Industry News

Stewart Announces Record Year 2003

February 18, 2004

HOUSTON, /PRNewswire-FirstCall/ --. For the second year in a row, Stewart Information Services Corporation (NYSE: STC ) annual revenues, net earnings, orders and earnings per share were the largest in the company's history.

Revenues for the year 2003 were $2.2 billion, a 26 percent increase from 2002. Net earnings for the year 2003 were $123.8 million, or $6.88 per diluted share, compared with net earnings of $94.5 million, or $5.30 per diluted share, for 2002. Stewart's assets now exceed $1 billion for the first time in the company's history.

Stewart earned $20.8 million, or $1.15 per diluted share, for the fourth quarter of 2003, compared with earnings of $43.8 million, or $2.46 per diluted share, for the fourth quarter of 2002. Revenues for the fourth quarter increased to $614.9 million compared with $551.3 million a year ago.

Although revenues for the fourth quarter increased by 12 percent over the fourth quarter of 2002, earnings declined by 53 percent. The fourth quarter included a significantly higher proportion of revenues from agency operations in 2003 (66 percent) compared with the 2002 period (59 percent). In high- volume years like 2003, agency operations generate a lower percentage of earnings to revenues than do direct operations. Employee costs for the rollout of SureClose® to more than 400 company locations in 2003 also affected the full year and the fourth quarter. Additionally, reserves taken on litigation in progress and a loss on a mapping/automation contract reduced earnings per share by approximately $0.13 in the fourth quarter.

Refinancing transactions declined in the second half of 2003 as a result of an overall increase in mortgage interest rates. Most industry experts project current interest rates to continue or move slightly higher and are forecasting significantly fewer refinancing transactions for 2004.

Stewart's incoming orders in the fourth quarter of 2003 were down 29 percent from the same quarter a year ago. Fourth quarter orders were off 26 percent from the third quarter. Stewart Morris, Jr., president and co- chief executive officer, said, "We monitor our incoming orders daily and weekly. Our employee counts at the end of the year had been reduced by approximately 10 percent from the peak month of July 2003. Our employee costs for the fourth quarter were approximately 13 percent less than the employee costs for the third quarter. We are continuing to lower staff levels and expenses to allow for reduced revenues, while maintaining superior core service to our customers.

"We continued our systematic analyses and acquisitions of title agencies and real estate information companies, concentrating on transactions that will be accretive to earnings and shareholder wealth," said Morris. "By completing process flow analyses and installing our integrated technology, we create further gains for our shareholders.

"Our investment in technology allows us to attract top quality personnel and support their effectiveness in serving our customers. The installation of our SureClose® transaction management system will allow us to increase the volume of delivery of bundled packages of services for lenders and title agencies," added Morris. "The implementation of our SureClose system is transforming our company to a real estate transaction management business. It also facilitates a shift from paper-based transactions to electronic processing improving both internal efficiency and service to our customers. By year-end we increased the number of SureClose installations to over 400 company locations with more than 140,000 files in the system. Extra startup expenses are incurred in implementation; however, when fully implemented we believe this will provide us a competitive advantage and help the company better manage its costs through all types of market conditions."

"The resumption of a payment of an annual cash dividend in the fourth quarter of 2003 of $0.46 per share, the continuing emphasis on growth in book value to $34.47 and all-time record earnings per share in 2003 illustrate our focus on being a value-creating entity," said Malcolm S. Morris, chairman and co-chief executive officer. Indicative of this focus on growing shareholder return, Stewart has been included on the prestigious Forbes Platinum 400 list of the best performing big companies in America for the third consecutive year.

"The challenge going forward is to right-size in an ever-changing economic landscape, but doing so with the expectation of long run increases in revenues and profitability regardless of short term hurdles," said Morris. Fannie Mae estimates that one-to-four family lending will drop by more than 50 percent in 2004 when compared with 2003 -- with substantially all of the decline coming from reduced refinance transactions. They project 2004 existing and new home sales to be the second best year in history. Industry expectations are for commercial transactions to continue to gain volume. Stewart's recent acquisition of Title Associates, Inc. demonstrates its ongoing emphasis on expansion in the higher premium commercial sector.

Source: Stewart Information Services Corporation

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