10-Q 1 stc-20240630.htm STEWART Q2-2024 10-Q stc-20240630
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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 June 30, 2024
or
    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: (713625-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading 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 filerSmaller 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 July 30, 2024, there were 27,679,051 outstanding shares of the issuer's Common Stock.



FORM 10-Q QUARTERLY REPORT
QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
 
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.




















2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
 ($000 omitted, except per share)
Revenues
Title revenues:
Direct operations255,480 257,994 466,068 465,864 
Agency operations240,760 208,755 481,532 457,775 
Real estate solutions
92,198 71,387 175,214 133,978 
Operating revenues588,438 538,136 1,122,814 1,057,617 
Investment income14,306 12,123 27,207 18,722 
Net realized and unrealized (losses) gains
(514)(1,105)6,524 (2,883)
602,230 549,154 1,156,545 1,073,456 
Expenses
Amounts retained by agencies200,126 171,776 400,102 377,514 
Employee costs179,708 182,666 352,125 353,217 
Other operating expenses152,291 129,333 289,244 250,073 
Title losses and related claims21,090 19,802 38,472 37,476 
Depreciation and amortization15,198 15,528 30,582 30,434 
Interest4,812 4,875 9,869 9,724 
573,225 523,980 1,120,394 1,058,438 
Income before taxes and noncontrolling interests
29,005 25,174 36,151 15,018 
Income tax expense
(7,940)(5,392)(8,876)(454)
Net income
21,065 19,782 27,275 14,564 
Less net income attributable to noncontrolling interests3,722 3,967 6,802 6,939 
Net income attributable to Stewart
17,343 15,815 20,473 7,625 
Net income
21,065 19,782 27,275 14,564 
Other comprehensive (loss) income, net of taxes:
Foreign currency translation adjustments(1,256)4,254 (5,726)4,852 
Change in net unrealized gains and losses on investments114 (5,765)(2,162)852 
Reclassification adjustments for realized gains and losses on investments390 221 540 313 
Other comprehensive (loss) income, net of taxes:
(752)(1,290)(7,348)6,017 
Comprehensive income
20,313 18,492 19,927 20,581 
Less net income attributable to noncontrolling interests3,722 3,967 6,802 6,939 
Comprehensive income attributable to Stewart
16,591 14,525 13,125 13,642 
Basic average shares outstanding (000)27,592 27,255 27,549 27,228 
Basic earnings per share attributable to Stewart
0.63 0.58 0.74 0.28 
Diluted average shares outstanding (000)28,013 27,444 28,011 27,402 
Diluted earnings per share attributable to Stewart
0.62 0.58 0.73 0.28 
See notes to condensed consolidated financial statements.
3


CONDENSED CONSOLIDATED BALANCE SHEETS
 
 June 30, 2024 (Unaudited)
 
 December 31, 2023
 ($000 omitted)
Assets
Cash and cash equivalents133,405 233,365 
Short-term investments43,341 39,023 
Investments, at fair value:
Debt securities (amortized cost of $607,696 and $631,294)
584,585 610,236 
Equity securities76,348 69,700 
660,933 679,936 
Receivables:
Premiums from agencies39,974 38,676 
Trade and other91,485 75,706 
Income taxes4,882 3,535 
Notes21,226 14,570 
Allowance for uncollectible amounts(8,186)(7,583)
149,381 124,904 
Property and equipment:
Land2,545 2,545 
Buildings19,274 19,219 
Furniture and equipment251,883 234,370 
Accumulated depreciation(186,973)(173,799)
86,729 82,335 
Operating lease assets108,653 115,879 
Title plants, at cost73,378 73,359 
Goodwill1,080,546 1,072,129 
Intangible assets, net of amortization177,112 193,196 
Deferred tax assets3,673 3,776 
Other assets128,335 84,959 
2,645,486 2,702,861 
Liabilities
Notes payable445,568 445,290 
Accounts payable and accrued liabilities165,382 190,054 
Operating lease liabilities127,307 135,654 
Estimated title losses512,446 528,269 
Deferred tax liabilities23,509 25,045 
1,274,212 1,324,312 
Contingent liabilities and commitments
Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital
345,082 338,451 
Retained earnings1,064,870 1,070,841 
Accumulated other comprehensive loss:
Foreign currency translation adjustments(24,305)(18,579)
Net unrealized losses on debt securities investments(18,258)(16,636)
Treasury stock – 352,161 common shares, at cost
(2,666)(2,666)
Stockholders’ equity attributable to Stewart1,364,723 1,371,411 
Noncontrolling interests6,551 7,138 
Total stockholders’ equity (27,605,057 and 27,370,227 shares outstanding)
1,371,274 1,378,549 
2,645,486 2,702,861 
See notes to condensed consolidated financial statements.
4


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 Six Months Ended 
 June 30,
 20242023
 ($000 omitted)
Reconciliation of net income to cash used by operating activities:
Net income
27,275 14,564 
Add (deduct):
Depreciation and amortization30,582 30,434 
Adjustments for bad debt provisions1,155 1,443 
Net realized and unrealized (gains) losses
(6,524)2,883 
Amortization of net (discount) premium on debt securities investments
(168)387 
Payments for title losses in excess of provisions
(11,550)(27,468)
Adjustments for insurance recoveries of title losses208  
Increase in receivables – net
(19,184)(6,692)
Increase in other assets – net(11,275)(5,859)
Decrease in accounts payable and other liabilities – net(25,971)(34,042)
Change in net deferred income taxes360 585 
Net income from equity method investments
(507)(378)
Dividends received from equity method investments613 876 
Stock-based compensation expense6,337 7,043 
Other – net184 269 
Cash used by operating activities
(8,465)(15,955)
Investing activities:
Proceeds from sales of investments in securities20,971 39,488 
Proceeds from matured investments in debt securities51,775 55,250 
Purchases of investments in securities(58,368)(55,461)
Net purchases of short-term investments(4,781)(2,838)
Purchases of property and equipment and other long-lived assets
(19,424)(15,495)
Proceeds from sale of property and equipment and other assets81 106 
Cash paid for acquisition of businesses(8,247)(22,400)
Increase in notes receivable(7,320)(6,360)
Purchases of cost-basis and other investments
(29,879)(29)
Other – net(1,079)429 
Cash used by investing activities(56,271)(7,310)
Financing activities:
Proceeds from notes payable3,387 3,538 
Payments on notes payable(3,378)(5,776)
Distributions to noncontrolling interests(7,443)(7,549)
Contributions from noncontrolling interests54  
Repurchases of Common Stock(3,517)(1,353)
Proceeds from stock option and employee stock purchase plan exercises3,811 1,991 
Cash dividends paid(26,180)(24,531)
Payment of contingent consideration related to acquisitions(302)(2,000)
Cash used by financing activities(33,568)(35,680)
Effects of changes in foreign currency exchange rates(1,656)617 
Change in cash and cash equivalents(99,960)(58,328)
Cash and cash equivalents at beginning of period233,365 248,367 
Cash and cash equivalents at end of period133,405 190,039 
See notes to condensed consolidated financial statements.
5


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common Stock
Additional paid-in capitalRetained earnings
Accumulated other comprehensive loss
Treasury stockNoncontrolling interestsTotal
($000 omitted)
Six Months Ended June 30, 2024
Balance at December 31, 202327,723 310,728 1,070,841 (35,215)(2,666)7,138 1,378,549 
Net income attributable to Stewart— — 20,473 — — — 20,473 
Dividends on Common Stock ($0.95 per share)
— — (26,444)— — — (26,444)
Stock-based compensation186 6,151 — — — — 6,337 
Stock repurchases(57)(3,460)— — — — (3,517)
Stock option and employee stock purchase plan exercises99 3,712 — — — — 3,811 
Change in net unrealized gains and losses on investments, net of taxes— — — (2,162)— — (2,162)
Reclassification adjustment for realized gains and losses on investments, net of taxes— — — 540 — — 540 
Foreign currency translation adjustments, net of taxes— — — (5,726)— — (5,726)
Net income attributable to noncontrolling interests— — — — — 6,802 6,802 
Distributions to noncontrolling interests— — — — — (7,443)(7,443)
Net effect of other changes in ownership— — — — — 54 54 
Balance at June 30, 202427,951 317,131 1,064,870 (42,563)(2,666)6,551 1,371,274 
Six Months Ended June 30, 2023
Balance at December 31, 202227,483 296,861 1,091,816 (51,343)(2,666)8,114 1,370,265 
Net income attributable to Stewart
— — 7,625 — — — 7,625 
Dividends on Common Stock ($0.90 per share)
— — (24,983)— — — (24,983)
Stock-based compensation117 6,926 — — — — 7,043 
Stock repurchases(32)(1,321)— — — — (1,353)
Stock option and employee stock purchase plan exercises52 1,939 — — — — 1,991 
Change in net unrealized gains and losses on investments, net of taxes— — — 852 — — 852 
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — 313 — — 313 
Foreign currency translation adjustments, net of taxes— — — 4,852 — — 4,852 
Net income attributable to noncontrolling interests— — — — — 6,939 6,939 
Distributions to noncontrolling interests— — — — — (7,549)(7,549)
Balance at June 30, 202327,620 304,405 1,074,458 (45,326)(2,666)7,504 1,365,995 
See notes to condensed consolidated financial statements.

6


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common Stock
Additional paid-in capitalRetained earningsAccumulated other comprehensive lossTreasury stockNoncontrolling interestsTotal
($000 omitted)
Three Months Ended June 30, 2024
Balance at March 31, 2024
27,933 313,381 1,060,808 (41,811)(2,666)6,498 1,364,143 
Net income attributable to Stewart— — 17,343 — — — 17,343 
Dividends on Common Stock ($0.48 per share)
— — (13,281)— — — (13,281)
Stock-based compensation14 3,653 — — — — 3,667 
Stock repurchases(2)(125)— — — — (127)
Stock option and employee stock purchase plan exercises6 222 — — — 228 
Change in net unrealized gains and losses on investments, net of taxes— — — 114 — — 114 
Reclassification adjustment for realized gains and losses on investments, net of taxes— — — 390 — — 390 
Foreign currency translation adjustments, net of taxes— — — (1,256)— — (1,256)
Net income attributable to noncontrolling interests— — — — — 3,722 3,722 
Distributions to noncontrolling interests— — — — — (3,723)(3,723)
Net effect of other changes in ownership— — — — — 54 54 
Balance at June 30, 202427,951 317,131 1,064,870 (42,563)(2,666)6,551 1,371,274 
Three Months Ended June 30, 2023
Balance at March 31, 2023
27,598 300,225 1,071,320 (44,036)(2,666)7,311 1,359,752 
Net income attributable to Stewart— — 15,815 — — — 15,815 
Dividends on Common Stock ($0.45 per share)
— — (12,677)— — — (12,677)
Stock-based compensation24 4,260 — — — — 4,284 
Stock repurchases(2)(80)— — — — (82)
Change in net unrealized gains and losses on investments, net of taxes— — — (5,765)— — (5,765)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — 221 — — 221 
Foreign currency translation adjustments, net of taxes— — — 4,254 — — 4,254 
Net income attributable to noncontrolling interests— — — — — 3,967 3,967 
Distributions to noncontrolling interests— — — — — (3,774)(3,774)
Balance at June 30, 202327,620 304,405 1,074,458 (45,326)(2,666)7,504 1,365,995 
See notes to condensed consolidated financial statements.

7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

Interim financial statements. The financial information contained in this report for the three and six months ended June 30, 2024 and 2023, and as of June 30, 2024, 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, 2023 filed with the Securities and Exchange Commission on February 29, 2024 (2023 Form 10-K).

A. Management’s responsibility. The accompanying interim financial statements were prepared by management, which 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 $518.6 million and $527.4 million at June 30, 2024 and December 31, 2023, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $9.6 million and $10.0 million at June 30, 2024 and December 31, 2023, 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.


NOTE 2

Revenues. The Company's operating revenues, summarized by type, are as follows:
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
($000 omitted)
Title insurance premiums:
Direct173,813 170,677 315,512 301,494 
Agency240,760 208,755 481,532 457,775 
Escrow fees42,195 42,323 75,738 75,250 
Real estate solutions and abstract fees109,473 89,811 206,847 166,971 
Other revenues22,197 26,570 43,185 56,127 
588,438 538,136 1,122,814 1,057,617 



8


NOTE 3

Investments in debt and equity securities. As of June 30, 2024 and December 31, 2023, the net unrealized investment gains relating to investments in equity securities held were $17.8 million and $11.2 million, respectively (refer to Note 5).

The amortized costs and fair values of investments in debt securities are as follows:
 June 30, 2024December 31, 2023
 
Amortized
costs
Fair
values
Amortized
costs
Fair
values
 ($000 omitted)
Municipal18,117 17,860 22,201 22,031 
Corporate227,427 215,470 242,656 231,474 
Foreign326,999 316,952 332,723 323,391 
U.S. Treasury Bonds35,153 34,303 33,714 33,340 
607,696 584,585 631,294 610,236 

Foreign debt securities consist of Canadian government, provincial 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:
 June 30, 2024December 31, 2023
 GainsLossesGainsLosses
 ($000 omitted)
Municipal2 259  170 
Corporate417 12,374 764 11,946 
Foreign740 10,787 1,765 11,097 
U.S. Treasury Bonds3 853 106 480 
1,162 24,273 2,635 23,693 

Debt securities as of June 30, 2024 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 less72,579 75,528 
After one year through five years325,691 311,733 
After five years through ten years197,013 186,303 
After ten years12,413 11,021 
607,696 584,585 

9


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 June 30, 2024, were:
 Less than 12 monthsMore than 12 monthsTotal
 LossesFair valuesLossesFair valuesLossesFair values
 ($000 omitted)
Municipal31 1,422 228 14,186 259 15,608 
Corporate136 10,580 12,238 188,316 12,374 198,896 
Foreign1,032 67,940 9,755 186,773 10,787 254,713 
U.S. Treasury Bonds139 10,540 714 23,113 853 33,653 
1,338 90,482 22,935 412,388 24,273 502,870 

The number of specific debt investment holdings held in an unrealized loss position as of June 30, 2024 was 334. Of these securities, 278 were in unrealized loss positions for more than 12 months. Total gross unrealized investment losses at June 30, 2024 slightly increased compared to December 31, 2023, primarily due to the continuing high interest rate environment which started in late 2022. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery in value, and no significant credit risk is deemed to exist, these investments are not considered as credit-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.

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 December 31, 2023, were:
 Less than 12 monthsMore than 12 monthsTotal
 LossesFair valuesLossesFair valuesLossesFair values
 ($000 omitted)
Municipal50 13,022 120 8,383 170 21,405 
Corporate68 4,808 11,878 208,971 11,946 213,779 
Foreign472 31,918 10,625 216,135 11,097 248,053 
U.S. Treasury Bonds327 20,895 153 4,815 480 25,710 
917 70,643 22,776 438,304 23,693 508,947 


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.

10


As of June 30, 2024, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal 17,860 17,860 
Corporate 215,470 215,470 
Foreign 316,952 316,952 
U.S. Treasury Bonds 34,303 34,303 
Equity securities76,348  76,348 
76,348 584,585 660,933 

As of December 31, 2023, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal 22,031 22,031 
Corporate 231,474 231,474 
Foreign 323,391 323,391 
U.S. Treasury Bonds 33,340 33,340 
Equity securities69,700  69,700 
69,700 610,236 679,936 

As of June 30, 2024 and December 31, 2023, 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 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
 ($000 omitted)
Realized gains116 278 218 339 
Realized losses(89)(3,430)(380)(4,177)
Net unrealized investment (losses) gains recognized on equity securities still held
(541)2,047 6,686 955 
(514)(1,105)6,524 (2,883)

11


Realized losses during the second quarter and first six months of 2023 included a $3.2 million contingent receivable loss adjustment related to a previous disposition of a business.

Investment gains and losses recognized related to investments in equity securities are as follows:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2024202320242023
($000 omitted)
Net investment (losses) gains recognized on equity securities during the period
(541)1,988 6,693 232 
Less: Net realized (losses) gains on equity securities sold during the period
 (59)7 (723)
Net unrealized investment (losses) gains recognized on equity securities still held
(541)2,047 6,686 955 

Proceeds from sales of investments in securities are as follows: 
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
 ($000 omitted)
Proceeds from sales of debt securities1 7,433 20,768 14,879 
Proceeds from sales of equity securities96 5,283 203 24,609 
Total proceeds from sales of investments in securities97 12,716 20,971 39,488 


NOTE 6

Goodwill. The summary of changes in goodwill is as follows:
TitleReal Estate SolutionsConsolidated Total
($000 omitted)
Balances at December 31, 2023
707,935 364,194 1,072,129 
Acquisitions8,230  8,230 
Purchase accounting adjustments187  187 
Balances at June 30, 2024
716,352 364,194 1,080,546 

During the first six months of 2024, goodwill recorded in the title segment was related to an acquisition of a title office.
12


NOTE 7

Estimated title losses. A summary of estimated title losses for the six months ended June 30 is as follows:

20242023
 ($000 omitted)
Balances at January 1528,269 549,448 
Provisions:
Current year37,793 36,773 
Previous policy years679 703 
Total provisions38,472 37,476 
Payments, net of recoveries:
Current year(9,276)(6,990)
Previous policy years(40,746)(57,954)
Total payments, net of recoveries(50,022)(64,944)
Effects of changes in foreign currency exchange rates(4,273)2,161 
Balances at June 30
512,446 524,141 
Loss ratios as a percentage of title operating revenues:
Current year provisions4.0 %4.0 %
Total provisions4.1 %4.1 %


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 usually include a combination of time-based restricted stock 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 generally 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 an employee service requirement over a period of approximately three years. The Company has not granted stock options since 2021 and all outstanding stock option awards are fully vested at June 30, 2024. 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 six months of 2024 and 2023, the Company granted time-based and performance-based restricted stock units with aggregate grant-date fair values of $13.8 million (225,000 units with an average grant price per unit of $61.44) and $12.0 million (293,000 units with an average grant price per unit of $41.01).


13


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. To calculate diluted EPS, the number of shares is adjusted to include the number of additional shares that would have been outstanding if restricted units were vested and issued and stock options were exercised. In periods of net losses, 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 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
($000 omitted, except per share)
Numerator:
Net income attributable to Stewart
17,343 15,815 20,473 7,625 
Denominator (000):
Basic average shares outstanding27,592 27,255 27,549 27,228 
Average number of dilutive shares relating to options211 43 206 52 
Average number of dilutive shares relating to restricted units
210 146 256 122 
Diluted average shares outstanding28,013 27,444 28,011 27,402 
Basic earnings per share attributable to Stewart
0.63 0.58 0.74 0.28 
Diluted earnings per share attributable to Stewart
0.62 0.58 0.73 0.28 


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 June 30, 2024, 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 June 30, 2024, 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.

14


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, investigations 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 has three reportable operating segments: the title segment, the real estate solutions segment, and the corporate and other segment. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, abstracting, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes home and personal insurance services, Internal Revenue Code Section 1031 tax-deferred exchanges, and digital customer engagement platform services. The real estate solutions segment supports the real estate industry and primarily includes credit and real estate information services, valuation management services, online notarization and closing services, and search services. The corporate and other segment is primarily comprised of the parent holding company and centralized support services departments.

Selected statement of income information related to these segments is as follows:
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
 ($000 omitted)
Title segment:
Revenues510,035 480,825 981,387 942,468 
Depreciation and amortization8,536 8,883 17,266 16,986 
Income before taxes and noncontrolling interest
33,371 35,459 43,554 34,794 
Real estate solutions segment:
Revenues92,222 71,411 175,263 134,035 
Depreciation and amortization6,264 6,280 12,538 12,581 
Income before taxes5,116 3,282 11,847 4,648 
Corporate and other segment:
Revenues (net realized losses)(27)(3,082)(105)(3,047)
Depreciation and amortization398 365 778 867 
Loss before taxes(9,482)(13,567)(19,250)(24,424)
Consolidated Stewart:
Revenues602,230 549,154 1,156,545 1,073,456 
Depreciation and amortization15,198 15,528 30,582 30,434 
Income before taxes and noncontrolling interest
29,005 25,174 36,151 15,018 

15


The Company does not provide asset information by reportable operating segment as it does not routinely evaluate the asset position by segment.

Total revenues generated in the United States and all international operations are as follows:
 Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
 2024202320242023
 ($000 omitted)
United States563,839 514,699 1,088,861 1,012,228 
International38,391 34,455 67,684 61,228 
602,230 549,154 1,156,545 1,073,456 


NOTE 13
Other comprehensive (loss) income. Changes in the balances of each component of other comprehensive (loss) income and the related tax effects are as follows:
Three Months Ended 
 June 30, 2024
Three Months Ended 
 June 30, 2023
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments145 31 114 (7,298)(1,533)(5,765)
Reclassification adjustments for realized gains and losses on investments493 103 390 280 59 221 
638 134 504 (7,018)(1,474)(5,544)
Foreign currency translation adjustments(1,685)(429)(1,256)5,102 848 4,254 
Other comprehensive loss
(1,047)(295)(752)(1,916)(626)(1,290)

Six Months Ended 
 June 30, 2024
Six Months Ended 
 June 30, 2023
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments(2,736)(574)(2,162)1,078 226 852 
Reclassification adjustment for realized gains and losses on investments683 143 540 396 83 313 
(2,053)(431)(1,622)1,474 309 1,165 
Foreign currency translation adjustments(7,088)(1,362)(5,726)5,812 960 4,852 
Other comprehensive (loss) income
(9,141)(1,793)(7,348)7,286 1,269 6,017 


16


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

MANAGEMENT’S OVERVIEW

Second quarter 2024 overview. We reported net income attributable to Stewart of $17.3 million ($0.62 per diluted share) for the second quarter 2024, compared to net income of $15.8 million ($0.58 per diluted share) for the second quarter 2023. Pretax income before noncontrolling interests for the second quarter 2024 was $29.0 million compared to pretax income before noncontrolling interests of $25.2 million for the prior year quarter. The second quarter 2024 results included $0.5 million of pretax net realized and unrealized losses primarily driven by fair value changes of equity securities investments in the title segment, while second quarter 2023 results included $1.1 million of pretax net realized and unrealized losses primarily due to a realized loss related to a previous disposition of a business recorded in the corporate and other segment, partially offset by net unrealized gains on fair value changes of equity securities investments in the title segment.

Summary results of the title segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended June 30
 20242023% Change
Operating revenues496.2 466.7 %
Investment income14.3 12.1 18 %
Net realized and unrealized (losses) gains
(0.5)2.0 (125)%
Pretax income
33.4 35.5 (6)%
Pretax margin6.5 %7.4 %

Title segment operating revenues improved $29.5 million, or 6%, in the second quarter 2024 primarily driven by increased revenues from our domestic commercial, international and agency title operations, partially offset by lower domestic noncommercial revenues, while total segment operating expenses increased $31.3 million, or 7%, compared to the second quarter 2023. Agency retention expenses in the second quarter 2024 increased $28.4 million, or 17%, primarily driven by $32.0 million, or 15%, improvement in gross agency revenues compared to the second quarter 2023, while the average independent agency remittance rate in the second quarter 2024 decreased to approximately 16.9%, compared to 17.7% during the prior year quarter, primarily due to increased agency revenues in states with relatively higher agent retention rates.

Total title segment employee costs and other operating expenses slightly increased by $2.0 million, or less than 1%, in the second quarter 2024 compared to the prior year quarter, primarily due to increased outside search expenses related to higher commercial revenues. As a percentage of operating revenues, these expenses were 49.7% in the second quarter 2024 compared to 52.4% in the second quarter 2023. Title loss expense in the second quarter 2024 increased $1.3 million, or 7%, primarily driven by higher title revenues compared to the prior year quarter. As a percentage of title revenues, title loss expense was 4.2% for both the second quarters 2024 and 2023.

Investment income improved by $2.2 million in the second quarter 2024 compared to the prior year quarter, primarily resulting from higher interest income on eligible escrow balances in the second quarter 2024. Included in the title segment’s pretax income for the second quarters 2024 and 2023 were acquisition intangible asset amortization expenses of $2.8 million and $3.3 million, respectively.

17


Summary results of the real estate solutions segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended June 30
 20242023% Change
Operating revenues92.2 71.4 29 %
Pretax income5.1 3.3 56 %
Pretax margin5.5 %4.6 %

The segment's operating revenues increased $20.8 million, or 29%, in the second quarter 2024 compared to the prior year quarter, primarily due to increased revenues from credit information and valuation services. On a combined basis, employee costs and other operating expenses in the second quarter 2024 increased $19.0 million, or 31%, primarily due to the higher operating revenues. Included in the segment's results for the second quarters 2024 and 2023 were acquisition intangible asset amortization expenses of $5.5 million and $5.8 million, respectively.

In regard to the corporate and other segment, pretax results were driven by net expenses attributable to corporate operations which decreased to $9.5 million in the second quarter 2024, compared to $10.5 million in the second quarter 2023, primarily driven by management’s cost discipline. The segment’s results for the second quarter 2023 included net realized losses of $3.1 million, primarily driven by a loss adjustment resulting from a previous disposition of a business.


CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures surrounding contingencies and commitments.

Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the six months ended June 30, 2024, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the 2023 Form 10-K.

Operations. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, agencies and centralized title services centers. Our real estate solutions operations include credit and real estate information services, valuation management services, online notarization and closing services, and search services. The corporate and other segment includes our parent holding company and centralized support services departments.

Factors affecting revenues. The principal factors that contribute to changes in our operating revenues include:
interest rates;
availability of mortgage loans;
number and average value of mortgage loan originations;
ability of potential purchasers to qualify for loans;
inventory of existing homes available for sale;
ratio of purchase transactions compared with refinance transactions;
ratio of closed orders to open orders;
home prices;
consumer confidence, including employment trends;
demand by buyers;
premium rates;
foreign currency exchange rates;
market share;
ability to attract and retain highly productive sales associates;
18


independent agency remittance rates;
opening and integration of new offices and acquisitions;
office closures;
number and value of commercial transactions, which typically yield higher premiums;
government or regulatory initiatives;
acquisitions or divestitures of businesses;
volume of distressed property transactions; and
seasonality and/or weather.

Premiums are determined in part by the values of the transactions we handle. To the extent inflation or market conditions cause increases in the prices of homes and other real estate, premium revenues are also increased. Conversely, falling home prices cause premium revenues to decline. Home price changes may override the seasonal nature of the title insurance business. Historically, our first quarter is the least active in terms of title insurance revenues as home buying is generally depressed during winter months. Our second and third quarters are typically the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of the year. On average, title premium rates for refinance orders are lower compared to a similarly priced purchase transaction.


RESULTS OF OPERATIONS

Comparisons of our results of operations for the three and six months ended June 30, 2024 with the corresponding periods in the prior year are set forth below. Factors contributing to fluctuations in the results of operations are presented in the order of their monetary significance, and we have quantified, when necessary, significant changes. Segment results are included in the discussions and, when relevant, are discussed separately.

Our statements on home sales, interest rates and loan activity are based on published U.S. industry data from sources including Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors® (NAR) and the U.S. Census Bureau as of June 30, 2024. We also use information from our direct operations.

Operating environment. Existing home sales in June 2024 were 3.9 million units (seasonally-adjusted basis), which were 5% lower from both a year ago and May 2024, primarily due to the continuing elevated interest rate environment accompanied by rising home prices. According to NAR, the June 2024 median home price of $427,000 was the highest ever recorded, further affecting housing affordability and increasing unsold home inventory, which at the end of June 2024 was 23% higher than a year ago and 3% higher than May 2024. On new residential construction, U.S. housing starts (seasonally-adjusted) in June 2024 were 3% better than May 2024, but 4% lower than a year ago, while June 2024 newly-issued building permits were 3% higher than May 2024, but 3% lower compared to June 2023.

Regarding lending activity, total U.S. single family mortgage originations during the second quarter 2024 totaled $441 billion, which was comparable to $442 billion in the second quarter 2023, as the purchase lending decline of 3% was offset by a 12% improvement in refinancing originations, according to Fannie Mae and MBA (averaged). During the second quarter 2024, the average 30-year fixed interest rate averaged 7.0% compared to 6.5% in the second quarter 2023 and 6.7% in the first quarter 2024. For the full year 2024, Fannie Mae and MBA expect the interest rate to average 6.8%, similar to the 2023 average, while total originations for the year 2024 are expected to be 13% higher compared to 2023, with total lending volumes in the third and fourth quarters of 2024 anticipated to improve 17% and 29%, respectively, compared to the same periods in 2023.

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Title revenues. Direct title revenue information is presented below:
 
Three Months Ended June 30,
Six Months Ended June 30,
 20242023 Change% Chg20242023 Change% Chg
 ($ in millions)($ in millions)
Non-commercial
Domestic169.4 184.5 (15.1)(8)%304.6 334.9 (30.3)(9)%
International28.1 25.9 2.2 %47.3 45.0 2.3 %
197.5 210.4 (12.9)(6)%351.9 379.9 (28.0)(7)%
Commercial:
Domestic51.0 41.5 9.5 23 %100.8 74.2 26.6 36 %
International7.0 6.1 0.9 15 %13.4 11.8 1.6 14 %
58.0 47.6 10.4 22 %114.2 86.0 28.2 33 %
Total direct title revenues255.5 258.0 (2.5)(1)%466.1 465.9 0.2 — %

Domestic non-commercial revenues decreased in the second quarter and first six months of 2024, compared to the same periods in 2023, primarily driven by lower residential transactions with total purchase and refinancing closed orders decreasing 9% and 8% in the second quarter and first six months of 2024, respectively. Additionally, average residential fee per file in both the second quarter and first six months of 2024 decreased to $3,000 (or 7% and 11%, respectively) compared to the same periods in 2023, primarily due to a lower purchase transaction mix in 2024.

Domestic commercial revenues increased in the second quarter and first six months of 2024, compared to the same periods in 2023, primarily as a result of increased average transaction size (primarily in the energy and industrial sectors). Average domestic commercial fee per file improved to $13,500 (or 17%) and $13,700 (or 39%) in the second quarter and first six months of 2024, respectively, while domestic commercial orders closed increased 6% in the second quarter 2024 and slightly decreased 2% in the first six months of 2024, compared to the same periods in 2023.

Orders information for the three and six months ended June 30 is as follows:
Three Months Ended June 30,
Six Months Ended June 30,
20242023Change% Chg
2024
2023
Change% Chg
Opened Orders:
Commercial3,526 3,294 232 %7,219 7,136 83 %
Purchase55,057 57,443 (2,386)(4)%103,081 106,912 (3,831)(4)%
Refinance16,731 16,860 (129)(1)%33,102 32,989 113 — %
Other11,407 7,588 3,819 50 %22,654 12,009 10,645 89 %
Total86,721 85,185 1,536 %166,056 159,046 7,010 %
Closed Orders:
Commercial3,787 3,585 202 %7,355 7,509 (154)(2)%
Purchase37,832 42,226 (4,394)(10)%67,576 73,854 (6,278)(9)%
Refinance9,978 10,583