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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-02658
 STEWART INFORMATION SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
74-1677330
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1360 Post Oak Blvd.,
Suite 100
 
Houston,
Texas
77056
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713625-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par value per share
STC
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
Accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No
On October 30, 2024, there were 27,721,674 outstanding shares of the issuer's Common Stock.



FORM 10-Q QUARTERLY REPORT
QUARTER ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
 
Item Page
PART I – FINANCIAL INFORMATION
1.
2.
3.
4.
PART II – OTHER INFORMATION
1.
1A.
2.
5.
6.
As used in this report, “we,” “us,” “our,” "Registrant," the “Company” and “Stewart” mean Stewart Information Services Corporation and our subsidiaries, unless the context indicates otherwise.




















2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
 ($000 omitted, except per share)
Revenues
Title revenues:
Direct operations270,706 256,377 736,774 722,242 
Agency operations282,549 265,700 764,081 723,476 
Real estate solutions
96,346 68,190 271,561 202,169 
Operating revenues649,601 590,267 1,772,416 1,647,887 
Investment income13,626 13,393 40,833 32,114 
Net realized and unrealized gains (losses)
4,714 (1,946)11,238 (4,829)
667,941 601,714 1,824,487 1,675,172 
Expenses
Amounts retained by agencies233,980 218,983 634,083 596,498 
Employee costs193,862 181,493 545,987 534,710 
Other operating expenses155,646 130,455 444,890 380,530 
Title losses and related claims21,282 22,251 59,754 59,727 
Depreciation and amortization15,480 16,414 46,062 46,848 
Interest4,899 5,054 14,768 14,777 
625,149 574,650 1,745,544 1,633,090 
Income before taxes and noncontrolling interests
42,792 27,064 78,943 42,082 
Income tax expense
(9,123)(9,134)(17,999)(9,588)
Net income
33,669 17,930 60,944 32,494 
Less net income attributable to noncontrolling interests3,573 3,931 10,375 10,870 
Net income attributable to Stewart
30,096 13,999 50,569 21,624 
Net income
33,669 17,930 60,944 32,494 
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments4,842 (5,847)(884)(995)
Change in net unrealized gains and losses on investments13,015 (7,468)10,853 (6,616)
Reclassification adjustments for realized gains and losses on investments402 20 942 333 
Other comprehensive income (loss), net of taxes:
18,259 (13,295)10,911 (7,278)
Comprehensive income
51,928 4,635 71,855 25,216 
Less net income attributable to noncontrolling interests3,573 3,931 10,375 10,870 
Comprehensive income attributable to Stewart
48,355 704 61,480 14,346 
Basic average shares outstanding (000)27,688 27,348 27,592 27,269 
Basic earnings per share attributable to Stewart
1.09 0.51 1.83 0.79 
Diluted average shares outstanding (000)28,200 27,650 28,069 27,445 
Diluted earnings per share attributable to Stewart
1.07 0.51 1.80 0.79 
See notes to condensed consolidated financial statements.
3


CONDENSED CONSOLIDATED BALANCE SHEETS
 
 September 30, 2024 (Unaudited)
 
 December 31, 2023
 ($000 omitted)
Assets
Cash and cash equivalents183,772 233,365 
Short-term investments44,911 39,023 
Investments, at fair value:
Debt securities (amortized cost of $613,668 and $631,294)
607,540 610,236 
Equity securities81,121 69,700 
688,661 679,936 
Receivables:
Premiums from agencies40,730 38,676 
Trade and other93,698 75,706 
Income taxes5,356 3,535 
Notes21,403 14,570 
Allowance for uncollectible amounts(8,851)(7,583)
152,336 124,904 
Property and equipment:
Land2,545 2,545 
Buildings19,926 19,219 
Furniture and equipment260,131 234,370 
Accumulated depreciation(192,566)(173,799)
90,036 82,335 
Operating lease assets105,510 115,879 
Title plants, at cost76,028 73,359 
Goodwill1,080,681 1,072,129 
Intangible assets, net of amortization175,166 193,196 
Deferred tax assets3,749 3,776 
Other assets128,720 84,959 
2,729,570 2,702,861 
Liabilities
Notes payable445,704 445,290 
Accounts payable and accrued liabilities196,670 190,054 
Operating lease liabilities122,788 135,654 
Estimated title losses517,592 528,269 
Deferred tax liabilities32,481 25,045 
1,315,235 1,324,312 
Contingent liabilities and commitments
Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital
353,172 338,451 
Retained earnings1,080,879 1,070,841 
Accumulated other comprehensive loss:
Foreign currency translation adjustments(19,463)(18,579)
Net unrealized losses on debt securities investments(4,841)(16,636)
Treasury stock – 352,161 common shares, at cost
(2,666)(2,666)
Stockholders’ equity attributable to Stewart1,407,081 1,371,411 
Noncontrolling interests7,254 7,138 
Total stockholders’ equity (27,713,557 and 27,370,227 shares outstanding)
1,414,335 1,378,549 
2,729,570 2,702,861 
See notes to condensed consolidated financial statements.
4


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Nine Months Ended 
 September 30,
 20242023
 ($000 omitted)
Reconciliation of net income to cash used by operating activities:
Net income
60,944 32,494 
Add (deduct):
Depreciation and amortization46,062 46,848 
Adjustments for bad debt provisions1,991 2,425 
Net realized and unrealized (gains) losses
(11,238)4,829 
Amortization of net (discount) premium on debt securities investments
(460)448 
Payments for title losses in excess of provisions
(9,053)(26,417)
Adjustments for insurance recoveries of title losses208  
(Increase) decrease in receivables – net
(22,798)7,007 
Increase in other assets – net(16,796)(9,581)
Increase (decrease) in accounts payable and other liabilities – net
3,912 (24,766)
Change in net deferred income taxes5,199 (692)
Net income from equity method investments
(1,031)(847)
Dividends received from equity method investments848 1,121 
Stock-based compensation expense9,593 10,310 
Other – net275 399 
Cash provided by operating activities
67,656 43,578 
Investing activities:
Proceeds from sales of investments in securities34,276 53,630 
Proceeds from matured investments in debt securities78,849 58,005 
Purchases of investments in securities(99,169)(72,857)
Net purchases of short-term investments(5,206)(14,005)
Purchases of property and equipment and other long-lived assets
(28,125)(29,487)
Proceeds from sale of property and equipment and other assets114 369 
Cash paid for acquisition of businesses and related assets
(14,383)(25,100)
Increase in notes receivable(8,320)(6,960)
Purchases of cost-basis and other investments
(29,810)(1075)
Other – net187 727 
Cash used by investing activities(71,587)(36,753)
Financing activities:
Proceeds from notes payable3,387 3,538 
Payments on notes payable(3,378)(5,776)
Distributions to noncontrolling interests(10,313)(11,646)
Contributions from noncontrolling interests54  
Repurchases of Common Stock(3,618)(1,576)
Proceeds from stock option and employee stock purchase plan exercises8,746 4,846 
Cash dividends paid(40,035)(37,524)
Payment of contingent consideration related to acquisitions(496)(3,025)
Cash used by financing activities(45,653)(51,163)
Effects of changes in foreign currency exchange rates(9)(1,044)
Change in cash and cash equivalents(49,593)(45,382)
Cash and cash equivalents at beginning of period233,365 248,367 
Cash and cash equivalents at end of period183,772 202,985 
See notes to condensed consolidated financial statements.
5


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common Stock
Additional paid-in capitalRetained earnings
Accumulated other comprehensive loss
Treasury stockNoncontrolling interestsTotal
($000 omitted)
Nine Months Ended September 30, 2024
Balance at December 31, 202327,723 310,728 1,070,841 (35,215)(2,666)7,138 1,378,549 
Net income attributable to Stewart— — 50,569 — — — 50,569 
Dividends on Common Stock ($1.45 per share)
— — (40,531)— — — (40,531)
Stock-based compensation198 9,395 — — — — 9,593 
Stock repurchases(59)(3,559)— — — — (3,618)
Stock option and employee stock purchase plan exercises204 8,542 — — — — 8,746 
Change in net unrealized gains and losses on investments, net of taxes— — — 10,853 — — 10,853 
Reclassification adjustment for realized gains and losses on investments, net of taxes— — — 942 — — 942 
Foreign currency translation adjustments, net of taxes— — — (884)— — (884)
Net income attributable to noncontrolling interests— — — — — 10,375 10,375 
Distributions to noncontrolling interests— — — — — (10,313)(10,313)
Net effect of other changes in ownership— — — — — 54 54 
Balance at September 30, 202428,066 325,106 1,080,879 (24,304)(2,666)7,254 1,414,335 
Nine Months Ended September 30, 2023
Balance at December 31, 202227,483 296,861 1,091,816 (51,343)(2,666)8,114 1,370,265 
Net income attributable to Stewart
— — 21,624 — — — 21,624 
Dividends on Common Stock ($1.38 per share)
— — (38,216)— — — (38,216)
Stock-based compensation134 10,176 — — — — 10,310 
Stock repurchases(37)(1,539)— — — — (1,576)
Stock option and employee stock purchase plan exercises129 4,717 — — — — 4,846 
Change in net unrealized gains and losses on investments, net of taxes— — — (6,616)— — (6,616)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — 333 — — 333 
Foreign currency translation adjustments, net of taxes— — — (995)— — (995)
Net income attributable to noncontrolling interests— — — — — 10,870 10,870 
Distributions to noncontrolling interests— — — — — (11,646)(11,646)
Balance at September 30, 202327,709 310,215 1,075,224 (58,621)(2,666)7,338 1,359,199 
See notes to condensed consolidated financial statements.

6


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common Stock
Additional paid-in capitalRetained earningsAccumulated other comprehensive lossTreasury stockNoncontrolling interestsTotal
($000 omitted)
Three Months Ended September 30, 2024
Balance at June 30, 2024
27,951 317,131 1,064,870 (42,563)(2,666)6,551 1,371,274 
Net income attributable to Stewart— — 30,096 — — — 30,096 
Dividends on Common Stock ($0.50 per share)
— — (14,087)— — — (14,087)
Stock-based compensation12 3,244 — — — — 3,256 
Stock repurchases(2)(99)— — — — (101)
Stock option and employee stock purchase plan exercises105 4,830 — — — — 4,935 
Change in net unrealized gains and losses on investments, net of taxes— — — 13,015 — — 13,015 
Reclassification adjustment for realized gains and losses on investments, net of taxes— — — 402 — — 402 
Foreign currency translation adjustments, net of taxes— — — 4,842 — — 4,842 
Net income attributable to noncontrolling interests— — — — — 3,573 3,573 
Distributions to noncontrolling interests— — — — — (2,870)(2,870)
Balance at September 30, 202428,066 325,106 1,080,879 (24,304)(2,666)7,254 1,414,335 
Three Months Ended September 30, 2023
Balance at June 30, 2023
27,620 304,405 1,074,458 (45,326)(2,666)7,504 1,365,995 
Net income attributable to Stewart— — 13,999 — — — 13,999 
Dividends on Common Stock ($0.48 per share)
— — (13,233)— — — (13,233)
Stock-based compensation17 3,250 — — — — 3,267 
Stock repurchases(5)(218)— — — — (223)
Stock option exercises77 2,778 2,855 
Change in net unrealized gains and losses on investments, net of taxes— .— (7,468)— — (7,468)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — 20 — — 20 
Foreign currency translation adjustments, net of taxes— — — (5,847)— — (5,847)
Net income attributable to noncontrolling interests— — — — — 3,931 3,931 
Distributions to noncontrolling interests— — — — — (4,097)(4,097)
Balance at September 30, 202327,709 310,215 1,075,224 (58,621)(2,666)7,338 1,359,199 
See notes to condensed consolidated financial statements.

7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

Interim financial statements. The financial information contained in this report for the three and nine months ended September 30, 2024 and 2023, and as of September 30, 2024, is unaudited. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission on February 29, 2024 (2023 Form 10-K).

A. Management’s responsibility. The accompanying interim financial statements were prepared by management, which is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with the United States (U.S.) generally accepted accounting principles (GAAP), including management’s best judgments and estimates. In the opinion of management, all adjustments necessary for a fair presentation of this information for all interim periods, consisting only of normal recurring accruals, have been made. The Company’s results of operations for interim periods are not necessarily indicative of results for a full year and actual results could differ.

B. Consolidation. The condensed consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. All significant intercompany amounts and transactions have been eliminated and provisions have been made for noncontrolling interests. Unconsolidated investees, in which the Company typically owns from 20% to 50% of the voting stock, are accounted for using the equity method.

C. Restrictions on cash and investments. The Company maintains investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $537.0 million and $527.4 million at September 30, 2024 and December 31, 2023, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $9.7 million and $10.0 million at September 30, 2024 and December 31, 2023, respectively. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease.


NOTE 2

Revenues. The Company's operating revenues, summarized by type, are as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
($000 omitted)
Title insurance premiums:
Direct185,584 169,285 501,096 470,779 
Agency282,549 265,700 764,081 723,476 
Escrow fees41,188 41,973 116,926 117,223 
Real estate solutions and abstract fees113,981 86,451 320,828 253,422 
Other revenues26,299 26,858 69,485 82,987 
649,601 590,267 1,772,416 1,647,887 



8


NOTE 3

Investments in debt and equity securities. As of September 30, 2024 and December 31, 2023, the net unrealized investment gains relating to investments in equity securities held were $21.9 million and $11.2 million, respectively (refer to Note 5).

The amortized costs and fair values of investments in debt securities are as follows:
 September 30, 2024December 31, 2023
 
Amortized
costs
Fair
values
Amortized
costs
Fair
values
 ($000 omitted)
Municipal14,629 14,559 22,201 22,031 
Corporate219,160 214,031 242,656 231,474 
Foreign333,428 332,310 332,723 323,391 
U.S. Treasury Bonds46,451 46,640 33,714 33,340 
613,668 607,540 631,294 610,236 

Foreign debt securities consist of Canadian government, provincial and corporate bonds, United Kingdom treasury and corporate bonds, and Mexican government bonds.

Gross unrealized gains and losses on investments in debt securities are as follows:
 September 30, 2024December 31, 2023
 GainsLossesGainsLosses
 ($000 omitted)
Municipal9 79  170 
Corporate1,406 6,535 764 11,946 
Foreign4,656 5,774 1,765 11,097 
U.S. Treasury Bonds383 194 106 480 
6,454 12,582 2,635 23,693 

Debt securities as of September 30, 2024 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
Amortized
costs
Fair
values
 ($000 omitted)
In one year or less84,595 83,992 
After one year through five years328,164 323,155 
After five years through ten years188,330 188,725 
After ten years12,579 11,668 
613,668 607,540 

9


Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024, were:
 Less than 12 monthsMore than 12 monthsTotal
 LossesFair valuesLossesFair valuesLossesFair values
 ($000 omitted)
Municipal1 1,447 78 10,188 79 11,635 
Corporate8 5,201 6,527 171,050 6,535 176,251 
Foreign28 21,133 5,746 158,489 5,774 179,622 
U.S. Treasury Bonds15 10,312 179 12,389 194 22,701 
52 38,093 12,530 352,116 12,582 390,209 

The number of specific debt investment holdings held in an unrealized loss position as of September 30, 2024 was 257. Of these securities, 234 were in unrealized loss positions for more than 12 months. Total gross unrealized investment losses at September 30, 2024 decreased compared to December 31, 2023, primarily due to lower interest rates in the third quarter 2024. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery in value, and no significant credit risk is deemed to exist, these investments are not considered as credit-impaired. The Company believes its investment portfolio is diversified and expects no material loss to result from the failure to perform by issuers of the debt securities it holds. Investments made by the Company are not collateralized.

Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023, were:
 Less than 12 monthsMore than 12 monthsTotal
 LossesFair valuesLossesFair valuesLossesFair values
 ($000 omitted)
Municipal50 13,022 120 8,383 170 21,405 
Corporate68 4,808 11,878 208,971 11,946 213,779 
Foreign472 31,918 10,625 216,135 11,097 248,053 
U.S. Treasury Bonds327 20,895 153 4,815 480 25,710 
917 70,643 22,776 438,304 23,693 508,947 


NOTE 4

Fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous, market for the asset or liability in an orderly transaction between market participants at the measurement date. Under U.S. GAAP, there is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs when possible.

The three levels of inputs used to measure fair value are as follows:
 
Level 1 – quoted prices in active markets for identical assets or liabilities;
Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

10


As of September 30, 2024, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal 14,559 14,559 
Corporate 214,031 214,031 
Foreign 332,310 332,310 
U.S. Treasury Bonds 46,640 46,640 
Equity securities81,121  81,121 
81,121 607,540 688,661 

As of December 31, 2023, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal 22,031 22,031 
Corporate 231,474 231,474 
Foreign 323,391 323,391 
U.S. Treasury Bonds 33,340 33,340 
Equity securities69,700  69,700 
69,700 610,236 679,936 

As of September 30, 2024 and December 31, 2023, Level 1 financial instruments consist of equity securities. Level 2 financial instruments consist of municipal, governmental, and corporate bonds, both U.S. and foreign. In accordance with the Company’s policies and guidelines which incorporate relevant statutory requirements, the Company’s third-party registered investment manager invests only in securities rated as investment grade or higher by the major rating services, where observable valuation inputs are significant. The fair value of the Company's investments in debt and equity securities is primarily determined using a third-party pricing service provider. The third-party pricing service provider calculates the fair values using both market approach and model valuation methods, as well as pricing information obtained from brokers, dealers and custodians. Management ensures the reasonableness of the third-party service valuations by comparing them with pricing information from the Company's investment manager.


NOTE 5

Net realized and unrealized gains (losses). Realized and unrealized gains and losses are detailed as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
 ($000 omitted)
Realized gains322 900 540 1,239 
Realized losses(108)(307)(488)(4,484)
Net unrealized investment gains (losses) recognized on equity securities still held
4,500 (2,539)11,186 (1,584)
4,714 (1,946)11,238 (4,829)

11


During the first nine months of 2023, realized losses included a $3.2 million contingent receivable loss adjustment related to a previous disposition of a business, while realized gains were primarily due to gains on sale of investment securities.

Investment gains and losses recognized related to investments in equity securities are as follows:
Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
2024202320242023
($000 omitted)
Net investment gains (losses) recognized on equity securities during the period
4,796 (1,738)11,489 (1,505)
Less: Net realized gains on equity securities sold during the period
296 801 303 79 
Net unrealized investment gains (losses) recognized on equity securities still held
4,500 (2,539)11,186 (1,584)

Proceeds from sales of investments in securities are as follows: 
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
 ($000 omitted)
Proceeds from sales of debt securities12,361 10,255 33,129 25,134 
Proceeds from sales of equity securities944 3,887 1,147 28,496 
Total proceeds from sales of investments in securities13,305 14,142 34,276 53,630 


NOTE 6

Goodwill. The summary of changes in goodwill is as follows:
TitleReal Estate SolutionsConsolidated Total
($000 omitted)
Balances at December 31, 2023
707,935 364,194 1,072,129 
Acquisitions8,366  8,366 
Purchase accounting adjustments186  186 
Balances at September 30, 2024
716,487 364,194 1,080,681 

During the first nine months of 2024, goodwill recorded in the title segment was related to an acquisition of a title office.
12


NOTE 7

Estimated title losses. A summary of estimated title losses for the nine months ended September 30 is as follows:

20242023
 ($000 omitted)
Balances at January 1528,269 549,448 
Provisions:
Current year59,959 59,036 
Previous policy years(205)691 
Total provisions59,754 59,727 
Payments, net of recoveries:
Current year(14,171)(12,911)
Previous policy years(54,636)(73,233)
Total payments, net of recoveries(68,807)(86,144)
Effects of changes in foreign currency exchange rates(1,624)(1,636)
Balances at September 30
517,592 521,395 
Loss ratios as a percentage of title operating revenues:
Current year provisions4.0 %4.1 %
Total provisions4.0 %4.1 %


NOTE 8

Share-based payments. As part of its incentive compensation program for executives and senior management employees, the Company provides share-based awards, which usually include a combination of time-based restricted stock units, performance-based restricted stock units and stock options. Each restricted stock unit represents a contractual right to receive a share of the Company's Common Stock. The time-based units generally vest on each of the first three anniversaries of the grant date, while the performance-based units vest upon achievement of certain financial objectives and an employee service requirement over a period of approximately three years. The Company has not granted stock options since 2021 and all outstanding stock option awards are fully vested at September 30, 2024. The compensation expense associated with the share-based awards is calculated based on the fair value of the related award and recognized over the corresponding vesting period.

During the first nine months of 2024 and 2023, the Company granted time-based and performance-based restricted stock units with aggregate grant-date fair values of $14.5 million (235,000 units with an average grant price per unit of $61.56) and $12.1 million (296,000 units with an average grant price per unit of $41.03).


13


NOTE 9

Earnings per share. Basic earnings per share (EPS) attributable to Stewart is calculated by dividing net income attributable to Stewart by the weighted-average number of shares of Common Stock outstanding during the reporting periods. To calculate diluted EPS, the number of shares is adjusted to include the number of additional shares that would have been outstanding if restricted units were vested and issued and stock options were exercised. In periods of net losses, dilutive shares are excluded from the calculation of the diluted EPS and diluted EPS is computed in the same manner as basic EPS.

The calculation of the basic and diluted EPS is as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
($000 omitted, except per share)
Numerator:
Net income attributable to Stewart
30,096 13,999 50,569 21,624 
Denominator (000):
Basic average shares outstanding27,688 27,348 27,592 27,269 
Average number of dilutive shares relating to options243 69 217 52 
Average number of dilutive shares relating to restricted units
269 233 260 124 
Diluted average shares outstanding28,200 27,650 28,069 27,445 
Basic earnings per share attributable to Stewart
1.09 0.51 1.83 0.79 
Diluted earnings per share attributable to Stewart
1.07 0.51 1.80 0.79 


NOTE 10

Contingent liabilities and commitments. In the ordinary course of business, the Company guarantees the third-party indebtedness of certain of its consolidated subsidiaries. As of September 30, 2024, the maximum potential future payments on the guarantees are not more than the related notes payable recorded in the condensed consolidated balance sheets. The Company also guarantees the indebtedness related to lease obligations of certain of its consolidated subsidiaries. The maximum future obligations arising from these lease-related guarantees are not more than the Company’s future lease obligations, as presented on the condensed consolidated balance sheets, plus lease operating expenses. As of September 30, 2024, the Company also had unused letters of credit aggregating $4.9 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees.


NOTE 11

Regulatory and legal developments. The Company is subject to claims and lawsuits arising in the ordinary course of its business, most of which involve disputed policy claims. In some of these lawsuits, the plaintiffs seek exemplary or treble damages in excess of policy limits. The Company does not expect that any of these ordinary course proceedings will have a material adverse effect on its consolidated financial condition or results of operations. The Company believes that it has adequate reserves for the various litigation matters and contingencies referred to in this paragraph and that the likely resolution of these matters will not materially affect its consolidated financial condition or results of operations.

14


The Company is subject to non-ordinary course of business claims or lawsuits from time to time. To the extent the Company is currently the subject of these types of lawsuits, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range of loss, if any, will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Additionally, the Company occasionally receives various inquiries from governmental regulators concerning practices in the insurance industry. Many of these practices do not concern title insurance. To the extent the Company is in receipt of such inquiries, it believes that, where appropriate, it has adequately reserved for these matters and does not anticipate that the outcome of these inquiries will materially affect its consolidated financial condition or results of operations.

The Company is subject to various other administrative actions, investigations and inquiries into its business conduct in certain of the states in which it operates. While the Company cannot predict the outcome of the various regulatory and administrative matters, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of any of these matters will materially affect its consolidated financial condition or results of operations.

NOTE 12

Segment information. The Company has three reportable operating segments: the title segment, the real estate solutions segment, and the corporate and other segment. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, abstracting, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes home and personal insurance services, Internal Revenue Code Section 1031 tax-deferred exchanges, and digital customer engagement platform services. The real estate solutions segment supports the real estate industry and primarily includes credit and real estate information services, valuation management services, online notarization and closing services, and search services. The corporate and other segment is primarily comprised of the parent holding company and centralized support services departments.

Selected statement of income information related to these segments is as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
 ($000 omitted)
Title segment:
Revenues571,600 533,624 1,552,988 1,476,093 
Depreciation and amortization8,860 9,196 26,126 26,182 
Income before taxes and noncontrolling interest
44,994 35,385 88,546 70,181 
Real estate solutions segment:
Revenues96,384 68,215 271,648 202,250 
Depreciation and amortization6,264 6,820 18,803 19,401 
Income before taxes7,382 2,626 19,231 7,273 
Corporate and other segment:
Revenues (net realized losses)(43)(125)(149)(3,171)
Depreciation and amortization356 398 1,133 1,265 
Loss before taxes(9,584)(10,947)(28,834)(35,372)
Consolidated Stewart:
Revenues667,941 601,714 1,824,487 1,675,172 
Depreciation and amortization15,480 16,414 46,062 46,848 
Income before taxes and noncontrolling interest
42,792 27,064 78,943 42,082 

15


The Company does not provide asset information by reportable operating segment as it does not routinely evaluate the asset position by segment.

Total revenues generated in the United States and all international operations are as follows:
 Three Months Ended 
 September 30,
Nine Months Ended 
 September 30,
 2024202320242023
 ($000 omitted)
United States629,036 562,045 1,717,898 1,574,275 
International38,905 39,669 106,589 100,897 
667,941 601,714 1,824,487 1,675,172 


NOTE 13
Other comprehensive income (loss). Changes in the balances of each component of other comprehensive income (loss) and the related tax effects are as follows:
Three Months Ended 
 September 30, 2024
Three Months Ended 
 September 30, 2023
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments16,474 3,459 13,015 (9,452)(1,984)(7,468)
Reclassification adjustments for realized gains and losses on investments509 107 402 25 5 20 
16,983 3,566 13,417 (9,427)(1,979)(7,448)
Foreign currency translation adjustments5,333 491 4,842 (6,931)(1,084)(5,847)
Other comprehensive income (loss)
22,316 4,057 18,259 (16,358)(3,063)(13,295)

Nine Months Ended 
 September 30, 2024
Nine Months Ended 
 September 30, 2023
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments13,738 2,885 10,853 (8,374)(1,758)(6,616)
Reclassification adjustment for realized gains and losses on investments1,192 250 942 421 88 333 
14,930 3,135 11,795 (7,953)(1,670)(6,283)
Foreign currency translation adjustments(1,755)(871)(884)(1,119)(124)(995)
Other comprehensive income (loss)
13,175 2,264 10,911 (9,072)(1,794)(7,278)


16


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S OVERVIEW

Third quarter 2024 overview. We reported net income attributable to Stewart of $30.1 million ($1.07 per diluted share) for the third quarter 2024, compared to net income of $14.0 million ($0.51 per diluted share) for the third quarter 2023. Pretax income before noncontrolling interests for the third quarter 2024 was $42.8 million compared to pretax income before noncontrolling interests of $27.1 million for the prior year quarter. The third quarter 2024 results included $4.7 million of pretax net realized and unrealized gains, while the third quarter 2023 results included $1.9 million of pretax net realized and unrealized losses, both of which were primarily driven by net unrealized gains and losses, respectively, from fair value changes of equity security investments in the title segment.

Summary results of the title segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended September 30
 20242023% Change
Operating revenues553.3 522.1 %
Investment income13.6 13.4 %
Net realized and unrealized gains (losses)
4.8 (1.8)361 %
Pretax income
45.0 35.4 27 %
Pretax margin7.9 %6.6 %

Title segment operating revenues improved $31.2 million, or 6%, in the third quarter 2024 primarily driven by increased revenues from our domestic commercial and agency title operations, while total segment operating expenses increased $28.4 million, or 6%, compared to the third quarter 2023. Agency retention expenses in the third quarter 2024 increased $15.0 million, or 7%, primarily resulting from $16.8 million, or 6%, improvement in gross agency revenues compared to the third quarter 2023.

Total title segment employee costs and other operating expenses increased by $14.6 million, or 6%, in the third quarter 2024 compared to the prior year quarter, primarily due to higher outside search and incentive compensation expenses related to higher commercial revenues. As a percentage of operating revenues, these expenses were 47.4% in both third quarters of 2024 and 2023. Title loss expense in the third quarter 2024 decreased $1.0 million, or 4%, primarily due to an overall favorable claim experience compared to the prior year quarter. As a percentage of title revenues, title loss expense was 3.8% for the third quarter 2024 compared to 4.3% in the third quarter 2023.

Included in the title segment’s pretax income for the third quarters 2024 and 2023 were acquisition intangible asset amortization and related expenses of $2.8 million and $3.4 million, respectively.

Summary results of the real estate solutions segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended September 30
 20242023% Change
Operating revenues96.3 68.2 41 %
Pretax income7.4 2.6 181 %
Pretax margin7.7 %3.8 %

17


The segment's operating revenues increased $28.2 million, or 41%, in the third quarter 2024 compared to the prior year quarter, primarily due to improved revenues from our credit information and valuation services. On a combined basis, segment employee costs and other operating expenses in the third quarter 2024 increased $24.2 million, or 41%, in line with the higher operating revenues. Included in the segment's results for the third quarters 2024 and 2023 were acquisition intangible asset amortization expenses of $5.5 million and $6.3 million, respectively.

In regard to the corporate and other segment, pretax results were driven by net expenses attributable to corporate operations, which decreased to $9.5 million in the third quarter 2024, compared to $10.8 million in the third quarter 2023, primarily due to a prior acquisition-related settlement expense in the third quarter 2023.


CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures surrounding contingencies and commitments.

Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the nine months ended September 30, 2024, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the 2023 Form 10-K.

Operations. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, agencies and centralized title services centers. Our real estate solutions operations include credit and real estate information services, valuation management services, online notarization and closing services, and search services. The corporate and other segment includes our parent holding company and centralized support services departments.

Factors affecting revenues. The principal factors that contribute to changes in our operating revenues include:
interest rates;
availability of mortgage loans;
number and average value of mortgage loan originations;
ability of potential purchasers to qualify for loans;
inventory of existing homes available for sale;
ratio of purchase transactions compared with refinance transactions;
ratio of closed orders to open orders;
home prices;
consumer confidence, including employment trends;
demand by buyers;
premium rates;
foreign currency exchange rates;
market share;
ability to attract and retain highly productive sales associates;
independent agency remittance rates;
opening and integration of new offices and acquisitions;
office closures;
number and value of commercial transactions, which typically yield higher premiums;
government or regulatory initiatives;
acquisitions or divestitures of businesses;
volume of distressed property transactions; and
seasonality and/or weather.

18


Premiums are determined in part by the values of the transactions we handle. To the extent inflation or market conditions cause increases in the prices of homes and other real estate, premium revenues are also increased. Conversely, falling home prices cause premium revenues to decline. Home price changes may override the seasonal nature of the title insurance business. Historically, our first quarter is the least active in terms of title insurance revenues as home buying is generally depressed during winter months. Our second and third quarters are typically the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of the year. On average, title premium rates for refinance orders are lower compared to a similarly priced purchase transaction.


RESULTS OF OPERATIONS

Comparisons of our results of operations for the three and nine months ended September 30, 2024 with the corresponding periods in the prior year are set forth below. Factors contributing to fluctuations in the results of operations are presented in the order of their monetary significance, and we have quantified, when necessary, significant changes. Segment results are included in the discussions and, when relevant, are discussed separately.

Our statements on home sales, interest rates and loan activity are based on published U.S. industry data from sources including Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors® (NAR) and the U.S. Census Bureau as of September 30, 2024. We also use information from our direct operations.

Operating environment. According to NAR, existing home sales (seasonally-adjusted basis) in September 2024 totaled 3.8 million units, which was 1% and 4% lower from August 2024 and a year ago, respectively, primarily due to the consumer hesitancy and affordability challenges, despite the gradually declining interest rate environment. The median home price increased 3% in September 2024 to $405,000 from September 2023, marking the 15th consecutive month of year-over-year price increases, which contributed to increases of 2% and 23% in unsold home inventory in September 2024 compared to August 2024 and September 2023, respectively. In relation to new residential construction, U.S. housing starts (seasonally-adjusted) in September 2024 were 1% lower compared to both August 2024 and September 2023, while newly-issued building permits in September 2024 were 3% and 6% lower compared to August 2024 and September 2023, respectively.

Based on averaged estimates by Fannie Mae and MBA, total U.S. single family mortgage originations during the third quarter 2024 increased 10% to $464 billion compared to the prior year quarter, with purchase and refinancing originations increasing 4% and 42%, respectively. During the third quarter 2024, the average 30-year fixed interest rate averaged lower at 6.6%, compared to 7.0% in both the third quarter 2023 and the second quarter 2024, primarily influenced by the federal government's first interest rate reduction since March 2020. For the fourth quarter 2024, Fannie Mae and MBA expect the interest rate to further decline to an average of 6.2%, lower than the 7.3% average in the fourth quarter 2023, while total dollar originations for the fourth quarter 2024 are expected to increase 7%, compared to the third quarter 2024, behind a projected 69% increase in refinancing lending, partially offset by a 10% decline forecast in purchase originations.

Title revenues. Direct title revenue information is presented below:
 
Three Months Ended September 30,
Nine Months Ended September 30,
 20242023 Change
% Chg*
20242023 Change% Chg
 ($ in millions)($ in millions)
Non-commercial
Domestic168.2 167.6 0.6 — %472.9 502.4 (29.5)(6)%
International29.0 29.1 (0.1)— %76.3 74.1 2.2 %
197.2 196.7 0.5 — %549.2 576.5 (27.3)(5)%
Commercial:
Domestic67.4 51.9 15.5 30 %168.1 126.1 42.0 33 %
International6.1 7.8 (1.7)(22)%19.5 19.6 (0.1)(1)%
73.5 59.7 13.8 23 %187.6 145.7 41.9 29 %
Total direct title revenues270.7 256.4 14.3 %736.8 722.2 14.6 %
*Rounded.
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Domestic non-commercial revenues in the third quarter 2024 were comparable to the prior year quarter, primarily due to the slightly higher average fee per file offsetting the slightly lower non-commercial domestic transactions in the third quarter 2024. Domestic non-commercial revenues in the first nine months of 2024 declined compared to the same period in 2023, primarily as a result of lower residential transactions. Average residential fee per file for both the third quarter and first nine months of 2024 was $3,000, which was 2% higher compared to the third quarter 2023 and 6% lower compared to the first nine months of 2023 primarily due to a lower purchase transaction mix during the first nine months of 2024.

Domestic commercial revenues increased in the third quarter and first nine months of 2024, compared to the same periods in 2023, primarily as a result of increased average transaction size, primarily from the energy and multi-family sectors, and, for third quarter 2024, an improvement in commercial transactions closed compared to the third quarter 2023. Average domestic commercial fee per file increased to $17,700 (or 25%) and $15,100 (or 34%) in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023.

Orders information for the three and nine months ended September 30 is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
20242023Change% Chg
2024
2023
Change% Chg
Opened Orders:
Commercial3,665 3,320 345 10 %10,884 10,456 428 %
Purchase49,458 53,285 (3,827)(7)%152,539 160,197 (7,658)(5)%
Refinance20,920 16,032 4,888 30 %54,022 49,021 5,001 10 %
Other13,421 8,630 4,791 56 %36,075 20,639 15,436 75 %
Total87,464 81,267 6,197 %253,520 240,313 13,207 %
Closed Orders:
Commercial3,794 3,661 133 %11,149 11,170 (21)— %
Purchase35,590 39,903 (4,313)(11)%103,166 113,757 (10,591)(9)%
Refinance11,766 10,397 1,369 13 %31,097 30,593 504 %
Other8,225 6,347 1,878 30 %23,921 12,936 10,985 85 %
Total59,375 60,308 (933)(2)%169,333 168,456 877 %

Other opened and closed orders, which typically have a lower average fee per file compared to residential purchase transactions, increased in the third quarter and first nine months of 2024 compared to the same periods in 2023, primarily due to higher home equity loan-related transactions.

Gross revenues from independent agency operations improved $16.8 million, or 6%, in the third quarter 2024 and $40.6 million, or 6%, in the first nine months of 2024, compared to the same periods in 2023, primarily due to increased agent activity in 2024. Agency revenues, net of retention, increased $1.9 million, or 4%, in the third quarter 2024 and $3.0 million, or 2%, in the first nine months of 2024, compared to the same periods in 2023, primarily due to higher gross agency revenues and slightly higher average agent retention rates. Refer further to the "Retention by agencies" discussion under Expenses below.

Real estate solutions revenues. Real estate solutions revenues improved $28.2 million, or 41%, in the third quarter 2024 and $69.4 million, or 34%, in the first nine months of 2024, primarily driven by higher revenues from credit-related information and valuation services businesses compared to the same periods in 2023.

Investment income. Investment income in the third quarter and first nine months of 2024 increased $0.2 million, or 2%, and $8.7 million, or 27%, respectively, compared to the same periods in 2023. The higher investment income in the first nine months of 2024 was primarily due to higher interest income in 2024 resulting from earned interest from eligible escrow balances, which was an initiative that we started during the late second quarter 2023.

Net realized and unrealized (losses) gains. Refer to Note 5 to the condensed consolidated financial statements.
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Expenses. An analysis of expenses is shown below:
 
Three Months Ended September 30,
Nine Months Ended September 30,
 20242023Change*% Chg20242023Change*% Chg
 ($ in millions)($ in millions)
Amounts retained by agencies234.0 219.0 15.0 %634.1 596.5 37.6 %
As a % of agency revenues82.8 %82.4 %83.0 %82.4 %
Employee costs193.9 181.5 12.4 %546.0 534.7 11.3 %
As a % of operating revenues29.8 %30.7 %30.8 %32.4 %
Other operating expenses155.6 130.5 25.2 19 %444.9 380.5 64.4 17 %
As a % of operating revenues24.0 %22.1 %25.1 %23.1 %
Title losses and related claims21.3 22.3 (1.0)(4)%59.8 59.7 0.1 — %
As a % of title revenues3.8 %4.3 %4.0 %4.1 %
*May not foot due to rounding.

Retention by agencies. Amounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged 82.8% and 83.0% in the third quarter and first nine months of 2024, respectively, compared to 82.4% in both the third quarter and first nine months of 2023, primarily as a result of increased revenues from states with relatively higher retention rates in 2024. The average retention percentage may vary from period to period due to the geographical mix of agency operations, the volume of title revenues and, in some states, laws or regulations. Due to the variety of such laws or regulations, as well as competitive factors, the average retention rate can differ significantly from state to state. In addition, a high proportion of our independent agencies are in states with retention rates greater than 80%. We continue to focus on increasing profit margins in every state, increasing premium revenue in states where remittance rates are higher, and maintaining the quality of our agency network, which we believe to be the industry’s best, in order to mitigate claims risk and drive consistent future performance. While market share is important in our agency operations channel, it is not as important as margins, risk mitigation and profitability.

Employee costs. Consolidated employee costs increased $12.4 million, or 7%, and $11.3 million, or 2%, in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023, primarily due to higher salaries expense resulting from business growth and annual merit increases, higher incentive compensation consistent with improved revenues, and higher medical benefits expense due to increased claims activity. Title segment employee costs increased $10.4 million, or 6%, in the third quarter 2024 and $10.3 million, or 2%, in the first nine months of 2024, while employee costs in the real estate solutions segment increased $1.7 million, or 14%, in the third quarter 2024 and $2.6 million, or 7%, in the first nine months of 2024, compared to the same periods in 2023.

Total employee costs, as a percentage of total operating revenues, were 29.8% and 30.8% in the third quarter and first nine months of 2024, respectively, compared to 30.7% and 32.4% in the third quarter and first nine months of 2023, respectively, primarily due to higher operating revenues. As of September 30, 2024, we had approximately 6,800 employees compared to approximately 7,000 and 6,800 employees as of September 30, 2023 and December 31, 2023, respectively.

Other operating expenses. Other operating expenses include costs that are primarily fixed in nature, costs that follow, to varying degrees, changes in transaction volumes and revenues (variable costs) and costs that fluctuate independently of revenues (independent costs). Costs that are primarily fixed in nature include rent and other occupancy expenses, equipment rental, insurance, repairs and maintenance, technology costs, telecommunications and title plant expenses. Variable costs include appraiser and service expenses related to real estate solutions operations, outside search fees, attorney fee splits, credit losses (on receivables), copy supplies, delivery fees, postage, premium taxes and title plant maintenance expenses. Independent costs include general supplies, litigation defense, business promotion and marketing and travel.

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Consolidated other operating expenses increased $25.2 million, or 19%, in the third quarter 2024 and $64.4 million, or 17%, in the first nine months of 2024 compared to the same periods in 2023, primarily due to higher information and service expenses and outside search fees consistent with increased revenues in our real estate solutions and commercial title operations, respectively. Total variable costs in the third quarter and first nine months of 2024 increased $27.9 million, or 40%, and $66.9 million, or 33%, primarily driven by our real estate solutions and commercial services operations. Total costs that are primarily fixed in nature decreased $1.3 million, or 3%, and $2.4 million, or 2%, in the third quarter and first nine months of 2024, respectively, while independent costs decreased $1.5 million, or 10%, in the third quarter 2024 primarily due to office closure costs recorded in the third quarter 2023, and were comparable in both the first nine months of 2024 and 2023, primarily as a result of lower litigation-related expenses being offset by higher travel and business promotion expenses in the first nine months of 2024.

As a percentage of total operating revenues, consolidated other operating expenses in the third quarter and first nine months of 2024 were 24.0% and 25.1%, respectively, compared to 22.1% and 23.1% in the third quarter and first nine months of 2023, respectively, primarily resulting from increased real estate solutions service expenses related to higher revenues in 2024.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were 3.8% and 4.3% for the third quarters 2024 and 2023, respectively, and 4.0% and 4.1% for the first nine months of 2024 and 2023, respectively. The title loss expense in the third quarter 2024 decreased $1.0 million, or 4%, compared to the prior year quarter, and was comparable in both the first nine months of 2024 and 2023, primarily due to our overall favorable claim experience, partially offset by effect of increased title revenues in 2024. The title loss ratio in any given quarter can be significantly influenced by changes in large claims incurred, escrow losses and adjustments to reserves for existing large claims.

The composition of title policy loss expense is as follows:
 
Three Months Ended September 30,
Nine Months Ended September 30,
 20242023Change% Chg20242023Change% Chg
 ($ in millions)($ in millions)
Provisions – known claims:
Current year4.2 4.9 (0.7)(14)%9.8 10.6 (0.8)(8)%
Prior policy years9.0 15.8 (6.8)(43)%51.4 58.3 (6.9)(12)%
13.2 20.7 (7.5)(36)%61.2 68.9 (7.7)(11)%
Provisions – IBNR
Current year18.0 17.4 0.6 %50.2 48.4 1.8 %
Prior policy years(0.9)— (0.9)(100)%(0.2)0.7 (0.9)(129)%
17.1 17.4 (0.3)(2)%50.0 49.1 0.9 %
Transferred from IBNR to known claims(9.0)(15.8)6.8 43 %(51.4)(58.3)6.9 (12)%
Total provisions21.3 22.3 (1.0)(4)%59.8 59.7 0.1 — %

Provisions for known claims arise primarily from prior policy years as claims are not typically reported until several years after policies are issued. Provisions - Incurred But Not Reported (IBNR) are estimates of claims expected to be incurred over the next 20 years; therefore, it is not unusual or unexpected to experience changes to those estimated provisions in both current and prior policy years as additional loss experience on policy years is obtained. This loss experience may result in changes to our estimate of total ultimate losses expected (i.e., the IBNR policy loss reserve). Current year provisions - IBNR are recorded on policies issued in the current year as a percentage of premiums earned (provisioning rate). As claims become known, provisions are reclassified from IBNR to known claims. Adjustments relating to large losses (those individually in excess of $1.0 million) may impact provisions either for known claims or for IBNR.

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Total known claims provision decreased $7.5 million, or 36%, and $7.7 million or 11% in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023, primarily as a result of timing of claims reported related to prior policy years. Current year IBNR provisions increased $0.6 million, or 3%, in the third quarter 2024 and increased $1.8 million, or 4%, in the first nine months of 2024, compared to the same periods in 2023, primarily due to increased title premiums in 2024. As a percentage of title operating revenues, provisions - IBNR for the current policy year was 3.3% in both the third quarters 2024 and 2023, and were 3.3% and 3.4% in the first nine months of 2024 and 2023, respectively.

Cash claim payments in the third quarter 2024 decreased $2.4 million, or 11%, compared to the third quarter 2023, primarily due to lower payments on general claims and a loss recovery, partially offset by increased payments on large claims related to prior policy years. Cash claim payments in the first nine months of 2024 decreased $17.3 million, or 20%, compared to the same period in 2023, primarily due to lower payments on both large and general claims related to prior policy years and several loss recoveries. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.

In addition to title policy claims, we incur losses in our direct operations from escrow, closing and disbursement functions. These escrow losses typically relate to errors or other miscalculations of amounts to be paid at closing, including timing or amount of a mortgage payoff, payment of property or other taxes and payment of homeowners’ association fees. Escrow losses also arise in cases of fraud, and in those cases, the title insurer incurs the loss under its obligation to ensure that an unencumbered title is conveyed. Escrow losses are recognized as expenses when discovered or when contingencies associated with them (such as litigation) are resolved and are typically paid less than 12 months after the loss is recognized.

Total title policy loss reserve balances are as follows:
September 30, 2024December 31, 2023
 ($ in millions)
Known claims62.6 70.2 
IBNR455.0 458.1 
Total estimated title losses517.6 528.3 

The actual timing of estimated title loss payments may vary since claims, by their nature, are complex and paid over long periods of time. Based on historical payment patterns, the outstanding loss reserves are substantially paid out within eight years. As a result, the estimate of the ultimate amount to be paid on any claim may be modified over that time period. Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary’s calculated estimates.

Depreciation and amortization. Depreciation and amortization expenses in the third quarter and first nine months of 2024 decreased $0.9 million, or 6%, and $0.8 million, or 2%, compared to the corresponding periods in 2023, primarily due to lower acquisition intangible amortization expenses resulting from several assets becoming fully amortized, partially offset by increased depreciation expenses related to new internal-use systems placed into operation. Acquisition intangible amortization expenses for the third quarter and first nine months of 2024 were $7.9 million and $24.0 million, respectively, compared to $9.3 million and $26.3 million in the same periods in 2023.

Income taxes. Our effective tax rates, based on income before taxes and after deducting income attributable to noncontrolling interests, were 23% and 26% in the third quarter and first nine months of 2024, respectively, compared to 39% and 31% in the third quarter and first nine months of 2023, respectively. The higher effective tax rates in the third quarter and first nine months of 2023 were primarily driven by discrete annual federal return tax adjustments recorded in the third quarter 2023 related to lower utilization of foreign tax credits.


23


LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to stockholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of September 30, 2024, our total cash and investments, including amounts reserved pursuant to statutory requirements aggregated $917.3 million. Of our total cash and investments at September 30, 2024, $491.2 million ($241.7 million, net of statutory reserves) was held in the United States and the rest internationally (principally in Canada).

As a holding company, the parent company is funded principally by cash from its subsidiaries' earnings in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. Cash held at the parent company and its unregulated subsidiaries (which totaled $37.9 million at September 30, 2024) is available for funding the parent company's operating expenses, interest payments on debt and dividend payments to common stockholders. The parent company also receives distributions from Stewart Title Guaranty Company (Guaranty), its regulated title insurance underwriter, to meet cash requirements for acquisitions and other strategic investments.

A substantial majority of our consolidated cash and investments as of September 30, 2024 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty uses its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and real estate solutions operations) for their operating and debt service needs.

We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $537.0 million and $527.4 million at September 30, 2024 and December 31, 2023, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $9.7 million and $10.0 million at September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, our known claims reserve totaled $62.6 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled $455.0 million. In addition to this, we had cash and investments (at amortized cost and excluding equity method investments) of $282.5 million, which are available for underwriter operations, including claims payments, and acquisitions.

The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The Texas Department of Insurance (TDI) must be notified of any dividend declared, and any dividend in excess of the greater of the statutory net operating income or 20% of surplus (which was approximately $168.7 million as of December 31, 2023) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and liquidity, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. During the nine months ended September 30, 2024, Guaranty paid $30.0 million of dividends to the parent company. Guaranty did not pay any dividends during the nine months ended September 30, 2023.

24


As the parent company conducts no operations apart from its wholly-owned subsidiaries, the discussion below focuses on consolidated cash flows.
 Nine Months Ended September 30,
 20242023
 ($ in millions)
Net cash provided by operating activities
67.7 43.6 
Net cash used by investing activities(71.6)(36.8)
Net cash used by financing activities(45.7)(51.2)

Operating activities. Our principal sources of cash from operations are premiums on title policies and revenue from title service-related transactions, real estate solutions and other operations. Our independent agencies remit cash to us net of their contractual retention. Our principal cash expenditures for operations are employee costs, operating costs and title claims payments.

Net cash provided by operations in the first nine months of 2024 improved to $67.7 million compared to $43.6 million in the first nine months of 2023, primarily driven by improved net results and lower payments on claims in 2024. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We are continuing our emphasis on cost management, especially in light of the current economic environment due to elevated mortgage interest rates, specifically focusing on lowering unit costs of production and improving operating margins in our direct title and real estate solutions operations. Our plans to improve margins include additional automation of manual processes, further consolidation of our various systems and production operations, and full integration of acquisitions. We continue to invest in the technology necessary to accomplish these goals.

Investing activities. Net cash used by investing activities is primarily related to proceeds from matured and sold investments, purchases of investments, capital expenditures and acquisition of businesses. During the first nine months of 2024, total proceeds from securities investments sold and matured were $113.1 million compared to $111.6 million during the first nine months of 2023, while cash used for purchases of securities investments was $99.2 million in the first nine months of 2024 compared to $72.9 million in the same period of 2023. Additionally, cash paid for cost-basis and other investments was $29.8 million and $1.1 million during the first nine months of 2024 and 2023, respectively.

We used $28.1 million and $29.5 million of cash for purchases of property and equipment and other long-lived assets during the first nine months of 2024 and 2023, respectively, while we used net cash of $14.4 million for an acquisition of a title office and a prior acquisition-related customer relationship asset in the title segment in the first nine months of 2024, compared to $25.1 million used for acquisitions in the title and real estate solutions segments during the first nine months of 2023. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.

Financing activities and capital resources. Total debt and stockholders’ equity were $445.7 million and $1.41 billion, respectively, as of September 30, 2024. During the first nine months of 2024 and 2023, payments on notes payable of $3.4 million and $5.7 million, respectively, and notes payable additions of $3.4 million and $3.5 million, respectively, were related to short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business.

At September 30, 2024, our line of credit facility was fully available, while our debt-to-equity and debt-to-capitalization ratios, excluding our Section 1031 notes, were approximately 32% and 24%, respectively. During the first nine months of 2024, we paid total dividends of $40.0 million ($1.45 per common share), compared to total dividends paid in the first nine months of 2023 of $37.5 million ($1.38 per common share).

25


We believe we have sufficient liquidity and capital resources to meet the cash needs of our ongoing operations, including consideration of the current economic and real estate environment created by the increasing mortgage interest rates. However, we may determine that additional debt or equity funding is warranted to provide liquidity for achievement of strategic goals or acquisitions or for unforeseen circumstances. Other than scheduled maturities of debt, operating lease payments and anticipated claims payments, we have no material contractual commitments. We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, including claims payments. However, to the extent that these funds are not sufficient, we may be required to borrow funds on terms less favorable than we currently have or seek funding from the equity market, which may not be successful or may be on terms that are dilutive to existing stockholders.

Contingent liabilities and commitments. See discussion of contingent liabilities and commitments in Note 10 to the condensed consolidated financial statements.

Other comprehensive income (loss). Unrealized gains and losses on available-for-sale debt securities investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive income (loss), a component of stockholders’ equity, until they are realized. During the first nine months of 2024, net unrealized investment gains of $11.8 million, net of taxes, which increased our other comprehensive income, were primarily related to net increases in the fair values of our foreign and corporate bond securities investments. These increases were primarily influenced by the federal government's reduction of interest rates during the third quarter 2024. During the first nine months of 2023, net unrealized investment losses of $6.3 million, net of taxes, which increased our other comprehensive loss, were primarily related to net decreases in the fair values of our foreign and corporate bond securities investments, primarily resulting from the elevated interest rate environment in 2023.

Changes in foreign currency exchange rates (primarily related to our Canadian and United Kingdom operations) decreased our other comprehensive income, net of taxes, by $0.9 million in the first nine months of 2024, while they increased our other comprehensive loss by $1.0 million in the first nine months of 2023.

Off-balance sheet arrangements. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements, other than our contractual obligations under operating leases. We also routinely hold funds in segregated escrow accounts pending the closing of real estate transactions and have qualified intermediaries in tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code. The Company holds the proceeds from these transactions until a qualifying exchange can occur. In accordance with industry practice, these segregated accounts are not included on the balance sheet. See Note 15 in our 2023 Form 10-K.

Forward-looking statements. Certain statements in this report 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 “may,” "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" 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 following:
the volatility of economic conditions;
adverse changes in the level of real estate activity;
changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing;
our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems;
our ability to prevent and mitigate cyber risks;
the impact of unanticipated title losses or the need to strengthen our policy loss reserves;
any effect of title losses on our cash flows and financial condition;
the ability to attract and retain highly productive sales associates;
the impact of vetting our agency operations for quality and profitability;
independent agency remittance rates;
changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products;
regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees;
26


our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services;
our ability to realize anticipated benefits of our previous acquisitions;
the outcome of pending litigation;
our ability to manage risks associated with potential cybersecurity or other privacy or data security breaches;
the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services;
our dependence on our operating subsidiaries as a source of cash flow;
our ability to access the equity and debt financing markets when and if needed;
effects of seasonality and weather; and
our ability to respond to the actions of our competitors.

The above risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including in Part I, Item 1A "Risk Factors" in our 2023 Form 10-K, and as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K filed subsequently. All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes during the nine months ended September 30, 2024 in our investment strategies, types of financial instruments held or the risks associated with such instruments that would materially alter the market risk disclosures made in our 2023 Form 10-K.


Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our principal executive officer and principal financial officer are responsible for establishing and maintaining disclosure controls and procedures. They evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2024, and have concluded that, as of such date, our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings

See discussion of legal proceedings in Note 11 to the condensed consolidated financial statements included in Item 1 of Part I of this Report, which is incorporated by reference into this Part II, Item 1, as well as Item 3. Legal Proceedings, in our 2023 Form 10-K.


Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our 2023 Form 10-K. There have been no material changes to our risk factors since our 2023 Form 10-K.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no repurchases of our Common Stock during the nine months ended September 30, 2024, except for repurchases of approximately 58,700 shares (aggregate purchase price of approximately $3.6 million) related to the statutory income tax withholding on the vesting of restricted unit grants to executives and senior management employees.


Item 5. Other Information

Book value per share. Our book value per share was $50.77 and $50.11 as of September 30, 2024 and December 31, 2023, respectively. As of September 30, 2024, our book value per share was based on approximately $1.41 billion of stockholders’ equity attributable to Stewart and 27,713,557 shares of Common Stock outstanding. As of December 31, 2023, our book value per share was based on approximately $1.37 billion of stockholders’ equity attributable to Stewart and 27,370,227 shares of Common Stock outstanding.


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Item 6. Exhibits
Exhibit  
3.1
3.2
31.1*
31.2*
32.1*
32.2*
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith



SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 6, 2024
Date
 Stewart Information Services Corporation
 Registrant
By: /s/ David C. Hisey
 David C. Hisey, Chief Financial Officer and Treasurer
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