Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (April 2013)
30 slides from Stewart Information Services's investor presentation, Apr 4, 2013
Slide 1: Spring 2013 Investor Presentation
Spring 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 • Extensive industry platform – Established market share in an $11 billion domestic industry – Well - balanced geographic national footprint with targeted international operations – Conservative management style with new organization structure and corporate strategy – Industr
Slide 4: Income Statement Non-GAAP Presentation
4 Income Statement Non-GAAP Presentation (in thousands) 2011 2012 % Change 2011 2012 % change Revenues Direct 166,560 192,446 15.5% 627,810 718,789 14.5% Agency Premiums 243,237 278,333 14.4% 877,225 1,007,380 14.8% Mortgage Services 27,389 44,777 63.5% 112,064 162,856 45.3% Total Operating Revenues
Slide 5: 2012 Financial Highlights
5 2012 Financial Highlights • Net earnings attributable to Stewart increased $59.6 million and $106.8 million for the fourth quarter and year 2012 compared to the same periods in 2011 • Earnings per diluted share increased to $2.56 and $4.61 for the fourth quarter and year 2012 compared to $0.11 and
Slide 6: Business Lines
6 Business Lines • Title insurance and related services – 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 • M
Slide 7: Stewart Operating Revenues
7 Trailing 12 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 Direct Title Agency Title Mortgage Services
Slide 8: Percentage Change in Trailing Month Moving Average Operating Revenues and Expenses
8 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 Net Operating Revenue EE & Other Operating
Slide 9: Direct Title Revenues and Orders
9 Trailing 12 Months – $ Millions Direct Title Revenues and Orders $500 $600 $700 $800 $900 $1,000 $1,100 '02'03'04'05'06'07'08'09'10'11'12 200,000 400,000 600,000 800,000 1,000,000 Direct Title Revenue Orders Opened Files Closed
Slide 10: Independent Agency Network
10 Independent Agency Network • Managing network to emphasize 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 fourth quarter 2008, average annual remittance per
Slide 11: Agency Revenues Net of Amounts Retained by Agencies
11 Trailing 12 Months – $ Millions Agency Revenues Net of Amounts Retained by Agencies $100 $150 $200 '08 '09 '10 '11 '12 2,500 3,500 4,500 5,500 6,500 Net Agency Revenue Independent Agencies Note: Number of independent agencies based on number of contractual relationships rather than number of phys
Slide 12: Agency Retention Rates
12 Agency Retention Rates Differences in independent a gency 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 statut
Slide 13: Focused Non-title Revenues and Profits: Mortgage Services Revenues
13 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing 12 Months – $ Millions Focused Non - title Revenues and Profits Mortgage Services Revenues Note: Years prior to 2012 not restated for change in segment reporting effective with Q4 2012 reporting. Impa
Slide 14: Other Operating Expenses and Employee Costs
14 Other Operating Expenses 0% 5% 10% 15% 20% 25% STC FAF FNF Employee Costs Expenses as a Percentage of Operating Revenues 2012 2011 0% 10% 20% 30% 40% STC FAF FNF
Slide 15: Claims Expense Vs. Cash Claims Paid Net of Recoveries
15 Trailing 12 Months – $ Millions Claims Expense Vs. Cash Claims Paid Net of Recoveries $25 $75 $125 $175 $225 '02 '03 '04 '05 '06 '07 '08 '09 '10'11 '12 $25 $75 $125 $175 $225 Anticipate accruals of 7.5 to 6.5 percent by year end 2013 Claims Expense Cash Claims Paid
Slide 16: Market Conditions
16 Market Conditions • 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 prices increases revenue per transaction by an average mid - 3 percent • Orders, driven by record - low rates and HARP 2.0
Slide 17: U.S. Existing Housing Sales Forecast
17 0 1 2 3 4 5 6 7 8 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 $8,000 Tax Credit Normal Market Bubble Fannie Mae® March 2013 Seasonally Adjusted Annualized Rate – Millions U.S. Existing Housing Sales Forecast National Association of REALTORS ®
Slide 18: 2013 Strategic Priorities
18 2013 Strategic Priorities • Highest quality, value added services • Customer sa tisfaction • Sales gr owth • Operational ex cellence and co mpliance le adership • Claims re duction and risk avoidance
Slide 19: Strategic Commitments – 2012 Update
19 Strategic Commitments – 2012 Update • Simplification and Alignment – Management team was reorganized along delivery and customer channels – Exited many minority owned positions through acquisitions and divestitures • Smart Growth – Revenues generated from non - title operations from mortgage serv
Slide 20: Strategic Commitments – 2012 Update (cont'd)
20 Strategic Commitments – 2012 Update (cont’d) • Profitable and Scalable Operations – Pretax earnings of $89.3 million were highest since 2006’s $84.5 million, a year in which revenues were 29.4 percent greater than in 2012 – Pretax title segment margin jumped from 6.0 percent in 2011 to 8.6 percen
Slide 21: Strategic Commitments – 2012 Update (cont'd)
21 Strategic Commitments – 2012 Update (cont’d) • Claims re duction and risk avoidance initiatives – L oss ratio on the current policy year declined from 6.3 percent in 2011 to 5.8 percent in 2012; portion of total loss ratio attributable to prior policy years declined from 3.2 percent in 2011 to 2.
Slide 22: 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, ext. 8014
Slide 23: Appendix
Spring 2013 Investor Presentation Appendix Stewart Information Services Corporation
Slide 24: Residential Lending Vs. Industry Title Premiums
24 Effective Lending – $ Trillions Residential Lending Vs. Industry Title 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 $3 $5 $7 $9 $11 $13 $15 $17 Forecast Fannie Mae Mar. 2013 2011 - 2013 Lending Likely Understates T
Slide 25: Net Operating Revenues
25 Trailing 12 Months – $ Millions Net Operating Revenues $0 $250 $500 $750 $1,000 $1,250 $1,500 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Direct Title Agency Net of Retention Mortgage Services
Slide 26: Title Revenues by Type of Regulatory Oversight
26 Title Revenues by Type of Regulatory Oversight Source: Form 9 filings (Schedule T) as compiled by ALTA
Slide 27: Employee Expenses
27 Trailing 12 Months Employee Expenses 20% 25% 30% 35% 40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 As a Percentage of Operating Revenues
Slide 28: Other Operating Expenses
28 Other Operating Expenses 10% 13% 15% 18% 20% 23% 25% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing 12 Months As a Percentage of Operating Revenues
Slide 29: Actuarial Claims as a Percentage of Net Statutory Premiums Written
29 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 Source: ALTA, Family - Company Aggregates Stewart First American Fidelity Claims Paid
Slide 30: 2012 Quarterly Segment Results
30 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 384,987 483,71
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