Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (May 2014)
34 slides from Stewart Information Services's investor presentation, May 13, 2014
Slide 1: Summer 2014 Investor Presentation
Summer 2014 Investor Presentation Stewart Information Services Corporation
Slide 2: Forward-looking Statements
2 Forward - looking Statements Certain statements in this news release 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 • Corporate strategy to grow revenue, reduce fixed costs and enhance margins • Continued diversification into complem
Slide 5: First Quarter 2014 & Full Year 2013 Highlights
5 First Quarter 2014 & Full Year 2013 Highlights • Pretax loss of $18.6 million in 1Q14 and pretax gain of $101.1 million in full year 2013. • Net loss attributable to Stewart of $12.1 million in 1Q14 ( - $0.54 per share) and net earnings attributable to Stewart of $63.0 million in 2013 ($2.60 per s
Slide 6: Income Statement (non-GAAP)
6 Income Statement (non - GAAP, in $000 except per share) 2014 2013 % Change 2013 2012 % Change Revenues Direct 149,689 159,646 -6.2% 750,031 723,539 3.7% Agency 213,673 227,662 -6.1% 1,046,378 1,007,380 3.9% Total Title Revenue 363,362 387,308 -6.2% 1,796,409 1,730,919 3.8% Mortgage Services 24,078
Slide 7: Balance Sheet
7 Balance Sheet (in $000, except per share) March December 2014 2013 Assets Cash & Cash Equivalents 120,342 194,289 Statutory Reserve Funds 454,206 450,564 Investments - Short Term 34,719 38,335 Investments - Other 114,028 96,671 Other Assets 309,189 301,312 Goodwill & Intangibles 244,135 244,888 To
Slide 8: Summary Cash Flow Statement
8 Summary Cash Flow Statement (in $000) March March December December 2014 2013 2013 2012 Cash Flow Net Cash (Used) Provided by Operations (50,189) (3,390) 87,187 120,522 Capex (4,283) (4,259) (17,282) (16,752) Proceeds (purchases) of investments, net (13,215) (21,024) (55,975) (25,752) Decreases (i
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 and Strategy
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 '14 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 '14 200,000 400,000 600,000 800,000 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 and Number of 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 '14 2,500 3,500 4,500 5,500 6,500 Trailing Twelve Months -
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% 14.0% '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 ® April 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
Summer 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 ® April 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 '14 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 '14 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 '14 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 '14 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
Slide 34: Mortgage Services – Products & Services
34 Mortgage Services – Products & Services Origination Servicing Capital Markets Centralized Title & Closing Collections Due Diligence Valuation Services Military Servicing Support Compliance Reviews Home Equity Title Solutions Default Title & REO Closing Securitization Support Home Equity Valuation
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