þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 74-1677330 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1980 Post Oak Blvd., Houston TX | 77056 | |
(Address of principal executive offices) | (Zip Code) |
(Former name, former address and former fiscal year, if changed since last report) |
Large accelerated filer þ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
Item | Page | |
PART I – FINANCIAL INFORMATION | ||
1. | ||
2. | ||
3. | ||
4. | ||
PART II – OTHER INFORMATION | ||
1. | ||
1A. | ||
2. | ||
5. | ||
6. | ||
For the Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($000 omitted, except per share) | |||||||||||
Revenues | |||||||||||
Title insurance: | |||||||||||
Direct operations | 241,109 | 243,128 | 664,128 | 676,148 | |||||||
Agency operations | 282,269 | 279,343 | 732,320 | 741,993 | |||||||
Ancillary services | 22,059 | 29,924 | 65,276 | 104,878 | |||||||
Investment income | 4,520 | 4,121 | 14,445 | 12,735 | |||||||
Investment and other gains (losses) – net | 3,253 | (811 | ) | 4,706 | 728 | ||||||
553,210 | 555,705 | 1,480,875 | 1,536,482 | ||||||||
Expenses | |||||||||||
Amounts retained by agencies | 231,586 | 227,374 | 598,915 | 607,611 | |||||||
Employee costs | 154,529 | 165,024 | 457,166 | 498,598 | |||||||
Other operating expenses | 94,043 | 99,758 | 268,210 | 286,553 | |||||||
Title losses and related claims | 26,365 | 25,883 | 66,612 | 78,593 | |||||||
Impairment of goodwill | — | 35,000 | — | 35,000 | |||||||
Depreciation and amortization | 7,082 | 7,633 | 22,728 | 22,013 | |||||||
Interest | 797 | 601 | 2,237 | 1,525 | |||||||
514,402 | 561,273 | 1,415,868 | 1,529,893 | ||||||||
Income (loss) before taxes and noncontrolling interests | 38,808 | (5,568 | ) | 65,007 | 6,589 | ||||||
Income tax expense | 9,041 | 4,859 | 16,779 | 7,735 | |||||||
Net income (loss) | 29,767 | (10,427 | ) | 48,228 | (1,146 | ) | |||||
Less net income attributable to noncontrolling interests | 3,392 | 3,040 | 9,450 | 7,663 | |||||||
Net income (loss) attributable to Stewart | 26,375 | (13,467 | ) | 38,778 | (8,809 | ) | |||||
Net income (loss) | 29,767 | (10,427 | ) | 48,228 | (1,146 | ) | |||||
Other comprehensive (loss) income, net of taxes: | |||||||||||
Foreign currency translation adjustments | (1,808 | ) | (4,282 | ) | (216 | ) | (8,538 | ) | |||
Change in net unrealized gains on investments | (263 | ) | (155 | ) | 11,708 | (4,096 | ) | ||||
Reclassification of adjustment for gains included in net income (loss) | (865 | ) | (439 | ) | (1,044 | ) | (1,221 | ) | |||
Other comprehensive (loss) income, net of taxes: | (2,936 | ) | (4,876 | ) | 10,448 | (13,855 | ) | ||||
Comprehensive income (loss) | 26,831 | (15,303 | ) | 58,676 | (15,001 | ) | |||||
Less net income attributable to noncontrolling interests | 3,392 | 3,040 | 9,450 | 7,663 | |||||||
Comprehensive income (loss) attributable to Stewart | 23,439 | (18,343 | ) | 49,226 | (22,664 | ) | |||||
Basic average shares outstanding (000) | 23,371 | 23,286 | 23,362 | 23,631 | |||||||
Basic earnings (loss) per share attributable to Stewart | 1.13 | (0.58 | ) | 1.15 | (0.37 | ) | |||||
Diluted average shares outstanding (000) | 23,611 | 23,286 | 23,596 | 23,631 | |||||||
Diluted earnings (loss) per share attributable to Stewart | 1.12 | (0.58 | ) | 1.13 | (0.37 | ) |
As of September 30, 2016 (Unaudited) | As of December 31, 2015 | ||||
($000 omitted) | |||||
Assets | |||||
Cash and cash equivalents | 161,788 | 179,067 | |||
Short-term investments | 40,068 | 39,707 | |||
Investments in debt and equity securities available-for-sale, at fair value: | |||||
Statutory reserve funds | 448,813 | 483,312 | |||
Other | 194,878 | 96,537 | |||
643,691 | 579,849 | ||||
Receivables: | |||||
Premiums from agencies | 33,402 | 36,393 | |||
Trade and other | 46,017 | 49,453 | |||
Income taxes | 1,767 | 1,914 | |||
Notes | 2,605 | 3,744 | |||
Allowance for uncollectible amounts | (8,714 | ) | (9,833 | ) | |
75,077 | 81,671 | ||||
Property and equipment, at cost | |||||
Land | 3,991 | 3,991 | |||
Buildings | 22,621 | 22,898 | |||
Furniture and equipment | 223,639 | 214,350 | |||
Accumulated depreciation | (177,254 | ) | (169,870 | ) | |
72,997 | 71,369 | ||||
Title plants, at cost | 75,313 | 75,743 | |||
Investments in investees, on an equity method basis | 9,625 | 9,628 | |||
Goodwill | 217,921 | 217,722 | |||
Intangible assets, net of amortization | 14,307 | 18,075 | |||
Deferred tax assets | 2,875 | 4,949 | |||
Other assets | 46,070 | 43,807 | |||
1,359,732 | 1,321,587 | ||||
Liabilities | |||||
Notes payable | 131,135 | 102,399 | |||
Accounts payable and accrued liabilities | 99,551 | 118,082 | |||
Estimated title losses | 460,700 | 462,622 | |||
Deferred tax liabilities | 9,980 | 1,356 | |||
701,366 | 684,459 | ||||
Contingent liabilities and commitments | |||||
Stockholders’ equity | |||||
Common and Class B Common Stock and additional paid-in capital | 185,223 | 180,385 | |||
Retained earnings | 461,497 | 455,519 | |||
Accumulated other comprehensive income (loss): | |||||
Unrealized investment gains on investments - net | 20,067 | 9,403 | |||
Foreign currency translation adjustments | (13,576 | ) | (13,360 | ) | |
Treasury stock – 352,161 common shares, at cost | (2,666 | ) | (2,666 | ) | |
Stockholders’ equity attributable to Stewart | 650,545 | 629,281 | |||
Noncontrolling interests | 7,821 | 7,847 | |||
Total stockholders’ equity (23,371,297 and 23,341,106 shares outstanding) | 658,366 | 637,128 | |||
1,359,732 | 1,321,587 |
Nine Months Ended September 30, | |||||
2016 | 2015 | ||||
($000 omitted) | |||||
Reconciliation of net income (loss) to cash provided by operating activities: | |||||
Net income (loss) | 48,228 | (1,146 | ) | ||
Add (deduct): | |||||
Depreciation and amortization | 22,728 | 22,013 | |||
Provision for bad debt | 1,189 | 1,672 | |||
Investment and other gains – net | (4,706 | ) | (728 | ) | |
Payments for title losses in excess of provisions | (4,446 | ) | (5,049 | ) | |
Insurance recoveries of title losses | 290 | 763 | |||
Impairment of goodwill | — | 35,000 | |||
Decrease in receivables – net | 4,386 | 8,634 | |||
Increase in other assets – net | (1,389 | ) | (1,446 | ) | |
Decrease in payables and accrued liabilities – net | (16,027 | ) | (3,147 | ) | |
Change in net deferred income taxes | 3,159 | (453 | ) | ||
Net income from equity investees | (1,933 | ) | (2,904 | ) | |
Dividends received from equity investees | 1,912 | 3,111 | |||
Stock based compensation expense | 5,093 | 4,626 | |||
Other – net | 5,502 | 4,651 | |||
Cash provided by operating activities | 63,986 | 65,597 | |||
Investing activities: | |||||
Proceeds from investments available-for-sale sold | 49,666 | 60,314 | |||
Proceeds from investments available-for-sale matured | 25,562 | 40,270 | |||
Purchases of investments available-for-sale | (122,149 | ) | (101,503 | ) | |
Net (purchases) sales of short-term investments | (361 | ) | 3,160 | ||
Purchases of property and equipment, title plants and real estate – net | (13,615 | ) | (13,373 | ) | |
Cash paid for acquisition of subsidiaries | (300 | ) | (3,958 | ) | |
Other – net | 944 | 1,904 | |||
Cash used by investing activities | (60,253 | ) | (13,186 | ) | |
Financing activities: | |||||
Payments on notes payable | (3,058 | ) | (19,325 | ) | |
Proceeds from notes payable | 24,804 | 30,196 | |||
Distributions to noncontrolling interests | (9,430 | ) | (6,861 | ) | |
Repurchases of common stock | — | (27,815 | ) | ||
Cash dividends paid | (20,800 | ) | (11,280 | ) | |
Cash paid on Class B Common Shares conversion | (12,000 | ) | — | ||
Payment of contingent consideration related to an acquisition | (2,002 | ) | — | ||
Other – net | (301 | ) | 23 | ||
Cash used by financing activities | (22,787 | ) | (35,062 | ) | |
Effects of changes in foreign currency exchange rates | 1,775 | (6,592 | ) | ||
(Decrease) increase in cash and cash equivalents | (17,279 | ) | 10,757 | ||
Cash and cash equivalents at beginning of period | 179,067 | 200,558 | |||
Cash and cash equivalents at end of period | 161,788 | 211,315 | |||
Common and Class B Common Stock ($1 par value) | Additional paid-in capital | Retained earnings | Accumulated other comprehensive (loss) income | Treasury stock | Noncontrolling interests | Total | ||||||||||||||
($000 omitted) | ||||||||||||||||||||
Balances at December 31, 2015 | 23,693 | 156,692 | 455,519 | (3,957 | ) | (2,666 | ) | 7,847 | 637,128 | |||||||||||
Net income attributable to Stewart | — | — | 38,778 | — | — | — | 38,778 | |||||||||||||
Cash dividends on Common Stock ($0.90 per share) | — | — | (20,800 | ) | — | — | — | (20,800 | ) | |||||||||||
Cash paid on Class B Common Shares conversion | — | — | (12,000 | ) | — | — | — | (12,000 | ) | |||||||||||
Stock based compensation and other | 30 | 5,063 | — | — | — | — | 5,093 | |||||||||||||
Purchase of remaining interest in consolidated subsidiary | — | (255 | ) | — | — | — | (46 | ) | (301 | ) | ||||||||||
Net change in unrealized gains and losses on investments | — | — | — | 11,708 | — | — | 11,708 | |||||||||||||
Net realized gain reclassification | — | — | — | (1,044 | ) | — | — | (1,044 | ) | |||||||||||
Foreign currency translation adjustments | — | — | — | (216 | ) | — | — | (216 | ) | |||||||||||
Net income attributable to noncontrolling interests | — | — | — | — | — | 9,450 | 9,450 | |||||||||||||
Subsidiary dividends paid to noncontrolling interests | — | — | — | — | — | (9,430 | ) | (9,430 | ) | |||||||||||
Balances at September 30, 2016 | 23,723 | 161,500 | 461,497 | 6,491 | (2,666 | ) | 7,821 | 658,366 |
September 30, 2016 | December 31, 2015 | ||||||||||
Amortized costs | Fair values | Amortized costs | Fair values | ||||||||
($000 omitted) | |||||||||||
Debt securities: | |||||||||||
Municipal | 72,725 | 75,421 | 70,300 | 72,008 | |||||||
Corporate | 341,005 | 358,164 | 303,870 | 309,461 | |||||||
Foreign | 156,444 | 162,798 | 149,914 | 153,221 | |||||||
U.S. Treasury Bonds | 12,793 | 12,883 | 13,803 | 13,906 | |||||||
Equity securities | 29,854 | 34,425 | 27,497 | 31,253 | |||||||
612,821 | 643,691 | 565,384 | 579,849 |
September 30, 2016 | December 31, 2015 | ||||||||||
Gains | Losses | Gains | Losses | ||||||||
($000 omitted) | |||||||||||
Debt securities: | |||||||||||
Municipal | 2,745 | 49 | 1,720 | 12 | |||||||
Corporate | 17,241 | 82 | 7,700 | 2,109 | |||||||
Foreign | 6,395 | 41 | 3,789 | 482 | |||||||
U.S. Treasury Bonds | 90 | — | 128 | 25 | |||||||
Equity securities | 5,462 | 891 | 4,842 | 1,086 | |||||||
31,933 | 1,063 | 18,179 | 3,714 |
Amortized costs | Fair values | ||||
($000 omitted) | |||||
In one year or less | 45,531 | 45,904 | |||
After one year through five years | 233,813 | 243,355 | |||
After five years through ten years | 223,019 | 233,147 | |||
After ten years | 80,604 | 86,860 | |||
582,967 | 609,266 |
Less than 12 months | More than 12 months | Total | |||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | ||||||||||||
($000 omitted) | |||||||||||||||||
Debt securities: | |||||||||||||||||
Municipal | 49 | 5,544 | — | — | 49 | 5,544 | |||||||||||
Corporate | 82 | 12,415 | — | — | 82 | 12,415 | |||||||||||
Foreign | 28 | 15,045 | 13 | 1,574 | 41 | 16,619 | |||||||||||
Equity securities | 578 | 7,080 | 313 | 2,294 | 891 | 9,374 | |||||||||||
737 | 40,084 | 326 | 3,868 | 1,063 | 43,952 |
Less than 12 months | More than 12 months | Total | |||||||||||||||
Losses | Fair values | Losses | Fair values | Losses | Fair values | ||||||||||||
($000 omitted) | |||||||||||||||||
Debt securities: | |||||||||||||||||
Municipal | 9 | 2,230 | 3 | 1,615 | 12 | 3,845 | |||||||||||
Corporate | 1,461 | 83,565 | 648 | 32,871 | 2,109 | 116,436 | |||||||||||
Foreign | 322 | 35,008 | 160 | 3,155 | 482 | 38,163 | |||||||||||
U.S. Treasury Bonds | 6 | 1,195 | 19 | 3,583 | 25 | 4,778 | |||||||||||
Equity securities | 720 | 4,440 | 366 | 3,224 | 1,086 | 7,664 | |||||||||||
2,518 | 126,438 | 1,196 | 44,448 | 3,714 | 170,886 |
• | 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. |
Level 1 | Level 2 | Fair value measurements | ||||||
($000 omitted) | ||||||||
Investments available-for-sale: | ||||||||
Debt securities: | ||||||||
Municipal | — | 75,421 | 75,421 | |||||
Corporate | — | 358,164 | 358,164 | |||||
Foreign | — | 162,798 | 162,798 | |||||
U.S. Treasury Bonds | — | 12,883 | 12,883 | |||||
Equity securities | 34,425 | — | 34,425 | |||||
34,425 | 609,266 | 643,691 |
Level 1 | Level 2 | Fair value measurements | ||||||
($000 omitted) | ||||||||
Investments available-for-sale: | ||||||||
Debt securities: | ||||||||
Municipal | — | 72,008 | 72,008 | |||||
Corporate | — | 309,461 | 309,461 | |||||
Foreign | — | 153,221 | 153,221 | |||||
U.S. Treasury Bonds | — | 13,906 | 13,906 | |||||
Equity securities | 31,253 | — | 31,253 | |||||
31,253 | 548,596 | 579,849 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($000 omitted) | |||||||||||
Realized gains | 3,301 | 968 | 8,377 | 3,195 | |||||||
Realized losses | (48 | ) | (1,779 | ) | (3,671 | ) | (2,467 | ) | |||
3,253 | (811 | ) | 4,706 | 728 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($000 omitted) | |||||||||||
Proceeds from sale of investments available-for-sale | 16,839 | 14,378 | 49,666 | 60,314 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
2016 | 2015 | 2016 | 2015 | |||||
($000 omitted, except per share) | ||||||||
Numerator: | ||||||||
Net income (loss) attributable to Stewart | 26,375 | (13,467 | ) | 38,778 | (8,809 | ) | ||
Less: Cash paid on Class B Common Shares conversion (a) | — | — | (12,000 | ) | — | |||
Net income (loss) available to common shareholders | 26,375 | (13,467 | ) | 26,778 | (8,809 | ) | ||
Denominator (000): | ||||||||
Basic average shares outstanding | 23,371 | 23,286 | 23,362 | 23,631 | ||||
Average number of dilutive shares relating to options | 1 | — | 1 | — | ||||
Average number of dilutive shares relating to grants of restricted shares | 239 | — | 233 | — | ||||
Diluted average shares outstanding | 23,611 | 23,286 | 23,596 | 23,631 | ||||
Basic earnings (loss) per share attributable to Stewart | 1.13 | (0.58 | ) | 1.15 | (0.37 | ) | ||
Diluted earnings (loss) per share attributable to Stewart | 1.12 | (0.58 | ) | 1.13 | (0.37 | ) |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($000 omitted) | |||||||||||
Title segment: | |||||||||||
Revenues | 529,816 | 527,294 | 1,410,863 | 1,431,412 | |||||||
Depreciation and amortization | 5,120 | 4,711 | 15,642 | 13,870 | |||||||
Income before taxes and noncontrolling interest | 50,308 | 48,803 | 100,984 | 95,978 | |||||||
Ancillary services and corporate segment: | |||||||||||
Revenues | 23,394 | 28,411 | 70,012 | 105,070 | |||||||
Depreciation and amortization | 1,962 | 2,922 | 7,086 | 8,143 | |||||||
Loss before taxes and noncontrolling interest | (11,500 | ) | (54,371 | ) | (35,977 | ) | (89,389 | ) | |||
Consolidated Stewart: | |||||||||||
Revenues | 553,210 | 555,705 | 1,480,875 | 1,536,482 | |||||||
Depreciation and amortization | 7,082 | 7,633 | 22,728 | 22,013 | |||||||
Income (loss) before taxes and noncontrolling interest | 38,808 | (5,568 | ) | 65,007 | 6,589 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($000 omitted) | |||||||||||
United States | 518,204 | 524,567 | 1,394,228 | 1,456,742 | |||||||
International | 35,006 | 31,138 | 86,647 | 79,740 | |||||||
553,210 | 555,705 | 1,480,875 | 1,536,482 |
For the Three Months Ended September 30, 2016 | For the Three Months Ended September 30, 2015 | ||||||||||||
Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | ||||||||
($000 omitted) | ($000 omitted) | ||||||||||||
Unrealized investment gains on investments - net: | |||||||||||||
Change in net unrealized gains on investments | (405 | ) | (142 | ) | (263 | ) | (239 | ) | (84 | ) | (155 | ) | |
Less: reclassification adjustment for net gains included in net income (loss) | (1,330 | ) | (465 | ) | (865 | ) | (675 | ) | (236 | ) | (439 | ) | |
Net unrealized gains | (1,735 | ) | (607 | ) | (1,128 | ) | (914 | ) | (320 | ) | (594 | ) | |
Foreign currency translation adjustments | (2,363 | ) | (555 | ) | (1,808 | ) | (5,787 | ) | (1,505 | ) | (4,282 | ) | |
Other comprehensive loss | (4,098 | ) | (1,162 | ) | (2,936 | ) | (6,701 | ) | (1,825 | ) | (4,876 | ) | |
For the Nine Months Ended September 30, 2016 | For the Nine Months Ended September 30, 2015 | ||||||||||||
Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | Before-Tax Amount | Tax Expense (Benefit) | Net-of-Tax Amount | ||||||||
($000 omitted) | ($000 omitted) | ||||||||||||
Unrealized investment gains on investments - net: | |||||||||||||
Change in net unrealized gains on investments | 18,012 | 6,304 | 11,708 | (6,303 | ) | (2,207 | ) | (4,096 | ) | ||||
Less: reclassification adjustment for net gains included in net income (loss) | (1,606 | ) | (562 | ) | (1,044 | ) | (1,878 | ) | (657 | ) | (1,221 | ) | |
Net unrealized gains | 16,406 | 5,742 | 10,664 | (8,181 | ) | (2,864 | ) | (5,317 | ) | ||||
Foreign currency translation adjustments | 1,581 | 1,797 | (216 | ) | (12,215 | ) | (3,677 | ) | (8,538 | ) | |||
Other comprehensive income (loss) | 17,987 | 7,539 | 10,448 | (20,396 | ) | (6,541 | ) | (13,855 | ) |
Title | Ancillary Services and Corporate | Consolidated Total | ||||||
($000 omitted) | ||||||||
Balances at December 31, 2015 | 208,873 | 8,849 | 217,722 | |||||
Re-allocation of goodwill | 2,382 | (2,382 | ) | — | ||||
Acquisition | 300 | — | 300 | |||||
Disposals | (101 | ) | — | (101 | ) | |||
Balances at September 30, 2016 | 211,454 | 6,467 | 217,921 |
• | $35.0 million goodwill impairment, of which $33.4 million was recorded in the ancillary services and corporate segment and $1.6 million was recorded in the title segment, |
• | $5.7 million of aggregate costs (consisting of consulting and third party service provider transition costs) related to our cost management program and new integrated disclosure rules preparations and $0.6 million of costs related to our exit of the delinquent loan servicing operations recorded in the ancillary services and corporate segment, and, |
• | $1.5 million of litigation expenses recorded as other operating expense in the title segment. |
• | mortgage 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; |
• | volume of distressed property transactions; |
• | consumer confidence, including employment trends; |
• | demand by buyers; |
• | number of households; |
• | premium rates; |
• | foreign currency exchange rates; |
• | market share; |
• | ability to attract and retain highly productive sales associates; |
• | independent agency remittance rates; |
• | opening of new offices and acquisitions; |
• | number of commercial transactions, which typically yield higher premiums; |
• | government or regulatory initiatives, including tax incentives and the implementation of the new integrated disclosure requirements; |
• | acquisitions or divestitures of businesses; and |
• | seasonality and/or weather. |
Three Months Ended | Nine Months Ended | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Opened Orders: | |||||||||||
Commercial | 11,866 | 11,766 | 35,334 | 38,921 | |||||||
Purchase | 63,115 | 63,836 | 193,625 | 194,898 | |||||||
Refinance | 42,851 | 40,542 | 113,819 | 140,409 | |||||||
Other | 3,423 | 5,380 | 10,032 | 17,362 | |||||||
Total | 121,255 | 121,524 | 352,810 | 391,590 | |||||||
Closed Orders: | |||||||||||
Commercial | 8,149 | 8,173 | 24,344 | 26,749 | |||||||
Purchase | 52,937 | 53,532 | 145,829 | 146,457 | |||||||
Refinance | 28,361 | 28,849 | 78,304 | 94,310 | |||||||
Other | 4,086 | 4,669 | 12,536 | 15,026 | |||||||
Total | 93,533 | 95,223 | 261,013 | 282,542 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||
($ in millions) | ($ in millions) | ||||||||||||||||
Commercial: | |||||||||||||||||
Domestic | 45.2 | 47.7 | (5.2 | )% | 123.8 | 126.3 | (2.0 | )% | |||||||||
International | 4.4 | 4.2 | 4.8 | % | 13.6 | 13.2 | 3.0 | % | |||||||||
49.6 | 51.9 | (4.4 | )% | 137.4 | 139.5 | (1.5 | )% | ||||||||||
Non-commercial | |||||||||||||||||
Domestic | 161.8 | 165.0 | (1.9 | )% | 456.7 | 472.3 | (3.3 | )% | |||||||||
International | 29.7 | 26.2 | 13.4 | % | 70.0 | 64.3 | 8.9 | % | |||||||||
191.5 | 191.2 | 0.2 | % | 526.7 | 536.6 | (1.8 | )% | ||||||||||
Total direct revenues | 241.1 | 243.1 | (0.8 | )% | 664.1 | 676.1 | (1.8 | )% |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||
2016 | 2016 | % Change | 2016 | 2015 | % Change | ||||||||||||
($ in millions) | |||||||||||||||||
Amounts retained by agencies | 231.6 | 227.4 | 1.9 | % | 598.9 | 607.6 | (1.4 | )% | |||||||||
As a % of agency revenues | 82.0 | % | 81.4 | % | 81.8 | % | 81.9 | % | |||||||||
Employee costs | 154.5 | 165.0 | (6.4 | )% | 457.2 | 498.6 | (8.3 | )% | |||||||||
As a % of operating revenues | 28.3 | % | 29.9 | % | 31.3 | % | 32.7 | % | |||||||||
Other operating expenses | 94.0 | 99.8 | (5.7 | )% | 268.2 | 286.6 | (6.4 | )% | |||||||||
As a % of operating revenues | 17.2 | % | 18.1 | % | 18.3 | % | 18.8 | % | |||||||||
Title losses and related claims | 26.4 | 25.9 | 1.9 | % | 66.6 | 78.6 | (15.2 | )% | |||||||||
As a % of title revenues | 5.0 | % | 5.0 | % | 4.8 | % | 5.5 | % |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
($ in millions) | ($ in millions) | ||||||||||
Provisions – known claims: | |||||||||||
Current year | 5.3 | 9.0 | 13.1 | 18.3 | |||||||
Prior policy years | 18.7 | 7.7 | 49.9 | 60.1 | |||||||
24.0 | 16.7 | 63.0 | 78.4 | ||||||||
Provisions – IBNR | |||||||||||
Current year | 21.0 | 16.7 | 60.3 | 60.9 | |||||||
Prior policy years | 0.1 | 0.2 | (6.8 | ) | (0.6 | ) | |||||
21.1 | 16.9 | 53.5 | 60.3 | ||||||||
Transferred to known claims | (18.7 | ) | (7.7 | ) | (49.9 | ) | (60.1 | ) | |||
Total provisions | 26.4 | 25.9 | 66.6 | 78.6 |
September 30, 2016 | December 31, 2015 | ||||
($ in millions) | |||||
Known claims | 74.8 | 83.2 | |||
IBNR | 385.9 | 379.4 | |||
Total estimated title losses | 460.7 | 462.6 |
For the Nine Months Ended September 30, | |||||
2016 | 2015 | ||||
(dollars in millions) | |||||
Net cash provided by operating activities | 64.0 | 65.6 | |||
Net cash used by investing activities | (60.3 | ) | (13.2 | ) | |
Net cash used by financing activities | (22.8 | ) | (35.1 | ) |
November 1, 2016 |
Date |
Stewart Information Services Corporation | ||
Registrant | ||
By: | /s/ J. Allen Berryman | |
J. Allen Berryman, Chief Financial Officer, Secretary, Treasurer and Principal Financial Officer |
Exhibit | ||||
3.1 | - | Restated Certificate of Incorporation of the Registrant, dated April 28, 2016 (incorporated by reference in this report from Exhibit 3.1 of the Current Report on Form 8-K filed April 29, 2016) | ||
3.2 | - | Third Amended and Restated By-Laws of the Registrant, as of April 27, 2016 (incorporated by reference in this report from Exhibit 3.2 of the Current Report on Form 8-K filed April 28, 2016) | ||
10.1 | - | Exhibit A to the Employment Agreement entered as of March 31, 2016, effective as of January 1, 2016, by and between Stewart Information Services Corporation and Steven M. Lessack (incorporated by reference in this report from Exhibit 10.1 of the Current Report on Form 8-K filed September 16, 2016) |
31.1* | - | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
31.2* | - | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
32.1* | - | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
32.2* | - | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS* | - | XBRL Instance 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 |
* | Filed herewith |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Matthew W. Morris | ||
Name: | Matthew W. Morris | |
Title: | Chief Executive Officer |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ J. Allen Berryman | ||
Name: | J. Allen Berryman | |
Title: | Chief Financial Officer, Secretary, Treasurer, and Principal Financial Officer |
/s/ Matthew W. Morris | ||
Name: | Matthew W. Morris | |
Title: | Chief Executive Officer |
/s/ J. Allen Berryman | ||
Name: | J. Allen Berryman | |
Title: | Chief Financial Officer, Secretary, Treasurer and Principal Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 28, 2016 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | STEWART INFORMATION SERVICES CORP | |
Entity Central Index Key | 0000094344 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Trading Symbol | STC | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 23,371,297 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Treasury stock, common shares | 352,161 | 352,161 |
Common stock, shares outstanding | 23,371,297 | 23,341,106 |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) - 9 months ended Sep. 30, 2016 - USD ($) $ in Thousands |
Total |
Common and Class B Common Stock ($1 par value) |
Additional paid-in capital |
Retained earnings |
Accumulated other comprehensive (loss) income |
Treasury stock |
Noncontrolling interests |
---|---|---|---|---|---|---|---|
Balances at December 31, 2015 at Dec. 31, 2015 | $ 637,128 | $ 23,693 | $ 156,692 | $ 455,519 | $ (3,957) | $ (2,666) | $ 7,847 |
Increase (Decrease) in Stockholders' Equity | |||||||
Net income attributable to Stewart | 38,778 | 38,778 | |||||
Cash dividends on Common Stock ($0.90 per share) | (20,800) | (20,800) | |||||
Cash paid on Class B Common Shares conversion | (12,000) | (12,000) | |||||
Stock based compensation and other | 5,093 | 30 | 5,063 | ||||
Purchase of remaining interest in consolidated subsidiary | (301) | (255) | (46) | ||||
Net change in unrealized gains and losses on investments | 11,708 | 11,708 | |||||
Net realized gain reclassification | (1,044) | (1,044) | |||||
Foreign currency translation adjustments | (216) | (216) | |||||
Net income attributable to noncontrolling interests | 9,450 | 9,450 | |||||
Subsidiary dividends paid to noncontrolling interests | (9,430) | (9,430) | |||||
Balances at September 30, 2016 at Sep. 30, 2016 | $ 658,366 | $ 23,723 | $ 161,500 | $ 461,497 | $ 6,491 | $ (2,666) | $ 7,821 |
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (UNAUDITED) (Parenthetical) - $ / shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Common stock, par value (in usd per share) | $ 1 | $ 1 |
Cash dividends on common stock (in usd per share) | $ 0.9 | |
Class B Common Stock | ||
Common stock, par value (in usd per share) | $ 1 |
Interim financial statements |
9 Months Ended |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Interim financial statements | Interim financial statements. The financial information contained in this report for the three and nine months ended September 30, 2016 and 2015, and as of September 30, 2016, 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, 2015. A. Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with 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 20% through 50% of the equity, are accounted for by the equity method. C. Reclassifications. Certain amounts in the 2015 interim financial statements have been reclassified for comparative purposes. Net loss attributable to Stewart, as previously reported, was not affected. D. 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, which approximated $448.8 million and $483.3 million at September 30, 2016 and December 31, 2015, respectively, are required to be fully funded and invested in high-quality securities and short-term investments. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $40.3 million and $17.2 million at September 30, 2016 and December 31, 2015, 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 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. |
Investments in debt and equity securities available-for-sale |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in debt and equity securities available-for-sale | Investments in debt and equity securities available-for-sale. The amortized costs and fair values follow:
Foreign debt securities consist primarily of Canadian government and corporate bonds, United Kingdom treasury bonds, and Mexican government bonds. Equity securities consist of common stocks and master limited partnerships. Gross unrealized gains and losses were:
Debt securities as of September 30, 2016 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
Gross unrealized losses on investments 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, 2016, were:
The number of investment securities in an unrealized loss position as of September 30, 2016 was 58, 8 securities of which were in unrealized loss positions for more than 12 months. Since the Company does not intend to sell and will more-likely-than-not maintain each investment security until its maturity or anticipated recovery, and no significant credit risk is deemed to exist, these investments are not considered other-than-temporarily impaired. Gross unrealized losses on investments 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, 2015, were:
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. |
Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | Fair value measurements. The Fair Value Measurements and Disclosures Topic (Topic 820) of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) defines fair value 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. Topic 820 establishes 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:
As of September 30, 2016, financial instruments measured at fair value on a recurring basis are summarized below:
As of December 31, 2015, financial instruments measured at fair value on a recurring basis are summarized below:
As of September 30, 2016, 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. All municipal, foreign, and U.S. Treasury bonds are valued using a third-party pricing service, and the corporate bonds are valued using the market approach, which includes three to ten inputs from relevant market sources, including Financial Industry Regulatory Authority’s (FINRA) Trade Reporting and Compliance Engine (TRACE) and independent broker/dealer quotes, bids and offerings, as well as other relevant market data, such as securities with similar characteristics (i.e. sector, rating, maturity, etc.). Broker/dealer quotes, bids and offerings mentioned above are gathered (typically three to ten) and a consensus risk premium spread (credit spread) over risk-free Treasury yields is developed from the inputs obtained, which is then used to calculate the resulting fair value. There were no transfers of investments between Level 1 and Level 2 during the nine months ended September 30, 2016 and 2015. |
Investment income and other gains and losses |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment income and other gains and losses | Investment income and other gains and losses. Gross realized investment and other gains and losses follows:
Expenses assignable to investment income were insignificant. There were no significant investments as of September 30, 2016 that did not produce income during the year. For the nine months ended September 30, 2016, investment and other gains – net included $1.6 million of net realized gains due to changes in the fair values of contingent consideration liabilities associated with certain prior year acquisitions, $1.2 million of realized gain on a cost-basis investment transaction and $2.9 million of net realized gains from the sale of investments available-for-sale, partially offset by $1.3 million of office closure costs. For the nine months ended September 30, 2015, investments and other gains - net included $2.0 million of net realized gains from the sale of investments available-for-sale, partially offset by $0.9 million impairment of other intangible assets. Proceeds from the sale of investments available-for-sale follows:
|
Share-based incentives |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based incentives | Share-based incentives. During the first quarters 2016 and 2015, the Company granted executives and senior management shares of restricted common stock which are time-based. Prior to 2016, time-based restricted common stock grants vest at the end of three years after the grant date, while the 2016 grants will vest on each of the first three anniversaries of the grant date. The Company also granted performance-based shares of restricted common stock which vest upon achievement of certain financial objectives over a period of three years. The aggregate fair values of these awards at the grant date in 2016 and 2015 were $3.9 million (105,000 shares with an average grant price of $37.33) and $4.2 million (113,000 shares with an average grant price of $37.04), respectively. Awards were made pursuant to the Company’s employee incentive compensation plans and the compensation expense associated with restricted stock awards is recognized over the corresponding vesting period. Additionally, during the second quarters 2016 and 2015, the Company granted its board of directors, as a component of annual director retainer compensation, 16,300 and 18,200 shares, respectively, of common stock, which immediately vested at the grant date. The aggregate fair values of these director awards at the grant dates in 2016 and 2015 were $0.6 million and $0.7 million, respectively. |
Earnings per share |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | Earnings per share. The Company’s 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 earnings per share, the number of shares is adjusted for the effects of any dilutive shares. The treasury stock method is used to calculate the dilutive number of shares related to the Company’s long term incentive and stock option plans. In periods of loss, dilutive shares are excluded from the calculation of the diluted earnings per share and diluted earnings per share is computed in the same manner as basic earnings per share. The calculation of the basic and diluted earnings per share is as follows:
(a) - In accordance with the ASC 260, Earnings Per Share, the $12.0 million payment to the holders of the Class B Common Stock shares (refer to Note 11) is treated in a manner similar to the treatment of dividends on preferred stock for the purpose of calculating EPS. Accordingly, the $12.0 million payment was deducted from the 2016 net income to arrive at net income available to common stockholders for calculating basic and diluted EPS. |
Contingent liabilities and commitments |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent liabilities and commitments | 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, 2016, 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 minimum lease payments. As of September 30, 2016, the Company also had unused letters of credit aggregating $5.6 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees. |
Segment information |
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Segment information | Segment information. Prior to 2016, the Company reported three operating segments: title insurance and related services (title), mortgage services and corporate. Effective in the first quarter 2016, as a result of restructuring and streamlining the management of the mortgage services operations, the Company began reporting two operating segments: title and ancillary services and corporate. The centralized title services business, previously included in the mortgage services segment, is now included in the title segment. The remaining operations of the mortgage services segment, principally valuation services, government services and loan file review and audit, are not material, in the aggregate, for separate segment presentation and are now included in the ancillary services and corporate segment. In addition, the Company began allocating the costs of its centralized administrative services departments to the respective operating businesses. The new operating segments reflect the current manner that management uses in allocating resources and assessing performance of the Company's businesses. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes centralized title services, home and personal insurance services and Internal Revenue Code Section 1031 tax-deferred exchanges. The ancillary services and corporate segment consists principally of services related to valuation services to large lenders, government services and loan file and review and audit (referred to as ancillary services and other operations). Also included in the ancillary services and corporate segment are expenses of the parent holding company and certain other enterprise-wide overhead costs. Selected statement of income information related to these segments is as follows using restated prior year period amounts to conform to the new segment presentation:
The Company does not provide asset information by reportable operating segment as it does not routinely evaluate the asset position by segment. Revenues generated in the United States and all international operations are as follows:
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Regulatory and legal developments |
9 Months Ended |
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Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Regulatory and legal developments | 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 plaintiff seeks exemplary or treble damages in excess of policy limits. The Company does not expect that any of these proceedings will have a material adverse effect on its consolidated financial condition or results of operations. Along with the other major title insurance companies, the Company is party to class action lawsuits concerning the title insurance industry. The Company believes that it has adequate reserves for the various litigation matters and contingencies discussed in this paragraph and that the likely resolution of these matters will not materially affect its consolidated financial condition or results of operations. The Company is subject to administrative actions and litigation relating to the basis on which premium taxes are paid in certain states. Additionally, the Company has received various other inquiries from governmental regulators concerning practices in the insurance industry. Many of these practices do not concern title insurance. The Company believes that 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 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. |
Other comprehensive income (loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | Other comprehensive income (loss). Changes in the balances of each component of other comprehensive income (loss) and the related tax effects are as follows:
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Class B Common Stock conversion |
9 Months Ended |
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Sep. 30, 2016 | |
Equity [Abstract] | |
Class B Common Stock conversion | Class B Common Stock conversion. On January 26, 2016, the Company entered into an Exchange Agreement with the holders of the Class B Common Stock relating to the exchange of 1,050,012 Class B Common Stock shares, representing all outstanding Class B Common Stock, for 1,050,012 shares of Common Stock and $12.0 million in cash. The Exchange Agreement was subject to the approval by the Company's stockholders. On April 27, 2016, the Company's stockholders approved the Exchange Agreement and the related amendments to the Company's by-laws and certificate of incorporation and entered into a Registration Rights Agreement with the holders of the Class B Common Stock. On the same date after the stockholders' approval, the Company issued 1,050,012 shares of Common Stock plus $12.0 million cash in exchange for the retirement of the outstanding 1,050,012 Class B Common Stock shares. In accordance with U.S. GAAP, the $12.0 million cash payment was recorded as a reduction to retained earnings, similar to dividends on preferred stock (refer to Note 6). |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill. In connection with the restructuring of the reportable segments (refer to Note 8), management determined it is appropriate to re-allocate the goodwill attributable to the centralized title services business from the ancillary services and corporate segment to the title segment as shown below.
The Company evaluates goodwill for impairment annually based on information as of June 30 of the current year or more frequently if circumstances suggest that impairment may exist. The Company performed the annual goodwill impairment analysis during the quarter ended September 30, 2016 and utilized the quantitative assessment for all title and ancillary services reporting units. The Company determined that the current reporting units of direct operations, agency operations, international operations and ancillary services (formerly, mortgage services) are appropriate for performing the annual goodwill impairment test. The Company performed a step one analysis in accordance with the ASC 350, Intangibles - Goodwill and Other, using a combination of the income approach (discounted cash flow technique) and the market approach (guideline company and precedent transaction analyses). Based on the step one analysis, the Company determined that the fair values of all reporting units exceeded their corresponding carrying values. Based on this assessment, the Company concluded that the goodwill related to each of the reporting units is not impaired. |
Interim financial statements (Policies) |
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Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Management's responsibility | Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with 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. |
Consolidation | 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 20% through 50% of the equity, are accounted for by the equity method. |
Reclassifications | Reclassifications. Certain amounts in the 2015 interim financial statements have been reclassified for comparative purposes. Net loss attributable to Stewart, as previously reported, was not affected. |
Restrictions on cash and investments | 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, which approximated $448.8 million and $483.3 million at September 30, 2016 and December 31, 2015, respectively, are required to be fully funded and invested in high-quality securities and short-term investments. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $40.3 million and $17.2 million at September 30, 2016 and December 31, 2015, 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 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. |
Investments in debt and equity securities available-for-sale (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Costs and Fair Values | The amortized costs and fair values follow:
Proceeds from the sale of investments available-for-sale follows:
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Gross Unrealized Gains and Losses | Gross unrealized gains and losses were:
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Debt Securities According to Contractual Terms | Debt securities as of September 30, 2016 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
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Gross Unrealized Losses on Investments and Fair Values of Related Securities | Gross unrealized losses on investments 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, 2015, were:
Gross unrealized losses on investments 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, 2016, were:
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Fair value measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments Measured at Fair Value on Recurring Basis | As of September 30, 2016, financial instruments measured at fair value on a recurring basis are summarized below:
As of December 31, 2015, financial instruments measured at fair value on a recurring basis are summarized below:
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Investment income and other gains and losses (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Realized Investment and Other Gains and Losses | Gross realized investment and other gains and losses follows:
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Proceeds from Sale of Investments Available-for-Sale | The amortized costs and fair values follow:
Proceeds from the sale of investments available-for-sale follows:
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Earnings per share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The calculation of the basic and diluted earnings per share is as follows:
(a) - In accordance with the ASC 260, Earnings Per Share, the $12.0 million payment to the holders of the Class B Common Stock shares (refer to Note 11) is treated in a manner similar to the treatment of dividends on preferred stock for the purpose of calculating EPS. Accordingly, the $12.0 million payment was deducted from the 2016 net income to arrive at net income available to common stockholders for calculating basic and diluted EPS. |
Segment information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selected Statement of Operations and Income (Loss) Information Related to Segments | Selected statement of income information related to these segments is as follows using restated prior year period amounts to conform to the new segment presentation:
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Revenues Generated in Domestic and All International Operations | Revenues generated in the United States and all international operations are as follows:
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Other comprehensive income (loss) (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in the Balances of Each Component of Other Comprehensive Income (Loss) | Changes in the balances of each component of other comprehensive income (loss) and the related tax effects are as follows:
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Goodwill (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Goodwill | In connection with the restructuring of the reportable segments (refer to Note 8), management determined it is appropriate to re-allocate the goodwill attributable to the centralized title services business from the ancillary services and corporate segment to the title segment as shown below.
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Interim financial statements (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Statutory reserve funds, short-term investments | $ 448,813 | $ 483,312 |
Statutory reserve funds, investments | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Statutory reserve funds, short-term investments | 448,800 | 483,300 |
Statutory reserve funds, cash and cash equivalents | ||
Restricted Cash and Cash Equivalents Items [Line Items] | ||
Statutory reserve funds, cash and cash equivalents | $ 40,300 | $ 17,200 |
Investments in debt and equity securities available-for-sale - Gross Unrealized Gains and Losses (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | $ 31,933 | $ 18,179 |
Losses | 1,063 | 3,714 |
Municipal | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | 2,745 | 1,720 |
Losses | 49 | 12 |
Corporate | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | 17,241 | 7,700 |
Losses | 82 | 2,109 |
Foreign | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | 6,395 | 3,789 |
Losses | 41 | 482 |
U.S. Treasury Bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | 90 | 128 |
Losses | 0 | 25 |
Equity Securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Gains | 5,462 | 4,842 |
Losses | $ 891 | $ 1,086 |
Investments in debt and equity securities available-for-sale - Debt Securities According to Contractual Terms (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Amortized costs | |
In one year or less | $ 45,531 |
After one year through five years | 233,813 |
After five years through ten years | 223,019 |
After ten years | 80,604 |
Amortized costs, total | 582,967 |
Fair values | |
In one year or less | 45,904 |
After one year through five years | 243,355 |
After five years through ten years | 233,147 |
After ten years | 86,860 |
Debt securities, fair values total | $ 609,266 |
Investments in debt and equity securities available-for-sale - Additional Information (Details) |
Sep. 30, 2016
investment
|
---|---|
Investments, Debt and Equity Securities [Abstract] | |
Number of investments in an unrealized loss position | 58 |
Number of investments in an unrealized loss positions for more than 12 months | 8 |
Investment income and other gains and losses - Gross Realized Investment and Other Gains and Losses (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Available for sale securities gross realized gain (loss) | ||||
Realized gains | $ 3,301 | $ 968 | $ 8,377 | $ 3,195 |
Realized losses | (48) | (1,779) | (3,671) | (2,467) |
Realized gains (losses) | $ 3,253 | $ (811) | $ 4,706 | $ 728 |
Investment income and other gains and losses - Additional Information (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Net realized gains due to changes in the fair values of contingent consideration liabilities | $ 1.6 | |
Realized gain on a cost-basis investment transaction | 1.2 | |
Net realized gains from the sale of investments available-for-sale | 2.9 | $ 2.0 |
Office closure costs | $ 1.3 | |
Impairment of other intangible asset | $ 0.9 |
Investment income and other gains and losses - Proceeds from the Sale of Investments Available-for-Sale (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Gain loss on sale of investments | ||||
Proceeds from sale of investments available-for-sale | $ 16,839 | $ 14,378 | $ 49,666 | $ 60,314 |
Earnings per share - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jan. 26, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Conversion of Stock [Line Items] | |||||
Conversion of stock, additional cash issued to Class B common stock holders | $ 0 | $ 0 | $ 12,000 | $ 0 | |
Conversion, Class B Common Stock to Common Stock | |||||
Conversion of Stock [Line Items] | |||||
Conversion of stock, additional cash issued to Class B common stock holders | $ 12,000 | $ 12,000 |
Contingent liabilities and commitments (Details) $ in Millions |
Sep. 30, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Guarantee of indebtedness, relating to unused letters of credit | $ 5.6 |
Segment information - Additional Information (Details) - segment |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Segment Reporting [Abstract] | ||
Number of operating segments | 2 | 3 |
Segment information - Selected Statement of Operations and Income (Loss) Information Related to Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | ||||
Revenues | $ 553,210 | $ 555,705 | $ 1,480,875 | $ 1,536,482 |
Depreciation and amortization | 7,082 | 7,633 | 22,728 | 22,013 |
Income before taxes and noncontrolling interest | 38,808 | (5,568) | 65,007 | 6,589 |
Title segment: | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 529,816 | 527,294 | 1,410,863 | 1,431,412 |
Depreciation and amortization | 5,120 | 4,711 | 15,642 | 13,870 |
Income before taxes and noncontrolling interest | 50,308 | 48,803 | 100,984 | 95,978 |
Ancillary services and corporate segment: | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 23,394 | 28,411 | 70,012 | 105,070 |
Depreciation and amortization | 1,962 | 2,922 | 7,086 | 8,143 |
Income before taxes and noncontrolling interest | $ (11,500) | $ (54,371) | $ (35,977) | $ (89,389) |
Segment information - Revenues Generated in United States and All International Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Segment Reporting Information [Line Items] | ||||
Revenues | $ 553,210 | $ 555,705 | $ 1,480,875 | $ 1,536,482 |
United States | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | 518,204 | 524,567 | 1,394,228 | 1,456,742 |
International | ||||
Segment Reporting Information [Line Items] | ||||
Revenues | $ 35,006 | $ 31,138 | $ 86,647 | $ 79,740 |
Class B Common Stock conversion (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Jan. 26, 2016 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Conversion of Stock [Line Items] | |||||
Conversion of stock, additional cash issued to Class B common stock holders | $ 0 | $ 0 | $ 12,000 | $ 0 | |
Conversion, Class B Common Stock to Common Stock | |||||
Conversion of Stock [Line Items] | |||||
Conversion of stock, additional cash issued to Class B common stock holders | $ 12,000 | $ 12,000 | |||
Conversion, Class B Common Stock to Common Stock | Class B Common Stock | |||||
Conversion of Stock [Line Items] | |||||
Conversion of stock, number of shares converted | 1,050,012 | ||||
Conversion, Class B Common Stock to Common Stock | Common Stock | |||||
Conversion of Stock [Line Items] | |||||
Conversion of stock, number of shares issued | 1,050,012 |
Goodwill (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Goodwill by Segment | |
Balances at December 31, 2015 | $ 217,722 |
Re-allocation of goodwill | 0 |
Acquisition | 300 |
Disposals | (101) |
Balances at September 30, 2016 | 217,921 |
Title | |
Goodwill by Segment | |
Balances at December 31, 2015 | 208,873 |
Re-allocation of goodwill | 2,382 |
Acquisition | 300 |
Disposals | (101) |
Balances at September 30, 2016 | 211,454 |
Ancillary Services and Corporate | |
Goodwill by Segment | |
Balances at December 31, 2015 | 8,849 |
Re-allocation of goodwill | (2,382) |
Acquisition | 0 |
Disposals | 0 |
Balances at September 30, 2016 | $ 6,467 |
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