Stewart Reports Earnings for 2005
February 16, 2006
HOUSTON, /PRNewswire-FirstCall/ -- Stewart Information Services Corporation (NYSE: STC) reported the results of its operations for the year and fourth quarter ended December 31, 2005. (Dollar amounts in the table below are in millions, except for per share figures.)
|Year 2005||Year 2004|
|Pretax earnings before minority interests||165.0||146.7|
|Net earnings per diluted share||4.86||4.53|
|Pretax earnings before minority interests||21.2 (A)||37.4 (B)|
|Net earnings||9.1 (A)||20.3 (B)|
|Net earnings per diluted share||0.50 (A)||1.11 (B)|
(A) Includes an addition to large title loss reserves aggregating $10.5 million ($6.8 million after taxes, or $0.37 per diluted share).
(B) Includes charge relating to litigation of $4.4 million ($2.9 million after taxes, or $0.16 per diluted share).
* Revenues for the year 2005 set an all-time record high at $2.4 billion. This represented an increase of 11.4 percent over the year 2004. Pretax earnings (calculated before minority interests) for the year 2005 were $165.0 million, as compared with $146.7 million for 2004.
* The Company's pretax profit margin was 6.8 percent for the year 2005 compared with 6.7 percent for 2004. In comparing 2005 with 2004, pretax earnings were increased by a higher level of commercial transactions and a higher mix of revenues from direct operations compared with lower-margin agency business. Acquisitions increased revenues by $37.3 million and pretax earnings by $8.0 million in 2005.
* Profits for the year 2005 versus 2004 were impacted by higher employee costs and other operating expenses because the Company continues to incur the costs of investment in technology advancements. The Company's goal is to increase productivity, gain market share and provide superior service to its customers. Profits in 2005 were also impacted by an addition to title loss reserves of $10.5 million in the fourth quarter for large losses relating to a mortgage fraud and a defalcation.
* For the fourth quarter of 2005, revenues increased 1.7 percent to $622.6 million compared with the fourth quarter of 2004. Pretax earnings and margins were $21.2 million and 3.4 percent, respectively, for the fourth quarter of 2005 and $37.4 million and 6.1 percent, respectively, for the same quarter in 2004. As noted in the yearly analysis above, earnings for the fourth quarter of 2005 were decreased by the increase to large title loss reserves and by higher employee costs and other operating expenses.
* The fourth quarter of 2005 also includes charges relating to corrections of the Company's accounting for leases and employee vacations of $2.8 million and $2.1 million, respectively. The combined total of $3.2 million after taxes, or $0.17 per diluted share, is immaterial for the year as to net earnings, cash flows and stockholders' equity.
* Stewart's book value per share increased by 9.7 percent to $42.21 per share at December 31, 2005 as compared with $38.48 at December 31, 2004.
* Stewart paid $0.75 per share as its annual cash dividend for 2005, a 63 percent increase from $0.46 per share in 2004.
Title orders declined in the fourth quarter of 2005 by 2.2 percent from the same period a year ago. Although orders were higher in October 2005 than October 2004, there was a decline in each of the months of November and December from the same month a year earlier. A rise in mortgage interest rates was the major reason for the decline.
"The year resulted in all-time record revenues," stated Stewart Morris, Jr., co-chief executive officer. "We seek to improve our profit margins and are taking actions to improve future performance. We monitor employee levels and other costs with a goal of maintaining a minimum staff necessary to provide the customer service needed to continue growing market share. Our technology is facilitating increased productivity and customer responsiveness and service. We will continue to invest heavily in 2006 in enhancements to our production and transaction management system, as well as the development of new technology products that serve real estate information and lender markets. We believe these strategies will position us for strong gains in market share. Accretive acquisitions continue to help our earnings."
Source Stewart Information Services