Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (2013)
31 slides from Stewart Information Services's investor presentation, Aug 5, 2013
Slide 1: Summer 2013 Investor Presentation
Summer 2013 Investor Presentation Stewart Information Services Corporation
Slide 2: Forward-looking Statements
Forward-looking Statements Certain statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financ
Slide 3: Investment Highlights
Investment Highlights • Established market share in $11 billion domestic industry • Well positioned to capitalize on the ongoing real estate recovery • Conservative management style with new organizational structure and refined corporate strategy to grow revenue, reduce fixed costs and enhance margi
Slide 4: First Quarter 2013 Financial Highlights
First Quarter 2013 Financial Highlights • Net earnings attributable to Stewart increased $15.4 million to $3.2 million ($0.15 per share) from a prior year net loss of $12.2 million ($0.63 loss per share) • Results include a net $3.7 million ($0.18 per share) charge reported in investment and other (
Slide 5: Income Statement (non-GAAP presentation)
Income Statement (non-GAAP presentation) Three Months Ended March 31 2012 2013 % Change Revenues Direct 150,333 158,544 5.5% Agency 196,321 227,662 16.0% Mortgage Services 33,760 37,172 10.1% Total Operating Revenues 380,414 423,377 11.3% Investment Income/Other Gains 4,572 336 -92.7% Total Revenues
Slide 6: Balance Sheet
Balance Sheet December March 2012 2013 % Change Assets Cash & Cash Equivalents 196,688 169,688 -13.7% Cash & Cash Equivalents - Statutory Reserve Funds 12,067 5,688 -52.9% Investments - Statutory Reserve Funds 444,579 450,155 1.3% Investments - Short Term 37,025 36,146 -2.4% Investments - Other 58,6
Slide 7: Summary Cash Flow Statement
Summary Cash Flow Statement March March Full Year Full Year 2012 2013 2011 2012 Cash Flow Net Cash (Used) Provided by Operations (20,336) (3,390) 23,409 120,522 CAPEX (4,662) (4,259) (17,704) (16,752) Proceeds (Purchases) of Investments, Net 971 (21,024) 3,579 (25,752) Proceeds from Sale of Land, Bu
Slide 8: Business Lines
Business Lines Title Insurance and Related Services Title insurance to the residential and commercial sectors through direct and independent agencies domestically and 2012 Operating Revenue globally -- includes the functions of searching, examining, $1,889.0 Million closing and insuring the conditio
Slide 9: Stewart Operating Revenues
Stewart Operating Revenues Trailing Twelve Months - $ Millions Direct Title Agency Title Mortgage Services $2,500 $2,000 $1,500 $1,000 $500 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 9
Slide 10: Revenues and Pre-tax Earnings Trends
Revenues and Pre-tax Earnings Trends $ Millions $2,500 $500 $2,000 $400 $1,500 $300 $1,000 $200 $500 $100 $0 $- ($500) $(100) ($1,000) $(200) ($1,500) $(300) 2006 2007 2008 2009 2010 2011 2012 Revenue Pre-tax income (Loss) 10
Slide 11: Direct Title Revenues and Orders
Direct Title Revenues and Orders Trailing Twelve Months - $ Millions $1,100 1,000,000 $1,000 $900 800,000 $800 600,000 $700 400,000 $600 $500 200,000 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Revenue Orders Opened Files Closed 11
Slide 12: Independent Agency Network
Independent Agency Network • Managing agency network by emphasizing quality and profitability over market share growth to reduce risk, improve performance and ensure our platform supports the needs of a changing customer and regulatory environment – Since 4Q 2008, average annual remittance per indep
Slide 13: Net Agency Revenues
Net Agency Revenues Trailing Twelve Months - $ Millions $200 6,500 5,500 $150 4,500 3,500 $100 2,500 '08 '09 '10 '11 '12 '13 Net Agency Revenue Number of Independent Agents Note: Number of independent agencies based on number of contractual relationships rather than number of physical locations of a
Slide 14: Agency Retention Rates
Agency Retention Rates Differences in independent agency retention rates largely driven by geography. STC FNF FAF Overall 82.1% 78.2% 79.3% Difference from STC -3.9% -2.8% Excluding Florida and California (using STC Retention Rates) 81.9% 81.3% 80.6% Difference from STC -0.6% -1.2% Source: Form 9 fi
Slide 15: Stewart Mortgage Services Revenues
Stewart Mortgage Services Revenues Trailing Twelve Months - $ Millions $180 Focused $160 Non-title Revenues $140 and Profits $120 $100 $80 $60 $40 $20 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Note: Years prior to 2012 not restated for change in segment reporting effective with Q4 2012 repo
Slide 16: Expenses As a Percent of Operating Revenues
Expenses As a Percent of Operating Revenues Other Operating Expenses Employee Costs 25.0% 40.0% 35.0% 20.0% 30.0% 15.0% 25.0% 20.0% 10.0% 15.0% 10.0% 5.0% 5.0% 0.0% 0.0% STC FAF FNF STC FAF FNF 1Q 2013 Full Year 2012 16
Slide 17: Claims Expense Vs. Cash Claims
Claims Expense Vs. Cash Claims Trailing 12 Months - $ Millions $225 Anticipate accruals of 6.0 to 7.0 percent by year-end 2013, including large claims $175 $125 $75 $25 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Claims Expense Cash Claims Paid (Net of Recoveries) 17
Slide 18: Market Conditions
Market Conditions Positives • Housing sales continuing recovery with estimated 8 percent increase in total new and existing sales in 2013 • Home prices increasing – a 5 percent rise in home prices increases revenue per transaction in the mid-3 percent range • Interest rates remain at historically lo
Slide 19: U.S. Existing Housing Sales
U.S. Existing Housing Sales Seasonally Adjusted Annualized Rate – Millions 8 Normal Bubble $8,000 7 Market Tax Fannie Mae® May 2013 Credit 6 5 4 3 2 1 0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 National Association of REALTORS® 19
Slide 20: 2013 Strategic Priorities
2013 Strategic Priorities • Highest quality, value added services • Customer satisfaction • Sales growth • Operational excellence and compliance leadership • Claims reduction and risk avoidance 20
Slide 21: Strategic Commitments – 2012 Update
Strategic Commitments – 2012 Update Simplification and Alignment • Management team was reorganized along delivery and customer channels • Exited multiple minority owned positions through acquisitions and divestitures Smart Growth • Revenues generated from non-title, mortgage servicing support produc
Slide 22: Matt Morris, Allen Berryman, Ted C. Jones
Matt Morris CEO Allen Berryman CFO Ted C. Jones, PhD Chief Economist Director of Investor Relations ted@stewart.com 713.625.8014 direct 800.729.1900, extension 8014 22
Slide 23: Appendix
Summer 2013 Investor Presentation Appendix Stewart Information Services Corporation
Slide 24: Residential Lending Vs. Industry Premiums
Residential Lending Vs. Industry Premiums $3.0 $17 $2.5 2011-2014 Lending $15 Forecast Fannie Likely Understates Title Mae® May 2013 $2.0 Revenues Due to Cash $13 Sales Double Normal $11 $1.5 $9 $1.0 $7 $0.5 $5 $0.0 $3 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Effective Lending – $ Trillio
Slide 25: Operating Revenues and Expenses
Operating Revenues and Expenses Percentage Change in Trailing 12 Month Moving Average 10.0% 7.5% 5.0% 2.5% 0.0% -2.5% -5.0% -7.5% -10.0% '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Net Operating Revenue Employee & Other Operating Expenses 25
Slide 26: Stewart Net Operating Revenues
Stewart Net Operating Revenues Trailing 12 Months - $ Millions Direct Title Agency Net of Retention Mortgage Services $1,500 $1,250 $1,000 $750 $500 $250 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 26
Slide 27: Title Revenues by Regulatory Oversight
Title Revenues by Regulatory Oversight Source: Form 9 filings (Schedule T) as compiled by ALTA 27
Slide 28: Employee Expenses
Employee Expenses As a Percentage of Operating Revenues Trailing 12 Months 40% 35% 30% 25% 20% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 28
Slide 29: Other Operating Expenses
Other Operating Expenses As a Percentage of Operating Revenues Trailing 12 Months 25% 23% 20% 18% 15% 13% 10% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 29
Slide 30: Ultimate Loss Ratios by Policy Year
Ultimate Loss Ratios by Policy Year Actuarial Claims as a Percentage of Net Statutory Premiums Written –U.S. Operations Only 12.0% Stewart Claims Paid First American 10.0% Fidelity 8.0% 6.0% 4.0% 2.0% 0.0% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: ALTA, Family-Company Aggregates 30
Slide 31: 2012 Quarterly Segment Results
2012 Quarterly Segment Results Restated to Reflect New Segment Reporting (in $000s) Q1 2012 Q2 2012 Q3 2012 Q4 2012 YE 2012 Revenues Title 343,789 434,281 466,853 468,160 1,713,082 Mortgage Services 37,792 45,541 46,864 47,817 178,015 Corporate 3,406 3,889 7,024 4,995 19,314 Total 384,967 483,712 52
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