EX-99.1 2 v121280_ex99-1.htm Unassociated Document
 

NEWS   from:
 
STEWART INFORMATION SERVICES CORPORATION
 
P.O. Box 2029, Houston, Texas 77252-2029
 
www.stewart.com
 
Contact:
Ted C. Jones
   
Director - Investor Relations
   
(713) 625-8014

FOR RELEASE AT 6AM CDT

Stewart Reports Operating Results for the Second Quarter 2008

HOUSTON, July 30, 2008 - Stewart Information Services Corporation (NYSE-STC) today reported the results of its operations for the second quarter and six months ended June 30, 2008. (Dollar amounts in the table below are in millions, except per share figures.)
 
   
Second Quarter
  
   
2008 (a)
  
2007
  
Total revenues
  
$
428.5
  
$
573.4
  
Pretax (loss) earnings before minority interests
   
(41.2
)
  
19.2
 
Net (loss) earnings
   
(26.6
)
  
10.1
 
Net (loss) earnings per diluted share
   
(1.47
)
  
0.55
  
 
   
Six Months
  
 
 
2008 (a)
  
2007 (b)
  
Total revenues
 
$
822.7
  
$
1,105.1
  
Pretax (loss) earnings before minority interests
   
(82.0
)
  
14.6
  
Net (loss) earnings
   
(51.9
)
  
5.4
  
Net (loss) earnings per diluted share
   
(2.87
)
  
0.29
  

(a)
The second quarter of 2008 includes pretax charges totaling $24.2 million ($15.7 million after taxes, or $0.87 per share) relating to a reserve adjustment of $10.0 million for prior policy years, $8.2 million relating to large claims and two agency defalcations, and a software impairment charge of $6.0 million. The first three months of 2008 includes an additional charge of $4.6 million ($3.0 million after taxes, or $0.17 per share) relating to an agency defalcation.
 
(b)
The first six months of 2007 includes a $3.2 million gain ($2.1 million after taxes, or $0.11 per diluted share) from the sale of two subsidiaries and a charge of $7.4 million ($4.8 million after taxes, or $0.26 per diluted share) relating to large claims.
 
Financial Results

The continuing decline in our orders resulting from the decrease in new and existing home sales, home prices, construction and lending in the second quarter of 2008, coupled with worsening policy claims payment experience and a software impairment charge, resulted in a pretax (and before minority interests) loss of $41.2 million compared with earnings of $19.2 million in the same quarter last year. The software impairment charge of $6.0 million relates to software developed, and now abandoned, in our REI segment for one of its subsidiaries.
 
 
Revenues in the second quarter of 2008 fell to $428.5 million, a decline of 25.3 percent from the $573.4 million in the same period last year. This reduction in revenues reflects the second quarter 2008 decline in our order volume resulting from decreases in existing home sales (down 16.7 percent), new home sales (down 33.2 percent) and existing home prices (down 15.8 percent) compared with the second quarter of 2007. Our international operations remained profitable, offsetting, in part, our loss in the second quarter of 2008 for U.S. operations.

Total revenues for the first half of 2008 were $822.7 million, down 25.6 percent from the same period in 2007. Overall, the Company reported a loss of $82.0 million before taxes and minority interests in the first half of 2008 compared with a profit of $14.6 million in the same period in 2007.

“We are responding strategically to this downturn by implementing cost reductions throughout the Company. We remain committed to our long-term strategies and restructuring efforts even in this extremely difficult real estate environment,” said Malcolm S. Morris, co-chief executive officer and chairman. “We are progressing in our shared-services initiatives and have contracted several national relationships for savings in procurement. These initiatives and relationships, which range from accounting and information technology to procurement and human resources, have significant potential for process improvements and cost reductions. We are also consolidating many of our separate corporate entities to better serve our customers, streamline our administrative functions and reduce fixed costs.

“We are experiencing higher than expected payments of policy claims, which resulted in our taking a $10.0 million charge this quarter relating to prior policy years,” added Morris. “However, we are continuing to make progress in reducing our risk exposure through the review and cancellation of higher-risk title agencies and by auditing potential title agencies prior to adding them to our agency network.”

“We continue to respond to declining market conditions by aggressively reducing variable and fixed expenses,” said Stewart Morris, Jr., co-chief executive officer and president. “In the second quarter of 2008, our employee count was reduced by 350, which brings our year-to-date reduction to 810, or 9.6 percent. Our total reduction in employee count is 2,400, or 24.6 percent, since December 31, 2006. We have also closed 68 unprofitable branch and office locations since the beginning of 2008.

“In addition, we are responding to the consumer in these tough markets," said Morris. "We announced a simplification of our rate structure in California to better serve our customers. Also in this quarter, we formed a new multi-state foreclosure trustee company that will allow us to offer nationwide default services. We remain on track for site conversions of legacy production systems to our new, but proven, web-based production systems this year. A recent fire in an office where we have implemented our paperless technology reinforced our commitment to long-term investment in our web-based production system and SureClose®, our transaction management technology. Within hours of the fire, the office was up and running remotely via the internet and closings continued with no loss of service or files,” said Morris.
 
 
Stewart Information Services Corporation is a customer-driven, technology-enabled, strategically competitive, real estate information, title insurance and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries throughout the United States and in international markets. Stewart also provides post-closing lender services, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at www.stewart.com.

This press release may contain forward-looking statements, which include all statements other than statements of historical facts. Forward-looking statements are not guarantees of performance and no assurance can be given that Stewart's expectations will be achieved. In particular, historical order counts do not necessarily indicate future revenues since Stewart cannot predict the number of orders that will result in closings.

###
 
 
STEWART INFORMATION SERVICES CORPORATION
STATEMENTS OF EARNINGS
(In thousands of dollars, except per share amounts)
   
Three months ended
  
Six months ended
  
   
June 30
  
June 30
  
   
2008
  
2007
  
2008
  
2007
  
Revenues
                  
Title insurance:
                          
Direct operations
    
200,688
    
270,428
    
381,275
    
500,042
  
Agency operations
    
213,513
    
276,434
    
404,566
    
548,688
  
Real estate information
   
11,302
    
16,497
    
26,018
    
33,030
  
Investment income
   
7,456
    
9,168
    
15,534
    
18,219
  
Investment and other (losses) gains - net
   
(4,412
)
  
902
    
(4,709
)
  
5,124
  
     
428,547
    
573,429
    
822,684
    
1,105,103
  
Expenses
                          
Amounts retained by agencies
   
174,562
    
222,752
    
330,124
    
445,142
  
Employee costs
   
146,076
    
179,096
    
298,039
    
355,888
  
Other operating expenses
   
86,412
    
105,241
    
173,248
    
198,884
  
Title losses and related claims
   
46,595
    
35,117
    
76,316
    
66,976
  
Depreciation and amortization
   
8,950
    
10,149
    
18,041
    
20,034
  
Impairment of other assets
    
6,011
    
-
    
6,011
    
-
  
Interest    
1,121
    
1,874
    
2,936
    
3,542
  
     
469,727
    
554,229
    
904,715
    
1,090,466
  
                           
(Loss) earnings before taxes and minority interests
    
(41,180
)
  
19,200
    
(82,031
)
  
14,637
  
Income tax (benefit) expense
   
(16,470
)
  
5,541
    
(33,233
)
  
2,921
  
Minority interests
   
1,934
    
3,535
    
3,137
    
6,354
  
Net (loss) earnings
   
(26,644
)
  
10,124
    
(51,935
)
  
5,362
  
                           
(Loss) earnings per diluted share
    
(1.47
)
  
0.55
    
(2.87
)
  
0.29
  
Average number of diluted shares (000)
   
18,092
    
18,351
    
18,069
    
18,340
  
                           
Segment information:
                          
Title revenues
    
417,245
    
556,932
    
795,787
    
1,068,873
  
Title pretax (loss) earnings before minority interests
    
(32,763
)
  
19,862
    
(74,308
)
  
11,807
  
                           
REI revenues
   
11,302
    
16,497
    
26,897
    
36,230
  
REI pretax (loss) earnings before minority interests
   
(8,417
)
  
(662
)
  
(7,723
)
  
2,830
  
 
                          
Selected financial information:
                          
Cash (used) provided by operations
    
(15,862
)
  
31,922
    
(47,309
)
  
16,806
  
Title loss payments - net of recoveries
    
38,981
    
22,424
    
69,463
    
47,877
  
Changes in other comprehensive earnings - net of taxes
    
(7,654
)
  
(286
)
  
(7,496
)
  
547
  
                           
Number of title orders opened (000):
                          
April
    
48.4
    
59.0
              
May
    
43.1
    
60.7
              
June
   
38.9
    
58.1
              
Quarter
   
130.4
    
177.8
              
                           
Number of title orders closed (000):
                          
Quarter
   
93.5
    
125.1
              
 
 
  
June 30  
2008
 
Dec 31 
2007
  
           
Stockholders’ equity
   
696,903
    
754,059
  
Number of shares outstanding (000)
   
18,146
    
18,031
  
Book value per share
   
38.41
    
41.82
  
 
 
STEWART INFORMATION SERVICES CORPORATION
BALANCE SHEETS (condensed)
(In thousands of dollars)

   
June 30
  
Dec 31
  
   
2008
  
2007
  
Assets
          
Cash and cash equivalents
   
102,900
    
109,239
  
Short-term investments
   
57,212
    
79,780
  
Investments - statutory reserve funds
    
503,152
    
518,586
  
Investments - other
   
83,721
    
98,511
  
Receivables - premiums from agencies
   
37,968
    
48,040
  
Receivables - other
   
105,405
    
93,335
  
Allowance for uncollectible amounts
   
(12,352
)
  
(11,613
)
Property and equipment
   
86,411
    
96,457
  
Title plants
   
79,027
    
78,245
  
Goodwill
   
209,879
    
208,824
  
Intangible assets
   
12,986
    
17,157
  
Other assets
   
102,899
    
105,413
  
     
1,369,208
    
1,441,974
  
               
Liabilities
              
Notes payable
   
116,799
    
108,714
  
Accounts payable and accrued liabilities
   
93,502
    
122,167
  
Estimated title losses
   
447,229
    
441,324
  
Minority interests
   
14,775
    
15,710
  
     
672,305
    
687,915
  
Contingent liabilities and commitments
          
               
Stockholders' equity
              
Common and Class B Common Stock and additional paid-in capital
   
143,472
    
141,196
  
Retained earnings
   
545,182
    
597,118
  
Accumulated other comprehensive earnings
   
12,346
    
19,842
  
Treasury stock
   
(4,097
)
  
(4,097
)
               
Total stockholders' equity
    
696,903
    
754,059
  
               
     
1,369,208
    
1,441,974
  


July 30, 2008