Stewart Reports Earnings for First Quarter 2006

April 27, 2006

HOUSTON, /PRNewswire-FirstCall/ -- Stewart Information Services Corporation (NYSE: STC) reported the results of its operations for the first quarter ended March 31, 2006. (Dollar amounts in the table below are in millions, except for per share figures.)

  First Quarter 2006

First Quarter 2005
Total revenues $ 539.4 % 11.0

Pretax earnings before minority interests



Net earnings



Net earnings per diluted share



Financial Highlights

  • Revenues increased 5.6 percent to $539.4 million in the first quarter of 2006 as compared with $511.0 million for the first quarter of 2005. This quarter's revenues represent the highest revenues for any first quarter in the Company's history. Pretax earnings (calculated before minority interests) for the first quarter of 2006 were $8.3 million as compared with $20.2 million for the same period of 2005.

  • Revenues were positively impacted by an increase in both direct and agency business. The increase in direct operations is primarily due to acquisitions and growth in commercial transactions. Acquisitions increased revenues by $12.1 million and pretax earnings by $1.7 million for the quarter.

  • The increase in revenues for the quarter was more than offset by  increases primarily in employee and other operating costs. Employee  costs were impacted by the competitive market for key employees in  California and other states. Retention of these key associates is  essential to managing through changes in the marketplace. Employee  costs were also higher compared to the same period a year ago due to  significant increases in health insurance claims and premium costs,  additional employees at newly opened locations and increases in staff  providing technology-related services. While the Company continually  monitors changes in transaction volumes, it carefully reacts to seasonal fluctuations. The Company maintains staffing levels sufficient to continue to provide superior customer service and gain market share through a reasonably stable, dedicated employee work force. Other operating costs increased primarily due to expenses related to new offices and increased technology development and security costs.

  • Stewart's book value per share decreased to $42.16 per share at March 31, 2006 as compared with $42.21 at December 31, 2005. The decline in book value per share was primarily due to an increase in unrealized losses in the Company's bond portfolio triggered by interest rate increases in the first quarter of 2006.

  • Title orders declined in the first quarter of 2006 by 8.9 percent from the same period a year ago. Orders were 9.8 percent lower in March 2006 than in March 2005. Steady increases in mortgage interest rates were the major reason for the decline in title orders.
"We took corrective actions in the quarter including management changes in several major markets in which our offices were not performing up to expectations," said Stewart Morris, Jr., co-chief executive officer. "Also, we should be delivering AIM+, our fourth-generation Web-based title production system and the second generation of SureClose®, our transaction management system, by the end of 2006. An outside third-party research group that was engaged to study the savings from our new technology identified future savings and increased productivity opportunities. Our next step is to define and deploy these labor-saving workflow processes to obtain optimum benefit across our offices.

"We have reorganized to combine Landata Systems and Stewart Realty Solutions under one profit center, Stewart Transaction Solutions," added Stewart Morris, Jr. "This move places all of our technology under single leadership, continuing our drive to sell our award-winning technology solutions to the real estate and title industries.

SureClose recently passed the 1.7 million online-file mark and continues to lead the industry in volume and service. We also continue to add two to three new companies per day on our TitleLogix® and TitleWorkPlace(TM) application service providers (ASPs), the title industry's leading ASP facilities."

Source: Stewart Information Services Corporation

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