HOUSTON, July 30 TX-STC-Report-Q2ERN
HOUSTON, July 30 /PRNewswire-FirstCall/ -- 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(R), 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
http://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 30June 30
2008 2007 20082007
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 information11,30216,497 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 costs146,076 179,096 298,039 355,888
Other operating expenses 86,412 105,241 173,248 198,884
Title losses and related claims46,59535,117 76,316 66,976
Depreciation and amortization 8,95010,149 18,041 20,034
Impairment of other assets 6,011 -6,011 -
Interest1,121 1,8742,936 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 3,5353,137 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) 18,09218,351 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 11,30216,497 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 38,98122,424 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
May43.1 60.7
June 38.9 58.1
Quarter 130.4 177.8
Number of title orders closed
(000):
Quarter 93.5 125.1
June 30Dec 31
2008 2007
Stockholders' equity 696,903 754,059
Number of shares outstanding (000)18,14618,031
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
Goodwill209,879 208,824
Intangible assets12,986 17,157
Other assets102,899 105,413
1,369,2081,441,974
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' equity696,903 754,059
1,369,2081,441,974
July 30, 2008
SOURCE Stewart Information Services Corporation
