Stewart Reports Operating Results for the First Quarter 2008

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HOUSTON, April 30, 2008 -- Stewart Information Services Corporation NYSE-STC today reported the results of its operations for the quarter ended March 31, 2008. (Dollar amounts in the table below are in millions, except for per share figures.)

First Quarter
2008 2007 (a)
Total revenues
$394.1
$531.7
Pretax loss before minority interests
(36.3)
(4.6)
Net loss
(22.3)
(4.8)
Net loss per share
(1.24)
(0.26)
   

(a) Includes a $3.2 million gain ($2.1 million after taxes, or $0.11 per share) from the sale of two subsidiaries. Also includes a charge of $5.1 million ($3.3 million after taxes, or $0.18 per share) relating to four large title losses.

Financial Highlights
-- Revenues decreased 25.9 percent to $394.1 million in the first quarter of 2008 compared with $531.7 million for the first quarter of 2007. The Company reported a loss before taxes (and before minority interests) of $36.3 million for the first quarter of 2008 compared with a loss of $4.6 million for the same period in 2007.

-- The revenue decline in 2008 was due to a significant decrease in title orders resulting from a decline in home sales and reduced financing activity relating primarily to tightening of mortgage lending practices and issues in the credit market, as well as lower home prices.

-- The Company continues to respond aggressively to the decline in the real estate market and is taking appropriate steps to restore profitability. In addition to workforce reductions, the Company continues to consolidate branch offices and locations, and is pursuing the completion of title search and production efficiencies company-wide. The Company's shared services initiative also remains on target and will generate benefits during 2008 in the areas of procurement and information technology infrastructure by reducing costs and enhancing service levels.

-- Excluding acquisitions, divestitures and startups, the Company has reduced its employee count since December 31, 2005 by approximately 2,500, or 24.8 percent. The Company reduced its employee count during the first quarter of 2008 by approximately 460, or 5.4 percent. The Company will continue to incur significant costs relating to conversion of its technology to more efficient platforms. Although other operating expenses have declined, they have not declined at the same rate as revenues due to the relatively fixed nature of some of these costs, such as rent and other occupancy expenses, and costs associated with our growing, profitable international and commercial businesses.

-- Stewart's book value per share decreased to $40.48 at March 31, 2008 compared with $41.82 at December 31, 2007.

-- Title orders declined in the first quarter of 2008 by 13.0 percent from the same period a year ago. Orders were 26.3 percent lower in March 2008 than in March 2007.

"The first quarter of 2008 has been a challenging environment for profitability given the current adverse economic conditions, as well as the traditional negative impact of the seasonality of real estate sales," said Stewart Morris, Jr., co-chief executive officer and president. "Fannie Mae's current estimate is that a total of $499 billion of one-to-four family lending was completed in the first quarter of 2008 versus $612 billion in the first quarter of 2007 -- an 18.5 percent decline. In view of this, we continued our reduction in staffing levels in the first quarter of 2008.

"We continue the process of converting our legacy production systems to a new web-based production platform on our centralized ASP and data center. As this progresses during the year, we will eliminate three data centers, reduce the required level of personnel and reduce maintenance costs," said Morris.

"SureClose®, our industry-leading transaction management system, has been adopted by the Arizona Association of Realtors®, the seventh largest state association in the country," added Morris. It will serve more than 5,000 brokerage companies statewide. More than 80 percent of homebuyers already utilize the web to search for a home to purchase. The use of SureClose will now allow the buyer, seller, lender and Realtor® to track the progress of the closing via the web.

"Stewart Title Guaranty Company (Guaranty) now has the largest statutory policyholders' surplus of any title insurance underwriter and was the only underwriter with surplus greater than $100 million to increase surplus in 2007," said Malcolm S. Morris, co-chief executive officer and chairman. "For a record 33rd consecutive year Guaranty has grown surplus, even in 2007, which was one of the most difficult years on record. Policyholders' protection provided by increasing financial strength is facilitating our growth in the commercial segment.

"We are making progress in reducing our risk exposure by evaluating and potentially cancelling agencies that our models indicate are at the higher-end of the risk spectrum," added Morris. "While we continue to add new agencies, we have increased our qualifying requirements. In addition to our standard background checks on agency personnel and other due diligence, we are now completing full pre-signing audits of agencies," said Morris.

Stewart Information Services Corporation 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, 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 since Stewart cannot predict the number of orders that will result in closings.


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

 
Three months ended
March 31
 
2008
2007
Revenues  
Title insurance:  
Direct operations
180,587
229,614
Agency operations
191,053
272,254
Real estate information
14,716
16,533
Investment income
8,078
9,051
Investment and other (losses) gains - net
(297)
4,222
 
394,137
531,674
 
Expenses
Amounts retained by agencies
155,562
222,390
Employee costs
151,962
176,793
Other operating expenses
86,836
93,643
Title losses and related claims
25,121
31,859
Depreciation and amortization
9,091
9,885
Interest
1,815
1,668
 
430,387
536,238
 
Loss before taxes and minority interests
(36,250)
(4,564)
Income tax benefit
(15,161)
(2,621)
Minority interests
1,203
2,819
Net loss
(22,292)
(4,762)
 
 Average number of shares (000)
18,046
18,237
Net loss per share
(1.24)
(0.26)
 
Segment information:
Title revenues
379,421
515,141
Title pretax loss before minority interests
(36,944)
(8,056)
REI revenues
14,716
16,533
REI pretax earnings before minority interests
694
3,492
 
Selected financial information:
Cash used by operations
(31,447)
(15,116)
Title loss payments - net of recoveries
30,482
25,453
Changes in other comprehensive earnings - net
159
833
 
Number of title orders opened (000):
January
50.9
56.0
February
52.7
53.4
March
47.0
63.8
Quarter150.6173.2
   
Number of title orders closed - quarter(000):89.5109.4
   
 
Mar 31
Dec 31
 
2008
2007
   
Stockholders' equity
733,412

754,059

Number of shares outstanding (000)
18,120
18,031
Book value per share
40.48
41.82
   

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

 
March 31
Dec 31
 
2008
2007
Assets  
Cash and cash equivalents
90,903
109,239
Short-term investments
77,648
79,780
Investments - statutory reserve funds
516,613
518,586
Investments - other
93,424
98,511
Receivables - premiums from agencies
37,379
48,040
Receivables - other
99,972
93,335
Allowance for uncollectible amounts 
(12,001)
(11,613)
Property and equipment
91,151
96,457
Title plants
78,650
78,245
Goodwill
209,628
208,824
Intangible assets
15,950
17,157
Other assets
104,751
105,413
 
 
1,404,068
1,441,974
 
Liabilities
Notes payable
116,223
108,714
Accounts payable and accrued liabilities
89,639
108,658
Estimated title losses
434,509
441,324
Deferred income taxes
15,314
13,509
Minority interests
14,971
15,710
 
670,656
687,915
 
Contingent liabilities and commitments
 
Stockholders' equity
Common and Class B Common Stock
and additional paid-in capital
142,682
141,196
Retained earnings
574,826
597,118
Accumulated other comprehensive earnings
20,001
19,842
Treasury stock
(4,097)
(4,097)
 
Total stockholders' equity
733,412
754,059
 
 
1,404,068

1,441,974

April 30, 2008

Source: Stewart Information Services Corporation


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