-----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, NrCi8l6wMiTbwwseNzgId1ObOYWJ5loeJdrZOeIz66K+ve5hX5qo0OYK/OIuQkZ+ 48a8oTXTcAKlf/nE8EQMGQ== 0000950129-97-001224.txt : 19970327 0000950129-97-001224.hdr.sgml : 19970327 ACCESSION NUMBER: 0000950129-97-001224 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-02658 FILM NUMBER: 97563748 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 STREET 2: STE 830 CITY: HOUSTON STATE: TX ZIP: 77056 10-K405 1 STEWART INFORMATION SERVICES CORP. - 12/31/96 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 incorporation or organization) Identification No.) 1980 POST OAK BLVD., HOUSTON, TEXAS 77056 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 625-8100 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $1 PAR VALUE 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] As of March 1, 1997, 6,256,801 shares of Common Stock, $1 par value, and 525,006 shares of Class B Common Stock, $1 par value, were outstanding. The aggregate market value as of such date of the Common Stock (based upon the closing sales price of the Common Stock as reported by the NYSE on February 28, 1997) of Stewart Information Services Corporation held by non-affiliates of the Registrant was approximately $125,918,120. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Stewart Information Services Corporation Annual Report to Stockholders for the year ended December 31, 1996 are incorporated by reference in Parts I and II of this document. Portions of the definitive proxy statement (the "Proxy Statement"), relating to the annual meeting of the Registrant's stockholders to be held April 25, 1997, are incorporated by reference in Parts III and IV of this document. ================================================================================ 2 FORM 10-K ANNUAL REPORT YEAR ENDED DECEMBER 31, 1996 TABLE OF CONTENTS PART I
ITEM NO. PAGE --- ---- 1. Business . . . . . . . . . . . . . . . . . . . . . . . 1 2. Properties . . . . . . . . . . . . . . . . . . . . . . 3 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 4 4. Submission of Matters to a Vote of Security Holders . 4 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . 5 6. Selected Financial Data . . . . . . . . . . . . . . . . 6 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . 6 8. Financial Statements and Supplementary Data . . . . . 6 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . 6 PART III 10. Directors and Executive Officers of the Registrant . . 7 11. Executive Compensation . . . . . . . . . . . . . . . . . 7 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . . 7 13. Certain Relationships and Related Transactions . . . . . 7 PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 8 Signatures . . . . . . . . . . . . . . . . . . . . . . . 10
i 3 P A R T I ITEM 1. BUSINESS Stewart's primary business is title insurance. Stewart issues policies through more than 3,700 issuing locations on homes and other real property located in all 50 states, the District of Columbia, Canada, Mexico, Belize (reinsurance), the Bahamas, Guam, England and the Commonwealth of the Northern Marianas. Stewart sells computer-related services and information, as well as mapping products and geographic information systems to government and private entities, both domestic and foreign. Examination and closing. The purpose of a title examination is to ascertain the ownership of the property being transferred, what debts are owed on it and what the title policy coverage will be. This involves searching for and examining documents such as deeds, mortgages, wills, divorce decrees, court judgments, liens, paving assessments and tax records. At the closing or "settlement", the seller executes a deed to the new owner. The buyer signs new mortgage documents. Closing funds are then disbursed to the seller, the prior mortgage company, real estate brokers, the title company and others. The documents are then recorded in the public records. A title policy is generally issued to both the lender and new owner. Title policies. Lenders in the USA generally require title insurance as a condition to making a loan on real estate, including securitized lending. This is to assure lenders of the priority of their lien position. The purchasers of the property want the assurance given in their policy against claims that may arise against their ownership. The face amount of the policy is normally the purchase price or the amount of the related loan. Title insurance is substantially different from other types of insurance. Fire, auto, health and life insurance protect against losses and events in the future. In contrast, title insurance seeks to eliminate most risks through the examination and settlement process. Losses. Losses on policies occur because of a title defect not discovered during the examination and settlement process. Other reasons for losses include forgeries, misrepresentations, unrecorded construction liens, the failure to pay off existing liens, mishandling of settlement funds, issuance by agents of unauthorized coverages and other legal issues. Some claimants seek damages in excess of policy limits. Such claims are based on various legal theories usually alleging misrepresentation by an issuing office. Although the Company vigorously defends against spurious claims, it has from time to time incurred a loss in excess of policy limits. Experience shows that most claims against policies and claim payments are made in the first six years after the policy has been issued, although claims may be made many years later. By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal environment existing at the time of settlement of the claims. Factors affecting revenues. Title revenues are closely related to the level of activity in the real estate market and the prices at which real estate sales are made. Real estate sales are directly affected by the availability and cost of money to finance purchases. Other factors include demand by buyers, consumer confidence and family incomes. These factors may override the seasonal nature of the title business. Generally, the third quarter is the most active in terms of real estate sales and the first quarter is the least active. -1- 4 Selected information for the national real estate industry follows (1996 amounts are preliminary):
1996 1995 1994 ---------- ---------- ---------- Housing starts - millions........................... 1.47 1.35 1.46 Housing resales - millions.......................... 4.09 3.80 3.95 Housing resales - median sales price in $ thousands......................................... 118.1 112.9 109.8
Customers. The primary sources of title business are attorneys, builders, developers, lenders and real estate brokers. No one customer was responsible for as much as five percent of Stewart's title revenues in any of the last three years. Titles insured included residential and commercial properties, undeveloped acreage, farms and ranches. Service, location, financial strength, size and related factors affect customer acceptance. Increasing market share is accomplished primarily by providing superior service. The parties to a closing are concerned with personal schedules and the interest and other costs associated with the delays in the settlement. The rates charged to customers are regulated to varying degrees by different states. Market share. Estimating a title insurer's market share is difficult. Stewart believes it is the leading title insurer in Texas and in a number of cities across the USA. Based on unconsolidated statutory revenues for 1995 (1996 amounts are not available), Stewart Title Guaranty Company ("Guaranty") is the fourth largest title insurer in America. Competitors include (names are abbreviated) Chicago Title, Commonwealth, Fidelity, First American, Lawyers Title and Old Republic. As do most title insurers, Stewart also competes with abstractors, attorneys who issue title opinions and attorney-owned title insurance bar funds. A number of home builders, financial institutions, real estate brokers and others own or control title insurance agents, some of which issue policies underwritten by Guaranty. This "controlled" business also provides competition for Stewart's agents. Offices. The number of locations issuing Stewart policies was 3,763 at December 31, 1996, compared to 3,549 a year earlier and 3,312 two years earlier. Of these totals, 3,488, 3,302 and 3,018 were independent agents at December 31, 1996, 1995 and 1994, respectively. Affiliated offices produced 77% to 80% of consolidated revenues from title premiums and fees during each of the three years ended December 31, 1996. Title revenues by state. The approximate amounts and percentages of Stewart's consolidated title revenues (excluding other revenues) by state for the last three years were: AMOUNTS ($MILLIONS) PERCENTAGES ======== ======= ======= ======= ======== ======== 1996 1995 1994 1996 1995 1994 ======== ======= ======= ======= ======== ======== Texas................. 73 61 73 24 25 27 California............ 65 59 68 22 24 25 Florida............... 26 21 22 9 9 8 Nevada................ 15 13 14 5 5 5 Colorado.............. 15 12 12 5 5 4 Arizona............... 14 12 14 5 5 5 New York ............. 13 9 7 4 4 3 All others............ 77 56 62 26 23 23 --- --- --- --- --- --- 298 243 272 100 100 100 === === === === === === -2- 5 Regulations. Title insurance companies are subject to extensive state regulations covering rates, agent licensing, policy forms, trade practices, reserve requirements, investments and the flow of funds between an insurer and its parent or its subsidiaries and any similar related party transaction. Kickbacks and similar practices are prohibited by certain state and federal laws. Employees. Stewart and its subsidiaries employed approximately 4,111 persons at December 31, 1996. ITEM 2. PROPERTIES The Registrant and its wholly-owned subsidiary, Stewart Title Guaranty Company and its subsidiaries ("Guaranty"), own or lease the following properties: The following table sets forth information about the Registrant's other principal properties:
Location Type Use Size Acquired In - ----------------------- ---------------------- ------------------- --------------- ----------- Houston, Texas Leased office building Executive office of 206,796 sq. ft. (1) the Registrant and Guaranty Dallas, Texas Leased office building Office of Guaranty 25,117 sq. ft (2) Austin, Texas Leased office building Office of Guaranty 14,278 sq. ft. (3) Los Angeles, California Leased office building Office of Guaranty 22,466 sq. ft. (4) San Diego, California Leased office building Office of Guaranty 20,020 sq. ft. (5) Riverside, California Leased office building Office of Guaranty 20,968 sq. ft. (4) San Antonio, Texas Owned office building Office of Guaranty 26,769 sq. ft. 1980 & 1982 Galveston, Texas Owned office building Office of Guaranty 50,000 sq. ft. 1905 Phoenix, Arizona Owned office building Office of Guaranty 24,459 sq. ft. 1981 Phoenix, Arizona Owned office building Office of Guaranty 17,500 sq. ft. 1985 Tucson, Arizona Owned office building Office of Guaranty 24,000 sq. ft. 1974
(1) The lease terminates in 2004. (2) This lease terminates in 1999. (3) This lease terminates in 2001. (4) These leases terminate in 1998. (5) This lease terminates in 2000. The Registrant leases offices at approximately 304 locations. The average term for all such leases is approximately six years. The leases expire from 1997 to 2006. The Registrant believes it will not have any difficulty obtaining renewals of leases as they expire or, alternatively, leasing comparable property. The aggregate annual rental expense under all leases was approximately $18,586,000. All buildings and equipment owned or leased by the Registrant are considered by the Registrant to be well maintained, adequately insured and generally sufficient for the Registrant's purposes. Substantially all of the Registrant's owned real property above is subject to mortgages. -3- 6 ITEM 3. LEGAL PROCEEDINGS Guaranty and 18 other title insurers are defendants in a consolidated class action proceeding originating from complaints first filed in April 1990. The suit is currently pending in the United States District Court for the District of Arizona. The plaintiffs allege that the defendants violated federal antitrust law by participating in title insurance rating bureaus in Arizona and Wisconsin in the early 1980s through which they allegedly agreed upon the prices and other terms and conditions of sale for title search and examination services. The plaintiffs request treble damages in an unspecified amount, costs and attorneys' fees. The Court has certified the proceeding as a class action and approved a settlement pursuant to which members of the class would receive cash (not to exceed approximately $4.1 million from all defendants) and additional coverage under, and discounts on, title insurance policies. In addition, the Court has awarded counsel for certain plaintiffs the negotiated sum of $1.3 million in fees and expenses. The Court has awarded counsel for the remaining plaintiffs fees and expenses totaling $0.5 million. The Court has under advisement the motions of such plaintiff's counsel to amend and to reconsider that award. James C. O'Brien and Ingrid K. O'Brien vs. Stewart Title Guaranty Company, filed September 25, 1996, in the United States District Court, Southern District of Florida. This purported class action is one of eight similar suits filed against various underwriters in Florida, including Guaranty. The alleged class would include all purchasers of title insurance or evidence of title in Florida since 1990. Plaintiffs allege that Guaranty's premium and cost sharing agreements with its Florida agents, which are governed by and set in accordance with rates promulgated by the Florida Department of Insurance, constitute violations of the Real Estate Settlement Procedures Act and Florida law, including fraudulent and negligent misrepresentation. Plaintiffs seek injunctive relief and treble damages of at least $60 million based upon the title insurance premiums paid by the purported class. Guaranty has filed a motion to dismiss the complaint on various grounds, including the filed rate doctrine. The Court has deferred any action on the plaintiff's motion to certify the proceedings as a class action pending disposition of Guaranty's motion to dismiss. Guaranty believes that the plaintiff's allegations are without merit and intends to vigorously defend this suit. The Registrant is a party to 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. -4- 7 P A R T II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The following table sets forth the high and low sales prices of the Common Stock for each fiscal period indicated, as reported by NYSE, and the amount of cash dividends paid per share.
HIGH LOW DIVIDENDS ----- ----- --------- 1996: First quarter . . . . . . . . . 21.38 19.63 .06 Second quarter. . . . . . . . . 21.25 19.63 .06 Third quarter . . . . . . . . . 21.00 20.00 .06 Fourth quarter. . . . . . . . . 22.63 20.25 .06 1995: First quarter . . . . . . . . . 17.63 15.13 .05 Second quarter. . . . . . . . . 20.00 17.13 .05 Third quarter . . . . . . . . . 20.25 18.63 .05 Fourth quarter . . . . . . . . 22.50 18.63 .06
The Company has paid regular quarterly cash dividends on its Common Stock since 1972. The Company's Certificate of Incorporation provides that no cash dividends may be paid on the Class B Common Stock. While it is the current intention of the Board of Directors to continue to pay quarterly cash dividends on its Common Stock, the payment of future dividends necessarily will depend on the earnings and financial needs of the Company, as well as applicable legal restrictions. -5- 8 ITEM 6. SELECTED FINANCIAL DATA Selected financial data have been included on Page 18 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1996, and such information is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth on Pages 18 through 21 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1996, and such information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1996 Annual Report to Stockholders Page No. Independent Auditors' Report ....................................... 21 Consolidated Statements of Earnings and Retained Earnings for the Years Ended December 31, 1996, 1995 and 1994 ....................... 22 Consolidated Balance Sheets as of December 31, 1996 and 1995 ....... 23 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 ................................... 24 Notes to Consolidated Financial Statements ......................... 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -6- 9 P A R T III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 25, 1997, under the captions "Election of Directors" and "Executive Compensation", and such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 25, 1997, under the caption "Executive Compensation", and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 25, 1997, under the caption "Security Ownership of Certain Beneficial Owners and Management", and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is set forth in the Registrant's Proxy Statement relating to the annual meeting of the Registrant's stockholders to be held April 25, 1997, under the caption "Executive Compensation", and such information is incorporated herein by reference. -7- 10 P A R T IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. and 2. Financial Statements and Financial Statement Schedules Item 8 of this Report on Form 10-K lists certain consolidated financial statements of the Registrant and its subsidiaries incorporated by reference to the Annual Report to Stockholders for the year ended December 31, 1996, which includes a reference to appropriate page numbers in such Annual Report.
Form 10-K Page No. --------- Independent Auditors' Report ................................................ 11 Reports of Independent Auditors ............................................. 12 Schedule II - Financial information of the Registrant (Parent Company) ..... 36 - Short-term borrowings ........................................ 40 Schedule V - Valuation and qualifying accounts ............................ 41
All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended December 31, 1996. (c) Exhibits 3.1 - Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987) 3.2 - By-Laws of the Registrant 4 - Rights of Common and Class B Common Stockholders (incorporated by reference to Exhibits 3.1 and 3.2 hereto) 10.1 - Summary of agreements as to payment of bonuses to certain executive officers 10.2 - Deferred Compensation Agreements dated March 10, 1986 between the Registrant and certain executive officers (incorporated by reference to Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987) -8- 11 13. - Annual Report to Stockholders for 1996 (the financial text of the annual report incorporated herein by reference in Item 6 of Part II of this report) 21. - Subsidiaries of the Registrant 23. - Consents of Independent Certified Public Accountants, including consents to incorporation by reference of their reports into previously filed Securities Act registration statements 27. - Financial Data Schedule -9- 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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) By: Carloss Morris --------------------------------------------- Carloss Morris, Co-Chief Executive Officer and Chairman of the Board of Directors By: Stewart Morris --------------------------------------------- Stewart Morris, Co-Chief Executive Officer, President and Director By: Max Crisp --------------------------------------------- Max Crisp, Vice President-Finance, Secretary, Treasurer, Director and Principal Financial and Accounting Officer Dated: March 25, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Max Crisp Director March 25, 1997 ------------------------ (Max Crisp) E. Douglas Hodo Director March 25, 1997 - ------------------------- (E. Douglas Hodo) C. M. Hudspeth Director March 25, 1997 - ------------------------- (C. M. Hudspeth) Carloss Morris Director March 25, 1997 - ------------------------- (Carloss Morris) Stewart Morris Director March 25, 1997 - ------------------------- (Stewart Morris) -10- 13 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Stewart Information Services Corporation: Under date of February 7, 1997, we reported on the consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1996, as contained in the 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1996. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedules as listed in the accompanying index. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. /s/ KPMG PEAT MARWICK L.L.P. - --------------------------------------- Houston. Texas February 7, 1997 -11- 14 REPORT OF INDEPENDENT ACCOUNTANT Stewart Title Company El Paso, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at 500 N. Mesa, Suite 300, El Paso, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company, El Paso, Texas, as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ M. TIMOTHY O'ROARK -------------------------- M. TIMOTHY O'ROARK, C.P.A. El Paso, Texas February 18, 1997 -12- 15 REPORT OF INDEPENDENT AUDITORS The Board of Directors Stewart Title We have audited the statements of operations, retained earnings, and cash flows for the year ended December 31, 1994 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and its cash flows for the year ended December 31, 1994 in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG L.L.P. ------------------------------- ERNST & YOUNG LLP Century City Los Angeles, California January 20, 1995 -13- 16 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Stewart Title & Trust of Phoenix, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and retained earnings and of cash flows as of and for each of the two years in the period ended December 31, 1994 present fairly, in all material respects, the financial position, results of operations and cash flows of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and affiliate as of and for each of the two years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and affiliate for any period subsequent to December 31, 1994. /s/ PRICE WATERHOUSE LLP - ---------------------------------------- PRICE WATERHOUSE LLP Phoenix, Arizona January 20, 1995 -14- 17 To the Board of Directors Stewart Title of California San Jose, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Stewart Title of California at December 31, 1996 and 1995 and the related statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of California as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS ------------------------------ GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 16, 1997 -15- 18 To the Board of Directors Stewart Title of Monterey County Monterey, California INDEPENDENT AUDITORS REPORT We have audited the accompanying balance sheet of Stewart Title of Monterey County at December 31, 1996 and 1995 and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Monterey County as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS ------------------------------ GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 7, 1997 -16- 19 To the Board of Directors Stewart Title of Modesto Modesto, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheets of Stewart Title of Modesto at December 31, 1996 and 1995, and the related statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Modesto as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS ----------------------------- GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 7, 1997 -17- 20 To the Board of Directors Stewart Title of Fresno County Fresno, California INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Stewart Title of Fresno County at December 31, 1996 and 1995 and the related statements of income, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stewart Title of Fresno County as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ GRANT BENNETT ACCOUNTANTS ----------------------------- GRANT BENNETT ACCOUNTANTS A PROFESSIONAL CORPORATION Certified Public Accountants January 9, 1997 -18- 21 EXHIBIT A INDEPENDENT AUDITORS' REPORT The Board of Directors Stewart Title Dallas, Inc. dba: Stewart Title North Texas, Inc. We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996, prepared from the accounts maintained at your office at 5728 LBJ Freeway, Dallas, Texas. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Dallas, Inc. dba: Stewart Title North Texas, Inc. as of December 31, 1996 in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and are not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ WILKERSON & ARTHUR - ---------------------- Wilkerson & Arthur, P.C. January 16, 1997 -19- 22 EXHIBIT A INDEPENDENT AUDITORS' REPORT The Board of Directors Priority Title Company of Dallas, L.L.C. We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996, prepared from the accounts maintained at your office at 5728 LBJ Freeway, Dallas, Texas. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Priority Title Company of Dallas, L.L.C. as of December 31, 1996 in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and are not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ WILKERSON & ARTHUR, P.C. - --------------------------------------- Wilkerson & Arthur, P.C. January 16, 1997 -20- 23 REPORT OF INDEPENDENT ACCOUNTANTS To: Stewart Title Austin, Inc. Austin, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Austin, Inc. as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at Austin, Texas. This financial statement is the responsibility Of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Austin, Inc., as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole. January 16, 1997 /s/ AARONSON, WHITE & COMPANY - ------------------------------------------ Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -21- 24 REPORT OF INDEPENDENT ACCOUNTANTS To: Stewart Title Company - Galveston Galveston, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Company - Galveston as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at Galveston, Texas. This financial statement is the responsibility Of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Galveston, as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole. January 10, 1997 /s/ AARONSON, WHITE & COMPANY - ------------------------------------ Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -22- 25 REPORT OF INDEPENDENT ACCOUNTANTS To: Stewart Title of Montgomery County, Inc. The Woodlands, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title of Montgomery County, Inc. as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at The Woodlands, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Montgomery County, Inc., as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole. January 23, 1997 /s/ AARONSON, WHITE & COMPANY - ------------------------------------- Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -23- 26 REPORT OF INDEPENDENT ACCOUNTANTS To: Stewart Title Company - Fort Bend Sugarland, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Stewart Title Company - Fort Bend as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at Sugarland, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Fort Bend, as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report is presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities taken as a whole. January 14, 1997 /s/ AARONSON, WHITE & COMPANY - -------------------------------------- Aaronson, White & Company 16010 Barker's Point Lane Suite 175 Houston, Texas 77079 -24- 27 INDEPENDENT AUDITORS' REPORT The Board of Directors Stewart Title - Houston Division I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of the National Title Services Division of Stewart Title Guaranty Company as of December 31, 1996 and 1995, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by the National Title Services Division of Stewart Title Guaranty Company as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. My audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA - ------------------------------------ Ginny Sanders May, CPA January 21, 1997 -25- 28 INDEPENDENT AUDITORS' REPORT The Board of Directors Stewart Title - Houston Division I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of the Houston Division of Stewart Title as of December 31, 1996 and 1995, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by the Houston Division of Stewart Title as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. My audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA - ------------------------------------- Ginny Sanders May, CPA January 21, 1997 -26- 29 INDEPENDENT AUDITORS' REPORT The Board of Directors Priority Title Company of Houston, L.L.C. I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts of Priority Title Company of Houston, L. L. C. as of December 31, 1996 and 1995, prepared from the accounts maintained in your office at 1980 Post Oak Boulevard, Houston, Texas. The financial statement is the responsibility of the company's management. My responsibility is to express an opinion on this financial statement based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Priority Title Company of Houston, L.L.C. as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. My audit has been made of or the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ GINNY SANDERS MAY, CPA - ----------------------------------------- Ginny Sanders May, CPA January 21, 1997 -27- 30 EXHIBIT A Independent Auditors' Report Board of Directors Stewart Title Company--Beaumont Division Beaumont, Texas 77706 We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996, prepared from the accounts maintained at your office at 2390 N. Dowlen Road, Beaumont, Texas. This financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company - Beaumont Division. as of December 31, 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities. taken as a whole. Very truly yours, /s/ EDGAR, KIKER, & CROSS ---------------------------- EDGAR, KIKER & CROSS, L.L.P. Certified Public Accountants -28- 31 INDEPENDENT AUDITOR'S REPORT Board of Directors Stewart Title Company Houston, Texas I have examined the statements of assets and liabilities of trust (escrow) fund accounts as of December 31, 1996 and 1995, prepared from the accounts maintained at your office in San Antonio, Texas. My examination, which was limited to such accounts, was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as I considered necessary in the circumstances. In my opinion, the aforementioned statements of assets and liabilities of trust (escrow) fund accounts (not separately presented herein) present fairly the assets and liabilities of such accounts handled by the San Antonio Division of Stewart Title Company, as of December 31, 1996 and 1995, in accordance with generally accepted accounting principles, applied on a consistent basis. /s/ JIM S. WALKER ----------------------------- Jim S. Walker Certified Public Accountant Beaumont, Texas January 15, 1997 -29- 32 INDEPENDENT AUDITORS' REPORT Board of Directors Stewart Title Company Amarillo, Texas District Office We have audited the accompanying Statement of Assets and Liabilities of Trust Fund Accounts as of December 31, 1996, prepared from the accounts maintained at your office at Amarillo, Texas. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. we believe that our audits of the Statements of Assets and Liabilities of Trust (Escrow) Fund Accounts provide a reasonable basis for our opinion. In our opinion, Statements of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company, for the years then ended in conformity with generally accepted accounting principles. Our audits have been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of these reports is presented as additional information and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examinations of the basic Statements of Assets and Liabilities, and is fairly stated in all material respects in relation to the basic Statements of Assets and Liabilities, taken as a whole. /s/ DOSHIER, PICKENS & FRANCIS, P.C. - ---------------------------------------- DOSHIER, PICKENS & FRANCIS, P.C. January 14, 1997 -30- 33 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Stewart Title of Corpus Christi, Inc. Corpus Christi, Texas We have audited the Statements of Assets and Liabilities of Trust [Escrow] Fund Accounts as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at Corpus Christi, Texas. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits of the financial statements provide a reasonable basis for our opinion. In our opinion, the Statements of Assets and Liabilities of Trust [Escrow] Fund Accounts referred to above present fairly, in all material respects, the assets and liabilities of such accounts managed by Stewart Title Company, Corpus Christi Branch, as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audits have been made for the purpose of forming an opinion of the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of these reports is presented as additional information and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examinations of the basic statements of assets and liabilities, and is fairly stated in all material respects in relation to the basic statements of assets and liabilities, taken as a whole. /s/ FANCHER & COMPANY - -------------------------------------- FANCHER AND COMPANY January 27, 1997 -31- 34 REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors Stewart Title of Lubbock, Inc. 7802 Indiana Avenue Lubbock, Texas 79423 I have audited the accompanying Statement of Assets and Liabilities of Trust (Escrow) Accounts as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at 7802 Indiana Avenue, Lubbock, TX 79423. These financial statements are the responsibility of the company's management. My responsibility is to express an opinion of these financial statements based on my audits. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provides a reasonable basis for my opinions. In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above present fairly, in all material respects, the assets and liabilities of such escrow accounts handled by Stewart Title of Lubbock, Inc., as of December 31, 1996, and 1995 in conformity with generally accepted accounting principles. My audits have been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information contained in Exhibit C through F, inclusive, and Exhibit H of these reports, is presented as additional information and is not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examination of the basic Statement of Assets and Liabilities, and is fairly stated in all material respects in relation to the basic statements of assets and liabilities taken as a whole. /s/ JESUS YEPEZ Jesus Yepez Certified Public Accountant Lubbock, Texas -32- 35 REPORT OF INDEPENDENT ACCOUNTANT Board of Directors Stewart Title Guaranty Company Houston, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996 and 1995, prepared from the accounts maintained at your office at 2401 Moores Lane, Texarkana, Texas. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions. In our opinion, the Statements of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above present fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of Texarkana as of December 31, 1996 and 1995, in conformity with generally accepted accounting principles. Our audits have been made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information contained in Exhibits C through F, inclusive, and Exhibit H of these reports are presented as additional information and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the examinations of the basic statements of assets and liabilities, and is fairly stated in all material respects in relation to the basic statements of assets and liabilities, taken as a whole. /s/ WILLIAMS & PEARCY Williams & Pearcy, P.C. January 25, 1996 -33- 36 Independent Auditor's Report Stewart Title Company of Rockport, Inc. Rockport, Texas 78382 We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996 prepared from the accounts maintained at your office at Rockport, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title Company of Rockport, Inc. as of December 31, 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through H, inclusive, of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C. Flusche, Van Beveren, Kilgore, P.C. Corpus Christi, Texas February 6, 1997 -34- 37 Independent Auditor's Report Stewart Title of San Patricio County, Inc. Portland, Texas We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts as of December 31, 1996 prepared from the accounts maintained at your office at Portland, Texas. The financial statement is the responsibility of the company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund Accounts referred to above presents fairly, in all material respects, the assets and liabilities of such accounts handled by Stewart Title of San Patricio County, Inc. as of December 31, 1996, in conformity with generally accepted accounting principles. Our audit has been made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information contained in Exhibits C through Exhibit H of this report are presented as additional information and is not a required part of the basic financial statement. Such information has been subjected to the audit procedures applied in the examination of the basic statement of assets and liabilities, and is fairly stated in all material respects in relation to the basic statement of assets and liabilities, taken as a whole. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C. Flusche, Van Beveren, Kilgore, P.C. Corpus Christi, Texas February 6, 1997 -35- 38 SCHEDULE II STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) INCOME AND RETAINED EARNINGS INFORMATION
Year Ended December 31, ------------------------------ 1996 1995 1994 -------- -------- -------- (In thousands) Revenues Investment income ..................................... $ 439 $ 224 $ 201 Other income............................................ - 12 28 -------- -------- -------- 439 236 229 Expenses Employee costs ......................................... 163 211 288 Other operating expenses ............................... 1,515 1,634 1,211 Depreciation and amortization .......................... 100 101 21 -------- -------- -------- 1,778 1,946 1,520 Loss before taxes and equity in earnings of investees .... (1,339) (1,710) (1,291) Income taxes (benefit) ................................... (458) (592) (444) Equity in earnings of investees .......................... 15,318 8,125 10,525 -------- -------- -------- Net income ............................................... 14,437 7,007 9,678 Retained earnings at beginning of year ................... 118,547 112,754 106,262 Cash dividends on Common Stock ($.24, $.21 and $.20 per share) ................................................. (1,488) (1,214) (1,118) Stock dividend ........................................... - - (2,068) -------- -------- -------- Retained earnings at end of year ......................... $131,496 $118,547 $112,754 ======== ======== ========
See accompanying note to financial statements. (Schedule continued on following page.) -36- 39 SCHEDULE II (CONTINUED) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) BALANCE SHEET INFORMATION
December 31, -------------------- 1996 1995 -------- -------- (In thousands) Assets Cash and cash equivalents ...................................................... $ 100 $ 54 -------- -------- Short-term investments .......................................................... 10,620 4,373 -------- -------- Receivables: Notes, including $6,960 and $7,057 from affiliates .............................. 7,094 7,251 Other, including $2,493 and $5,000 from affiliates .............................. 6,140 6,873 Less allowance for uncollectible amounts ........................................ (20) - -------- -------- 13,214 14,124 Furniture and equipment at cost ................................................. 167 167 Less accumulated depreciation ................................................... (85) (67) -------- -------- 82 100 Title plants, at cost ........................................................... 48 48 Investments in investees ......................................................... 168,243 155,408 Other assets ..................................................................... 3,168 3,241 -------- -------- $195,475 177,348 ======== ======== Liabilities Payables: Notes, including $ - and $ - from affiliates ................................... $ 580 $ - Accounts payable and accrued liabilities ....................................... 3,905 2,496 Contingent liabilities and commitments Stockholders' equity Common - $1 par, authorized 15,000,000, issued and outstanding 6,216,441 and 5,864,758 ................................................................ 6,216 5,865 Class B Common - $1 par, authorized 1,500,000, issued and outstanding 525,006... 525 525 Additional paid-in-capital ..................................................... 50,833 45,945 Net unrealized investment gains, net of deferred taxes ........................ 1,920 3,970 Retained earnings (1) ......................................................... 131,496 118,547 -------- -------- Total stockholders' equity ($28.33 and $27.36 per share) ............... 190,990 174,852 -------- -------- $195,475 $177,348 ======== ========
(1) Includes undistributed earnings of subsidiaries of $130,708 in 1996 and $126,480 in 1995. See accompanying note to financial statements. (Schedule continued on following page.) -37- 40 SCHEDULE II (CONTINUED) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) CASH FLOWS INFORMATION
Year Ended December 31, ---------------------------- 1996 1995 1994 ------- ------ -------- (In thousands) Cash flow from operating activities (Note) ................... $ 7,033 $1,169 $ (281) Cash flow from investing activities: Purchases of furniture and equipment and title plants - net......................................................... - - (56) Proceeds from investments sold ............................. 11,520 7,011 4,076 Purchases of investments, excluding mortgage loans .......... (17,767) (6,865) (4,901) Increases in mortgages and other notes receivable ........... (70) (262) - Collections on mortgages and other notes receivable ......... 227 31 698 ------- ------ -------- Cash used by investing activities ............................ (6,090) (85) (183) ------- ------ -------- Cash flow from financing activities: Dividends paid .............................................. (1,488) (1,214) (1,118) Proceeds of notes payable ................................... 610 - - Payments on notes payable ................................... (30) - - Proceeds from issuance of stock ............................. 11 - 837 ------- ------ -------- Cash used by financing activities ............................ (897) (1,214) (281) ------- ------ -------- Increase (decrease) in cash and cash equivalents ............. $ 46 $ (130) $ (745) ======= ====== ======== Note: Reconciliation of net income to the above amounts: Net income .................................................. $14,437 $7,007 $ 9,678 Add (deduct): Depreciation and amortization .............................. 100 101 21 Provision for uncollectible amounts - net ................. 20 64 - Increase in accounts receivable - net ...................... (3,207) (1,326) (378) Increase (decrease) in accounts payable and accrued liabilities - net ......................................... 264 (2,668) 195 Equity in net earnings of investees ........................ (15,318) (8,125) (10,525) Dividends received from investees........................... 11,090 5,650 1,340 Stock bonuses .............................................. - - 61 Other - net ................................................ (353) 466 (673) ------- ------ -------- Cash provided (used) by operating activities ................. $ 7,033 $1,169 $ (281) ======= ====== ======== Supplemental information: Income taxes paid .......................................... - - - Interest paid .............................................. - - -
See accompanying note to financial statements. (Schedule continued on following page.) -38- 41 SCHEDULE II (continued) STEWART INFORMATION SERVICES CORPORATION (PARENT COMPANY) NOTE TO FINANCIAL STATEMENT INFORMATION The Registrant operates as a holding company transacting substantially all business through its subsidiaries. The consolidated financial statements for the Registrant and its subsidiaries are included in Part II, Item 8 of Form 10-K. The Parent Company financial statements should be read in conjunction with the aforementioned consolidated financial statements and notes thereto and financial statement schedules. Total dividends received from unconsolidated subsidiaries for 1996, 1995 and 1994 were $8,583,000, $9,390,000 and $2,600,000, respectively. -39- 42 SCHEDULE II (CONTINUED) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS THREE YEARS ENDED DECEMBER 31, 1996
======================================================================================================================== Col. A Col. B Col. C Col. D Col. E Col. F ========================================================================================================= ============= Maximum Average Weighted Weighted amount amount average Balance average outstanding outstanding interest rate Category of aggregate at end interest during the during the during the short-term borrowings (1) of period rate period period (2) period (3) ========================================================================================================= ============= December 31, 1994: Banks ........................................... $4,456,107 8.58% $4,456,107 $2,739,508 7.38% ========== ==== ========== ========== ==== December 31, 1995: Banks ........................................... $3,380,430 8.61% $5,055,807 $4,487,714 8.82% ========== ==== ========== ========== ==== December 31, 1996: Banks ........................................... $2,646,893 7.55% $4,046,900 $3,145,603 8.03% ========== ==== ========== ========== ====
(1) Bank borrowings represent short-term notes due within one year of the loan's origination. (2) Computed by summing each month-end balance and dividing the total by twelve. (3) Computed by dividing total yearly interest expense by the average of the month-end principal balances. -40- 43 SCHEDULE V STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS DECEMBER 31, 1996
=================================================================================================================================== Col. C Col. A Col. B Additions Col. D Col. E =================================================================================================================================== Balance Charged Charged to at to other Balance beginning cost and accounts -Deductions- at end Description of period expenses describe described of period =================================================================================================================================== Stewart Information Services Corporation and subsidiaries: Year ended December 31, 1994: Estimated title losses .................... $117,585,559 $40,211,895 - $23,481,018(A) $134,316,436 Allowance for uncollectible amounts .................................. 5,268,419 2,233,675 - 1,379,045(B) 6,123,049 Year ended December 31, 1995: Estimated title losses .................... 134,316,436 29,590,891 - 25,594,793(A) 138,312,534 Allowance for uncollectible amounts................................... 6,123,049 1,333,744 - 957,846(B) 6,498,947 Year ended December 31, 1996: Estimated title losses .................... 138,312,534 33,829,851 - 21,810,822(A) 150,331,563 Allowance for uncollectible amounts................................... 6,498,947 1,575,000 - 1,404,356(B) 6,669,591 Stewart Information Services Corporation - Parent: Year ended December 31, 1994: Allowance for uncollectible amounts $ 8,198 - - - $ 8,198 Year ended December 31, 1995: Allowance for uncollectible amounts 8,198 $ 64,382 - $ 72,580(C) - Year ended December 31, 1996: Allowance for uncollectible amounts - 20,000 - - 20,000
(A) Represents payments of policy losses and loss adjustment expenses during the year, less salvage collections. (B) Represents uncollectible accounts written off. (C) Represents an adjustment to accounts receivable previously reserved and current year write-off of uncollected accounts. -41- 44 INDEX TO EXHIBITS
Sequentially Numbered Exhibit Page - ------- ------------ 3.1 - Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987) 3.2 - By-laws of the Registrant 4 - Rights of Common and Class B Common Stockholders (incorporated by reference to Exhibits 3.1 and 3.2 hereto) 10.1 - Summary of agreements as to payment of bonuses to certain executive officers 10.2 - Deferred Compensation Agreements dated March 10, 1986 between the Registrant and certain executive officers (incorporated by reference to Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987) 13. - Annual Report to Stockholders for 1996 (the financial text of the annual report incorporated herein by reference in Item 6 of Part II of this report) 21. - Subsidiaries of the Registrant 23. - Consents of Independent Certified Public Accountants, including consents to incorporation by reference of their reports to previously filed Securities Act registration statements 27. - Financial Data Schedule
EX-3.2 2 BY-LAWS OF THE REGISTRANT 1 EXHIBIT 3.2 BY-LAWS OF STEWART INFORMATION SERVICES CORPORATION ARTICLE I OFFICES SECTION 1.1. Registered office. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name of its registered agent shall be The Corporation Trust Company. SECTION 1.2. Other offices. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.1. Place of Meeting. All meetings of stockholders for the election of directors shall be held at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. 1 2 SECTION 2.2. Annual Meeting. The annual meeting of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. SECTION 2.3. Voting List. The officer who has charge of stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice, or if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.4. Special Meeting. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board or by the President or by the Board of Directors or by written order of a majority of the 2 3 directors and shall be called by the President or the Secretary at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose of the proposed meeting. The Chairman of the Board or the President or directors so calling, or the stockholders so requesting, any such meeting shall fix the time and any place, either within or without the State of Delaware, as the place for holding such meeting. SECTION 2.5. Notice of Meeting. Written notice of the annual, and each special meeting of stockholders, stating the time, place and purpose or purposes thereof, shall be given to each stockholder entitled to vote thereat, not less than ten nor more than 60 days before the meeting. SECTION 2.6. Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at any meeting of stockholders for the transaction of business except at each election of directors and as otherwise provided by statute or by the Certificate of Incorporation. At each meeting for the election of directors the holders of a majority of the Common Stock and the holders of a majority of the Class B Common Stock, issued and outstanding of each such class, and entitled to vote thereat, present in person or represented by proxy shall constitute a quorum. Notwithstanding the other provisions of the Certificate of Incorporation or these by-laws, the holders of a majority of the shares of capital stock entitled to vote thereat, present in person or represented by 3 4 proxy, whether or not a quorum is present, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 2.7. Voting. (a) Unless express provision of applicable statute, of the Certificate of Incorporation or of these by-laws shall provide to the contrary, at each meeting of stockholders each holder of capital stock of the Corporation shall be entitled to cast one vote for each share of capital stock registered in his or its name on the books of the Corporation on the record date for determination of stockholders entitled to notice of, and to vote at, such meeting on each matter properly submitted to stockholders at each meeting. If any stockholder entitled to vote at any 4 5 meeting shall be present at such meeting and such stockholder shall abstain, whether in person or by proxy, from casting the vote or votes which he or it is entitled to cast at such meeting, such abstention shall not affect the determination of the presence of a quorum at such meeting. For all purposes of these by-laws, an abstention from voting on any matter properly submitted to stockholders at a meeting shall not be considered a vote cast for or against such matter. (b) Each stockholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by stockholder, bearing a date not more than three years prior to voting, unless such instrument provides for a longer period, and filed with the Secretary of the Corporation before, or at the time of, the meeting. If such instrument shall designate two or more persons to act as proxies, unless such instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all of the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one, or if any even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect to the same portion of the shares as he is of the proxies representing such shares. 5 6 (c) When a quorum is present at any meeting of stockholders, a majority of the shares voted in person or by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of applicable statute, of the Certificate of Incorporation or of these by-laws, a different vote is required, in which case such express provision shall govern and control the decision of such question. (d) When a quorum is present at any meeting of stockholders at which the Board of Directors is to be elected, the stockholders shall elect such directors by a plurality of the shares voted in person or by proxy. All votes for election of directors that are cast in person shall be cast by written ballot. SECTION 2.8. Consent of Stockholders. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action by any provision of the statutes, the meeting and vote of stockholders may be dispensed with if all the stockholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken; or if the Certificate of Incorporation authorizes the action to be taken with the written consent of the holders of less than all the stock who would have been entitled to vote upon the action if a meeting were held, then on the written consent of the stockholders having 6 7 not less than such percentage of the number of votes as may be authorized in the Certificate of Incorporation; provided that in no case shall the written consent be by the holders of stock having less than the minimum percentage of the vote required by statute for the proposed corporate action, and provided that prompt notice must be given to all stockholders of the taking of corporate action without a meeting and by less than unanimous consent. SECTION 2.9. Voting of Stock of Certain Holders. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the by-laws of such corporation may prescribe, or in the absence of such provision, as the Board of Directors of such corporation may determine. Shares standing in the name of a deceased person may be voted by the executor or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardian, conservator or trustee may be voted by such fiduciary, either in person or by proxy, but no such fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the corporation, he has expressly empowered the pledgee to vote 7 8 thereon, in which case only the pledgee, or his proxy, may represent the stock and vote thereon. SECTION 2.10. Treasury Stock. The corporation shall not vote, directly or indirectly, shares of its own stock owned by it; and such shares shall not be counted in determining the total number of outstanding shares. SECTION 2.11. Fixing Record Date. The Board of Directors may fix in advance a date, not exceeding 60 days preceding the date of any meeting of stockholders, or the date for payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change, or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining a consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting and any adjournment thereof, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, any such meeting and any adjournment thereof, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or to exercise such rights, or to give such 8 9 consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. ARTICLE III BOARD OF DIRECTORS SECTION 3.1. Powers. The business and affairs of the corporation shall be managed by its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders. SECTION 3.2. Number, Election and Term. The number of directors which shall constitute the whole Board shall be NINE. Unless such number if fixed by express provision of the statutes or the Certificate of Incorporation, in which case such express provision shall govern and control, the number of directors shall from time to time be fixed and determined by the directors and shall be set forth in the notice of any meeting of stockholders held for the purpose of electing directors. The directors shall be elected at the annual meeting of stockholders, except as provided in Section 3.3, and each director elected shall hold office until his successor shall be elected and shall qualify. Directors need not be residents of Delaware or stockholders of the corporation. 9 10 SECTION 3.3. Vacancies, Additional Directors and Removal From Office. If any vacancy occurs in the members of the Board of Directors elected by the holders of Common stock caused by death, resignation, retirement, disqualification or removal from office of any such director, or otherwise, or if any new directorship to be elected by the holders of Common stock is created by an increase in the authorized number of directors, a majority of the directors then in office elected by the holders of Common stock, though less than a quorum, or a sole remaining such director, may choose a successor or fill the newly created directorship; and a director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced. If any vacancy occurs in the members of the Board of Directors elected by the holders of Class B Common stock caused by death, resignation, retirement, disqualification or removal from office of any such director, or otherwise, or if any new directorship to be elected by the holders of Class B Common stock is created by an increase in the authorized number of directors, a majority of the directors then in office elected by the holders of Class B Common stock, though less than a quorum, or a sole remaining such director, may choose a successor or fill the newly created directorship; and a director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, 10 11 unless sooner displaced. A director may be removed either for or without cause at any special meeting of stockholders duly called and held for such purpose except that only the stockholders entitled to vote for any such director may vote for the removal of such director. SECTION 3.4. Regular Meeting. A regular meeting of the Board of Directors shall be held each year, without other notice than this by-law, at the place of, and immediately following, the annual meeting of stockholders; and other regular meetings of the Board of Directors shall be held each year, at such time and place as the Board of Directors may provide, by resolution, either within or without the State of Delaware, without other notice than such resolution. SECTION 3.5. Special Meeting. A special meeting of the Board of Directors may be called by the Chairman of the Board or by the President and shall be called by the Secretary on the written request of any two directors. The Chairman or President so calling, or the directors so requesting, any such meeting shall fix the time and any place, either within or without the State of Delaware, as the place for holding such meeting. SECTION 3.6. Notice of Special Meeting. Written notice of special meetings of the Board of Directors shall be given to each director at least 48 hours prior to the time of such meeting; provided however, in instances where notice of such meeting is 11 12 given orally, by telephone or telegraph, such notice need be given only 24 hours prior to such meeting. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting for the purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in notice or waiver of notice of such meeting, except that notice shall be given of any proposed amendment to the by-laws if it is to be adopted at any special meeting or with respect to any other matter where notice is required by statute. SECTION 3.7. Quorum and Vote Required. Six of the nine members of the Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, and the act of six of the directors shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the Certificate of Incorporation or by these by-laws. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 3.8. Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these by-laws, 12 13 any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof as provided in Article IV of these by-laws, may be taken without a meeting, if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 3.9. Compensation. Directors, as such, shall not be entitled to any stated salary for their services unless voted by the stockholders or the Board of Directors; but by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board of Directors or any meeting of a committee of directors. No provision of these by-laws shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 3.10. Nomination of Directors to be Elected by Holders of Common Stock. Only persons who are nominated in accordance with the following procedures are eligible for election as directors by the holders of the Common Stock of the corporation. Nominations of persons for election by the holders of Common Stock to the Board of Directors of the corporation may be made at a meeting of stockholders provided such nominations are made by or at the direction of the Board of Directors or by a nominating committee appointed by the Board of Directors or a 13 14 person appointed by the Board of Directors to make nominations. Nominations may also be made by any holder of Common Stock of the corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this section. Nominations, if made by a stockholder of the corporation, shall be made pursuant to timely notice in writing addressed to the secretary of the corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not later than the 15th day of February next preceding the annual meeting of stockholders. SECTION 3.11. Advisory Directors. The Board of Directors may elect from one (1) to nine (9) (as it may decide) Advisory Members of the Board of Directors who may meet with the Board of Directors at such Board Meeting to which they are invited by the Chairman of the Board, or the President or Executive Vice President (it being realized that there may be meetings not deemed important enough to warrant time and travel expense of all or a part of the Advisory Members), and give the Board of Directors the benefit of their advice and counsel. The Advisory Members of the Board of Directors may be elected at any regular or special meeting of the Board of Directors. The Advisory Members of the Board of Directors shall receive the same fee for attending a meeting that a Director receives and shall be paid their travel 14 15 expenses, if any, incurred in attending meetings of the Board of Directors. No such payment shall preclude any Director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE IV COMMITTEE OF DIRECTORS SECTION 4.1. Designation, Powers and Name. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, including, if they shall so determine, an Executive Committee, each such committee to consist of two or more of the directors of the corporation. The committee shall have and may exercise such of the powers of the Board of Directors in the management of the business and affairs of the corporation as may be provided in such resolution. The committee may authorize the seal of the corporation to be affixed to all papers which may require it. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to 15 16 act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names and such limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 4.2. Minutes. Each committee of directors shall keep regular minutes of its proceedings and report the same to the Board of Directors when required. SECTION 4.3. Compensation. Members of special or standing committees may be allowed compensation for attending committee meetings, if the Board of Directors shall so determine. ARTICLE V NOTICE SECTION 5.1. Methods of Giving Notice. Whenever under the provisions of the statutes, the Certificate of Incorporation or these by-laws, notice is required to be given to any director, member of any committee or stockholder, such notice shall be in writing and delivered personally or mailed to such director, member or stockholder; provided that in the case of a director or a member of any committee such notice may be given orally or by telephone or telegram. If mailed, notice to a director, member of a committee or stockholder shall be deemed to be given when deposited in the United States mail first class in a sealed envelope, with postage thereon prepaid, addressed, in the case of a stockholder, to the stockholder at the stockholder's address as 16 17 it appears on the records of the corporation or, in the case of a director or a member of a committee, to such person at his business address. If sent by telegraph, notice to a director or member of a committee shall be deemed to be given when the telegram, so addressed, is delivered to the telegraph company. SECTION 5.2. Written Waiver. Whenever any notice is required to be given under the provisions of the statutes, the Certificate of Incorporation or these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE VI OFFICERS SECTION 6.1. Officers. The officers of the corporation are Chairman of the Board and Co-Chief Executive Officer, a President and Co-Chief Executive Officer, a Senior Executive Vice President-Assistant Chairman, a Senior Executive Vice President-Assistant President, one or more Vice Presidents, any one or more which may be designated an Executive Vice President and/or Senior Vice President, a Vice President-Finance, a Secretary, a Treasurer and a Controller. The Board of Directors may by resolution create the office of Vice Chairman of the Board and define the duties of such office. The Board of Directors may appoint such other officers and agents including Assistant Vice 17 18 Presidents, Assistant Secretaries and Assistant Treasurers, as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined by the Board. Any two or more offices, other than the offices of President and Secretary, may be held by the same person. No officer shall execute, acknowledge, verify or countersign any instrument on behalf of the corporation in more than one capacity, if such instrument is required by law, by these by-laws or by any act of the corporation to be executed, acknowledged, verified or countersigned by two or more officers. The Chairman of the Board and Co-Chief Executive Officer and the President and Co-Chief Executive Officer shall be elected from among the directors. With the foregoing exceptions, none of the other officers need be a director, and none of the officers need be a stockholder of the corporation. SECTION 6.2. Election and Term of Office. The officers of the corporation shall be elected annually by the Board of Directors at its first regular meeting held after the annual meeting of stockholders or as soon thereafter as conveniently possible. Each officer shall hold office until his successor shall have been chosen and shall have qualified or until his death or the effective date of his resignation or removal, or until he shall cease to be a director in the case of the Chairman of the 18 19 Board and Co-Chief Executive Officer and the President and Co-Chief Executive Officer. SECTION 6.3. Removal and Resignation. Any officer or agent elected or appointed by the Board of Directors may be removed with cause by the affirmative vote of the Board of Directors whenever, in its judgment, the best interests of the corporation shall be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.4. Vacancies. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, may be filled by the Board of Directors for the unexpired portion of the term. SECTION 6.5. Salaries. The salaries of all officers and agents of the corporation shall be fixed by the Board of Directors or pursuant to its direction; and no officer shall be prevented from receiving such salary by reason of his also being a director. 19 20 SECTION 6.6. Chairman of the Board and Co-Chief Executive Officer. The Chairman of the Board and Co-Chief Executive Officer shall preside at all meetings of the Board of Directors or of the stockholders of the corporation. In the Chairman's absence, or at the election of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer, such duties shall be attended to by the President and Co-Chief Executive Officer. The Chairman of the Board and the President shall formulate and submit to the Board of Directors or the Executive Committee matters of general policy for the corporation and shall perform such other duties as usually appertain to the office or as may be prescribed by the Board of Directors or the Executive Committee. The Chairman of the Board and Co-Chief Executive Officer shall, with the President and Co-Chief Executive Officer, be the principal executive officer of the corporation and, subject to the control of the Board of Directors, shall in general supervise and control the business and affairs of the corporation. The Chairman of the Board and Co-Chief Executive Officer, acting with the President and Co-Chief Executive Officers shall have the power to appoint and remove subordinate officers, agents and employees, except those elected or appointed by the Board of Directors. The Chairman of the Board and Co-Chief Executive Officer, acting with the President and Co-Chief Executive Officer, shall keep the Board of Directors and 20 21 the Executive Committee fully informed and shall consult them concerning the business of the corporation. Either or both may sign with the Secretary or any other officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation and any deeds, bonds, mortgages, contracts, checks, notes, drafts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof has been expressly delegated by these by-laws or by the Board of Directors to some other officer or agent of the corporation, or shall be required by law to be otherwise executed. Either or both the Chairman of the Board and the President shall vote, or give a proxy to any other officer of the corporation to vote, all shares of stock of any other corporation (except that the Board of Directors shall vote, or give a proxy to one or more member(s) of the Board to vote, all shares of the stock of Stewart Title Guaranty Company) standing in the name of the corporation and in general they shall perform all other duties normally incident to the office of the Chairman of the Board and Co-Chief Executive Officer and President and Co-Chief Executive Officer, and such other duties as may be prescribed by the stockholders, the Board of Directors or the Executive Committee from time to time. In the absence of the President and Co-Chief Executive Officer, or in the event such officer is unable or refuses to act, the Chairman of the Board and Co-Chief Executive Officer shall perform the duties and exercise 21 22 the powers of the President and Co-Chief Executive Officer. If the office of the President is vacant, the Chairman of the Board shall be the Chief Executive Officer. SECTION 6.7. President and Co-Chief Executive Officer. The President and Co-Chief Executive Officer shall, with the Chairman of the Board and Co-Chief Executive Officer, be the principal executive officer of the corporation and subject to the control of the Board of Directors, shall in general supervise and control the business and affairs of the corporation. In the absence of the Chairman of the Board and Co-Chief Executive Officer, the President and Co-Chief Executive Officer shall preside at all meetings of the Board of Directors and of the Stockholders. The President and Co-Chief Executive Officer, acting with the Chairman of the Board and Co-Chief Executive Officer, shall have the power to appoint and remove subordinate officers, agents and employees, except those elected or appointed by the Board of Directors. The President and Co-Chief Executive Officer, acting with the Chairman of the Board and Co-Chief Executive Officer, shall keep the Board of Directors and the Executive Committee fully informed and shall consult them concerning the business of the corporation. Either or both may sign with the Secretary or any other officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation and any deeds, bonds, mortgages, 22 23 contracts, checks, notes, drafts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof has been expressly delegated by these by-laws or by the Board of Directors to some other officer or agent of the corporation, or shall be required by law to be otherwise executed. Either or both the Chairman of the Board and the President shall vote, or give a proxy to any other officer of the corporation to vote, all shares of stock of any other corporation (except that the Board of Directors shall vote, or give a proxy to one or more member(s) of the Board to vote, all shares of the stock of Stewart Title Guaranty Company) standing in the name of the corporation and in general they shall perform all other duties normally incident to the office of President and Co-Chief Executive Officer and Chairman of the Board and Co-Chief Executive Officer and such other duties as may be prescribed by the stockholders, the Board of Directors or the Executive Committee from time to time. In the absence of the Chairman of the Board and Co-Chief Executive Officer, or in the event such officer is unable or refuses to act, the President and Co-Chief Executive Officer shall perform the duties and exercise the powers of the Chairman of the Board and Co-Chief Executive Officer. If the office of the Chairman of the Board is vacant, the President shall be the Chief Executive Officer. 23 24 SECTION 6.8. Vice President. In the absence of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer, or in the event both are unable or refuse to act, either or both the Senior Executive Vice President-Assistant Chairman and the Senior Executive Vice President-Assistant President (or in the event both such offices are vacant or both such officers are unable or refuse to act, the Vice President-Finance) shall perform the duties and exercise the powers of the President and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive Officer. In the event the offices of both Chairman and President are vacant, the Senior Executive Vice President-Assistant Chairman shall perform the duties and exercise the powers of the Chairman and Co-Chief Executive Officer and the Senior Executive Vice President-Assistant President shall perform the duties and exercise the powers of the President and Co-Chief Executive Officer. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation. The Vice Presidents shall perform such other duties as from time to time may be assigned to them by the Chairman, the President, the Board of Directors or the Executive Committee. SECTION 6.9. Secretary. The Secretary shall (a) keep the minutes of the meetings of the stockholders, the Board of Directors and committees of directors; (b) see that all notices 24 25 are duly given in accordance with the provisions of these by-laws and as required by law; (c) be custodian of the corporate records and of the seal of the corporation, and see that the seal of the corporation or a facsimile thereof is affixed to all certificates for shares prior to the issue thereof and to all documents, the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these by-laws; (d) keep or cause to be kept a register of the post office address of each stockholder which shall be furnished by such stockholder; (e) sign with the President, or an Executive Vice President or Vice President, certificates for shares of the corporation, the issue of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general, perform all duties normally incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.10. Treasurer. If required by the Board of Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board of Directors shall determine. He shall have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for 25 26 monies due and payable to the corporation from any source whatsoever and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with the provisions of Section 7.3 of these by-laws, and in general, perform all duties normally incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.11. Controller. The Controller shall prepare, or cause to be prepared, for submission at each regular meeting of the Board of Directors, at each annual meeting of the stockholders, and at such other times as may be required by the Board of Directors, the President or the Executive Committee, a statement of financial condition of the corporation in such detail as may be required; and in general, perform all the duties incident to the office of Controller and such other duties as from time to time may be assigned to him by the President, the Board of Directors or the Executive Committee. SECTION 6.12. Assistant Secretary or Treasurer. The Assistant Secretaries and Assistant Treasurers shall, in general, perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the President, the Board of Directors or the Executive Committee. The Assistant Secretaries and Assistant Treasurers shall, in the absence of the 26 27 Secretary or Treasurer, respectively, perform all functions and duties which such absent officers may delegate, but such delegation shall not relieve the absent officer from the responsibilities and liabilities of his office. The Assistant Secretaries may sign, with the President or a Vice President, certificates for shares of the corporation, the issue of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. ARTICLE VII CONTRACTS, CHECKS AND DEPOSITS SECTION 7.1. Contracts. Subject to the provisions of Section 6.1, the Board of Directors may authorize any officer, officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 7.2. Checks, etc. All checks, demands, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers or such agent or agents of the 27 28 corporation, and in such manner, as shall be determined by the Board of Directors. SECTION 7.3. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VIII CERTIFICATES OF STOCK SECTION 8.1. Issuance. Each stockholder of this corporation shall be entitled to a certificate or certificates showing the number of shares of stock registered in his name on the books of the corporation. The certificates shall be in such form as may be determined by the Board of Directors, shall be issued in numerical order and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary. If any certificate is countersigned (1) by a transfer agent other than the corporation or any employee of the corporation, or (2) by a registrar other than the corporation or any employee of the corporation, any other signature on the certificate may be a facsimile. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative participating, optional or 28 29 other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class of stock; provided that, except as otherwise provided by statute, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and qualifications, limitations or restrictions of such preferences and rights. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, stolen, destroyed or mutilated certificate a new one may be issued therefor upon such terms and with such indemnity, if any, to the corporation as the Board of Directors may prescribe. Certificates shall not be issued representing fractional shares of stock. SECTION 8.2. Lost Certificates. The Board of Directors may direct a new certificate or certificates to be issued in place 29 30 of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate or certificates alleged to have been lost, stolen or destroyed, or both. SECTION 8.3. Transfers. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of shares shall be made only on the books of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney and filed with the Secretary of the corporation or the Transfer Agent. 30 31 SECTION 8.4. Registered Stockholders. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE IX DIVIDENDS SECTION 9.1. Declaration. Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. SECTION 9.2. Reserve. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conclusive to the interest of the corporation, and the 31 32 Directors may modify or abolish any such reserve in the manner in which it was created. ARTICLE X INDEMNIFICATION SECTION 10.1. Third Party Actions. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and 32 33 in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 10.2. Actions by or in the Right of the Corporation. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his duty to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of 33 34 liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 10.3. Determination of Conduct. The determination that an officer, director, employee or agent, has met the applicable standard of conduct set forth in Sections 10.1 and 10.2 (unless indemnification is ordered by a court) shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. SECTION 10.4. Payment of Expenses in Advance. Expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article X. 34 35 SECTION 10.5. Indemnity Not Exclusive. The indemnification and advancement of expenses provided hereunder or granted pursuant hereto shall not be deemed exclusive of any other rights to which those seeking indemnification or the advancement of expenses may be entitled under any other by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The indemnification and advancement of expenses provided hereunder or granted pursuant hereto shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE XI MISCELLANEOUS SECTION 11.1. Seal. The corporate seal shall have inscribed thereon the name of the corporation, and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced. SECTION 11.2. Books. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at the offices of the corporation at 35 36 Houston, Texas, or at such other place or places as may be designated from time to time by the Board of Directors. ARTICLE XII AMENDMENT These by-laws may be altered, amended or repealed at any regular or special meeting of the Board of Directors if (i) notice of such alteration, amendment or repeal is contained in the notice of such meeting and (ii) such alteration, amendment or repeal is approved by a majority vote of the directors elected by the holders of the Common Stock and a majority vote of the directors elected by the holders of Class B Common Stock; with each such class of directors voting separately. 36 EX-10.1 3 SUMMARY OF AGREEMENTS AS TO PAYMENT OF BONUSES 1 EXHIBIT 10.1 STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES MATERIAL CONTRACTS DECEMBER 31, 1996 STEWART MORRIS, JR., as Chairman of the Board, shall receive in addition to his salary, 1% on the first $20,000,000 of the consolidated income before taxes of Stewart Title Guaranty Company as reported to its stockholders and .5% of the profits exceeding $20,000.000. For the calendar year 1996, Mr. Morris shall receive no less that $125,000 in bonus compensation. For the calendar year 1996, Mr. Morris received $218,075 in bonus compensation. Total compensation shall exclude payments made by the company for insurance premiums, board fees or stock options granted. MALCOLM S. MORRIS, as President and Chief Executive Officer, shall receive in addition to his salary, 1% on the first $20,000,000 of the consolidated income before taxes of Stewart Title Guaranty Company as reported to its stockholders and .5% of the profits exceeding $20,000.000. For the calendar year 1996, Mr. Morris shall receive no less that $125,000 in bonus compensation. For the calendar year 1996, Mr. Morris received $218,075 in bonus compensation. Total compensation shall exclude payments made by the company for insurance premiums, board fees or stock options granted. CARLOSS MORRIS, as Chairman of the Executive Committee, shall receive in addition to his salary, 1.5% of the first $13,000,000 of the consolidated net income of Stewart Title Guaranty Company as reported to its stockholders and .75% of the profits exceeding $13,000,000. For the calendar year 1996, Mr. Morris shall receive no less than $100,000 in bonus compensation. For the calendar year 1996 Mr. Morris received $211,305 in bonus compensation. Total compensation shall exclude any insurance premiums, board fees or stock options granted. STEWART MORRIS, as Vice Chairman of the Executive Committee, shall receive in addition to his salary, 1.5% of the first $13,000,000 of the consolidated net income of Stewart Title Guaranty Company as reported to its stockholders and .75% of the profits exceeding $13,000,000. For the calendar year 1996, Mr. Morris shall receive no less than $100,000 in bonus compensation. For the calendar year 1996 Mr. Morris received $211,305 in bonus compensation. Total compensation shall exclude any insurance premiums, board fees or stock options granted. 2 EXHIBIT 13 SELECTED FINANCIAL DATA (Ten year summary)
- ------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 - ------------------------------------------------------------------------------------------------------------------------- In millions of dollars: Total revenues ...................... 344.1 282.5 302.2 348.6 290.0 217.1 210.5 188.5 176.9 183.2 Title premiums, fees and other revenues ................... 328.3 266.7 289.3 334.2 275.6 202.3 197.9 173.8 165.1 173.5 Total operating expenses (1) ........ 318.6 269.6 287.0 308.8 266.9 214.7 208.1 187.3 171.2 177.0 Title losses, included above ........ 33.8 29.6 40.2 58.6 54.1 40.7 38.2 33.0 25.6 25.9 Investment gains (losses), after taxes ...................... 0.1 0.6 (0.5) 0.3 0.1 1.4 -- 1.0 0.1 (0.2) Net earnings (2) .................... 14.4 7.0 9.7 23.7 14.6 1.7 0.2 0.1 3.7 11.7 Cash from operating activities ...... 36.8 20.6 27.7 54.3 36.3 18.6 11.0 10.2 8.9 10.8 Total assets ........................ 383.4 351.4 325.2 313.9 251.9 219.1 201.3 197.8 193.9 182.4 Long-term debt ...................... 7.9 7.3 2.5 3.0 4.2 6.8 6.6 5.3 7.3 5.0 Stockholders' equity (3) ............ 191.0 174.9 156.4 156.2 128.6 114.8 113.9 115.0 116.8 115.2 Ratios (%): Net earnings/total revenues ......... 4.2 2.5 3.2 6.8 5.0 0.8 0.1 0.1 2.1 6.4 Title losses/title premiums, etc .... 10.3 11.1 13.9 17.5 19.6 20.1 19.3 19.0 15.5 14.9 Per share data: (4) Average shares (in thousands) ....... 6,707 6,292 6,198 6,119 6,096 6,096 6,096 6,096 6,071 6,047 Net earnings (2) .................... 2.15 1.11 1.56 3.87 2.40 0.27 0.03 0.01 0.61 1.93 Cash dividends ...................... 0.24 0.21 0.20 0.17 0.15 0.13 0.23 0.33 0.51 0.51 Stockholders' equity (3) ............ 28.33 27.36 25.17 25.37 21.10 18.84 18.69 18.87 19.17 19.05 Market price High ............................. 22.63 22.50 21.42 20.33 14.50 9.67 12.33 14.00 12.00 17.17 Low .............................. 19.63 15.13 14.38 12.50 8.67 5.17 4.50 11.17 9.17 7.17 Year-end ......................... 20.75 21.50 15.38 20.00 13.67 9.17 5.25 11.33 11.92 9.17
(1) Excludes interest expense and minority interests. (2) Includes the following items, after providing for taxes: 1992 - a reserve established for title losses over ten years old of $2.2 million, or $.36 per share. 1991 - a fresh start tax credit of $1.3 million, or $.21 per share. 1988 - a gain on the termination of pension plan of $0.5 million, or $.08 per share. 1987 - a tax benefit of $7.4 million, or $1.22 per share, granted by the Tax Reform Act of 1986. (3) Includes unrealized gains and losses upon adoption of FAS 115 in 1993. (4) Restated for one-for-two stock split in April 1994. MANAGEMENT DISCUSSION AND ANALYSIS A comparison of the results of operations of the Company for 1996 with 1995 and 1995 with 1994 follows. GENERAL. The Company's dominant segment of operations is the land title business. In general, the principal factors that 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 revenues from nonresidential, commercial transactions. Although relatively few in number, large commercial transactions usually yield higher premiums. 18 3 Mortgage interest rates began a downward trend in the early months of 1995 that continued for the rest of the year. By May 1995, rates had fallen to below year-earlier levels. This improvement in interest rates helped increase real estate activity. Company revenues for the third and fourth quarters of 1995 exceeded revenues for the same quarters in 1994. By the end of 1995, interest rates had fallen to near the 7 percent level. In early 1996, interest rates began to trend upward until they reached the 8 percent level in April. Rates have fluctuated in a fairly narrow range since then. Refinancing transactions fell significantly in 1996 compared to 1995. Existing home sales rose in the first half of 1996 and then declined slightly in the second half, while still exceeding sale levels in the second half of 1995. TITLE REVENUES. The Company's revenues from premiums, fees and other revenues increased 23.1% in 1996 over 1995 and decreased 7.8% in 1995 over 1994. The number of orders opened and closed by the Company and the average revenue per order closed follow:
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- Number of orders opened (000s) ............................ 319 278 279 Number of orders closed (000s) ............................ 239 206 233 Average revenue per order closed(1) ....................... $945 $909 $879 - --------------------------------------------------------------------------------
(1) Based on revenues from title operations of $297.9 million, $243.3 million and $271.9 million, less amounts earned from independent agents of $71.7 million, $55.6 million and $67.4 million for 1996, 1995 and 1994, respectively. Total closings increased 16.0% in 1996 and decreased 11.6% in 1995. The average revenue per closing increased 4.0% in 1996 and 3.4% in 1995. The average rate was increased each year by higher home prices. There were no major revenue rate increases in 1996 or 1995. TITLE REVENUES BY STATE. The approximate amounts and percentages of Stewart's consolidated title revenues (excluding other revenues) by state for the last three years were:
- -------------------------------------------------------------------------------- Amounts ($ millions) Percentages 1996 1995 1994 1996 1995 1994 - -------------------------------------------------------------------------------- Texas ................................ 73 61 73 24 25 27 California ........................... 65 59 68 22 24 25 Florida .............................. 26 21 22 9 9 8 Nevada ............................... 15 13 14 5 5 5 Colorado ............................. 15 12 12 5 5 4 Arizona .............................. 14 12 14 5 5 5 New York ............................. 13 9 7 4 4 3 All others ........................... 77 56 62 26 23 23 - -------------------------------------------------------------------------------- 298 243 272 100 100 100 ================================================================================
INVESTMENTS. Investment income increased 6.5% in 1996 and 9.5% in 1995, primarily because of increases in the average balances invested and, in 1995, higher market yields. The investment gains in 1996 and 1995 were realized as part of the ongoing management of the investment portfolio for the purpose of improving performance. Investment losses in 1994 include a sale of certain portfolio bonds to use tax loss carrybacks that would have otherwise expired. The pretax loss on the sale was $1.3 million. 19 4 EXPENSES. The Company incurs a substantial portion of its total expenses when orders are received and processed, but revenues are not recognized until the orders are closed. Most orders are closed, or canceled, within 90 days of receipt. Employee costs increased 21.4% in 1996 and decreased 5.1% in 1995. The average number of employees and average compensation paid to employees increased in both years. The number of persons employed by the Company at December 31, 1996, 1995 and 1994 was 4,111, 3,757 and 3,470, respectively. The increase in staff in 1996 and 1995 was primarily in the automation and real estate information areas, new offices and an increased number of employees in field service centers. The staff was reduced in California in both years. The Company has chosen to increase cost levels in automation and real estate information areas because it believes the development and sale of new products and services for new and existing customers is important to its future. Through automating operating processes, the Company expects to add customer revenues and reduce operating expenses and title losses in the future. Other operating expenses increased 14.9% in 1996 and decreased slightly in 1995. Excluding the effect of new offices, the increase in 1996 was 12.8% and the decrease was 5.3% in 1995. The overall increase and decrease for both years was caused primarily by changes in transaction volume. Expenses that increased in 1996 included business promotion, supplies, rent and premium taxes. Bad debts, premium taxes and supplies decreased in 1995. Other operating expenses also include policy forms, delivery costs, title plant expenses, telephone and travel. Most of these expenses follow, to varying degrees, the changes in transaction volume and revenues. Provisions for title losses, as a percentage of title premiums, fees and other revenues, were 10.3%, 11.1% and 13.9% in 1996, 1995 and 1994, respectively. The continued improvement in industry trends and the Company's recent experience in claims has also led to smaller provisions for title losses. The Company's labor and certain other operating costs are sensitive to inflation. Increases in cost of living are considered in granting pay raises. 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 handled by the Company. PREMIUM TAXES. In December 1994 the California Board of Equalization (CBOE) ruled in favor of the Company concerning an assessment of additional premium taxes for the year 1987. However, an additional assessment for retaliatory taxes for 1987 was left pending. In April 1996 the CBOE ruled in favor of the Company on the retaliatory tax assessment. Four other states have also assessed or threatened assessments of additional premium or retaliatory taxes. The amounts aggregated $1.5 million, excluding interest and penalties, and primarily covered the years 1984 through 1993. The Company cannot predict whether there will be additional tax assessments by these states or other states. State taxing authorities are under increasing pressure to collect additional tax revenues. The Company intends to vigorously oppose any assessments and believes its tax payments are correct. However, there can be no assurance the Company will prevail in these controversies. If it does not, the tax assessments may result in a material reduction in the Company's net earnings in future years. INCOME TAXES. The provisions for federal and state income taxes represented an effective tax rate of 36.9%, 34.7% and 30.1% in 1996, 1995 and 1994, respectively. The 1996 effective tax rate was higher primarily because nontaxable income from municipal bonds was significantly less in relation to pretax profits. The 1994 tax rate was lower primarily because dividends remitted by investees in 1994 exceeded the earnings of investees. In the other two years, earnings exceeded dividends. UNCERTAINTY. A major bank holding company introduced a plan in 1994 to guarantee the performance of its mortgage lending company to cure title defects relating to loans sold in the secondary market. The Company believes the plan has not significantly affected the demand for title insurance to date and will not in the future. However, the Company cannot predict the ultimate effect of the plan. LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operations was $36.8 million, $20.6 million and $27.7 million in 1996, 1995 and 1994, respectively. Internally-generated cash flow has been the primary source of funds for additions to property and equipment, expanding operations, dividends to shareholders and other requirements. This source may be supplemented by bank borrowings. 20 5 A substantial majority of consolidated cash and investments is held by Stewart Title Guaranty Company (Guaranty) and its title insurance subsidiary, Stewart Title Insurance Company. Cash transfers between Guaranty and its subsidiaries and the Company are subject to certain legal restrictions. See Notes 4 and 5 to the financial statements. The liquidity of the Company itself, excluding Guaranty and its subsidiaries and excluding notes receivable from affiliates, consisted of cash and investments of $10.7 million, a dividend receivable of $2.5 million from Guaranty (received in February 1997) and short-term liabilities of $0.9 million at December 31, 1996. The Company knows of no commitments or uncertainties which are likely to materially affect the ability of the Company and its subsidiaries to fund their cash needs. See Note 15 to the financial statements. The Company's capital resources, represented primarily by long-term debt of $7.9 million and stockholders' equity of $191.0 million at December 31, 1996, are considered adequate. INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors of Stewart Information Services Corporation We have audited the accompanying consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. For the year ended December 31, 1994, we did not audit the financial statements of certain subsidiaries and a majority of the escrow funds referred to in Note 1. The financial statements of these subsidiaries reflect total revenues constituting 19% of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the subsidiaries and the escrow funds, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits for the years ended December 31, 1996 and 1995, and on our audit and the reports of other auditors for the year ended December 31, 1994, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stewart Information Services Corporation and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," as of December 31, 1995. KPMG Peat Marwick LLP Houston, Texas February 7, 1997 21 6 CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
- ----------------------------------------------------------------------------------------------------- Years ended December 31 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- ($000 Omitted) REVENUES Title premiums, fees and other revenues ....................... 328,296 266,728 289,265 Investment income ............................................. 14,451 13,564 12,382 Investment gains (losses) - net ............................... 129 956 (842) Other income, including equity earnings ....................... 1,205 1,257 1,350 - ----------------------------------------------------------------------------------------------------- 344,081 282,505 302,155 EXPENSES Employee costs ................................................ 170,944 140,795 148,325 Other operating expenses ...................................... 102,768 89,408 90,704 Title losses and related claims ............................... 33,830 29,591 40,212 Depreciation and amortization ................................. 11,007 9,855 7,801 Interest ...................................................... 1,140 1,194 586 Minority interests ............................................ 1,514 933 687 - ----------------------------------------------------------------------------------------------------- 321,203 271,776 288,315 Earnings before taxes ............................................ 22,878 10,729 13,840 Income taxes ..................................................... 8,441 3,722 4,162 - ----------------------------------------------------------------------------------------------------- NET EARNINGS ..................................................... 14,437 7,007 9,678 Retained earnings at beginning of year ........................... 118,547 112,754 106,262 Cash dividends on Common Stock ($.24, $.21 and $.20 per share) ... (1,488) (1,214) (1,118) Stock dividend ................................................... -- -- (2,068) - ----------------------------------------------------------------------------------------------------- Retained earnings at end of year ................................. 131,496 118,547 112,754 - ----------------------------------------------------------------------=============================== Average number of shares outstanding (000 omitted) ............... 6,707 6,292 6,198 EARNINGS PER SHARE ............................................... 2.15 1.11 1.56 - ----------------------------------------------------------------------===============================
See notes to consolidated financial statements. 22 7 CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------ December 31 1996 1995 - ------------------------------------------------------------------------------------------ ($000 Omitted) ASSETS Cash and cash equivalents ...................................... 18,484 16,698 Short-term investments ......................................... 31,946 28,238 Investments in debt securities, at market: Statutory reserve funds ..................................... 127,057 118,040 Other ....................................................... 73,456 67,716 - ------------------------------------------------------------------------------------------ 200,513 185,756 Receivables: Notes ....................................................... 5,686 7,242 Premiums from agents ........................................ 10,107 8,418 Other ....................................................... 22,493 21,079 Less allowance for uncollectible amounts .................... (6,670) (6,499) - ------------------------------------------------------------------------------------------ 31,616 30,240 Property and equipment, at cost: Land ........................................................ 2,432 1,359 Buildings ................................................... 6,882 5,576 Furniture and equipment ..................................... 70,711 62,115 Less accumulated depreciation and amortization .............. (51,840) (44,779) - ------------------------------------------------------------------------------------------ 28,185 24,271 Title plants, at cost .......................................... 21,096 19,243 Real estate, at lower of cost or net realizable value .......... 1,866 3,303 Investments in investees, on an equity basis ................... 5,639 6,123 Goodwill, less accumulated amortization of $4,828 and $3,881 ... 16,535 11,029 Deferred income taxes .......................................... 14,615 14,108 Other assets ................................................... 12,877 12,350 - ------------------------------------------------------------------------------------------ 383,372 351,359 - -----------------------------------------------------------------------=================== LIABILITIES Notes payable, including $7,935 and $7,334 long-term portion ... 12,324 12,589 Accounts payable and accrued liabilities ....................... 25,033 20,559 Estimated title losses ......................................... 150,331 138,312 Income taxes ................................................... 419 482 Minority interests ............................................. 4,275 4,565 Contingent liabilities and commitments STOCKHOLDERS' EQUITY Common - $1 par, authorized 15,000,000, issued and outstanding 6,216,441 and 5,864,758 ......................... 6,216 5,865 Class B Common - $1 par, authorized 1,500,000, issued and outstanding 525,006 .............................. 525 525 Additional paid-in capital ..................................... 50,833 45,945 Net unrealized investment gains, net of deferred taxes ......... 1,920 3,970 Retained earnings .............................................. 131,496 118,547 - ------------------------------------------------------------------------------------------ Total stockholders' equity ($28.33 and $27.36 per share) .... 190,990 174,852 - ------------------------------------------------------------------------------------------ 383,372 351,359 - -----------------------------------------------------------------------===================
See notes to consolidated financial statements. 23 8 CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------------------------- Years ended December 31 1996 1995 1994 - -------------------------------------------------------------------------------------------------- ($000 Omitted) CASH PROVIDED BY OPERATING ACTIVITIES (NOTE) .................. 36,750 20,568 27,702 Investing activities: Purchases of property and equipment and title plants - net ....................................... (12,670) (6,700) (12,177) Proceeds from investments matured and sold ................. 82,489 81,674 113,777 Purchases of investments ................................... (103,978) (90,385) (145,273) Increases in notes receivable .............................. (1,340) (1,081) (2,408) Collections on notes receivable ............................ 2,833 2,069 3,962 Cash paid for the acquisition of subsidiaries - net ........ (493) (5,175) (1,042) Proceeds from issuance of stock ............................ 11 -- 296 - -------------------------------------------------------------------------------------------------- CASH USED BY INVESTING ACTIVITIES ............................. (33,148) (19,598) (42,865) Financing activities: Dividends paid ............................................. (1,488) (1,214) (1,118) Proceeds of notes payable .................................. 4,366 7,937 5,125 Payments on notes payable .................................. (4,694) (7,209) (3,514) - -------------------------------------------------------------------------------------------------- CASH (USED) PROVIDED BY FINANCING ACTIVITIES .................. (1,816) (486) 493 - -------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............. 1,786 484 (14,670) - ------------------------------------------------------------------================================ Note: Reconciliation of net earnings to the above amounts - Net earnings ............................................... 14,437 7,007 9,678 Add (deduct): Depreciation and amortization ........................... 11,007 9,855 7,801 Provisions for title losses in excess of payments ....... 12,019 3,996 16,730 Provision for uncollectible amounts - net ............... 171 376 855 (Increase) decrease in accounts receivable - net ........ (2,419) 2,814 3,265 Increase (decrease) in accounts payable and accrued liabilities - net .................................... 4,195 (1,834) (2,909) Provision for deferred income taxes ..................... 596 1,344 (1,794) Decrease in income taxes payable ........................ (1,184) (708) (7,042) Minority interest expense ............................... 1,514 933 687 Equity in net earnings of investees ..................... (980) (700) (801) Realized investment (gains) losses - net ................ (129) (956) 842 Stock bonuses ........................................... 328 303 61 Increase in other assets ................................ (1,151) (846) -- Other - net ............................................. (1,654) (1,016) 329 - -------------------------------------------------------------------------------------------------- Cash provided by operating activities ...................... 36,750 20,568 27,702 - ------------------------------------------------------------------================================ Supplemental information: Income taxes paid .......................................... 9,004 3,283 13,794 Interest paid .............................................. 1,092 1,199 446
See notes to consolidated financial statements. 24 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Three years ended December 31, 1996) NOTE 1 A. NATURE OF OPERATIONS. Stewart Information Services Corporation's dominant segment of operations is the land title business. The Company's revenues are materially affected by the volume of real estate activity in the United States. Mortgage interest rates are a major factor underlying real estate activity. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The accompanying financial statements were prepared by management which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles, including management's best judgments and estimates, with due consideration given to materiality. Actual results could differ from estimates. C. RECLASSIFICATION. Certain amounts in the 1995 and 1994 consolidated financial statements have been reclassified for comparative purposes. D. CONSOLIDATION. Consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. Unconsolidated investees, owned 20% through 50%, and over which the Company exercises significant influence, are accounted for by the equity method. All significant intercompany accounts and transactions are eliminated, and provision is made for minority interests. E. STATUTORY ACCOUNTING. The accounts of Stewart Title Guaranty Company (Guaranty) and its subsidiary, Stewart Title Insurance Company, both title insurers, are maintained on a statutory basis, in accordance with practices required or permitted by regulatory authorities. The statutory accounts are restated in consolidation to conform to generally accepted accounting principles. In restating to generally accepted accounting principles, the amounts for statutory premium reserve and reserve for reported title losses are eliminated and, in substitution, amounts are established for estimated title losses (see below). The net effect, after providing for deferred income taxes, is included in consolidated retained earnings. In calculating the amount owed on federal income tax returns, the statutory premium reserve and reserve for reported title losses must be discounted to their present values. F. TITLE PREMIUMS AND FEES. Revenues from services rendered in closing and insuring titles are considered earned at the time of the closing of the related real estate transactions. G. TITLE LOSSES AND RELATED CLAIMS. Estimating future title loss payments is difficult because of the complex nature of title claims, the long periods of time over which claims are paid, significantly varying dollar amounts of individual claims and other factors. For losses under $750,000 each, the Company estimates the aggregate amount that will be paid in future years on title policies issued in the current year. The estimated amount is charged to earnings currently (when the related revenues are recognized). In making the estimates, the Company uses moving average ratios of recent actual policy loss payment experience, net of recoveries, to premium revenues. Policy losses in excess of $750,000 each are individually evaluated and charged to earnings when they become known. A general reserve is maintained for unknown major losses. Escrow and other losses incurred in office operations are accounted for separately. Amounts shown as the Company's estimated liability for future loss payments are continually reviewed for reasonableness and adjusted as appropriate. In accordance with industry practice, the amounts have not been discounted to their present values. H. INCOME TAXES. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the tax bases and the book carrying values for certain assets and liabilities. Valuation allowances are provided as may be appropriate. Enacted tax rates are used in calculating amounts. I. EARNINGS PER SHARE. Earnings per share amounts are calculated using the weighted average number of shares of Common Stock and Class B Common Stock outstanding during each year. The dilutive effect of Common Stock equivalents is insignificant. J. CASH EQUIVALENTS. Cash equivalents are highly liquid investments that are convertible to cash or mature on a daily basis as part of the Company's management of day-to-day operating cash. 25 10 K. INVESTMENTS. The Company has classified all of its investments in debt securities as available for sale. Net unrealized gains or losses on securities, less taxes, are included in stockholders' equity. Any permanent declines in fair values of securities are charged to earnings. L. PROPERTY AND EQUIPMENT. Depreciation is computed principally by the straight-line method at the following rates: buildings - 30 to 40 years and furniture and equipment - 3 to 10 years. Maintenance and repairs are expensed as incurred while improvements are capitalized. Gains and losses are recognized at disposal. M. TITLE PLANTS. Title plants include compilations of a county's official land records, prior examination files, copies of prior title policies, maps and related materials which are geographically indexed to a specific property. The costs of acquiring existing title plants and building new ones, prior to the time such plants are placed in operation, are capitalized. Such costs are not amortized because there is no indication of any loss of value. The costs of maintaining and operating title plants are expensed as incurred. Gains and losses on sales of copies of title plants or interests in title plants are recognized in the year of sale. N. GOODWILL. Goodwill is the excess of the purchase price over the fair value of net assets of subsidiaries acquired and is amortized by charges to earnings over 10 to 40 years. O. LONG-LIVED ASSETS. The Company adopted FAS 121 effective December 31, 1995. The cumulative effect of the change was negligible. The Company continuously reviews the carrying value of its title plants, goodwill and other long-lived assets for possible impairment. Where appropriate, the book amounts are reduced to fair market values. P. ESCROW FUNDS. Cash held in escrow for customers is excluded from the balance sheets. NOTE 2 GROSS REVENUES. In the accompanying financial statements, premiums earned on policies issued by independent agents are shown net of amounts retained by agents for their services. Under statutory accounting, premium revenues include agent charges, with an offsetting expense for the same amount. On a statutory basis, revenues and expenses would be increased by like amounts and would be stated as shown below. There would be no effect on net earnings.
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- ($000 Omitted) Title premiums, fees and other revenues (gross) .................. 640,233 518,792 598,179 Less amounts retained by agents ............................... (311,937) (252,064) (308,914) - -------------------------------------------------------------------------------- Title premiums, fees and other revenues (net) .................... 328,296 266,728 289,265 - -----------------------------------------------================================
NOTE 3 INCOME TAXES. The following reconciles federal income taxes computed at the statutory rate with income taxes as reported.
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- ($000 Omitted) Expected income taxes at 35% ..................... 8,007 3,755 4,844 State income taxes ............................... 908 393 494 Tax effect of permanent differences: Tax-exempt interest ........................... (1,407) (1,425) (1,560) Nondeductible items ........................... 465 606 665 Equity income ................................. (343) (251) (280) Minority interests ............................ 530 327 240 Other - net ................................... 281 317 (241) - -------------------------------------------------------------------------------- Income taxes ..................................... 8,441 3,722 4,162 - -----------------------------------------------------========================== Effective income tax rate (%) .................... 36.9 34.7 30.1 - -----------------------------------------------------==========================
26 11 Deferred tax assets and liabilities at December 31, 1996 and 1995 were as follows:
- -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- ($000 Omitted) Deferred tax assets: Book over tax title loss provisions ................. 15,945 16,464 Net operating losses ................................ 394 619 Allowance for bad debts ............................. 1,318 1,086 Other ............................................... 926 938 - -------------------------------------------------------------------------------- 18,583 19,107 Less valuation allowance ............................ (1,030) (1,221) - -------------------------------------------------------------------------------- 17,553 17,886 Deferred tax liabilities: Unrealized gains on investments ..................... (1,034) (2,137) Tax over book depreciation .......................... (441) (356) Investments in partnerships ......................... (204) (90) Other ............................................... (1,259) (1,195) - -------------------------------------------------------------------------------- (2,938) (3,778) - -------------------------------------------------------------------------------- Net deferred tax assets ................................ 14,615 14,108 - -------------------------------------------------------------===================
The Company's valuation allowance relates to portions of certain subsidiary operating loss carryforwards and other deferred tax assets. Management believes future earnings levels will be sufficient to permit the Company to realize net deferred tax assets. There were deferred tax expenses of $596,000 and $1,344,000 and a deferred tax benefit of $1,794,000 for the years ended December 31, 1996, 1995 and 1994, respectively. NOTE 4 RESTRICTIONS ON CASH AND INVESTMENTS. The "statutory reserve funds" included in the accompanying financial statements have been set aside to comply with legal requirements for statutory premium reserves and state deposits. These funds were not available for any other purpose. A substantial majority of investments and cash at each year end was held by title insurer subsidiaries. Generally, the types of investments a title insurer can make are subject to legal restrictions. Furthermore, the transfer of funds by a title insurer to its parent or subsidiary operations, as well as other related party transactions, are restricted by law and generally require the approval of state insurance authorities. NOTE 5 DIVIDEND RESTRICTIONS. Substantially all of consolidated retained earnings at each year end was represented by the retained earnings of Guaranty, which owns directly or indirectly substantially all of the subsidiaries included in the consolidation. Guaranty cannot pay a dividend in excess of certain limits without the approval of the Texas Insurance Commissioner. The maximum dividend which could have been paid without such approval in 1996 was $25,164,000. Guaranty paid or declared cash dividends of $8,583,000 in 1996. Guaranty also paid significantly less than maximum legal limits for dividends in 1995 and 1994. Dividends from Guaranty were also voluntarily restricted primarily to maintain statutory surplus and liquidity at competitive levels. The ability of a title insurer to pay claims can significantly affect the decision of lenders and other custom-ers when buying a policy from a particular insurer. 27 12 NOTE 6 INVESTMENTS. The amortized costs and market values of investments in debt securities at December 31 follow:
- -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- AMORTIZED MARKET Amortized Market COSTS VALUES costs values - -------------------------------------------------------------------------------- ($000 Omitted) Municipal .......................... 105,079 106,934 93,042 95,049 Mortgage-backed .................... 30,274 30,569 26,630 27,499 US Government ...................... 27,951 27,958 28,393 29,636 Corporate and utilities ............ 34,255 35,052 31,584 33,572 - -------------------------------------------------------------------------------- 197,559 200,513 179,649 185,756 - ----------------------------------------========================================
The gross unrealized gains and losses at December 31 were:
- -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- GAINS LOSSES Gains Losses - -------------------------------------------------------------------------------- ($000 Omitted) Municipal ...................................... 1,942 87 2,117 110 Mortgage-backed ................................ 1,213 918 1,684 815 US Government .................................. 287 280 1,286 43 Corporate and utilities ........................ 1,066 269 2,033 45 - -------------------------------------------------------------------------------- 4,508 1,554 7,120 1,013 - ---------------------------------------------------=============================
Debt securities at December 31, 1996 mature, according to their contractual terms, as follows (actual maturities may differ because of call or prepayment rights):
- -------------------------------------------------------------------------------- Amortized Market costs values - -------------------------------------------------------------------------------- ($000 Omitted) In one year or less .................................... 1,702 1,713 After one year through five years ...................... 37,863 38,126 After five years through ten years ..................... 94,686 96,547 After ten years ........................................ 33,034 33,558 Mortgage-backed securities ............................. 30,274 30,569 - -------------------------------------------------------------------------------- 197,559 200,513 - -------------------------------------------------------------===================
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. The mortgage-backed securities are insured by GNMA and FNMA. NOTE 7 INVESTMENT INCOME. Income from investments and net realized gains (losses) from sales of investments for the three years follow:
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- ($000 Omitted) Income: Short-term investments and cash equivalents ..................... 2,619 2,025 1,745 Debt securities Municipal ............................ 4,907 4,805 4,639 Mortgage-backed ...................... 2,219 2,204 2,526 US Government ........................ 1,874 2,042 1,156 Corporate and utilities .............. 2,376 1,936 1,740 Other ................................... 456 552 576 - -------------------------------------------------------------------------------- 14,451 13,564 12,382 - -------------------------------------------------=============================== Net realized gains (losses): Debt securities Gains ................................ 632 1,258 914 Losses ............................... (503) (186) (2,007) Other investments ....................... -- (116) 251 - -------------------------------------------------------------------------------- 129 956 (842) - -------------------------------------------------===============================
The sales of debt securities resulted in proceeds of $33,191,000 in 1996, $41,911,000 in 1995 and $70,442,000 in 1994. In 1994, certain securities were sold to use tax loss carrybacks that would have otherwise expired. Expenses assignable to investment income were insignificant. There were no significant investments at December 31, 1996 that did not produce income during the year. NOTE 8 NOTES PAYABLE. Notes payable at December 31 follow:
- -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- ($000 Omitted) Banks: Secured by mortgages on real estate, primarily at prime (8.25% at December 31, 1996), payable lump sum and serially ........................ 416 994 Unsecured, 6.0% to 9.5%, varying payments ............................................. 10,383 10,453 Other ................................................... 639 616 Other than banks ........................................... 886 526 - -------------------------------------------------------------------------------- 12,324 12,589 - ----------------------------------------------------------------===============
The above notes mature $4,389,000 in 1997, $1,953,000 in 1998, $3,611,000 in 1999, $858,000 in 2000, $1,019,000 in 2001 and $494,000 subsequent to 2001. 28 13 NOTE 9 ESTIMATED TITLE LOSSES. Provisions accrued, payments made and liability balances for the three years follow:
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- ($000 Omitted) Balances at January 1 ................... 138,312 134,316 117,586 Provisions ........................... 33,830 29,591 40,212 Payments ............................. (21,231) (25,530) (22,172) Decrease in salvage .................. (580) (65) (1,310) - -------------------------------------------------------------------------------- Balances at December 31 ................. 150,331 138,312 134,316 - ----------------------------------------------==================================
Provisions include amounts related to the current year of approximately $32,863,000, $29,591,000 and $38,886,000 for 1996, 1995 and 1994, respectively. Payments related to the current year, including escrow and other loss payments, were approximately $6,201,000, $5,613,000 and $8,216,000 for 1996, 1995 and 1994, respectively. The above current year provision totals include provisions made for claims which are based on historical ratios of losses-to-premium revenues. See Note 1(G) for the principles followed in accounting for title losses and related claims. NOTE 10 FAIR VALUES. The Company's financial instruments include cash and cash equivalents, short-term investments, investments in debt securities (carried at market value), notes receivable, accounts receivable, notes payable, accounts payable and commitments. The fair values of financial instruments are determined by reference to various market data and other valuation techniques, as appropriate. The fair values of financial instruments approximated their carrying values at December 31, 1996 and 1995. NOTE 11 COMMON STOCK AND CLASS B COMMON STOCK. Holders of Common and Class B Common Stock have the same rights, except no cash dividends may be paid on Class B Common Stock. The two classes of stock vote separately when electing directors and on any amendment to the Company's certificate of incorporation that affects the two classes unequally. A provision of the by-laws requires an affirmative vote of at least two-thirds of the directors to elect officers or to approve any proposal which may come before the directors. This provision cannot be changed without a majority vote of each class of stock. Holders of Class B Common Stock may, with no cumulative voting rights, elect four directors if 525,000 or more shares of Class B Common Stock are outstanding; three directors if between 300,000 and 525,000 shares are outstanding; and none if less than 300,000 shares of Class B Common Stock are outstanding. Holders of Common Stock, with cumulative voting rights, elect the balance of the nine directors. Class B Common Stock may, at any time, be converted by its shareholders into Common Stock on a share-for-share basis, but all of the holders of Class B Common Stock have agreed among themselves not to convert their stock prior to January 2005. 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. At December 31, 1996 and 1995, there were 72,910 shares (cost $233,000) and 84,482 shares (cost $294,000), respectively, of Common Stock held by a subsidiary of the Company. These shares are considered retired but may be issued from time to time in lieu of new shares. On April 28, 1994, the Company effected a one-for-two stock split recorded in the form of a 50% stock dividend. All share and per share data presented in these financial statements have been restated for the effects of the stock split. NOTE 12 CHANGES IN COMMON STOCK. Changes in stock and additional paid-in capital for the years ended December 31, 1996, 1995 and 1994 were as follows:
- --------------------------------------------------------------------------------- Class B Additional Common Common paid-in Stock Stock capital - --------------------------------------------------------------------------------- ($000 Omitted) Balances at December 31, 1993 .................... 3,753 350 41,894 Stock dividend ................................ 1,893 175 -- Acquisition ................................... 3 -- 41 Exercise of stock options ..................... 22 -- 401 Stock bonuses ................................. 16 -- 414 - --------------------------------------------------------------------------------- Balances at December 31, 1994 .................... 5,687 525 42,750 Acquisitions .................................. 159 -- 2,911 Stock bonuses ................................. 19 -- 284 - --------------------------------------------------------------------------------- Balances at December 31, 1995 .................... 5,865 525 45,945 Acquisitions .................................. 335 -- 4,362 Exercise of stock options ..................... 1 -- 10 Stock bonuses and other ....................... 15 -- 313 Foreign currency translation .................. -- -- 203 - --------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1996 .................... 6,216 525 50,833 - -------------------------------------------------------==========================
29 14 NOTE 13 STOCK OPTIONS. A summary of the status of the Company's two fixed stock option plans as of December 31, 1996, 1995 and 1994, and changes during the years ended on those dates follows:
- -------------------------------------------------------------------------------- Exercise Shares prices (1) - -------------------------------------------------------------------------------- ($) December 31, 1993 ..................................... 141,450 9.62 Granted ............................................ 18,900 20.00 Exercised .......................................... (32,250) 9.17 - -------------------------------------------------------------------------------- December 31, 1994 ..................................... 128,100 11.26 Granted ............................................ 30,300 18.10 - -------------------------------------------------------------------------------- December 31, 1995 ..................................... 158,400 12.57 Granted ............................................ 37,900 21.09 Exercised .......................................... (1,200) 9.17 - -------------------------------------------------------------------------------- DECEMBER 31, 1996 ..................................... 195,100 14.25 - --------------------------------------------------------------------------------
(1) Weighted-average At December 31, 1996, 1995 and 1994 there were 179,049, 152,600 and 128,100 options, respectively, exercisable. The weighted-average fair value of options granted during the years 1996 and 1995 was $6.73 and $7.62, respectively. The following summarizes information about fixed stock options outstanding at December 31, 1996:
- -------------------------------------------------------------------------------- Range of exercise prices ($) 9.17 to 19.50 to 9.17 to 15.38 21.50 21.50 - -------------------------------------------------------------------------------- Options outstanding: Shares ..................................... 118,300 76,800 195,100 Remaining contractual life (1) ............. 4.3 6.5 5.2 Exercise price (1) ......................... 10.25 20.41 14.25 Options exercisable: Shares ..................................... 118,300 60,749 179,049 Exercise price (1) ......................... 10.25 20.28 13.65 - --------------------------------------------------------------------------------
(1) Weighted-average The Company applies APB 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its fixed stock option plans. Under FAS 123, compensation cost is recognized for the fair value of the employees' purchase rights, which was estimated using the Black-Scholes model. The Company assumed a dividend yield of 1.2%, an expected life of one year for each option year, expected volatility of 18.1% and risk-free interest rates between 6.2% and 6.7% for the years 1996 and 1995. Had compensation cost for the Company's plans been determined consistent with FAS 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
- -------------------------------------------------------------------------------- 1996 1995 - -------------------------------------------------------------------------------- ($000 Omitted) Net earnings: As reported ............................................. 14,437 7,007 Pro forma ............................................... 14,271 6,857 Earnings per share: As reported ............................................. 2.15 1.11 Pro forma ............................................... 2.13 1.09 - --------------------------------------------------------------------------------
A stock option plan for region managers authorizing the issuance of up to 100,000 shares was adopted effective January 1, 1997. NOTE 14 LEASES. The Company's expense for leased office space was $18,586,000 in 1996, $17,284,000 in 1995 and $16,296,000 in 1994. These are operating, noncancelable leases expiring over the next ten years. The future minimum lease payments are as follows (stated in thousands of dollars): 1997....................................... 16,354 1998....................................... 12,868 1999....................................... 8,764 2000....................................... 6,125 2001....................................... 4,976 2002 and after............................. 9,108 ---------------------------------------------------- 58,195 ----------------------------------------------======
NOTE 15 CONTINGENT LIABILITIES AND COMMITMENTS. The Company makes separate provisions for individual title losses over $750,000 and reviews claims in excess of this amount asserted against Guaranty when evaluating the adequacy of recorded reserves. See Note 1(G). Claims had been made at December 31, 1996 against Guaranty for amounts in excess of $750,000 for which no provision was made. Management believes, with the advice of counsel, the loss on these claims (1) will be resolved for less than $750,000 each or (2) cannot be reasonably estimated. Management believes any loss on these claims which cannot be estimated at December 31, 1996 will not 30 15 be material in relation to the consolidated financial condition of the Company. The Company is contingently liable for disbursements of escrow funds held by agents in certain cases where specific insured closing guarantees have been issued. In December 1994 the California Board of Equalization (CBOE) ruled in favor of the Company concerning an assessment of additional premium taxes for the year 1987. However, an additional assessment for retaliatory taxes for 1987 was left pending. In April 1996 the CBOE ruled in favor of the Company on the retaliatory tax assessment. Four other states have also assessed or threatened assessments of additional premium or retaliatory taxes. The amounts aggregated $1.5 million, excluding interest and penalties, and primarily covered the years 1984 through 1993. The Company cannot predict whether there will be additional tax assessments by these states or other states. State taxing authorities are under increasing pressure to collect additional tax revenues. The Company intends to vigorously oppose any assessments and believes its tax payments are correct. However, there can be no assurance the Company will prevail in these controversies. If it does not, the tax assessments may result in a material reduction in the Company's net earnings in future years. Various takeout commitments approximated $726,000 at December 31, 1996. Management believes adequate provisions have been made for any losses resulting from these commitments. NOTE 16 REINSURANCE. As is the industry practice, the Company cedes risk to other underwriters in excess of certain underwriting limits. However, the Company remains contingently liable if the reinsurer should fail to satisfy its obligations. The Company also assumes risk from other underwriters. A payment on an assumed risk or a recovery on a ceded risk is rare in the experience of the Company and the industry. The Company has not paid or recovered any reinsured losses during the three years ended December 31, 1996. The total amount of premiums for assumed and ceded risks was less than one percent of title premiums, fees and other revenues in each of the last three years. NOTE 17 EQUITY IN INVESTEES. Certain summarized aggregate financial information for investees follows:
- -------------------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------- ($000 Omitted) For the year: Revenues ......................................... 53,531 50,804 69,125 Net earnings ..................................... 3,120 2,245 1,471 As of December 31: Total assets ..................................... 23,717 25,321 Stockholders' equity ............................. 15,313 16,567 - --------------------------------------------------------------------------------
NOTE 18 QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
- -------------------------------------------------------------------------------- Mar 31 June 30 Sept 30 Dec 31 - -------------------------------------------------------------------------------- ($000 Omitted, except per share) Revenues: 1996 ................................ 78,004 89,719 88,046 88,312 1995 ................................ 58,048 67,327 77,165 79,965 Net earnings (loss): 1996 ................................ 2,175 5,702 4,457 2,103 1995 ................................ (1,427) 1,675 3,501 3,258 Earnings (loss) per share: 1996 ................................ .33 .85 .66 .31 1995 ................................ (.23) .27 .55 .51 - --------------------------------------------------------------------------------
31 16 STEWART TITLE GUARANTY COMPANY STEWART TITLE INSURANCE COMPANY Subsidiaries of Stewart Information Services Corporation UNCONSOLIDATED STATUTORY BALANCE SHEETS From statutory Annual Statements as filed (unaudited)
- ---------------------------------------------------------------------------------------------- Stewart Title Stewart Title December 31, 1996 Guaranty Company Insurance Company - ---------------------------------------------------------------------------------------------- ($000 Omitted) Admitted assets Bonds ................................................... 180,631 16,292 Stocks (investments in subsidiaries) .................... 74,026 1,744 Cash and bank deposits .................................. 10,755 665 Short-term investments .................................. 4,372 1,223 Title plants ............................................ 4,947 295 Title insurance premiums, fees and other receivables .... 8,572 154 Other ................................................... 7,981 554 - ---------------------------------------------------------------------------------------- 291,284 20,927 - ----------------------------------------------------------------======================== Liabilities, surplus and other funds Reserve for title losses ................................ 28,457 1,261 Statutory premium reserve ............................... 115,389 4,406 Other ................................................... 13,612 1,377 157,458 7,044 Surplus as regards policyholders (Note) .................... 133,826 13,883 - ---------------------------------------------------------------------------------------- 291,284 20,927 - ----------------------------------------------------------------======================== Consolidated stockholder's equity (unaudited), based on generally accepted accounting principles (GAAP), for Stewart Title Guaranty Company at December 31, 1996 was ($000 omitted) ......................................... 161,621 =======
Note: The amount shown above for stockholder's equity exceeds policyholder surplus primarily because under GAAP the statutory premium reserve and reserve for reported title losses are eliminated and estimated title loss reserves are substituted, net of applicable income taxes. STEWART TITLE GUARANTY COMPANY STATUTORY POLICYHOLDER SURPLUS GROWTH (In $ millions) 22 consecutive years of statutory [GRAPH] policyholder surplus growth -- unmatched in the title industry. 1975 6 1976 7 1977 8 1978 10 1979 12 1980 12 1981 12 1982 14 1983 17 1984 21 1985 24 1986 44 1987 45 1988 61 1989 62 1990 63 1991 65 1992 87 1993 114 1994 120 1995 126 1996 134
32 EX-21 4 SUBSIDIARIES OF THE REGISTRANT 1 Exhibit 21 STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION - ----------------------------------------------------------------- ------------- Stewart Title of Mobile, Inc. ............................... Alabama Stewart Title & Trust of Phoenix, Inc. ...................... Arizona Citizens Title & Trust ...................................... Arizona Stewart Title & Trust of Tucson ............................. Arizona Stewart Title of Arkansas ................................... Arkansas Stewart Title Company of San Diego .......................... California Stewart Title Company of California ......................... California Stewart Title of Modesto .................................... California Stewart Title (Los Angeles) ................................. California Stewart Title of Fresno County .............................. California Stewart Title of the Inland Empire .......................... California Landata, Inc. of Los Angeles ................................ California Stewart Title of Monterey County ............................ California Stewart Title of Santa Barbara .............................. California Asset Preservation, Inc. .................................... California Landata, Inc. of the West Coast - Northern California Division ....................................... California Stewart Title of Larimer County, Inc. ....................... Colorado Stewart Title of Aspen, Inc. ................................ Colorado Stewart Title of Eagle County, Inc. ......................... Colorado Stewart Title of Glenwood Springs, Inc. ..................... Colorado Stewart Title of Denver, Inc. ............................... Colorado Stewart Title Company of Colorado Springs ................... Colorado Landata, Inc. of the Rocky Mountains ........................ Colorado Stewart Title of Tampa ...................................... Florida Stewart Title Guaranty of Jacksonville, Inc. ................ Florida Stewart Title of Orange County, Inc. ........................ Florida Stewart Title of Clearwater, Inc. ........................... Florida Stewart Title of Polk County, Inc. .......................... Florida Stewart Title of Martin County .............................. Florida Stewart Title of Sarasota, Inc. ............................. Florida Stewart Title of Pinellas, Inc. ............................ Florida Landata, Inc. of Florida .................................... Florida Stewart Title of Pensacola .................................. Florida Stewart Title of Tallahassee, Inc. .......................... Florida Stewart River City Title .................................... Florida Stewart Title of Northwestern Florida ....................... Florida Charlotte County Abstract & Title Company ................... Florida Bay Title Services, Inc. .................................... Florida Stewart Approved Title, Inc. ................................ Florida Stewart Information Hungary ................................. Hungary Stewart Title Company of Idaho, Inc. ........................ Idaho
(continued) 2 Exhibit 21 (continued) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION - ---------------------------------------------------------------- -------------- Stewart Title Company of Illinois .............................. Illinois Landata, Inc. of Illinois ...................................... Illinois Stewart Title Services of Indiana, Inc. ........................ Indiana Stewart Title of Louisiana, Inc. ............................... Louisiana Stewart Title Company of Maryland .............................. Maryland Cambridge Landata, Incorporated ................................ Maryland Stewart Title of Detroit, Inc. ................................. Michigan Stewart Title Company of Minnesota ............................. Minnesota Stewart Title of Mississippi ................................... Mississippi Stewart Title, Inc. (Kansas City) .............................. Missouri Stewart Title of Douglas County ................................ Nevada Stewart Title of Northern Nevada ............................... Nevada Stewart Title of Carson City ................................... Nevada Stewart Title of Nevada ........................................ Nevada Stewart Title of Northeastern Nevada ........................... Nevada Stewart Title of Central Nevada ................................ Nevada Public Data Marketing, Inc. .................................... Nevada Northeast Land Title ........................................... New Hampshire Stewart Title of Central Jersey, Inc. .......................... New Jersey Stewart-Princeton Abstract ..................................... New Jersey Stewart Title Services of North Jersey, L.L.C................... New Jersey Santa Fe Abstract Limited ...................................... New Mexico Stewart Title Limited .......................................... New Mexico Stewart Title Insurance Company ................................ New York Barretta Landata, L.L.C. ....................................... New York Stewart Title of Mecklenburg County ............................ North Carolina Stewart Title of North Carolina, Inc. .......................... North Carolina Stewart Title Agency of Ohio, Inc. ............................. Ohio Stewart Abstract & Title Co. of Oklahoma ....................... Oklahoma Stewart Title of Rhode Island, Inc. ............................ Rhode Island Stewart Data Slovakia .......................................... Slovakia Ortem Investments, Inc. ........................................ Texas East-West, Inc. ................................................ Texas Stewart Title of San Patricio County, Inc. ..................... Texas Stewart Title Guaranty Company ................................. Texas Southland Information, Inc. .................................... Texas Stewart Title Company .......................................... Texas Stewart Title Austin, Inc. ..................................... Texas Stewart Title of Lubbock, Inc. ................................. Texas Stewart Title Company of Rockport, Inc. ........................ Texas Texarkana Title and Abstract, Inc. ............................. Texas Stewart Investment Services Corporation ........................ Texas
(continued) 3 Exhibit 21 (continued) STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF NAME OF SUBSIDIARY INCORPORATION - ---------------------------------------------------------------- -------------- Stewart Trust Company .......................................... Texas Landata Systems, Inc. .......................................... Texas Landata, Inc. of San Antonio ................................... Texas Landata, Inc. of Midwest ....................................... Texas Landata RE-Source, Inc. ........................................ Texas Landata Field Services ......................................... Texas Landata Land Records, Inc. ..................................... Texas Fulghum, Inc. Texas ................................................................ OnLine Mortgage Documents, Inc. ................................ Texas Stewart Mortgage Information Company ........................... Texas Stewart Mortgage Processing .................................... Texas Stewart Management Information, Inc. ........................... Texas Stewart - U.A.M., Inc. ......................................... Texas Baca-Landata, Inc. ............................................. Texas Primero, Inc. Texas ................................................................ Landata Geo Services, Inc. ..................................... Texas Priority Title - Houston ....................................... Texas Priority Title - Dallas Texas ................................................................ Stewart Title of North Texas ................................... Texas Stewart Information International, Inc. ........................ Texas San Antonio Data, Inc. ......................................... Texas Stewart Title of Corpus Christi ................................ Texas Stewart Title Insurance Company (U.K.) Limited ................. United Kingdom Conquest Group ................................................. United Kingdom Michael Hickmott & Company ..................................... United Kingdom Stewart Title Great Britain .................................... United Kingdom Stewart Title of Virginia ...................................... Virginia Stewart Title and Escrow, Inc. ................................. Virginia Stewart Title - Shenandoah Valley, L.C. ........................ Virginia Stewart Title Services of Virginia, L.C. ....................... Virginia Signature & Stewart Settlements, L.C. .......................... Virginia Stewart Title & Settlement Services, Inc. ...................... Virginia Cedar Run Title & Abstract ..................................... Virginia Land Title Research ............................................ Virginia Stewart Services of Greater Virginia ........................... Virginia Stewart Title of Gillette, Inc. ............................... Wyoming
EX-23 5 CONSENTS/INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1 EXHIBIT 23 The Board of Directors Stewart Information Services Corporation: We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of our report dated February 7, 1997, relating to the consolidated balance sheets of Stewart Information Services Corporation and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of earnings and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1996, and all related schedules, which report appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. Our report covering the December 31, 1995 financial statements refers to a change in accounting for long-lived assets. We also consent to the reference to our firm under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ KPMG PEAT MARWICK LLP - ---------------------------------- KPMG PEAT MARWICK LLP Houston, Texas March 24, 1997 2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 33-48519, No. 33-48520, No. 33-518156, No. 33- 59747, No. 33-62535 and 333-03981) of Stewart Information Services Corporation of our report dated January 20, 1995 on the consolidated financial statements of Stewart Title & Trust of Phoenix, Inc. appearing in this Form 10-K. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Phoenix, Arizona March 20, 1997 3 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Interests of Named Experts and Counsel" and to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, and No. 33-03981) pertaining to the 1992 Nonqualified Stock Option Plan for Region Managers, the Stewart Morris, Jr. 1992 Stock Option and Malcolm Morris 1992 Stock Option, the Associates Stock Bonus Plan, 1995 Stock Option Plan, the Salary Deferral Plan and Trust, and the 1996 Directors' Stock Plan, respectively, of Stewart Information Services Corporation of our report dated January 20, 1995 with respect to the statements of operations and retained earnings, and cash flows for the year ended December 31, 1994 (not presented separately therein) included in Stewart Information Services Corporation's Annual Report (Form 10-K) for the year ended December 31, 1996, filed with the Securities and Exchange Commission. /s/ ERNST & YOUNG LLP ERNST & YOUNG LLP Century City Los Angeles, California March 17, 1997 4 March 12, 1997 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No.33-48520, No. 33-58156, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our reports which appears in the December 31, 1996 annual report on Form 10 K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. Sincerely, /s/ GRANT BENNETT ACCOUNTANTS GRANT BENNETT ACCOUNTANTS Certified Public Accountants A Professional Corporation Sacramento, California 5 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, and No. 33-62535) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ WILKERSON & ARTHUR - ------------------------ Wilkerson & Arthur, P.C. Fort Worth, Texas 6 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747 No. 33-62535 and No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ M. TIMOTHY O'ROARK - ---------------------- M. TIMOTHY O'ROARK El Paso, TX February 18, 1997 7 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ AARONSON, WHITE & COMPANY ----------------------------- AARONSON,WHITE & COMPANY Houston, TX 8 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of my reports which appear in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ GINNY SANDERS MAY, CPA - -------------------------- Lake Jackson, TX March 11, 1997 9 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our report which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ EDGAR, KIKER & CROSS, L.L.P. ---------------------------------------------------- Certified Public Accountants Beaumont, Texas February 20, 1997 10 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, and No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of my report which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ JIM S. WALKER - ----------------- Jim S. Walker Beaumont, TX January 31, 1997 11 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our report which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ DOSHIER, PICKENS & FRANCIS, P.C. Doshier, Pickens & Francis, P.C. Amarillo, Texas February 25, 1997 12 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of our report which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ FANCHER AND COMPANY Corpus Christi, Texas February 28, 1997 13 The Board of Directors Stewart Information Services Corporation I consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of my report which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. I also consent to the reference to me under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ JESUS YEPEZ CPA LUBBOCK, TX FEBRUARY 5, 1997 14 The Board of Directors Stewart Information Services Corporation We consent to incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, and No- 333- 03981) on Form S-8 of Stewart Information Services Corporation of our report, which appears in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interests of Named Experts and Counsel" in such Registration Statements. /s/ WILLIAMS & PEARCY, P.C. Williams & Pearcy, P.C. Texarkana, USA January 25, 1996 15 The Board of Directors Stewart Information Services Corporation We consent to the incorporation by reference in the registration statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333- 03981) on Form S-8 of Stewart Information Services Corporation of our reports which appear in the December 31, 1996 annual report on Form 10-K of Stewart Information Services Corporation. We also consent to the reference to us under the heading "Interest of Named Experts and Counsel" in such Registration Statements. /s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C. FLUSCHE, VAN BEVEREN, KILGORE, P.C. Corpus Christi, Texas February 28, 1997 EX-27 6 FINANCIAL DATA SCHEDULE
7 This schedule contains summary financial information extracted from the balance sheet as of December 31, 1996 and the related statement of earnings for the year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 YEAR DEC-31-1996 DEC-31-1996 200,513 0 0 0 0 0 232,459 18,484 0 0 383,372 150,331 0 0 0 12,324 0 0 6,741 184,249 383,372 328,296 14,451 129 1,205 33,830 0 0 22,878 8,441 14,437 0 0 0 14,437 2.15 2.15 138,312 32,863 967 6,201 15,030 150,331 0
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