<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-12688
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STEWART INFORMATION SERVICES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 74-1677330
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1980 Post Oak Blvd., Houston, TX 77056
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(Address of principal executive offices)
(Zip Code)
(713) 625-8100
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common 5,847,003
Class B Common 525,006
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FORM 10-Q
QUARTERLY REPORT
Quarter Ended September 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item No. Page
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<S> <C>
Part I
1. Financial Statements 1
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II
1. Legal Proceedings 10
6. Exhibits and Reports on Form 8-K 13
Signature 17
</TABLE>
<PAGE> 3
STEWART INFORMATION SERVICES CORPORATION
CONSOLDIATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS AND QUARTER ENDED
September 30, 1995 and 1994
<TABLE>
<CAPTION>
THIRD QUARTER NINE MONTHS
1995 1994 1995 1994
----- ----- ---- ----
($000 Omitted) ($000 Omitted)
<S> <C> <C> <C> <C>
Revenues
Title premiums, fees and related revenues 73,158 68,611 191,201 225,055
Investment income 3,384 3,072 10,011 9,134
Investment gains (losses) 247 (84) 600 293
Other income 376 186 728 1,563
------ ------ ------- -------
77,165 71,785 202,540 236,045
Expenses
Employee costs 36,872 35,470 102,724 115,510
Other operating expenses 22,446 21,826 63,250 68,351
Title losses and related claims 9,201 9,520 22,234 32,730
Depreciation and amortization 2,640 2,088 7,319 5,767
Interest 416 134 831 401
Minority interests 403 184 636 732
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71,978 69,222 196,994 223,491
Income before taxes 5,187 2,563 5,546 12,554
Income taxes 1,686 896 1,797 4,143
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Net income 3,501 1,667 3,749 8,411
====== ====== ======= =======
Average number of shares outstanding (000) 6,344 6,204 6,264 6,194
Earnings per share
Net income 0.55 0.27 0.60 1.36
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</TABLE>
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STEWART INFORMATION SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
SEPT 30 DEC 31
1995 1994
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($000 Omitted)
<S> <C> <C>
Assets
Cash and cash equivalents 19,306 16,214
Investments - statutory reserve fund 119,190 105,642
Investments - other 89,463 90,737
Receivables 30,056 29,440
Property and equipment, net 25,434 24,778
Title plants 19,777 14,369
Deferred taxes 16,864 20,477
Other 28,887 23,519
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348,977 325,176
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Liabilities
Notes payable 15,893 7,865
Accounts payable and accrued liabilities 21,871 21,968
Estimated title losses 137,402 134,316
Minority interest 4,597 4,674
Contingent liabilities and commitments
Stockholders' equity
Common and Class B Common Stock and
additional paid-in capital 51,965 48,962
Net unrealized investment gains/(losses), less
deferred taxes 1,609 (5,363)
Retained earnings 115,640 112,754
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Total stockholders' equity ($26.56 per share at
September 30, 1995) 169,214 156,353
------- ------
348,977 325,176
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</TABLE>
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STEWART INFORMATION SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
($000 Omitted)
<S> <C> <C>
Net cash flow provided by operating activities (Note) 13,052 18,250
Cash flow from investing activities:
Purchases of property and equipment and title plants, less capital
leases - net (5,781) (6,192)
Proceeds of investments matured to sold 52,583 59,649
Purchases of investments, excluding mortgage loans (54,594) (88,081)
Increases in mortgages and other notes (1,014) (1,779)
Collections on mortgages and other notes 923 1,785
Cash paid in the purchase of subsidiaries - net (5,278) (976)
Proceeds from issuance of stock 253 306
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Net cash used by investing activities (12,908) (35,288)
Cash flow from financing activities:
Dividends paid (863) (834)
Proceeds of notes payable 6,488 2,944
Payments on notes payable and capital leases (2,677) (3,180)
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Net cash provided (used) by financing activities 2,948 (1,070)
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Net increase (decrease) in cash equivalents 3,092 (18,108)
======== =======
NOTE: Reconciliation of net income to above amounts:
Net income 3,749 8,411
Add (deduct):
Depreciation and amortization 7,319 5,767
Provision for title losses in excess of payments 3,086 15,574
Provision for uncollectible amounts 0 1,097
Decrease in accounts receivable, net 552 838
Decrease in accounts payable and accrued liabilities - net (1,420) (12,392)
Minority interest expense 635 732
Equity in net earnings of investees (310) (1,213)
Realized investment losses (gains) - net 600 (293)
Other, net (1,159) (271)
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Net cash flow provided by operating activities 13,052 18,250
======== =======
</TABLE>
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STEWART INFORMATION SERVICES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
Note 1: Interim Financial Statements
The financial information contained in this report for the nine month
periods ended September 30, 1995 and 1994, and as at September 30, 1995, is
unaudited. In the opinion of management, all adjustments necessary for a fair
presentation of this information for all unaudited periods, consisting only of
normal recurring accruals, have been made. The results of operations for the
interim periods are not necessarily indicative of results for a full year.
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Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
A comparison of the results of operations of the Company for the first nine
months of 1995 with the first nine months of 1994 follows:
General
The Company's dominant segment of operations is the land title business. In
general, the principal factors which contribute to increases in title revenues
include declining mortgage interest rates (which usually increase home sales),
increases in refinancing ("refis") transactions, rising home prices, higher
premium rates, increased market share, additional revenues from new offices and
increased revenue from non-residential commercial transactions. Although
relatively few in number, large commercial transactions usually yield higher
premiums.
Revenues
The Company's revenues from title premiums and fees fell $33.9 million, or
15.0%, in the first nine months of 1995 as compared to the first nine months of
1994. The Company did not benefit in the first quarter of 1995 from a high
volume of loan refinancings like the first quarter of 1994.
Regular business declined also from the same period a year ago. Volume in the
first quarter of 1994 was driven by low mortgage interest rates, which began a
steady rise in February 1994, and peaked at the 9.7% level in December 1994. A
gradual decline in rates began in the early months of 1995, dropping below and
stabilizing at roughly the 8% level in May.
The number of closings handled by the Company were down 19.7% primarily because
of the reduction in refinancing transactions, as well as regular transactions,
resulting from the rise in mortgage rates noted above. Closings decreased in
California, Texas, Colorado, Florida and most of the company's other major
markets. The average revenue per closing rose 6.8% primarily because regular
transactions generate higher premiums than refi transactions. Premium revenues
from new and existing agents decreased 22.6% in 1995 over 1994.
Investment income was up 9.6% in 1995 due to an increase in the average balance
invested and higher market yields.
Expenses
Employee expenses decreased $12.8 million, or 11.1% in 1995 primarily because
of a decrease in the average number of employees from 4,029 a year ago to 3,559
in 1995. The decrease in staff in 1995 was primarily in Texas, California and
Florida. While the Company has reduced overall employee expenses, employee
expenses of the systems development and programming operations increased. Most
of the increase was attributable to developing new, or significantly improving,
existing operating processes. These expenditures are expected to add customer
revenues and reduce operating expenses and title losses in the future.
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<PAGE> 8
Other operating expenses decreased by $5.1 million, or 7.5%, in 1995
primarily because of the decrease in volume which reduced supplies, premium
taxes, advertising, bad debts and title plant expenses. Other operating
expenses include office rent, telephone, policy forms, delivery expenses and
travel.
Provisions for title losses and related claims were down $10.5 million in
1995. The Company's recent experience in claims has improved significantly
as a result of the Company's programs designed to curtail claims and
improve recoveries on claims. As a percentage of title premiums, fees and
related revenues, provisions decreased to 11.6% in 1995 versus 14.5% in 1994.
The ratio was 13.9% for the full year 1994.
In December 1994 the California Board of Equalization (the CBOE ) ruled
in favor of the Company concerning an assessment previously filed against
the Company for certain additional premium taxes for the year 1987.
However, an assessment of $1.1 million for retaliatory taxes for that same
year was left pending. In August 1995 the staff of the CBOE recommended that
the assessment be increased to $2.5 million. These amounts do not include
interest and penalties, which can add materially to amounts assessed. A
hearing before the CBOE is expected to be scheduled in the near future.
Five other states also have premium tax assessments pending against the
Company for various years ranging from 1984 through 1994. The aggregate
amount of the assessments is $1.8 million, excluding interest and penalties.
The Company cannot predict whether additional premium taxes will be assessed
by California and these states for years other than those assessed to date.
Also the Company cannot predict if other states will make similar
assessments. State taxing authorities may be increasingly inclined to seek
additional revenues by assessing premium taxes against title insurance
companies domiciled outside the assessing state.
There are significant differences between Texas, where the Company's principal
insurer is domiciled, and California and other states as to the regulation
and taxation of the title insurance industry. Numerous complex issues are
involved. The Company intends to oppose vigorously these assessments. There
can be no assurance about whether the Company will prevail in these
controversies or that retaliatory premium tax assessments will not, in the
aggregate, materially adversely affect the Company's earnings in future years.
The provision for income taxes represented a 32.4% effective tax rate in 1995
and 33.0% effective tax rate in 1994.
Liquidity and capital resources
Operating earnings represent the primary source of financing, but this may
be supplemented by bank borrowings. The capital resources of the Company,
and the present debt-to-equity relationship, are considered satisfactory.
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<PAGE> 9
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
A comparison of the results of operations of the Company for the third quarter
of 1995 with the third quarter of 1994 follows:
General
The Company's dominant segment of operations is the land title business. In
general, the principal factors which contribute to increases in title revenues
include declining mortgage interest rates (which usually increase home sales
and refinancing transactions), rising home prices, higher premium rates,
increased market share, additional revenues from new offices and increased
revenue from non-residential commercial transactions. Although relatively few
in number, large commercial transactions usually yield higher premiums.
Revenues
The Company's revenues from title premiums and fees rose $4.5 million, or 6.6%,
in the third quarter of 1995 as compared to the third quarter of 1994.
The number of closings handled by the Company were up 7.7% primarily because of
a gradual decline in mortgage interest rates that began in the early months of
1995, dropping below and stabilizing at roughly the 8% level in May. Closings
increased in Texas, Colorado, Florida and most of the company's other major
markets except California. The average revenue per closing rose 4.3%. Premium
revenues from new and existing agents decreased 6.7% in 1995 as compared to
1994.
Investment income was up 10.2% in 1995, due to an increase in market yields.
Expenses
Employee expenses increased $1.4 million, or 4.0%, in 1995. While the Company
has reduced employee expenses in the title offices, the reduction was more than
offset by the addition of new offices and increases in the systems development
and programming operations. Most of the increase was attributable to
developing new, or significantly improving, existing operating processes.
These expenditures are expected to add customer revenues and reduce operating
expenses and title losses in the future.
Other operating expenses increased by $.6 million, or 2.8%, in 1995 primarily
because of increased volume. Other operating expenses include advertising,
premium taxes, title plant expenses, rent, supplies, telephone, policy forms,
delivery, travel and fees paid to attorneys for examination and closing
services.
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<PAGE> 10
Provisions for title losses and related claims were down $.3 million in 1995.
The Company's recent experience in claims has improved significantly as a
result of the Company's programs designed to curtail claims and improve
recoveries on claims. The first and second quarters of 1995 included larger
than usual recoveries. As a percentage of title premiums, fees and related
revenues, provisions decreased to 12.6% in 1995 versus 13.9% in 1994. The
ratio was 13.9% for the full year 1994.
In December 1994 the California Board of Equalization (the "CBOE") ruled in
favor of the Company concerning an assessment previously filed against the
Company for certain additional premium taxes for the year 1987. However, an
assessment of $1.1 million for retaliatory taxes for that same year was left
pending. In August 1995 the staff of the CBOE recommended that the assessment
be increased to $2.5 million. These amounts do not include interest and
penalties, which can add materially to amounts assessed. A hearing before the
CBOE is expected to be scheduled in the near future.
Five other states also have premium tax assessments pending against the Company
for various years ranging from 1984 through 1994. The aggregate amount of the
assessments is $1.8 million, excluding interest and penalties. The Company
cannot predict whether additional premium taxes will be assessed by California
and these states for years other than those assessed to date. Also the Company
cannot predict if other states will make similar assessments. State taxing
authorities may be increasingly inclined to seek additional revenues by
assessing premium taxes against title insurance companies domiciled outside the
assessing state.
There are significant differences between Texas, where the Company's principal
insurer is domiciled, and California and other states as to the regulation and
taxation of the title insurance industry. Numerous complex issues are
involved. The Company intends to oppose vigorously these assessments. There
can be no assurance about whether the Company will prevail in these
controversies or that retaliatory premium tax assessments will not, in the
aggregate, materially adversely affect the Company's earnings in future years.
The provision for income taxes represented a 32.5% effective tax rate in 1995
and 35.0% effective tax rate in 1994.
Liquidity and capital resources
Operating earnings represent the primary source of financing, but this may be
supplemented by bank borrowings. The capital resources of the Company, and the
present debt-to-equity relationship, are considered satisfactory.
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<PAGE> 11
PART II
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. - Rights of Common and Class B Common
Stockholders
27.0 - Financial data schedule
28.2 - Details of Investments as reported in the
Quarterly Report to Shareholders
(b) There were no reports on Form 8-K filed during the
quarter ended September 30, 1995
</TABLE>
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<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
On August 29, 1989, a purported class action was filed in the Circuit
Court of Milwaukee County, Wisconsin against Guaranty, eleven other title
insurance companies and nine individuals. The plaintiffs purported to represent
a class of all persons and entities in Wisconsin who purchased title insurance
and/or search and examination services from 1971 through at least December 31,
1984. The complaint alleges that the defendants violated Wisconsin antitrust
and insurance laws by participating in a title insurance rating bureau.
Plaintiffs seek declaratory relief, treble damages in an unspecified amount and
costs and attorneys' fees. On February 1, 1990, the defendants filed a motion
to dismiss the complaint in the Circuit Court of Milwaukee County, Wisconsin on
the basis of res judicata, implied repeal of the Wisconsin antitrust laws by the
Wisconsin insurance laws, filed tariff doctrine and statute of limitations. The
Circuit Court granted the defendants' motion on October 17, 1990. On June 19,
1991, the Circuit Court denied the plaintiffs' motion to amend their complaint
to add new plaintiffs. The plaintiffs appealed the Circuit Court's rulings to
the Court of Appeals of Wisconsin, which certified the appeal to the Wisconsin
Supreme Court on April 1, 1992. On June 9, 1993, the Supreme Court affirmed the
Circuit Court's dismissal of the case. The plaintiffs filed a motion for
reconsideration in the Wisconsin Supreme Court on or about June 28, 1993, and
the defendants filed a response on or about July 7, 1993. On or about August 17,
1993, the Wisconsin Supreme Court denied the plaintiffs' motion. The United
States Supreme Court denied the plaintiff's petition for certiorari on February
22, 1994.
On April 13, 1990, Walter Thomas Brown and Jeffrey L. Dziewit sued
Guaranty and five other major title insurers in a purported class action in
United States District Court for the District of Arizona. The complaint
alleges that the defendants' participation in a title insurance rating bureau
constituted a violation of federal antitrust laws. Plaintiffs seek injunctive
relief, treble damages in an unspecified amount, and costs and attorneys' fees.
The plaintiffs purport to represent a class consisting of all persons, except
officers and directors of the defendants and their immediate families, who
purchased title search and examination services from defendants in Arizona and
Wisconsin from January 7, 1981, to the present time. The District Court
granted the defendants' motion for summary judgment on March 1, 1991. On
December 28, 1992, the United States Court of Appeals for the Ninth Circuit
affirmed in part the decision of the district court, holding that the federal
class action settlement bars the plaintiffs' claims for injunctive relief, but
reversed in part the decision of the district court by holding that the federal
class action settlement does not bar the plaintiffs' claims for monetary
damages. In addition, the court held that the defendants are not protected
from the plaintiffs' claims by the state action doctrine or the filed tariff
doctrine. The title insurers filed a petition for rehearing in the Ninth
Circuit on or about January 11, 1993. On or about March 17, 1993, the Ninth
Circuit denied the petition for rehearing. On or about March 24, 1993, the
Ninth Circuit granted the title insurers' motion to stay issuance of the Ninth
Circuit's mandate for a period of ninety days, pending the title insurers'
filing of a petition for certiorari with the United States Supreme Court.
On or about June 15, 1993, the title insurers filed their petition for
a writ of certiorari. On or about October 1, 1993, counsel for the plaintiffs
and counsel for the defendants executed a "memorandum of understanding"
regarding a proposed settlement. Under an Agreement of Settlement subsequently
executed by the parties, the proposed settlement class would include persons
who purchased search and examination services in Wisconsin and Arizona from
January 1, 1981 through June 10, 1986. Members of the settlement class who
purchased from one of the defendants or their agents from 1981 through 1984
with respect to Wisconsin, or from 1981 through 1982 with respect to Arizona,
would be entitled to receive a cash payment equal to 7.7 percent of the amount
that each such class member paid for title search and examination services
(provided that the total liability of the defendants not exceed $1,587,326 in
Wisconsin and that the total liability of the defendants not exceed $1,225,200
in Arizona). Members of the
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<PAGE> 13
settlement class who are eligible but do not elect to receive the cash option
would receive, without additional charge, a policy enhancement designed to
reflect the impact of inflation from January 1, 1981 to the date of any final
settlement order. Such class members and members of the settlement class who
purchased from persons other than the defendants or their agents will receive
the last $5,000 of coverage without charge in connection with any new title
insurance policy purchased from any of the defendants within one year following
any final settlement order with respect to property located either in Arizona
or Wisconsin. Members of this settlement class would have the right to "opt
out" of the proposed settlement, and the defendants would have the right to
reject the settlement if 5,000 or more members elect to opt out. The proposed
settlement, which is subject to notice and court approval pursuant to the
provisions of Federal Rule of Civil Procedure 23 and other authorities, would
result in a judgment dismissing with prejudice all claims of the settlement
class under federal and state antitrust laws as to the defendants and their
agents, officers, and employees.
On October 4, 1993, the Supreme Court granted the title insurers'
petition for a writ of certiorari. On or about April 4, 1994, the Supreme
Court dismissed the writ as improvidently granted. On June 1, 1994, the
parties jointly filed with the district court their Agreement of Settlement and
a proposed order that would preliminarily approve the proposed settlement,
authorize notice to be given to members of the settlement class, and schedule a
hearing on the proposed settlement. On or about July 5, 1994, counsel for the
plaintiffs filed "Plaintiffs" Notice of Withdrawal of Joint Request for Entry
of Preliminary Settlement Order Lodged June 1, 1994." On or about July 14,
1994, the title insurers filed their response, urging the court to enforce the
Agreement of Settlement and to enter the proposed order.
On September 19, 1989, the Federal Trade Commission ("FTC") denied
Guaranty's appeal of the Administrative Law Judge's decision in In the Matter
of Ticor Title Insurance. The FTC ordered Guaranty and the other respondents
to cease and desist from discussing, proposing, settling or filing any rates
for title search and examination services through rating bureaus in New Jersey,
Pennsylvania, Connecticut, Wisconsin, Arizona and Montana, except where such
collective activity is engaged in pursuant to clearly articulated state policy
and is actively supervised by a state regulatory agency. The Court of Appeals
for the Third Circuit reversed the FTC's decision on January 9, 1991 and held
that the collective filing of rates for title search and examination services
is immune from federal antitrust liability under the state-action doctrine.
On June 12, 1992, the Supreme Court determined that state regulators
in Wisconsin and Montana failed to actively supervise rating bureau activity in
those states and that as a result, state action immunity did not apply.
Accordingly, the Court reversed the Court of Appeals' finding with respect to
those states. The Court also remanded to the Court of Appeals with
instructions to reconsider its findings with respect to Arizona and
Connecticut. The Court did not consider defenses raised by the title insurers
other than state action immunity. On July 15, 1993, the Court of Appeals held
that the state action doctrine did not apply to the title insurers' activity in
Arizona and Connecticut. The Court of Appeals also held that the title
insurers' activity was not protected by the McCarren-Ferguson Act's exemption
for the "business of insurance" or by the exemption for petitioning of the
government. On or about August 30, 1993, the Court of Appeals denied the title
insurers' petition for rehearing. The title insurers filed a petition for a
writ of certiorari with the United States Supreme Court, which denied the
petition on March 21, 1994. The FTC's order has been modified to delete
references to New Jersey and Pennsylvania and, as modified, has become final.
On or about April 22, 1994, Harold Segall and three other plaintiffs
sued Guaranty and 10 other title insurance companies in the United States
District Court for the Eastern District of Wisconsin. The plaintiffs purport
to represent a class consisting of persons who purchased title search and
examination services from one or more of the defendants in connection with the
sale or refinancing of residential real
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<PAGE> 14
estate in Wisconsin from January 7, 1981 through at least January 8, 1985.
According to the plaintiffs, the defendants violated federal antitrust law by
participating in a title insurance rating bureau through which they allegedly
agreed upon the process and other terms and conditions of sale for title search
and examination services in Wisconsin. The plaintiffs request treble damages
in an unspecified amount, costs, and attorney's fees. The plaintiffs also seek
an injunction against certain defendants other than Guaranty. On or about June
15, 1994 Guaranty filed its answer to the complaint. On or about July 8, 1994,
the plaintiffs filed a Motion to Transfer with the Judicial Panel on
Multidistrict Litigation, requesting that it transfer the action to the United
State District Court of the District of Arizona for consolidation with the
Arizona Federal proceeding, described above. Guaranty filed its opposition to
the motion on August 1, 1994. On October 11, 1994, the Panel filed an order
granting the Motion to Transfer.
On May 18, 1995, the plaintiffs and defendants in the consolidated
proceeding presented a proposed settlement to the United States District Court
for the District of Arizona. The proposed settlement class would include
persons who purchased search and examination services in Wisconsin and Arizona
from January 1, 1981, through June 10, 1986 from any title insurance
underwriter or agent. Members of the settlement class who purchased from 1981
through 1984 with respect to Wisconsin, or from 1981 through 1982 with respect
to Arizona, would be entitled to receive a cash payment equal to 7.7 percent of
the amount that each such class member paid for title search and examination
services (provided that the total liability of the defendants not exceed
$2,070,326 in Wisconsin and $1,996,613 in Arizona). Members of the settlement
class who purchased search and examination services between January 1, 1981 and
June 10, 1986 but do not receive the cash option would receive, without
additional charge, a policy enhancement designed to reflect the impact of
inflation from January 1, 1981 to the date of any final settlement order. The
same enhancement would be provided to members of the settlement class who did
not purchase search and examination services but became insured during the
applicable period by any defendant. Class members who purchased search and
examination services, and class members who neither purchased search and
examination nor become insured by any defendant, would receive the last $5,000
of coverage without charge in connection with any new title insurance policy
purchased from any of the defendants within one year following any final
settlement order with respect to property located in either Arizona or
Wisconsin. Members of this settlement class would have the right to "opt out"
of the proposed settlement, and the defendants would have the right to reject
the settlement if 5,000 or more members elected to opt out. The proposed
settlement, which is subject to notice and court approval pursuant to the
provisions of Federal Rule of Civil Procedure 23 and other authorities, would
result in a judgment dismissing with prejudice all claims of the settlement
class under federal and state antitrust and other laws as to the defendants and
their affiliates, agents, officers, and employees.
On June 19, 1995, the Court entered an order preliminarily approving
the proposed settlement and authorizing the parties to attempt to negotiate an
amount of plantiffs' attorneys' fees and expenses to be awarded by the Court
and paid by the defendants. The plaintiffs subsequently petitioned the Court
to award approximately $7.8 million in such fees and expenses, and the
defendants have opposed such an award. The Court conducted a final hearing on
the proposed 1995 settlement on October 10, 1995. On October 31, 1995, the
Court filed an order certifying the consolidated proceeding as a class action.
The Court has taken under advisement the other issues in the proceeding.
The Registrant is a party to number routine lawsuits incidental to
its business most of which involve disputed policy claims. In many of these
suits, the plaintiff seeks exemplary or treble damages in excess of policy
limits based on the alleged malfeasance of an issuing agent of the Registrant.
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<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Stewart Information Services Corporation
----------------------------------------
(Registrant)
November 10, 1995
Date
Max Crisp
-----------------------------------------------
Max Crisp
(Vice President - Finance, Secretary-Treasurer,
Director and Principal Financial
and Accounting Officer)
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<PAGE> 16
EXHIBIT INDEX
4. - Rights of Common and Class B Common
Stockholders
27.0 - Financial data schedule
28.2 - Details of Investments as reported in the
Quarterly Report to Shareholders
<PAGE> 1
EXHIBIT 4
STEWART INFORMATION SERVICES CORPORATION
RIGHTS OF COMMON AND CLASS B COMMON STOCKHOLDERS
SEPTEMBER 30, 1995
================================================================================
Common and Class B Common stockholders have the same rights, except (1) no
cash dividends may be paid on Class B Common Stock and (2) the two classes of
stock are voted separately in electing directors. A provision in the by-laws
requires an affirmative vote of at least two-thirds of the directors to approve
any proposal which may come before the directors. This by-law provision cannot
be changed without majority vote of each class of stock.
Common stockholders, with cumulative voting rights, may elect five or more
of the nine directors. Class B Common stockholders may, with no cumulative
voting rights, elect four directors, if 350,000 or more shares of Class B
Common stock are outstanding; three directors, if between 200,000 and 350,000
shares of Class B Common Stock are outstanding; if less than 200,000 shares of
Class B Commons Stock are outstanding, the Common Stock and the Class B Common
Stock shall be voted as a single class upon all matters, with the right to
cumulate votes for the election of directors.
No change in the Certificate of Incorporation which would affect the Common
Stock and the Class B Common Stock unequally shall be made without the
affirmative vote of at least a majority of the outstanding shares of each
class, voting as a class.
Class B Common Stock may, at any time, be converted by its holders into
Common Stock on a share-for-share basis. Such conversion is mandatory on any
transfer to a person not a lineal descendant (or spouse, trustee, etc. of such
descendant) of William H. Stewart.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF SEPTEMBER 30, 1995 AND THE RELATED STATEMENT OF EARNINGS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<DEBT-HELD-FOR-SALE> 174,812
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 3,445
<REAL-ESTATE> 3,059
<TOTAL-INVEST> 208,653<F1>
<CASH> 19,306
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 348,977
<POLICY-LOSSES> 137,402
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 15,893
<COMMON> 6,372
0
0
<OTHER-SE> 162,842
<TOTAL-LIABILITY-AND-EQUITY> 348,977
191,201
<INVESTMENT-INCOME> 10,011
<INVESTMENT-GAINS> 600
<OTHER-INCOME> 728
<BENEFITS> 22,234
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 5,546
<INCOME-TAX> 1,797
<INCOME-CONTINUING> 3,749
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,749
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<RESERVE-OPEN> 134,316
<PROVISION-CURRENT> 21,172
<PROVISION-PRIOR> 1,062
<PAYMENTS-CURRENT> 5,109
<PAYMENTS-PRIOR> 14,039
<RESERVE-CLOSE> 137,402
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes short-term investments.
</FN>
</TABLE>
<PAGE> 1
Exhibit 28.2
STEWART INFORMATION SERVICES CORPORATION
DETAILS OF INVESTMENTS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
SEPT 30 DEC 31
1995 1994
------- ------
($000 Omitted)
<S> <C> <C>
Investments, at market, partially restricted:
Short-term investments $31,672 $56,363
U.S. Treasury and agency obligations 21,384 10,105
Municipal bonds 91,869 85,267
Mortgage-backed securities 28,003 26,872
Corporate bonds 29,195 11,335
Mortgage loans 3,445 3,309
Real estate and other, at lower of cost or market 3,085 3,128
-------- --------
TOTAL INVESTMENTS $208,653 $196,379
======== ========
</TABLE>
NOTE: The total appears as the sum of two amounts under 'investments' -
statutory reserve fund and 'investments' - other in the balance
sheet presented on page 2.
