Stewart(US:STC)2023-05-08 18:49Financial Performance - In Q1 2023, the company reported a net loss of $8.2 million ($0.30 loss per diluted share), a significant decline from a net income of $57.9 million ($2.11 per diluted share) in Q1 2022[50]. - The title segment's pretax loss was $0.7 million in Q1 2023, compared to a pretax income of $82.8 million in Q1 2022, reflecting a 101% decline[51]. - Total closed orders in Q1 2023 were the lowest for the company in over 15 years, with a 37% decrease in total opened orders compared to Q1 2022[67]. - Non-commercial domestic revenues fell by $69.9 million, or 32%, due to a 50% decline in residential purchase and refinancing transactions in Q1 2023[66]. - The company anticipates a 26% decline in total mortgage originations for the year 2023 compared to 2022, reflecting ongoing challenges in the housing market[64]. Revenue and Expenses - Title segment operating revenues decreased by $265.1 million, or 37%, to $456.9 million in Q1 2023, primarily due to volume declines in direct title and agency operations[51]. - Real estate solutions segment revenues decreased by $26.8 million, or 30%, in Q1 2023, primarily due to lower transaction volumes amid the current economic environment[55][68]. - Employee costs in the title segment decreased by $49.6 million, or 18%, in Q1 2023, but represented 50.4% of operating revenues compared to 38.8% in Q1 2022[52]. - Consolidated employee costs decreased by $34.4 million, or 17%, in Q1 2023 compared to Q1 2022, with total employee costs as a percentage of total operating revenues rising to 32.8% from 24.3%[72]. - Other operating expenses decreased by $69.0 million, or 36%, in Q1 2023, with total variable costs down by $64.6 million, or 51%[75]. Investment and Cash Flow - Investment income increased by $3.0 million, or 82%, to $6.6 million in Q1 2023, driven by higher interest income from increased interest rates and higher short-term investments[51][69]. - Net cash used by operating activities was $51.1 million in Q1 2023, compared to net cash provided of $34.9 million in Q1 2022[90]. - Cash and investments totaled $891.0 million as of March 31, 2023, with $505.6 million held in the United States[83]. - The company reported net unrealized investment gains of $6.7 million in Q1 2023, primarily due to increases in the fair values of corporate and foreign bond securities investments[97]. Loss Provisions and Claims - Provisions for title losses decreased by $11.5 million, or 40%, in Q1 2023, with the title loss ratio at 3.9% compared to 4.0% in Q1 2022[76]. - Total estimated title losses as of March 31, 2023, were $533.4 million, down from $549.4 million as of December 31, 2022[80]. - Cash claim payments increased by $13.2 million, or 65%, in Q1 2023, primarily due to payments on existing large claims[78]. Debt and Equity - Total debt and stockholders' equity were $445.1 million and $1.36 billion, respectively, as of March 31, 2023[93]. - As of March 31, 2023, the company's debt-to-equity ratio was approximately 33% and the debt-to-capitalization ratio was about 25%[94]. - Total dividends paid in Q1 2023 amounted to $12.3 million ($0.45 per common share), an increase from $10.1 million ($0.38 per common share) in Q1 2022[94]. Tax and Compliance - The effective tax rate increased to 38% in Q1 2023 from 23% in Q1 2022, with a rate of 25% excluding discrete tax adjustments[82]. - The company has no material contractual commitments other than scheduled maturities of debt and operating lease payments[95]. Liquidity and Strategic Outlook - The company has sufficient liquidity and capital resources to meet ongoing operational cash needs, but may consider additional debt or equity funding for strategic goals or acquisitions[95]. - The company expects cash flows from operations to be sufficient to fund operations, including claims payments, but may need to borrow under less favorable terms if necessary[95]. - There have been no material changes in investment strategies or financial instruments held during the quarter ended March 31, 2023[102]. - The company is subject to various risks including changes in mortgage interest rates and the ability to respond to technology changes[102]. - The company holds funds in segregated escrow accounts pending real estate transactions, which are not included on the balance sheet[99].