Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (2015)
27 slides from Stewart Information Services's investor presentation, 2015
Slide 1: Stewart Information Services Corporation Investor Presentation – Winter 2015
Stewart Information Services Corporation Investor Presentation – Winter 2015 1
Slide 2: Forward-looking Statements
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 and financ
Slide 3: Non-GAAP Disclosures
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 ma
Slide 4: Company Overview
Company Overview Stewart Information Services Title Insurance Segment Mortgage Services Segment • Provide independent, third-party closing and • Diversified products and services supporting the settlement services mortgage process • Search, examine and insure the condition of the ◦◦ Centralized Titl
Slide 5: Achievements Since Housing Crisis
Achievements Since Housing Crisis Strengthen • Increased shareholder’s equity from $448 million in 2010 to $676 million in 2014 Balance Sheet • Raised $65mm in convertible notes in 2009 to refinance bank debt that was callable at any time, with the notes subsequently converted into equity in 2014 •
Slide 6: Increasing Shareholder Value
Increasing Shareholder Value Improve Margins • Continue to execute initiatives around centralization, optimization, offshoring and technology rationalization • Leverage balance sheet and ratings to drive continued growth in higher margin commercial business • Achieve 50/50 direct to independent agen
Slide 7: Focused Growth
Focused Growth Title Operations • Increase direct market share in higher growth states and top MSAs where Stewart is below its national market share through organic sales growth and accretive acquisitions • Independent agency growth in higher remittance rate states Commercial Title Operations • Comp
Slide 8: Improving Efficiency
Improving Efficiency Post-Crisis Reductions in Cost Structure • Post-crisis, Stewart changed operating model and reduced operating costs by $100+ million to reflect the new market environment (origination volume has been between $1-2 trillion since 2008, dropping from $2-4 trillion from 2001 to 2007
Slide 9: 2014-2015 Cost Reduction Plan
2014-2015 Cost Reduction Plan Cost Saving Initiative Action Centralization/ • Completed headcount reductions in claims operation with additional reductions Automation by year-end 2015 • Consolidate work into key offices • Automate wire transfer operations for escrow functions Outsourcing • Completed
Slide 10: Title Insurance – Market Share Map
Title Insurance – Market Share Map 11% 15.8% 6.7% 9.6% 28.8% 21.6% 6.7% 19.2% 9.4% 12.3% 11.8% 25% 21.6% 12.9% 11% 11.6% 11.8% 8.9% 6.4% 13% 12.8% 5% 11.5% 18.9% 5.5% 13.8% 9.9% 4.3% 6.8% 12.4% 11.3% 13.4% 3.9% 15.1% 5% 11.2% 5.6% 10.2% 6.9% 18.1% 10.8% 18.1% 15.1% 16.5% 12% 17.4% 11.4% 9.9% 36.5% 4
Slide 11: Commercial Title
Commercial Title Growth Strategy U.S. & Canada Commercial Title Premiums • Stewart has targeted growth in commercial business for higher margin profile and cyclical diversity from residential real estate trends • Aligned sales teams to customer channels $ 155.9 to increase capture rate of larger-lia
Slide 12: Title Insurance – Loss Ratio by Policy Year
Title Insurance – Loss Ratio by Policy Year Actuarial Claims as a % of Net Statutory Premiums Written – U.S. Operations Only 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Claims Paid Stewart First American Fidelity National Source: ALTA®, Family-C
Slide 13: Title Insurance – GAAP Loss Provision Ratios
Title Insurance – GAAP Loss Provision Ratios Quarterly Title Loss Provision as a % of Revenues – Includes Prior Year True-ups 30% 25% 20% 15% 10% 5% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Fidelity National First American Stewart Source: Company press releases and SEC filings 13
Slide 14: Agency Network – Overview
Agency Network – Overview • Focus on quality and profitability over market share growth • Leading the industry in assisting independent agencies as they prepare for CFPB and other regulatory compliance requirements • Emphasis on capturing a higher percentage of business from current agencies and sig
Slide 15: Agency Network – Revenues Net of Retention
Agency Network – Revenues Net of Retention Trailing 12 Months – $ Millions Net Revenue Number of Independent Agents $250 7,000 6,000 $200 5,000 $150 4,000 3,000 $100 2,000 $50 1,000 $0 0 2008 2009 2010 2011 2012 2013 2014 2015 Net Agency Revenues Independent Agents Note: Number of independent agenci
Slide 16: Capital Priorities
Capital Priorities Underwriter Business Model Other • Continue to strengthen • Look to increase direct • $70 million capital balance sheet by growing residential and commercial return program announced $500+ million in statutory title operations’ presence in February 2014 surplus consistent with pac
Slide 17: Revenues and Pretax Earnings Trends
Revenues and Pretax Earnings Trends $ Millions Revenue Pretax Earnings $2,500 $500 $2,000 $400 $1,500 $300 $1,000 $200 $500 $100 $0 $0 -$500 -$100 -$1,000 -$200 -$1,500 -$300 2006 2007 2008 2009 2010 2011 2012 2013 2014* Total Revenues Pretax Earnings * Excludes one-time charges and benefits 17
Slide 18: Balance Sheet – September 30, 2015
Balance Sheet – September 30, 2015 Assets $ thousands Ratios Cash & Cash Equivalents 211,315 Return on Equity, TTM 2.6% Investments - Statutory Reserve Funds 480,132 Debt-to-Equity 12.7% Investments - Other 95,242 Debt-to-Capital 12.2% Other Assets 292,906 Book Value Per Share Goodwill & Intangibles
Slide 19: Matt Morris, Allen Berryman, Nat Otis
Matt Morris CEO Allen Berryman CFO Nat Otis SVP, Finance and Director of Investor Relations [email protected] (713) 625-8360 direct (800) 729-1900, ext. 8360 toll free 19
Slide 20: Appendix
Stewart Information Services Corporation Appendix 20
Slide 21: Market Conditions
Market Conditions • Home prices continue to increase – 5% increase in home prices equates to a 3.5%+ increase in revenue per transaction • Commercial real estate market remains solid with expectations for increased refinancings • Interest rates remain at historically low levels – although possibilit
Slide 22: Stewart Revenues vs. Mortgage Origination Cycle
Stewart Revenues vs. Mortgage Origination Cycle U.S. Mortgage Origination / Refinancings ($tn) Gross Revenues ($bn) $ 4.0 $ 4.0 $ 3.5 $ 3.5 $ 3.0 Pre-Crisis Average: $2.8tn $ 3.0 $ 2.5 $ 2.5 Post-Crisis Average: $1.7tn $ 2.0 $ 2.0 $ 1.5 $ 1.5 $ 1.0 $ 1.0 $ 0.5 $ 0.5 $ 0.0 $ 0.0 2001 2002 2003 2004 2
Slide 23: U.S. Existing Housing Sales
U.S. Existing Housing Sales National Association of REALTORS® Seasonally Adjusted Annualized Rate – $ Millions 8 Normal Bubble Market 7 Last Normal Market Fannie Mae® 2002 Forecast 6 Tax Credit 5 4 3 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: National As
Slide 24: Residential Lending Vs. Industry Premiums
Residential Lending Vs. Industry Premiums $ Trillions $ Billions $3.0 $18.0 $16.0 $2.5 Fannie Mae® 2011-2014 Lending Likely Forecast $14.0 Understates Title Revenues Due to Elevated Cash Sales $2.0 $12.0 $10.0 $1.5 $8.0 $1.0 $6.0 $4.0 $0.5 $2.0 $0.0 $0.0 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '
Slide 25: Title Revenues by Regulatory Oversight
Title Revenues by Regulatory Oversight Stewart Family 2014 Title Industry 2014 Foreign 3% Foreign 8% File and use Rating Bureau 29% 22% File and use Rating Bureau 36% 25% File and wait No filing Promulgated 1% required 25% Promulgated 10% No filing 27% required 13% File and wait 1% Source: Form 9 fi
Slide 26: SISCO Organizational Structure
SISCO Organizational Structure SISCO STG STG STIC STL (UK) STC Mexico Title Other SLS Offices Non-Title 26
Slide 27: Corporate Governance
Corporate Governance • Nine member Board of Directors is annually elected • Majority vote standard • Separate CEO and Chairman of the Board • Seven of nine members of the Board are independent • Shareholders can call special meetings • Shareholders can act by written consent • Declawed preferred sto
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