Stewart reports earnings for third quarter

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HOUSTON, Oct. 27, 2004 -- Stewart Information Services Corporation (NYSE-STC) reported net earnings of $21.1 million, or $1.16 per diluted share, for the three months ended September 30, 2004, versus net earnings of $42.1 million, or $2.34 per diluted share, for the third quarter of 2003. Revenues in the third quarter decreased 16 percent to $530 million from $629 million for the same period last year. The growth in book value continued to $37.76 per share as of September 30, 2004 -- an all time record.

Total revenues for the first nine months of 2004 were $1.6 billion, down 4 percent from the same period a year ago. Earnings for the first nine months totaled $62.2 million, or $3.42 per diluted share, versus $103.0 million, or $5.74 per diluted share, for the first nine months of 2003.

"SureClose®, our transaction management system, continues to grow in number of users and is our vehicle to go paperless in the title office," said Stewart Morris, Jr., president and co-chief executive officer. "It is also our method of delivering products, communicating on files and archiving closed files. SureClose is the most significant new technology in our tool kit. We make enhancements continually. We are now adding more than 20,000 documents to SureClose each working day. The system also proved itself as to security during the three hurricanes that recently tracked across Florida. Although twenty-one of our Florida offices incurred some operational interruption from hurricane damage, our customers and associates had immediate access to their files via the Internet. Paperless transactions are now a reality when using the latest SureClose release. Our company continues to enhance current systems and add new applications to improve customer service and associate effectiveness."

"Accolades for our financial performance continued in this past quarter," said Malcolm S. Morris, chairman of the board and co-chief executive officer. "Stewart was ranked 31st in Fortune magazine's list of the 100 fastest growing companies. We have been included on the Forbes Platinum 400 Companies -- the best big companies in the US, and as a member of the Fortune 1000, Russell 2000, 2500 and 3000 Value Indexes and Russell 2000, 2500 and 3000 Indexes. We also are on the S&P Small Cap 600. Sandler O'Neill & Partners, L.P. included Stewart in their first-ever Premium Players List for 2004, made up of the top 30 insurance companies that have consistently demonstrated exceptional growth and profitability and above-average performance in the past five years."

"Although tight inventory levels in many high end residential markets have moderated, the forecast for the upscale market continues to be strong," reported Laurie Moore-Moore, Stewart advisory director and president of The Institute for Luxury Home Marketing. "The affluent are still shifting dollars into real estate from other investments, home prices are rising, and luxury home demand is very healthy."

Title orders per working day for the third quarter of 2004 were down 13 percent from the same period in 2003 primarily due to the decrease in refinancing transactions. Beginning in July 2003, orders fell to lower levels because of an increase in mortgage interest rates. However, in August and September 2004, interest rates averaged 30 to 40 basis point less than the same period last year. In September 2004, orders were up 4 percent over the same month a year ago.

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, new services and new offices. Employee costs are the largest component of the company's operating costs, excluding title agency retentions. Employee counts and order counts are monitored on a regular basis. However, the company's strategy is not to overreact to either increases or decreases in transaction volumes. Instead, the company works to maintain good service to its customers through a reasonably stable, dedicated employee work force allowing for continued growth.

The company continues to emphasize gaining commercial business, acquiring companies with higher margins and expanding internationally. The company believes these strategies will position it for future growth, diversification and strength.

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 7,800 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.

SUMMARY OF OPERATIONS

Stewart Information Services Corporation

 

Three months


ended September 30


2004    2003

Revenues

$529,663,000

$629,388,000

Net earnings

$21,138,000

$42,068,000

Average shares - diluted

18,195,000

18,006,000

Earnings per share:

Basic

$1.17

$2.35

Diluted

$1.16

$2.34


 

Nine months


ended September 30


2004    2003

Revenues

$1,560,011,000

$1,628,387,000

Net earnings

$62,239,000

$102,973,000

Average shares - diluted

18,190,000

17,937,000

Earnings per share:

Basic

$3.44

$5.78

Diluted

$3.42

$5.74

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

Three months

Nine months

ended Sept 30

ended Sept 30

2004 2003 2004 2003

Revenues

Title Insurance:

Direct operations
224,814

261,063

648,913

692,938

Agency operations

282,988

340,961

841,470

858,545

Real estate information services

16,001

21,683

51,340

61,567

Investment income
5,920
5,262
16,242
14,580
Investment gains (losses) - net
(60)
419
2,046
757

529,663

629,388

1,560,011

1,628,387

Expenses

Amounts retained by agencies

229,525

279,678

684,980

703,462

Employee costs

149,542

157,192

436,345

436,372

Other operating expenses

79,600

86,727

235,328

226,174

Title losses and related claims

25,194

25,894

70,281

66,561

Depreciation

7,723

6,422

22,981

18,499

Interest

309

202

799

563

Minority interests

3,707

4,755

9,715

11,237

495,600

560,870

1,460,429

1,462,868


Earnings before taxes

34,063

68,518

99,582

165,519

Income taxes

12,925

26,450

37,343

62,546

Net earnings

21,138

42,068

62,239

102,973


Average number shares
outstanding (000)

18,195

18,006

18,190

17,937

Earnings per share - diluted

1.16

2.34

3.42

5.74

Segment information:

Title revenues

513,662

607,705

1,508,671

1,566,820

Title pretax earnings

33,724

63,865

97,127

153,281


REI revenues

16,001

21,683

51,340

61,567

REI pretax earnings

339

4,653

2,455

12,238

Selected financial information (000):

Cash flow from operations

58,887

73,050

143,697

156,656

Title loss payments - net
of recoveries

13,237

15,564

46,216

39,340

Other comprehensive earnings (loss)
- net of taxes

5,880

(2,316)

(2,493)

4,326

Average number of basic shares

18,102

17,893

18,092

17,826

Number of title orders opened

205

238

649

816


Sept 30

December 31

2004

2003

 
Stockholders' equity 683,556 621,389
Number of shares outstanding 18,102 18,026
Book value per share 37.76 34.47

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

Sept 30

December 31

2004

2003

Assets

Cash and cash equivalents

113,878

114,202

Short-term investments

192,014

153,322

Investments - statutory reserve funds

399,131

375,421

Investments-other

71,726

59,035

Receivables

64,605

79,025

Property and equipment

78,296

74,174

Title plants

52,109

43,216

Goodwill

112,012

79,084

Other assets

62,601

54,388

 

1,146,372

1,031,867

Liabilities

Notes payable

40,035

24,583

Accounts payable and accrued liabilities

91,663

82,147

Estimated title losses
292,154
268,089

Deferred income taxes

24,439

22,440

Minority interests

14,525

13,219


Contingent liabilities and commitments

Stockholders' equity

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

143,589

141,168

Retained earnings

531,346

469,107

Accumulated other comprehensive
earnings

12,526

15,019

Treasury stock

(3,905)

(3,905)


Total stockholders' equity

683,556

621,389

 

1,146,372

1,031,867

October 27, 2004


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