Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (2013)
34 slides from Stewart Information Services's investor presentation, 2013
Slide 1: Winter 2013 Investor Presentation
Winter 2013 Investor Presentation Stewart Information Services Corporation
Slide 2: Forward-looking Statements
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 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: Investment Highlights
Investment Highlights • Trusted provider in $11 billion domestic industry • Well positioned to capitalize on the ongoing real estate recovery and heightened regulatory environment • Streamlined organizational structure and responsive corporate strategy to grow revenue, reduce fixed costs and enhance
Slide 5: Third Quarter 2013 Financial Highlights
Third Quarter 2013 Financial Highlights • Pretax earnings were $29.6 million, down from $39.4 million in prior year period • Net earnings attributable to Stewart were $15.4 million ($0.63 per share) down from $34.7 million ($1.45 per share) in the prior year period. Of note, the prior period benefit
Slide 6: Income Statement (non-GAAP)
Income Statement (non-GAAP) Three Months Ended September 30 2013 2012 % Change Revenues Direct 198,970 190,233 4.6% Agency 306,583 281,587 8.9% Total Title Revenue 505,553 471,820 7.1% Mortgage Services 26,696 42,021 -36.5% Total Operating Revenues 532,249 513,840 3.6% Investment Income/Other Gains
Slide 7: Balance Sheet
Balance Sheet September 2013 December 2012 % Change Assets Cash & Cash Equivalents 192,359 196,471 -2.1% Cash & Cash Equivalents - Statutory Reserve Funds 8,779 12,067 -27.2% Investments - Statutory Reserve Funds 449,323 444,579 1.1% Investments - Short Term 37,274 37,025 0.7% Investments - Other 83
Slide 8: Summary Cash Flow Statement
Summary Cash Flow Statement Nine Months Ended September September 2013 2012 % Change Cash Flow Net Cash (Used) Provided by Operations 70,846 56,830 24.7% Proceeds (Purchases) of Investments, Net (46,045) (4,122) 1017.1% Purchase of Property and Equipment, Net (12,855) (9,113) 41.1% Cash Paid for Acq
Slide 9: Title Insurance
Title Insurance Residential • Provides independent, third-party closing and settlement services while acting as an 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 homeowners
Slide 10: Mortgage Services
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 and servi
Slide 11: Revenues and Pre-tax Earnings Trends
Revenues and Pre-tax Earnings Trends $ Millions Revenue Pre-tax Earnings $2,500 $500 $2,000 $400 $1,500 $300 $1,000 $200 $500 $100 $0 $- ($500) $(100) ($1,000) $(200) ($1,500) $(300) 2006 2007 2008 2009 2010 2011 2012 2013 YTD 11
Slide 12: Stewart Operating Revenues
Stewart Operating Revenues Trailing Twelve Months - $ Millions Direct Title Agency Title Mortgage Services $2,500 $2,000 $1,500 $1,000 $500 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 12
Slide 13: Direct Title Revenues and Orders
Direct Title Revenues and Orders Trailing Twelve Months - $ Millions Revenue Orders $1,100 1,000,000 $1,000 $900 800,000 $800 600,000 $700 400,000 $600 $500 200,000 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Revenue Orders Opened Orders Closed 13
Slide 14: Independent Agency Network
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 indep
Slide 15: Agency Revenues net of Retention
Agency Revenues net of Retention Trailing Twelve Months - $ Millions Revenue Number of Independent Agents $200 6,500 5,500 $150 4,500 3,500 $100 2,500 '08 '09 '10 '11 '12 '13 Note: Number of independent agencies based on number of contractual relationships rather than number of physical locations of
Slide 16: Agency Retention Rates
Agency Retention Rates Differences in independent agency retention rates largely driven by geography STC FNF FAF Overall Retention Rate 82.1% 78.2% 79.3% Difference from STC -3.9% -2.8% Excluding Florida and California (using STC Retention Rates) 81.9% 81.3% 80.6% Difference from STC -0.6% -1.2% Sou
Slide 17: Stewart Mortgage Services Revenues
Stewart Mortgage Services Revenues Trailing Twelve Months - $ Millions $180 Focused $160 Non-title $140 Revenues and Profits $120 $100 $80 $60 $40 $20 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 As Mortgage Services transitions to a more sustainable revenue base, both segment revenues and pro
Slide 18: Expenses As a Percent of Operating Revenues
Expenses As a Percent of Operating Revenues Other Operating Expenses Employee Costs 25.0% 40.0% 35.0% 20.0% 30.0% 15.0% 25.0% 20.0% 10.0% 15.0% 10.0% 5.0% 5.0% 0.0% 0.0% STC FAF FNF STC FAF FNF Q3 2013 YTD 2013 18
Slide 19: Title Loss Provision Ratios
Title Loss Provision Ratios Quarterly Title Loss Provision Ratios – Includes Prior Year True-ups Source: Company press releases and SEC filings 19
Slide 20: Ultimate Loss Ratios by Policy Year
Ultimate Loss Ratios by Policy Year Actuarial Claims as a % of Net Statutory Premiums Written –U.S. Operations Only 12.0% Stewart Claims Paid First American 10.0% Fidelity 8.0% 6.0% 4.0% 2.0% 0.0% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: ALTA, Family-Company Aggregates 20
Slide 21: Market Conditions
Market Conditions Positives • Housing sales continuing recovery with estimated 5 percent increase in total new and existing sales in 2014 • Home prices increasing – a 5 percent rise in home prices increases revenue per transaction in the mid-3 percent range • Interest rates remain at historically lo
Slide 22: U.S. Existing Housing Sales
U.S. Existing Housing Sales Seasonally Adjusted Annualized Rate – Millions 8 Bubble Normal $8,000 Fannie Mae® 7 Market Tax October 2013 Credit 6 5 Last Normal Market in 2002 4 3 2 1 0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 National Association of REALTORS® 22
Slide 23: 2014 Strategic Priorities
2014 Strategic Priorities • Lead the market in providing compliant, trusted and tailored real estate services in concert with changing regulatory environment • Repositioning Mortgage Services to excel in a normalized market • Expanding footprint of direct operations, primarily in western states • Co
Slide 24: Matt Morris, Allen Berryman, Ted C. Jones
Matt Morris CEO Allen Berryman CFO Ted C. Jones, PhD Chief Economist Director of Investor Relations [email protected] 713.625.8014 direct 800.729.1900, extension 8014 24
Slide 25: Appendix
Winter 2013 Investor Presentation Appendix Stewart Information Services Corporation
Slide 26: Residential Lending Vs. Industry Premiums
Residential Lending Vs. Industry Premiums $3.0 $17 $2.5 2011-2014 Lending Likely $15 Understates Title Revenues Due to Cash Forecast Fannie Mae® $2.0 Sales Double Normal October 2013 $13 $11 $1.5 $9 $1.0 $7 $0.5 $5 $0.0 $3 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Effective Lending – $ Tri
Slide 27: Stewart Net Operating Revenues
Stewart Net Operating Revenues Trailing 12 Months - $ Millions Direct Title Agency Net of Retention Mortgage Services $1,500 $1,250 $1,000 $750 $500 $250 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 27
Slide 28: Title Revenues by Regulatory Oversight
Title Revenues by Regulatory Oversight Source: Form 9 filings (Schedule T) as compiled by ALTA 28
Slide 29: Claims Expense Vs. Cash Claims
Claims Expense Vs. Cash Claims Trailing 12 Months - $ Millions $225 Anticipate accruals of 5.5%-6.5% by year-end 2013, including large claims $175 $125 $75 $25 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Claims Expense Cash Claims Paid (Net of Recoveries) 29
Slide 30: Employee Expenses
Employee Expenses As a Percentage of Operating Revenues Trailing 12 Months 40% 35% 30% 25% 20% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 30
Slide 31: Other Operating Expenses
Other Operating Expenses As a Percentage of Operating Revenues Trailing 12 Months 25% 23% 20% 18% 15% 13% 10% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 31
Slide 32: Statutory Surplus and Operating Leverage
Statutory Surplus and Operating Leverage Thousands Multiple 32
Slide 33: Debt-to-Capital and Debt-to-Equity
Debt-to-Capital and Debt-to-Equity 33
Slide 34: Book Value and Tangible Book Value
Book Value and Tangible Book Value Per Share 34
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