Stewart Information Services Corporation announces first quarter earnings

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HOUSTON, April 28, 2004 -- Stewart Information Services Corporation (NYSE-STC) today reported net earnings of $11.1 million for the three months ended March 31, 2004, compared to net earnings of $19.9 million for the first quarter of 2003. On a diluted per share basis, net earnings were $.61 for the first quarter of 2004, compared to net earnings of $1.11 for the first quarter of 2003. Revenues in the first quarter increased 5 percent to $465 million from $441 million in the same period last year.

Title orders for the company for the first quarter of 2004 and the month of March 2004 (adjusted for same number of work days) were each down 17 percent from the same periods in 2003. The decrease in orders was primarily attributable to a decline in refinancing transactions. The decline began in the third quarter of 2003 when mortgage interest rates increased. Rates are currently at a level comparable to a year ago.

Despite a 5 percent decrease in title orders, total revenues increased 5 percent in the first quarter of this year because of increased premiums from agencies, home prices and commercial business. Revenues from direct operations declined less than order counts because refinancing transactions represented a larger portion of orders in 2003 and the company earns less revenue on refinancing transactions.

Pretax profits declined by 42 percent in the first quarter of 2004 over the same quarter a year ago due to a higher complement of lower margin agency business compared to direct operations. In addition, opening new offices and occupancy costs contributed to lower margins.

We continue our focus to increase book value, which grew to $35.17 per share.

"Our long-term plan is ongoing. We are increasing higher-margin commercial lines of business, developing, acquiring and using technology to increase productivity for our customers and our associates. We are creating innovative products and packages, maintaining an excellence of service expected by our customers -- all for the goal of enhancing shareholder value," said Stewart Morris, Jr., president and co-chief executive officer.

"The purchase of the remaining interest of RealtyAssist this past quarter allows us to more widely distribute a productivity platform for residential real estate agents and brokers. At the same time, it electronically integrates their activities with ours, resulting in increased productivity."

Stewart's industry-first home equity transaction bundle is exceeding expectations for sales to customers. Stewart expects its innovative bundling of services to continue growth in multiple rather than single products in the future.

"With the acquisition of Title Associates this past quarter, we acquired the pre-eminent commercial title agency in the crucial Manhattan market and gained a major national referral business. Significant commercial transactions will now go to Stewart rather than being shared among the competition. There is no finer team than Title Associates, and we are happy they have joined Stewart," said Malcolm S. Morris, chairman and co-chief executive officer.

"Although interest rates have been more favorable than we anticipated for the first quarter of 2004, strong job growth should see rates increase. While that will reduce refinancings in the near term, it supports continued health and growth in residential and commercial markets."

Stewart Information Services Corporation is a technology driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services through more than 7,400 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, document preparation, property reports and background checks. Stewart also supplies post-closing services to lenders, automated county clerk land records, property ownership mapping, 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.

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

 

Three months


ended March 31


2004    2003

Revenues

$464,892,000

$440,924,000

Net earnings

$11,140,000

$19,875,000

Average shares - diluted

18,181,000

17,831,000

Earnings per share:

Basic

$0.62

$1.12

Diluted

$0.61

$1.11


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

 

Three months


ended March 31


2004    2003

Revenues

Title Insurance:

Direct operations

182,534

191,730

Agency operations

257,887

225,565

Real estate information services

17,615

19,050

Investment income
5,152
4,783
Investment gains (losses) - net
1,704
(204)

464,892

440,924

Expenses

Amounts retained by agencies

210,052

184,749

Employee costs

134,350

132,002

Other operating expenses

73,981

66,848

Title losses and related claims

19,280

17,956

Depreciation

6,976

5,909

Interest

218

215

Minority interests

2,148

2,338

447,005

410,017


Earnings before taxes

17,887

30,907

Income taxes

6,747

11,032

Net earnings

11,140

19,875


Average number shares
outstanding (000)

18,181

17,831

Earnings per share - diluted

0.61

1.11

Segment information:

Title revenues

447,277

421,874

Title pretax earnings

16,653

27,942


REI revenues

17,615

19,050

REI pretax earnings

1,234

2,965

Selected financial information (000):

Cash flow from operations

25,251

22,538

Title loss payments - net
of recoveries

12,940

11,590

Other comprehensive earnings - net of taxes

1,673

872

Average number of basic shares

18,070

17,742

Number of title orders opened

223

263


March 31

March 31

2004

2003

 
Stockholders' equity 636,547 515,127
Number of shares outstanding 18,100,000 17,766,000
Book value per share 35.17 29.00

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

March 31

December 31

2004

2003

Assets

Cash and cash equivalents

101,401

114,202

Short-term investments

146,756

153,322

Investments - statutory reserve funds

387,692

375,421

Investments-other

63,109

59,035

Receivables

66,202

79,025

Property and equipment

77,867

74,174

Title plants

45,473

43,216

Goodwill

97,655

79,084

Other assets

58,839

54,388

 

1,044,994

1,031,867

Liabilities

Notes payable

28,738

24,583

Accounts payable and accrued liabilities

68,468

82,148

Estimated title losses
274,429
268,089

Deferred income taxes

24,185

22,440

Minority interests

12,627

13,219


Contingent liabilities and commitments

Stockholders' equity

Common and Class B Common Stock and
additional paid-in capital

143,514

141,168

Retained earnings

480,246

469,106

Accumulated other comprehensive
earnings

16,692

15,019

Treasury stock

(3,905)

(3,905)


Total stockholders' equity

636,547

621,388

 

1,044,994

1,031,867

April 28, 2004


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