Stewart Reports Operating Results for the Second Quarter 2008
July 30, 2008
HOUSTON, -- Stewart Information Services Corporation (NYSE: STC) today reported the results of its operations for the second quarter and six months ended June 30, 2008. (Dollar amounts in the table below are in millions, except per share figures.)
|
Second Quarter |
|
|
2008(a) |
2007 |
Total revenues |
$428.5 |
$573.4 |
Pretax (loss) earnings before minority interests |
(41.2) |
19.2 |
Net (loss) earnings |
(26.6) |
10.1 |
Net (loss) earnings per diluted share |
(1.47) |
0.55 |
|
Six Months |
|
|
2008(a) |
2007(b) |
Total revenues |
$822.7 |
$1,105.1 |
Pretax (loss) earnings before minority interests |
(82.0) |
14.6 |
Net (loss) earnings |
(51.9) |
5.4 |
Net (loss) earnings per diluted share |
(2.87) |
0.29 |
(a) The second quarter of 2008 includes pretax charges totaling $24.2 million ($15.7 million after taxes, or $0.87 per share) relating to a reserve adjustment of $10.0 million for prior policy years, $8.2 million relating to large claims and two agency defalcations, and a software impairment charge of $6.0 million. The first three months of 2008 includes an additional charge of $4.6 million ($3.0 million after taxes, or $0.17 per share) relating to an agency defalcation.
(b) The first six months of 2007 includes a $3.2 million gain ($2.1 million after taxes, or $0.11 per diluted share) from the sale of two subsidiaries and a charge of $7.4 million ($4.8 million after taxes, or $0.26 per diluted share) relating to large claims.
Financial Result
The continuing decline in our orders resulting from the decrease in new and existing home sales, home prices, construction and lending in the second quarter of 2008, coupled with worsening policy claims payment experience and a software impairment charge, resulted in a pretax (and before minority interests) loss of $41.2 million compared with earnings of $19.2 million in the same quarter last year. The software impairment charge of $6.0 million relates to software developed, and now abandoned, in our REI segment for one of its subsidiaries.
Revenues in the second quarter of 2008 fell to $428.5 million, a decline of 25.3 percent from the $573.4 million in the same period last year. This reduction in revenues reflects the second quarter 2008 decline in our order volume resulting from decreases in existing home sales (down 16.7 percent), new home sales (down 33.2 percent) and existing home prices (down 15.8 percent) compared with the second quarter of 2007. Our international operations remained profitable, offsetting, in part, our loss in the second quarter of 2008 for U.S. operations.
Total revenues for the first half of 2008 were $822.7 million, down 25.6 percent from the same period in 2007. Overall, the Company reported a loss of $82.0 million before taxes and minority interests in the first half of 2008 compared with a profit of $14.6 million in the same period in 2007.
"We are responding strategically to this downturn by implementing cost reductions throughout the Company. We remain committed to our long-term strategies and restructuring efforts even in this extremely difficult real estate environment," said Malcolm S. Morris, co-chief executive officer and chairman. "We are progressing in our shared-services initiatives and have contracted several national relationships for savings in procurement. These initiatives and relationships, which range from accounting and information technology to procurement and human resources, have significant potential for process improvements and cost reductions. We are also consolidating many of our separate corporate entities to better serve our customers, streamline our administrative functions and reduce fixed costs.
"We are experiencing higher than expected payments of policy claims, which resulted in our taking a $10.0 million charge this quarter relating to prior policy years," added Morris. "However, we are continuing to make progress in reducing our risk exposure through the review and cancellation of higher-risk title agencies and by auditing potential title agencies prior to adding them to our agency network."
"We continue to respond to declining market conditions by aggressively reducing variable and fixed expenses," said Stewart Morris, Jr., co-chief executive officer and president. "In the second quarter of 2008, our employee count was reduced by 350, which brings our year-to-date reduction to 810, or 9.6 percent. Our total reduction in employee count is 2,400, or 24.6 percent, since December 31, 2006. We have also closed 68 unprofitable branch and office locations since the beginning of 2008.
"In addition, we are responding to the consumer in these tough markets," said Morris. "We announced a simplification of our rate structure in California to better serve our customers. Also in this quarter, we formed a new multi-state foreclosure trustee company that will allow us to offer nationwide default services. We remain on track for site conversions of legacy production systems to our new, but proven, web-based production systems this year. A recent fire in an office where we have implemented our paperless technology reinforced our commitment to long-term investment in our web-based production system and SureClose(R), our transaction management technology. Within hours of the fire, the office was up and running remotely via the internet and closings continued with no loss of service or files," said Morris.
Source: Stewart Information Services Corporation
Contact ALTA at 202-296-3671 or communications@alta.org.