Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (April 2014)
33 slides from Stewart Information Services's investor presentation, Apr 8, 2014
Slide 1: Spring 2014 Investor Presentation
Spring 2014 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: Non-GAAP Disclosures
3 Non - GAAP Disclosures This presentation may contain certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including but not limited to, losses and litigation expenses arising from non - predictable title losses and adjusted pretax ti
Slide 4: Investment Highlights
4 Investment Highlights • Trusted provider in $12+ billion domestic industry • Well positioned to capitalize on the ongoing real estate recovery and heightened regulatory environment • Streamlined organizational structure and responsive corporate strategy to grow revenue, reduce fixed costs and enha
Slide 5: Full Year 2013 Financial Highlights
5 Full Year 2013 Financial Highlights • Pretax earnings were $101.1 million in 2013, up from $89.3 million in 2012. • Net earnings attributable to Stewart were $63.0 million ($2.60 per share) in 2013, down from $109.2 million ($4.61 per share) in 2012. Of note, both years benefited from the release
Slide 6: Income Statement (non-GAAP)
6 Income Statement (non - GAAP) 2013 2012 % Change 2013 2012 % Change Revenues Direct 179,515 193,555 -7.3% 750,031 723,539 3.7% Agency 242,235 278,333 -13.0% 1,046,378 1,007,380 3.9% Total Title Revenue 421,750 471,888 -10.6% 1,796,409 1,730,919 3.8% Mortgage Services 23,366 43,668 -46.5% 117,145 1
Slide 7: Balance Sheet
7 Balance Sheet December December 2013 2012 Assets Cash & Cash Equivalents 178,788 196,471 Statutory Reserve Funds 466,065 456,646 Investments - Short Term 38,336 37,025 Investments - Other 86,779 58,680 Other Assets 311,203 314,385 Goodwill & Intangibles 244,888 227,970 Total Assets 1,326,059 1,291
Slide 8: Summary Cash Flow Statement
8 Summary Cash Flow Statement December December 2013 2012 Cash Flow Net Cash (Used) Provided by Operations 87,187 120,522 Capex (17,282) (16,752) Proceeds (purchases) of investments, net (55,975) (25,752) Decreases (increases) in notes receivable (1,002) (463) Collections on notes receivable 2,666 9
Slide 9: Title Insurance
9 Title Insurance Residential • Provides independent, third - party closing and settlement services while acting as a trusted advisor to parties in the real estate transaction • Searching, examining and insuring the condition of the title to real property, thereby providing security of ownership to
Slide 10: Mortgage Services Business Lines
10 Mortgage Services Business Lines • Mortgage origination services include post - closing management, loan review, valuation and due diligence • Component servicing business includes call center services, loss mitigation support, short sale and deed - in - lieu services as well as transfer support
Slide 11: Revenues and Pre-tax Earnings Trends
11 Revenues and Pre - tax Earnings Trends $ Millions Pre - tax Earnings Revenue ($1,500) ($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 2012 2013 $(300) $(200) $(100) $- $100 $200 $300 $400 $500
Slide 12: Stewart Operating Revenues Trailing Twelve Months
12 Stewart Operating Revenues Trailing Twelve Months - $ Millions $0 $500 $1,000 $1,500 $2,000 $2,500 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Agency Title Mortgage Services
Slide 13: Direct Title Revenues and Orders
13 Direct Title Revenues and Orders Trailing Twelve Months - $ Millions Direct Title Revenue Orders Opened Orders Closed $500 $600 $700 $800 $900 $1,000 $1,100 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 200,000 400,000 600,000 800,000 1,000,000 Orders Revenue
Slide 14: Independent Agency Network
14 Independent Agency Network • Focus is on quality and profitability over market share growth to reduce risk and consistently improve operational performance. • Leading the industry in assisting independent agencies prepare for Consumer Financial Protection Bureau (CFPB) compliance and enabling the
Slide 15: Agency Revenues - Net of Retention; Number of Independent Agents
15 Agency Revenues - Net of Retention Number of Independent Agents Note: Number of independent agencies based on number of contractual relationships rather than number of physical locations of agencies. $100 $150 $200 '08 '09 '10 '11 '12 '13 2,500 3,500 4,500 5,500 6,500 Trailing Twelve Months - $ M
Slide 16: Agency Retention Rates
16 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, 2013. STC retention rates were used in the calculations because competitor rates are not included in SEC or statutory
Slide 17: Stewart Mortgage Services Revenues
17 Stewart Mortgage Services Revenues Trailing Twelve Months - $ Millions Note: Years prior to 2012 not restated for change in segment reporting effective with Q4 2012 reporting. Impact in any given year would not be material to revenues. $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 '03 '04 '05 '06 '
Slide 18: Title Loss Provision Ratios
18 Title Loss Provision Ratios Quarterly Title Loss Provision Ratios – Includes Prior Year True - ups Source: Company press releases and SEC filings
Slide 19: Ultimate Loss Ratios by Policy Year
19 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 '13 Ultimate Loss Ratios by Policy Year Actuarial Claims as a % of Net Statutory Premiums Written – U.S. Operations Only Source: ALTA, Family - Company Aggregates Stewart First American Fidelity Claims Paid
Slide 20: Market Conditions
20 Market Conditions Positives • Home prices continue to increase – a 5 percent rise in home prices increases revenue per transaction in the mid - 3 percent range • Commercial real estate market remaining solid • Interest rates remain at historically low levels • HARP extension to 2015 • Full benefi
Slide 21: U.S. Existing Housing Sales
21 0 1 2 3 4 5 6 7 8 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 U.S. Existing Housing Sales Seasonally Adjusted Annualized Rate – Millions $8,000 Tax Credit Normal Market Bubble Fannie Mae ® February 2014 National Association of REALTORS ® Last Normal Market in 2002
Slide 22: 2014 Strategic Priorities
22 2014 Strategic Priorities • Lead the market in providing compliant, trusted and tailored real estate services in concert with changing regulatory environment • Expand commercial market share • Repositioning Mortgage Services to excel in a normalized real estate market • Expanding footprint of dir
Slide 23: Management and Investor Relations Contacts
23 CEO Matt Morris CFO Allen Berryman Nat Otis Ted Jones, PhD SVP, Financial Planning & Strategic Analysis Senior Vice President Director of Investor Relations Chief Economist nat.otis@stewart.com ted@stewart.com 713.625.8360 direct 713.625.8014 direct 800.729.1900, extension 8360 800.729.1900, exte
Slide 24: Appendix
Spring 2014 Investor Presentation Appendix Stewart Information Services Corporation
Slide 25: Residential Lending vs. Industry Premiums
25 $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 Residential Lending Vs. Industry Premiums Forecast Fannie Mae ® February 2014 2011 - 2014 Lending Likely Understates Title Revenues Due to Cash Sales Double Normal Effective Lending
Slide 26: Stewart Net Operating Revenues
26 Stewart Net Operating Revenues Trailing 12 Months - $ Millions $0 $250 $500 $750 $1,000 $1,250 $1,500 '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: Claims Expense vs. Cash Claims
28 $25 $75 $125 $175 $225 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Claims Expense vs. Cash Claims Trailing 12 Months - $ Millions Anticipate accruals of 5.5% - 6.0% in 2014, including large claims Claims Expense Cash Claims Paid (Net of Recoveries)
Slide 29: Employee Expenses
29 Employee Expenses 20% 25% 30% 35% 40% '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 As a Percentage of Operating Revenues Trailing 12 Months
Slide 30: Other Operating Expenses
30 Other Operating Expenses 10% 13% 15% 18% 20% 23% 25% '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 As a Percentage of Operating Revenues Trailing 12 Months
Slide 31: Statutory Surplus and Operating Leverage
31 Statutory Surplus and Operating Leverage Thousands Multiple
Slide 32: Debt-to-Capital and Debt-to-Equity
32 Debt - to - Capital and Debt - to - Equity
Slide 33: Book Value and Tangible Book Value Per Share
33 Book Value and Tangible Book Value Per Share
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