Stewart Information Services Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

stc-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-02658

STEWART INFORMATION SERVICES CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		74-1677330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1360 Post Oak Blvd.,	Suite 100
Houston,	Texas	77056
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (713) 625-8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	STC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☑

Large accelerated filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

Accelerated filer

☐

Smaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

On April 27, 2021, there were 26,811,242 outstanding shares of the issuer's Common Stock.

FORM 10-Q QUARTERLY REPORT

QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS


Item		Page
	PART I – FINANCIAL INFORMATION

1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

3.	Quantitative and Qualitative Disclosures About Market Risk	27

4.	Controls and Procedures	28
	PART II – OTHER INFORMATION
1.	Legal Proceedings	29

1A.	Risk Factors	29

2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

5.	Other Information	29

6.	Exhibits	29

	Signature	31

As used in this report, “we,” “us,” “our,” "Registrant," the “Company” and “Stewart” mean Stewart Information Services Corporation and our subsidiaries, unless the context indicates otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended March 31,
			2021	2020
		($000 omitted, except per share)
Revenues
Title revenues:
Direct operations			279,504	198,283
Agency operations			345,932	242,030
Ancillary services			55,931	5,461
Operating revenues			681,367	445,774
Investment income			3,945	5,218
Net realized and unrealized gains (losses)			3,274	(11,091)
			688,586	439,901
Expenses
Amounts retained by agencies			283,935	199,366
Employee costs			169,397	135,652
Other operating expenses			125,482	71,858
Title losses and related claims			28,773	18,632
Depreciation and amortization			6,430	4,231
Interest			567	892
			614,584	430,631
Income before taxes and noncontrolling interests			74,002	9,270
Income tax expense			(16,880)	(1,896)
Net income			57,122	7,374
Less net income attributable to noncontrolling interests			2,886	2,197
Net income attributable to Stewart			54,236	5,177

Net income			57,122	7,374
Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments			1,867	(11,442)
Change in net unrealized gains and losses on investments			(9,156)	(2,580)
Reclassification adjustment for realized gains and losses on investments			(145)	(80)
Other comprehensive loss, net of taxes:			(7,434)	(14,102)
Comprehensive income (loss)			49,688	(6,728)
Less net income attributable to noncontrolling interests			2,886	2,197
Comprehensive income (loss) attributable to Stewart			46,802	(8,925)

Basic average shares outstanding (000)			26,736	23,638
Basic earnings per share attributable to Stewart			2.03	0.22
Diluted average shares outstanding (000)			26,984	23,749
Diluted earnings per share attributable to Stewart			2.01	0.22

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS


	As of March 31, 2021 (Unaudited)	As of December 31, 2020
	($000 omitted)
Assets
Cash and cash equivalents	412,763	432,683
Short-term investments	17,855	20,678
Investments in debt and equity securities, at fair value	682,799	684,387



Receivables:
Premiums from agencies	37,713	34,507
Trade and other	63,106	56,054
Income taxes	172	501
Notes	1,531	1,557
Allowance for uncollectible amounts	(5,393)	(4,807)
	97,129	87,812
Property and equipment:
Land	2,964	2,964
Buildings	22,617	22,598
Furniture and equipment	172,874	168,147
Accumulated depreciation	(144,723)	(142,038)
	53,732	51,671
Operating lease assets	110,586	106,479
Title plants, at cost	73,113	72,863
Investments on equity method basis	20,537	6,765
Goodwill	480,159	431,477
Intangible assets, net of amortization	38,912	37,382
Deferred tax assets	4,359	4,330
Other assets	50,862	42,048
	2,042,806	1,978,575
Liabilities
Notes payable	125,572	101,773
Accounts payable and accrued liabilities	212,774	225,180
Operating lease liabilities	123,121	119,089
Estimated title losses	509,541	496,275
Deferred tax liabilities	23,900	23,852
	994,908	966,169
Contingent liabilities and commitments
Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital	300,978	301,937
Retained earnings	733,973	688,819
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments	(6,371)	(8,238)
Net unrealized gains on debt securities investments	15,959	25,260

Treasury stock – 352,161 common shares, at cost	(2,666)	(2,666)
Stockholders’ equity attributable to Stewart	1,041,873	1,005,112
Noncontrolling interests	6,025	7,294
Total stockholders’ equity (26,806,025 and 26,728,242 shares outstanding)	1,047,898	1,012,406
	2,042,806	1,978,575

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Three Months Ended March 31,
	2021	2020
	($000 omitted)
Reconciliation of net income to cash provided by operating activities:
Net income	57,122	7,374
Add (deduct):
Depreciation and amortization	6,430	4,231
Provision for bad debt	708	154
Net realized and unrealized (gains) losses	(3,274)	11,091
Amortization of net premium on debt securities investments	938	1,144
Payments for title losses less than (in excess of) provisions	12,234	(2,809)
Adjustments for insurance recoveries of title losses	(205)	173
(Increase) decrease in receivables – net	(3,513)	11,542
Increase in other assets – net	(7,869)	(3,813)
Decrease in accounts payable and other liabilities – net	(20,116)	(43,165)
Change in net deferred income taxes	2,007	1,495
Net income from equity method investments	(924)	(645)
Dividends received from equity method investments	764	1,235
Stock-based compensation expense	3,174	887
Other – net	(34)	(254)
Cash provided (used) by operating activities	47,442	(11,360)
Investing activities:
Proceeds from sales of investments in securities	3,051	11,796
Proceeds from matured investments in debt securities	42,836	18,814
Purchases of investments in securities	(47,881)	(30,703)
Net sales (purchases) of short-term investments	2,648	2,982
Purchases of property and equipment, and real estate – net	(5,721)	(4,781)
Cash paid for acquisition of businesses	(52,575)	(1,449)
Cash paid for acquisition of equity method investment	(16,080)	—
Other – net	131	38
Cash used by investing activities	(73,591)	(3,303)
Financing activities:
Proceeds from notes payable	178,975	204
Payments on notes payable	(154,910)	(8,223)
Distributions to noncontrolling interests	(3,844)	(3,326)


Repurchases of Common Stock	(1,935)	(393)
Proceeds from stock option exercises	61	—
Cash dividends paid	(8,840)	(7,099)

Purchase of remaining interest in consolidated subsidiary	(2,570)	—
Other - net	(777)	—
Cash provided (used) by financing activities	6,160	(18,837)
Effects of changes in foreign currency exchange rates	69	(3,510)
Change in cash and cash equivalents	(19,920)	(37,010)
Cash and cash equivalents at beginning of period	432,683	330,609
Cash and cash equivalents at end of period	412,763	293,599

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


	Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total
	($000 omitted)
Three Months Ended March 31, 2021
Balance at December 31, 2020	27,080	274,857	688,819	17,022	(2,666)	7,294	1,012,406

Net income attributable to Stewart	—	—	54,236	—	—	—	54,236
Dividends on Common Stock ($0.33 per share)	—	—	(9,082)	—	—	—	(9,082)

Stock-based compensation	113	3,061	—	—	—	—	3,174
Stock repurchases	(37)	(1,898)	—	—	—	—	(1,935)
Stock option exercises	2	59	—	—	—	—	61
Purchase of remaining interest in consolidated subsidiary	—	(2,259)	—	—	—	(311)	(2,570)
Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(9,156)	—	—	(9,156)
Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(145)	—	—	(145)
Foreign currency translation adjustments, net of taxes	—	—	—	1,867	—	—	1,867
Net income attributable to noncontrolling interests	—	—	—	—	—	2,886	2,886
Distributions to noncontrolling interests	—	—	—	—	—	(3,844)	(3,844)

Balance at March 31, 2021	27,158	273,820	733,973	9,588	(2,666)	6,025	1,047,898

Three Months Ended March 31, 2020
Balance at December 31, 2019	24,062	164,217	564,392	(2,699)	(2,666)	6,453	753,759

Net income attributable to Stewart	—	—	5,177	—	—	—	5,177
Dividends on Common Stock ($0.30 per share)	—	—	(7,124)	—	—	—	(7,124)
Stock-based compensation	(20)	907	—	—	—	—	887
Stock repurchases	(10)	(383)	—	—	—	—	(393)

Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(2,580)	—	—	(2,580)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(80)	—	—	(80)
Foreign currency translation adjustments, net of taxes	—	—	—	(11,442)	—	—	(11,442)
Net income attributable to noncontrolling interests	—	—	—	—	—	2,197	2,197
Distributions to noncontrolling interests	—	—	—	—	—	(3,326)	(3,326)

Balance at March 31, 2020	24,032	164,741	562,445	(16,801)	(2,666)	5,324	737,075

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

Interim financial statements. The financial information contained in this report for the three months ended March 31, 2021 and 2020, and as of March 31, 2021, is unaudited. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 1, 2021 (2020 Form 10-K).

A. Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with the United States (U.S.) generally accepted accounting principles (GAAP), including management’s best judgments and estimates. In the opinion of management, all adjustments necessary for a fair presentation of this information for all interim periods, consisting only of normal recurring accruals, have been made. The Company’s results of operations for interim periods are not necessarily indicative of results for a full year and actual results could differ.

B. Consolidation. The condensed consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. All significant intercompany amounts and transactions have been eliminated and provisions have been made for noncontrolling interests. Unconsolidated investees, in which the Company typically owns from 20% to 50% of the voting stock, are accounted for using the equity method.

C. Restrictions on cash and investments. The Company maintains investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $491.3 million and $496.6 million at March 31, 2021 and December 31, 2020, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $25.6 million and $20.0 million at March 31, 2021 and December 31, 2020, respectively. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease.

D. Amendment to line of credit agreement. On March 23, 2021, in relation to its line of credit facility (as disclosed in Note 10 of the 2020 Form 10-K), the Company entered into a second amendment and restated credit agreement (Second Amendment), which increased the available unsecured line of credit commitment from $200 million to $350 million, and extended the maturity of the line of credit to March 2026. Other changes that the Second Amendment made effective were: the addition of new lender banks to the lenders group, the increase of the restricted payment limitation from $40 million to $100 million, the increase of the additional unsecured indebtedness provision from $100 million to $250 million, the removal of the annual capital expenditures limit, and the new definitions of EBITDA and fixed charge coverage ratio. The additional $50 million that the Company can request in addition to the line of credit commitment was not changed.

NOTE 2

Revenues. The Company's operating revenues, summarized by type, are as follows:


	Three Months Ended March 31,
			2021	2020
		($000 omitted)
Title insurance premiums:
Direct			194,993	138,283
Agency			345,932	242,030
Escrow fees			56,649	33,086
Appraisal management, abstract and other ancillary services			68,620	16,077
Other revenues			15,173	16,298
			681,367	445,774

NOTE 3

Investments in debt and equity securities. The total fair values of the Company's investments in debt and equity securities are as follows:


	March 31, 2021	December 31, 2020
	($000 omitted)
Investments in:
Debt securities	615,445	631,386
Equity securities	67,354	53,001
	682,799	684,387

As of March 31, 2021 and December 31, 2020, the net unrealized investment gains relating to investments in equity securities held were $9.9 million and $4.4 million, respectively (refer to Note 5).

The amortized costs and fair values of investments in debt securities are as follows:


	March 31, 2021		December 31, 2020
	Amortized costs	Fair values	Amortized costs	Fair values
	($000 omitted)
Municipal	42,015	44,089	45,138	47,603
Corporate	276,870	289,159	285,962	305,450
Foreign	269,792	275,585	261,748	271,711
U.S. Treasury Bonds	6,567	6,612	6,564	6,622

	595,244	615,445	599,412	631,386

Foreign debt securities consist of Canadian government and corporate bonds, United Kingdom treasury and corporate bonds, and Mexican government bonds.

Gross unrealized gains and losses on investments in debt securities are as follows:


	March 31, 2021		December 31, 2020
	Gains	Losses	Gains	Losses
	($000 omitted)
Municipal	2,077	3	2,465	—
Corporate	13,124	835	19,594	106
Foreign	6,572	779	10,024	61
U.S. Treasury Bonds	70	25	82	24

	21,843	1,642	32,165	191

Debt securities as of March 31, 2021 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):


	Amortized costs	Fair values
	($000 omitted)
In one year or less	58,344	59,145
After one year through five years	311,487	321,937
After five years through ten years	194,553	201,439
After ten years	30,860	32,924
	595,244	615,445

Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2021, were:


	Less than 12 months		More than 12 months		Total
	Losses	Fair values	Losses	Fair values	Losses	Fair values
	($000 omitted)
Municipal	3	130	—	—	3	130
Corporate	835	27,208	—	—	835	27,208
Foreign	756	65,568	23	254	779	65,822
U.S. Treasury Bonds	1	109	24	1,022	25	1,131

	1,595	93,015	47	1,276	1,642	94,291

The number of specific debt investment holdings held in an unrealized loss position as of March 31, 2021 was 47. Of these securities, 3 were in unrealized loss positions for more than 12 months. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery, and no significant credit risk is deemed to exist, these investments are not considered as other-than-temporarily impaired. The Company believes its investment portfolio is diversified and expects no material loss to result from the failure to perform by issuers of the debt securities it holds. Investments made by the Company are not collateralized.


	Less than 12 months		More than 12 months		Total
	Losses	Fair values	Losses	Fair values	Losses	Fair values
	($000 omitted)
Municipal	—	—	—	—	—	—
Corporate	106	13,518	—	—	106	13,518
Foreign	40	2,912	21	254	61	3,166
U.S. Treasury Bonds	—	—	24	1,022	24	1,022

	146	16,430	45	1,276	191	17,706

NOTE 4

Fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous, market for the asset or liability in an orderly transaction between market participants at the measurement date. Under U.S. GAAP, there is a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs when possible.

The three levels of inputs used to measure fair value are as follows:

•Level 1 – quoted prices in active markets for identical assets or liabilities;

•Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and

•Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of March 31, 2021, financial instruments measured at fair value on a recurring basis are summarized below:


	Level 1	Level 2	Fair value measurements
	($000 omitted)
Investments in securities:
Debt securities:
Municipal	—	44,089	44,089
Corporate	—	289,159	289,159
Foreign	—	275,585	275,585
U.S. Treasury Bonds	—	6,612	6,612
Equity securities	67,354	—	67,354
	67,354	615,445	682,799

As of December 31, 2020, financial instruments measured at fair value on a recurring basis are summarized below:


	Level 1	Level 2	Fair value measurements
	($000 omitted)
Investments in securities:
Debt securities:
Municipal	—	47,603	47,603
Corporate	—	305,450	305,450
Foreign	—	271,711	271,711
U.S. Treasury Bonds	—	6,622	6,622
Equity securities	53,001	—	53,001
	53,001	631,386	684,387

As of March 31, 2021 and December 31, 2020, Level 1 financial instruments consist of equity securities. Level 2 financial instruments consist of municipal, governmental, and corporate bonds, both U.S. and foreign. In accordance with the Company’s policies and guidelines which incorporate relevant statutory requirements, the Company’s third-party registered investment manager invests only in securities rated as investment grade or higher by the major rating services, where observable valuation inputs are significant. The fair value of the Company's investments in debt and equity securities is primarily determined using a third-party pricing service provider. The third-party pricing service provider calculates the fair values using both market approach and model valuation methods, as well as pricing information obtained from brokers, dealers and custodians. Management ensures the reasonableness of the third-party service valuations by comparing them with pricing information from the Company's investment manager.

NOTE 5

Net realized and unrealized (losses) gains. Realized and unrealized gains and losses are detailed as follows:


	Three Months Ended March 31,
			2021	2020
		($000 omitted)
Realized gains			170	153
Realized losses			(2,469)	(690)
Net unrealized investment (losses) gains recognized on equity securities still held at end of period			5,573	(10,554)
			3,274	(11,091)

Net realized losses for the first quarter 2021 included a $2.5 million loss related to a disposal of an equity method investment.

Investment gains and losses recognized related to investments in equity securities are as follows:


	Three Months Ended March 31,
			2021	2020
		($000 omitted)
Net investment gains (losses) recognized on equity securities during the period			5,582	(11,061)
Less: Net realized gains (losses) on equity securities sold during the period			9	(507)
Net unrealized investment gains (losses) recognized on equity securities still held at end of period			5,573	(10,554)

Proceeds from sales of investments in securities are as follows:


	Three Months Ended March 31,
			2021	2020
		($000 omitted)
Proceeds from sales of debt securities			115	11,503
Proceeds from sales of equity securities			2,936	293
Total proceeds from sales of investments in securities			3,051	11,796

NOTE 6

Goodwill and other intangibles. The summary of changes in goodwill is as follows.


	Title	Ancillary Services and Corporate	Consolidated Total
		($000 omitted)
Balances at December 31, 2020	361,433	70,044	431,477
Acquisitions	32,619	20,202	52,821

Purchase accounting adjustments	(4,397)	258	(4,139)
Balances at March 31, 2021	389,655	90,504	480,159

During the first quarter 2021, goodwill acquired in the title segment was related to an acquisition of a title search and support services provider, while goodwill acquired in the ancillary services and corporate segment was related to an acquisition of an online notarization and closing solutions provider. The goodwill balances for both acquisitions were based on the Company's preliminary purchase accounting, which is expected to be finalized in the second half of 2021.

NOTE 7

Estimated title losses. A summary of estimated title losses for the three months ended March 31 is as follows:


	2021		2020
	($000 omitted)
Balances at January 1	496,275		459,053
Provisions:
Current year	28,407		18,521
Previous policy years	366		111
Total provisions	28,773		18,632
Payments, net of recoveries:
Current year	(3,606)		(2,214)
Previous policy years	(12,933)		(19,227)
Total payments, net of recoveries	(16,539)		(21,441)

Effects of changes in foreign currency exchange rates	1,032		(8,662)
Balances at March 31	509,541		447,582
Loss ratios as a percentage of title operating revenues:
Current year provisions	4.5	%	4.2	%
Total provisions	4.6	%	4.2	%

Provisions in the first quarter 2021 increased compared to the first quarter 2020, primarily as a result of increased title revenues. Claim payments in the first quarter 2021 decreased compared to the same period in 2020, primarily due to lower payments on large and non-large claims relating to prior policy years; while the effect of changes in foreign currency exchange rates for the first quarters 2021 and 2020 were primarily influenced by the appreciation and depreciation, respectively, of the Canadian dollar against the U.S. dollar during those periods.

NOTE 8

Share-based payments. As part of its incentive compensation program for executives and senior management employees, the Company provides share-based awards, which include time-based restricted units, performance-based restricted stock units, and stock options. Each restricted stock unit represents a contractual right to receive a share of the Company's common stock. The time-based units vest on each of the first three anniversaries of the grant date, while the performance-based units vest upon achievement of certain financial objectives and employee service requirement over a period of approximately three years. The stock options vest on each of the first three anniversaries of the grant date at a rate of 20%, 30% and 50%, chronologically, and expire 10 years after the grant date. Each vested stock option can be exercised to purchase a share of the Company's common stock at the strike price set by the Company at the grant date. The compensation expense associated with the share-based awards is calculated based on the fair value of the related award and recognized over the corresponding vesting period.

During the first quarter 2021, the aggregate grant-date fair values of restricted stock unit and stock option awards were $8.3 million (155,000 units with an average grant price per unit of $53.24) and $1.3 million (139,000 options with an average grant price per option of $9.24 and exercise strike price of $53.24). During the first quarter 2020, the aggregate grant-date fair values of restricted stock unit and stock option awards were $2.4 million (60,000 units with an average grant price per unit of $39.76) and $3.4 million (650,000 options with an average grant price per option of $5.32 and exercise strike price of $39.76), respectively.

NOTE 9

Earnings per share. Basic earnings per share (EPS) attributable to Stewart is calculated by dividing net income attributable to Stewart by the weighted-average number of shares of Common Stock outstanding during the reporting periods. Outstanding shares of Common Stock granted to employees that are not yet vested (restricted shares) are excluded from the calculation of the weighted-average number of shares outstanding for calculating basic EPS. To calculate diluted EPS, the number of shares is adjusted to include the number of additional shares that would have been outstanding if restricted shares and units were vested and stock options were exercised. In periods of loss, dilutive shares are excluded from the calculation of the diluted EPS and diluted EPS is computed in the same manner as basic EPS.

The calculation of the basic and diluted EPS is as follows:


	Three Months Ended March 31,
			2021	2020
		($000 omitted, except per share)
Numerator:


Net income attributable to Stewart			54,236	5,177

Denominator (000):
Basic average shares outstanding			26,736	23,638
Average number of dilutive shares relating to options			103	—
Average number of dilutive shares relating to grants of restricted units and shares			145	111
Diluted average shares outstanding			26,984	23,749

Basic earnings per share attributable to Stewart			2.03	0.22

Diluted earnings per share attributable to Stewart			2.01	0.22

NOTE 10

Contingent liabilities and commitments. In the ordinary course of business, the Company guarantees the third-party indebtedness of certain of its consolidated subsidiaries. As of March 31, 2021, the maximum potential future payments on the guarantees are not more than the related notes payable recorded in the condensed consolidated balance sheets. The Company also guarantees the indebtedness related to lease obligations of certain of its consolidated subsidiaries. The maximum future obligations arising from these lease-related guarantees are not more than the Company’s future lease obligations, as presented on the condensed consolidated balance sheets, plus lease operating expenses. As of March 31, 2021, the Company also had unused letters of credit aggregating $4.9 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees.

NOTE 11

Regulatory and legal developments. The Company is subject to claims and lawsuits arising in the ordinary course of its business, most of which involve disputed policy claims. In some of these lawsuits, the plaintiffs seek exemplary or treble damages in excess of policy limits. The Company does not expect that any of these ordinary course proceedings will have a material adverse effect on its consolidated financial condition or results of operations. The Company believes that it has adequate reserves for the various litigation matters and contingencies referred to in this paragraph and that the likely resolution of these matters will not materially affect its consolidated financial condition or results of operations.

The Company is subject to non-ordinary course of business claims or lawsuits from time to time. To the extent the Company is currently the subject of these types of lawsuits, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range of loss, if any, will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Additionally, the Company occasionally receives various inquiries from governmental regulators concerning practices in the insurance industry. Many of these practices do not concern title insurance. To the extent the Company is in receipt of such inquiries, it believes that, where appropriate, it has adequately reserved for these matters and does not anticipate that the outcome of these inquiries will materially affect its consolidated financial condition or results of operations.

The Company is subject to various other administrative actions and inquiries into its business conduct in certain of the states in which it operates. While the Company cannot predict the outcome of the various regulatory and administrative matters, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of any of these matters will materially affect its consolidated financial condition or results of operations.

NOTE 12

Segment information. The Company reports two operating segments: title and ancillary services and corporate. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes home and personal insurance services and Internal Revenue Code Section 1031 tax-deferred exchanges. The ancillary services and corporate segment includes appraisal management services, search and valuation services, and online notarization and closing solutions, which are the principal offerings of ancillary services, expenses of the parent holding company, and certain other enterprise-wide overhead costs (net of centralized administrative services costs allocated to respective operating businesses).

Selected statement of income information related to these segments is as follows:

Three Months Ended
March 31,

2021

Price	38.50	EPS	4
Shares	24	P/E	9
MCap	916	P/FCF	9
Net Debt	-321	EBIT	128
TEV	595	TEV/EBIT	5
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-04
10-K	2020-12-31	Filed 2021-03-01
10-Q	2020-09-30	Filed 2020-11-04
10-Q	2020-06-30	Filed 2020-08-03
10-Q	2020-03-31	Filed 2020-05-04
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-01
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-06
10-Q	2018-03-31	Filed 2018-05-03
10-K	2017-12-31	Filed 2018-02-28
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-06-30	Filed 2017-07-28
10-Q	2017-03-31	Filed 2017-04-28
10-K	2016-12-31	Filed 2017-02-27
10-Q	2016-09-30	Filed 2016-11-01
10-Q	2016-06-30	Filed 2016-07-29
10-Q	2016-03-31	Filed 2016-04-29
10-K	2015-12-31	Filed 2016-02-26
10-Q	2015-09-30	Filed 2015-11-03
10-Q	2015-06-30	Filed 2015-07-31
10-Q	2015-03-31	Filed 2015-05-04
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-10-31
10-Q	2014-06-30	Filed 2014-08-01
10-Q	2014-03-31	Filed 2014-05-01
10-K	2013-12-31	Filed 2014-02-28
10-Q	2013-09-30	Filed 2013-11-06
10-Q	2013-06-30	Filed 2013-08-02
10-Q	2013-03-31	Filed 2013-05-03
10-K	2012-12-31	Filed 2013-03-06
10-Q	2012-09-30	Filed 2012-11-02
10-Q	2012-06-30	Filed 2012-08-03
10-Q	2012-03-31	Filed 2012-05-03
10-K	2011-12-31	Filed 2012-03-12
10-Q	2011-09-30	Filed 2011-11-02
10-Q	2011-06-30	Filed 2011-08-03
10-Q	2011-03-31	Filed 2011-05-04
10-K	2010-12-31	Filed 2011-03-03
10-Q	2010-09-30	Filed 2010-11-03
10-Q	2010-06-30	Filed 2010-08-03
10-Q	2010-03-31	Filed 2010-05-05
10-K	2009-12-31	Filed 2010-03-05

8-K	2020-10-21
8-K	2020-09-01
8-K	2020-08-31
8-K	2020-08-12
8-K	2020-07-22
8-K	2020-06-04
8-K	2020-06-01
8-K	2020-05-07
8-K	2020-04-22
8-K	2020-02-07
8-K	2020-02-05
8-K	2020-01-15
8-K	2019-12-12
8-K	2019-12-09
8-K	2019-10-22
8-K	2019-10-01
8-K	2019-09-20
8-K	2019-09-09
8-K	2019-09-08
8-K	2019-09-06
8-K	2019-07-25
8-K	2019-06-19
8-K	2019-06-10
8-K	2019-04-25
8-K	2019-03-11
8-K	2019-02-14
8-K	2019-01-31
8-K	2019-01-31
8-K	2018-12-31
8-K	2018-12-31
8-K	2018-11-09
8-K	2018-11-02
8-K	2018-10-25
8-K	2018-09-05
8-K	2018-08-24
8-K	2018-08-22
8-K	2018-07-18
8-K	2018-06-18
8-K	2018-05-31
8-K	2018-05-22
8-K	2018-05-03
8-K	2018-03-18
8-K	2018-02-22
8-K	2018-02-08
8-K	2017-12-29

EX-10.1	eppinger2021restrictedstoc.htm
EX-10.2	eppinger2021restrictedperf.htm
EX-10.3	eppinger2021stockoption.htm
EX-10.4	hisey2021restrictedstockun.htm
EX-10.5	hisey2021restrictedperform.htm
EX-10.6	hisey2021stockoption.htm
EX-10.7	killea2021restrictedstocku.htm
EX-10.8	killea2021restrictedperfor.htm
EX-10.9	killea2021stockoption.htm
EX-10.10	lessack2021restrictedstock.htm
EX-10.11	lessack2021restrictedunitc.htm
EX-10.12	lessack2021restrictedperfo.htm
EX-10.13	lessack2021stockoption.htm
EX-10.14	smith2021restrictedstockun.htm
EX-10.15	smith2021restrictedperform.htm
EX-10.16	smith2021stockoption.htm
EX-31.1	q1-2021ex311.htm
EX-31.2	q1-2021ex312.htm
EX-32.1	q1-2021ex321.htm
EX-32.2	q1-2021ex322.htm

STC 10Q Quarterly Report

Stewart Information Services Earnings 2021-03-31