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Stewart(STC) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements and detailed notes on accounting policies, revenues, investments, and segment performance Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) This statement details the company's revenues, expenses, net income, and comprehensive income for the specified periods Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited) | Metric | Three Months Ended June 30, 2025 ($'000) | Three Months Ended June 30, 2024 ($'000) | Six Months Ended June 30, 2025 ($'000) | Six Months Ended June 30, 2024 ($'000) | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues ($'000) | | | | | | Direct title revenues | 291,262 | 255,480 | 522,942 | 466,068 | | Agency title revenues | 301,285 | 240,760 | 568,803 | 481,532 | | Real estate solutions | 112,650 | 92,198 | 209,727 | 175,214 | | Operating revenues | 705,197 | 588,438 | 1,301,472 | 1,122,814 | | Investment income | 16,257 | 14,306 | 28,913 | 27,207 | | Net realized and unrealized gains (losses) | 727 | (514) | 3,780 | 6,524 | | Total Revenues ($'000) | 722,181 | 602,230 | 1,334,165 | 1,156,545 | | Expenses ($'000) | | | | | | Amounts retained by agencies | 252,112 | 200,126 | 473,489 | 400,102 | | Employee costs | 208,209 | 179,708 | 394,019 | 352,125 | | Other operating expenses | 173,527 | 152,291 | 334,439 | 289,244 | | Title losses and related claims | 21,454 | 21,090 | 39,156 | 38,472 | | Depreciation and amortization | 15,150 | 15,198 | 30,472 | 30,582 | | Interest | 4,953 | 4,812 | 9,914 | 9,869 | | Total Expenses ($'000) | 675,405 | 573,225 | 1,281,489 | 1,120,394 | | Income before taxes and noncontrolling interests ($'000) | 46,776 | 29,005 | 52,676 | 36,151 | | Income tax expense ($'000) | (11,141) | (7,940) | (11,625) | (8,876) | | Net income attributable to Stewart ($'000) | 31,922 | 17,343 | 34,999 | 20,473 | | Basic earnings per share attributable to Stewart ($) | 1.14 | 0.63 | 1.26 | 0.74 | | Diluted earnings per share attributable to Stewart ($) | 1.13 | 0.62 | 1.24 | 0.73 | | Comprehensive income attributable to Stewart ($'000) | 46,376 | 16,591 | 55,824 | 13,125 | - Net income attributable to Stewart increased significantly for both the three months ended June 30, 2025, by 84% to $31.9 million, and for the six months ended June 30, 2025, by 71% to $35.0 million, compared to the respective prior year periods11 - Diluted EPS attributable to Stewart rose to $1.13 for Q2 2025 (from $0.62 in Q2 2024) and to $1.24 for the first six months of 2025 (from $0.73 in the same period of 2024)11 - Total revenues for the three months ended June 30, 2025, increased by 19.9% to $722.2 million, and for the six months ended June 30, 2025, increased by 15.4% to $1,334.2 million, driven by growth across direct title, agency title, and real estate solutions revenues11 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets | Metric | June 30, 2025 ($'000) | December 31, 2024 ($'000) | | :--------------------------------- | :-------------------- | :------------------------ | | Assets | | | | Cash and cash equivalents | 178,101 | 216,298 | | Short-term investments | 45,731 | 41,199 | | Investments, at fair value | 689,743 | 669,099 | | Total Receivables | 166,067 | 140,763 | | Property and equipment, net | 83,167 | 87,613 | | Operating lease assets | 113,615 | 102,210 | | Goodwill | 1,092,747 | 1,084,139 | | Intangible assets, net | 158,348 | 173,075 | | Other assets | 173,888 | 136,060 | | Total Assets | 2,781,157 | 2,730,145 | | Liabilities | | | | Notes payable | 446,000 | 445,841 | | Accounts payable and accrued liabilities | 203,903 | 214,580 | | Operating lease liabilities | 129,787 | 118,835 | | Estimated title losses | 523,085 | 511,534 | | Deferred tax liabilities | 32,100 | 28,266 | | Total Liabilities | 1,334,875 | 1,319,056 | | Stockholders' Equity | | | | Stockholders' equity attributable to Stewart | 1,437,751 | 1,402,142 | | Noncontrolling interests | 8,531 | 8,947 | | Total Stockholders' Equity | 1,446,282 | 1,411,089 | | Total Liabilities and Stockholders' Equity | 2,781,157 | 2,730,145 | - Total assets increased by $51.0 million to $2,781.2 million as of June 30, 2025, from $2,730.1 million at December 31, 2024, primarily driven by increases in investments, receivables, and goodwill13 - Stockholders' equity attributable to Stewart increased by $35.6 million to $1,437.8 million as of June 30, 2025, from $1,402.1 million at December 31, 202413 - Estimated title losses increased to $523.1 million at June 30, 2025, from $511.5 million at December 31, 202413 Condensed Consolidated Statements of Cash Flows (Unaudited) This statement outlines the cash inflows and outflows from operating, investing, and financing activities for the period Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2025 ($'000) | Six Months Ended June 30, 2024 ($'000) | | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | 41,051 | 27,275 | | Cash provided (used) by operating activities | 23,501 | (8,465) | | Cash used by investing activities | (29,496) | (56,271) | | Cash used by financing activities | (35,521) | (33,568) | | Effects of changes in foreign currency exchange rates | 3,319 | (1,656) | | Change in cash and cash equivalents | (38,197) | (99,960) | | Cash and cash equivalents at end of period | 178,101 | 133,405 | - Net cash provided by operating activities significantly improved to $23.5 million for the first six months of 2025, compared to net cash used of $8.5 million in the same period of 2024, primarily due to higher net income and lower claims payments14105 - Cash used by investing activities decreased to $29.5 million for the first six months of 2025, from $56.3 million in the prior year, mainly due to lower purchases of cost-basis and other investments14106 - Cash used by financing activities increased to $35.5 million for the first six months of 2025, from $33.6 million in the prior year, primarily due to higher cash dividends paid14 Condensed Consolidated Statements of Equity (Unaudited) This statement details changes in each component of stockholders' equity, including net income, dividends, and other comprehensive income Condensed Consolidated Statements of Equity (Unaudited) | Equity Component | Balance at Dec 31, 2024 ($'000) | Net Income Attributable to Stewart ($'000) | Dividends on Common Stock ($'000) | Stock-based Compensation ($'000) | Stock Repurchases ($'000) | Other Comprehensive Income (Loss) ($'000) | Balance at Jun 30, 2025 ($'000) | | :--------------------------------- | :------------------------------ | :----------------------------------------- | :-------------------------------- | :------------------------------- | :------------------------ | :---------------------------------------- | :------------------------------ | | Common Stock | 28,117 | — | — | 172 | (50) | — | 28,293 | | Additional paid-in capital | 330,604 | — | — | 8,650 | (3,424) | — | 338,673 | | Retained earnings | 1,089,484 | 34,999 | (28,460) | — | — | — | 1,096,023 | | Accumulated other comprehensive loss | (43,397) | — | — | — | — | 20,825 | (22,572) | | Treasury stock | (2,666) | — | — | — | — | — | (2,666) | | Noncontrolling interests | 8,947 | 6,052 | (6,394) | — | — | — | 8,531 | | Total | 1,411,089 | 41,051 | (34,854) | 8,822 | (3,474) | 20,825 | 1,446,282 | - Total stockholders' equity increased by $35.2 million from December 31, 2024, to June 30, 2025, reaching $1,446.3 million15 - Accumulated other comprehensive loss improved significantly, decreasing from $(43.4) million at December 31, 2024, to $(22.6) million at June 30, 2025, primarily due to positive foreign currency translation adjustments and changes in net unrealized gains on investments15 - Dividends on Common Stock for the six months ended June 30, 2025, totaled $28.46 million ($1.00 per share), an increase from $26.44 million ($0.95 per share) in the same period of 202415 NOTE 1 Interim Financial Statements This note clarifies the unaudited nature of interim financial statements, statutory reserve restrictions, and new legislation - The financial information for the three and six months ended June 30, 2025 and 2024, is unaudited and prepared in conformity with U.S. GAAP, based on management's best judgments and estimates2122 - Statutory reserve funds, totaling approximately $516.3 million in debt/equity securities and $7.4 million in cash at June 30, 2025, are restricted for statutory premium reserves and are not available for current claim payments or other purposes24 - Management's preliminary analysis indicates that the 'One Big Beautiful Bill Act' (OBBBA), signed into law on July 4, 2025, is not expected to have a material impact on the Company's consolidated financial statements25 NOTE 2 Revenues This note provides a detailed breakdown of operating revenues by type, highlighting growth trends across different segments Operating Revenues by Type | Revenue Type | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Direct title insurance premiums | 200,680 | 173,813 | 363,504 | 315,512 | | Agency title insurance premiums | 301,285 | 240,760 | 568,803 | 481,532 | | Escrow fees | 46,698 | 42,195 | 81,176 | 75,738 | | Real estate solutions and abstract fees | 130,790 | 109,473 | 244,256 | 206,847 | | Other revenues | 25,744 | 22,197 | 43,733 | 43,185 | | Total Operating Revenues | 705,197 | 588,438 | 1,301,472 | 1,122,814 | - Total operating revenues increased by 19.8% for the three months ended June 30, 2025, and by 15.9% for the six months ended June 30, 2025, compared to the prior year periods, driven by strong growth in both direct and agency title insurance premiums and real estate solutions27 NOTE 3 Investments in Debt and Equity Securities This note details the company's debt and equity securities portfolio, including costs, fair values, and unrealized gains/losses Investments in Debt and Equity Securities | Investment Type | Amortized Costs (Jun 30, 2025, $'000) | Fair Values (Jun 30, 2025, $'000) | Amortized Costs (Dec 31, 2024, $'000) | Fair Values (Dec 31, 2024, $'000) | | :---------------- | :------------------------------------ | :-------------------------------- | :------------------------------------ | :-------------------------------- | | Municipal | 12,322 | 12,248 | 14,563 | 14,415 | | Corporate | 199,623 | 195,174 | 219,015 | 210,307 | | Foreign | 345,501 | 345,388 | 316,247 | 313,619 | | U.S. Treasury Bonds | 52,151 | 52,238 | 49,462 | 48,274 | | Total Debt Securities | 609,597 | 605,048 | 599,287 | 586,615 | | Equity Securities | N/A | 84,695 | N/A | 82,484 | - Net unrealized investment gains on equity securities held increased to $28.2 million at June 30, 2025, from $23.2 million at December 31, 202428 - Total gross unrealized investment losses on debt securities decreased to $10.1 million at June 30, 2025, from $16.2 million at December 31, 2024, primarily due to lower interest rates in the first six months of 20253031 - As of June 30, 2025, 168 out of 221 debt investment holdings in an unrealized loss position had been in that position for more than 12 months, but these are not considered credit-impaired due to the Company's intent to hold them to maturity and lack of significant credit risk31 NOTE 4 Fair Value Measurements This note describes the fair value hierarchy and valuation methods for financial instruments, categorized into Level 1 and Level 2 Fair Value Measurements of Financial Instruments | Financial Instrument | Level 1 (Jun 30, 2025, $ thousands) | Level 2 (Jun 30, 2025, $ thousands) | Fair Value Measurements (Jun 30, 2025, $ thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :------------------------------------- | | Debt securities: | | | | | Municipal | — | 12,248 | 12,248 | | Corporate | — | 195,174 | 195,174 | | Foreign | — | 345,388 | 345,388 | | U.S. Treasury Bonds | — | 52,238 | 52,238 | | Equity securities | 84,695 | — | 84,695 | | Total Investments in Securities | 84,695 | 605,048 | 689,743 | - Level 1 financial instruments, primarily equity securities, totaled $84.7 million at June 30, 2025, while Level 2 instruments, consisting of various debt securities, amounted to $605.0 million34 - The fair value of investments is determined using a third-party pricing service, which employs market and model valuation methods, and is verified by management against investment manager pricing information34 NOTE 5 Net Realized and Unrealized Gains (Losses) This note details net realized and unrealized gains and losses, highlighting their impact on financial performance Net Realized and Unrealized Gains (Losses) | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Realized gains | 42 | 116 | 598 | 218 | | Realized losses | (1,714) | (89) | (2,392) | (380) | | Net unrealized investment gains (losses) recognized on equity securities still held | 2,399 | (541) | 5,574 | 6,686 | | **Total Net realized and unrealized gains (losses)** | **727** | **(514)** | **3,780** | **6,524** | - The Company reported net realized and unrealized gains of **$0.7 million** for Q2 2025, a significant improvement from net losses of **$0.5 million** in Q2 2024, primarily driven by net unrealized gains on equity securities[36](index=36&type=chunk) - For the first six months of 2025, net realized and unrealized gains were **$3.8 million**, down from **$6.5 million** in the same period of 2024, largely due to higher net unrealized gains on equity securities in the prior year[36](index=36&type=chunk) - Realized losses in Q2 and the first six months of 2025 included a **$1.2 million** loss related to an acquisition contingent liability adjustment[36](index=36&type=chunk) [NOTE 6 Goodwill](index=13&type=section&id=NOTE%206%20Goodwill.) This note outlines changes in consolidated goodwill, primarily due to acquisitions within the title segment Goodwill by Segment | Segment | Balances at December 31, 2024 ($ thousands) | Acquisitions ($ thousands) | Balances at June 30, 2025 ($ thousands) | | :-------------------- | :---------------------------- | :----------- | :------------------------ | | Title | 719,945 | 8,608 | 728,553 | | Real Estate Solutions | 364,194 | — | 364,194 | | **Consolidated Total** | **1,084,139** | **8,608** | **1,092,747** | - Consolidated goodwill increased by **$8.6 million** to **$1,092.7 million** at June 30, 2025, primarily due to acquisitions of title offices within the title segment during the first six months of 2025[38](index=38&type=chunk) [NOTE 7 Estimated Title Losses](index=14&type=section&id=NOTE%207%20Estimated%20title%20losses.) This note details estimated title losses, including provisions, payments, and foreign currency impact Estimated Title Losses Activity | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------- | :----------------------------- | :----------------------------- | | Balances at January 1 | 511,534 | 528,269 | | Total provisions | 39,156 | 38,472 | | Total payments, net of recoveries | (35,523) | (50,022) | | Effects of changes in foreign currency exchange rates | 7,918 | (4,273) | | **Balances at June 30** | **523,085** | **512,446** | | Loss ratios as a percentage of title operating revenues: | | | | Current year provisions | 3.5 % | 4.0 % | | Total provisions | 3.6 % | 4.1 % | - Estimated title losses increased to **$523.1 million** at June 30, 2025, from **$511.5 million** at January 1, 2025[39](index=39&type=chunk) - The total title loss ratio improved to **3.6%** for the first six months of 2025, down from **4.1%** in the same period of 2024, primarily due to favorable claims experience[39](index=39&type=chunk)[59](index=59&type=chunk) - Total payments, net of recoveries, decreased by **29%** to **$35.5 million** for the first six months of 2025, compared to **$50.0 million** in the prior year, driven by large recoveries and lower payments on claims[39](index=39&type=chunk)[91](index=91&type=chunk) [NOTE 8 Share-based Payments](index=14&type=section&id=NOTE%208%20Share-based%20payments.) This note describes share-based compensation activities, including restricted stock unit grants and their fair value - During the first six months of 2025, the Company granted time-based and performance-based restricted stock units with an aggregate grant-date fair value of **$15.3 million** (**215,000 units** at an average price of **$71.36 per unit**)[41](index=41&type=chunk) - This represents an increase in fair value from **$13.8 million** (**225,000 units** at **$61.44 per unit**) granted in the same period of 2024[41](index=41&type=chunk) [NOTE 9 Earnings Per Share](index=15&type=section&id=NOTE%209%20Earnings%20per%20share.) This note presents basic and diluted earnings per share calculations, reflecting net income and average shares Earnings Per Share Calculation | EPS Metric | Three Months Ended June 30, 2025 ($'000) | Three Months Ended June 30, 2024 ($'000) | Six Months Ended June 30, 2025 ($'000) | Six Months Ended June 30, 2024 ($'000) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to Stewart ($'000) | 31,922 | 17,343 | 34,999 | 20,473 | | Basic average shares outstanding ('000) | 27,931 | 27,592 | 27,880 | 27,549 | | Diluted average shares outstanding ('000) | 28,330 | 28,013 | 28,337 | 28,011 | | Basic earnings per share attributable to Stewart ($) | 1.14 | 0.63 | 1.26 | 0.74 | | Diluted earnings per share attributable to Stewart ($) | 1.13 | 0.62 | 1.24 | 0.73 | - Diluted EPS increased by **82%** to **$1.13** for Q2 2025 and by **70%** to **$1.24** for the first six months of 2025, compared to the respective prior year periods, reflecting higher net income attributable to Stewart[44](index=44&type=chunk) [NOTE 10 Contingent Liabilities and Commitments](index=15&type=section&id=NOTE%2010%20Contingent%20liabilities%20and%20commitments.) This note discusses guarantees for third-party indebtedness, lease obligations, and unused letters of credit - The Company guarantees third-party indebtedness and lease obligations of its consolidated subsidiaries, with maximum potential future payments not exceeding recorded notes payable and future lease obligations[45](index=45&type=chunk) - As of June 30, 2025, the Company had unused letters of credit totaling **$4.9 million** related to workers' compensation and other insurance, with no expected payments on these guarantees[45](index=45&type=chunk) [NOTE 11 Regulatory and Legal Developments](index=15&type=section&id=NOTE%2011%20Regulatory%20and%20legal%20developments.) This note addresses ordinary course claims, lawsuits, and governmental inquiries, assessing their potential financial impact - The Company is subject to ordinary course claims and lawsuits, primarily disputed policy claims, and does not expect them to have a material adverse effect on its financial condition or results of operations[46](index=46&type=chunk) - For non-ordinary course lawsuits and governmental inquiries, the Company believes any potential loss is not reasonably possible or will not be material, and has adequately reserved for these matters[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 12 Segment Information](index=16&type=section&id=NOTE%2012%20Segment%20information.) This note provides a detailed breakdown of revenues and pretax income by operating segment and geographic region Segment Revenues and Pretax Income | Segment | Three Months Ended June 30, 2025 Revenues ($ thousands) | Three Months Ended June 30, 2024 Revenues ($ thousands) | Six Months Ended June 30, 2025 Revenues ($ thousands) | Six Months Ended June 30, 2024 Revenues ($ thousands) | | :-------------------- | :---------------------------------------- | :---------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Title | 609,548 | 510,035 | 1,124,423 | 981,387 | | Real estate solutions | 112,674 | 92,222 | 209,785 | 175,263 | | Corporate | (41) | (27) | (43) | (105) | | **Consolidated Stewart** | **722,181** | **602,230** | **1,334,165** | **1,156,545** | | | Three Months Ended June 30, 2025 Pretax Income ($ thousands) | Three Months Ended June 30, 2024 Pretax Income ($ thousands) | Six Months Ended June 30, 2025 Pretax Income ($ thousands) | Six Months Ended June 30, 2024 Pretax Income ($ thousands) | | Title | 49,314 | 33,371 | 61,080 | 43,554 | | Real estate solutions | 6,741 | 5,116 | 10,800 | 11,847 | | Corporate | (9,279) | (9,482) | (19,204) | (19,250) | | **Consolidated Stewart** | **46,776** | **29,005** | **52,676** | **36,151** | - The Title segment's revenues increased by **19.5%** to **$609.5 million** for Q2 2025 and by **14.6%** to **$1,124.4 million** for the first six months of 2025, with pretax income rising by **47.8%** and **40.2%** respectively[51](index=51&type=chunk) - Real Estate Solutions revenues grew by **22.2%** to **$112.7 million** for Q2 2025 and by **19.7%** to **$209.8 million** for the first six months of 2025, while its pretax income increased by **31.8%** in Q2 2025 but decreased by **8.8%** for the first six months of 2025[52](index=52&type=chunk) Revenues by Geographic Region | Geographic Region | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | 682,144 | 563,839 | 1,263,719 | 1,088,861 | | International | 40,037 | 38,391 | 70,446 | 67,684 | | **Total Revenues** | **722,181** | **602,230** | **1,334,165** | **1,156,545** | [NOTE 13 Other Comprehensive Income (Loss)](index=18&type=section&id=NOTE%2013%20Other%20comprehensive%20income%20(loss).) This note explains other comprehensive income components, including unrealized investment gains/losses and foreign currency adjustments Other Comprehensive Income (Loss) Components | Component | Six Months Ended June 30, 2025 Net-of-Tax Amount ($ thousands) | Six Months Ended June 30, 2024 Net-of-Tax Amount ($ thousands) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Change in net unrealized gains and losses on investments | 6,090 | (2,162) | | Reclassification adjustment for realized gains and losses on investments | 327 | 540 | | Foreign currency translation adjustments | 14,408 | (5,726) | | Total Other comprehensive income (loss) | 20,825 | (7,348) | - Other comprehensive income (loss) significantly improved to a gain of $20.8 million for the first six months of 2025, compared to a loss of $7.3 million in the same period of 202454 - This improvement was driven by positive foreign currency translation adjustments ($14.4 million gain vs. $5.7 million loss YoY) and a shift to net unrealized gains on investments ($6.1 million gain vs. $2.2 million loss YoY), primarily due to lower interest rates and appreciation of the Canadian dollar and British pound against the U.S. dollar54112113 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, condition, and operational results, covering key highlights and liquidity Management's Overview This overview highlights key financial results, including net income, pretax income, and segment performance - Net income attributable to Stewart for Q2 2025 was $31.9 million ($1.13 diluted EPS), a significant increase from $17.3 million ($0.62 diluted EPS) in Q2 202456 - Pretax income before noncontrolling interests for Q2 2025 rose to $46.8 million from $29.0 million in the prior year quarter56 Title Segment Performance Highlights | Title Segment Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | % Change | | :------------------- | :------------------- | :------------------- | :------- | | Operating revenues | 592.5 | 496.2 | 19 % | | Investment income | 16.2 | 14.3 | 14 % | | Net realized and unrealized gains (losses) | 0.8 | (0.5) | 258 % | | Pretax income | 49.3 | 33.4 | 48 % | | Pretax margin | 8.1 % | 6.5 % | | - Title segment operating revenues increased by 19% in Q2 2025, driven by improved direct and agency title operations, while pretax income grew by 48% to $49.3 million57 - Real estate solutions segment operating revenues increased by 22% to $112.7 million in Q2 2025, with pretax income growing by 32% to $6.7 million6061 Critical Accounting Estimates This section confirms no material changes to critical accounting estimates during the reporting period - No material changes were made to critical accounting estimates during the six months ended June 30, 2025, as previously disclosed in the 2024 Form 10-K63 Operations This section describes the company's core business activities, including title insurance and real estate solutions - The Company's primary business is title insurance and settlement-related services across all 50 U.S. states and international markets64 - Real estate solutions operations include credit and real estate information, valuation, online notarization, closing, and capital markets search services64 Factors Affecting Revenues This section identifies key external and internal factors influencing operating revenues, such as interest rates and market activity - Key factors influencing operating revenues include interest rates, mortgage loan availability and value, home prices, consumer confidence, premium rates, foreign currency exchange rates, market share, and the volume of commercial transactions65 - Historically, Q1 is the least active for title insurance revenues, while Q2 and Q3 are typically the most active due to the traditional home buying season66 Results of Operations This section analyzes the operating environment, revenues by segment, and various expense categories Operating Environment This section describes broader market conditions, including home sales, median home prices, and mortgage origination trends - Existing home sales in June 2025 were 3.9 million units, similar to a year ago but 3% lower than May 2025, due to elevated mortgage rates and rising home prices69 - The median home price in June 2025 was $435,000, marking the 24th consecutive month of year-over-year increases, up 2% from June 202469 - Total U.S. single-family mortgage originations increased 24% to $532 billion in Q2 2025, primarily driven by higher refinancing activity, with the 30-year fixed mortgage rate averaging 6.8% (down from 7.0% in Q2 2024)70 Title Revenues This section analyzes direct title revenues, including commercial and international segments, and order volumes Direct Title Revenue Breakdown | Direct Title Revenue | Q2 2025 ($ millions) | Q2 2024 ($ millions) | Change ($ millions) | % Chg | YTD 2025 ($ millions) | YTD 2024 ($ millions) | Change ($ millions) | % Chg | | :-------------------------------- | :------ | :------ | :----- | :---- | :------- | :------- | :----- | :---- | | Non-commercial Domestic | 179.6 | 169.4 | 10.2 | 6 % | 314.2 | 304.6 | 9.6 | 3 % | | Commercial Domestic | 74.6 | 51.0 | 23.6 | 46 % | 144.0 | 100.8 | 43.2 | 43 % | | Total International | 7.4 | 7.0 | 0.4 | 6 % | 13.1 | 13.4 | (0.3) | (2)% | | Total Direct Title Revenues | 291.3 | 255.5 | 35.8 | 14 % | 522.9 | 466.1 | 56.8 | 12 % | - Domestic commercial revenues significantly improved by 46% in Q2 2025 and 43% in the first six months of 2025, driven by increased average transaction size and closed transactions in sectors like energy, mixed-use, retail, and data centers73 Title Orders Opened and Closed | Orders | Q2 2025 Opened (Units) | Q2 2024 Opened (Units) | % Chg Opened | Q2 2025 Closed (Units) | Q2 2024 Closed (Units) | % Chg Closed | | :--------------- | :------------- | :------------- | :----------- | :------------- | :------------- | :----------- | | Commercial | 4,526 | 3,526 | 28 % | 4,415 | 3,787 | 17 % | | Purchase | 52,793 | 55,057 | (4)% | 35,886 | 37,832 | (5)% | | Refinance | 19,736 | 16,731 | 18 % | 12,165 | 9,978 | 22 % | | Other | 12,591 | 11,407 | 10 % | 14,128 | 7,902 | 79 % | | Total | 89,646 | 86,721 | 3 % | 66,594 | 59,499 | 12 % | - Gross revenues from independent agency operations increased by 25% in Q2 2025 and 18% in the first six months of 2025, primarily due to improved volumes in key agency states77 Real Estate Solutions Revenues This section examines growth in real estate solutions revenues, driven by credit information and valuation services - Real estate solutions revenues improved by 22% in Q2 2025 and 20% in the first six months of 2025, driven by higher revenues from credit information and valuation services78 Investment Income This section analyzes the increase in investment income, primarily from higher interest and dividend earnings - Investment income increased by 14% in Q2 2025 and 6% in the first six months of 2025, primarily due to higher interest and dividend income from bond and cost-basis investments79 Net Realized and Unrealized Gains (Losses) This section directs to Note 5 for detailed information on net realized and unrealized gains and losses - Refer to Note 5 for detailed information on net realized and unrealized gains and losses[80](index=80&type=chunk) [Expenses](index=23&type=section&id=Expenses.) This section analyzes various expense categories, including agency retention, employee costs, and other operating expenses [Retention by Agencies](index=23&type=section&id=Retention%20by%20agencies.) This section discusses the percentage of revenues retained by independent agencies and influencing factors - Amounts retained by independent agencies, as a percentage of revenues, averaged **83.7%** in Q2 2025 and **83.2%** in the first six months of 2025, slightly up from **83.2%** and **83.1%** in the prior year periods, due to increased revenues from states with higher retention rates[82](index=82&type=chunk) [Employee Costs](index=23&type=section&id=Employee%20costs.) This section analyzes changes in consolidated employee costs, including incentive compensation, salaries, and benefits - Consolidated employee costs increased by **16%** in Q2 2025 and **12%** in the first six months of 2025, primarily due to higher incentive compensation and increased salaries/benefits from higher employee counts[83](index=83&type=chunk) - As a percentage of total operating revenues, employee costs improved to **29.5%** in Q2 2025 and **30.3%** in the first six months of 2025, down from **30.5%** and **31.4%** respectively in the prior year, driven by higher operating revenues[84](index=84&type=chunk) - Average cost per employee increased by **10%** in Q2 2025 and **8%** in the first six months of 2025, mainly due to increased incentive compensation[84](index=84&type=chunk) [Other Operating Expenses](index=23&type=section&id=Other%20operating%20expenses.) This section details the increase in other operating expenses, driven by variable costs and search fees - Consolidated other operating expenses increased by **14%** in Q2 2025 and **16%** in the first six months of 2025, primarily due to a **22%** and **23%** increase in total variable costs, respectively, driven by higher third-party service and appraiser expenses and title outside search fees[86](index=86&type=chunk) - As a percentage of total operating revenues, other operating expenses improved to **24.6%** in Q2 2025 and **25.7%** in the first six months of 2025, compared to **25.9%** and **25.8%** in the prior year periods, due to higher operating revenues[87](index=87&type=chunk) [Title Losses](index=25&type=section&id=Title%20losses.) This section analyzes provisions for title losses, including loss ratio, known claims, and cash claim payments - Provisions for title losses, as a percentage of title operating revenues, improved to **3.6%** for both Q2 and the first six months of 2025, down from **4.2%** and **4.1%** respectively in the prior year periods, reflecting favorable claims experience[88](index=88&type=chunk) - Total known claims provision decreased by **41%** in Q2 2025 and **28%** in the first six months of 2025, primarily due to lower large claims from prior policy years[90](index=90&type=chunk) - Cash claim payments decreased by **39%** in Q2 2025 and **29%** in the first six months of 2025, driven by large recoveries and lower payments on large and non-large claims[91](index=91&type=chunk) Title Policy Loss Reserve | Title Policy Loss Reserve | June 30, 2025 ($ millions) | December 31, 2024 ($ millions) | | :------------------------------------- | :------------ | :---------------- | | Known claims | 65.8 | 66.9 | | IBNR (Incurred But Not Reported) | 457.3 | 444.6 | | **Total Estimated Title Losses** | **523.1** | **511.5** | [Depreciation and Amortization](index=26&type=section&id=Depreciation%20and%20amortization.) This section notes comparable depreciation and amortization expenses, with offsetting changes from amortized assets and new systems - Total depreciation and amortization expenses were comparable in Q2 and the first six months of 2025 compared to the prior year periods[94](index=94&type=chunk) - A decline in acquisition intangible amortization due to fully amortized assets was offset by increased depreciation from new internal systems[94](index=94&type=chunk) [Income Taxes](index=26&type=section&id=Income%20taxes.) This section discusses effective tax rates for the reporting periods, noting a decrease due to higher pretax income - The effective tax rates were **26%** for Q2 2025 and **25%** for the first six months of 2025, lower than **31%** and **30%** respectively in the prior year periods, primarily due to higher pretax income[95](index=95&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section overviews cash, investments, statutory reserves, capital structure, and cash flow analysis [Overview](index=27&type=section&id=Overview.) This overview summarizes total cash and investments, statutory reserve restrictions, and intercompany dividends - As of June 30, 2025, total cash and investments aggregated **$913.6 million**, with **$486.3 million** held in the U.S. and the remainder internationally[97](index=97&type=chunk) - Statutory reserve funds, totaling approximately **$516.3 million** in investments and **$7.4 million** in cash, are restricted and not available for current claim payments[100](index=100&type=chunk) - Stewart Title Guaranty Company (Guaranty) paid dividends of **$50.0 million** to the parent company during the first six months of 2025, compared to **$20.0 million** in the same period of 2024[101](index=101&type=chunk) [Operating Activities](index=28&type=section&id=Operating%20activities.) This section analyzes cash flow from operating activities, highlighting improvements from net income and claims payments - Net cash provided by operations improved to **$23.5 million** during the first six months of 2025, from net cash used of **$8.5 million** in the prior year, driven by higher net income and lower claims payments[105](index=105&type=chunk) - The Company is focused on cost management, automation, system consolidation, and integration of acquisitions to improve operating margins[105](index=105&type=chunk) [Investing Activities](index=28&type=section&id=Investing%20activities.) This section details cash flows from investing activities, including securities, property, and acquisitions - Cash used by investing activities decreased to **$29.5 million** for the first six months of 2025, from **$56.3 million** in the prior year[104](index=104&type=chunk)[106](index=106&type=chunk) - Proceeds from sales and maturities of securities investments totaled **$84.8 million**, while purchases were **$72.2 million** during the first six months of 2025[106](index=106&type=chunk) - Cash used for property and equipment expenditures was **$27.1 million**, and **$8.5 million** was used for acquisitions of title offices and an intangible asset during the first six months of 2025[107](index=107&type=chunk) [Financing Activities and Capital Resources](index=28&type=section&id=Financing%20activities%20and%20capital%20resources.) This section reviews the company's debt, equity, debt-to-equity ratios, and common stock dividends paid - Total debt was **$446.0 million** and stockholders' equity was **$1.45 billion** as of June 30, 2025[108](index=108&type=chunk) - The debt-to-equity ratio was approximately **31%**, and the debt-to-capitalization ratio was approximately **24%** (excluding Section 1031 notes)[108](index=108&type=chunk) - Total dividends paid were **$27.9 million** (**$1.00 per common share**) during the first six months of 2025, an increase from **$26.2 million** (**$0.95 per common share**) in the prior year[109](index=109&type=chunk) [Contingent Liabilities and Commitments](index=29&type=section&id=Contingent%20liabilities%20and%20commitments.) This section refers to Note 10 for detailed information on contingent liabilities and commitments - Refer to Note 10 for details on contingent liabilities and commitments[111](index=111&type=chunk) [Other Comprehensive Income (Loss)](index=29&type=section&id=Other%20comprehensive%20income%20(loss).) This section discusses the impact of unrealized investment gains and foreign currency adjustments on comprehensive income - Net unrealized investment gains of $6.4 million (net of taxes) increased other comprehensive income in the first six months of 2025, primarily due to lower interest rates112 - Foreign currency translation adjustments resulted in $14.4 million of other comprehensive income (net of taxes) in the first six months of 2025, as the Canadian dollar and British pound appreciated against the U.S. dollar113 Off-Balance Sheet Arrangements This section confirms no material off-balance sheet arrangements and clarifies segregated fund treatment - The Company does not have any material off-balance sheet arrangements for liquidity or financing114 - Funds held in segregated escrow accounts and by qualified intermediaries for tax-deferred property exchanges are not included on the balance sheet, in accordance with industry practice114 Forward-Looking Statements This section cautions that forward-looking statements are subject to risks and uncertainties, with no obligation to update - Forward-looking statements in the report are subject to various risks and uncertainties, including economic conditions, real estate activity, mortgage interest rates, technology changes, title losses, and regulatory changes115120 - The Company disclaims any obligation to update forward-looking statements unless required by applicable law116 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no material changes to investment strategies, financial instruments, or market risks during the quarter - No material changes occurred in investment strategies, types of financial instruments held, or associated market risks during Q2 2025117 Item 4. Controls and Procedures This section details the evaluation of disclosure controls and reports on changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the adequacy and effectiveness of disclosure controls and procedures as of June 30, 2025 - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were adequate and effective as of June 30, 2025118 Changes in Internal Control Over Financial Reporting This section reports no material changes in internal control over financial reporting during the quarter - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025119 PART II – OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 11 for legal proceedings information, indicating no new material updates - Legal proceedings information is incorporated by reference from Note 11 to the condensed consolidated financial statements122 Item 1A. Risk Factors This section states no material changes to risk factors have occurred since the 2024 Form 10-K filing - No material changes to risk factors have occurred since the 2024 Form 10-K123 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports common stock repurchases for statutory income tax withholding on restricted unit grants - Approximately 49,900 shares of Common Stock were repurchased for $3.5 million during the first six months of 2025, solely for statutory income tax withholding on restricted unit grants124 Item 5. Other Information This section provides book value per share details and confirms no new trading plans by directors or Section 16 officers Book Value Per Share This section presents the company's book value per share and related equity figures Book Value Per Share Details | Metric | June 30, 2025 ($) | December 31, 2024 ($) | | :--------------------------------- | :------------ | :---------------- | | Book value per share | $51.46 | $50.50 | | Stockholders' equity attributable to Stewart | $1.44 billion | $1.40 billion | | Common Stock outstanding (count) | 27,939,997 | 27,763,691 | - Book value per share increased to $51.46 as of June 30, 2025, from $50.50 at December 31, 2024125 Trading Plans This section confirms no new Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated - No director or Section 16 officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025126 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated By-Laws, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and various XBRL taxonomy documents127 Signature This section contains the official signature of Stewart Information Services Corporation by its Chief Financial Officer and Treasurer - The report was signed on August 5, 2025, by David C. Hisey, Chief Financial Officer and Treasurer of Stewart Information Services Corporation129