EX-99.1 2 v147582_ex99-1.htm
NEWS   from:
STEWART INFORMATION SERVICES CORPORATION
P.O. Box 2029, Houston, Texas 77252-2029
www.stewart.com
 Contact:
Ted C. Jones
 
Director - Investor Relations
 
(713) 625-8014

FOR RELEASE AT 6AM CDT

Stewart Reports Financial Results for the First Quarter 2009

Houston, April 30, 2009 – Stewart Information Services Corporation (NYSE: STC) today reported the results of its operations for the quarter ended March 31, 2009 (dollar amounts are in millions, except for per share figures):

   
First Quarter (a)
  
   
2009
    
2008
  
             
Total revenues
   $ 313.5     $ 394.1  
Pretax loss (b)
     (37.3 )     (40.9 )
Income tax expense (benefit) (c)
     3.2       (16.8 )
Net loss attributable to Stewart
     (42.0 )     (25.3 )
Net loss per share attributable to Stewart
     (2.31 )     (1.40 )

(a)
The first quarter of 2009 includes pretax charges of $8.9 million relating to the impairment of investment securities and other assets. The first quarter of 2009 also includes pretax credits of $2.6 million relating to a recovery on a previously recognized agency defalcation and $3.0 million relating to the reversal of an accrual for a legal matter resolved in the Company’s favor. The first quarter of 2008 includes a pretax charge of $4.6 million relating to an agency defalcation.

(b)
Before noncontrolling interests

(c)
The Company did not recognize an income tax benefit in the first quarter of 2009 relating to its pretax loss due to the recording of a valuation allowance against deferred tax assets.  The valuation allowance will be evaluated for reversal when the Company returns to profitability.  The income tax expense of $3.2 million recorded in the first quarter of 2009 is related to certain goodwill book/tax differences and taxes in foreign jurisdictions for our international operations.

Revenues decreased 20.5 percent to $313.5 million in the first quarter of 2009 compared with $394.1 million for the first quarter of 2008.  The Company reported a loss before taxes (and before noncontrolling interests) of $37.3 million for the first quarter of 2009 compared with a loss of $40.9 million for the same period in 2008.
 
The revenue decline in the first quarter of 2009 was due to fewer closed title orders arising from the continuing decline in new and existing home sales, as well as a decline in selling prices and average revenue per file closed.  Average revenue per file closed was lower due to a shift in mix of orders, with the first quarter of 2009 experiencing fewer large commercial orders and many more residential refinancing orders (which generate lower revenues per order closed than sale transactions) than in the first quarter of 2008. Title orders declined in the first quarter of 2009 by 6.3 percent from the same period a year ago, which was the lowest quarterly decline since the fourth quarter of 2005. A significant percentage of title orders opened in the first quarter of 2009 related to the refinancing of existing mortgages. These loans are taking longer to process by lenders than has historically been the case due to tightened lending standards and internal capacity constraints of the lenders. Even so, our overall closing ratio showed improvement during March 2009.
 

The Company continues to reduce costs and improve productivity in its core operations. Total expenses declined 19.4 percent to $350.8 million in the first quarter of 2009 compared with $435.0 million for the first quarter of 2008.  In addition to workforce reductions described below, the Company continues to pursue the implementation of title search and production efficiencies company-wide through its regional production center initiative.  As a result, significant savings per order processed are being achieved in operationally mature centers. The Company’s back-office centralization initiatives remain on target and will begin generating benefits during 2009 in the areas of human resources, finance and accounting, procurement and information technology by continuing to reduce costs while providing high quality customer service.

The Company reduced its employee count during the first quarter of 2009 by approximately 170, or 2.7 percent, as part of its ongoing efforts to reduce costs. Employee costs were 24.5 percent lower in the first quarter of 2009 compared with the first quarter of 2008 due to realizing the full benefit of headcount reductions made during 2008 and the reductions made in the first quarter of this year.  Since December 31, 2007, we have reduced headcount by 28.2 percent.

As a result of our aggressive efforts to reduce spending to current market conditions, other operating costs declined 21.6 percent in the first quarter of 2009 compared with the same period in 2008. This decline is consistent with the decrease in revenues. Many of our other operating costs are relatively fixed, such as rent and other occupancy expenses. However, we benefited from decreases in some of these fixed costs in the first quarter of 2009 due to cost reduction efforts in 2008.

Our title loss provision as a percentage of title revenues was 7.0 percent in the first quarter of 2009 compared with 8.0 percent in the same period of 2008.

Stewart's book value per share decreased to $25.33 at March 31, 2009 compared with $27.95 at December 31, 2008.

“Beginning in December 2008, record-low interest rates fueled refinancing activity and, to a lesser extent, sale transactions, which have resulted in improving trends in our order counts,” said Stewart Morris, Jr., president and co-chief executive officer.  “The current surge in refinancing activity has resulted in longer interest rate-lock periods, which in turn delay the closing of the transactions.  As a result, we incurred expenses related to these orders opened during the first quarter of 2009 for which we have not yet recognized the related revenues, although these orders did begin to close in the latter half of March and continued into April. Our aggressive actions to reduce expenses and move production to regional production centers have aligned our costs with changing market conditions and positioned us to take advantage of revenue opportunities as they occur.”

“In our underwriting operations, we see positive trends on claims as the number of new claims being filed has finally leveled off,” said Malcolm S. Morris, chairman and co-chief executive officer. “While the cancellation of more than 3,000 underperforming agents in the past six months is reducing our risk with little reduction in remitted premiums, we continue to sign high-quality agents as a result of changes in the industry. We are also evaluating our rate structure in each state and increasing rates where appropriate to better match the cost of doing business in those states.  Furthermore, even in this challenging global economic climate, our international operations remained profitable,” said Morris.

 
 
 

Stewart Information Services Corporation (NYSE: STC) is a customer-driven, technology-enabled, strategically competitive real estate information, title insurance and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries throughout the United States and in international markets. Stewart also provides post-closing lender services, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at www.stewart.com.
 
Forward-looking statements. Certain statements in this news release are "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance.  These statements often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “will” or other similar words.  Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements.  These risks and uncertainties include, among other things, the severity and duration of current financial and economic conditions, the impact of recent significant decreases in the level of real estate activity, continued weakness or further adverse changes in the level of real estate activity, our ability to respond to and implement technology changes, the impact of unanticipated title losses on the need to further strengthen our policy loss reserves, any effect of title losses on our cash flows and financial condition, the impact of changes in governmental and insurance regulations, our dependence on our operating subsidiaries as a source of cash flow, the realization of expected expense savings resulting from our expense reduction steps taken in 2008, our ability to access the equity and debt financing markets, our ability to grow our international operations, and our ability to respond to the actions of our competitors.  These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2008 and our Current Reports on Form 8-K.  We expressly disclaim any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

 
 
 

STEWART INFORMATION SERVICES CORPORATION
STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share amounts)

   
Three months ended
March 31
  
   
2009
    
2008
  
             
Revenues
            
Title insurance:
            
Direct operations
     142,538       180,587  
Agency operations
     166,770       191,053  
Real estate information
     7,365       14,716  
Investment income
     5,598       8,078  
Investment and other losses - net
     (8,812 )     (297 )  
      313,459       394,137  
Expenses
                
Amounts retained by agencies
     137,416       155,562  
Employee costs
     114,706       151,962  
Other operating expenses
     68,047       86,836  
Title losses and related claims
     21,572       29,721  
Depreciation and amortization
     7,864       9,091  
Interest
     1,179       1,815  
      350,784       434,987  
                 
Loss before taxes and noncontrolling interests
     (37,325 )     (40,850 )
Income tax expense (benefit)
     3,223       (16,761 )
Net loss
     (40,548 )     (24,089 )
Less net earnings attributable to noncontrolling interests
     1,471       1,203  
Net loss attributable to Stewart
     (42,019 )     (25,292 )
                 
Net loss per share attributable to Stewart
     (2.31 )     (1.40 )
                 
Average number of shares (000)
     18,153       18,046  
                 
Segment information:
                
Title revenues
     306,094       379,421  
Title pretax loss before noncontrolling interests
     (36,153 )     (41,544 )
                 
REI revenues
     7,365       14,716  
REI pretax (loss) earnings before noncontrolling interests
     (1,172 )     694  
                 
Selected financial information:
                
Cash used by operations
     (27,796 )     (31,447 )
Title loss payments - net of recoveries
     36,529       30,482  
Other comprehensive (loss) earnings
     (4,069 )     159  
                 
Number of title orders opened (000):
                
January
     52.2       52.7  
February
     40.4       50.9  
March
      48.6        47.0  
Quarter
     141.2       150.6  
Number of title orders closed (000):
                
Quarter
     83.9       89.5  
 

 
   
March 31
 2009
    
December 31
 2008
  
             
Stockholders’ equity
     461,322       507,069  
Number of shares outstanding (000)
     18,210       18,142  
Book value per share
     25.33       27.95  
 
 
 
 

STEWART INFORMATION SERVICES CORPORATION
BALANCE SHEETS (condensed)
(In thousands of dollars)


   
March 31
    
December 31
  
   
2009
    
2008
  
             
Assets
            
Cash and cash equivalents
     58,353       76,558  
Cash and cash equivalents - statutory reserve funds
      9,912        9,688  
Total cash and cash equivalents
     68,265       86,246  
                 
Short-term investments
     28,096       37,120  
Investments - statutory reserve funds
     365,085       374,508  
Investments - other
     124,571       156,267  
Receivables - premiums from agencies
     28,712       35,707  
Receivables - other
     73,154       89,365  
Allowance for uncollectible amounts 
     (19,018 )     (17,504 )
Property and equipment
     77,823       83,533  
Title plants
     78,184       78,363  
Goodwill
     212,651       210,901  
Intangible assets
     7,720       8,448  
Other assets
     75,177       83,588  
Investments - pledged, at fair value
     221,794       222,684  
                 
      1,342,214       1,449,226  
                 
Liabilities
                
Notes payable
     108,147       135,276  
Line of credit, secured by pledged investments
     221,794       222,684  
Accounts payable and accrued liabilities
     92,376       110,769  
Estimated title losses
     445,619       461,532  
Deferred income taxes
     12,956       11,896  
      880,892       942,157  
                 
Contingent liabilities and commitments
                
                 
Stockholders' equity
                
Common and Class B Common Stock and
additional paid-in capital
      144,545        143,811  
Retained earnings
     311,528       353,547  
Accumulated other comprehensive (loss) earnings
     (3,488 )     581  
Treasury stock
     (4,330 )     (4,097 )
Stockholders' equity attributable to Stewart 
     448,255       493,842  
Noncontrolling interests
      13,067        13,227  
Total stockholders' equity 
     461,322       507,069  
                 
      1,342,214       1,449,226