Stewart Reports Financial Results for the First Quarter 2009

HOUSTON, April 30 -- Stewart Information Services Corporation (NYSE:STC - News) today reported the results of its operations for the quarter ended March 31, 2009 (dollar amounts are in millions, except for per share figures):

                                                   First Quarter (a)
                                                  2009          2008
                                                  ----          ----

    Total revenues                              $313.5        $394.1
    Pretax loss (b)                              (37.3)        (40.9)
    Income tax expense (benefit) (c)               3.2         (16.8)
    Net loss attributable to Stewart             (42.0)        (25.3)
    Net loss per share attributable to Stewart   (2.31)        (1.40)

    (a) The first quarter of 2009 includes pretax charges of $8.9 million
        relating to the impairment of investment securities and other assets.
        The first quarter of 2009 also includes pretax credits of $2.6
        million relating to a recovery on a previously recognized agency
        defalcation and $3.0 million relating to the reversal of an accrual
        for a legal matter resolved in the Company's favor. The first quarter
        of 2008 includes a pretax charge of $4.6 million relating to an agency

    (b) Before noncontrolling interests

    (c) The Company did not recognize an income tax benefit in the first
        quarter of 2009 relating to its pretax loss due to the recording of a
        valuation allowance against deferred tax assets.  The valuation
        allowance will be evaluated for reversal when the Company returns to
        profitability.  The income tax expense of $3.2 million recorded in the
        first quarter of 2009 is related to certain goodwill book/tax
        differences and taxes in foreign jurisdictions for our international

Revenues decreased 20.5 percent to $313.5 million in the first quarter of 2009 compared with $394.1 million for the first quarter of 2008. The Company reported a loss before taxes (and before noncontrolling interests) of $37.3 million for the first quarter of 2009 compared with a loss of $40.9 million for the same period in 2008.

The revenue decline in the first quarter of 2009 was due to fewer closed title orders arising from the continuing decline in new and existing home sales, as well as a decline in selling prices and average revenue per file closed. Average revenue per file closed was lower due to a shift in mix of orders, with the first quarter of 2009 experiencing fewer large commercial orders and many more residential refinancing orders (which generate lower revenues per order closed than sale transactions) than in the first quarter of 2008. Title orders declined in the first quarter of 2009 by 6.3 percent from the same period a year ago, which was the lowest quarterly decline since the fourth quarter of 2005. A significant percentage of title orders opened in the first quarter of 2009 related to the refinancing of existing mortgages. These loans are taking longer to process by lenders than has historically been the case due to tightened lending standards and internal capacity constraints of the lenders. Even so, our overall closing ratio showed improvement during March 2009.

The Company continues to reduce costs and improve productivity in its core operations. Total expenses declined 19.4 percent to $350.8 million in the first quarter of 2009 compared with $435.0 million for the first quarter of 2008. In addition to workforce reductions described below, the Company continues to pursue the implementation of title search and production efficiencies company-wide through its regional production center initiative. As a result, significant savings per order processed are being achieved in operationally mature centers. The Company's back-office centralization initiatives remain on target and will begin generating benefits during 2009 in the areas of human resources, finance and accounting, procurement and information technology by continuing to reduce costs while providing high quality customer service.

The Company reduced its employee count during the first quarter of 2009 by approximately 170, or 2.7 percent, as part of its ongoing efforts to reduce costs. Employee costs were 24.5 percent lower in the first quarter of 2009 compared with the first quarter of 2008 due to realizing the full benefit of headcount reductions made during 2008 and the reductions made in the first quarter of this year. Since December 31, 2007, we have reduced headcount by 28.2 percent.

As a result of our aggressive efforts to reduce spending to current market conditions, other operating costs declined 21.6 percent in the first quarter of 2009 compared with the same period in 2008. This decline is consistent with the decrease in revenues. Many of our other operating costs are relatively fixed, such as rent and other occupancy expenses. However, we benefited from decreases in some of these fixed costs in the first quarter of 2009 due to cost reduction efforts in 2008.

Our title loss provision as a percentage of title revenues was 7.0 percent in the first quarter of 2009 compared with 8.0 percent in the same period of 2008.

Stewart's book value per share decreased to $25.33 at March 31, 2009 compared with $27.95 at December 31, 2008.

"Beginning in December 2008, record-low interest rates fueled refinancing activity and, to a lesser extent, sale transactions, which have resulted in improving trends in our order counts," said Stewart Morris, Jr., president and co-chief executive officer. "The current surge in refinancing activity has resulted in longer interest rate-lock periods, which in turn delay the closing of the transactions. As a result, we incurred expenses related to these orders opened during the first quarter of 2009 for which we have not yet recognized the related revenues, although these orders did begin to close in the latter half of March and continued into April. Our aggressive actions to reduce expenses and move production to regional production centers have aligned our costs with changing market conditions and positioned us to take advantage of revenue opportunities as they occur."

"In our underwriting operations, we see positive trends on claims as the number of new claims being filed has finally leveled off," said Malcolm S. Morris, chairman and co-chief executive officer. "While the cancellation of more than 3,000 underperforming agents in the past six months is reducing our risk with little reduction in remitted premiums, we continue to sign high-quality agents as a result of changes in the industry. We are also evaluating our rate structure in each state and increasing rates where appropriate to better match the cost of doing business in those states. Furthermore, even in this challenging global economic climate, our international operations remained profitable," said Morris.

Stewart Information Services Corporation (NYSE: STC - News) is a customer-driven, technology-enabled, strategically competitive real estate information, title insurance and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries throughout the United States and in 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

Forward-looking statements. Certain statements in this news release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the severity and duration of current financial and economic conditions, the impact of recent significant decreases in the level of real estate activity, continued weakness or further adverse changes in the level of real estate activity, our ability to respond to and implement technology changes, the impact of unanticipated title losses on the need to further strengthen our policy loss reserves, any effect of title losses on our cash flows and financial condition, the impact of changes in governmental and insurance regulations, our dependence on our operating subsidiaries as a source of cash flow, the realization of expected expense savings resulting from our expense reduction steps taken in 2008, our ability to access the equity and debt financing markets, our ability to grow our international operations, and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2008 and our Current Reports on Form 8-K. We expressly disclaim any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

    (In thousands of dollars, except per share amounts)

                                                           Three months ended
                                                                March 31
                                                            2009        2008

     Title insurance:
      Direct operations                                   142,538     180,587
      Agency operations                                   166,770     191,053
     Real estate information                                7,365      14,716
     Investment income                                      5,598       8,078
     Investment and other losses - net                     (8,812)       (297)
                                                           -------      -----
                                                          313,459     394,137

     Amounts retained by agencies                         137,416     155,562
     Employee costs                                       114,706     151,962
     Other operating expenses                              68,047      86,836
     Title losses and related claims                       21,572      29,721
     Depreciation and amortization                          7,864       9,091
     Interest                                               1,179       1,815
                                                            -----       -----
                                                          350,784     434,987

    Loss before taxes and noncontrolling interests        (37,325)    (40,850)
    Income tax expense (benefit)                            3,223     (16,761)
                                                            -----     --------
    Net loss                                              (40,548)    (24,089)
    Less net earnings attributable to noncontrolling
     interests                                              1,471       1,203
                                                            -----       -----
    Net loss attributable to Stewart                      (42,019)    (25,292)
                                                          ========    ========

    Net loss per share attributable to Stewart              (2.31)      (1.40)
                                                            ======      ======

    Average number of shares (000)                         18,153      18,046
                                                           ======      ======

    Segment information:
     Title revenues                                       306,094     379,421
     Title pretax loss before noncontrolling interests    (36,153)    (41,544)

     REI revenues                                           7,365      14,716
     REI pretax (loss) earnings before noncontrolling
      interests                                            (1,172)        694

    Selected financial information:
     Cash used by operations                              (27,796)    (31,447)
     Title loss payments - net of recoveries               36,529      30,482
     Other comprehensive (loss) earnings                   (4,069)        159

    Number of title orders opened (000):
      January                                                52.2        52.7
      February                                               40.4        50.9
      March                                                  48.6        47.0
                                                             ----        ----
         Quarter                                            141.2       150.6
                                                            =====       =====

    Number of title orders closed (000):
      Quarter                                                83.9        89.5
                                                             ====        ====

                                                        March 31   December 31
                                                           2009         2008
                                                           ----         ----

    Stockholders' equity                                  461,322     507,069
    Number of shares outstanding (000)                     18,210      18,142
    Book value per share                                    25.33       27.95

    BALANCE SHEETS (condensed)
    (In thousands of dollars)

                                                         March 31  December 31
                                                            2009        2008
                                                            ----        ----

     Cash and cash equivalents                             58,353      76,558
     Cash and cash equivalents - statutory reserve funds    9,912       9,688
                                                            -----       -----
      Total cash and cash equivalents                      68,265      86,246

     Short-term investments                                28,096      37,120
     Investments - statutory reserve funds                365,085     374,508
     Investments - other                                  124,571     156,267
     Receivables - premiums from agencies                  28,712      35,707
     Receivables - other                                   73,154      89,365
     Allowance for uncollectible amounts                  (19,018)    (17,504)
     Property and equipment                                77,823      83,533
     Title plants                                          78,184      78,363
     Goodwill                                             212,651     210,901
     Intangible assets                                      7,720       8,448
     Other assets                                          75,177      83,588
     Investments - pledged, at fair value                 221,794     222,684
                                                          -------     -------

                                                        1,342,214   1,449,226
                                                        =========   =========

     Notes payable                                        108,147     135,276
     Line of credit, secured by pledged investments       221,794     222,684
     Accounts payable and accrued liabilities              92,376     110,769
     Estimated title losses                               445,619     461,532
     Deferred income taxes                                 12,956      11,896
                                                           ------      ------
                                                          880,892     942,157

    Contingent liabilities and commitments

    Stockholders' equity
     Common and Class B Common Stock and
      additional paid-in capital                          144,545     143,811
     Retained earnings                                    311,528     353,547
     Accumulated other comprehensive (loss) earnings       (3,488)        581
     Treasury stock                                        (4,330)     (4,097)
                                                           -------    -------
      Stockholders' equity attributable to Stewart        448,255     493,842
     Noncontrolling interests                              13,067      13,227
                                                           ------      ------
      Total stockholders' equity                          461,322     507,069
                                                          -------     -------

                                                        1,342,214   1,449,226
                                                        =========   =========