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Stewart Reports Earnings for Third Quarter 2006

October 26, 2006

HOUSTON, /PRNewswire-FirstCall/ -- Stewart Information Services Corporation (NYSE: STC) reported the results of its operations for the third quarter and nine months ended September 30, 2006. (Dollar amounts in the table below are in millions, except per share figures.)

	Third Quarter
	2006	2005
Total Revenues	$641.5	$639.4
Pretax earnings before minority interests	27.0	57.2
Net earnings	14.2	31.8
Net earnings per diluted share	0.77	1.77
Nine Months	2006	2005
Total revenues	$ 1,825.7	$ 1,801.5
Pretax earnings before minority interests	64.9	143.7
Net earnings	32.5	4.37

 

Financial Highlights

• Revenues increased 0.3 percent to $641.5 million in the third quarter of 2006 compared with $639.4 million for the third quarter of 2005. Pretax earnings (calculated before minority interests) for the third quarter of 2006 were $27.0 million compared with $57.2 million for the same period of 2005.
• Revenues increased 1.3 percent to $1.83 billion in the first nine months of 2006 compared with $1.80 billion for the first nine months of 2005. Pretax earnings (calculated before minority interests) for the first nine months of 2006 were $64.9 million compared with $143.7 million for the same period of 2005.
• The increase in revenue in the third quarter of 2006 from the same period in 2005 was due primarily to revenues from new agencies, the impact of acquisitions and strong growth in commercial transactions, offset by a decline in revenues and transactions handled by our direct operations.  The decrease in revenues from direct operations resulted from a reduction in residential closings due to a higher interest rate environment that has significantly impacted certain major markets of the country.  Mortgage interest rates averaged 6.6 percent in the third quarter of 2006 compared with 5.8 percent in the third quarter of 2005. Acquisitions increased revenues by $12.1 million for the quarter.
• Profits for the third quarter of 2006 versus 2005 were reduced primarily due to a higher complement of lower-margin agency business compared to direct operations and higher other operating costs.  Other operating costs increased primarily due to expenses associated with new offices, increased technology development for higher productivity and security costs to comply with both privacy laws and Sarbanes-Oxley. The Company is continually monitoring changes in transaction volumes and has now reduced staff levels accordingly while continuing with its goal to provide superior customer service and gain market share. Excluding the effect of increases from new locations, the Company's workforce was reduced by approximately 650 employees, or 6.4 percent, since September 30, 2005.  A significant number of these staff reductions occurred during the third quarter and, as such, the corresponding reduction in employee costs will be realized in the fourth quarter of 2006.
• Stewart's book value per share increased to $44.11 at September 30, 2006 compared with $42.21 at December 31, 2005.
• Title orders from direct operations declined in the third quarter of 2006 by 23.2 percent from the same period a year ago. September orders were 25.0 percent lower than the same month a year ago. The increase in mortgage interest rates and a reduction in home sales were the major reasons for the decline in title orders.

"Within our REI portal group, PropertyInfo.com, we changed leadership and consolidated our web-based title services for agencies to provide a one-stop order and delivery point for our agency network," said Stewart Morris, Jr., president and co-chief executive officer. "We also have consolidated and rebranded the lender services division of Stewart Mortgage Information, which is now known as Stewart Lender Services. Products and services, spanning from loan origination to post-closing services, are available at http://www.stewartlenderservices.com .

"Homebuyers have evolved rapidly from print-based media to online searching," added Stewart Morris, Jr. "Our SureClose® transaction management platform, patent-pending eClosingRoom(TM), e-signature, e-notarization, e- recording and e-vault technologies position Stewart to continue to exceed consumer expectations for lower costs and more efficient closings. Our investment in technology has resulted in a key marketing and productivity tool. We are moving our primary title production and transaction management systems to an integrated web-based platform."

"Our rapidly growing commercial title business is a bright spot on the financial side," said Malcolm S. Morris, chairman and co-chief executive officer. "We have tripled our commercial business since 2000. Commercial customers are serviced by Stewart's National Title Services (NTS), which has 20 offices across the country plus more than 900 Stewart Title offices and branches. In addition, the 2004 acquisition of Title Associates in New York has also contributed greatly to this growth. Our commercial closers, underwriters, marketing specialists and escrow officers deliver stellar service. Stewart Title Guaranty Company's balance sheet, with an industry- record 31 years of growth in surplus and reserves, provides the confidence level that commercial policyholders demand.

"The current growing commercial real estate market is benefiting not only our title business but also our subsidiary, Asset Preservation, Inc., which is a national leader in tax-deferred exchanges under Section 1031 of the Internal Revenue Code."

Stewart Information Services Corporation is a customer-oriented, technology-driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries through more than 9,500 policy-issuing offices and agencies in the United States and international markets. Stewart also provides post-closing lender services, mortgage default management solutions, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges.

Stewart Information Services Corporation