Stewart Reports Earnings for First Quarter 2006

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HOUSTON, April 27 2006 -- Stewart Information Services Corporation (NYSE-STC) today reported the results of its operations for the first quarter ended March 31, 2006. (Dollar amounts in the table below are in millions, except for per share figures.)

  First Quarter
  2006 2005

Total Revenues

$539.4

$511.0

Pretax earnings before minority interests

8.3

20.2

Net earnings

2.6

10.7

Net earnings per diluted share

0.14 0.59

Financial Highlights

* Revenues increased 5.6 percent to $539.4 million in the first quarter of 2006 as compared with $511.0 million for the first quarter of 2005.
This quarter's revenues represent the highest revenues for any first quarter in the Company's history. Pretax earnings (calculated before minority interests) for the first quarter of 2006 were $8.3 million as compared with $20.2 million for the same period of 2005.

* Revenues were positively impacted by an increase in both direct and agency business. The increase in direct operations is primarily due to acquisitions and growth in commercial transactions. Acquisitions increased revenues by $12.1 million and pretax earnings by $1.7 million for the quarter.

* The increase in revenues for the quarter was more than offset by increases primarily in employee and other operating costs. Employee costs were impacted by the competitive market for key employees in California and other states. Retention of these key associates is essential to managing through changes in the marketplace. Employee costs were also higher compared to the same period a year ago due to significant increases in health insurance claims and premium costs, additional employees at newly opened locations and increases in staff providing technology-related services. While the Company continually monitors changes in transaction volumes, it carefully reacts to seasonal fluctuations. The Company maintains staffing levels sufficient to continue to provide superior customer service and gain market share through a reasonably stable, dedicated employee work force. Other operating costs increased primarily due to expenses related to new offices and increased technology development and security costs.

* Stewart's book value per share decreased to $42.16 per share at March 31, 2006 as compared with $42.21 at December 31, 2005. The decline in book value per share was primarily due to an increase in unrealized losses in the Company's bond portfolio triggered by interest rate increases in the first quarter of 2006.

* Title orders declined in the first quarter of 2006 by 8.9 percent from the same period a year ago. Orders were 9.8 percent lower in March 2006 than in March 2005. Steady increases in mortgage interest rates were the major reason for the decline in title orders.

"We took corrective actions in the quarter including management changes in several major markets in which our offices were not performing up to expectations," said Stewart Morris, Jr., co-chief executive officer. "Also, we should be delivering AIM+, our fourth-generation Web-based title production system and the second generation of SureClose®, our transaction management system, by the end of 2006. An outside third-party research group that was engaged to study the savings from our new technology identified future savings and increased productivity opportunities. Our next step is to define and deploy these labor-saving workflow processes to obtain optimum benefit across our offices.

"We have reorganized to combine Landata Systems and Stewart Realty Solutions under one profit center, Stewart Transaction Solutions," added Stewart Morris, Jr. "This move places all of our technology under single leadership, continuing our drive to sell our award-winning technology solutions to the real estate and title industries. SureClose recently passed the 1.7 million online-file mark and continues to lead the industry in volume and service. We also continue to add two to three new companies per day on our TitleLogix® and TitleWorkPlace(TM) application service providers (ASPs), the title industry's leading ASP facilities."

Stewart was named to FORTUNE magazine's annual list of "America's Most Admired Companies", landing at number four on the mortgage services industry list. "Stewart was the best-ranked title insurance company on the list, receiving high marks for its use of corporate assets and financial soundness," said Malcolm S. Morris, co-chief executive officer. "Our record 31 consecutive years of growth in surplus and reserves is unmatched by any other title insurance company and provides ongoing policyholder protection. This is one of the enabling factors in our growing commercial segment."

Stewart Information Services Corporation is a technology-driven, strategically competitive, real estate information and transaction management company providing title insurance and related information services through more than 9,000 policy-issuing offices and agencies in the United States and international markets. Stewart also provides post-closing lender services, default management solutions, 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 property 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

2006 2005
Revenues

Title Insurance:

Direct operations
227,818

212,874

Agency operations

281,654

273,685

Real estate information services

20,019

17,627

Investment income
8,537
6,308
Investment and other gains - net
1,394
468

539,422

510,962


Expenses    

Amounts retained by agencies

226,876

223,587

Employee costs

179,102

155,617

Other operating expenses

89,804

80,997

Title losses and related claims

25,258

22,131

Depreciation and amortization

8,688

7,806

Interest

1,429

617

531,157

490,755


Earnings before taxes and minority interests

8,265

20,207

Income taxes

1,750

6,618

Minority interests 3,869 2,923

Net earnings

2,646

10,666

Average number of diluted shares (000)

18,304

18,225

Earnings per share - diluted

0.14

0.59

Segment information:

Title revenues

519,403

493,335

Title pretax earnings before minority interests

6,765

18,868


REI revenues

20,019

17,627

REI pretax earnings before minority interests

1,500

1,339

Selected financial information:

Cash (used in) provided by operations

(14, 015)

14,287

Title loss payments - net of recoveries

27,490

16,535

Changes in other comprehensive earnings - net of taxes

(3,001)

(5,127)

Number of title orders opened (000):





January
February
March
Quarter

60.3
59.5
73.4
193.2

62.6
68.1
81.3
212.0


March 31

December 31

2006

2005

Stockholders' equity 768,222 766,313
Number of shares outstanding (000) 18,220 18,154
Book value per share 42.16 42.21

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

March 31

December 31

2006

2005

Assets

Cash and cash equivalents

118,361

134,734

Short-term investments

176,404

206,717

Investments - statutory reserve funds

457,663

449,475

Investments-other

74,683

85,802

Receivables - premiums from agencies

40,297

49,397

Receivables - other 45,744 47,791
Less allowance for uncollectable amounts (8,090) (8,526)

Property and equipment

90,780

85,762

Title plants

61,530

58,930

Goodwill

181,443

155,624

Intangible assets
15,968
15,268

Other assets

79,475

80,177

1,334,258

1,361,151

Liabilities

Notes payable

93,100

88,413

Accounts payable and accrued liabilities

96,337

125,255

Estimated title losses
346,096
346,704

Deferred income taxes

11,623

15,784

Minority interests

18,880

18,682

566,036
594,838

Contingent liabilities and commitments

Stockholders' equity

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

147,631

145,367

Retained earnings

621,878

619,232

Accumulated other comprehensive earnings

2,627

5,628

Treasury stock

(3,914)

(3,914)

Total stockholders' equity

768,222

766,313

1,334,258

1,361,151

April 27, 2006


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