HOUSTON, July 25 2002 -- Stewart Information Services Corporation (NYSE: STC ) reported all-time record highs in the second quarter of 2002 for any quarter in its history for net earnings and revenues. Net earnings were $17.7 million compared to $15.4 million for the same period in 2001. On a diluted per share basis, net earnings were $.99 for the second quarter of 2002 compared to $1.00 for the second quarter of 2001. Revenues in the second quarter increased 29 percent to $408 million from $316 million in the same period last year.
For the six months ended June 30, 2002, Stewart earned $29.1 million, or $1.62 per diluted share, compared to $18.5 million, or $1.21 per diluted share, for the same six-month period in 2001. Revenues year-to-date increased 35 percent to $756 million.
"Very good housing demand and refinance business driven by low interest rates and ongoing strong demographic demand are continuing to produce strong earnings," said Malcolm S. Morris, chairman of the board and co-chief executive officer. "Softness in the commercial segment, which is now experiencing a gradual recovery, contributed in reducing earnings. Our commercial pipeline is once again filling as a result of the diversion of investing from lackluster equities to real estate.
"We realized a gain on the sale of investment real estate during the second quarter but it was negated by a comparable after-tax loss of $1.2 million on the sale of WorldCom bonds. We have no further exposure to WorldCom in our $338 million investment accounts.
"While lower interest rates have contributed to residential sales and refinance activity, they have also distracted and temporarily slowed our ongoing acquisition program. We reiterate our intent to continually acquire title agencies, typically using cash and debt. We believe the strength of our balance sheet positions us favorably among our competitors in making acquisitions."
"Title orders were at an all-time high for any second quarter in our history and were the second best ever for any quarter," said Stewart Morris, Jr., co-chief executive officer and president. "Orders were 8 percent higher than in the second quarter of 2001, with June orders 14 percent higher than June 2001.
"Our investments in technology to achieve greater productivity are contributing to the bottom line. As we continue to convert users to our Application Service Provider (ASP), Titlelogix.com(TM), expenses are anticipated to stabilize while productivity rises. At the same time, through our technology investments, process improvements and transaction management, our customers will receive a superior real estate transaction experience."
"Our continuing investment in transaction management technology has put us in position to focus marketing efforts on enhanced communication among the parties of the real estate transaction with the benefit of a finer experience for the consumer," added Stewart Morris, Jr. "We will be the exclusive sponsor of the Technology Learning Center at the National Association of Realtors Convention this year. We are fulfilling our mission statement of enhancing the real estate transaction process."
Stewart Information Services Corporation is a technology driven, strategically competitive, global real estate information company. Stewart provides title insurance and related information services through more than 6,000 issuing locations in the United States and several international markets. Stewart meets the needs of the real estate and mortgage industries through the delivery of information services required for settlement using e-commerce. These services include title reports, flood determinations, property appraisals, surveys, document preparation, property reports and background checks. Stewart also supplies post-closing services to lenders, automated county clerk land records and geographic information systems for governmental entities. Stewart provides expertise in tax-deferred exchanges. More information about Stewart can be found at www.stewart.com.
###
SUMMARY OF OPERATIONS
Stewart Information Services Corporation
| Three months | |||
| ended June 30 | |||
| 2002 2001 | |||
| Revenues | $408,238,000 | $315,660,000 | |
| Net earnings | $17,711,000 | $15,438,000 | |
| Average shares - diluted | 17,935,000 | 15,385,000 | |
| Earnings per share: | |||
| Basic | $ 1.00 | $ 1.01 | |
| Diluted | $ 0.99 | $ 1.00 | |
| Six months | |||
| U>ended June 30 | |||
| 2002 2001 | |||
| Revenues | $756,212,000 | $561,374,000 | |
| Net earnings | $29,055,000 | $18,511,000 | |
| Average shares - diluted | 17,945,000 | 15,327,000 | |
| Earnings per share: | |||
| Basic | $ 1.63 | $ 1.22 | |
| Diluted | $ 1.62 | $ 1.21 | |
STEWART INFORMATION SERVICES CORPORATION
STATEMENTS OF EARNINGS
(In thousands of dollars, except per share amounts)
| Three months | Six months | |
| ended June 30 | ended June 30 | |
| 2002 2001 | 2002 2001 |
Revenues
| Title insurance: | ||||
| Direct operations | 153,775 | 136,326 | 300,338 | 236,614 |
| Agency operations | 232,271 | 157,887 | 412,543 | 283,484 |
| 386,046 | 294,213 | 712,881 | 520,098 | |
| Real estate information services | 17,364 | 16,902 | 33,248 | 30,833 |
| Investment income | 4,593 | 4,500 | 9,496 | 10,045 |
| Investment gains - net | 235 | 45 | 587 | 398 |
| 408,238 | 315,660 | 756,212 | 561,374 | |
Expenses
| Amounts retained by agents | 188,560 | 128,858 | 336,849 | 231,315 |
| Employee costs | 105,979 | 90,916 | 210,544 | 170,268 |
| Other operating expenses | 60,217 | 50,179 | 115,421 | 92,329 |
| Title losses and related claims | 16,702 | 11,917 | 31,068 | 21,512 |
| Depreciation | 5,243 | 4,770 | 10,628 | 9,497 |
| Goodwill | --- | 828 | --- | 1,369 |
| Interest | 260 | 784 | 515 | 1,443 |
| Minority interests | 2,534 | 2,171 | 4,064 | 3,396 |
| 379,495 | 290,423 | 709,089 | 531,129 |
| Earnings before taxes | 28,743 | 25,237 | 47,123 | 30,245 |
| Income taxes | 11,032 | 9,799 | 18,068 | 11,734 |
| Net earnings | 17,711 | 15,438 | 29,055 | 18,511 |
| Average number shares outstanding (000) | 17,935 | 15,385 | 17,945 | 15,327 |
| Earnings per share - diluted | .99 | 1.00 | 1.62 | 1.21 |
Segment information:
| Title revenues | 390,874 | 298,758 | 722,964 | 530,541 |
| Title pretax earnings | 26,740 | 22,884 | 43,682 | 27,298 |
| REI revenues | 17,364 | 16,902 | 33,248 | 30,833 |
| REI pretax earnings | 2,003 | 2,353 | 3,441 | 2,947 |
Selected financial information (000):
| Cash flow from operations | 26,725 | 34,346 | 43,840 | 44,566 |
| Title loss payments - net of recoveries | 13,342 | 12,557 | 23,646 | 20,475 |
| Other comprehensive income (loss) - net of taxes | 3,684 | (1,095) | 1,354 | 1,060 |
| Average number of basic shares | 17,777 | 15,246 | 17,793 | 15,178 |
| Number of title orders opened | 175 | 162 | 346 | 320 |
| Tangible book value, excludes goodwill ($20.80 per share at June 30, 2002) |
STEWART INFORMATION SERVICES CORPORATION
BALANCE SHEETS (condensed)
(In thousands of dollars)
| June 30 | Dec 31 | |
| 2002 | 2001 |
Assets
| Cash and cash equivalents | 77,078 | 60,706 |
| Short-term investments | 58,091 | 56,267 |
| Investments - statutory | 269,093 | 239,084 |
| Investments - other | 68,506 | 86,046 |
| Receivables | 47,573 | 52,036 |
| Property and equipment | 47,909 | 48,772 |
| Title plants | 39,419 | 37,715 |
| Goodwill 55,983 | 52,971 | |
| Deferred income taxes | --- | 4,288 |
| Other | 41,929 | 39,978 |
| 654,680 | 563,448 |
Liabilities
| Notes payable | 15,765 | 13,794 |
| Accounts payable and accrued | 46,288 | 57,752 |
| Deferred income taxes | 859 | --- |
| Estimated title losses | 209,966 | 202,544 |
| Minority interests | 9,721 | 9,233 |
Contingent liabilities and commitments
Stockholders' equity
| Common and Class B Common Stock and additional paid-in capital | 133,911 | 133,157 |
| Retained earnings | 287,299 | 258,746 |
| Accumulated other comprehensive | 5,503 | 4,149 |
| Treasury stock | (3,731) | (1,512) |
| Total stockholders' equity | 422,982 | 394,540 |
| 705,581 | 677,863 |
July 25, 2002