: Executive Vice President and Chief Financial Officer, Secretary- Treasurer, Director and Principal Financial and Accounting Officer -15- INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 - Certificate of Incorporation of the Registrant, as amended March 19, 2001 (incorporated by reference in this report from Exhibit 3.1 of Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 3.2 - By-Laws of the Registrant, as amended March 13, 2000 (incorporated by reference in this report from Exhibit 3.2 of Annual Report on Form 10-K for the fiscal year ended December 31, 2000) 4. - Rights of Common and Class B Common Stockholders * 10.1 - Summary of agreements as to payment of bonuses to certain executive officers (incorporated by reference in this report from Exhibit 10.1 of Annual Report on Form 10-K for the fiscal year ended December 31, 2002) * 10.2 - Deferred Compensation Agreements dated March 10, 1986, amended July 24, 1990 and October 30, 1992, between the Registrant and certain executive officers (incorporated by reference in this report from Exhibit 10.2 of Annual Report on Form 10-K for the fiscal year ended December 31, 1997) * 10.3 - Stewart Information Services Corporation 1999 Stock Option Plan (incorporated by reference in this report from Exhibit 10.3 of Annual Report on Form 10-K for the fiscal year ended December 31, 1999) * 10.4 - Stewart Information Services Corporation 2002 Stock Option Plan for Region Managers (incorporated by reference in this report from Exhibit 10.4 of Quarterly Report on Form 10-Q for the quarter ended March 31, 2002) 99.1 - Details of Investments at March 31, 2003 and December 31, 2002 99.2 - Certificate of Co-Chief Executive Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 99.3 - Certificate of Co-Chief Executive Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 99.4 - Certificate of Chief Financial Officer pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002
* A management compensation plan, contract or arrangement. EX-4 3 h05733exv4.txt RIGHTS OF COMMON AND CLASS B COMMON STOCKHOLDERS EXHIBIT 4 STEWART INFORMATION SERVICES CORPORATION RIGHTS OF COMMON AND CLASS B COMMON STOCKHOLDERS March 31, 2003 Common and Class B Common stockholders have the same rights, except (1) no cash dividend 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 a majority vote of each class of stock. Common stockholders, with cumulative voting rights, may elect five of the nine directors. Class B Common stockholders may, with no cumulative voting rights, elect four directors, if 1,050,000 or more shares of Class B Common stock are outstanding; three directors, if between 600,000 and 1,050,000 shares of Class B Common Stock are outstanding; if less than 600,000 shares of Class B Common 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-99.1 4 h05733exv99w1.txt DETAILS OF INVESTMENTS AT MARCH 2003 & DEC 2002 EXHIBIT 99.1 STEWART INFORMATION SERVICES CORPORATION DETAILS OF INVESTMENTS MARCH 31, 2003 AND DECEMBER 31, 2002
MAR 31 DEC 31 2003 2002 -------- -------- ($000 Omitted) Investments, at market, partially restricted: Short-term investments 52,117 50,673 U. S. Treasury and agency obligations 35,988 39,798 Municipal bonds 162,900 159,453 Foreign 49,230 34,748 Mortgage-backed securities 1,012 1,360 Corporate bonds 140,233 132,502 Equity securities 12,108 7,900 -------- -------- TOTAL INVESTMENTS 453,588 426,434 ======== ========
NOTE: The total appears as the sum of three amounts on the condensed consolidated balance sheets presented on page 2: (1) 'short-term investments', (2) 'investments - statutory reserve funds' and (3) 'investments - other'. EX-99.2 5 h05733exv99w2.txt CERTIFICATION OF CEO PURSUANT TO SECTION 906 EXHIBIT 99.2 STEWART INFORMATION SERVICES CORPORATION CERTIFICATE OF CO-CHIEF EXECUTIVE OFFICER FOR THE THREE MONTHS ENDED MARCH 31, 2003 Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 The undersigned, being the Co-Chief Executive Officer of Stewart Information Services Corporation (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the United States Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated May 9, 2003. /s/ MALCOLM S. MORRIS - -------------------------------- Name: Malcolm S. Morris Title: Chairman of the Board and Co-Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Stewart Information Services Corporation and will be retained by Stewart Information Services Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.3 6 h05733exv99w3.txt CERTIFICATION OF CEO PURSUANT TO SECTION 906 EXHIBIT 99.3 STEWART INFORMATION SERVICES CORPORATION CERTIFICATE OF CO-CHIEF EXECUTIVE OFFICER FOR THE THREE MONTHS ENDED MARCH 31, 2003 Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 The undersigned, being the Co-Chief Executive Officer of Stewart Information Services Corporation (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the United States Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated May 9, 2003. /s/ STEWART MORRIS, JR. - ----------------------------- Name: Stewart Morris, Jr. Title: President and Co-Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Stewart Information Services Corporation and will be retained by Stewart Information Services Corporation and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.4 7 h05733exv99w4.txt CERTIFICATION OF CFO PURSUANT TO SECTION 906 EXHIBIT 99.4 STEWART INFORMATION SERVICES CORPORATION CERTIFICATE OF CHIEF FINANCIAL OFFICER FOR THE THREE MONTHS ENDED MARCH 31, 2003 Pursuant to Section 906(a) of the Sarbanes-Oxley Act of 2002 The undersigned, being the Chief Financial Officer of Stewart Information Services Corporation (the "Company"), hereby certifies that the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, filed with the United States Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated May 9, 2003. /s/ MAX CRISP - ------------------------------------ Name: Max Crisp Title: Executive Vice President and Chief Financial Officer, Secretary- Treasurer, Director and Principal Financial and Accounting Officer A signed original of this written statement required by Section 906 has been provided to Stewart Information Services Corporation and will be retained by Stewart Information Services Corporation and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----