Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (May 2013)
31 slides from Stewart Information Services's investor presentation, May 30, 2013
Slide 1: Summer 2013 Investor Presentation
Summer 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: First Quarter 2013 Financial Highlights
4 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)
5 Income Statement (non - GAAP presentation) 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 384,986 423,713 10.1% A
Slide 6: Balance Sheet
6 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
Slide 7: Summary Cash Flow Statement
7 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,
Slide 8: Business Lines
8 Business Lines Title I nsurance and Related S ervices Title insurance to the residential and commercial sectors through direct and independent agencies domestically and globally -- includes the functions of searching, examining, closing and insuring the condition of the title to real property Mort
Slide 9: Stewart Operating Revenues
9 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 10: Revenues and Pre-tax Earnings Trends
10 Revenues and Pre - tax Earnings Trends ($1,500) ($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 2012 $(300) $(200) $(100) $- $100 $200 $300 $400 $500 Pre - tax income (Loss) Revenue $ Millions
Slide 11: Direct Title Revenues and Orders
11 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 12: Independent Agency Network
12 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 13: Net Agency Revenues
13 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 14: Agency Retention Rates
14 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 statutor
Slide 15: Focused Non-title Revenues and Profits
15 $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 16: Expenses as a Percent of Operating Revenues
16 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 1Q 2013 Full Year 2012 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% STC FAF FNF
Slide 17: Claims Expense vs. Cash Claims
17 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 6.0 to 7.0 percent by year - end 2013, including large claims Claims Expense Cash Claims Paid (Net of Recoveries)
Slide 18: Market Conditions
18 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 19: U.S. Existing Housing Sales
19 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® May 2013 Seasonally Adjusted Annualized Rate – Millions U.S. Existing Housing Sales National Association of REALTORS ®
Slide 20: 2013 Strategic Priorities
20 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 21: Strategic Commitments – 2012 Update
21 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 p
Slide 22: Management and Investor Relations Contact
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
Summer 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 ® May 2013 2011 - 2014 Lending Likely Understates Ti
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 Percentage of Net Premiums Written
30 Actuarial Claims as a Percentage 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
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