Stewart Reports Earnings for Second Quarter 2006
July 27, 2006
HOUSTON, -- Stewart Information Services Corporation (NYSE: STC) reported the results of its operations for the second quarter and six months ended June 30, 2006. (Dollar amounts in the table below are in millions, except per share figures.)
|Pretax earnings before minority interests||29.6||66.4|
|Net earnings per diluted share||0.86||2.04|
|Pretax earnings before minority interests||37.9||86.6|
|Net earnings per diluted share||1.00||2.63|
Revenues decreased 1.0 percent to $644.7 million in the second quarter of 2006 compared with $651.1 million for the second quarter of 2005. Pretax earnings (calculated before minority interests) for the second quarter of 2006 were $29.6 million compared with $66.4 million for the same period of 2005.
Revenues increased 1.9 percent to $1,184.2 million in the first six months of 2006 compared with $1,162.0 million for the first six months of 2005. Pretax earnings (calculated before minority interests) for the first six months of 2006 were $37.9 million compared with $86.6 million for the same period of 2005.
The decrease in revenues and transactions handled in the second quarter of 2006 from the same period in 2005 resulted primarily from a reduction in residential closings due to a higher interest rate environment. Mortgage interest rates averaged 6.6% in the second quarter of 2006 compared with 5.7% in the second quarter of 2005. Acquisitions and strong growth in commercial transactions positively impacted revenues in the second quarter of 2006, partially offsetting the decrease in residential activity. Acquisitions increased revenues by $12.1 million for the quarter.
Profits for the second quarter of 2006 versus 2005 were reduced primarily by higher employee costs and other operating costs. Other operating costs increased primarily due to expenses associated with new offices, increased technology development and related security costs and litigation expenses. Employee costs were higher compared with the same period a year ago due to newly opened locations and increased technology-related services. The Company has taken steps to maintain staffing levels sufficient to continue to provide superior customer service and gain market share through a reasonably stable, dedicated employee work force. The Company is continually monitoring changes in transaction volume and cyclical developments in the marketplace to manage its current level of business and respond to opportunities with regard to both people and technology.
The Company's provisions for title losses as a percentage of title operating revenues increased to 6.4% in the second quarter of 2006 compared with 4.9% for the same period of 2005. This was the result of an increase in our loss payment experience and an addition to title loss reserves of $4.9 million related to defalcations by two independent title agencies.
Stewart's book value per share increased to $42.92 at June 30, 2006 compared with $42.21 at December 31, 2005.
Title orders declined in the second quarter of 2006 by 17.0 percent from the same period a year ago. Orders were 22.7 percent lower in June 2006 than in June 2005. Steady increases in mortgage interest rates were the major reason for the decline in title orders.
Source: Stewart Information Services Corporation