Stewart Reports First Quarter 2024 Results

• Total revenues of $554.3 million ($547.3 million on an adjusted basis) compared to $524.3 million ($526.1 million on an adjusted basis) in the prior year quarter
• Net income of $3.1 million ($4.6 million on an adjusted basis) compared to net loss of $8.2 million (net income of $0.2 million on an adjusted basis) in the prior year quarter
• Diluted earnings per share of $0.11 ($0.17 on an adjusted basis) compared to prior year quarter loss per diluted share of $0.30 ($0.01 earnings per share on an adjusted basis)

HOUSTON, April 24, 2024 /PRNewswire/ -- Stewart Information Services Corporation (NYSE: STC) today reported net income attributable to Stewart of $3.1 million ($0.11 per diluted share) for the first quarter 2024, compared to a net loss of $8.2 million ($0.30 loss per diluted share) for the first quarter 2023. On an adjusted basis, Stewart's first quarter 2024 net income was $4.6 million ($0.17 per diluted share) compared to net income of $0.2 million ($0.01 per diluted share) in the first quarter 2023. First quarter 2024 pretax income before noncontrolling interests was $7.1 million ($9.1 million on an adjusted basis) compared to pretax loss before noncontrolling interests of $10.2 million (pretax income of $0.9 million on an adjusted basis) for the first quarter 2023.

First quarter 2024 results included $7.0 million of pretax net realized and unrealized gains primarily driven by net unrealized gains on fair value changes of equity securities investments, while first quarter 2023 results included $1.8 million of pretax net realized and unrealized losses, primarily composed of net unrealized losses on fair value changes of equity securities investments and realized losses on sales of investment securities.

"Our first quarter results improved over the first quarter 2023, but reflect the continuing challenges in the real estate market due to the higher interest rate environment, which we expect to continue for several quarters. We are encouraged by the increase in our commercial revenues this quarter compared to the prior year, although we anticipate ongoing challenges to residential transaction volumes," commented Fred Eppinger, chief executive officer. "We remain focused on our strategic investments and will continue to focus on balancing thoughtful cost discipline with investment in long-term enterprise initiatives to create a stronger and more resilient company."

Selected Financial Information
Summary results of operations are as follows (dollars in millions, except per share amounts, pretax margin and adjusted pretax margin, and amounts may not add as presented due to rounding):

Title Segment
Summary results of the title segment are as follows (dollars in millions, except pretax margin and adjusted pretax margin):

First quarter 2024 title segment operating revenues decreased $5.5 million, or 1 percent, primarily as a result of residential volume declines in our direct and agency title operations, partially offset by increased commercial revenues, while total segment operating expenses declined by $1.1 million, which was less than 1 percent, compared to the first quarter 2023. Agency retention expenses in the first quarter 2024 decreased $5.8 million, or 3 percent, in line with $8.2 million, or 3 percent, lower gross agency revenues, while the average independent agency remittance rate in the first quarter 2024 was approximately 17 percent, compared to 17.4 percent during the prior year quarter.

Total title segment employee costs and other operating expenses increased by $4.3 million, or 2 percent, in the first quarter 2024 compared to the prior year quarter, primarily due to increased outside search expenses related to higher commercial revenues. As a percentage of operating revenues, these expenses were 52 percent in the first quarter 2024 compared to 50.4 percent in the prior year quarter. First quarter title loss expense decreased $0.3 million, or 2 percent, primarily due to lower title revenues compared to the prior year quarter. As a percentage of title revenues, title loss expense was 3.9 percent for both the first quarters 2024 and 2023.

Investment income improved by $6.3 million in the first quarter 2024 compared to the prior year quarter, primarily due to higher interest income resulting from earned interest from eligible escrow balances in the first quarter 2024. Non-GAAP adjustments to the title segment's pretax income included $3.4 million of total acquisition intangible asset amortization and other expenses for both the first quarters 2024 and 2023, and $7.1 million and ($1.8) million of net realized and unrealized gains (losses) in the first quarters 2024 and 2023, respectively.

Direct title revenues information is presented below (dollars in millions):

Total non-commercial domestic revenues in the first quarter 2024 declined $15.0 million, or 10 percent, primarily due to a 5 percent decline in total residential purchase and refinancing transactions and a lower average fee per file compared to the prior year quarter. First quarter 2024 domestic commercial revenues improved by $17.0 million, or 52 percent, primarily driven by increased average transaction size, which was partially offset by fewer commercial transactions. Average domestic commercial fee per file in the first quarter 2024 was $13,900, or 67 percent higher compared to $8,300 in the first quarter 2023, while average residential fee per file in the first quarter 2024 was $2,900, or 16 percent lower compared to $3,400 in the prior year quarter, primarily due to a lower purchase transaction mix in the first quarter 2024.

Real Estate Solutions Segment
Summary results of the real estate solutions segment are as follows (dollars in millions, except pretax margin and adjusted pretax margin):

First quarter 2024 segment operating revenues increased $20.4 million, or 33 percent, compared to the prior year quarter, primarily driven by higher revenues from credit information and valuation services. Combined segment employee costs and other operating expenses increased $15.1 million, or 27 percent, in the first quarter 2024 consistent with the higher operating revenues. Non-GAAP adjustments to pretax income shown in the schedule above were related to acquisition intangible asset amortization expenses.

Corporate and Other Segment
The segment's results were primarily driven by net expenses attributable to corporate operations, which decreased to $9.7 million in the first quarter 2024, compared to $10.9 million in the first quarter 2023, primarily driven by management's cost discipline.

Expenses
Consolidated employee costs in the first quarter 2024 increased slightly by $1.9 million, or 1 percent, compared to the prior year quarter, while as a percentage of total operating revenues, employee costs improved to 32.3 percent in the first quarter 2024 compared to 32.8 percent in the prior year quarter.

Total other operating expenses in the first quarter 2024 increased $16.2 million, or 13 percent, primarily driven by higher service expenses and outside search fees related to increased revenues from real estate solutions and commercial title operations, respectively, partially offset by lower third-party outsourcing and litigation settlement expenses compared to the first quarter 2023. As a percentage of total operating revenues, consolidated other operating expenses for the first quarter 2024 were 25.6 percent, compared to 23.2 percent in the prior year quarter, primarily driven by increased real estate solutions service expenses.

Other
Net cash used by operations in the first quarter 2024 was $29.6 million compared to net cash used by operations in the first quarter 2023 of $51.1 million, primarily as a result of improved results and lower payments on claims and accounts payable during the first quarter 2024.

First Quarter Earnings Call
Stewart will hold a conference call to discuss the first quarter 2024 earnings at 8:30 a.m. Eastern Time on Thursday, April 25, 2024. To participate, dial (800) 267-6316 (USA) or (203) 518-9783 (International) - access code STCQ124. Additionally, participants can listen to the conference call through Stewart's Investor Relations website at http://investors.stewart.com/news-and-events/events/default.aspx. The conference call replay will be available from 11:00 a.m. Eastern Time on April 25, 2024 until midnight on May 2, 2024 by dialing (888) 276-5316 (USA) or (402) 220-2333 (International).

About Stewart
Stewart (NYSE-STC) is a global real estate services company, offering products and services through our direct operations, network of Stewart Trusted Providers™ and family of companies. From residential and commercial title insurance and closing and settlement services to specialized offerings for the mortgage and real estate industries, we offer the comprehensive service, deep expertise and solutions our customers need for any real estate transaction. At Stewart, we are dedicated to becoming the premier title services company and we are committed to doing so by partnering with our customers to create mutual success. Learn more at stewart.com.

Cautionary statement regarding forward-looking statements. Certain statements in this earnings release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "may," "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the volatility of economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the ability to attract and retain highly productive sales associates; the impact of vetting our agency operations for quality and profitability; independent agency remittance rates; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; our ability to manage risks associated with potential cybersecurity or other privacy or data security breaches; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; seasonality and weather; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023, and if applicable, as supplemented by any risk factors contained in our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K filed subsequently. All forward-looking statements included in this earnings release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this earnings release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

ST-IR

Appendix A
Non-GAAP Adjustments

Management uses a variety of financial and operational measurements other than its financial statements prepared in accordance with United States Generally Accepted Accounting Principles (GAAP) to analyze its performance. These include: (1) adjusted revenues, which are reported revenues adjusted for net realized and unrealized gains and losses and (2) adjusted pretax income and adjusted net income, which are reported pretax income and reported net income after earnings from noncontrolling interests, respectively, adjusted for net realized and unrealized gains and losses, acquired intangible asset amortization, office closure costs, and executive severance expenses. Adjusted diluted earnings per share (adjusted diluted EPS) is calculated using adjusted net income divided by the diluted average weighted outstanding shares. Adjusted pretax margin is calculated using adjusted pretax income divided by adjusted total revenues. Management views these measures as important performance measures of core profitability for its operations and as key components of its internal financial reporting. Management believes investors benefit from having access to the same financial measures that management uses.

Below are reconciliations of the non-GAAP financial measures used by management to the most directly comparable GAAP measures for the quarter ended March 31, 2024 and 2023 (dollars in millions, except shares, per share amounts and pretax margins, and amounts may not add as presented due to rounding).

SOURCE Stewart Information Services Corporation