Stewart Reports Earnings for First Quarter 2007


HOUSTON, April 26 2007 -- Stewart Information Services Corporation (NYSE-STC) today reported the results of its operations for the quarter ended March 31, 2007. (Dollar amounts in the table below are in millions, except for per share figures.)

  First Quarter
  2007 2006
Total revenues
$531.7
$539.4
Pretax (loss) earnings before minority interests
(4.6) (a)
8.3
Net (loss) earnings
(4.8) (a)
2.6
Net (loss) earnings per diluted share
(0.26) (a)
0.14


(a) Includes a $3.2 million gain ($2.1 million after taxes, or $0.11 per diluted share) from the sale of two subsidiaries, GlobeXplorer® and AirPhotoUSA®, in the first quarter of 2007. Also includes a charge to earnings of $5.1 million ($3.3 million after taxes, or $0.18 per diluted share) for title loss provisions relating to four large title losses.

Financial Highlights

  • Revenues decreased approximately 1.4 percent to $531.7 million in the first quarter of 2007 compared with $539.4 million for the first quarter of 2006. The Company reported a loss before taxes (and before minority interests) of $4.6 million for the first quarter of 2007 compared with earnings of $8.3 million for the same period of 2006. As described in the preceding footnote, the first quarter of 2007 includes a gain on the sale of two subsidiaries and a charge to earnings for large title losses.

  • The revenue decline was due to decreasing home sales and prices, adverse weather conditions and reduced financing activity related in part to a weakening in the subprime lending market. Revenues were favorably impacted by commercial and international transactions. Acquisitions increased revenues by $4.3 million and pretax earnings by $0.3 million for the quarter.

  • Excluding acquisitions, divestitures and startups, the Company has reduced its employee headcount since December 31, 2006 by approximately 470, or 4.7 percent. The Company has, however, increased the number of employees in its better-performing operations, including its commercial business. In addition, the current conversion and roll-out phases of the Company's AIM+ technology will temporarily require above-normal staffing levels. The Company maintains staffing levels sufficient to continue to provide superior customer service and gain market share through a highly-trained, dedicated employee work force. The Company continues to incur significant costs related to its technology advancements.

  • Stewart's book value per share decreased to $43.81 at March 31, 2007 compared with $44.00 at December 31, 2006.

  • Title orders declined in the first quarter of 2007 by 10.4 percent from the same period a year ago. Orders were 13.6 percent lower in March 2007 than in March 2006. The continued softening of the housing market was the primary reason for the decline in title orders.

"During the quarter, we continued the alignment of technology services with our Company strategy, including changing the leadership of our technology services group and incorporating responsibilities for PropertyInfo.com, Stewart's real estate information portal, under the same leadership," said Stewart Morris, Jr., co-chief executive officer. "The migration of ASP users to our new state-of-the-art data center is progressing well, which we expect will allow us to shut down multiple older data centers by the end of the third quarter.

"We are also looking forward to contributions from Murshid Khan, our new chief information officer, who joined Stewart this month," said Stewart Morris, Jr. "His experience managing complex IT operations at Disney will be important in leading our IT efforts as we target efficiencies and increased service levels, all with the ultimate goal of enhancing the real estate transaction process."

"While small in size, contracts signed this past quarter to install and service our LandFolio® system in the governmental land recording offices in Belize and Bermuda illustrate Stewart's ability to provide industry-leading real estate transaction services globally," said Malcolm S. Morris, co-chief executive officer.

"For the second year in a row, FORTUNE magazine named us one of 'America's Most Admired Companies', maintaining fourth place on the mortgage services industry list," said Malcolm S. Morris. "Our focus continues in growing the higher-profit commercial services and achieving substantial improvement in our international operations. In addition, our direct operations and acquisitions in recent years, which include operations servicing New York's commercial customers, are producing excellent results."

Stewart Information Services Corporation is a customer-oriented, technology-driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries through more than 9,500 policy-issuing offices and agencies in the United States and 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 .

This press release may contain forward-looking statements, which include all statements other than statements of historical facts. Forward-looking statements are not guarantees of performance and no assurance can be given that Stewart's expectations will be achieved. In particular, historical order counts do not necessarily indicate future revenues because Stewart cannot predict the number of orders that will result in closings.

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

 
Three months ended
March 31
 
2007
2006
Revenues    
Title insurance:    
Direct operations
229,614
227,818
Agency operations
272,254
281,654
 
Real estate information
16,533
20,019
Investment income
9,051
8,537
Investment and other gains - net (1)
4,222
1,394
 
531,674
539,422
 
Expenses
Amounts retained by agencies
222,390
226,876
Employee costs
176,793
179,102
Other operating expenses
93,643
89,804
Title losses and related claims
31,859
25,258
Depreciation and amortization
9,885
8,688
Interest
1,668
1,429
 
536,238
531,157
 
(Loss) earnings before taxes and minority interests
(4,564)
8,265
Income tax (benefit) expense
(2,621)
1,750
Minority interests
2,819
3,869
Net (loss) earnings
(4,762)
2,646
 
Average number of diluted shares (000)
18,329
18,304
(Loss) earnings per share - diluted
(0.26)
0.14
 
Segment information:
Title revenues
515,141
519,403
Title pretax (loss) earnings before minority interests
(8,056)
6,765
REI revenues
16,533
20,019
REI pretax earnings before minority interests (1)
3,492
1,500
 
Selected financial information:
Cash provided by operations
(15,116)
(14,015)
Title loss payments - net of recoveries
25,453
27,490
Changes in other comprehensive earnings - net of taxes
833
(3,001)
 
Number of title orders opened (000):
January
55.9
60.3
February
53.3
59.5
March
63.6
73.4
Quarter
172.8
193.2
     
 
Mar 31
Dec 31
 
2007
2006
     
Stockholders' equity
799,781
802,262
Number of shares outstanding (000)
18,254
18,231
Book value per share
43.81
44.00
     

(1) Includes a gain of $3.2 million in 2007 related to the sale of subsidiaries.


        
STEWART INFORMATION SERVICES CORPORATION BALANCE SHEETS (condensed)
(In thousands of dollars)
 
March 31
December 31
 
2007
2006
Assets    
Cash and cash equivalents
104,074
136,137
Short-term investments
147,419
161,711
Investments - statutory reserve funds
503,192
490.540
Investments - other
65,188
78.249
Receivables - premiums from agencies
49,150
58,023
Receivables - other
57,299
61,556
Less allowance for uncollectible amounts
(8,330)
(9,112)
Property and equipment
101,002
99,325
Title plants
74,119
70,324
Goodwill
202,348
204,302
Intangible assets
20,902
15,444
Other assets
104,177
91,708
 
 
1,420,540
1,458,207
 
Liabilities
Notes payable
106,057
109,549
Accounts payable and accrued liabilities
94,726
130,589
Estimated title losses
390,802
384,396
Deferred income taxes
11,982
14,139
Minority interests
17,192
17,272
 
620,759
655,945
 
Contingent liabilities and commitments
 
Stockholders' equity
Common and Class B Common Stock and
additional paid-in capital
149,487
148,517
Retained earnings
645,314
649,598
Accumulated other comprehensive earnings
8,894
8,061
Treasury stock
(3,914)
(3,914)
 
Total stockholders' equity
799,781
802,262
 
April 26, 2007
1,420,540
1,458,207

Source: Stewart Information Services Corporation