Stewart(STC) - 2025 Q1 - Quarterly Report

Part I – Financial Information Financial Statements The company reported total revenues of $612.0 million for Q1 2025, an increase from $554.3 million in Q1 2024, with net income attributable to Stewart consistent at $3.1 million, while total assets slightly decreased to $2.71 billion and operating cash flow used $29.9 million Condensed Consolidated Statements of Income and Comprehensive Income (Loss) Q1 2025 vs Q1 2024 Income Statement Highlights | Metric | Q1 2025 ($'000) | Q1 2024 ($'000) | Change | | :--- | :--- | :--- | :--- | | Operating Revenues | 596,275 | 534,376 | +11.6% | | Total Revenues | 611,984 | 554,315 | +10.4% | | Income before taxes | 5,900 | 7,146 | -17.4% | | Net Income Attributable to Stewart | 3,077 | 3,130 | -1.7% | | Diluted EPS Attributable to Stewart | $0.11 | $0.11 | No Change | Condensed Consolidated Balance Sheets Balance Sheet Highlights (as of March 31, 2025) | Metric | March 31, 2025 ($'000) | Dec 31, 2024 ($'000) | | :--- | :--- | :--- | | Cash and cash equivalents | 148,510 | 216,298 | | Total Investments | 674,842 | 669,099 | | Goodwill | 1,092,747 | 1,084,139 | | Total Assets | 2,707,096 | 2,730,145 | | Notes payable | 445,860 | 445,841 | | Estimated title losses | 510,790 | 511,534 | | Total Liabilities | 1,299,233 | 1,319,056 | | Total Stockholders' Equity | 1,407,863 | 1,411,089 | Condensed Consolidated Statements of Cash Flows Q1 2025 vs Q1 2024 Cash Flow Summary | Activity | Q1 2025 ($'000) | Q1 2024 ($'000) | | :--- | :--- | :--- | | Cash used by operating activities | (29,927) | (29,588) | | Cash used by investing activities | (20,007) | (47,377) | | Cash used by financing activities | (18,645) | (16,771) | | Change in cash and cash equivalents | (67,788) | (95,014) | Notes to Financial Statements Key notes detail revenue composition, investment portfolio structure, goodwill changes from acquisitions, title loss reserve activity, and segment performance, with statutory reserve funds for title insurance at approximately $539.2 million in investments and $10.3 million in cash, goodwill increasing by $8.6 million due to title segment acquisitions, and the title segment's pretax income rising to $11.8 million while the real estate solutions segment's pretax income fell to $4.1 million - The company maintains statutory reserve funds for its underwriters, which are not available for current claim payments; as of March 31, 2025, these funds included approximately $539.2 million in investments and $10.3 million in cash[21] Operating Revenues by Type (Q1 2025 vs Q1 2024) | Revenue Type | Q1 2025 ($'000) | Q1 2024 ($'000) | | :--- | :--- | :--- | | Direct Title Insurance Premiums | 162,824 | 141,699 | | Agency Title Insurance Premiums | 267,518 | 240,772 | | Escrow fees | 34,478 | 33,543 | | Real estate solutions and abstract fees | 113,466 | 97,374 | | Other revenues | 17,989 | 20,988 | | Total Operating Revenues | 596,275 | 534,376 | - Goodwill increased by $8.6 million in Q1 2025 due to acquisitions of title offices within the title segment[31] Segment Pretax Income (Q1 2025 vs Q1 2024) | Segment | Q1 2025 Pretax Income ($'000) | Q1 2024 Pretax Income ($'000) | | :--- | :--- | :--- | | Title | 11,767 | 10,181 | | Real estate solutions | 4,059 | 6,732 | | Corporate | (9,926) | (9,767) | | Consolidated Pretax Income | 5,900 | 7,146 | Management's Discussion and Analysis (MD&A) Management reported net income of $3.1 million ($0.11 per diluted share) for Q1 2025, flat with Q1 2024, with the title segment seeing an 11% increase in operating revenues and a 16% rise in pretax income to $11.8 million, while the real estate solutions segment's revenues grew 17% but higher costs led to a 40% drop in pretax income to $4.1 million, highlighting a challenging market with high mortgage rates but noting improved commercial revenues and a focus on cost management and technology investment Management's Overview Net income attributable to Stewart was $3.1 million ($0.11 per diluted share) in Q1 2025, unchanged from Q1 2024, with the title segment's pretax income growing 16% to $11.8 million driven by an 11% revenue increase, while the real estate solutions segment's pretax income fell 40% to $4.1 million despite a 17% revenue increase due to higher operating costs Q1 2025 Financial Highlights | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income Attributable to Stewart | $3.1 million | $3.1 million | | Diluted EPS | $0.11 | $0.11 | | Pretax Income | $5.9 million | $7.1 million | Title Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $499.2 M | $451.4 M | +11% | | Pretax Income | $11.8 M | $10.2 M | +16% | | Pretax Margin | 2.3% | 2.2% | +0.1 ppt | Real Estate Solutions Segment Performance (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $97.1 M | $83.0 M | +17% | | Pretax Income | $4.1 M | $6.7 M | -40% | | Pretax Margin | 4.2% | 8.1% | -3.9 ppt | Results of Operations Operating revenues grew due to a 10% increase in direct title revenues, led by a 39% surge in domestic commercial business, and an 11% rise in agency revenues, with real estate solutions revenues increasing 17% driven by credit information services, though overall expenses also rose, with other operating expenses up 18% due to higher service costs, and the title loss ratio improved to 3.5% from 3.9% due to favorable claims experience - The operating environment in Q1 2025 was characterized by high mortgage rates (averaging 6.8%) and rising home prices, which challenged affordability and led to a 2% year-over-year decline in existing home sales[63][64] Direct Title Revenue Breakdown (Q1 2025 vs Q1 2024) | Category | Q1 2025 ($M) | Q1 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | | Domestic Non-commercial | 134.4 | 135.3 | -1% | | Domestic Commercial | 69.3 | 49.7 | +39% | | International | 28.0 | 25.6 | +9% | | Total Direct Title Revenues | 231.7 | 210.6 | +10% | Direct Operations Order Count (Q1 2025 vs Q1 2024) | Order Type | Q1 2025 Closed Orders | Q1 2024 Closed Orders | % Change | | :--- | :--- | :--- | :--- | | Commercial | 4,390 | 3,568 | +23% | | Purchase | 26,780 | 29,744 | -10% | | Refinance | 9,898 | 9,353 | +6% | | Total Closed Orders | 45,673 | 50,459 | -9% | - The title loss ratio improved to 3.5% of title operating revenues in Q1 2025 from 3.9% in Q1 2024, attributed to overall favorable claim experience[80] Liquidity and Capital Resources As of March 31, 2025, the company held $869.1 million in total cash and investments, with a significant portion held by its regulated subsidiary, Guaranty, subject to regulatory restrictions, and statutory reserve funds totaling approximately $549.5 million, while the parent company held $19.2 million in cash, and the debt-to-equity ratio was approximately 32%, with the company believing its liquidity is sufficient for ongoing operations, claims, and strategic goals - As of March 31, 2025, total cash and investments were $869.1 million; of this, $471.9 million was held in the U.S. and the rest internationally, primarily in Canada[88] - The parent holding company's available cash was $19.2 million at quarter-end; a substantial majority of consolidated cash is held by the regulated underwriter, Guaranty, and its use is subject to legal and regulatory restrictions[89][90] Cash Flow Summary (Q1 2025 vs Q1 2024) | Activity | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | Net cash used in operating activities | (29.9) | (29.6) | | Net cash used by investing activities | (20.0) | (47.4) | | Net cash used by financing activities | (18.6) | (16.8) | - The company's debt-to-equity ratio was approximately 32% and its debt-to-capitalization ratio was 24% as of March 31, 2025; the line of credit facility was fully available[99] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes in its investment strategies, types of financial instruments held, or associated market risks during the first quarter of 2025 compared to what was disclosed in its 2024 Form 10-K - No material changes to market risk disclosures occurred in Q1 2025[108] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of March 31, 2025, and concluded they were effective, with no material changes to the company's internal control over financial reporting during the quarter - The principal executive and financial officers concluded that as of March 31, 2025, the company's disclosure controls and procedures were adequate and effective[109] - No changes in internal control over financial reporting occurred during Q1 2025 that materially affected, or are reasonably likely to materially affect, internal controls[110] Part II – Other Information Legal Proceedings The company is subject to claims and lawsuits in the ordinary course of business, and management believes it has adequate reserves and does not expect these proceedings to have a material adverse effect on its financial condition or results of operations - The company does not expect any ordinary course legal proceedings to have a material adverse effect on its financial condition or operations, and believes reserves are adequate[39][113] Risk Factors There have been no material changes to the company's risk factors since the filing of its 2024 Form 10-K - No material changes to the company's risk factors were reported for the period[114] Use of Proceeds and Stock Repurchases During Q1 2025, the company did not make any open market repurchases of its Common Stock, but did repurchase approximately 48,300 shares for about $3.4 million to cover statutory income tax withholding on vested restricted stock units for employees - In Q1 2025, the company repurchased approximately 48,300 shares for $3.4 million, solely related to tax withholding on vested employee restricted stock units[115] Other Information The company's book value per share was $50.16 as of March 31, 2025, a slight decrease from $50.50 at the end of 2024, and no directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading plans during the quarter - Book value per share decreased to $50.16 at March 31, 2025, from $50.50 at December 31, 2024[116] - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025[117]