Stewart Reports Earnings for the Year 2004

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HOUSTON, Feb. 16, 2005 -- Stewart Information Services Corporation NYSE-STC today reported results for the fourth quarter and year end 2004. Net earnings for the year 2004 were $82.5 million, or $4.53 per diluted share, compared to net earnings of $123.8 million, or $6.88 per diluted share, for 2003. Revenues for the year 2004 were $2.2 billion, a decrease of 2.5 percent compared to 2003.

Stewart earned $20.3 million, or $1.11 per diluted share, for the fourth quarter of 2004, compared to $20.8 million, or $1.15 per diluted share, for the fourth quarter of 2003. Revenues for the fourth quarter increased by 2.0 percent over the fourth quarter of 2003.

Book value per share increased 11.6 percent, from $34.47 at the end of 2003 to $38.48 at December 31, 2004. "As in 2003, Stewart paid a $0.46 cents per share annual cash dividend in December of 2004," said Malcolm S. Morris, chairman and co-chief executive officer. "Our story is clear -- pay reasonable dividends to our shareholders, increase book value per share and execute accretive acquisitions. Achieving this balance in an off-peak year for our business is what we work hard to deliver to our shareholders. To accomplish this, we are expanding internationally, growing our higher-margin commercial business, capturing a significant share of emerging market growth activity and providing a bundle of services, in addition to title insurance, that enhances the transaction process."

"We are dedicated to enhancing shareholder value and are focusing on the long-run increase in margins and revenues by attracting, retaining and training the best group of associates in the industry," said Stewart Morris, Jr., president and co-chief executive officer. "We have a seasoned management team that is changing the way we do business. We are providing our staff the technology tools to continue delivering magnificent service to our customers.

"Utilizing our Web-based transaction management system, SureClose®, and our production systems accessible through TitleLogix®, our Application Service Provider, proved their mettle this past year," added Morris. "This technology enabled our Florida offices to continue service to their customers despite the devastation of multiple hurricanes. As the systems become more widely used and incorporate electronic signatures and electronic courthouse filings, they will dramatically improve the way we do our daily business. At the same time, SureClose makes essential data available to consumers and real estate professionals 24/7, from electronic order entry to electronic delivery of our products and services. Our focus is on the future, and we have invested in recent years to provide for future productivity and profitability."

Stewart's incoming orders in the fourth quarter of 2004 were up 11.6 percent from the same quarter a year ago. Orders in the month of December 2004 were up 11.8 percent from December 2003. Nationally, industry-wide refinance activity made up 69 percent of all national residential lending activity in 2003 versus 51 percent in 2004 (preliminary) and is forecast at slightly less than 40 percent in 2005. Industry forecasts call for a modest interest rate increase in 2005, implying a further contraction in refi business.

Total one-to-four family residential lending nationwide declined from $3.8 trillion in 2003 to $2.8 trillion in 2004, a decline of 27 percent. The reduction resulted from a gradual shrinking of refinance activity. Operating profit margins decreased year-over-year due primarily to the fixed nature of most of the company's operating costs. Margins were also reduced due to the company's investments in growth, technology and new services. Excluding title agency retentions, employee costs are the largest component of the company's operating costs. Consistent with Stewart's strategy of balancing employee costs with its business volume over the long term, employee costs and order counts are continually monitored. The company works to balance staffing with customer service needs using scalable technology to allow for continued growth."

Stewart experienced increased costs in 2004 for the rollout of SureClose and its effective integration into company and customer use. SureClose is now installed at more than 725 company locations and independent title agencies and has more than 525,000 active files in process on the system.

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 7,800 policy-issuing offices and agencies in the United States and several international markets. Stewart delivers via e-commerce the services required for settlement by the real estate and mortgage industries. 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 December 31

2004 2003

Revenues

$622,848,000

$610,643,000

Net earnings

$20,279,000

$20,782,000

Average shares - diluted

18,224,000

18,095,000

Earnings per share:

Basic

$1.12

$1.16

Diluted

$1.11

$1.15


 

Year Ended

December 31

2004 2003

Revenues

$2,182,859,000

$2,239,030,000

Net earnings

$82,518,000

$123,755,000

Average shares - diluted

18,199,000

17,980,000

Earnings per share:

Basic

$4.56

$6.93

Diluted

$4.53

$6.88

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

Three months ended

Year ended

December 31

December 31

2004 2003 2004 2003

 (A)

(A)

Revenues

Title Insurance:

Direct operations
231,784

195,516

880,697

888,454

Agency operations

366,172

391,255

1,207,642

1,249,800


 

 

 

 

Real estate information services

17,567

17,099

68,907

78,666

Investment income
6,272
5,220
22,514
19,800
Investment gains - net
1,053
1,553
3,099
2,310

622,848

610,643

2,182,859

2,239,030

Expenses

Amounts retained by agencies

302,044

320,820

987,024

1,024,282

Employee costs

154,747

137,114

591,092

573,486

Other operating expenses

89,569

81,335

324,897

307,509

Title losses and related claims

30,560

28,266

100,841

94,827

Depreciation and
amortization

8,044

6,741

31,025

25,240

Interest

449

158

1,248

721

Minority interests

3,803

2,225

13,518

13,462

589,216

576,659

2,049,645

2,039,527


Earnings before taxes

33,632

33,984

133,214

199,503

Income taxes

13,353

13,202

50,696

75,748

Net earnings

20,279

20,782

82,518

123,755


Average number of
diluted shares
outstanding (000)

18,224

18,095

18,199

17,980

Earnings per share - diluted

1.11

1.15

4.53

6.88

Segment information:

Title revenues

605,281

593,544

2,113,952

2,160,364

Title pretax earnings

32,897

34,108

130,024

187,435


REI revenues

17,567

17,099

68,907

78,666

REI pretax earnings
(loss) (A)

735

(124)

3,190

12,068


Three months ended

Year ended

December 31

December 31

2004 2003 2004 2003

 (A)

(A)


Selected supplemental information (000):

Cash flow from operations

26,713

35,556

170,410

190,063

Title loss payments - net
of recoveries

22,192

18,656

68,408

57,996

Other comprehensive earnings (loss) -
net of taxes

1,262

1,349

(1,231)

5,675

Average number of basic shares

18,114

17,975

18,097

17,862

Number of title orders opened

191.1

171.4

839.9

986.9


December 31

December 31

2004

2003

 
Stockholder's equity 621,389 493,592
Number of shares outstanding 18,026 17,731
Book value per share 34.47 27.84

(A) The fourth quarter of 2003 includes expenses of $3.5 million relating to litigation and a REI mapping/computer system project. Net earnings were reduced by $2.3 million, or $.13 per share.

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

December 31

December 31

2003

2002

Assets

Cash and cash equivalents

114,202

139,156

Short-term investments

153,322

50,673

Investments-statutory reserve funds

375,421

306,501

Investments-other

59,035

69,260

Receivables

79,025

69,041

Property and equipment

74,174

61,158

Title plants

43,216

40,307

Goodwill

79,084

66,885

Other

54,388

41,005

 

1,031,867

843,986

Liabilities

Notes payable

24,583

14,195

Accounts payable and accrued liabilities

82,147

83,961

Estimated title losses
268,089
230,058

Deferred income taxes

22,440

11,284

Minority interests

13,219

10,896

Contingent liabilities and commitments

Stockholders' equity

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

141,168

134,927

Retained earnings

469,107

353,226

Accumulated other comprehensive
earnings

15,019

9,344

Treasury stock

(3,905)

(3,905)


Total stockholders' equity

621,389

493,592

 

1,031,867

843,986

February 17, 2004


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