Stewart Reports Earnings for Third Quarter 2005

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HOUSTON, Oct. 27 /PRNewswire-FirstCall/ -- Stewart Information Services Corporation (NYSE-STC) reported net earnings of $31.8 million, or $1.74 per diluted share, for the three months ended September 30, 2005, versus net earnings of $21.1 million, or $1.16 per diluted share, for the third quarter of 2004. Revenues in the third quarter of 2005 increased 21 percent to $639.4 million from $529.7 million for the same period last year.

Total revenues for the first nine months of 2005 were $1.8 billion, up 15 percent from the same period a year ago. Earnings for the first nine months totaled $79.7 million, or $4.37 per diluted share, versus $62.2 million, or $3.42 per diluted share, for the first nine months of 2004.
Title orders in the third quarter of 2005 were 16 percent greater than the same quarter a year ago. Orders in the month of September were 12 percent greater than the same month last year.

Revenues increased in the third quarter of 2005 over the same period in 2004 due to continuing favorable long-term interest rates, which positively impacted residential and commercial closings. However, long-term interest rates for the month of September 2005 were slightly higher than in September 2004. Rates rose slightly in early October 2005. Acquisitions also contributed to the increase in revenues. The company's pretax profit margin increased in the third quarter of 2005 compared to the same quarter a year ago. The increase was primarily due to a higher mix of revenues from direct operations compared to lower margin agency business. This was offset somewhat by ongoing technology costs, which the company continues to believe will provide for the potential growth in future profits, productivity and market share.

"We are systematically delivering on our strategic plan to increase the effectiveness of our associates, improve customer satisfaction and enhance operating efficiencies -- all focused on increasing revenues, margins and shareholder value. Our offices are undergoing a complete process workflow review to apply new technology to increase productivity and reduce costs," said Stewart Morris, Jr., president and co-chief executive officer. "Book value has increased 11 percent since the end of 2004 to $42.58 per share," added Morris.

New operations in the quarter included the launching of Stewart Insurance and Financial Services in California. Recently approved by the California Department of Insurance, this group represents a comprehensive portfolio of property and casualty insurance carriers, including Allied Insurance, The Hartford and Travelers.

Stewart Default Solutions is now offering BackInTheBlack® software for mortgage default and foreclosure services, meeting needs in a key segment of the market that should grow as interest rates rise. This service includes loss mitigation on non-performing mortgage loans, as well as actual foreclosure and remarketing of the pledged assets.

"Stewart is again serving as the exclusive program sponsor of the Technology Learning Center (TLC) presented at the National Association of Realtors® (NAR) Conference in San Francisco ongoing through October 31," said Malcolm S. Morris, chairman and co-CEO. "This will be the sixth consecutive year that we will have sponsored and managed the TLC. More than 8,000 Realtors will be introduced to new technology enabling them to provide the best service to their buyers and sellers and increase their individual productivity."

Stewart continues to make strategic acquisitions contributing to its future growth. The previously announced acquisition of Monroe Title Insurance Corporation of Rochester, New York, is awaiting Monroe shareholder consent and necessary regulatory approval.

Effective September 1, 2005 and retroactive to the start of the year, the Texas Legislature reduced statutory reserve requirements for Stewart's major title insurer. This released for other uses a portion of low-yielding statutory reserve investments in the amount of approximately $18.3 million, after taxes, in the third quarter of 2005.

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 8,000 policy-issuing offices and agencies in the United States and a number of 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 September 30


2005    2004

Revenues

$639,442,000

$529,663,000

Net earnings

$31,771,000

$21,138,000

Average shares - diluted
18,259,000
18,195,000

Earnings per share:

Basic

$1.75

$1.17

Diluted

$1.74

$1.16

 

 

Nine months


ended September 30


2005    2004

Revenues

$1,801,483,000

$1,560,011,000

Net earnings

$79,664,000

$62,239,000

Average shares - diluted
18,236,000
18,190,000

Earnings per share:

Basic

$4.39

$3.44

Diluted

$4.37

$3.42

STEWART INFORMATION SERVICES CORPORATION
STATEMENTS OF EARNINGS
(Thousands of dollars, except per share)

Three months

Nine months

ended September 30

ended September 30

2005 2004 2005 2004

Revenues

Title Insurance:

Direct operations
287,607

224,814

779,422

648,913

Agency operations

320,545

282,988

935,730

841,470

Real estate information services

22,760

16,001

61,075

51,340

Investment income
8,016
5,920
21,473
16,242
Investment and other gains (losses) - net
514
(60)
3,783
2,046

639,442

529,663

1,801,483

1,560,011

Expenses

Amounts retained by agencies

259,557

229,525

762,781

684,980

Employee costs

183,863

149,542

513,353

436,345

Other operating expenses

97,963

79,600

270,927

235,328

Title losses and related claims

31,434

25,194

83,778

70,281

Depreciation and amortization

8,592

7,723

24,642

22,981

Interest

883

309

2,278

799

Minority interests

5,499

3,707

14,019

9,715

587,791

495,600

1,671,778

1,460,429


Earnings before taxes

51,651

34,063

129,705

99,582

Income taxes

19,880

12,925

50,041

37,343

Net earnings

31,771

21,138

79,664

62,239

Average number of diluted shares outstanding (000)

18,259

18,195

18,236

18,190

Earnings per share - diluted

1.74

1.16

4.37

3.42

Segment information:

Title revenues

616,682

513,662

1,740,408

1,508,671

Title pretax earnings

46,579

34,093

120,652

98,504


REI revenues

22,760

16,001

61,075

51,340

REI pretax earnings (loss)

5,072

(30)

9,053

1,078

Selected financial information

Cash flow from operations

45,903

58,887

133,272

143,697

Title loss payments - net of recoveries

26,336

13,237

59,777

46,216

Changes in other comprehensive earnings (losses) - net

(4,099)

5,880

(5,244)

(2,493)

Number of title orders opened (000):









July
August
September
Quarter

76.9
86.0
74.8
237.7

69.2
68.7
66.7
204.6






September 30

December 31

2005

2004

Stockholders' equity 772,487 697,313
Number of shares outstanding 18,142 18,121
Book value per share 42.58 38.48

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

September 30

December 31

2005

2004

Assets

Cash and cash equivalents

131,584

121,383

Short-term investments

219,922

181,195

Investments - statutory reserve funds

427,920

401,814

Investments-other

81,272

68,793

Receivables

86,097

80,277

Property and equipment

84,912

83,391

Title plants

57,130

52,679

Goodwill

151,909

124,636

Intangible assets
15,527
16,988

Other assets

73,110

62,197

1,329,383

1,193,353

Liabilities

Notes payable

78,938

49,930

Accounts payable and accrued liabilities

111,106

101,544

Estimated title losses
324,766
300,749

Deferred income taxes

24,643

29,335

Minority interests

17,443

14,482

556,896
496,040

Contingent liabilities and commitments

Stockholders' equity

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

144,889

144,135

Retained earnings

622,959

543,295

Accumulated other comprehensive earnings

8,544

13,788

Treasury stock

(3,905)

(3,905)

Total stockholders' equity

772,487

697,313

1,329,383

1,193,353

October 27, 2005


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