Stewart Reports Earnings for Q2 2005 EPS of $2.04 vs. $1.65 Q2 2004

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HOUSTON, July 28, 2005 -- Stewart Information Services Corporation (NYSE-STC) today reported results for the quarter ended June 30, 2005. Revenues for the three-month period ended June 30, 2005 were $651 million, the highest in the company's history, and an increase of 15 percent over the $565 million reported in the same period last year. Net earnings were $37.2 million, or $2.04 per diluted share, for the three months ended June 30, 2005, versus net earnings of $30.0 million, or $1.65 per diluted share, for the second quarter of 2004.

Total revenues for the first half of 2005 were $1.2 billion, up 13 percent from the same period a year ago. Earnings for the first six months totaled $47.9 million, or $2.63 per diluted share, versus $41.1 million, or $2.26 per diluted share, for the first six months of 2004.

Book value per share increased 7 percent to $41.06 at June 30, 2005 from December 31, 2004. The increase was attributable to the earnings for the first six months of 2005.

Order counts for the quarter and the month ended June 30, 2005 were up 9 percent and 22 percent, respectively, from the same periods a year ago, adjusted for the number of working days.

The increase in revenues and transactions handled in the second quarter of 2005 over the same period in 2004 resulted primarily from a lower interest rate environment. The company's pretax profit margin percentage also increased. Acquisitions made by the company since the second quarter of 2004 contributed to the higher profit margin. Employee costs and other expenses increased at rates less than the increase in revenues, also improving the margin. While technology costs could have been maintained at previous levels, the company believes its on-going investment in technology provides potential for growth in its future profits, productivity and market share.

"Low interest rates, a robust economy and strong demographic demand all contributed to setting record housing sales and commercial property transactions," said Malcolm S. Morris, co-chief executive officer and chairman of the board. "Our commercial title operations continue posting impressive growing revenues and profitability.

"The State of Texas has enacted legislation, effective September 1, 2005, that will reduce the statutory premium reserve requirements," added Morris. "The change does not directly impact amounts reported for our earnings or loss reserves under U.S. generally accepted accounting principles. However, based on 2004 amounts, the change would have freed up $32 million in low-risk and low- yield statutory reserve investments, making this portion of our future cash flow available for other uses." Complete details and a history of House Bill 885 can be viewed at http://www.capitol.state.tx.us , selecting 79th Regular Session- 2005, then entering HB885.

"We continued our systematic acquisition process in strategically located markets and acquired four title agencies in the past quarter," said Stewart Morris, Jr., co-chief executive officer and president. "In the second quarter of 2005 we completed or announced title agency acquisitions in Colorado, South Dakota, Wisconsin and California."

In addition, Stewart continued international expansion with the establishment of Stewart Title Eastern Caribbean in Anguilla, British West Indies. This office joins a growing network of Latin American and Caribbean operations, providing both international and local purchasers and lenders with title and related transaction services.

"The rapid growth of SureClose(R), our paperless working platform, recently generated the one-millionth transaction, making it one of the most utilized transaction management systems in the industry," added Morris. "This system not only provides truly magnificent 24/7 service to our customers but also increases our own productivity and effectiveness. This is an investment that is just now starting to realize its potential in our operations as customers and associates begin using SureClose in their daily operations.

"Stewart's real estate information data portal, http://www.propertyinfo.com, serves our internal and external customers by providing real estate information access, integrated applications and online product distribution," added Morris. PropertyInfo.com brings together the inclusive information and integrated tools that real estate and title professionals need on a daily basis: public records, aerial imagery, maps, search and extraction tools, editable reports and documents, and production applications that save title and real estate agents and their customers, time and resources. Users have access to parcel-level and spatial data and images from a single web site. The portal contains both owned and third-party data and integrated processing applications, allowing greater efficiencies that can result in higher production volume without added overhead.

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 required for settlement by the real estate and mortgage industries through more than 8,000 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

 

Three months


ended June 30


2005    2004

Revenues

$651,079,000

$565,456,000

Net earnings

$37,227,000

$29,961,000

Average shares - diluted

18,227,000

18,192,000

Earnings per share:

Basic

$ 2.05

$ 1.66

Diluted

$ 2.04

$ 1.65

 

 

Six months


ended June 30


2005    2004

Revenues

$1,162,041,000

$1,030,348,000

Net earnings

$47,893,000

$41,101,000

Average shares - diluted

18,226,000

18,187,000

Earnings per share:

Basic

$2.64

$2.27

Diluted

$2.63

$2.26

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

2005 2004 2005 2004

Revenues

Title Insurance:

Direct operations
278,941

241,578

491,815

424,112

Agency operations

341,500

300,595

615,185

558,482

Real estate information services

20,688

17,711

38,315

35,326

Investment income
7,149
5,170
13,457
10,322
Investment and other gains - net
2,801
402
3,269
2,106

651,079

565,456

1,162,041

1,030,348

Expenses

Amounts retained by agencies

279,637

245,403

503,224

455,455

Employee costs

173,873

152,453

329,490

286,803

Other operating expenses

91,967

81,747

172,964

155,728

Title losses and related claims

30,213

25,807

52,344

45,087

Depreciation and
amortization

8,244

8,282

16,050

15,258

Interest

778

272

1,395

490

Minority interests

5,597

3,860

8,520

6,008

590,309

517,824

1,083,987

964,829


Earnings before taxes

60,770

47,632

78,054

65,519

Income taxes

23,543

17,671

30,161

24,418

Net earnings

37,227

29,961

47,893

41,101

Average number of
diluted shares (000)

18,227

18,192

18,226

18,187

Earnings per share - diluted

2.04

1.65

2.63

2.26

Segment information:

Title revenues

630,391

547,745

1,123,726

995,022

Title pretax earnings

57,861

46,417

74,073

63,070


REI revenues

20,688

17,711

38,315

35,326

REI pretax earnings

2,909

1,215

3,981

2,449

Selected financial information

Cash flow from operations

73,082

58,273

87,369

84,810

Title loss payments - net of recoveries

16,906

20,039

33,441

32,979

Other comprehensive (loss) -
net of taxes

3,982

(10,046)

(1,145)

(8,373)

Number of title orders opened (000):

 

 

 

 

April
May
June
Quarter

76.3
80.0
88.8
245.1

79.4
69.6
72.7
221.7

 

 


June 30

December 31

2005

2004

 
Stockholders' equity 744,626 697,313
Number of shares outstanding (000) 18,135 18,121
Book value per share 41.06 38.48

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

June 30

December 31

2005

2004

Assets

Cash and cash equivalents

119,610

121,383

Short-term investments

201,852

181,195

Investments - statutory reserve funds

429,824

401,814

Investments-other

80,924

68,793

Receivables

86,723

80,277

Property and equipment

85,379

83,391

Title plants

55,548

52,679

Goodwill

146,424

124,636

Intangible assets
16,728
16,988

Other assets

60,685

62,197

 

1,283,697

1,193,353

Liabilities

Notes payable

64,840

49,930

Accounts payable and accrued liabilities

103,833

101,544

Estimated title losses
319,667
300,749

Deferred income taxes

33,963

29,335

Minority interests

16,768

14,482

 
539,071
496,040

Contingent liabilities and commitments

Stockholders' equity

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

144,700

144,135

Retained earnings

591,188

543,295

Accumulated other comprehensive earnings

12,643

13,788

Treasury stock

(3,905)

(3,905)

Total stockholders' equity

744,626

697,313

 

1,283,697

1,193,353

July 28, 2005


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