Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (August 2013)
34 slides from Stewart Information Services's investor presentation, Aug 27, 2013
Slide 1: Fall 2013 Investor Presentation
Fall 2013 Investor Presentation Stewart Information Services Corporation
Slide 2: Forward-looking Statements
2 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 a
Slide 3: Investment Highlights
3 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 mar
Slide 4: Second Quarter 2013 Financial Highlights
4 Second Quarter 2013 Financial Highlights • Net earnings attributable to Stewart increased $2.0 million to $26.9 million ($1.09 per share) from $24.9 million ($1.05 per share) in the prior year period • Results include $123K in investment and other gains versus $1.1 million in investment and other
Slide 5: Income Statement (non-GAAP)
5 Income Statement (non - GAAP) 2013 2012 % Change Revenues Direct 211,900 188,216 12.6% Agency 269,898 251,139 7.5% Total Title Revenue 481,798 439,355 9.7% Mortgage Services 31,014 39,860 -22.2% Total Operating Revenues 512,812 479,215 7.0% Investment Income/Other Gains 4,408 4,497 -2.0% Total Rev
Slide 6: Balance Sheet
6 Balance Sheet June December 2013 2012 % Change Assets Cash & Cash Equivalents 208,791 196,471 6.3% Cash & Cash Equivalents - Statutory Reserve Funds 7,798 12,067 -35.4% Investments - Statutory Reserve Funds 441,390 444,579 -0.7% Investments - Short Term 36,889 37,025 -0.4% Investments - Other 61,2
Slide 7: Summary Cash Flow Statement
7 Summary Cash Flow Statement June June 2013 2012 % Change Cash Flow Net Cash (Used) Provided by Operations 43,094 19,376 122.4% Proceeds (Purchases) of Investments, Net (21,949) 10,591 Purchase of Property and Equipment, Net (7,588) (5,744) 32.1% Cash Paid for Acquisitions of Subsidiaries and Other
Slide 8: Title Insurance
8 Title Insurance Residential • Searching, examining, closing and insuring the condition of the title to real property • Title operations in all 50 states • Agency operations through roughly 3,000 independent issuing agents. Down by over half since peak of the real estate market Commercial • Strong
Slide 9: Mortgage Services
9 Mortgage Services Business Lines • Mortgage origination services include post - closing management, loan review , valuation and due diligence • C omponent servicing business includes call center services, loss mitigation support, short sale and deed - in - lieu services as well as transfer support
Slide 10: Stewart Operating Revenues
10 Trailing Twelve Months - $ Millions Stewart Operating Revenues $0 $500 $1,000 $1,500 $2,000 $2,500 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Agency Title Mortgage Services
Slide 11: Revenues and Pre-tax Earnings Trends
11 Revenues and Pre - tax Earnings Trends Pre - tax Earnings Revenue $ Millions ($1,500) ($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 2012 2013 YTD $(300) $(200) $(100) $- $100 $200 $300 $400 $500
Slide 12: Direct Title Revenues and Orders
12 Trailing Twelve Months - $ Millions Direct Title Revenues and Orders $500 $600 $700 $800 $900 $1,000 $1,100 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 200,000 400,000 600,000 800,000 1,000,000 Direct Title Revenue Orders Opened Files Closed
Slide 13: Independent Agency Network
13 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 in
Slide 14: Net Agency Revenues
14 Trailing Twelve Months - $ Millions Net Agency Revenues $100 $150 $200 '08 '09 '10 '11 '12 '13 2,500 3,500 4,500 5,500 6,500 Net Agency Revenue Number of Independent Agents Note: Number of independent agencies based on number of contractual relationships rather than number of physical locations o
Slide 15: Agency Retention Rates
15 Agency Retention Rates Differences in independent agency retention rates largely driven by geography Source: Form 9 filings for respective underwriters for year ended December 31, 2012. STC retention rates were used in the calculations because competitor rates are not included in SEC or statutory
Slide 16: Focused Non-title Revenues and Profits
16 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Trailing Twelve Months - $ Millions Focused Non - title Revenues and Profits Stewart Mortgage Services Revenues Note: Years prior to 2012 not restated for change in segment reporting effective with Q4 2012
Slide 17: Other Operating Expenses and Employee Costs
17 Other Operating Expenses 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% STC FAF FNF Employee Costs Expenses As a Percent of Operating Revenues 2 Q 2013 YTD 2013 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% STC FAF FNF
Slide 18: Claims Expense vs. Cash Claims
18 Trailing 12 Months - $ Millions Claims Expense Vs. Cash Claims $25 $75 $125 $175 $225 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Anticipate accruals of 5.5% - 6.5% by year - end 2013, including large claims Claims Expense Cash Claims Paid (Net of Recoveries)
Slide 19: Market Conditions
19 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 r ates remain at historica
Slide 20: U.S. Existing Housing Sales
20 0 1 2 3 4 5 6 7 8 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 $8,000 Tax Credit Normal Market Bubble Fannie Mae® August 2013 Seasonally Adjusted Annualized Rate – Millions U.S. Existing Housing Sales National Association of REALTORS ® Last Normal Market in 2002
Slide 21: 2013 Strategic Priorities
21 2013 Strategic Priorities • Highest quality, value added services • Customer sa tisfaction • Sales gr owth • Operational ex cellence and compliance le adership • Claims re duction and risk avoidance
Slide 22: Management and Investor Relations Contacts
22 CEO Matt Morris CFO Allen Berryman Ted C. Jones, PhD Chief Economist Director of Investor Relations ted@stewart.com 713.625.8014 direct 800.729.1900, extension 8014
Slide 23: Appendix
Fall 2013 Investor Presentation Appendix Stewart Information Services Corporation
Slide 24: Residential Lending vs. Industry Premiums
24 Effective Lending – $ Trillions Residential Lending Vs. Industry Premiums Statutory Title Premiums $ Billions $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 $3 $5 $7 $9 $11 $13 $15 $17 Forecast Fannie Mae ® August 2013 2011 - 2014 Lending Likely Understates
Slide 25: Change in Operating Revenues and Expenses
25 Percentage Change in Trailing 12 Month Moving Average Operating Revenues and Expenses -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
Slide 26: Stewart Net Operating Revenues
26 Trailing 12 Months - $ Millions Stewart Net Operating Revenues $0 $250 $500 $750 $1,000 $1,250 $1,500 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Agency Net of Retention Mortgage Services
Slide 27: Title Revenues by Regulatory Oversight
27 Title Revenues by Regulatory Oversight Source: Form 9 filings (Schedule T) as compiled by ALTA
Slide 28: Employee Expenses
28 Trailing 12 Months Employee Expenses 20% 25% 30% 35% 40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 As a Percentage of Operating Revenues
Slide 29: Other Operating Expenses
29 Other Operating Expenses 10% 13% 15% 18% 20% 23% 25% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Trailing 12 Months As a Percentage of Operating Revenues
Slide 30: Actuarial Claims as a % of Net Statutory Premiums Written
30 Actuarial Claims as a % of Net Statutory Premiums Written – U.S. Operations Only Ultimate Loss Ratios by Policy Year 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: ALTA, Family - Company Aggregates Stewart First American Fidelity Claims Paid
Slide 31: 2012 Quarterly Segment Results
31 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
Slide 32: Statutory Surplus and Operating Leverage
32 Statutory Surplus and Operating Leverage Thousands Multiple
Slide 33: Debt-to-Capital and Debt-to-Equity
33 Debt - to - Capital and Debt - to - Equity
Slide 34: Book Value and Tangible Book Value Per Share
34 Book Value and Tangible Book Value Per Share
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