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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-12688
STEWART INFORMATION SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-1677330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1980 POST OAK BLVD., HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 625-8100
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1 PAR VALUE
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of March 1, 1997, 6,256,801 shares of Common Stock, $1 par value, and
525,006 shares of Class B Common Stock, $1 par value, were outstanding. The
aggregate market value as of such date of the Common Stock (based upon the
closing sales price of the Common Stock as reported by the NYSE on February 28,
1997) of Stewart Information Services Corporation held by non-affiliates of the
Registrant was approximately $125,918,120.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Stewart Information Services Corporation Annual Report to
Stockholders for the year ended December 31, 1996 are incorporated by reference
in Parts I and II of this document.
Portions of the definitive proxy statement (the "Proxy Statement"),
relating to the annual meeting of the Registrant's stockholders to be held
April 25, 1997, are incorporated by reference in Parts III and IV of this
document.
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<PAGE> 2
FORM 10-K
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
ITEM
NO. PAGE
--- ----
<S> <C> <C>
1. Business . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . 3
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 4
4. Submission of Matters to a Vote of Security Holders . 4
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . 5
6. Selected Financial Data . . . . . . . . . . . . . . . . 6
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 6
8. Financial Statements and Supplementary Data . . . . . 6
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . 6
PART III
10. Directors and Executive Officers of the Registrant . . 7
11. Executive Compensation . . . . . . . . . . . . . . . . . 7
12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . 7
13. Certain Relationships and Related Transactions . . . . . 7
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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P A R T I
ITEM 1. BUSINESS
Stewart's primary business is title insurance. Stewart issues policies through
more than 3,700 issuing locations on homes and other real property located in
all 50 states, the District of Columbia, Canada, Mexico, Belize (reinsurance),
the Bahamas, Guam, England and the Commonwealth of the Northern Marianas.
Stewart sells computer-related services and information, as well as mapping
products and geographic information systems to government and private entities,
both domestic and foreign.
Examination and closing. The purpose of a title examination is to ascertain the
ownership of the property being transferred, what debts are owed on it and what
the title policy coverage will be. This involves searching for and examining
documents such as deeds, mortgages, wills, divorce decrees, court judgments,
liens, paving assessments and tax records.
At the closing or "settlement", the seller executes a deed to the new owner.
The buyer signs new mortgage documents. Closing funds are then disbursed to the
seller, the prior mortgage company, real estate brokers, the title company and
others. The documents are then recorded in the public records. A title policy
is generally issued to both the lender and new owner.
Title policies. Lenders in the USA generally require title insurance as a
condition to making a loan on real estate, including securitized lending. This
is to assure lenders of the priority of their lien position. The purchasers of
the property want the assurance given in their policy against claims that may
arise against their ownership. The face amount of the policy is normally the
purchase price or the amount of the related loan.
Title insurance is substantially different from other types of insurance. Fire,
auto, health and life insurance protect against losses and events in the
future. In contrast, title insurance seeks to eliminate most risks through the
examination and settlement process.
Losses. Losses on policies occur because of a title defect not discovered
during the examination and settlement process. Other reasons for losses include
forgeries, misrepresentations, unrecorded construction liens, the failure to
pay off existing liens, mishandling of settlement funds, issuance by agents of
unauthorized coverages and other legal issues.
Some claimants seek damages in excess of policy limits. Such claims are based
on various legal theories usually alleging misrepresentation by an issuing
office. Although the Company vigorously defends against spurious claims, it has
from time to time incurred a loss in excess of policy limits.
Experience shows that most claims against policies and claim payments are made
in the first six years after the policy has been issued, although claims may be
made many years later. By their nature, claims are often complex, vary greatly
in dollar amounts and are affected by economic and market conditions and the
legal environment existing at the time of settlement of the claims.
Factors affecting revenues. Title revenues are closely related to the level of
activity in the real estate market and the prices at which real estate sales
are made. Real estate sales are directly affected by the availability and cost
of money to finance purchases. Other factors include demand by buyers, consumer
confidence and family incomes. These factors may override the seasonal nature
of the title business. Generally, the third quarter is the most active in terms
of real estate sales and the first quarter is the least active.
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Selected information for the national real estate industry follows (1996
amounts are preliminary):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Housing starts - millions........................... 1.47 1.35 1.46
Housing resales - millions.......................... 4.09 3.80 3.95
Housing resales - median sales price in $
thousands......................................... 118.1 112.9 109.8
</TABLE>
Customers. The primary sources of title business are attorneys, builders,
developers, lenders and real estate brokers. No one customer was responsible
for as much as five percent of Stewart's title revenues in any of the last
three years. Titles insured included residential and commercial properties,
undeveloped acreage, farms and ranches.
Service, location, financial strength, size and related factors affect customer
acceptance. Increasing market share is accomplished primarily by providing
superior service. The parties to a closing are concerned with personal
schedules and the interest and other costs associated with the delays in the
settlement. The rates charged to customers are regulated to varying degrees by
different states.
Market share. Estimating a title insurer's market share is difficult. Stewart
believes it is the leading title insurer in Texas and in a number of cities
across the USA. Based on unconsolidated statutory revenues for 1995 (1996
amounts are not available), Stewart Title Guaranty Company ("Guaranty") is the
fourth largest title insurer in America.
Competitors include (names are abbreviated) Chicago Title, Commonwealth,
Fidelity, First American, Lawyers Title and Old Republic. As do most title
insurers, Stewart also competes with abstractors, attorneys who issue title
opinions and attorney-owned title insurance bar funds. A number of home
builders, financial institutions, real estate brokers and others own or control
title insurance agents, some of which issue policies underwritten by Guaranty.
This "controlled" business also provides competition for Stewart's agents.
Offices. The number of locations issuing Stewart policies was 3,763 at December
31, 1996, compared to 3,549 a year earlier and 3,312 two years earlier. Of
these totals, 3,488, 3,302 and 3,018 were independent agents at December 31,
1996, 1995 and 1994, respectively. Affiliated offices produced 77% to 80% of
consolidated revenues from title premiums and fees during each of the three
years ended December 31, 1996.
Title revenues by state. The approximate amounts and percentages of Stewart's
consolidated title revenues (excluding other revenues) by state for the last
three years were:
AMOUNTS
($MILLIONS) PERCENTAGES
======== ======= ======= ======= ======== ========
1996 1995 1994 1996 1995 1994
======== ======= ======= ======= ======== ========
Texas................. 73 61 73 24 25 27
California............ 65 59 68 22 24 25
Florida............... 26 21 22 9 9 8
Nevada................ 15 13 14 5 5 5
Colorado.............. 15 12 12 5 5 4
Arizona............... 14 12 14 5 5 5
New York ............. 13 9 7 4 4 3
All others............ 77 56 62 26 23 23
--- --- --- --- --- ---
298 243 272 100 100 100
=== === === === === ===
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Regulations. Title insurance companies are subject to extensive state
regulations covering rates, agent licensing, policy forms, trade practices,
reserve requirements, investments and the flow of funds between an insurer and
its parent or its subsidiaries and any similar related party transaction.
Kickbacks and similar practices are prohibited by certain state and federal
laws.
Employees. Stewart and its subsidiaries employed approximately 4,111 persons at
December 31, 1996.
ITEM 2. PROPERTIES
The Registrant and its wholly-owned subsidiary, Stewart Title
Guaranty Company and its subsidiaries ("Guaranty"), own or lease the following
properties:
The following table sets forth information about the Registrant's
other principal properties:
<TABLE>
<CAPTION>
Location Type Use Size Acquired In
- ----------------------- ---------------------- ------------------- --------------- -----------
<S> <C> <C> <C> <C>
Houston, Texas Leased office building Executive office of 206,796 sq. ft. (1)
the Registrant and
Guaranty
Dallas, Texas Leased office building Office of Guaranty 25,117 sq. ft (2)
Austin, Texas Leased office building Office of Guaranty 14,278 sq. ft. (3)
Los Angeles, California Leased office building Office of Guaranty 22,466 sq. ft. (4)
San Diego, California Leased office building Office of Guaranty 20,020 sq. ft. (5)
Riverside, California Leased office building Office of Guaranty 20,968 sq. ft. (4)
San Antonio, Texas Owned office building Office of Guaranty 26,769 sq. ft. 1980 & 1982
Galveston, Texas Owned office building Office of Guaranty 50,000 sq. ft. 1905
Phoenix, Arizona Owned office building Office of Guaranty 24,459 sq. ft. 1981
Phoenix, Arizona Owned office building Office of Guaranty 17,500 sq. ft. 1985
Tucson, Arizona Owned office building Office of Guaranty 24,000 sq. ft. 1974
</TABLE>
(1) The lease terminates in 2004.
(2) This lease terminates in 1999.
(3) This lease terminates in 2001.
(4) These leases terminate in 1998.
(5) This lease terminates in 2000.
The Registrant leases offices at approximately 304 locations. The
average term for all such leases is approximately six years. The leases expire
from 1997 to 2006. The Registrant believes it will not have any difficulty
obtaining renewals of leases as they expire or, alternatively, leasing
comparable property. The aggregate annual rental expense under all leases was
approximately $18,586,000.
All buildings and equipment owned or leased by the Registrant are
considered by the Registrant to be well maintained, adequately insured and
generally sufficient for the Registrant's purposes. Substantially all of the
Registrant's owned real property above is subject to mortgages.
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<PAGE> 6
ITEM 3. LEGAL PROCEEDINGS
Guaranty and 18 other title insurers are defendants in a consolidated
class action proceeding originating from complaints first filed in April 1990.
The suit is currently pending in the United States District Court for the
District of Arizona. The plaintiffs allege that the defendants violated federal
antitrust law by participating in title insurance rating bureaus in Arizona and
Wisconsin in the early 1980s through which they allegedly agreed upon the
prices and other terms and conditions of sale for title search and examination
services. The plaintiffs request treble damages in an unspecified amount, costs
and attorneys' fees.
The Court has certified the proceeding as a class action and approved
a settlement pursuant to which members of the class would receive cash (not to
exceed approximately $4.1 million from all defendants) and additional coverage
under, and discounts on, title insurance policies. In addition, the Court has
awarded counsel for certain plaintiffs the negotiated sum of $1.3 million in
fees and expenses. The Court has awarded counsel for the remaining plaintiffs
fees and expenses totaling $0.5 million. The Court has under advisement the
motions of such plaintiff's counsel to amend and to reconsider that award.
James C. O'Brien and Ingrid K. O'Brien vs. Stewart Title Guaranty
Company, filed September 25, 1996, in the United States District Court,
Southern District of Florida. This purported class action is one of eight
similar suits filed against various underwriters in Florida, including
Guaranty. The alleged class would include all purchasers of title insurance or
evidence of title in Florida since 1990. Plaintiffs allege that Guaranty's
premium and cost sharing agreements with its Florida agents, which are governed
by and set in accordance with rates promulgated by the Florida Department of
Insurance, constitute violations of the Real Estate Settlement Procedures Act
and Florida law, including fraudulent and negligent misrepresentation.
Plaintiffs seek injunctive relief and treble damages of at least $60 million
based upon the title insurance premiums paid by the purported class. Guaranty
has filed a motion to dismiss the complaint on various grounds, including the
filed rate doctrine. The Court has deferred any action on the plaintiff's
motion to certify the proceedings as a class action pending disposition of
Guaranty's motion to dismiss. Guaranty believes that the plaintiff's
allegations are without merit and intends to vigorously defend this suit.
The Registrant is a party to 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low sales prices of the Common
Stock for each fiscal period indicated, as reported by NYSE, and the amount of
cash dividends paid per share.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
----- ----- ---------
<S> <C> <C> <C>
1996:
First quarter . . . . . . . . . 21.38 19.63 .06
Second quarter. . . . . . . . . 21.25 19.63 .06
Third quarter . . . . . . . . . 21.00 20.00 .06
Fourth quarter. . . . . . . . . 22.63 20.25 .06
1995:
First quarter . . . . . . . . . 17.63 15.13 .05
Second quarter. . . . . . . . . 20.00 17.13 .05
Third quarter . . . . . . . . . 20.25 18.63 .05
Fourth quarter . . . . . . . . 22.50 18.63 .06
</TABLE>
The Company has paid regular quarterly cash dividends on its Common Stock
since 1972. The Company's Certificate of Incorporation provides that no cash
dividends may be paid on the Class B Common Stock.
While it is the current intention of the Board of Directors to continue to
pay quarterly cash dividends on its Common Stock, the payment of future
dividends necessarily will depend on the earnings and financial needs of the
Company, as well as applicable legal restrictions.
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ITEM 6. SELECTED FINANCIAL DATA
Selected financial data have been included on Page 18 of the Registrant's
Annual Report to Stockholders for the year ended December 31, 1996, and such
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is set forth on Pages 18 through 21
of the Registrant's Annual Report to Stockholders for the year ended December
31, 1996, and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
1996 Annual Report
to Stockholders
Page No.
<S> <C>
Independent Auditors' Report ....................................... 21
Consolidated Statements of Earnings and Retained Earnings for the
Years Ended December 31, 1996, 1995 and 1994 ....................... 22
Consolidated Balance Sheets as of December 31, 1996 and 1995 ....... 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ................................... 24
Notes to Consolidated Financial Statements ......................... 25
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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<PAGE> 9
P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the captions "Election of Directors" and
"Executive Compensation", and such information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Executive Compensation", and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Security Ownership of Certain
Beneficial Owners and Management", and such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Executive Compensation", and such
information is incorporated herein by reference.
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P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement Schedules
Item 8 of this Report on Form 10-K lists certain consolidated financial
statements of the Registrant and its subsidiaries incorporated by reference to
the Annual Report to Stockholders for the year ended December 31, 1996, which
includes a reference to appropriate page numbers in such Annual Report.
<TABLE>
<CAPTION>
Form 10-K
Page No.
---------
<S> <C>
Independent Auditors' Report ................................................ 11
Reports of Independent Auditors ............................................. 12
Schedule II - Financial information of the Registrant (Parent Company) ..... 36
- Short-term borrowings ........................................ 40
Schedule V - Valuation and qualifying accounts ............................ 41
</TABLE>
All other schedules are omitted, as the required information is inapplicable or
the information is presented in the consolidated financial statements or
related notes.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1996.
(c) Exhibits
3.1 - Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1987)
3.2 - By-Laws of the Registrant
4 - Rights of Common and Class B Common Stockholders (incorporated by
reference to Exhibits 3.1 and 3.2 hereto)
10.1 - Summary of agreements as to payment of bonuses to certain executive
officers
10.2 - Deferred Compensation Agreements dated March 10, 1986 between the
Registrant and certain executive officers (incorporated by reference
to Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987)
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<PAGE> 11
13. - Annual Report to Stockholders for 1996 (the financial text of the
annual report incorporated herein by reference in Item 6 of Part II
of this report)
21. - Subsidiaries of the Registrant
23. - Consents of Independent Certified Public Accountants, including
consents to incorporation by reference of their reports into
previously filed Securities Act registration statements
27. - Financial Data Schedule
-9-
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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)
By: Carloss Morris
---------------------------------------------
Carloss Morris, Co-Chief Executive Officer and
Chairman of the Board of Directors
By: Stewart Morris
---------------------------------------------
Stewart Morris, Co-Chief Executive Officer,
President and Director
By: Max Crisp
---------------------------------------------
Max Crisp, Vice President-Finance, Secretary,
Treasurer, Director and Principal Financial
and Accounting Officer
Dated: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Max Crisp Director March 25, 1997
------------------------
(Max Crisp)
E. Douglas Hodo Director March 25, 1997
- -------------------------
(E. Douglas Hodo)
C. M. Hudspeth Director March 25, 1997
- -------------------------
(C. M. Hudspeth)
Carloss Morris Director March 25, 1997
- -------------------------
(Carloss Morris)
Stewart Morris Director March 25, 1997
- -------------------------
(Stewart Morris)
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<PAGE> 13
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Stewart Information Services Corporation:
Under date of February 7, 1997, we reported on the consolidated balance sheets
of Stewart Information Services Corporation and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of earnings and retained
earnings and cash flows for each of the years in the three-year period ended
December 31, 1996, as contained in the 1996 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related financial statement schedules as listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK L.L.P.
- ---------------------------------------
Houston. Texas
February 7, 1997
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<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANT
Stewart Title Company
El Paso, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 500 N. Mesa, Suite 300, El Paso, Texas.
This financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company, El
Paso, Texas, as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ M. TIMOTHY O'ROARK
--------------------------
M. TIMOTHY O'ROARK, C.P.A.
El Paso, Texas
February 18, 1997
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<PAGE> 15
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Stewart Title
We have audited the statements of operations, retained earnings, and cash flows
for the year ended December 31, 1994 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and its cash flows for the
year ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG L.L.P.
-------------------------------
ERNST & YOUNG LLP
Century City
Los Angeles, California
January 20, 1995
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<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Stewart Title & Trust of Phoenix, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows as of
and for each of the two years in the period ended December 31, 1994 present
fairly, in all material respects, the financial position, results of operations
and cash flows of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and
affiliate as of and for each of the two years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and
affiliate for any period subsequent to December 31, 1994.
/s/ PRICE WATERHOUSE LLP
- ----------------------------------------
PRICE WATERHOUSE LLP
Phoenix, Arizona
January 20, 1995
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<PAGE> 17
To the Board of Directors
Stewart Title of California
San Jose, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Stewart Title of California
at December 31, 1996 and 1995 and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of California as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
------------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 16, 1997
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<PAGE> 18
To the Board of Directors
Stewart Title of Monterey County
Monterey, California
INDEPENDENT AUDITORS REPORT
We have audited the accompanying balance sheet of Stewart Title of Monterey
County at December 31, 1996 and 1995 and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of Monterey
County as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
------------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 7, 1997
-16-
<PAGE> 19
To the Board of Directors
Stewart Title of Modesto
Modesto, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Stewart Title of
Modesto at December 31, 1996 and 1995, and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stewart Title of
Modesto as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
-----------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 7, 1997
-17-
<PAGE> 20
To the Board of Directors
Stewart Title of Fresno County
Fresno, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Stewart Title of Fresno
County at December 31, 1996 and 1995 and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of Fresno County
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
-----------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 9, 1997
-18-
<PAGE> 21
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title Dallas, Inc.
dba: Stewart Title North Texas, Inc.
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 5728 LBJ Freeway, Dallas, Texas.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Dallas, Inc.
dba: Stewart Title North Texas, Inc. as of December 31, 1996 in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and are not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ WILKERSON & ARTHUR
- ----------------------
Wilkerson & Arthur, P.C.
January 16, 1997
-19-
<PAGE> 22
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Priority Title Company of Dallas, L.L.C.
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 5728 LBJ Freeway, Dallas, Texas.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Priority Title Company of
Dallas, L.L.C. as of December 31, 1996 in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and are not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ WILKERSON & ARTHUR, P.C.
- ---------------------------------------
Wilkerson & Arthur, P.C.
January 16, 1997
-20-
<PAGE> 23
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Austin, Inc.
Austin, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Austin, Inc. as of December 31, 1996
and 1995, prepared from the accounts maintained at your office at Austin,
Texas.
This financial statement is the responsibility Of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Austin, Inc., as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 16, 1997
/s/ AARONSON, WHITE & COMPANY
- ------------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-21-
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Company - Galveston
Galveston, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Company - Galveston as of December 31,
1996 and 1995, prepared from the accounts maintained at your office at
Galveston, Texas.
This financial statement is the responsibility Of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Company - Galveston, as of December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 10, 1997
/s/ AARONSON, WHITE & COMPANY
- ------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-22-
<PAGE> 25
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title of Montgomery County, Inc.
The Woodlands, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title of Montgomery County, Inc. as of
December 31, 1996 and 1995, prepared from the accounts maintained at your
office at The Woodlands, Texas.
This financial statement is the responsibility of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
of Montgomery County, Inc., as of December 31, 1996 and 1995, in conformity
with generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 23, 1997
/s/ AARONSON, WHITE & COMPANY
- -------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-23-
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Company - Fort Bend
Sugarland, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Company - Fort Bend as of December 31,
1996 and 1995, prepared from the accounts maintained at your office at
Sugarland, Texas.
This financial statement is the responsibility of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Company - Fort Bend, as of December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 14, 1997
/s/ AARONSON, WHITE & COMPANY
- --------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
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<PAGE> 27
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title - Houston Division
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of the National Title Services Division of Stewart Title Guaranty
Company as of December 31, 1996 and 1995, prepared from the accounts maintained
in your office at 1980 Post Oak Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by the National Title Services
Division of Stewart Title Guaranty Company as of December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
My audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- ------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-25-
<PAGE> 28
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title - Houston Division
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of the Houston Division of Stewart Title as of December 31, 1996 and
1995, prepared from the accounts maintained in your office at 1980 Post Oak
Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by the Houston Division of
Stewart Title as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
My audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- -------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-26-
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Priority Title Company of Houston, L.L.C.
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of Priority Title Company of Houston, L. L. C. as of December 31, 1996
and 1995, prepared from the accounts maintained in your office at 1980 Post Oak
Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Priority Title Company of
Houston, L.L.C. as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
My audit has been made of or the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- -----------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-27-
<PAGE> 30
EXHIBIT A
Independent Auditors' Report
Board of Directors
Stewart Title Company--Beaumont Division
Beaumont, Texas 77706
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 2390 N. Dowlen Road, Beaumont, Texas.
This financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company -
Beaumont Division. as of December 31, 1996, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities. taken as a whole.
Very truly yours,
/s/ EDGAR, KIKER, & CROSS
----------------------------
EDGAR, KIKER & CROSS, L.L.P.
Certified Public Accountants
-28-
<PAGE> 31
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Stewart Title Company
Houston, Texas
I have examined the statements of assets and liabilities of trust (escrow) fund
accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office in San Antonio, Texas.
My examination, which was limited to such accounts, was made in accordance with
generally accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as I considered
necessary in the circumstances.
In my opinion, the aforementioned statements of assets and liabilities of trust
(escrow) fund accounts (not separately presented herein) present fairly the
assets and liabilities of such accounts handled by the San Antonio Division of
Stewart Title Company, as of December 31, 1996 and 1995, in accordance with
generally accepted accounting principles, applied on a consistent basis.
/s/ JIM S. WALKER
-----------------------------
Jim S. Walker
Certified Public Accountant
Beaumont, Texas
January 15, 1997
-29-
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stewart Title Company
Amarillo, Texas District Office
We have audited the accompanying Statement of Assets and Liabilities of Trust
Fund Accounts as of December 31, 1996, prepared from the accounts maintained at
your office at Amarillo, Texas. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. we believe that our audits of the Statements of Assets and
Liabilities of Trust (Escrow) Fund Accounts provide a reasonable basis for our
opinion.
In our opinion, Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company, for
the years then ended in conformity with generally accepted accounting
principles.
Our audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examinations of the basic Statements of Assets and Liabilities, and is
fairly stated in all material respects in relation to the basic Statements of
Assets and Liabilities, taken as a whole.
/s/ DOSHIER, PICKENS & FRANCIS, P.C.
- ----------------------------------------
DOSHIER, PICKENS & FRANCIS, P.C.
January 14, 1997
-30-
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Stewart Title of Corpus Christi, Inc.
Corpus Christi, Texas
We have audited the Statements of Assets and Liabilities of Trust [Escrow] Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at Corpus Christi, Texas. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits of the financial statements
provide a reasonable basis for our opinion.
In our opinion, the Statements of Assets and Liabilities of Trust [Escrow] Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such accounts managed by Stewart Title Company, Corpus
Christi Branch, as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audits have been made for the purpose of forming an opinion of the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examinations of the basic statements of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statements of
assets and liabilities, taken as a whole.
/s/ FANCHER & COMPANY
- --------------------------------------
FANCHER AND COMPANY
January 27, 1997
-31-
<PAGE> 34
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Stewart Title of Lubbock, Inc.
7802 Indiana Avenue
Lubbock, Texas 79423
I have audited the accompanying Statement of Assets and Liabilities of Trust
(Escrow) Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 7802 Indiana Avenue, Lubbock, TX 79423.
These financial statements are the responsibility of the company's
management. My responsibility is to express an opinion of these financial
statements based on my audits. I conducted my audit in accordance with
generally accepted auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on
a test basis evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provides a
reasonable basis for my opinions.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such escrow accounts handled by Stewart Title of Lubbock,
Inc., as of December 31, 1996, and 1995 in conformity with generally accepted
accounting principles.
My audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information contained
in Exhibit C through F, inclusive, and Exhibit H of these reports, is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examination of the basic Statement of Assets and Liabilities, and is
fairly stated in all material respects in relation to the basic statements of
assets and liabilities taken as a whole.
/s/ JESUS YEPEZ
Jesus Yepez
Certified Public Accountant
Lubbock, Texas
-32-
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANT
Board of Directors
Stewart Title Guaranty Company
Houston, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 2401 Moores Lane, Texarkana, Texas.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such accounts handled by Stewart Title of Texarkana as of
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
Our audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports are
presented as additional information and are not a required part of the basic
financial statements. Such information has been subjected to the audit
procedures applied in the examinations of the basic statements of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statements of assets and liabilities, taken as a whole.
/s/ WILLIAMS & PEARCY
Williams & Pearcy, P.C.
January 25, 1996
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<PAGE> 36
Independent Auditor's Report
Stewart Title Company of Rockport, Inc.
Rockport, Texas 78382
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 prepared from the accounts maintained at your
office at Rockport, Texas.
The financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company of
Rockport, Inc. as of December 31, 1996, in conformity with generally accepted
accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through H, inclusive, of this report are presented as additional
information and is not a required part of the basic financial statement. Such
information has been subjected to the audit procedures applied in the
examination of the basic statement of assets and liabilities, and is fairly
stated in all material respects in relation to the basic statement of assets
and liabilities, taken as a whole.
/s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C.
Flusche, Van Beveren, Kilgore, P.C.
Corpus Christi, Texas
February 6, 1997
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<PAGE> 37
Independent Auditor's Report
Stewart Title of San Patricio County, Inc.
Portland, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 prepared from the accounts maintained at your
office at Portland, Texas.
The financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title of San
Patricio County, Inc. as of December 31, 1996, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through Exhibit H of this report are presented as additional
information and is not a required part of the basic financial statement. Such
information has been subjected to the audit procedures applied in the
examination of the basic statement of assets and liabilities, and is fairly
stated in all material respects in relation to the basic statement of assets
and liabilities, taken as a whole.
/s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C.
Flusche, Van Beveren, Kilgore, P.C.
Corpus Christi, Texas
February 6, 1997
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<PAGE> 38
SCHEDULE II
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
INCOME AND RETAINED EARNINGS INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Revenues
Investment income ..................................... $ 439 $ 224 $ 201
Other income............................................ - 12 28
-------- -------- --------
439 236 229
Expenses
Employee costs ......................................... 163 211 288
Other operating expenses ............................... 1,515 1,634 1,211
Depreciation and amortization .......................... 100 101 21
-------- -------- --------
1,778 1,946 1,520
Loss before taxes and equity in earnings of investees .... (1,339) (1,710) (1,291)
Income taxes (benefit) ................................... (458) (592) (444)
Equity in earnings of investees .......................... 15,318 8,125 10,525
-------- -------- --------
Net income ............................................... 14,437 7,007 9,678
Retained earnings at beginning of year ................... 118,547 112,754 106,262
Cash dividends on Common Stock ($.24, $.21 and $.20 per
share) ................................................. (1,488) (1,214) (1,118)
Stock dividend ........................................... - - (2,068)
-------- -------- --------
Retained earnings at end of year ......................... $131,496 $118,547 $112,754
======== ======== ========
</TABLE>
See accompanying note to financial statements.
(Schedule continued on following page.)
-36-
<PAGE> 39
SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31,
--------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Assets
Cash and cash equivalents ...................................................... $ 100 $ 54
-------- --------
Short-term investments .......................................................... 10,620 4,373
-------- --------
Receivables:
Notes, including $6,960 and $7,057 from affiliates .............................. 7,094 7,251
Other, including $2,493 and $5,000 from affiliates .............................. 6,140 6,873
Less allowance for uncollectible amounts ........................................ (20) -
-------- --------
13,214 14,124
Furniture and equipment at cost ................................................. 167 167
Less accumulated depreciation ................................................... (85) (67)
-------- --------
82 100
Title plants, at cost ........................................................... 48 48
Investments in investees ......................................................... 168,243 155,408
Other assets ..................................................................... 3,168 3,241
-------- --------
$195,475 177,348
======== ========
Liabilities
Payables:
Notes, including $ - and $ - from affiliates ................................... $ 580 $ -
Accounts payable and accrued liabilities ....................................... 3,905 2,496
Contingent liabilities and commitments
Stockholders' equity
Common - $1 par, authorized 15,000,000, issued and outstanding 6,216,441 and
5,864,758 ................................................................ 6,216 5,865
Class B Common - $1 par, authorized 1,500,000, issued and outstanding 525,006... 525 525
Additional paid-in-capital ..................................................... 50,833 45,945
Net unrealized investment gains, net of deferred taxes ........................ 1,920 3,970
Retained earnings (1) ......................................................... 131,496 118,547
-------- --------
Total stockholders' equity ($28.33 and $27.36 per share) ............... 190,990 174,852
-------- --------
$195,475 $177,348
======== ========
</TABLE>
(1) Includes undistributed earnings of subsidiaries of $130,708 in 1996
and $126,480 in 1995.
See accompanying note to financial statements.
(Schedule continued on following page.)
-37-
<PAGE> 40
SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1996 1995 1994
------- ------ --------
(In thousands)
<S> <C> <C> <C>
Cash flow from operating activities (Note) ................... $ 7,033 $1,169 $ (281)
Cash flow from investing activities:
Purchases of furniture and equipment and title plants -
net......................................................... - - (56)
Proceeds from investments sold ............................. 11,520 7,011 4,076
Purchases of investments, excluding mortgage loans .......... (17,767) (6,865) (4,901)
Increases in mortgages and other notes receivable ........... (70) (262) -
Collections on mortgages and other notes receivable ......... 227 31 698
------- ------ --------
Cash used by investing activities ............................ (6,090) (85) (183)
------- ------ --------
Cash flow from financing activities:
Dividends paid .............................................. (1,488) (1,214) (1,118)
Proceeds of notes payable ................................... 610 - -
Payments on notes payable ................................... (30) - -
Proceeds from issuance of stock ............................. 11 - 837
------- ------ --------
Cash used by financing activities ............................ (897) (1,214) (281)
------- ------ --------
Increase (decrease) in cash and cash equivalents ............. $ 46 $ (130) $ (745)
======= ====== ========
Note: Reconciliation of net income to the above amounts:
Net income .................................................. $14,437 $7,007 $ 9,678
Add (deduct):
Depreciation and amortization .............................. 100 101 21
Provision for uncollectible amounts - net ................. 20 64 -
Increase in accounts receivable - net ...................... (3,207) (1,326) (378)
Increase (decrease) in accounts payable and accrued
liabilities - net ......................................... 264 (2,668) 195
Equity in net earnings of investees ........................ (15,318) (8,125) (10,525)
Dividends received from investees........................... 11,090 5,650 1,340
Stock bonuses .............................................. - - 61
Other - net ................................................ (353) 466 (673)
------- ------ --------
Cash provided (used) by operating activities ................. $ 7,033 $1,169 $ (281)
======= ====== ========
Supplemental information:
Income taxes paid .......................................... - - -
Interest paid .............................................. - - -
</TABLE>
See accompanying note to financial statements.
(Schedule continued on following page.)
-38-
<PAGE> 41
SCHEDULE II
(continued)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
NOTE TO FINANCIAL STATEMENT INFORMATION
The Registrant operates as a holding company transacting substantially all
business through its subsidiaries. The consolidated financial statements for
the Registrant and its subsidiaries are included in Part II, Item 8 of Form
10-K. The Parent Company financial statements should be read in conjunction
with the aforementioned consolidated financial statements and notes thereto and
financial statement schedules.
Total dividends received from unconsolidated subsidiaries for 1996, 1995
and 1994 were $8,583,000, $9,390,000 and $2,600,000, respectively.
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<PAGE> 42
SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
========================================================================================================================
Col. A Col. B Col. C Col. D Col. E Col. F
========================================================================================================= =============
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
Category of aggregate at end interest during the during the during the
short-term borrowings (1) of period rate period period (2) period (3)
========================================================================================================= =============
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Banks ........................................... $4,456,107 8.58% $4,456,107 $2,739,508 7.38%
========== ==== ========== ========== ====
December 31, 1995:
Banks ........................................... $3,380,430 8.61% $5,055,807 $4,487,714 8.82%
========== ==== ========== ========== ====
December 31, 1996:
Banks ........................................... $2,646,893 7.55% $4,046,900 $3,145,603 8.03%
========== ==== ========== ========== ====
</TABLE>
(1) Bank borrowings represent short-term notes due within one year of the
loan's origination.
(2) Computed by summing each month-end balance and dividing the total by
twelve.
(3) Computed by dividing total yearly interest expense by the average of the
month-end principal balances.
-40-
<PAGE> 43
SCHEDULE V
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
===================================================================================================================================
Col. C
Col. A Col. B Additions Col. D Col. E
===================================================================================================================================
Balance Charged Charged to
at to other Balance
beginning cost and accounts -Deductions- at end
Description of period expenses describe described of period
===================================================================================================================================
<S> <C> <C> <C> <C> <C>
Stewart Information Services
Corporation and subsidiaries:
Year ended December 31, 1994:
Estimated title losses .................... $117,585,559 $40,211,895 - $23,481,018(A) $134,316,436
Allowance for uncollectible
amounts .................................. 5,268,419 2,233,675 - 1,379,045(B) 6,123,049
Year ended December 31, 1995:
Estimated title losses .................... 134,316,436 29,590,891 - 25,594,793(A) 138,312,534
Allowance for uncollectible
amounts................................... 6,123,049 1,333,744 - 957,846(B) 6,498,947
Year ended December 31, 1996:
Estimated title losses .................... 138,312,534 33,829,851 - 21,810,822(A) 150,331,563
Allowance for uncollectible
amounts................................... 6,498,947 1,575,000 - 1,404,356(B) 6,669,591
Stewart Information Services
Corporation - Parent:
Year ended December 31, 1994:
Allowance for uncollectible amounts $ 8,198 - - - $ 8,198
Year ended December 31, 1995:
Allowance for uncollectible amounts 8,198 $ 64,382 - $ 72,580(C) -
Year ended December 31, 1996:
Allowance for uncollectible amounts - 20,000 - - 20,000
</TABLE>
(A) Represents payments of policy losses and loss adjustment expenses during
the year, less salvage collections.
(B) Represents uncollectible accounts written off.
(C) Represents an adjustment to accounts receivable previously reserved and
current year write-off of uncollected accounts.
-41-
<PAGE> 44
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit Page
- ------- ------------
<S> <C> <C>
3.1 - Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987)
3.2 - By-laws of the Registrant
4 - Rights of Common and Class B Common Stockholders
(incorporated by reference to Exhibits 3.1 and 3.2
hereto)
10.1 - Summary of agreements as to payment of bonuses to
certain executive officers
10.2 - Deferred Compensation Agreements dated March 10,
1986 between the Registrant and certain executive
officers (incorporated by reference to Exhibit 10.2
of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987)
13. - Annual Report to Stockholders for 1996 (the
financial text of the annual report incorporated
herein by reference in Item 6 of Part II of this
report)
21. - Subsidiaries of the Registrant
23. - Consents of Independent Certified Public
Accountants, including consents to incorporation by
reference of their reports to previously filed
Securities Act registration statements
27. - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
STEWART INFORMATION SERVICES CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. Registered office. The registered office of the
corporation in the State of Delaware shall be in the City of Wilmington, County
of New Castle, and the name of its registered agent shall be The Corporation
Trust Company.
SECTION 1.2. Other offices. The corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1. Place of Meeting. All meetings of stockholders
for the election of directors shall be held at such place, either within or
without the State of Delaware, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting.
1
<PAGE> 2
SECTION 2.2. Annual Meeting. The annual meeting of
stockholders shall be held at such date and time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting.
SECTION 2.3. Voting List. The officer who has charge of stock
ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 2.4. Special Meeting. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called by the Chairman
of the Board or by the President or by the Board of Directors or by written
order of a majority of the
2
<PAGE> 3
directors and shall be called by the President or the Secretary at the request
in writing of stockholders owning a majority in amount of the entire capital
stock of the corporation issued and outstanding and entitled to vote. Such
request shall state the purpose of the proposed meeting. The Chairman of the
Board or the President or directors so calling, or the stockholders so
requesting, any such meeting shall fix the time and any place, either within or
without the State of Delaware, as the place for holding such meeting.
SECTION 2.5. Notice of Meeting. Written notice of the annual,
and each special meeting of stockholders, stating the time, place and purpose
or purposes thereof, shall be given to each stockholder entitled to vote
thereat, not less than ten nor more than 60 days before the meeting.
SECTION 2.6. Quorum. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at any meeting of stockholders
for the transaction of business except at each election of directors and as
otherwise provided by statute or by the Certificate of Incorporation. At each
meeting for the election of directors the holders of a majority of the Common
Stock and the holders of a majority of the Class B Common Stock, issued and
outstanding of each such class, and entitled to vote thereat, present in person
or represented by proxy shall constitute a quorum. Notwithstanding the other
provisions of the Certificate of Incorporation or these by-laws, the holders of
a majority of the shares of capital stock entitled to vote thereat, present in
person or represented by
3
<PAGE> 4
proxy, whether or not a quorum is present, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
SECTION 2.7. Voting.
(a) Unless express provision of applicable statute, of the
Certificate of Incorporation or of these by-laws shall provide to the contrary,
at each meeting of stockholders each holder of capital stock of the Corporation
shall be entitled to cast one vote for each share of capital stock registered
in his or its name on the books of the Corporation on the record date for
determination of stockholders entitled to notice of, and to vote at, such
meeting on each matter properly submitted to stockholders at each meeting. If
any stockholder entitled to vote at any
4
<PAGE> 5
meeting shall be present at such meeting and such stockholder shall abstain,
whether in person or by proxy, from casting the vote or votes which he or it is
entitled to cast at such meeting, such abstention shall not affect the
determination of the presence of a quorum at such meeting. For all purposes of
these by-laws, an abstention from voting on any matter properly submitted to
stockholders at a meeting shall not be considered a vote cast for or against
such matter.
(b) Each stockholder having the right to vote shall be
entitled to vote in person or by proxy appointed by an instrument in writing
subscribed by stockholder, bearing a date not more than three years prior to
voting, unless such instrument provides for a longer period, and filed with the
Secretary of the Corporation before, or at the time of, the meeting. If such
instrument shall designate two or more persons to act as proxies, unless such
instrument shall provide to the contrary, a majority of such persons present at
any meeting at which their powers thereunder are to be exercised shall have and
may exercise all of the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one, or if
any even number attend and a majority do not agree on any particular issue,
each proxy so attending shall be entitled to exercise such powers in respect to
the same portion of the shares as he is of the proxies representing such
shares.
5
<PAGE> 6
(c) When a quorum is present at any meeting of stockholders,
a majority of the shares voted in person or by proxy shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of applicable statute, of the Certificate of Incorporation or of
these by-laws, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
(d) When a quorum is present at any meeting of stockholders
at which the Board of Directors is to be elected, the stockholders shall elect
such directors by a plurality of the shares voted in person or by proxy. All
votes for election of directors that are cast in person shall be cast by
written ballot.
SECTION 2.8. Consent of Stockholders. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken for or
in connection with any corporate action by any provision of the statutes, the
meeting and vote of stockholders may be dispensed with if all the stockholders
who would have been entitled to vote upon the action if such meeting were held
shall consent in writing to such corporate action being taken; or if the
Certificate of Incorporation authorizes the action to be taken with the written
consent of the holders of less than all the stock who would have been entitled
to vote upon the action if a meeting were held, then on the written consent of
the stockholders having
6
<PAGE> 7
not less than such percentage of the number of votes as may be authorized in
the Certificate of Incorporation; provided that in no case shall the written
consent be by the holders of stock having less than the minimum percentage of
the vote required by statute for the proposed corporate action, and provided
that prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous consent.
SECTION 2.9. Voting of Stock of Certain Holders. Shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent or proxy as the by-laws of such corporation may
prescribe, or in the absence of such provision, as the Board of Directors of
such corporation may determine. Shares standing in the name of a deceased
person may be voted by the executor or administrator of such deceased person,
either in person or by proxy. Shares standing in the name of a guardian,
conservator or trustee may be voted by such fiduciary, either in person or by
proxy, but no such fiduciary shall be entitled to vote shares held in such
fiduciary capacity without a transfer of such shares into the name of such
fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the corporation,
he has expressly empowered the pledgee to vote
7
<PAGE> 8
thereon, in which case only the pledgee, or his proxy, may represent the stock
and vote thereon.
SECTION 2.10. Treasury Stock. The corporation shall not vote,
directly or indirectly, shares of its own stock owned by it; and such shares
shall not be counted in determining the total number of outstanding shares.
SECTION 2.11. Fixing Record Date. The Board of Directors may
fix in advance a date, not exceeding 60 days preceding the date of any meeting
of stockholders, or the date for payment of any dividend or distribution, or
the date for the allotment of rights, or the date when any change, or
conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining a consent, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such meeting and
any adjournment thereof, or entitled to receive payment of any such dividend or
distribution, or to receive any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital stock,
or to give such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, any such meeting and any
adjournment thereof, or to receive payment of such dividend or distribution, or
to receive such allotment of rights, or to exercise such rights, or to give
such
8
<PAGE> 9
consent, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. Powers. The business and affairs of the
corporation shall be managed by its Board of Directors, which may exercise all
such powers of the corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these by-laws
directed or required to be exercised or done by the stockholders.
SECTION 3.2. Number, Election and Term. The number of
directors which shall constitute the whole Board shall be NINE. Unless such
number if fixed by express provision of the statutes or the Certificate of
Incorporation, in which case such express provision shall govern and control,
the number of directors shall from time to time be fixed and determined by the
directors and shall be set forth in the notice of any meeting of stockholders
held for the purpose of electing directors. The directors shall be elected at
the annual meeting of stockholders, except as provided in Section 3.3, and each
director elected shall hold office until his successor shall be elected and
shall qualify. Directors need not be residents of Delaware or stockholders of
the corporation.
9
<PAGE> 10
SECTION 3.3. Vacancies, Additional Directors and Removal From
Office. If any vacancy occurs in the members of the Board of Directors elected
by the holders of Common stock caused by death, resignation, retirement,
disqualification or removal from office of any such director, or otherwise, or
if any new directorship to be elected by the holders of Common stock is created
by an increase in the authorized number of directors, a majority of the
directors then in office elected by the holders of Common stock, though less
than a quorum, or a sole remaining such director, may choose a successor or
fill the newly created directorship; and a director so chosen shall hold office
until the next annual election and until his successor shall be duly elected
and shall qualify, unless sooner displaced. If any vacancy occurs in the
members of the Board of Directors elected by the holders of Class B Common
stock caused by death, resignation, retirement, disqualification or removal
from office of any such director, or otherwise, or if any new directorship to
be elected by the holders of Class B Common stock is created by an increase in
the authorized number of directors, a majority of the directors then in office
elected by the holders of Class B Common stock, though less than a quorum, or a
sole remaining such director, may choose a successor or fill the newly created
directorship; and a director so chosen shall hold office until the next annual
election and until his successor shall be duly elected and shall qualify,
10
<PAGE> 11
unless sooner displaced. A director may be removed either for or without cause
at any special meeting of stockholders duly called and held for such purpose
except that only the stockholders entitled to vote for any such director may
vote for the removal of such director.
SECTION 3.4. Regular Meeting. A regular meeting of the Board
of Directors shall be held each year, without other notice than this by-law, at
the place of, and immediately following, the annual meeting of stockholders;
and other regular meetings of the Board of Directors shall be held each year,
at such time and place as the Board of Directors may provide, by resolution,
either within or without the State of Delaware, without other notice than such
resolution.
SECTION 3.5. Special Meeting. A special meeting of the Board
of Directors may be called by the Chairman of the Board or by the President and
shall be called by the Secretary on the written request of any two directors.
The Chairman or President so calling, or the directors so requesting, any such
meeting shall fix the time and any place, either within or without the State of
Delaware, as the place for holding such meeting.
SECTION 3.6. Notice of Special Meeting. Written notice of
special meetings of the Board of Directors shall be given to each director at
least 48 hours prior to the time of such meeting; provided however, in
instances where notice of such meeting is
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given orally, by telephone or telegraph, such notice need be given only 24
hours prior to such meeting. Any director may waive notice of any meeting. The
attendance of a director at any meeting shall constitute a waiver of notice of
such meeting for the purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any special meeting of the Board of
Directors need be specified in notice or waiver of notice of such meeting,
except that notice shall be given of any proposed amendment to the by-laws if
it is to be adopted at any special meeting or with respect to any other matter
where notice is required by statute.
SECTION 3.7. Quorum and Vote Required. Six of the nine
members of the Board of Directors shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, and the act of six of the
directors shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, by the Certificate of Incorporation
or by these by-laws. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 3.8. Action Without Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these by-laws,
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any action required or permitted to be taken at any meeting of the Board of
Directors, or of any committee thereof as provided in Article IV of these
by-laws, may be taken without a meeting, if a written consent thereto is signed
by all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
SECTION 3.9. Compensation. Directors, as such, shall not be
entitled to any stated salary for their services unless voted by the
stockholders or the Board of Directors; but by resolution of the Board of
Directors, a fixed sum and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the Board of Directors or any
meeting of a committee of directors. No provision of these by-laws shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 3.10. Nomination of Directors to be Elected by
Holders of Common Stock. Only persons who are nominated in accordance with the
following procedures are eligible for election as directors by the holders of
the Common Stock of the corporation. Nominations of persons for election by the
holders of Common Stock to the Board of Directors of the corporation may be
made at a meeting of stockholders provided such nominations are made by or at
the direction of the Board of Directors or by a nominating committee appointed
by the Board of Directors or a
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person appointed by the Board of Directors to make nominations. Nominations may
also be made by any holder of Common Stock of the corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this section. Nominations, if made by a stockholder of
the corporation, shall be made pursuant to timely notice in writing addressed
to the secretary of the corporation. To be timely, a stockholder's notice shall
be delivered to or mailed and received at the principal executive offices of
the corporation not later than the 15th day of February next preceding the
annual meeting of stockholders.
SECTION 3.11. Advisory Directors. The Board of Directors may
elect from one (1) to nine (9) (as it may decide) Advisory Members of the Board
of Directors who may meet with the Board of Directors at such Board Meeting to
which they are invited by the Chairman of the Board, or the President or
Executive Vice President (it being realized that there may be meetings not
deemed important enough to warrant time and travel expense of all or a part of
the Advisory Members), and give the Board of Directors the benefit of their
advice and counsel. The Advisory Members of the Board of Directors may be
elected at any regular or special meeting of the Board of Directors. The
Advisory Members of the Board of Directors shall receive the same fee for
attending a meeting that a Director receives and shall be paid their travel
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expenses, if any, incurred in attending meetings of the Board of Directors. No
such payment shall preclude any Director from serving the corporation in any
other capacity and receiving compensation therefor.
ARTICLE IV
COMMITTEE OF DIRECTORS
SECTION 4.1. Designation, Powers and Name. The Board of
Directors may, by resolution passed by a majority of the whole Board, designate
one or more committees, including, if they shall so determine, an Executive
Committee, each such committee to consist of two or more of the directors of
the corporation. The committee shall have and may exercise such of the powers
of the Board of Directors in the management of the business and affairs of the
corporation as may be provided in such resolution. The committee may authorize
the seal of the corporation to be affixed to all papers which may require it.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
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act at the meeting in the place of any such absent or disqualified member. Such
committee or committees shall have such name or names and such limitations of
authority as may be determined from time to time by resolution adopted by the
Board of Directors.
SECTION 4.2. Minutes. Each committee of directors shall keep
regular minutes of its proceedings and report the same to the Board of
Directors when required.
SECTION 4.3. Compensation. Members of special or standing
committees may be allowed compensation for attending committee meetings, if the
Board of Directors shall so determine.
ARTICLE V
NOTICE
SECTION 5.1. Methods of Giving Notice. Whenever under the
provisions of the statutes, the Certificate of Incorporation or these by-laws,
notice is required to be given to any director, member of any committee or
stockholder, such notice shall be in writing and delivered personally or mailed
to such director, member or stockholder; provided that in the case of a
director or a member of any committee such notice may be given orally or by
telephone or telegram. If mailed, notice to a director, member of a committee
or stockholder shall be deemed to be given when deposited in the United States
mail first class in a sealed envelope, with postage thereon prepaid, addressed,
in the case of a stockholder, to the stockholder at the stockholder's address
as
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it appears on the records of the corporation or, in the case of a director or a
member of a committee, to such person at his business address. If sent by
telegraph, notice to a director or member of a committee shall be deemed to be
given when the telegram, so addressed, is delivered to the telegraph company.
SECTION 5.2. Written Waiver. Whenever any notice is required
to be given under the provisions of the statutes, the Certificate of
Incorporation or these by-laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VI
OFFICERS
SECTION 6.1. Officers. The officers of the corporation are
Chairman of the Board and Co-Chief Executive Officer, a President and Co-Chief
Executive Officer, a Senior Executive Vice President-Assistant Chairman, a
Senior Executive Vice President-Assistant President, one or more Vice
Presidents, any one or more which may be designated an Executive Vice President
and/or Senior Vice President, a Vice President-Finance, a Secretary, a
Treasurer and a Controller. The Board of Directors may by resolution create the
office of Vice Chairman of the Board and define the duties of such office. The
Board of Directors may appoint such other officers and agents including
Assistant Vice
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Presidents, Assistant Secretaries and Assistant Treasurers, as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined by the Board. Any two or
more offices, other than the offices of President and Secretary, may be held by
the same person. No officer shall execute, acknowledge, verify or countersign
any instrument on behalf of the corporation in more than one capacity, if such
instrument is required by law, by these by-laws or by any act of the
corporation to be executed, acknowledged, verified or countersigned by two or
more officers. The Chairman of the Board and Co-Chief Executive Officer and the
President and Co-Chief Executive Officer shall be elected from among the
directors. With the foregoing exceptions, none of the other officers need be a
director, and none of the officers need be a stockholder of the corporation.
SECTION 6.2. Election and Term of Office. The officers of the
corporation shall be elected annually by the Board of Directors at its first
regular meeting held after the annual meeting of stockholders or as soon
thereafter as conveniently possible. Each officer shall hold office until his
successor shall have been chosen and shall have qualified or until his death or
the effective date of his resignation or removal, or until he shall cease to be
a director in the case of the Chairman of the
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Board and Co-Chief Executive Officer and the President and Co-Chief Executive
Officer.
SECTION 6.3. Removal and Resignation. Any officer or agent
elected or appointed by the Board of Directors may be removed with cause by the
affirmative vote of the Board of Directors whenever, in its judgment, the best
interests of the corporation shall be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
Any officer may resign at any time by giving written notice to the corporation.
Any such resignation shall take effect at the date of the receipt of such
notice or at any later time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 6.4. Vacancies. Any vacancy occurring in any office
of the corporation by death, resignation, removal or otherwise, may be filled
by the Board of Directors for the unexpired portion of the term.
SECTION 6.5. Salaries. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors or pursuant
to its direction; and no officer shall be prevented from receiving such salary
by reason of his also being a director.
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SECTION 6.6. Chairman of the Board and Co-Chief Executive
Officer. The Chairman of the Board and Co-Chief Executive Officer shall preside
at all meetings of the Board of Directors or of the stockholders of the
corporation. In the Chairman's absence, or at the election of the President and
Co-Chief Executive Officer and the Chairman of the Board and Co-Chief Executive
Officer, such duties shall be attended to by the President and Co-Chief
Executive Officer. The Chairman of the Board and the President shall formulate
and submit to the Board of Directors or the Executive Committee matters of
general policy for the corporation and shall perform such other duties as
usually appertain to the office or as may be prescribed by the Board of
Directors or the Executive Committee. The Chairman of the Board and Co-Chief
Executive Officer shall, with the President and Co-Chief Executive Officer, be
the principal executive officer of the corporation and, subject to the control
of the Board of Directors, shall in general supervise and control the business
and affairs of the corporation. The Chairman of the Board and Co-Chief
Executive Officer, acting with the President and Co-Chief Executive Officers
shall have the power to appoint and remove subordinate officers, agents and
employees, except those elected or appointed by the Board of Directors. The
Chairman of the Board and Co-Chief Executive Officer, acting with the President
and Co-Chief Executive Officer, shall keep the Board of Directors and
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the Executive Committee fully informed and shall consult them concerning the
business of the corporation. Either or both may sign with the Secretary or any
other officer of the corporation thereunto authorized by the Board of
Directors, certificates for shares of the corporation and any deeds, bonds,
mortgages, contracts, checks, notes, drafts or other instruments which the
Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof has been expressly delegated by these by-laws or
by the Board of Directors to some other officer or agent of the corporation, or
shall be required by law to be otherwise executed. Either or both the Chairman
of the Board and the President shall vote, or give a proxy to any other officer
of the corporation to vote, all shares of stock of any other corporation
(except that the Board of Directors shall vote, or give a proxy to one or more
member(s) of the Board to vote, all shares of the stock of Stewart Title
Guaranty Company) standing in the name of the corporation and in general they
shall perform all other duties normally incident to the office of the Chairman
of the Board and Co-Chief Executive Officer and President and Co-Chief
Executive Officer, and such other duties as may be prescribed by the
stockholders, the Board of Directors or the Executive Committee from time to
time. In the absence of the President and Co-Chief Executive Officer, or in the
event such officer is unable or refuses to act, the Chairman of the Board and
Co-Chief Executive Officer shall perform the duties and exercise
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the powers of the President and Co-Chief Executive Officer. If the office of
the President is vacant, the Chairman of the Board shall be the Chief Executive
Officer.
SECTION 6.7. President and Co-Chief Executive Officer. The
President and Co-Chief Executive Officer shall, with the Chairman of the Board
and Co-Chief Executive Officer, be the principal executive officer of the
corporation and subject to the control of the Board of Directors, shall in
general supervise and control the business and affairs of the corporation. In
the absence of the Chairman of the Board and Co-Chief Executive Officer, the
President and Co-Chief Executive Officer shall preside at all meetings of the
Board of Directors and of the Stockholders. The President and Co-Chief
Executive Officer, acting with the Chairman of the Board and Co-Chief Executive
Officer, shall have the power to appoint and remove subordinate officers,
agents and employees, except those elected or appointed by the Board of
Directors. The President and Co-Chief Executive Officer, acting with the
Chairman of the Board and Co-Chief Executive Officer, shall keep the Board of
Directors and the Executive Committee fully informed and shall consult them
concerning the business of the corporation. Either or both may sign with the
Secretary or any other officer of the corporation thereunto authorized by the
Board of Directors, certificates for shares of the corporation and any deeds,
bonds, mortgages,
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contracts, checks, notes, drafts or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof has been expressly delegated by these by-laws or by the Board
of Directors to some other officer or agent of the corporation, or shall be
required by law to be otherwise executed. Either or both the Chairman of the
Board and the President shall vote, or give a proxy to any other officer of the
corporation to vote, all shares of stock of any other corporation (except that
the Board of Directors shall vote, or give a proxy to one or more member(s) of
the Board to vote, all shares of the stock of Stewart Title Guaranty Company)
standing in the name of the corporation and in general they shall perform all
other duties normally incident to the office of President and Co-Chief
Executive Officer and Chairman of the Board and Co-Chief Executive Officer and
such other duties as may be prescribed by the stockholders, the Board of
Directors or the Executive Committee from time to time. In the absence of the
Chairman of the Board and Co-Chief Executive Officer, or in the event such
officer is unable or refuses to act, the President and Co-Chief Executive
Officer shall perform the duties and exercise the powers of the Chairman of the
Board and Co-Chief Executive Officer. If the office of the Chairman of the
Board is vacant, the President shall be the Chief Executive Officer.
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SECTION 6.8. Vice President. In the absence of the President
and Co-Chief Executive Officer and the Chairman of the Board and Co-Chief
Executive Officer, or in the event both are unable or refuse to act, either or
both the Senior Executive Vice President-Assistant Chairman and the Senior
Executive Vice President-Assistant President (or in the event both such offices
are vacant or both such officers are unable or refuse to act, the Vice
President-Finance) shall perform the duties and exercise the powers of the
President and Co-Chief Executive Officer and the Chairman of the Board and
Co-Chief Executive Officer. In the event the offices of both Chairman and
President are vacant, the Senior Executive Vice President-Assistant Chairman
shall perform the duties and exercise the powers of the Chairman and Co-Chief
Executive Officer and the Senior Executive Vice President-Assistant President
shall perform the duties and exercise the powers of the President and Co-Chief
Executive Officer. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the corporation. The Vice Presidents
shall perform such other duties as from time to time may be assigned to them by
the Chairman, the President, the Board of Directors or the Executive Committee.
SECTION 6.9. Secretary. The Secretary shall (a) keep the
minutes of the meetings of the stockholders, the Board of Directors and
committees of directors; (b) see that all notices
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are duly given in accordance with the provisions of these by-laws and as
required by law; (c) be custodian of the corporate records and of the seal of
the corporation, and see that the seal of the corporation or a facsimile
thereof is affixed to all certificates for shares prior to the issue thereof
and to all documents, the execution of which on behalf of the corporation under
its seal is duly authorized in accordance with the provisions of these by-laws;
(d) keep or cause to be kept a register of the post office address of each
stockholder which shall be furnished by such stockholder; (e) sign with the
President, or an Executive Vice President or Vice President, certificates for
shares of the corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general, perform all duties
normally incident to the office of Secretary and such other duties as from time
to time may be assigned to him by the President, the Board of Directors or the
Executive Committee.
SECTION 6.10. Treasurer. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge of his
duties in such sum and with such surety or sureties as the Board of Directors
shall determine. He shall have charge and custody of and be responsible for all
funds and securities of the corporation; receive and give receipts for
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monies due and payable to the corporation from any source whatsoever and
deposit all such monies in the name of the corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of Section 7.3 of these by-laws, and in general, perform all duties
normally incident to the office of Treasurer and such other duties as from time
to time may be assigned to him by the President, the Board of Directors or the
Executive Committee.
SECTION 6.11. Controller. The Controller shall prepare, or
cause to be prepared, for submission at each regular meeting of the Board of
Directors, at each annual meeting of the stockholders, and at such other times
as may be required by the Board of Directors, the President or the Executive
Committee, a statement of financial condition of the corporation in such detail
as may be required; and in general, perform all the duties incident to the
office of Controller and such other duties as from time to time may be assigned
to him by the President, the Board of Directors or the Executive Committee.
SECTION 6.12. Assistant Secretary or Treasurer. The Assistant
Secretaries and Assistant Treasurers shall, in general, perform such duties as
shall be assigned to them by the Secretary or the Treasurer, respectively, or
by the President, the Board of Directors or the Executive Committee. The
Assistant Secretaries and Assistant Treasurers shall, in the absence of the
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Secretary or Treasurer, respectively, perform all functions and duties which
such absent officers may delegate, but such delegation shall not relieve the
absent officer from the responsibilities and liabilities of his office. The
Assistant Secretaries may sign, with the President or a Vice President,
certificates for shares of the corporation, the issue of which shall have been
authorized by a resolution of the Board of Directors. The Assistant Treasurers
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine.
ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.1. Contracts. Subject to the provisions of Section
6.1, the Board of Directors may authorize any officer, officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the corporation, and such authority may be general or
confined to specific instances.
SECTION 7.2. Checks, etc. All checks, demands, drafts or
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation, shall be signed by such officer or
officers or such agent or agents of the
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corporation, and in such manner, as shall be determined by the Board of
Directors.
SECTION 7.3. Deposits. All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositories as the Board
of Directors may select.
ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 8.1. Issuance. Each stockholder of this corporation
shall be entitled to a certificate or certificates showing the number of shares
of stock registered in his name on the books of the corporation. The
certificates shall be in such form as may be determined by the Board of
Directors, shall be issued in numerical order and shall be entered in the books
of the corporation as they are issued. They shall exhibit the holder's name and
number of shares and shall be signed by the President or a Vice President and
by the Secretary or an Assistant Secretary. If any certificate is countersigned
(1) by a transfer agent other than the corporation or any employee of the
corporation, or (2) by a registrar other than the corporation or any employee
of the corporation, any other signature on the certificate may be a facsimile.
If the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative
participating, optional or
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other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class of stock; provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish to each stockholder who so requests
the designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and qualifications,
limitations or restrictions of such preferences and rights. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in the case of a
lost, stolen, destroyed or mutilated certificate a new one may be issued
therefor upon such terms and with such indemnity, if any, to the corporation as
the Board of Directors may prescribe. Certificates shall not be issued
representing fractional shares of stock.
SECTION 8.2. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place
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of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against
the corporation with respect to the certificate or certificates alleged to have
been lost, stolen or destroyed, or both.
SECTION 8.3. Transfers. Upon surrender to the corporation or
the transfer agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
corporation or the Transfer Agent.
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SECTION 8.4. Registered Stockholders. The corporation shall
be entitled to treat the holder of record of any share or shares of stock as
the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of the State of Delaware.
ARTICLE IX
DIVIDENDS
SECTION 9.1. Declaration. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 9.2. Reserve. Before payment of any dividend, there
may be set aside out of any funds of the corporation available for dividends
such sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conclusive to the interest of the corporation, and the
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Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. Third Party Actions. The corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and
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in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 10.2. Actions by or in the Right of the Corporation.
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for misconduct in the performance of his duty to the corporation unless
and only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of
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liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
SECTION 10.3. Determination of Conduct. The determination
that an officer, director, employee or agent, has met the applicable standard
of conduct set forth in Sections 10.1 and 10.2 (unless indemnification is
ordered by a court) shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (2) if such quorum is not obtainable, or even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
SECTION 10.4. Payment of Expenses in Advance. Expenses
incurred in defending a civil or criminal action, suit or proceeding shall be
paid by the corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized in this Article X.
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SECTION 10.5. Indemnity Not Exclusive. The indemnification
and advancement of expenses provided hereunder or granted pursuant hereto shall
not be deemed exclusive of any other rights to which those seeking
indemnification or the advancement of expenses may be entitled under any other
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. The indemnification and advancement
of expenses provided hereunder or granted pursuant hereto shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Seal. The corporate seal shall have inscribed
thereon the name of the corporation, and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or otherwise reproduced.
SECTION 11.2. Books. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at the offices of the corporation at
35
<PAGE> 36
Houston, Texas, or at such other place or places as may be designated from time
to time by the Board of Directors.
ARTICLE XII
AMENDMENT
These by-laws may be altered, amended or repealed at any
regular or special meeting of the Board of Directors if (i) notice of such
alteration, amendment or repeal is contained in the notice of such meeting and
(ii) such alteration, amendment or repeal is approved by a majority vote of the
directors elected by the holders of the Common Stock and a majority vote of the
directors elected by the holders of Class B Common Stock; with each such class
of directors voting separately.
36
<PAGE> 1
EXHIBIT 10.1
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
MATERIAL CONTRACTS
DECEMBER 31, 1996
STEWART MORRIS, JR., as Chairman of the Board, shall receive in addition to his
salary, 1% on the first $20,000,000 of the consolidated income before taxes of
Stewart Title Guaranty Company as reported to its stockholders and .5% of the
profits exceeding $20,000.000. For the calendar year 1996, Mr. Morris shall
receive no less that $125,000 in bonus compensation. For the calendar year
1996, Mr. Morris received $218,075 in bonus compensation. Total compensation
shall exclude payments made by the company for insurance premiums, board fees
or stock options granted.
MALCOLM S. MORRIS, as President and Chief Executive Officer, shall receive in
addition to his salary, 1% on the first $20,000,000 of the consolidated income
before taxes of Stewart Title Guaranty Company as reported to its stockholders
and .5% of the profits exceeding $20,000.000. For the calendar year 1996, Mr.
Morris shall receive no less that $125,000 in bonus compensation. For the
calendar year 1996, Mr. Morris received $218,075 in bonus compensation. Total
compensation shall exclude payments made by the company for insurance premiums,
board fees or stock options granted.
CARLOSS MORRIS, as Chairman of the Executive Committee, shall receive in
addition to his salary, 1.5% of the first $13,000,000 of the consolidated net
income of Stewart Title Guaranty Company as reported to its stockholders and
.75% of the profits exceeding $13,000,000. For the calendar year 1996, Mr.
Morris shall receive no less than $100,000 in bonus compensation. For the
calendar year 1996 Mr. Morris received $211,305 in bonus compensation. Total
compensation shall exclude any insurance premiums, board fees or stock options
granted.
STEWART MORRIS, as Vice Chairman of the Executive Committee, shall receive in
addition to his salary, 1.5% of the first $13,000,000 of the consolidated net
income of Stewart Title Guaranty Company as reported to its stockholders and
.75% of the profits exceeding $13,000,000. For the calendar year 1996, Mr.
Morris shall receive no less than $100,000 in bonus compensation. For the
calendar year 1996 Mr. Morris received $211,305 in bonus compensation. Total
compensation shall exclude any insurance premiums, board fees or stock options
granted.
<PAGE> 2
EXHIBIT 13
SELECTED FINANCIAL DATA
(Ten year summary)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
In millions of dollars:
Total revenues ...................... 344.1 282.5 302.2 348.6 290.0 217.1 210.5 188.5 176.9 183.2
Title premiums, fees and
other revenues ................... 328.3 266.7 289.3 334.2 275.6 202.3 197.9 173.8 165.1 173.5
Total operating expenses (1) ........ 318.6 269.6 287.0 308.8 266.9 214.7 208.1 187.3 171.2 177.0
Title losses, included above ........ 33.8 29.6 40.2 58.6 54.1 40.7 38.2 33.0 25.6 25.9
Investment gains (losses),
after taxes ...................... 0.1 0.6 (0.5) 0.3 0.1 1.4 -- 1.0 0.1 (0.2)
Net earnings (2) .................... 14.4 7.0 9.7 23.7 14.6 1.7 0.2 0.1 3.7 11.7
Cash from operating activities ...... 36.8 20.6 27.7 54.3 36.3 18.6 11.0 10.2 8.9 10.8
Total assets ........................ 383.4 351.4 325.2 313.9 251.9 219.1 201.3 197.8 193.9 182.4
Long-term debt ...................... 7.9 7.3 2.5 3.0 4.2 6.8 6.6 5.3 7.3 5.0
Stockholders' equity (3) ............ 191.0 174.9 156.4 156.2 128.6 114.8 113.9 115.0 116.8 115.2
Ratios (%):
Net earnings/total revenues ......... 4.2 2.5 3.2 6.8 5.0 0.8 0.1 0.1 2.1 6.4
Title losses/title premiums, etc .... 10.3 11.1 13.9 17.5 19.6 20.1 19.3 19.0 15.5 14.9
Per share data: (4)
Average shares (in thousands) ....... 6,707 6,292 6,198 6,119 6,096 6,096 6,096 6,096 6,071 6,047
Net earnings (2) .................... 2.15 1.11 1.56 3.87 2.40 0.27 0.03 0.01 0.61 1.93
Cash dividends ...................... 0.24 0.21 0.20 0.17 0.15 0.13 0.23 0.33 0.51 0.51
Stockholders' equity (3) ............ 28.33 27.36 25.17 25.37 21.10 18.84 18.69 18.87 19.17 19.05
Market price
High ............................. 22.63 22.50 21.42 20.33 14.50 9.67 12.33 14.00 12.00 17.17
Low .............................. 19.63 15.13 14.38 12.50 8.67 5.17 4.50 11.17 9.17 7.17
Year-end ......................... 20.75 21.50 15.38 20.00 13.67 9.17 5.25 11.33 11.92 9.17
</TABLE>
(1) Excludes interest expense and minority interests.
(2) Includes the following items, after providing for taxes:
1992 - a reserve established for title losses over ten years old of $2.2
million, or $.36 per share.
1991 - a fresh start tax credit of $1.3 million, or $.21 per share.
1988 - a gain on the termination of pension plan of $0.5 million, or
$.08 per share.
1987 - a tax benefit of $7.4 million, or $1.22 per share, granted by the
Tax Reform Act of 1986.
(3) Includes unrealized gains and losses upon adoption of FAS 115 in 1993.
(4) Restated for one-for-two stock split in April 1994.
MANAGEMENT DISCUSSION AND ANALYSIS
A comparison of the results of operations of the Company for 1996 with 1995 and
1995 with 1994 follows.
GENERAL. The Company's dominant segment of operations is the land title
business. In general, the principal factors that 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 revenues from nonresidential, commercial transactions. Although
relatively few in number, large commercial transactions usually yield higher
premiums.
18
<PAGE> 3
Mortgage interest rates began a downward trend in the early months of 1995
that continued for the rest of the year. By May 1995, rates had fallen to below
year-earlier levels. This improvement in interest rates helped increase real
estate activity. Company revenues for the third and fourth quarters of 1995
exceeded revenues for the same quarters in 1994. By the end of 1995, interest
rates had fallen to near the 7 percent level.
In early 1996, interest rates began to trend upward until they reached the
8 percent level in April. Rates have fluctuated in a fairly narrow range since
then. Refinancing transactions fell significantly in 1996 compared to 1995.
Existing home sales rose in the first half of 1996 and then declined slightly
in the second half, while still exceeding sale levels in the second half of
1995.
TITLE REVENUES. The Company's revenues from premiums, fees and other revenues
increased 23.1% in 1996 over 1995 and decreased 7.8% in 1995 over 1994. The
number of orders opened and closed by the Company and the average revenue per
order closed follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of orders opened (000s) ............................ 319 278 279
Number of orders closed (000s) ............................ 239 206 233
Average revenue per order closed(1) ....................... $945 $909 $879
- --------------------------------------------------------------------------------
</TABLE>
(1) Based on revenues from title operations of $297.9 million, $243.3 million
and $271.9 million, less amounts earned from independent agents of $71.7
million, $55.6 million and $67.4 million for 1996, 1995 and 1994,
respectively.
Total closings increased 16.0% in 1996 and decreased 11.6% in 1995. The
average revenue per closing increased 4.0% in 1996 and 3.4% in 1995. The
average rate was increased each year by higher home prices. There were no major
revenue rate increases in 1996 or 1995.
TITLE REVENUES BY STATE. The approximate amounts and percentages of Stewart's
consolidated title revenues (excluding other revenues) by state for the last
three years were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amounts ($ millions) Percentages
1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Texas ................................ 73 61 73 24 25 27
California ........................... 65 59 68 22 24 25
Florida .............................. 26 21 22 9 9 8
Nevada ............................... 15 13 14 5 5 5
Colorado ............................. 15 12 12 5 5 4
Arizona .............................. 14 12 14 5 5 5
New York ............................. 13 9 7 4 4 3
All others ........................... 77 56 62 26 23 23
- --------------------------------------------------------------------------------
298 243 272 100 100 100
================================================================================
</TABLE>
INVESTMENTS. Investment income increased 6.5% in 1996 and 9.5% in 1995,
primarily because of increases in the average balances invested and, in 1995,
higher market yields.
The investment gains in 1996 and 1995 were realized as part of the ongoing
management of the investment portfolio for the purpose of improving
performance. Investment losses in 1994 include a sale of certain portfolio
bonds to use tax loss carrybacks that would have otherwise expired. The pretax
loss on the sale was $1.3 million.
19
<PAGE> 4
EXPENSES. The Company incurs a substantial portion of its total expenses when
orders are received and processed, but revenues are not recognized until the
orders are closed. Most orders are closed, or canceled, within 90 days of
receipt.
Employee costs increased 21.4% in 1996 and decreased 5.1% in 1995. The
average number of employees and average compensation paid to employees
increased in both years.
The number of persons employed by the Company at December 31, 1996, 1995
and 1994 was 4,111, 3,757 and 3,470, respectively. The increase in staff in
1996 and 1995 was primarily in the automation and real estate information
areas, new offices and an increased number of employees in field service
centers. The staff was reduced in California in both years.
The Company has chosen to increase cost levels in automation and real
estate information areas because it believes the development and sale of new
products and services for new and existing customers is important to its
future. Through automating operating processes, the Company expects to add
customer revenues and reduce operating expenses and title losses in the future.
Other operating expenses increased 14.9% in 1996 and decreased slightly in
1995. Excluding the effect of new offices, the increase in 1996 was 12.8% and
the decrease was 5.3% in 1995. The overall increase and decrease for both years
was caused primarily by changes in transaction volume. Expenses that increased
in 1996 included business promotion, supplies, rent and premium taxes. Bad
debts, premium taxes and supplies decreased in 1995. Other operating expenses
also include policy forms, delivery costs, title plant expenses, telephone and
travel. Most of these expenses follow, to varying degrees, the changes in
transaction volume and revenues.
Provisions for title losses, as a percentage of title premiums, fees and
other revenues, were 10.3%, 11.1% and 13.9% in 1996, 1995 and 1994,
respectively. The continued improvement in industry trends and the Company's
recent experience in claims has also led to smaller provisions for title
losses.
The Company's labor and certain other operating costs are sensitive to
inflation. Increases in cost of living are considered in granting pay raises.
To the extent inflation causes increases in the prices of homes and other real
estate, premium revenues are also increased. Premiums are determined in part by
the insured values of the transactions handled by the Company.
PREMIUM TAXES. In December 1994 the California Board of Equalization (CBOE)
ruled in favor of the Company concerning an assessment of additional premium
taxes for the year 1987. However, an additional assessment for retaliatory
taxes for 1987 was left pending. In April 1996 the CBOE ruled in favor of the
Company on the retaliatory tax assessment.
Four other states have also assessed or threatened assessments of
additional premium or retaliatory taxes. The amounts aggregated $1.5 million,
excluding interest and penalties, and primarily covered the years 1984 through
1993.
The Company cannot predict whether there will be additional tax
assessments by these states or other states. State taxing authorities are under
increasing pressure to collect additional tax revenues.
The Company intends to vigorously oppose any assessments and believes its
tax payments are correct. However, there can be no assurance the Company will
prevail in these controversies. If it does not, the tax assessments may result
in a material reduction in the Company's net earnings in future years.
INCOME TAXES. The provisions for federal and state income taxes represented an
effective tax rate of 36.9%, 34.7% and 30.1% in 1996, 1995 and 1994,
respectively. The 1996 effective tax rate was higher primarily because
nontaxable income from municipal bonds was significantly less in relation to
pretax profits. The 1994 tax rate was lower primarily because dividends
remitted by investees in 1994 exceeded the earnings of investees. In the other
two years, earnings exceeded dividends.
UNCERTAINTY. A major bank holding company introduced a plan in 1994 to
guarantee the performance of its mortgage lending company to cure title defects
relating to loans sold in the secondary market. The Company believes the plan
has not significantly affected the demand for title insurance to date and will
not in the future. However, the Company cannot predict the ultimate effect of
the plan.
LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operations was $36.8 million,
$20.6 million and $27.7 million in 1996, 1995 and 1994, respectively.
Internally-generated cash flow has been the primary source of funds for
additions to property and equipment, expanding operations, dividends to
shareholders and other requirements. This source may be supplemented by bank
borrowings.
20
<PAGE> 5
A substantial majority of consolidated cash and investments is held by
Stewart Title Guaranty Company (Guaranty) and its title insurance subsidiary,
Stewart Title Insurance Company. Cash transfers between Guaranty and its
subsidiaries and the Company are subject to certain legal restrictions. See
Notes 4 and 5 to the financial statements.
The liquidity of the Company itself, excluding Guaranty and its
subsidiaries and excluding notes receivable from affiliates, consisted of cash
and investments of $10.7 million, a dividend receivable of $2.5 million from
Guaranty (received in February 1997) and short-term liabilities of $0.9 million
at December 31, 1996.
The Company knows of no commitments or uncertainties which are likely to
materially affect the ability of the Company and its subsidiaries to fund their
cash needs. See Note 15 to the financial statements.
The Company's capital resources, represented primarily by long-term debt
of $7.9 million and stockholders' equity of $191.0 million at December 31,
1996, are considered adequate.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Stewart Information Services
Corporation
We have audited the accompanying consolidated balance sheets of Stewart
Information Services Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of earnings and retained earnings
and cash flows for each of the years in the three-year period ended December
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. For the year ended
December 31, 1994, we did not audit the financial statements of certain
subsidiaries and a majority of the escrow funds referred to in Note 1. The
financial statements of these subsidiaries reflect total revenues constituting
19% of the related consolidated totals. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as
it relates to the amounts included for the subsidiaries and the escrow funds,
is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits for the years ended December 31, 1996
and 1995, and on our audit and the reports of other auditors for the year ended
December 31, 1994, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Stewart
Information Services Corporation and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
as of December 31, 1995.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
21
<PAGE> 6
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Years ended December 31 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
REVENUES
Title premiums, fees and other revenues ....................... 328,296 266,728 289,265
Investment income ............................................. 14,451 13,564 12,382
Investment gains (losses) - net ............................... 129 956 (842)
Other income, including equity earnings ....................... 1,205 1,257 1,350
- -----------------------------------------------------------------------------------------------------
344,081 282,505 302,155
EXPENSES
Employee costs ................................................ 170,944 140,795 148,325
Other operating expenses ...................................... 102,768 89,408 90,704
Title losses and related claims ............................... 33,830 29,591 40,212
Depreciation and amortization ................................. 11,007 9,855 7,801
Interest ...................................................... 1,140 1,194 586
Minority interests ............................................ 1,514 933 687
- -----------------------------------------------------------------------------------------------------
321,203 271,776 288,315
Earnings before taxes ............................................ 22,878 10,729 13,840
Income taxes ..................................................... 8,441 3,722 4,162
- -----------------------------------------------------------------------------------------------------
NET EARNINGS ..................................................... 14,437 7,007 9,678
Retained earnings at beginning of year ........................... 118,547 112,754 106,262
Cash dividends on Common Stock ($.24, $.21 and $.20 per share) ... (1,488) (1,214) (1,118)
Stock dividend ................................................... -- -- (2,068)
- -----------------------------------------------------------------------------------------------------
Retained earnings at end of year ................................. 131,496 118,547 112,754
- ----------------------------------------------------------------------===============================
Average number of shares outstanding (000 omitted) ............... 6,707 6,292 6,198
EARNINGS PER SHARE ............................................... 2.15 1.11 1.56
- ----------------------------------------------------------------------===============================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
December 31 1996 1995
- ------------------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
ASSETS
Cash and cash equivalents ...................................... 18,484 16,698
Short-term investments ......................................... 31,946 28,238
Investments in debt securities, at market:
Statutory reserve funds ..................................... 127,057 118,040
Other ....................................................... 73,456 67,716
- ------------------------------------------------------------------------------------------
200,513 185,756
Receivables:
Notes ....................................................... 5,686 7,242
Premiums from agents ........................................ 10,107 8,418
Other ....................................................... 22,493 21,079
Less allowance for uncollectible amounts .................... (6,670) (6,499)
- ------------------------------------------------------------------------------------------
31,616 30,240
Property and equipment, at cost:
Land ........................................................ 2,432 1,359
Buildings ................................................... 6,882 5,576
Furniture and equipment ..................................... 70,711 62,115
Less accumulated depreciation and amortization .............. (51,840) (44,779)
- ------------------------------------------------------------------------------------------
28,185 24,271
Title plants, at cost .......................................... 21,096 19,243
Real estate, at lower of cost or net realizable value .......... 1,866 3,303
Investments in investees, on an equity basis ................... 5,639 6,123
Goodwill, less accumulated amortization of $4,828 and $3,881 ... 16,535 11,029
Deferred income taxes .......................................... 14,615 14,108
Other assets ................................................... 12,877 12,350
- ------------------------------------------------------------------------------------------
383,372 351,359
- -----------------------------------------------------------------------===================
LIABILITIES
Notes payable, including $7,935 and $7,334 long-term portion ... 12,324 12,589
Accounts payable and accrued liabilities ....................... 25,033 20,559
Estimated title losses ......................................... 150,331 138,312
Income taxes ................................................... 419 482
Minority interests ............................................. 4,275 4,565
Contingent liabilities and commitments
STOCKHOLDERS' EQUITY
Common - $1 par, authorized 15,000,000, issued and
outstanding 6,216,441 and 5,864,758 ......................... 6,216 5,865
Class B Common - $1 par, authorized 1,500,000,
issued and outstanding 525,006 .............................. 525 525
Additional paid-in capital ..................................... 50,833 45,945
Net unrealized investment gains, net of deferred taxes ......... 1,920 3,970
Retained earnings .............................................. 131,496 118,547
- ------------------------------------------------------------------------------------------
Total stockholders' equity ($28.33 and $27.36 per share) .... 190,990 174,852
- ------------------------------------------------------------------------------------------
383,372 351,359
- -----------------------------------------------------------------------===================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Years ended December 31 1996 1995 1994
- --------------------------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES (NOTE) .................. 36,750 20,568 27,702
Investing activities:
Purchases of property and equipment and
title plants - net ....................................... (12,670) (6,700) (12,177)
Proceeds from investments matured and sold ................. 82,489 81,674 113,777
Purchases of investments ................................... (103,978) (90,385) (145,273)
Increases in notes receivable .............................. (1,340) (1,081) (2,408)
Collections on notes receivable ............................ 2,833 2,069 3,962
Cash paid for the acquisition of subsidiaries - net ........ (493) (5,175) (1,042)
Proceeds from issuance of stock ............................ 11 -- 296
- --------------------------------------------------------------------------------------------------
CASH USED BY INVESTING ACTIVITIES ............................. (33,148) (19,598) (42,865)
Financing activities:
Dividends paid ............................................. (1,488) (1,214) (1,118)
Proceeds of notes payable .................................. 4,366 7,937 5,125
Payments on notes payable .................................. (4,694) (7,209) (3,514)
- --------------------------------------------------------------------------------------------------
CASH (USED) PROVIDED BY FINANCING ACTIVITIES .................. (1,816) (486) 493
- --------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............. 1,786 484 (14,670)
- ------------------------------------------------------------------================================
Note: Reconciliation of net earnings to the above amounts -
Net earnings ............................................... 14,437 7,007 9,678
Add (deduct):
Depreciation and amortization ........................... 11,007 9,855 7,801
Provisions for title losses in excess of payments ....... 12,019 3,996 16,730
Provision for uncollectible amounts - net ............... 171 376 855
(Increase) decrease in accounts receivable - net ........ (2,419) 2,814 3,265
Increase (decrease) in accounts payable and accrued
liabilities - net .................................... 4,195 (1,834) (2,909)
Provision for deferred income taxes ..................... 596 1,344 (1,794)
Decrease in income taxes payable ........................ (1,184) (708) (7,042)
Minority interest expense ............................... 1,514 933 687
Equity in net earnings of investees ..................... (980) (700) (801)
Realized investment (gains) losses - net ................ (129) (956) 842
Stock bonuses ........................................... 328 303 61
Increase in other assets ................................ (1,151) (846) --
Other - net ............................................. (1,654) (1,016) 329
- --------------------------------------------------------------------------------------------------
Cash provided by operating activities ...................... 36,750 20,568 27,702
- ------------------------------------------------------------------================================
Supplemental information:
Income taxes paid .......................................... 9,004 3,283 13,794
Interest paid .............................................. 1,092 1,199 446
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Three years ended December 31, 1996)
NOTE 1
A. NATURE OF OPERATIONS. Stewart Information Services Corporation's dominant
segment of operations is the land title business. The Company's revenues are
materially affected by the volume of real estate activity in the United States.
Mortgage interest rates are a major factor underlying real estate activity.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The accompanying financial
statements were prepared by management which is responsible for their integrity
and objectivity. The statements have been prepared in conformity with generally
accepted accounting principles, including management's best judgments and
estimates, with due consideration given to materiality. Actual results could
differ from estimates.
C. RECLASSIFICATION. Certain amounts in the 1995 and 1994 consolidated
financial statements have been reclassified for comparative purposes.
D. CONSOLIDATION. Consolidated financial statements include all subsidiaries in
which the Company owns more than 50% voting rights in electing directors.
Unconsolidated investees, owned 20% through 50%, and over which the Company
exercises significant influence, are accounted for by the equity method. All
significant intercompany accounts and transactions are eliminated, and
provision is made for minority interests.
E. STATUTORY ACCOUNTING. The accounts of Stewart Title Guaranty Company
(Guaranty) and its subsidiary, Stewart Title Insurance Company, both title
insurers, are maintained on a statutory basis, in accordance with practices
required or permitted by regulatory authorities. The statutory accounts are
restated in consolidation to conform to generally accepted accounting
principles.
In restating to generally accepted accounting principles, the amounts for
statutory premium reserve and reserve for reported title losses are eliminated
and, in substitution, amounts are established for estimated title losses (see
below). The net effect, after providing for deferred income taxes, is included
in consolidated retained earnings. In calculating the amount owed on federal
income tax returns, the statutory premium reserve and reserve for reported
title losses must be discounted to their present values.
F. TITLE PREMIUMS AND FEES. Revenues from services rendered in closing and
insuring titles are considered earned at the time of the closing of the related
real estate transactions.
G. TITLE LOSSES AND RELATED CLAIMS. Estimating future title loss payments is
difficult because of the complex nature of title claims, the long periods of
time over which claims are paid, significantly varying dollar amounts of
individual claims and other factors.
For losses under $750,000 each, the Company estimates the aggregate amount
that will be paid in future years on title policies issued in the current year.
The estimated amount is charged to earnings currently (when the related
revenues are recognized). In making the estimates, the Company uses moving
average ratios of recent actual policy loss payment experience, net of
recoveries, to premium revenues.
Policy losses in excess of $750,000 each are individually evaluated and
charged to earnings when they become known. A general reserve is maintained for
unknown major losses. Escrow and other losses incurred in office operations are
accounted for separately.
Amounts shown as the Company's estimated liability for future loss
payments are continually reviewed for reasonableness and adjusted as
appropriate. In accordance with industry practice, the amounts have not been
discounted to their present values.
H. INCOME TAXES. Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the tax bases and the book
carrying values for certain assets and liabilities. Valuation allowances are
provided as may be appropriate. Enacted tax rates are used in calculating
amounts.
I. EARNINGS PER SHARE. Earnings per share amounts are calculated using the
weighted average number of shares of Common Stock and Class B Common Stock
outstanding during each year. The dilutive effect of Common Stock equivalents
is insignificant.
J. CASH EQUIVALENTS. Cash equivalents are highly liquid investments that are
convertible to cash or mature on a daily basis as part of the Company's
management of day-to-day operating cash.
25
<PAGE> 10
K. INVESTMENTS. The Company has classified all of its investments in debt
securities as available for sale. Net unrealized gains or losses on securities,
less taxes, are included in stockholders' equity. Any permanent declines in
fair values of securities are charged to earnings.
L. PROPERTY AND EQUIPMENT. Depreciation is computed principally by the
straight-line method at the following rates: buildings - 30 to 40 years and
furniture and equipment - 3 to 10 years. Maintenance and repairs are expensed
as incurred while improvements are capitalized. Gains and losses are recognized
at disposal.
M. TITLE PLANTS. Title plants include compilations of a county's official land
records, prior examination files, copies of prior title policies, maps and
related materials which are geographically indexed to a specific property. The
costs of acquiring existing title plants and building new ones, prior to the
time such plants are placed in operation, are capitalized. Such costs are not
amortized because there is no indication of any loss of value. The costs of
maintaining and operating title plants are expensed as incurred. Gains and
losses on sales of copies of title plants or interests in title plants are
recognized in the year of sale.
N. GOODWILL. Goodwill is the excess of the purchase price over the fair value
of net assets of subsidiaries acquired and is amortized by charges to earnings
over 10 to 40 years.
O. LONG-LIVED ASSETS. The Company adopted FAS 121 effective December 31, 1995.
The cumulative effect of the change was negligible. The Company continuously
reviews the carrying value of its title plants, goodwill and other long-lived
assets for possible impairment. Where appropriate, the book amounts are reduced
to fair market values.
P. ESCROW FUNDS. Cash held in escrow for customers is excluded from the balance
sheets.
NOTE 2
GROSS REVENUES. In the accompanying financial statements, premiums earned on
policies issued by independent agents are shown net of amounts retained by
agents for their services. Under statutory accounting, premium revenues include
agent charges, with an offsetting expense for the same amount.
On a statutory basis, revenues and expenses would be increased by like
amounts and would be stated as shown below. There would be no effect on net
earnings.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
Title premiums, fees and
other revenues (gross) .................. 640,233 518,792 598,179
Less amounts retained
by agents ............................... (311,937) (252,064) (308,914)
- --------------------------------------------------------------------------------
Title premiums, fees and
other revenues (net) .................... 328,296 266,728 289,265
- -----------------------------------------------================================
</TABLE>
NOTE 3
INCOME TAXES. The following reconciles federal income taxes computed at the
statutory rate with income taxes as reported.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
Expected income taxes at 35% ..................... 8,007 3,755 4,844
State income taxes ............................... 908 393 494
Tax effect of permanent differences:
Tax-exempt interest ........................... (1,407) (1,425) (1,560)
Nondeductible items ........................... 465 606 665
Equity income ................................. (343) (251) (280)
Minority interests ............................ 530 327 240
Other - net ................................... 281 317 (241)
- --------------------------------------------------------------------------------
Income taxes ..................................... 8,441 3,722 4,162
- -----------------------------------------------------==========================
Effective income tax rate (%) .................... 36.9 34.7 30.1
- -----------------------------------------------------==========================
</TABLE>
26
<PAGE> 11
Deferred tax assets and liabilities at December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
Deferred tax assets:
Book over tax title loss provisions ................. 15,945 16,464
Net operating losses ................................ 394 619
Allowance for bad debts ............................. 1,318 1,086
Other ............................................... 926 938
- --------------------------------------------------------------------------------
18,583 19,107
Less valuation allowance ............................ (1,030) (1,221)
- --------------------------------------------------------------------------------
17,553 17,886
Deferred tax liabilities:
Unrealized gains on investments ..................... (1,034) (2,137)
Tax over book depreciation .......................... (441) (356)
Investments in partnerships ......................... (204) (90)
Other ............................................... (1,259) (1,195)
- --------------------------------------------------------------------------------
(2,938) (3,778)
- --------------------------------------------------------------------------------
Net deferred tax assets ................................ 14,615 14,108
- -------------------------------------------------------------===================
</TABLE>
The Company's valuation allowance relates to portions of certain
subsidiary operating loss carryforwards and other deferred tax assets.
Management believes future earnings levels will be sufficient to permit the
Company to realize net deferred tax assets.
There were deferred tax expenses of $596,000 and $1,344,000 and a deferred
tax benefit of $1,794,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
NOTE 4
RESTRICTIONS ON CASH AND INVESTMENTS. The "statutory reserve funds" included in
the accompanying financial statements have been set aside to comply with legal
requirements for statutory premium reserves and state deposits. These funds
were not available for any other purpose.
A substantial majority of investments and cash at each year end was held
by title insurer subsidiaries. Generally, the types of investments a title
insurer can make are subject to legal restrictions. Furthermore, the transfer
of funds by a title insurer to its parent or subsidiary operations, as well as
other related party transactions, are restricted by law and generally require
the approval of state insurance authorities.
NOTE 5
DIVIDEND RESTRICTIONS. Substantially all of consolidated retained earnings at
each year end was represented by the retained earnings of Guaranty, which owns
directly or indirectly substantially all of the subsidiaries included in the
consolidation.
Guaranty cannot pay a dividend in excess of certain limits without the
approval of the Texas Insurance Commissioner. The maximum dividend which could
have been paid without such approval in 1996 was $25,164,000. Guaranty paid or
declared cash dividends of $8,583,000 in 1996. Guaranty also paid significantly
less than maximum legal limits for dividends in 1995 and 1994.
Dividends from Guaranty were also voluntarily restricted primarily to
maintain statutory surplus and liquidity at competitive levels. The ability of
a title insurer to pay claims can significantly affect the decision of lenders
and other custom-ers when buying a policy from a particular insurer.
27
<PAGE> 12
NOTE 6
INVESTMENTS. The amortized costs and market values of investments in debt
securities at December 31 follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
AMORTIZED MARKET Amortized Market
COSTS VALUES costs values
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C> <C>
Municipal .......................... 105,079 106,934 93,042 95,049
Mortgage-backed .................... 30,274 30,569 26,630 27,499
US Government ...................... 27,951 27,958 28,393 29,636
Corporate and utilities ............ 34,255 35,052 31,584 33,572
- --------------------------------------------------------------------------------
197,559 200,513 179,649 185,756
- ----------------------------------------========================================
</TABLE>
The gross unrealized gains and losses at December 31 were:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
GAINS LOSSES Gains Losses
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C> <C>
Municipal ...................................... 1,942 87 2,117 110
Mortgage-backed ................................ 1,213 918 1,684 815
US Government .................................. 287 280 1,286 43
Corporate and utilities ........................ 1,066 269 2,033 45
- --------------------------------------------------------------------------------
4,508 1,554 7,120 1,013
- ---------------------------------------------------=============================
</TABLE>
Debt securities at December 31, 1996 mature, according to their
contractual terms, as follows (actual maturities may differ because of call or
prepayment rights):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Amortized Market
costs values
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
In one year or less .................................... 1,702 1,713
After one year through five years ...................... 37,863 38,126
After five years through ten years ..................... 94,686 96,547
After ten years ........................................ 33,034 33,558
Mortgage-backed securities ............................. 30,274 30,569
- --------------------------------------------------------------------------------
197,559 200,513
- -------------------------------------------------------------===================
</TABLE>
The Company believes its investment portfolio is diversified and expects
no material loss to result from the failure to perform by issuers of the debt
securities it holds. Investments made by the Company are not collateralized.
The mortgage-backed securities are insured by GNMA and FNMA.
NOTE 7
INVESTMENT INCOME. Income from investments and net realized gains (losses) from
sales of investments for the three years follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
Income:
Short-term investments and
cash equivalents ..................... 2,619 2,025 1,745
Debt securities
Municipal ............................ 4,907 4,805 4,639
Mortgage-backed ...................... 2,219 2,204 2,526
US Government ........................ 1,874 2,042 1,156
Corporate and utilities .............. 2,376 1,936 1,740
Other ................................... 456 552 576
- --------------------------------------------------------------------------------
14,451 13,564 12,382
- -------------------------------------------------===============================
Net realized gains (losses):
Debt securities
Gains ................................ 632 1,258 914
Losses ............................... (503) (186) (2,007)
Other investments ....................... -- (116) 251
- --------------------------------------------------------------------------------
129 956 (842)
- -------------------------------------------------===============================
</TABLE>
The sales of debt securities resulted in proceeds of $33,191,000 in 1996,
$41,911,000 in 1995 and $70,442,000 in 1994. In 1994, certain securities were
sold to use tax loss carrybacks that would have otherwise expired.
Expenses assignable to investment income were insignificant. There were no
significant investments at December 31, 1996 that did not produce income during
the year.
NOTE 8
NOTES PAYABLE. Notes payable at December 31 follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
Banks:
Secured by mortgages on real estate,
primarily at prime (8.25%
at December 31, 1996),
payable lump sum and serially ........................ 416 994
Unsecured, 6.0% to 9.5%, varying
payments ............................................. 10,383 10,453
Other ................................................... 639 616
Other than banks ........................................... 886 526
- --------------------------------------------------------------------------------
12,324 12,589
- ----------------------------------------------------------------===============
</TABLE>
The above notes mature $4,389,000 in 1997, $1,953,000 in 1998, $3,611,000
in 1999, $858,000 in 2000, $1,019,000 in 2001 and $494,000 subsequent to 2001.
28
<PAGE> 13
NOTE 9
ESTIMATED TITLE LOSSES. Provisions accrued, payments made and liability
balances for the three years follow:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
Balances at January 1 ................... 138,312 134,316 117,586
Provisions ........................... 33,830 29,591 40,212
Payments ............................. (21,231) (25,530) (22,172)
Decrease in salvage .................. (580) (65) (1,310)
- --------------------------------------------------------------------------------
Balances at December 31 ................. 150,331 138,312 134,316
- ----------------------------------------------==================================
</TABLE>
Provisions include amounts related to the current year of approximately
$32,863,000, $29,591,000 and $38,886,000 for 1996, 1995 and 1994, respectively.
Payments related to the current year, including escrow and other loss payments,
were approximately $6,201,000, $5,613,000 and $8,216,000 for 1996, 1995 and
1994, respectively.
The above current year provision totals include provisions made for claims
which are based on historical ratios of losses-to-premium revenues. See Note
1(G) for the principles followed in accounting for title losses and related
claims.
NOTE 10
FAIR VALUES. The Company's financial instruments include cash and cash
equivalents, short-term investments, investments in debt securities (carried at
market value), notes receivable, accounts receivable, notes payable, accounts
payable and commitments.
The fair values of financial instruments are determined by reference to
various market data and other valuation techniques, as appropriate. The fair
values of financial instruments approximated their carrying values at December
31, 1996 and 1995.
NOTE 11
COMMON STOCK AND CLASS B COMMON STOCK. Holders of Common and Class B Common
Stock have the same rights, except no cash dividends may be paid on Class B
Common Stock. The two classes of stock vote separately when electing directors
and on any amendment to the Company's certificate of incorporation that affects
the two classes unequally.
A provision of the by-laws requires an affirmative vote of at least
two-thirds of the directors to elect officers or to approve any proposal which
may come before the directors. This provision cannot be changed without a
majority vote of each class of stock.
Holders of Class B Common Stock may, with no cumulative voting rights,
elect four directors if 525,000 or more shares of Class B Common Stock are
outstanding; three directors if between 300,000 and 525,000 shares are
outstanding; and none if less than 300,000 shares of Class B Common Stock are
outstanding. Holders of Common Stock, with cumulative voting rights, elect the
balance of the nine directors.
Class B Common Stock may, at any time, be converted by its shareholders
into Common Stock on a share-for-share basis, but all of the holders of Class B
Common Stock have agreed among themselves not to convert their stock prior to
January 2005. 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.
At December 31, 1996 and 1995, there were 72,910 shares (cost $233,000)
and 84,482 shares (cost $294,000), respectively, of Common Stock held by a
subsidiary of the Company. These shares are considered retired but may be
issued from time to time in lieu of new shares.
On April 28, 1994, the Company effected a one-for-two stock split recorded
in the form of a 50% stock dividend. All share and per share data presented in
these financial statements have been restated for the effects of the stock
split.
NOTE 12
CHANGES IN COMMON STOCK. Changes in stock and additional paid-in capital for
the years ended December 31, 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Class B Additional
Common Common paid-in
Stock Stock capital
- ---------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
Balances at December 31, 1993 .................... 3,753 350 41,894
Stock dividend ................................ 1,893 175 --
Acquisition ................................... 3 -- 41
Exercise of stock options ..................... 22 -- 401
Stock bonuses ................................. 16 -- 414
- ---------------------------------------------------------------------------------
Balances at December 31, 1994 .................... 5,687 525 42,750
Acquisitions .................................. 159 -- 2,911
Stock bonuses ................................. 19 -- 284
- ---------------------------------------------------------------------------------
Balances at December 31, 1995 .................... 5,865 525 45,945
Acquisitions .................................. 335 -- 4,362
Exercise of stock options ..................... 1 -- 10
Stock bonuses and other ....................... 15 -- 313
Foreign currency translation .................. -- -- 203
- ---------------------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1996 .................... 6,216 525 50,833
- -------------------------------------------------------==========================
</TABLE>
29
<PAGE> 14
NOTE 13
STOCK OPTIONS. A summary of the status of the Company's two fixed stock option
plans as of December 31, 1996, 1995 and 1994, and changes during the years
ended on those dates follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Exercise
Shares prices (1)
- --------------------------------------------------------------------------------
($)
<S> <C> <C>
December 31, 1993 ..................................... 141,450 9.62
Granted ............................................ 18,900 20.00
Exercised .......................................... (32,250) 9.17
- --------------------------------------------------------------------------------
December 31, 1994 ..................................... 128,100 11.26
Granted ............................................ 30,300 18.10
- --------------------------------------------------------------------------------
December 31, 1995 ..................................... 158,400 12.57
Granted ............................................ 37,900 21.09
Exercised .......................................... (1,200) 9.17
- --------------------------------------------------------------------------------
DECEMBER 31, 1996 ..................................... 195,100 14.25
- --------------------------------------------------------------------------------
</TABLE>
(1) Weighted-average
At December 31, 1996, 1995 and 1994 there were 179,049, 152,600 and
128,100 options, respectively, exercisable. The weighted-average fair value of
options granted during the years 1996 and 1995 was $6.73 and $7.62,
respectively.
The following summarizes information about fixed stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Range of exercise prices ($)
9.17 to 19.50 to 9.17 to
15.38 21.50 21.50
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding:
Shares ..................................... 118,300 76,800 195,100
Remaining contractual life (1) ............. 4.3 6.5 5.2
Exercise price (1) ......................... 10.25 20.41 14.25
Options exercisable:
Shares ..................................... 118,300 60,749 179,049
Exercise price (1) ......................... 10.25 20.28 13.65
- --------------------------------------------------------------------------------
</TABLE>
(1) Weighted-average
The Company applies APB 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans. Under FAS 123, compensation cost is recognized for the fair
value of the employees' purchase rights, which was estimated using the
Black-Scholes model. The Company assumed a dividend yield of 1.2%, an expected
life of one year for each option year, expected volatility of 18.1% and
risk-free interest rates between 6.2% and 6.7% for the years 1996 and 1995.
Had compensation cost for the Company's plans been determined consistent
with FAS 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
Net earnings:
As reported ............................................. 14,437 7,007
Pro forma ............................................... 14,271 6,857
Earnings per share:
As reported ............................................. 2.15 1.11
Pro forma ............................................... 2.13 1.09
- --------------------------------------------------------------------------------
</TABLE>
A stock option plan for region managers authorizing the issuance of up to
100,000 shares was adopted effective January 1, 1997.
NOTE 14
LEASES. The Company's expense for leased office space was $18,586,000 in 1996,
$17,284,000 in 1995 and $16,296,000 in 1994. These are operating, noncancelable
leases expiring over the next ten years. The future minimum lease payments are
as follows (stated in thousands of dollars):
<TABLE>
<S> <C>
1997....................................... 16,354
1998....................................... 12,868
1999....................................... 8,764
2000....................................... 6,125
2001....................................... 4,976
2002 and after............................. 9,108
----------------------------------------------------
58,195
----------------------------------------------======
</TABLE>
NOTE 15
CONTINGENT LIABILITIES AND COMMITMENTS. The Company makes separate provisions
for individual title losses over $750,000 and reviews claims in excess of this
amount asserted against Guaranty when evaluating the adequacy of recorded
reserves. See Note 1(G).
Claims had been made at December 31, 1996 against Guaranty for amounts in
excess of $750,000 for which no provision was made. Management believes, with
the advice of counsel, the loss on these claims (1) will be resolved for less
than $750,000 each or (2) cannot be reasonably estimated. Management believes
any loss on these claims which cannot be estimated at December 31, 1996 will
not
30
<PAGE> 15
be material in relation to the consolidated financial condition of the Company.
The Company is contingently liable for disbursements of escrow funds held
by agents in certain cases where specific insured closing guarantees have been
issued.
In December 1994 the California Board of Equalization (CBOE) ruled in
favor of the Company concerning an assessment of additional premium taxes for
the year 1987. However, an additional assessment for retaliatory taxes for 1987
was left pending. In April 1996 the CBOE ruled in favor of the Company on the
retaliatory tax assessment.
Four other states have also assessed or threatened assessments of
additional premium or retaliatory taxes. The amounts aggregated $1.5 million,
excluding interest and penalties, and primarily covered the years 1984 through
1993.
The Company cannot predict whether there will be additional tax
assessments by these states or other states. State taxing authorities are under
increasing pressure to collect additional tax revenues.
The Company intends to vigorously oppose any assessments and believes its
tax payments are correct. However, there can be no assurance the Company will
prevail in these controversies. If it does not, the tax assessments may result
in a material reduction in the Company's net earnings in future years.
Various takeout commitments approximated $726,000 at December 31, 1996.
Management believes adequate provisions have been made for any losses resulting
from these commitments.
NOTE 16
REINSURANCE. As is the industry practice, the Company cedes risk to other
underwriters in excess of certain underwriting limits. However, the Company
remains contingently liable if the reinsurer should fail to satisfy its
obligations. The Company also assumes risk from other underwriters. A payment
on an assumed risk or a recovery on a ceded risk is rare in the experience of
the Company and the industry. The Company has not paid or recovered any
reinsured losses during the three years ended December 31, 1996. The total
amount of premiums for assumed and ceded risks was less than one percent of
title premiums, fees and other revenues in each of the last three years.
NOTE 17
EQUITY IN INVESTEES. Certain summarized aggregate financial information for
investees follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C> <C>
For the year:
Revenues ......................................... 53,531 50,804 69,125
Net earnings ..................................... 3,120 2,245 1,471
As of December 31:
Total assets ..................................... 23,717 25,321
Stockholders' equity ............................. 15,313 16,567
- --------------------------------------------------------------------------------
</TABLE>
NOTE 18
QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Mar 31 June 30 Sept 30 Dec 31
- --------------------------------------------------------------------------------
($000 Omitted, except per share)
<S> <C> <C> <C> <C>
Revenues:
1996 ................................ 78,004 89,719 88,046 88,312
1995 ................................ 58,048 67,327 77,165 79,965
Net earnings (loss):
1996 ................................ 2,175 5,702 4,457 2,103
1995 ................................ (1,427) 1,675 3,501 3,258
Earnings (loss) per share:
1996 ................................ .33 .85 .66 .31
1995 ................................ (.23) .27 .55 .51
- --------------------------------------------------------------------------------
</TABLE>
31
<PAGE> 16
STEWART TITLE GUARANTY COMPANY
STEWART TITLE INSURANCE COMPANY
Subsidiaries of Stewart Information Services Corporation
UNCONSOLIDATED STATUTORY BALANCE SHEETS
From statutory Annual Statements as filed (unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Stewart Title Stewart Title
December 31, 1996 Guaranty Company Insurance Company
- ----------------------------------------------------------------------------------------------
($000 Omitted)
<S> <C> <C>
Admitted assets
Bonds ................................................... 180,631 16,292
Stocks (investments in subsidiaries) .................... 74,026 1,744
Cash and bank deposits .................................. 10,755 665
Short-term investments .................................. 4,372 1,223
Title plants ............................................ 4,947 295
Title insurance premiums, fees and other receivables .... 8,572 154
Other ................................................... 7,981 554
- ----------------------------------------------------------------------------------------
291,284 20,927
- ----------------------------------------------------------------========================
Liabilities, surplus and other funds
Reserve for title losses ................................ 28,457 1,261
Statutory premium reserve ............................... 115,389 4,406
Other ................................................... 13,612 1,377
157,458 7,044
Surplus as regards policyholders (Note) .................... 133,826 13,883
- ----------------------------------------------------------------------------------------
291,284 20,927
- ----------------------------------------------------------------========================
Consolidated stockholder's equity (unaudited), based on
generally accepted accounting principles (GAAP), for
Stewart Title Guaranty Company at December 31, 1996
was ($000 omitted) ......................................... 161,621
=======
</TABLE>
Note: The amount shown above for stockholder's equity exceeds policyholder
surplus primarily because under GAAP the statutory premium reserve and reserve
for reported title losses are eliminated and estimated title loss reserves are
substituted, net of applicable income taxes.
STEWART TITLE GUARANTY COMPANY
STATUTORY POLICYHOLDER SURPLUS GROWTH
(In $ millions)
22 consecutive
years of statutory [GRAPH]
policyholder
surplus growth --
unmatched in
the title industry.
<TABLE>
<S> <C>
1975 6
1976 7
1977 8
1978 10
1979 12
1980 12
1981 12
1982 14
1983 17
1984 21
1985 24
1986 44
1987 45
1988 61
1989 62
1990 63
1991 65
1992 87
1993 114
1994 120
1995 126
1996 134
</TABLE>
32
<PAGE> 1
Exhibit 21
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY INCORPORATION
- ----------------------------------------------------------------- -------------
<C> <C>
Stewart Title of Mobile, Inc. ............................... Alabama
Stewart Title & Trust of Phoenix, Inc. ...................... Arizona
Citizens Title & Trust ...................................... Arizona
Stewart Title & Trust of Tucson ............................. Arizona
Stewart Title of Arkansas ................................... Arkansas
Stewart Title Company of San Diego .......................... California
Stewart Title Company of California ......................... California
Stewart Title of Modesto .................................... California
Stewart Title (Los Angeles) ................................. California
Stewart Title of Fresno County .............................. California
Stewart Title of the Inland Empire .......................... California
Landata, Inc. of Los Angeles ................................ California
Stewart Title of Monterey County ............................ California
Stewart Title of Santa Barbara .............................. California
Asset Preservation, Inc. .................................... California
Landata, Inc. of the West Coast - Northern
California Division ....................................... California
Stewart Title of Larimer County, Inc. ....................... Colorado
Stewart Title of Aspen, Inc. ................................ Colorado
Stewart Title of Eagle County, Inc. ......................... Colorado
Stewart Title of Glenwood Springs, Inc. ..................... Colorado
Stewart Title of Denver, Inc. ............................... Colorado
Stewart Title Company of Colorado Springs ................... Colorado
Landata, Inc. of the Rocky Mountains ........................ Colorado
Stewart Title of Tampa ...................................... Florida
Stewart Title Guaranty of Jacksonville, Inc. ................ Florida
Stewart Title of Orange County, Inc. ........................ Florida
Stewart Title of Clearwater, Inc. ........................... Florida
Stewart Title of Polk County, Inc. .......................... Florida
Stewart Title of Martin County .............................. Florida
Stewart Title of Sarasota, Inc. ............................. Florida
Stewart Title of Pinellas, Inc. ............................ Florida
Landata, Inc. of Florida .................................... Florida
Stewart Title of Pensacola .................................. Florida
Stewart Title of Tallahassee, Inc. .......................... Florida
Stewart River City Title .................................... Florida
Stewart Title of Northwestern Florida ....................... Florida
Charlotte County Abstract & Title Company ................... Florida
Bay Title Services, Inc. .................................... Florida
Stewart Approved Title, Inc. ................................ Florida
Stewart Information Hungary ................................. Hungary
Stewart Title Company of Idaho, Inc. ........................ Idaho
</TABLE>
(continued)
<PAGE> 2
Exhibit 21
(continued)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY INCORPORATION
- ---------------------------------------------------------------- --------------
<C> <C>
Stewart Title Company of Illinois .............................. Illinois
Landata, Inc. of Illinois ...................................... Illinois
Stewart Title Services of Indiana, Inc. ........................ Indiana
Stewart Title of Louisiana, Inc. ............................... Louisiana
Stewart Title Company of Maryland .............................. Maryland
Cambridge Landata, Incorporated ................................ Maryland
Stewart Title of Detroit, Inc. ................................. Michigan
Stewart Title Company of Minnesota ............................. Minnesota
Stewart Title of Mississippi ................................... Mississippi
Stewart Title, Inc. (Kansas City) .............................. Missouri
Stewart Title of Douglas County ................................ Nevada
Stewart Title of Northern Nevada ............................... Nevada
Stewart Title of Carson City ................................... Nevada
Stewart Title of Nevada ........................................ Nevada
Stewart Title of Northeastern Nevada ........................... Nevada
Stewart Title of Central Nevada ................................ Nevada
Public Data Marketing, Inc. .................................... Nevada
Northeast Land Title ........................................... New Hampshire
Stewart Title of Central Jersey, Inc. .......................... New Jersey
Stewart-Princeton Abstract ..................................... New Jersey
Stewart Title Services of North Jersey, L.L.C................... New Jersey
Santa Fe Abstract Limited ...................................... New Mexico
Stewart Title Limited .......................................... New Mexico
Stewart Title Insurance Company ................................ New York
Barretta Landata, L.L.C. ....................................... New York
Stewart Title of Mecklenburg County ............................ North Carolina
Stewart Title of North Carolina, Inc. .......................... North Carolina
Stewart Title Agency of Ohio, Inc. ............................. Ohio
Stewart Abstract & Title Co. of Oklahoma ....................... Oklahoma
Stewart Title of Rhode Island, Inc. ............................ Rhode Island
Stewart Data Slovakia .......................................... Slovakia
Ortem Investments, Inc. ........................................ Texas
East-West, Inc. ................................................ Texas
Stewart Title of San Patricio County, Inc. ..................... Texas
Stewart Title Guaranty Company ................................. Texas
Southland Information, Inc. .................................... Texas
Stewart Title Company .......................................... Texas
Stewart Title Austin, Inc. ..................................... Texas
Stewart Title of Lubbock, Inc. ................................. Texas
Stewart Title Company of Rockport, Inc. ........................ Texas
Texarkana Title and Abstract, Inc. ............................. Texas
Stewart Investment Services Corporation ........................ Texas
</TABLE>
(continued)
<PAGE> 3
Exhibit 21
(continued)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
NAME OF SUBSIDIARY INCORPORATION
- ---------------------------------------------------------------- --------------
<C> <C>
Stewart Trust Company .......................................... Texas
Landata Systems, Inc. .......................................... Texas
Landata, Inc. of San Antonio ................................... Texas
Landata, Inc. of Midwest ....................................... Texas
Landata RE-Source, Inc. ........................................ Texas
Landata Field Services ......................................... Texas
Landata Land Records, Inc. ..................................... Texas
Fulghum, Inc. Texas
................................................................
OnLine Mortgage Documents, Inc. ................................ Texas
Stewart Mortgage Information Company ........................... Texas
Stewart Mortgage Processing .................................... Texas
Stewart Management Information, Inc. ........................... Texas
Stewart - U.A.M., Inc. ......................................... Texas
Baca-Landata, Inc. ............................................. Texas
Primero, Inc. Texas
................................................................
Landata Geo Services, Inc. ..................................... Texas
Priority Title - Houston ....................................... Texas
Priority Title - Dallas Texas
................................................................
Stewart Title of North Texas ................................... Texas
Stewart Information International, Inc. ........................ Texas
San Antonio Data, Inc. ......................................... Texas
Stewart Title of Corpus Christi ................................ Texas
Stewart Title Insurance Company (U.K.) Limited ................. United Kingdom
Conquest Group ................................................. United Kingdom
Michael Hickmott & Company ..................................... United Kingdom
Stewart Title Great Britain .................................... United Kingdom
Stewart Title of Virginia ...................................... Virginia
Stewart Title and Escrow, Inc. ................................. Virginia
Stewart Title - Shenandoah Valley, L.C. ........................ Virginia
Stewart Title Services of Virginia, L.C. ....................... Virginia
Signature & Stewart Settlements, L.C. .......................... Virginia
Stewart Title & Settlement Services, Inc. ...................... Virginia
Cedar Run Title & Abstract ..................................... Virginia
Land Title Research ............................................ Virginia
Stewart Services of Greater Virginia ........................... Virginia
Stewart Title of Gillette, Inc. ............................... Wyoming
</TABLE>
<PAGE> 1
EXHIBIT 23
The Board of Directors
Stewart Information Services Corporation:
We consent to incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of our report
dated February 7, 1997, relating to the consolidated balance sheets of Stewart
Information Services Corporation and subsidiaries as of December 31, 1996 and
1995 and the related consolidated statements of earnings and retained earnings
and cash flows for each of the years in the three-year period ended December
31, 1996, and all related schedules, which report appears in the December 31,
1996 annual report on Form 10-K of Stewart Information Services Corporation.
Our report covering the December 31, 1995 financial statements refers to a
change in accounting for long-lived assets. We also consent to the reference to
our firm under the heading "Interests of Named Experts and Counsel" in such
Registration Statements.
/s/ KPMG PEAT MARWICK LLP
- ----------------------------------
KPMG PEAT MARWICK LLP
Houston, Texas
March 24, 1997
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-48519, No. 33-48520, No. 33-518156, No. 33-
59747, No. 33-62535 and 333-03981) of Stewart Information Services Corporation
of our report dated January 20, 1995 on the consolidated financial statements
of Stewart Title & Trust of Phoenix, Inc. appearing in this Form 10-K. We also
consent to the reference to us under the heading "Interests of Named Experts
and Counsel" in such Registration Statements.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Phoenix, Arizona
March 20, 1997
<PAGE> 3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Interests of Named
Experts and Counsel" and to the incorporation by reference in the Registration
Statements (Forms S-8 No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747,
No. 33-62535, and No. 33-03981) pertaining to the 1992 Nonqualified Stock
Option Plan for Region Managers, the Stewart Morris, Jr. 1992 Stock Option and
Malcolm Morris 1992 Stock Option, the Associates Stock Bonus Plan, 1995 Stock
Option Plan, the Salary Deferral Plan and Trust, and the 1996 Directors' Stock
Plan, respectively, of Stewart Information Services Corporation of our report
dated January 20, 1995 with respect to the statements of operations and
retained earnings, and cash flows for the year ended December 31, 1994 (not
presented separately therein) included in Stewart Information Services
Corporation's Annual Report (Form 10-K) for the year ended December 31, 1996,
filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Century City
Los Angeles, California
March 17, 1997
<PAGE> 4
March 12, 1997
The Board of Directors
Stewart Information Services Corporation
We consent to the incorporation by reference in the registration statements
(No. 33-48519, No.33-48520, No. 33-58156, No. 33-62535 and No. 333-03981) on
Form S-8 of Stewart Information Services Corporation of our reports which
appears in the December 31, 1996 annual report on Form 10 K of Stewart
Information Services Corporation. We also consent to the reference to us under
the heading "Interests of Named Experts and Counsel" in such Registration
Statements.
Sincerely,
/s/ GRANT BENNETT ACCOUNTANTS
GRANT BENNETT ACCOUNTANTS
Certified Public Accountants
A Professional Corporation
Sacramento, California
<PAGE> 5
The Board of Directors
Stewart Information Services Corporation
We consent to incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, and No. 33-62535) on Form
S-8 of Stewart Information Services Corporation of our report, which appears in
the December 31, 1996 annual report on Form 10-K of Stewart Information
Services Corporation. We also consent to the reference to us under the heading
"Interests of Named Experts and Counsel" in such Registration Statements.
/s/ WILKERSON & ARTHUR
- ------------------------
Wilkerson & Arthur, P.C.
Fort Worth, Texas
<PAGE> 6
The Board of Directors
Stewart Information Services Corporation
We consent to incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747 No. 33-62535 and No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of our report,
which appears in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services corporation. We also consent to the reference to us under
the heading "Interests of Named Experts and Counsel" in such Registration
Statements.
/s/ M. TIMOTHY O'ROARK
- ----------------------
M. TIMOTHY O'ROARK
El Paso, TX
February 18, 1997
<PAGE> 7
The Board of Directors
Stewart Information Services Corporation
We consent to incorporation by reference in the registration
statements (No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535
and No. 333-03981) on Form S-8 of Stewart Information Services Corporation of
our report, which appears in the December 31, 1996 annual report on Form 10-K
of Stewart Information Services Corporation. We also consent to the reference
to us under the heading "Interests of Named Experts and Counsel" in such
Registration Statements.
/s/ AARONSON, WHITE & COMPANY
-----------------------------
AARONSON,WHITE & COMPANY
Houston, TX
<PAGE> 8
The Board of Directors
Stewart Information Services Corporation
I consent to the incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of my reports
which appear in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services Corporation. I also consent to the reference to me under
the heading "Interest of Named Experts and Counsel" in such Registration
Statements.
/s/ GINNY SANDERS MAY, CPA
- --------------------------
Lake Jackson, TX
March 11, 1997
<PAGE> 9
The Board of Directors
Stewart Information Services Corporation
We consent to the incorporation by reference in the registration statements
(No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No.
333-03981) on Form S-8 of Stewart Information Services Corporation of our
report which appears in the December 31, 1996 annual report on Form 10-K of
Stewart Information Services Corporation. We also consent to the reference to
us under the heading "Interest of Named Experts and Counsel" in such
Registration Statements.
/s/ EDGAR, KIKER & CROSS, L.L.P.
----------------------------------------------------
Certified Public Accountants
Beaumont, Texas
February 20, 1997
<PAGE> 10
The Board of Directors
Stewart Information Services Corporation
I consent to the incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, and No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of my report
which appears in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services Corporation. I also consent to the reference to me under
the heading "Interest of Named Experts and Counsel" in such Registration
Statements.
/s/ JIM S. WALKER
- -----------------
Jim S. Walker
Beaumont, TX
January 31, 1997
<PAGE> 11
The Board of Directors
Stewart Information Services Corporation
We consent to the incorporation by reference in the registration statements
(No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No.
333-03981) on Form S-8 of Stewart Information Services Corporation of our
report which appears in the December 31, 1996 annual report on Form 10-K of
Stewart Information Services Corporation. We also consent to the reference to
us under the heading "Interest of Named Experts and Counsel" in such
Registration Statements.
/s/ DOSHIER, PICKENS & FRANCIS, P.C.
Doshier, Pickens & Francis, P.C.
Amarillo, Texas
February 25, 1997
<PAGE> 12
The Board of Directors
Stewart Information Services Corporation
We consent to the incorporation by reference in the registration statements
(No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No.
333-03981) on Form S-8 of Stewart Information Services Corporation of our
report which appears in the December 31, 1996 annual report on Form 10-K of
Stewart Information Services Corporation. We also consent to the reference to
us under the heading "Interest of Named Experts and Counsel" in such
Registration Statements.
/s/ FANCHER AND COMPANY
Corpus Christi, Texas
February 28, 1997
<PAGE> 13
The Board of Directors
Stewart Information Services Corporation
I consent to the incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535 and No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of my report
which appears in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services Corporation. I also consent to the reference to me under
the heading "Interest of Named Experts and Counsel" in such Registration
Statements.
/s/ JESUS YEPEZ CPA
LUBBOCK, TX
FEBRUARY 5, 1997
<PAGE> 14
The Board of Directors
Stewart Information Services Corporation
We consent to incorporation by reference in the registration statements (No.
33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, and No- 333-
03981) on Form S-8 of Stewart Information Services Corporation of our report,
which appears in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services Corporation. We also consent to the reference to us under
the heading "Interests of Named Experts and Counsel" in such Registration
Statements.
/s/ WILLIAMS & PEARCY, P.C.
Williams & Pearcy, P.C.
Texarkana, USA
January 25, 1996
<PAGE> 15
The Board of Directors
Stewart Information Services Corporation
We consent to the incorporation by reference in the registration statements
(No. 33-48519, No. 33-48520, No. 33-58156, No. 33-59747, No. 33-62535, No. 333-
03981) on Form S-8 of Stewart Information Services Corporation of our reports
which appear in the December 31, 1996 annual report on Form 10-K of Stewart
Information Services Corporation. We also consent to the reference to us under
the heading "Interest of Named Experts and Counsel" in such Registration
Statements.
/s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C.
FLUSCHE, VAN BEVEREN, KILGORE, P.C.
Corpus Christi, Texas
February 28, 1997
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet as of December 31, 1996 and the related statement of earnings for the year
ended December 31, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<DEBT-HELD-FOR-SALE> 200,513
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 232,459
<CASH> 18,484
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 383,372
<POLICY-LOSSES> 150,331
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 12,324
0
0
<COMMON> 6,741
<OTHER-SE> 184,249
<TOTAL-LIABILITY-AND-EQUITY> 383,372
328,296
<INVESTMENT-INCOME> 14,451
<INVESTMENT-GAINS> 129
<OTHER-INCOME> 1,205
<BENEFITS> 33,830
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 22,878
<INCOME-TAX> 8,441
<INCOME-CONTINUING> 14,437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,437
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
<RESERVE-OPEN> 138,312
<PROVISION-CURRENT> 32,863
<PROVISION-PRIOR> 967
<PAYMENTS-CURRENT> 6,201
<PAYMENTS-PRIOR> 15,030
<RESERVE-CLOSE> 150,331
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
