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Stewart Reports Updated Operating Results for the Second Quarter 2008

August 7, 2008

Stewart Information Services Corporation (NYSE: STC) updated results of operations for the second quarter and six months ended June 30, 2008. The update to the second quarter's and six months' earnings is related to the discovery of additional information subsequent to the Company's original earnings release on July 30, 2008 and prior to filing its quarterly report on Form 10-Q with the Securities and Exchange Commission. This additional information connected several independent claims to the same series of fraudulent transactions which resulted in the reclassification of the claims as a single large title claim. The impact of this title policy claim resulted in a pretax charge of $3.0 million ($2.0 million after taxes, or $0.11 per share) to the second quarter and six months ended June 30, 2008. The information presented herein has been updated, as necessary, to reflect the impact of this matter to the second quarter and six months ended June 30, 2008. There are no other updates to previously reported amounts. (Dollar amounts in the table below are in millions, except for per share figures.)

 
Second Quarter
 
2008(a)
2007
Total revenues
$428.5
$573.4
Pretax (loss) arnings before minority interests
(44.2)
19.2
Net (loss) earnings
(28.6)
10.1
Net (loss) earnings per diluted share
(1.58)
0.55

                                                           

 
Six Months
 
2008(a)
2007(b)
Total revenues
$822.7
$1,105.1
Pretax (loss) earnings before minority interests
(85.0)
14.6
Net (loss) earnings
(53.9)
5.4
Net (loss) earnings per diluted share
(2.98)
0.29


(a) The second quarter of 2008 includes pretax charges totaling $27.2 million ($17.7 million after taxes, or $0.98 per share) relating to a reserve adjustment of $10.0 million for prior policy years, $11.2 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 Results

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 $44.2 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 $85.0 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.

Source: Stewart Information Services Corporation



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