Slide 1: Summer 2012 Investor Presentation
Summer 2012 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 and fina
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 title
Slide 4: Investment Highlights
4 Investment Highlights • Extensive Industry Platform – Publicly held business managed by fourth generation of founding family – Industry leading expertise in serving all segments of the real estate services market – Established market share in $10 billion domestic industry – Well-balanced geographi
Slide 5: 2012 Strategic Commitments
5 2012 Strategic Commitments •Simplification and Alignment •Profitable and Scalable Operations •Strategic Pricing •Claims Reduction and Risk Avoidance Initiatives •Smart Growth
Slide 6: Non-GAAP Presentation
6 Non-GAAP Presentation (in thousands) 2011 2012 % Change 2011 2012 % change Revenues Direct 165,841 187,574 13.1% 305,071 339,208 11.2% Agency Premiums 213,829 251,139 17.4% 405,638 447,460 10.3% REI 22,564 40,502 79.5% 53,949 72,961 35.2% Total Operating Revenues 402,234 479,215 19.1% 764,658 859,
Slide 7: Business Lines
7 Business Lines • Title Insurance and Related Services – Title insurance to the residential and commercial sectors through direct and independent agencies domestically and globally – Includes the functions of searching, examining, closing and insuring the condition of the title to real property • R
Slide 8: Trailing Twelve Months Employee Expenses
8 Trailing Twelve Months Employee Expenses 20% 25% 30% 35% 40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 As a Percentage of Operating Revenues
Slide 9: Other Operating Expenses
9 Other Operating Expenses 10% 13% 15% 18% 20% 23% 25% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing Twelve Months As a Percentage of Operating Revenues
Slide 10: Expenses as a Percent of Operating Revenues
10 Other Operating Expenses Employee Costs Expenses As a Percent of Operating Revenues 2012 YTD 2011
Slide 11: Claims Expense vs. Cash Claims Paid Net of Recoveries
11 Trailing Twelve Months -$ 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 8.0 percent by year end Claims Expense Cash Claims Paid
Slide 12: Target: Balanced Direct and Independent Channels
12 50% 55% 60% 65% '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing 12 Months Target: Balanced Direct and Independent Channels 3,500 of 7,500 Agencies Canceled Percent Agency Revenues
Slide 13: Agency Remittance Rates
13 16% 17% 18% 19% 20% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing Twelve Months Target: 18 percent by year end 2012 with continued improvement Focused 12-month Improvement Including Geographic Issues Agency Remittance Rates
Slide 14: U.S. Existing Housing Sales Forecast
14 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 July 2012 Seasonally Adjusted Annualized Rate - Millions U.S. Existing Housing Sales Forecast National Association of REALTORS ®
Slide 15: Stewart REI Operating Revenues
15 $0 $20 $40 $60 $80 $100 $120 $140 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Trailing Twelve Months -$ Millions Focused Non-title Revenues and Profits Stewart REI Operating Revenues
Slide 16: 2012 Strategic Commitments
16 2012 Strategic Commitments 1. Simplification and Alignment 2. Profitable and Scalable Operations 3. Claims Reduction and Risk Avoidance Initiatives 4. Grow Shared Services 5. Sales Growth
Slide 17: Contacts
17 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 18: Summer 2012 Investor Presentation
Summer 2012 Investor Presentation Stewart Information Services Corporation
Slide 19: Residential Lending vs. Industry Title Premiums
19 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 $17 Forecast Fannie Mae July 2012 2011-2013 Lending Likely Understates Titl
Slide 20: Stewart Operating Revenues
20 Trailing Twelve Months -$ 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 Direct Title Agency Title REI
Slide 21: Expenses as a Percentage of Net Operating Revenues
21 Trailing Twelve Months As a Percentage of Net Operating Revenues 0% 25% 50% 75% 100% 125% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Employee Other Claims Expenses -Combined Ratio
Slide 22: Revenue and Combined Ratio
22 Trailing Twelve Months As a Percentage of Net Operating Revenues 0% 25% 50% 75% 100% 125% 150% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 -100% -80% -60% -40% -20% 0% 20% 40% Revenue & Combined Ratio Percent Change in Operating Revenue Combined Ratio
Slide 23: Ultimate Loss Ratios by Policy Year
23 Actuarial Claims as a Percentage of Net Statutory Premiums Written 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