Stewart Information Services Corp 10-Q for FY2021 Q3

Stewart Information Services Corp (STC)

10-Q 2021-11-03 For: 2021-09-30

Added on April 09, 2026

About this 10-Q

Stewart Information Services Corp filed this 10-Q on November 3, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).

Headline figures

Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $836.73M; up 40.5% from $595.7M a year earlier
Net income: $88.66M; up 58.6% from net income of $55.91M a year earlier
Diluted EPS: $3.26; up 47.5% from $2.21 a year earlier

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Delaware		74-1677330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1360 Post Oak Blvd.,	Suite 100
Houston,	Texas	77056
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	STC	New York Stock Exchange


Item		Page
	PART I – FINANCIAL INFORMATION

1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	Quantitative and Qualitative Disclosures About Market Risk	28

4.	Controls and Procedures	29
	PART II – OTHER INFORMATION
1.	Legal Proceedings	30

1A.	Risk Factors	30

2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

5.	Other Information	30

6.	Exhibits	31

	Signature	31


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
	($000 omitted, except per share)
Revenues
Title revenues:
Direct operations	366,091	280,114	999,098	696,611
Agency operations	401,762	282,605	1,138,023	802,022
Ancillary services	61,934	27,957	176,057	44,573
Operating revenues	829,787	590,676	2,313,178	1,543,206
Investment income	4,053	5,027	13,127	14,530
Net realized and unrealized gains (losses)	2,887	(7)	17,816	(6,035)
	836,727	595,696	2,344,121	1,551,701
Expenses
Amounts retained by agencies	329,906	231,051	935,861	659,138
Employee costs	197,587	155,638	555,451	428,817
Other operating expenses	152,587	98,531	415,864	245,003
Title losses and related claims	30,345	28,427	92,687	68,600
Depreciation and amortization	9,144	5,144	22,394	13,436
Interest	712	562	1,960	2,075
	720,281	519,353	2,024,217	1,417,069
Income before taxes and noncontrolling interests	116,446	76,343	319,904	134,632
Income tax expense	(23,051)	(16,058)	(70,547)	(29,293)
Net income	93,395	60,285	249,357	105,339
Less net income attributable to noncontrolling interests	4,732	4,376	11,639	10,107
Net income attributable to Stewart	88,663	55,909	237,718	95,232

Net income	93,395	60,285	249,357	105,339
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments	(4,243)	3,844	(997)	(3,404)
Change in net unrealized gains and losses on investments	(2,183)	920	(10,330)	15,055
Reclassification adjustment for realized gains and losses on investments	(355)	(175)	(918)	(276)
Other comprehensive (loss) income, net of taxes:	(6,781)	4,589	(12,245)	11,375
Comprehensive income	86,614	64,874	237,112	116,714
Less net income attributable to noncontrolling interests	4,732	4,376	11,639	10,107
Comprehensive income attributable to Stewart	81,882	60,498	225,473	106,607

Basic average shares outstanding (000)	26,873	25,148	26,803	24,151
Basic earnings per share attributable to Stewart	3.30	2.22	8.87	3.94
Diluted average shares outstanding (000)	27,238	25,297	27,090	24,256
Diluted earnings per share attributable to Stewart	3.26	2.21	8.78	3.93


	September 30, 2021 (Unaudited)	December 31, 2020
	($000 omitted)
Assets
Cash and cash equivalents	607,605	432,683
Short-term investments	17,198	20,678
Investments in debt and equity securities, at fair value	700,719	684,387



Receivables:
Premiums from agencies	47,324	34,507
Trade and other	66,711	56,054
Income taxes	5,107	501
Notes	1,390	1,557
Allowance for uncollectible amounts	(6,222)	(4,807)
	114,310	87,812
Property and equipment:
Land	2,964	2,964
Buildings	17,114	22,598
Furniture and equipment	191,231	168,147
Accumulated depreciation	(151,311)	(142,038)
	59,998	51,671
Operating lease assets	117,354	106,479
Title plants, at cost	73,127	72,863
Investments on equity method basis	21,734	6,765
Goodwill	536,176	431,477
Intangible assets, net of amortization	72,549	37,382
Deferred tax assets	4,566	4,330
Other assets	50,169	42,048
	2,375,505	1,978,575
Liabilities
Notes payable	275,276	101,773
Accounts payable and accrued liabilities	209,144	225,180
Operating lease liabilities	129,064	119,089
Estimated title losses	534,551	496,275
Deferred tax liabilities	10,770	23,852
	1,158,805	966,169
Contingent liabilities and commitments
Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital	306,257	301,937
Retained earnings	899,528	688,819
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments	(9,235)	(8,238)
Net unrealized gains on debt securities investments	14,012	25,260

Treasury stock – 352,161 common shares, at cost	(2,666)	(2,666)
Stockholders’ equity attributable to Stewart	1,207,896	1,005,112
Noncontrolling interests	8,804	7,294
Total stockholders’ equity (26,890,064 and 26,728,242 shares outstanding)	1,216,700	1,012,406
	2,375,505	1,978,575


	Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total
	($000 omitted)
Nine Months Ended September 30, 2021
Balance at December 31, 2020	27,080	274,857	688,819	17,022	(2,666)	7,294	1,012,406

Net income attributable to Stewart	—	—	237,718	—	—	—	237,718
Dividends on Common Stock ($0.99 per share)	—	—	(27,009)	—	—	—	(27,009)

Stock-based compensation	139	8,355	—	—	—	—	8,494
Stock repurchases	(41)	(2,104)	—	—	—	—	(2,145)
Stock option and employee stock purchase plan exercises	64	2,651	—	—	—	—	2,715
Purchase of remaining interest in consolidated subsidiaries	—	(4,744)	—	—	—	(872)	(5,616)
Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(10,330)	—	—	(10,330)
Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(918)	—	—	(918)
Foreign currency translation adjustments, net of taxes	—	—	—	(997)	—	—	(997)
Net income attributable to noncontrolling interests	—	—	—	—	—	11,639	11,639
Distributions to noncontrolling interests	—	—	—	—	—	(11,683)	(11,683)
Net effect of other changes in ownership	—	—	—	—	—	2,426	2,426
Balance at September 30, 2021	27,242	279,015	899,528	4,777	(2,666)	8,804	1,216,700

Nine Months Ended September 30, 2020
Balance at December 31, 2019	24,062	164,217	564,392	(2,699)	(2,666)	6,453	753,759

Net income attributable to Stewart	—	—	95,232	—	—	—	95,232
Dividends on Common Stock ($0.90 per share)	—	—	(22,401)	—	—	—	(22,401)
Issuance of Common Stock	3,026	105,935	—	—	—	—	108,961
Stock-based compensation	4	4,230	—	—	—	—	4,234
Stock repurchases	(20)	(806)	—	—	—	—	(826)

Change in net unrealized gains and losses on investments, net of taxes	—	—	—	15,055	—	—	15,055
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(276)	—	—	(276)
Foreign currency translation adjustments, net of taxes	—	—	—	(3,404)	—	—	(3,404)
Net income attributable to noncontrolling interests	—	—	—	—	—	10,107	10,107
Distributions to noncontrolling interests	—	—	—	—	—	(9,572)	(9,572)

Balance at September 30, 2020	27,072	273,576	637,223	8,676	(2,666)	6,988	950,869


	September 30, 2021	December 31, 2020
	($000 omitted)
Investments in:
Debt securities	617,278	631,386
Equity securities	83,441	53,001
	700,719	684,387


	September 30, 2021		December 31, 2020
	Amortized costs	Fair values	Amortized costs	Fair values
	($000 omitted)
Municipal	38,088	39,885	45,138	47,603
Corporate	280,090	292,119	285,962	305,450
Foreign	274,938	278,808	261,748	271,711
U.S. Treasury Bonds	6,426	6,466	6,564	6,622

	599,542	617,278	599,412	631,386


	September 30, 2021		December 31, 2020
	Gains	Losses	Gains	Losses
	($000 omitted)
Municipal	1,798	1	2,465	—
Corporate	12,630	601	19,594	106
Foreign	4,784	914	10,024	61
U.S. Treasury Bonds	60	20	82	24

	19,272	1,536	32,165	191


	Less than 12 months		More than 12 months		Total
	Losses	Fair values	Losses	Fair values	Losses	Fair values
	($000 omitted)
Municipal	1	130	—	—	1	130
Corporate	395	40,219	206	4,933	601	45,152
Foreign	888	83,259	26	246	914	83,505
U.S. Treasury Bonds	3	482	17	508	20	990

	1,287	124,090	249	5,687	1,536	129,777


	Level 1	Level 2	Fair value measurements
	($000 omitted)
Investments in securities:
Debt securities:
Municipal	—	39,885	39,885
Corporate	—	292,119	292,119
Foreign	—	278,808	278,808
U.S. Treasury Bonds	—	6,466	6,466
Equity securities	83,441	—	83,441
	83,441	617,278	700,719


	Title	Ancillary Services and Corporate	Consolidated Total
		($000 omitted)
Balances at December 31, 2020	361,433	70,044	431,477
Acquisitions	103,744	9,777	113,521
Purchase accounting adjustments	(4,492)	(4,307)	(8,799)
Disposals	(23)	—	(23)
Balances at September 30, 2021	460,662	75,514	536,176


	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	(2,764)	(581)	(2,183)	1,164	244	920
Reclassification adjustment for realized gains and losses on investments	(449)	(94)	(355)	(221)	(46)	(175)
	(3,213)	(675)	(2,538)	943	198	745

Foreign currency translation adjustments	(4,950)	(707)	(4,243)	4,384	540	3,844

Other comprehensive (loss) income	(8,163)	(1,382)	(6,781)	5,327	738	4,589


	For the Three Months Ended September 30
	2021		2020		% Change

Operating revenues	767.9		562.7		36	%
Investment income	4.1		5.0		(19)	%
Net realized and unrealized gains	0.3		—		100	%
Pretax income	119.1		82.4		45	%
Pretax margin	15.4	%	14.5	%


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021	2020	Change	% Change		2021	2020	Change	% Change
	($ in millions)					($ in millions)
Non-commercial
Domestic	249.1	208.2	40.9	20	%	709.1	503.8	205.3	41	%
International	44.2	30.4	13.8	45	%	118.8	70.4	48.4	69	%
	293.3	238.6	54.7	23	%	827.9	574.2	253.7	44	%
Commercial:
Domestic	64.5	36.7	27.8	76	%	149.2	108.7	40.5	37	%
International	8.3	4.8	3.5	73	%	22.0	13.7	8.3	61	%
	72.8	41.5	31.3	75	%	171.2	122.4	48.8	40	%
Total direct title revenues	366.1	280.1	86.0	31	%	999.1	696.6	302.5	43	%


	Amortized costs	Fair values
	($000 omitted)
In one year or less	64,866	65,678
After one year through five years	363,235	371,531
After five years through ten years	140,784	146,686
After ten years	30,657	33,383
	599,542	617,278


	2021		2020
	($000 omitted)
Balances at January 1	496,275		459,053
Provisions:
Current year	91,259		68,063
Previous policy years	1,428		537
Total provisions	92,687		68,600
Payments, net of recoveries:
Current year	(12,181)		(9,595)
Previous policy years	(40,745)		(49,390)
Total payments, net of recoveries	(52,926)		(58,985)

Effects of changes in foreign currency exchange rates	(1,485)		(1,856)
Balances at September 30	534,551		466,812
Loss ratios as a percentage of title operating revenues:
Current year provisions	4.3	%	4.5	%
Total provisions	4.3	%	4.6	%


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021	2020	Change	% Change		2021	2020	Change	% Change
Opened Orders:
Commercial	4,449	3,703	746	20	%	13,612	11,281	2,331	21	%
Purchase	73,213	73,668	(455)	(1)	%	220,420	184,224	36,196	20	%
Refinance	64,201	86,823	(22,622)	(26)	%	205,558	223,318	(17,760)	(8)	%
Other	1,761	1,067	694	65	%	5,253	2,293	2,960	129	%
Total	143,624	165,261	(21,637)	(13)	%	444,843	421,116	23,727	6	%

Closed Orders:
Commercial	4,199	3,799	400	11	%	12,531	10,549	1,982	19	%
Purchase	56,376	52,407	3,969	8	%	160,458	123,529	36,929	30	%
Refinance	47,437	56,027	(8,590)	(15)	%	165,642	138,906	26,736	19	%
Other	1,101	555	546	98	%	3,372	1,316	2,056	156	%
Total	109,113	112,788	(3,675)	(3)	%	342,003	274,300	67,703	25	%


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021	2020	Change	% Change		2021	2020	Change	% Change
	($ in millions)					($ in millions)
Provisions – known claims:
Current year	4.2	3.0	1.2	40	%	10.8	7.6	3.2	42	%
Prior policy years	13.8	16.9	(3.1)	(18)	%	41.5	45.0	(3.5)	(8)	%
	18.0	19.9	(1.9)	(10)	%	52.3	52.6	(0.3)	(1)	%
Provisions – IBNR
Current year	25.9	25.3	0.6	2	%	80.5	60.5	20.0	33	%
Prior policy years	0.2	0.1	0.1	100	%	1.4	0.5	0.9	180	%
	26.1	25.4	0.7	3	%	81.9	61.0	20.9	34	%
Transferred from IBNR to known claims	(13.8)	(16.9)	3.1	(18)	%	(41.5)	(45.0)	3.5	(8)	%
Total provisions	30.3	28.4	1.9	7	%	92.7	68.6	24.1	35	%


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*	—	Credit Agreement, dated October 28, 2021, among the Registrant, PNC Bank, as Administrative Agent, Swingline Loan Lender and Issuing Lender, the Guarantors, and Lenders Party thereto
10.2	—	Stock purchase agreement, dated August 23, 2021, by and among Informative Research, the Shareholders of Informative Research listed on Exhibit A thereto, Sean Buckner, solely in the capacity of shareholder representative thereunder, and the Registrant (incorporated by reference in this report from Exhibit 10.1 of the Current Report on Form 8-K filed on August 26, 2021)





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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	—	XBRL Taxonomy Extension Schema Document
101.CAL*	—	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	—	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	—	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	—	XBRL Taxonomy Extension Presentation Linkbase Document


						Stewart Information Services Corporation
						Registrant

By:						/s/ David C. Hisey
						David C. Hisey, Chief Financial Officer, Secretary and Treasurer


Level	Debt to Total Capitalization Ratio	Commitment Fee	Letter of Credit Fee	Revolving Credit Base Rate Spread	Term Loan Base Rate Spread	Revolving Credit LIBOR Rate Spread	Term Loan LIBOR Rate Spread
I	Less than 0.15 to 1.0	0.15%	1.25%	0.25%	0%	1.25%	0.875%
II	Greater than or equal to 0.15 to 1.0 but less than 0.20 to 1.0	0.20%	1.375%	0.375%	0%	1.375%	1.00%
III	Greater than or equal to 0.20 to 1.0 but less than 0.25 to 1.0	0.25%	1.50%	0.50%	0.125%	1.50%	1.125%
IV	Greater than or equal to 0.25 to 1.0	0.30%	1.625%	0.625%	0.25%	1.625%	1.25%


Available Tenor			Benchmark Replacement Adjustment
One-Month			0.11448% (11.448 basis points)
Three-Months			0.26161% (26.161 basis points)
Six-Months			0.42826% (42.826 basis points)


(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/ Frederick H. Eppinger
Name:						Frederick H. Eppinger
Title:						Chief Executive Officer


/s/ David C. Hisey
Name:						David C. Hisey
Title:						Chief Financial Officer, Secretary and Treasurer