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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, 1998
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)
<TABLE>
<S> <C>
DELAWARE 74-1677330
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1980 POST OAK BLVD., HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
</TABLE>
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 5, 1999, 6,589,539 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 March 5,
1999 of Stewart Information Services Corporation) held by non-affiliates of the
Registrant was approximately $224,456,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement (the "Proxy Statement"),
relating to the annual meeting of the Registrant's stockholders to be held
April 30, 1999, 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, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
ITEM
NO. PAGE
--- ----
<S> <C> <C>
1. Business ............................................................................... 1
2. Properties ............................................................................. 4
3. Legal Proceedings ...................................................................... 5
4. Submission of Matters to a Vote of Security Holders .................................... 5
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters .................. 6
6. Selected Financial Data ................................................................ 7
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations .......................................................................... 7
7A. Quantitative and Qualitative Disclosures About Market Risk ............................. 10
8. Financial Statements and Supplementary Data ............................................ 11
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure .......................................................................... 11
PART III
10. Directors and Executive Officers of the Registrant ..................................... 12
11. Executive Compensation ................................................................. 12
12. Security Ownership of Certain Beneficial Owners and Management ......................... 12
13. Certain Relationships and Related Transactions ......................................... 12
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ....................... 13
Signatures ............................................................................. 14
</TABLE>
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PART I
ITEM 1. BUSINESS
Stewart's primary business is title insurance. Stewart issues policies through
more than 4,200 issuing locations on homes and other real property located in
all 50 states, the District of Columbia and several foreign countries. Stewart
also sells computer-related services and information, as well as mapping
products and geographic information systems, to domestic and foreign
governments and private entities.
The Company's two segments of business are title and real estate information
("REI"). The segments significantly influence business to each other because of
the nature of their operations and their common customers. The segments provide
services through a network of offices, including both direct operations and
agents, throughout the United States. The operations in the several
international markets in which the Company does business are generally
insignificant to consolidated results.
The financial information related to these segments is discussed in Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations and is incorporated herein by reference.
TITLE
The title segment includes the functions of searching, examining, closing and
insuring the condition of the title to real property.
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.
Investments. The Company has established policies and procedures to manage its
exposure to changes in the fair value of its investments. These policies
include an emphasis on credit quality, management of portfolio duration,
maintaining or increasing investment income through high coupon rates and
actively managing profile and security mix depending on market conditions. The
Company has classified all of its investments as available-for-sale.
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.
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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, among other things,
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. A reserve
for incurred but not reported major losses is also maintained. 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.
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.
Selected information for the national real estate industry follows (1998
amounts are preliminary):
<TABLE>
<CAPTION>
------------ ------------ ------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Housing starts - millions ........................... 1.62 1.48 1.47
Housing resales - millions .......................... 4.78 4.22 4.09
Housing resales - median sales price in $
thousands ......................................... 130.1 124.1 118.1
</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 ten 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.
Financial strength and stability of the title underwriter is an important
factor in maintaining and increasing the Company's agency network. Out of the
nation's top five title insurers, Stewart earned the highest ratings awarded by
the industry's leading rating companies. Stewart received an A" from Demotech,
Inc., an A2 from Moodys and an A+ from Lace Financial and Duff & Phelps.
Market share. Estimating a title insurer's market share is difficult. Based on
unconsolidated statutory net premiums written for 1997 (1998 amounts are not
available), Stewart Title Guaranty Company ("Guaranty") is one of the leading
individual title insurers in America.
Competitors include (names are abbreviated) Chicago Title, Fidelity, First
American, Land America 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 4,249 at December
31, 1998, compared to 3,798 a year earlier and 3,763 two years earlier. Of
these totals 3,933, 3,517 and 3,488 were independent agents at December 31,
1998, 1997, and 1996, respectively.
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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.
REAL ESTATE INFORMATION
The real estate information segment provides services to the real estate and
mortgage industries primarily through the electronic delivery of services
needed for settlement. These services include title reports, flood
determinations, property appraisals, document preparation, credit reports and
other real estate information. In addition, this segment includes services
related to tax-deferred exchanges, surveys, the accounting and operating
systems of title agents and government authorities and the construction of
title plants.
Factors affecting revenues. As in the title segment, REI revenues are also
closely related to the level of activity in the real estate market.
Customers. The REI segment includes both mortgage services ancillary to the
settlement process as well as providing technology to facilitate the electronic
preparation and delivery of all types of real estate information. The primary
sources of REI business are lenders. Other customers include title offices,
real estate brokers, attorneys, municipalities and courthouses. No one customer
was responsible for as much as ten percent of Stewart's REI revenues in any of
the last three years.
The most important factor affecting customer acceptance and market share growth
is superior customer service. Similar to the title operations, the real estate
information being provided by the companies in this segment are a part of the
closing process which is driven by personal schedules and the interest and
other costs associated with the delays in the settlement.
GENERAL
Technology. Stewart's automation products and services are increasing
productivity in the title office and speeding the real estate closing process
for lenders, real estate professionals and consumers. In the past, an order
typically required several individuals to search the title, retrieve and review
documents and finally create the actual commitment. Today, one person can
receive the order electronically and, on the same screen, view the prior file,
examine the index of documents, retrieve and review electronically stored
documents, prepare the commitment and deliver the product on a normal
subdivision file.
Trademarks. Stewart has developed numerous automation products which are
crucial to both its title and REI segments. These products automate most facets
of the real estate transaction. Among these trademarked products are AIM(R),
LandataTitle Plant(TM), RESource(R), RealEC(TM) and Virtual Underwriter(R).
Employees. Stewart and its subsidiaries employed approximately 5,638 persons at
December 31, 1998.
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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 245,427 sq. ft. (1)
the Registrant and
Guaranty
Houston, Texas Leased office building Office of Guaranty 26,420 sq. ft. (2)
Dallas, Texas Leased office building Office of Guaranty 25,117 sq. ft. (3)
Los Angeles, California Leased office building Office of Guaranty 22,466 sq. ft. (1)
Riverside, California Leased office building Office of Guaranty 20,968 sq. ft. (4)
San Antonio, Texas Leased office building Office of Guaranty 20,864 sq. ft. (5)
San Diego, California Leased office building Office of Guaranty 20,020 sq. ft. (6)
Concord, California Leased office building Office of Guaranty 18,916 sq. ft. (4)
Denver, Colorado Leased office building Office of Guaranty 15,935 sq. ft. (7)
Austin, Texas Leased office building Office of Guaranty 14,278 sq. ft. (7)
Colorado Springs, Colorado Leased office building Office of Guaranty 14,000 sq. ft. (7)
Galveston, Texas Owned office building Office of Guaranty 50,000 sq. ft. 1905
San Antonio, Texas Owned office building Office of Guaranty 26,769 sq. ft. 1980 & 1982
Phoenix, Arizona Owned office building Office of Guaranty 24,459 sq. ft. 1981
Tucson, Arizona Owned office building Office of Guaranty 24,000 sq. ft. 1974
Phoenix, Arizona Owned office building Office of Guaranty 17,500 sq. ft. 1985
</TABLE>
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(1) These leases terminate in 2004.
(2) This lease terminates in 2002.
(3) This lease terminates in 1999.
(4) These leases terminate in 2003.
(5) This lease terminates in 2005.
(6) This lease terminates in 2000.
(7) These leases terminate in 2001.
The Registrant leases offices at approximately 328 locations. The
average term for all such leases is approximately six years. The leases expire
from 1999 to 2005. 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 $23,131,000.
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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ITEM 3. LEGAL PROCEEDINGS
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. The
Registrant does not expect that any of these proceedings will have a material
adverse effect on its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange
(NYSE) under the symbol "STC". 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>
1998:
First quarter ........................................ 32.25 28.50 .07
Second quarter ....................................... 53.88 30.31 .07
Third quarter ........................................ 67.75 43.00 .07
Fourth quarter ....................................... 58.75 45.00 .07
1997:
First quarter ........................................ 21.13 19.88 .06
Second quarter ....................................... 21.00 18.75 .06
Third quarter ........................................ 26.44 20.50 .07
Fourth quarter ....................................... 29.25 25.00 .07
</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.
The number of shareholders of record as of December 31, 1998 was
2,379. As of March 17, 1999, the price of one share of the Company's Common
Stock was $33.44.
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ITEM 6. SELECTED FINANCIAL DATA
(Ten year summary)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
In millions of dollars
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues...................... 968.8 708.9 656.0 534.6 611.1 683.6 540.7 385.5 374.0 315.5
Title segment:
Operating revenues............. 899.7 657.3 609.4 496.0 599.5 672.9 530.3 372.3 363.0 303.5
Investment income.............. 18.5 15.9 14.5 13.6 12.4 10.3 10.3 11.1 11.0 10.4
Investment gains (losses)...... 0.2 0.4 0.1 1.0 (0.8) 0.4 0.1 2.1 -- 1.6
Total revenues................. 918.4 673.6 624.0 510.6 611.1 683.6 540.7 385.5 374.0 315.5
Pretax earnings................ 73.2 29.2 22.5 10.8 13.8 37.6 21.2 1.1 0.9 (0.4)
REI segment: (1)
Revenues....................... 50.4 35.3 32.0 24.0
Pretax earnings................ 3.1 (5.5) 0.4 (0.1)
Title Loss provisions............... 39.2 29.8 33.8 29.6 40.2 58.6 54.1 40.7 38.2 33.0
% to title operating revenues.. 4.4 4.5 5.6 6.0 6.7 8.7 10.2 10.9 10.5 10.9
Net earnings (2).................... 47.0 15.3 14.4 7.0 9.7 23.7 14.6 1.7 0.2 0.1
Cash flow from operations........... 86.5 36.0 38.3 20.6 27.7 54.3 36.3 18.6 11.0 10.2
Total assets........................ 498.5 417.7 383.4 351.4 325.2 313.9 251.9 219.1 201.3 197.8
Long-term debt...................... 8.9 11.4 7.9 7.3 2.5 3.0 4.2 6.8 6.6 5.3
Stockholders' equity (3)............ 260.4 209.5 191.0 174.9 156.4 156.2 128.6 114.8 113.9 115.0
Per share data (4)
Average shares-diluted
(in thousands)................. 7,077 6,897 6,766 6,348 6,246 6,185 6,119 6,096 6,096 6,096
Net earnings-basic (2).............. 6.73 2.24 2.15 1.11 1.56 3.87 2.40 0.27 0.03 0.01
Net earnings-diluted (2)............ 6.65 2.22 2.13 1.10 1.55 3.83 2.39 0.27 0.03 0.01
Cash dividends...................... 0.28 0.26 0.24 0.21 0.20 0.17 0.15 0.13 0.23 0.33
Stockholders' equity (3)............ 36.86 30.34 28.33 27.36 25.17 25.37 21.10 18.84 18.69 18.87
Market price
High........................... 67.75 29.25 22.63 22.50 21.42 20.33 14.50 9.67 12.33 14.00
Low............................ 28.50 18.75 19.63 15.13 14.38 12.50 8.67 5.17 4.50 11.17
Year end....................... 58.00 29.00 20.75 21.50 15.38 20.00 13.67 9.17 5.25 11.33
</TABLE>
(1) Prior to 1995, segment operations for real estate information services
were not reported separately from title operations and were less
significant.
(2) Includes the following items, after providing for income taxes:
1997 - a writeoff of goodwill of $1.2 million, or $.18 per share.
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.
(3) Includes unrealized gains and losses upon adoption of FAS 115 in 1993.
(4) Restated for one-for-two stock split in April 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
A comparison of the results of operations of the Company for 1998 with 1997 and
1997 with 1996 follows.
GENERAL. The Company's two segments of operations are land titles and real
estate information. In general, the principal factors that contribute to
increases in the Company's operating 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
commercial transactions. Although relatively few in number, large commercial
transactions typically yield higher premiums.
Mortgage interest rates, on the average, fell from 7.81% in 1996 to
7.60% in 1997 and to 6.94% in 1998. In the early months of 1997, rates rose but
then began a fairly steady decline in May 1997 and fell each month that
followed. In 1998, rates rose slightly above 7% during the first half of the
year, but stayed just below 7% for the rest of the year.
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Operating in these mortgage interest rate environments and a strong
general economy, real estate activity began to increase in late 1997. Existing
home sales moved to record levels in the last quarter of 1997. Strong activity
in home sales continued throughout 1998. Refinancing transactions rose in the
last month of 1997 and in the first quarter of 1998 to record levels, decreased
in the second and third quarters and then increased dramatically to still
another record level in the fourth quarter of 1998.
TITLE REVENUES. The Company's revenues from premiums, fees and other revenues
increased 36.9% in 1998 over 1997 and 7.9% in 1997 over 1996. The number of
title orders opened and closed by the Company and the average revenue per order
closed follow (agent operations and certain other income have been excluded).
<TABLE>
<CAPTION>
------ ------ ------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Number of orders opened (000s)....................... 510 331 319
Number of orders closed (000s)....................... 368 247 239
Average revenue per order closed..................... $ 960 $ 979 $ 938
------ ------ ------
</TABLE>
Total closings increased 48.9% in 1998 and 3.2% in 1997. The average
revenue per closing decreased 1.9% in 1998 and increased 4.4% in 1997. The
average rate was increased each year by higher home prices, offset in 1998 by a
large number of refinancings with their lower premiums. A 3% reduction in Texas
title premiums became effective August 1, 1998. However, the Company is
experiencing new home equity business in Texas that did not exist before 1998.
There were no other major revenue rate changes in 1998 and 1997.
TITLE REVENUES BY STATE. The approximate amounts and percentages of
consolidated title revenues for the last three years were:
<TABLE>
<CAPTION>
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Amounts ($ millions) Percentages
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Texas................................ 162 116 111 18 18 18
California........................... 156 123 119 17 19 20
Florida.............................. 67 47 40 8 7 7
New York............................. 67 51 50 7 8 8
All Others........................... 448 320 289 50 48 47
--- --- --- --- --- ---
900 657 609 100 100 100
=== === === === === ===
</TABLE>
REI REVENUES. Real estate information revenues were $50.4 million in 1998,
$35.3 million in 1997 and $32.0 million in 1996. The increases in 1998 and 1997
were primarily due to a significant number of new businesses started and
additional income earned from existing operations. The Company terminated an
unprofitable REI business in late 1996 which reduced the revenue increase in
1997 over 1996.
INVESTMENTS. Investment income increased 16.2% in 1998 and 10.2% in 1997
primarily because of increases in average balances invested and higher market
yields. Investment gains in 1998, 1997 and 1996 were realized as part of the
ongoing management of the investment portfolio for the purpose of improving
performance.
AGENT RETENTION. Premiums earned from agents were $545.1 million in 1998,
$413.0 million in 1997 and $383.7 million in 1996. The amounts retained by
agents, as a percentage of premiums, were 80.4%, 81.0% and 81.3%, in the years
1998, 1997 and 1996, respectively.
Amounts retained by title agents are based on contracts between agents
and the title underwriters of the Company. The percentage that amounts retained
by agents bears to agent revenues may vary from year to year because of the
geographical mix of agent operations and the volume of title revenues.
EMPLOYEE AND OTHER EXPENSES. Employee costs for the combined segments of
businesses increased 33.2% in 1998 and 10.2% in 1997. The number of persons
employed by the Company at December 31, 1998, 1997 and 1996 was 5,638, 4,569,
and 4,111, respectively. The increase in staff in 1998 and 1997 was primarily
the result of increased title and REI volume and the expansion of the Company's
automation and national marketing operations. Through automating operating
processes, the Company expects to add customer revenues and reduce operating
expenses and title losses in the future.
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<PAGE> 11
Other operating expenses increased 24.8% in 1998 and 11.3% in 1997.
The overall increase for each year was caused primarily by changes in
transaction volume. Expenses that increased in 1998 were premium taxes, REI
expenses, business promotion, rent and supplies. Expenses that increased in
1997 were rent, premium taxes, business promotion and delivery costs. Other
operating expenses also include policy forms, 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 4.4%, 4.5% and 5.6% in 1998, 1997 and 1996,
respectively. The continued improvement in industry trends in claims and the
Company's improved experience in claims have led to lower loss ratios. An
increase in refinancing transactions, which results in lower loss exposure,
also reduced loss ratios. Such transactions were at record levels in 1998.
The Company's labor and certain other operating costs are sensitive to
inflation. 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.
NONRECURRING CHARGE. A subsidiary in the REI segment was sold in early 1998. A
pretax writeoff of $1.9 million of goodwill in the subsidiary was recorded in
the fourth quarter of 1997. The subsidiary incurred after-tax operating losses
of $1.0 million in 1997.
INCOME TAXES. The provision for federal and state income taxes represented
effective tax rates of 38.4%, 35.4% and 36.9% in 1998, 1997 and 1996,
respectively. The 1998 and 1996 effective tax rates were higher primarily
because nontaxable income from municipal bonds was significantly less in
relation to pretax profits.
LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operations was $86.5 million,
$36.0 million and $38.3 million in 1998, 1997 and 1996, 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.
A substantial majority of consolidated cash and investments is held by
Stewart Title Guaranty Company (Guaranty) and its subsidiaries. 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, is comprised of cash and investments aggregating $11.5 million
and short-term liabilities of $1.2 million at December 31, 1998. The Company
knows of no commitments or uncertainties which are likely to materially affect
the ability of the Company and its subsidiaries to fund cash needs.
The Company's capital resources, represented primarily by long-term
debt of $8.9 million and stockholders' equity of $260.4 million at December 31,
1998, are considered adequate.
THE YEAR 2000 ISSUE. Information technology is a crucial part of the Company's
business. The Company recognizes the technological challenges associated with
the Year 2000 ("Y2K") Issue. It has established a formal compliance plan to
address these challenges and a Y2K Team to carry out this plan. The plan
includes several distinct phases: (1) assessment, (2) remediation, (3) testing
and (4) implementation. The progress of the work of the Y2K Team is monitored
by the Company's senior management and the audit committee of the Company's
board of directors.
Computer software is used in the title and real estate information
segments of the Company's business. The uses of software in the title segment
include searching and examining titles, closing transactions, accounting for
agent policies and claims. In the real estate information segment, software is
used in providing mortgage services, such as flood determinations, appraisals
and assignments.
Most of this software was developed by the Company in recent years
with Y2K issues in mind. The Company has substantially completed its assessment
and remediation of this software. All remaining remediation and testing is
scheduled to be completed during the second quarter of 1999. Implementation is
being carried out as remediation is completed, with the implementation expected
to be completed early in the third quarter of 1999.
-9-
<PAGE> 12
In addition to its work on internally-developed computer software, the
Company has conducted an inventory of its systems worldwide. This inventory
includes software and hardware acquired from third parties for use by the
Company. The inventory also includes critical non-information technology
systems which may house non-compliant, embedded technology, such as fax
machines, photocopiers, telephone facilities and other common devices.
Assessment of these systems is ongoing and any necessary remediation is
scheduled for completion by the second quarter of 1999. Mission critical
systems have been given high priority.
Certain subsidiaries that have been acquired by the Company and still
operate with different systems from the Company's have been given high priority
under the Company's Y2K plan. The Company expects to complete all phases of Y2K
compliance for these subsidiaries during the second quarter of 1999.
In addition to addressing the Company's own systems, as described
above, the Y2K Team must assess the state of readiness of the systems of other
entities with which it does business. These include independent title insurance
agents and other business partners, such as county courthouses and lenders,
whose condition or operational capability is important to the Company. Failure
by these third parties to resolve adequately their Y2K problems could have a
material adverse effect on the Company's operations.
The Company believes its success in being Y2K compliant will not be
conclusively known until the year 2000 is actually reached. Failure by one or
more of the Company's own systems could result in lost revenues and additional
expenses required to carry out manual processing of transactions. The magnitude
of the failure of external forces on the business of the Company cannot be
predicted. Failures by the telecommunications industry, banking institutions
and others could have far-reaching, materially adverse effects on the Company,
the title insurance industry and the entire economy.
The Company expects to complete its Y2K program in a timely manner.
However, the Company believes that it is not possible to determine with
certainty that all Y2K issues have been identified or corrected. The number of
devices that could be affected and the interactions among these devices are
simply too numerous. In addition, the Company cannot accurately predict how
many failures related to the Y2K problem will occur or the severity, duration
or financial consequences of such failures. The Company has hired an outside
Y2K consultant to assist the Company in meeting its goals and in developing
contingency plans to define and address the worst-case scenario likely to be
faced. The plan is expected to be in place by the second quarter of 1999.
The Company has spent approximately $0.7 million during 1997 and 1998
directly related to assessing, remediating and testing its information
technology systems. These amounts have been funded from operations.
The Company currently estimates that the total cost of its Y2K
compliance program will not exceed $4.0 million. A significant portion of the
remaining costs are expected to be incurred during the first and second
quarters of 1999.
This entire section ("Year 2000 Issue") is hereby designated a "Year
2000 Readiness Disclosure", as defined in the Year 2000 Information and
Readiness Disclosure Act.
FORWARD LOOKING STATEMENTS. All statements included in this report which
address activities, events or developments that the Company expects or
anticipates will or may occur in the future are forward-looking statements.
Such forward-looking statements are subject to risks and uncertainties
including, among other things, changes in mortgage interest rates, employment
levels, actions of competitors, changes in real estate markets, general
economic conditions and legislation, primarily legislation related to
insurance, and other risks and uncertainties discussed in the Company's filings
with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The discussion below about the Company's risk management strategies
includes forward-looking statements that are subject to risk and uncertainties.
Management's projections of hypothetical net losses in fair value of the
Company's market rate sensitive instruments should certain potential changes in
market rates occur is presented below. While the Company believes that the
potential market rate changes are reasonably possible, actual results may
differ.
The Company's only material market risk in investments in financial
instruments is in its debt securities portfolio. The Company invests primarily
in marketable municipal, US government, corporate and mortgage-backed debt
securities. The Company does not invest in financial instruments of a hedging
or derivative nature.
-10-
<PAGE> 13
The Company has established policies and procedures to manage its
exposure to changes in the fair value of its investments. These policies
include an emphasis upon credit quality, management of portfolio duration,
maintaining or increasing investment income through high coupon rates and
actively managing profile and security mix depending upon market conditions.
The Company has classified all of its investments as available-for-sale.
The fair value of the Company's investments in debt securities at
December 31, 1998 was $221.6 million. Debt securities at December 31, 1998
mature, according to their contractual terms, as follows (actual maturities may
differ because of call or prepayment rights):
<TABLE>
<CAPTION>
Amortized Fair
costs values
------- -------
($000 Omitted)
<S> <C> <C>
In one year or less....................................................... 5,215 5,266
After one year through five years......................................... 46,652 48,317
After five years through ten years........................................ 106,831 112,033
After ten years........................................................... 50,082 51,799
Mortgage-backed securities................................................ 4,131 4,233
------- -------
212,911 221,648
======= =======
</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.
Based on the Company's debt securities portfolio and interest rates at
December 31, 1998, a 100 basis point increase in interest rates would result in
a decrease of approximately $11.5 million or 5.2% in the fair value of the
portfolio. Changes in interest rates may affect the fair value of the debt
securities portfolio and may result in unrealized gains or losses. Gains or
losses would only be realized upon the sale of the investments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required to be provided in this item is included in
the Consolidated Financial Statements of the Company, including the Notes
thereto, attached hereto as pages F-2 to F-16, and such information is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-11-
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the directors of the Company will be
included in the proxy statement for the 1999 Annual Meeting of Stockholders
(the "Proxy Statement") to be filed within 120 days after December 31, 1998,
and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation will be included in the
Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information, if any, regarding beneficial ownership of the Common
Stock will be included in the Proxy Statement and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding Certain Relationships and Related Transactions
will be included in the Proxy Statement and is incorporated herein by
reference.
-12-
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
The financial statements and financial statement schedules filed as part
of this report are listed in the "Index to Consolidated Financial
Statements" on Page F-1 hereof.
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, 1998.
(c) Exhibits
3.1 - Certificate of Incorporation of the Registrant, as amended April
30, 1993 (incorporated by reference herein from Exhibit 3.1 of
Annual Report on Form 10-K for the fiscal year ended December 31,
1997)
3.2 - By-Laws of the Registrant, as amended September 1, 1998
(incorporated by reference herein from Exhibit 3.2 of Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998)
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, amended
July 24, 1990 and October 30, 1992, between the Registrant and
certain executive officers (incorporated by reference herein from
Exhibit 10.2 of Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
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
*Indicates a management contract or compensation plan.
-13-
<PAGE> 16
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 17, 1999
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 17, 1999
- ------------------------------ --------------
(Max Crisp)
E. Douglas Hodo Director March 17, 1999
- ------------------------------ --------------
(E. Douglas Hodo)
C. M. Hudspeth Director March 17, 1999
- ------------------------------ --------------
(C. M. Hudspeth)
Carloss Morris Director March 17, 1999
- ------------------------------ --------------
(Carloss Morris)
Stewart Morris Director March 17, 1999
- ------------------------------ --------------
(Stewart Morris)
-14-
<PAGE> 17
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Stewart Information Services Corporation and Subsidiaries
Consolidated Financial Statements:
Independent Auditors' Report F-2
Consolidated Statements of Earnings and Retained Earnings for the years ended
December 31, 1998, 1997 and 1996 F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 F-5
Notes to Consolidated Financial Statements F-6
Reports of Independent Auditors F-17
Financial Statement Schedules:
Schedule II - Financial Information of the Registrant (Parent Company) S-1
Schedule V - Valuation and Qualifying Accounts S-5
</TABLE>
F-1
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Stewart Information Services Corporation
We have audited the consolidated financial statements of Stewart Information
Services Corporation and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules 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 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998 in conformity with
generally accepted accounting principles. Also, in our opinion, the related
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.
KPMG LLP
Houston, Texas
February 10, 1999
F-2
<PAGE> 19
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
------- ------- -------
Years ended December 31 1998 1997 1996
------- ------- -------
($000 Omitted)
<S> <C> <C> <C>
REVENUES
Title premiums, fees and other revenues........ 899,673 657,298 609,408
Real estate information services............... 50,372 35,320 32,030
Investment income.............................. 18,515 15,929 14,451
Investment gains - net ........................ 201 363 129
------- ------- -------
968,761 708,910 656,018
EXPENSES
Amounts retained by agents..................... 438,338 334,653 311,937
Employee costs................................. 250,966 188,385 170,944
Other operating expenses....................... 142,826 114,422 102,768
Title losses and related claims................ 39,226 29,794 33,830
Depreciation and amortization.................. 14,584 12,115 11,007
Interest....................................... 1,424 1,343 1,140
Minority interests............................. 5,070 2,614 1,514
Nonrecurring charge............................ -- 1,905 --
------- ------- -------
892,434 685,231 633,140
Earnings before taxes............................. 76,327 23,679 22,878
Income taxes...................................... 29,289 8,391 8,441
------- ------- -------
NET EARNINGS...................................... 47,038 15,288 14,437
Retained earnings at beginning of year............ 145,140 131,496 118,547
Cash dividends on Common Stock ($.28, $.26
and $.24 per share)............................ (1,815) (1,644) (1,488)
------- ------- -------
Retained earnings at end of year.................. 190,363 145,140 131,496
======= ======= =======
Average number of shares outstanding -
assuming dilution (000 omitted)................ 7,077 6,897 6,766
Earnings per share - basic........................ 6.73 2.24 2.15
EARNINGS PER SHARE - DILUTED...................... 6.65 2.22 2.13
======= ======= =======
Comprehensive earnings:
Net earnings...................................... 47,038 15,288 14,437
Changes in unrealized investment gains,
net of taxes of $858, $1,409 and ($1,104)...... 1,593 2,616 (2,050)
------- ------- -------
Comprehensive earnings............................ 48,631 17,904 12,387
======= ======= =======
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 20
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
------- -------
December 31 1998 1997
------- -------
($000 Omitted)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................................ 44,883 30,391
Short-term investments............................................... 59,446 35,761
Investments in debt and equity securities, at market:
Statutory reserve funds.......................................... 164,554 138,462
Other............................................................ 62,758 71,044
------- -------
227,312 209,506
Receivables:
Notes............................................................ 8,137 7,329
Premiums from agents............................................. 16,051 10,315
Other............................................................ 27,347 19,776
Less allowance for uncollectible amounts......................... (4,803) (5,552)
------- -------
46,732 31,868
Property and equipment, at cost:
Land............................................................. 2,335 2,266
Buildings........................................................ 6,476 6,372
Furniture and equipment.......................................... 97,111 80,804
Less accumulated depreciation and amortization................... (69,530) (59,027)
------- -------
36,392 30,415
Title plants, at cost................................................ 23,608 21,778
Real estate, at lower of cost or net realizable value................ 2,202 1,583
Investments in investees, on an equity basis......................... 7,368 7,231
Goodwill, less accumulated amortization of $6,995 and
$5,840............................................................ 23,615 18,427
Deferred income taxes................................................ 10,633 15,632
Other assets......................................................... 16,290 15,099
------- -------
498,481 417,691
LIABILITIES
Notes payable, including $8,894 and $11,442 long-term
portion........................................................... 16,194 19,087
Accounts payable and accrued liabilities............................. 42,615 26,553
Estimated title losses............................................... 171,763 156,791
Income taxes......................................................... 1,963 1,364
Minority interests................................................... 5,503 4,392
Contingent liabilities and commitments
Stockholders' equity
Common - $1 par, authorized 15,000,000, issued and
outstanding 6,539,965 and 6,381,046.............................. 6,540 6,381
Class B Common - $1 par, authorized 1,500,000, issued and
outstanding 525,006.............................................. 525 525
Additional paid-in capital........................................... 56,886 52,922
Retained earnings.................................................... 190,363 145,140
Accumulated other comprehensive earnings ............................ 6,129 4,536
------- -------
Total stockholders' equity ($36.86 and $30.34 per share)......... 260,443 209,504
------- -------
498,481 417,691
======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 21
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31 1998 1997 1996
-------- ------- -------
($000 Omitted)
<S> <C> <C> <C>
Cash provided by operating activities (Note)..................... 86,467 35,959 38,349
Investing activities:
Purchases of property and equipment and title
plants-net................................................. (20,473) (13,209) (12,670)
Proceeds from investments matured and sold ................... 65,770 40,133 47,724
Purchases of investments ..................................... (104,017) (48,554) (69,213)
Increases in notes receivable................................. (2,316) (2,644) (1,340)
Collections on notes receivable............................... 2,141 1,006 2,833
Cash paid for the acquisition of subsidiaries-net............. (5,886) (3,592) (493)
-------- ------- -------
Cash used by investing activities................................ (64,781) (26,860) (33,159)
Financing activities:
Dividends paid................................................ (1,815) (1,644) (1,488)
Distribution to minority interests............................ (4,031) (2,131) (1,599)
Proceeds from issuance of stock............................... 1,543 135 11
Proceeds of notes payable..................................... 9,150 10,688 4,366
Payments on notes payable..................................... (12,041) (4,240) (4,694)
-------- ------- -------
Cash (used) provided by financing activities..................... (7,194) 2,808 (3,404)
-------- ------- -------
Increase in cash and cash equivalents............................ 14,492 11,907 1,786
======== ======= =======
Note: Reconciliation of net earnings to the above amounts
Net earnings.................................................. 47,038 15,288 14,437
Add (deduct):
Depreciation and amortization................................. 14,584 12,115 11,007
Provisions for title losses in excess of payments............. 14,185 6,460 12,019
Provision for uncollectible amounts-net....................... (749) (1,118) 171
(Increase) decrease in accounts receivable-net................ (12,473) 2,660 (2,419)
Increase in accounts payable and accrued
liabilities-net............................................ 16,577 1,419 4,195
Provision (benefit) for deferred income taxes................. 4,142 (1,886) 596
Increase (decrease) in income taxes payable................... 599 945 (1,184)
Minority interest expense..................................... 5,070 2,614 1,514
Equity in net earnings of investees........................... (1,477) (1,964) (980)
Realized investment gains-net................................. (201) (363) (129)
Stock bonuses................................................. 577 409 328
Increase in other assets...................................... (1,952) (2,963) (1,151)
Nonrecurring charge........................................... -- 1,905 --
Other-net..................................................... 547 438 (55)
-------- ------- -------
Cash provided by operating activities 86,467 35,959 38,349
======== ======= =======
Supplemental information:
Income taxes paid......................................... 26,511 7,636 9,004
Interest paid............................................. 1,478 1,222 1,092
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Three years ended December 31, 1998)
NOTE 1
A. 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.
B. RECLASSIFICATION. Certain prior year amounts in the consolidated financial
statements have been reclassified for comparative purposes. Net earnings, as
previously reported, were not affected.
C. 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.
D. STATUTORY ACCOUNTING. The accounts of Stewart Title Guaranty Company
(Guaranty) and other title insurance underwriters owned by the Company 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.
E. 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.
F. 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,
among other things, 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. A
reserve for incurred but not reported major losses is also maintained. 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.
G. 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.
H. 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.
I. INVESTMENTS. The Company has classified all of its investments as
available-for-sale. Net unrealized gains or losses on securities, net of
applicable taxes, are included in stockholders' equity. Any permanent declines
in fair values of securities are charged to earnings.
F-6
<PAGE> 23
J. PROPERTY AND EQUIPMENT. Depreciation is computed principally using 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.
K. 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 creating 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 at the time of sale.
L. 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.
M. LONG-LIVED ASSETS. 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.
N. FAIR VALUES. The fair values of financial instruments, including cash, cash
equivalents, notes receivable, notes payable, accounts payable and commitments,
are determined by reference to various market data and other valuation
techniques, as appropriate. The fair values of these financial instruments
approximate their carrying values. Investments in debt and equity securities
are carried at their fair values.
O. ESCROW FUNDS. Cash held in escrow for customers is excluded from the balance
sheets.
P. COMPREHENSIVE INCOME. As of January 1, 1998, the Company adopted FAS 130
"Reporting Comprehensive Income". The Company's comprehensive income includes
net earnings and all non-owner related changes to stockholders' equity, which
is primarily unrealized gains on investments.
Q. DERIVATIVES AND HEDGING. The Company does not invest in hedging or
derivative instruments nor does it intend to do so in the future. Accordingly,
FAS 133 "Accounting for Derivative Instruments and Hedging Activities", which
becomes effective January 1, 1999, will have no impact on the consolidated
financial statements.
NOTE 2
NONRECURRING CHARGE. During the fourth quarter of 1997, the Company recorded a
pretax charge of $1,905,000 representing the writeoff of goodwill in a
subsidiary located in England that was sold in early 1998. This subsidiary was
included in the REI segment of the Company's operations until its sale.
NOTE 3
INCOME TAXES. The following reconciles federal income taxes computed at the
statutory rate with income taxes as reported.
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
($000 Omitted)
<S> <C> <C> <C> <C>
Expected income taxes at 35%..................... 26,714 8,288 8,007
State income taxes............................... 2,932 537 908
Tax effect of permanent differences:
Tax-exempt interest.......................... (1,779) (1,640) (1,407)
Nondeductible items.......................... 661 558 465
Equity income................................ (517) (687) (343)
Minority interests........................... 1,775 915 530
Other - net.................................. (497) 420 281
------ ----- -----
Income taxes.................................... 29,289 8,391 8,441
====== ===== =====
Effective income tax rate (%).................... 38.4 35.4 36.9
====== ===== =====
</TABLE>
F-7
<PAGE> 24
Deferred tax assets and liabilities at December 31, 1998 and 1997 were
as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
($000 Omitted)
<S> <C> <C>
Deferred tax assets:
Book over tax title loss provisions....................... 10,389 15,830
Accruals not currently deductible......................... 1,035 302
Net operating losses...................................... 972 810
Allowance for bad debts................................... 777 1,269
Book over tax depreciation................................ 898 359
Writeoff of goodwill...................................... -- 667
Other..................................................... 2,103 1,023
------ ------
16,174 20,260
Less valuation allowance.................................. (1,008) (805)
------ ------
15,166 19,455
Deferred tax liabilities:
Unrealized gains on investments........................... (3,301) (2,443)
Investments in partnerships............................... (835) (985)
Other..................................................... (397) (395)
------ ------
(4,533) (3,823)
------ ------
Net deferred tax assets...................................... 10,633 15,632
====== ======
</TABLE>
The Company's valuation allowance relates to portions of certain
subsidiary operating loss carryforwards and other deferred tax assets.
Management believes future earnings will be sufficient to permit the Company to
realize net deferred tax assets.
There was a deferred tax expense of $4,142,000 in 1998, a deferred tax
benefit of $1,886,000 in 1997 and a deferred tax expense of $596,000 in 1996.
NOTE 4
RESTRICTIONS ON CASH AND INVESTMENTS. The statutory reserve funds included in
the accompanying financial statements are maintained to comply with legal
requirements for statutory premium reserves and state deposits.
These funds are not available for any other purpose.
A substantial majority of investments and cash at each year end was
held by the Company's 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 the 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 1998 was $29,036,000. Guaranty paid
dividends significantly less than maximum legal limits in 1998, 1997 and 1996.
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 customers when buying a policy from a particular insurer.
F-8
<PAGE> 25
NOTE 6
INVESTMENTS. The amortized costs and market values of investments in debt and
equity securities at December 31 follow:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Amortized Market Amortized Market
costs values costs values
--------- ------ --------- ------
($000 Omitted)
<S> <C> <C> <C> <C>
Debt securities:
Municipal......................... 128,745 133,533 106,645 110,627
Mortgage-backed................... 4,131 4,233 26,466 27,085
US Government..................... 23,325 24,086 24,344 24,867
Corporate and utilities........... 56,710 59,796 41,028 42,718
Equity securities................. 4,971 5,664 4,044 4,209
------- ------- ------- -------
217,882 227,312 202,527 209,506
======= ======= ======= =======
</TABLE>
Gross unrealized gains and losses at December 31 were:
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
Gains Losses Gains Losses
----- ------ ----- ------
($000 Omitted)
<S> <C> <C> <C> <C>
Debt securities:
Municipal........................ 5,006 218 4,013 31
Mortgage-backed.................. 103 1 1,433 814
US Government.................... 789 28 636 113
Corporate and utilities.......... 3,182 96 1,709 19
Equity securities................ 749 56 165 --
----- --- ----- ---
9,829 399 7,956 977
===== === ===== ===
</TABLE>
Debt securities at December 31, 1998 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.............................................. 5,215 5,266
After one year through five years................................ 46,652 48,317
After five years through ten years............................... 106,831 112,033
After ten years.................................................. 50,082 51,799
Mortgage-backed securities....................................... 4,131 4,233
------- -------
212,911 221,648
======= =======
</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.
F-9
<PAGE> 26
NOTE 7
INVESTMENT INCOME. Income from investments and net realized gains and losses
from sales of investments for the three years follow:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
($000 Omitted)
<S> <C> <C> <C>
Income:
Debt securities........................................... 12,143 11,938 11,376
Short-term investments, cash equivalents
and other............................................... 6,372 3,991 3,075
------ ------ ------
18,515 15,929 14,451
====== ====== ======
Realized gains and losses:
Gains...................................................... 1,923 571 632
Losses..................................................... (1,722) (208) (503)
------ ------ ------
201 363 129
====== ====== ======
</TABLE>
The sales of securities resulted in proceeds of $54,368,000 in 1998,
$30,870,000 in 1997 and $33,191,000 in 1996.
Expenses assignable to investment income were insignificant. There
were no significant investments at December 31, 1998 that did not produce
income during the year.
NOTE 8
NOTES PAYABLE.
<TABLE>
<CAPTION>
1998 1997
------ ------
($000 Omitted)
<S> <C> <C>
Banks
Primarily unsecured, 5.2% to 8.5%, varying payments............. 13,174 17,384
Other than banks................................................... 3,020 1,703
------ ------
16,194 19,087
====== ======
</TABLE>
The above notes are due $7,300,000 in 1999, $3,114,000 in 2000,
$3,781,000 in 2001, $520,000 in 2002, $129,000 in 2003 and $1,350,000
subsequent to 2003.
F-10
<PAGE> 27
NOTE 9
ESTIMATED TITLE LOSSES. Provisions accrued, payments made and liability
balances for the three years follow:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
($000 Omitted)
<S> <C> <C> <C>
Balances at January 1................................ 156,791 150,331 138,312
Provisions........................................ 39,226 29,794 33,830
Payments.......................................... (25,041) (23,334) (21,231)
Reserve balance acquired.......................... 787 -- --
Decrease in salvage............................... -- -- (580)
------- ------- -------
Balances at December 31........................... 171,763 156,791 150,331
======= ======= =======
</TABLE>
Provisions include amounts related to the current year of
approximately $36,327,000, $27,188,000 and $32,863,000 for 1998, 1997 and 1996,
respectively. Payments related to the current year, including escrow and other
loss payments, were approximately $5,977,000, $5,991,000 and $6,201,000 for
1998, 1997 and 1996, 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(F) for the principles followed in accounting for title losses and
related claims.
NOTE 10
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, 1998 and 1997, there were 72,910 shares (cost
$233,000) 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.
F-11
<PAGE> 28
NOTE 11
CHANGES IN COMMON STOCK. Changes in stock and additional paid-in capital for
the years ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Class B Additional
Common Common paid-in
Stock Stock capital
----- ----- ------
($000 Omitted)
<S> <C> <C> <C>
Balances at December 31, 1995........................ 5,865 525 45,945
Acquisitions...................................... 335 -- 4,362
Stock bonuses and other........................... 15 -- 313
Exercise of stock options......................... 1 -- 10
Foreign currency translation...................... -- -- 203
----- --- ------
Balances at December 31, 1996........................ 6,216 525 50,833
Acquisitions...................................... 137 -- 1,634
Stock bonuses and other........................... 19 -- 390
Exercise of stock options......................... 9 -- 126
Foreign currency translation...................... -- -- (61)
----- --- ------
Balances at December 31, 1997........................ 6,381 525 52,922
Acquisitions...................................... 41 -- 1,659
Stock bonuses and other........................... 17 -- 560
Exercise of stock options......................... 101 -- 1,442
Tax benefit on stock options exercised ........... -- -- 828
Foreign currency translation...................... -- -- 51
Treasury stock.................................... -- -- (576)
----- --- ------
Balances at December 31, 1998........................ 6,540 525 56,886
===== === ======
</TABLE>
NOTE 12
STOCK OPTIONS. A summary of the status of the Company's fixed stock option
plans as of December 31, 1998, 1997 and 1996, and changes during the years
ended on those dates, follows:
<TABLE>
<CAPTION>
Exercise
Shares prices(1)
------ ---------
($)
<S> <C> <C>
December 31, 1995............................................... 158,400 12.57
Granted...................................................... 37,900 21.09
Exercised.................................................... (1,200) 9.17
-------- -----
December 31, 1996............................................... 195,100 14.25
Granted...................................................... 38,400 19.85
Exercised.................................................... (8,500) 15.77
Forfeited.................................................... (6,900) 13.58
-------- -----
December 31, 1997............................................... 218,100 15.20
Granted...................................................... 45,300 37.67
Exercised.................................................... (101,400) 15.21
Forfeited.................................................... (5,200) 15.82
-------- -----
December 31, 1998............................................... 156,800 21.67
======== =====
</TABLE>
(1) Weighted average
F-12
<PAGE> 29
At December 31, 1998, 1997 and 1996 there were 140,350, 186,838 and
179,049 options, respectively, exercisable. The weighted-average fair values of
options granted during the years 1998, 1997 and 1996 were $14.35, $6.79 and
$6.73, respectively.
The following summarizes information about fixed stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
--------------------------------------------------------
Range of exercise prices($) Total
9.17 to 19.50 to 37.56 to 9.17 to
15.38 21.50 37.88 37.88
------- -------- -------- -------
<S> <C> <C> <C> <C>
Options outstanding:
Shares.................................. 46,400 68,100 42,300 156,800
Remaining contractual life-years(1)..... 3.0 6.5 8.0 5.9
Exercise price(1)....................... 9.36 20.12 37.65 21.67
Options exercisable:
Shares.................................. 46,400 51,650 42,300 140,350
Exercise price(1)....................... 9.36 20.32 37.65 21.92
------ ------ ------ -------
</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 is estimated using the
Black-Scholes model. The Company assumed a dividend yield of 0.7%, an expected
life of five to ten years for each option, expected volatility of 22.2% and
risk-free interest rates between 5.0% and 6.3% for the years 1998, 1997 and
1996.
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>
1998 1997 1996
------ ------ ------
($000 Omitted)
<S> <C> <C> <C>
Net earnings:
As reported......................................... 47,038 15,288 14,437
Pro forma........................................... 46,615 15,119 14,271
Earnings per share:
Net earnings-basic.................................. 6.73 2.24 2.15
Net earnings-assuming dilution...................... 6.65 2.22 2.13
Pro forma-assuming dilution......................... 6.59 2.19 2.11
</TABLE>
NOTE 13
EARNINGS PER SHARE. The Company follows FAS 128 "Earnings per Share" which
became effective for financial statements issued after December 15, 1997. All
prior period earnings per share amounts have been restated to conform to the
provisions of the Statement.
The Company's basic earnings per share figures were calculated by dividing net
earnings by the weighted average number of shares of Common Stock and Class B
Common Stock outstanding during the reporting period.
To calculate diluted earnings per share, the number of shares determined above
was increased by assuming the issuance of all dilutive shares during the same
reporting period. The treasury stock method was used in calculating the
additional number of shares. The only potential dilutive effect on earnings per
share for the Company related to its stock option plans.
In calculating the effect of the options and determining a figure for diluted
earnings per share, the average number of shares used in calculating basic
earnings per share was increased by 91,000 in 1998, 68,000 in 1997 and 59,000
in 1996.
F-13
<PAGE> 30
NOTE 14
LEASES. The Company's expense for leased office space was $23,131,000 in 1998,
$20,520,000 in 1997 and $18,586,000 in 1996. 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>
1999.............................................................. 20,270
2000.............................................................. 16,911
2001.............................................................. 13,801
2002.............................................................. 10,286
2003.............................................................. 8,656
2004 and after.................................................... 4,361
------
74,285
======
</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(F).
Claims have been made at December 31, 1998 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, 1998 will not 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.
Various takeout commitments approximated $3,364,000 at December 31,
1998. 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 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, 1998. 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>
1998 1997 1996
------ ------ ------
($000 Omitted)
<S> <C> <C> <C>
For the year:
Revenues............................................. 85,706 66,760 59,368
Net earnings......................................... 5,360 4,808 3,120
As of December 31:
Total assets........................................ 47,331 30,508
Stockholders' equity................................ 19,760 17,389
</TABLE>
F-14
<PAGE> 31
NOTE 18
SEGMENT INFORMATION. The Company's two reportable segments are title and real
estate information. The segments significantly influence business to each other
because of the nature of their operations and their common customers.
The title segment includes the functions of searching, examining,
closing and insuring the condition of the title to real property. The real
estate information segment provides services to the real estate and mortgage
industries primarily through the electronic delivery of services needed for
settlement. These services include title reports, flood determinations,
property appraisals, document preparation, credit reports and other real estate
information. In addition, this segment includes services related to
tax-deferred exchanges, surveys, the accounting and operating systems of title
agents and government authorities and the construction of title plants.
The segments provide services through a network of offices, including
both direct operations and agents, throughout the United States. The operations
in the several international markets in which the Company does business are
generally insignificant to consolidated results.
Under the Company's internal reporting and accountability systems,
most general corporate expenses are incurred by and charged to the title
segment. Technology operating costs are also charged to the title segment,
except for direct expenditures relating to the real estate information segment.
These expenditures are charged to that segment. All investment income is
included in the title segment as it is generated primarily from the investments
of the title underwriting operations.
<TABLE>
<CAPTION>
Real estate
Title information Total
----- ----------- -----
($000 omitted)
<S> <C> <C> <C> <C>
Revenues:
1998 918,389 50,372 968,761
1997 673,590 35,320 708,910
1996 623,988 32,030 656,018
Pretax earnings (losses):
1998 73,198 3,129 76,327
1997 29,145 (5,466)(1) 23,679
1996 22,462 416 22,878
Identifiable assets:
1998 463,030 35,451 498,481
1997 392,963 24,728 417,691
</TABLE>
(1) Includes a nonrecurring pretax charge of $1,905,000 for a writeoff of
goodwill in a subsidiary that was sold in 1998.
NOTE 19
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:
1998........................................ 197,042 235,439 250,425 285,855
1997........................................ 145,966 174,006 182,626 206,312
Net earnings:
1998........................................ 8,625 11,258 14,048 13,107
1997........................................ 64 5,528 5,487 4,209
Earnings per share-diluted:
1998........................................ 1.23 1.59 1.98 1.84
1997........................................ .01 .81 .80 .61
</TABLE>
F-15
<PAGE> 32
STEWART TITLE GUARANTY COMPANY
STEWART TITLE INSURANCE COMPANY
Principal Underwriters of Stewart Information Services Corporation
UNCONSOLIDATED STATUTORY BALANCE SHEETS
From statutory Annual Statements as filed (unaudited)
<TABLE>
<CAPTION>
Stewart Title Stewart Title
December 31, 1998 Guaranty Company Insurance Company
---------------- -----------------
($000 Omitted)
<S> <C> <C>
Admitted assets
Bonds.................................................................... 190,411 21,553
Stocks - investments in affiliates....................................... 115,071 1,088
Stocks - other........................................................... 6,507 --
Cash and bank deposits................................................... 28,630 1,990
Short-term investments................................................... 8,731 --
Title plants............................................................. 4,797 229
Title insurance premiums, fees and other receivables .................... 13,590 849
Other.................................................................... 9,049 776
------- ------
376,786 26,485
======= ======
Liabilities, surplus and other funds
Reserve for title losses................................................. 31,856 3,541
Statutory premium reserve................................................ 146,440 6,807
Other.................................................................... 14,524 1,200
------- ------
192,820 11,548
Surplus as regards policyholders (Note) 183,966 14,937
------- ------
376,786 26,485
======= ======
</TABLE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
Consolidated stockholder's equity (unaudited), based on generally accepted
accounting principles (GAAP), for Stewart Title Guaranty Company at
December 31, 1998 was ($000 omitted)........................................................... $228,950
========
</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.
F-16
<PAGE> 33
To the Board of Directors
Stewart Title of Fresno County
Fresno, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets 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 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 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 8, 1997
F-17
<PAGE> 34
To the Board of Directors
Stewart Title of Monterey County
Monterey, California
INDEPENDENT AUDITOR'S 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
F-18
<PAGE> 35
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
F-19
<PAGE> 36
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
F-20
<PAGE> 37
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, 1998, 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, 1998 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 29, 1999
F-21
<PAGE> 38
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, 1998, 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, 1998 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 29, 1998
F-22
<PAGE> 39
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, 1998 and 1997, 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, 1998 and 1997, 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, C.P.A.
M. TIMOTHY O'ROARK, C.P.A.
January 20, 1999
F-23
<PAGE> 40
REPORT OF INDEPENDENT ACCOUNTANT
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, 1998 and
1997, 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, 1998 and 1997, 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 13, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-24
<PAGE> 41
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,
1998 and 1997, 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, 1998 and 1997, 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 20, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-25
<PAGE> 42
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Company - Fort Bend
Sugar Land, 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, 1998 and
1997, prepared from the accounts maintained at your office at Sugar Land,
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, 1998 and 1997, 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 20, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-26
<PAGE> 43
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, 1998 and 1997,
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, 1998 and 1997, 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 8, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-27
<PAGE> 44
REPORT OF INDEPENDENT ACCOUNTANTS
To: Pacific Title, L.C.
Sugar Land, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow)
Fund Accounts of Pacific Title, L.C. as of December 31, 1998 and 1997, prepared
from the accounts maintained at your office at Sugar Land, 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 Pacific Title, L.C., as of
December 31, 1998 and 1997, 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 20, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-28
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title of Eagle Pass, Inc. d/b/a Title Guaranty
Eagle Pass, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow)
Fund Accounts of Stewart Title of Eagle Pass, Inc. d/b/a Title Guaranty as of
December 31, 1998 and 1997, prepared from the accounts maintained at your
office at Eagle Pass, 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 Eagle Pass,
Inc. d/b/a Title Guaranty, as of December 31, 1998 and 1997, 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 11, 1999
/s/ AARONSON, WHITE & COMPANY
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
F-29
<PAGE> 46
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stewart Title of Houston
We have audited the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 and 1997, prepared from the accounts
maintained in your office at 1980 Post Oak Boulevard, Houston, Texas.
The financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on the 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 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 Houston as of
December 31, 1998 and 1997, 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 examination of the Statements of Assets and Liabilities, and is fairly
stated in all material respects in relation to the Statements of Assets and
Liabilities, taken as a whole.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 20, 1999
F-30
<PAGE> 47
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stewart Title Guaranty Company
We have audited the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 and 1997, prepared from the accounts
maintained in your office at 1980 Post Oak Boulevard, Suite 650, Houston,
Texas.
The financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on the 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 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 Guaranty Company's
National Title Services Division as of December 31, 1998 and 1997, 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 examination of the Statements of Assets and Liabilities, and is fairly
stated in all material respects in relation to the Statements of Assets and
Liabilities, taken as a whole.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 20, 1999
F-31
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
Managers
Priority Title Company of Houston, L.L.C.
We have audited the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 and 1997, prepared from the accounts
maintained in your office at 1980 Post Oak Boulevard, Suite 1750, Houston,
Texas.
The financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on the 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 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 Priority Title Company of Houston,
L.L.C. as of December 31, 1998 and 1997, 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 examination of the Statements of Assets and Liabilities, and is fairly
stated in all material respects in relation to the Statements of Assets and
Liabilities, taken as a whole.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 13, 1999
F-32
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
Managers
Premier Title Company of Houston, L.L.C.
We have audited the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 and 1997, prepared from the accounts
maintained in your office at 1980 Post Oak Boulevard, Houston, Texas.
The financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on the 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 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 Premier Title Company of Houston,
L.L.C. as of December 31, 1998 and 1997, 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 examination of the Statements of Assets and Liabilities, and is fairly
stated in all material respects in relation to the Statements of Assets and
Liabilities, taken as a whole.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 13, 1999
F-33
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
Managers
MHI Title Company of Houston, L.L.C.
We have audited the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 and 1997, prepared from the accounts
maintained in your office at 1980 Post Oak Boulevard, Houston, Texas.
The financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on the 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 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 MHI Title Company of Houston,
L.L.C. as of December 31, 1998 and 1997, 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 examination of the Statements of Assets and Liabilities, and is fairly
stated in all material respects in relation to the Statements of Assets and
Liabilities, taken as a whole.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 13, 1999
F-34
<PAGE> 51
INDEPENDENT AUDITORS' REPORT
Managers
Allecon Title Agency, L.L.C.
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998, prepared from the accounts maintained in your
office at 1980 Post Oak Boulevard, Suite 1785, Houston, 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 Allecon Title Agency, L.L.C.
as of December 31, 1998, in conformity with generally accepted accounting
principles.
Our audit has 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 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.
/s/ GRATZER, CLEM & COMPANY, P.C.
Gratzer, Clem & Company, P.C.
January 13, 1999
F-35
<PAGE> 52
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, 1998, 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, 1998, 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, LLP
Certified Public Accountants and Consultants
January 19, 1999
RTE/ms
F-36
<PAGE> 53
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, 1998 and 1997, 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, 1998 and 1997, 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 20, 1999
F-37
<PAGE> 54
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
(Escrow) Fund Accounts as of December 31, 1998, prepared from the accounts
maintained at your office at Amarillo, 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 accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit of the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts provides a reasonable basis for our opinion.
In our opinion, the accompanying 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, for the year then ended 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 audit 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/ DOSHIER, PICKENS & FRANCIS, P.C.
DOSHIER, PICKENS & FRANCIS, P.C.
January 15, 1999
F-38
<PAGE> 55
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stewart Title of Corpus Christi, Inc.
Corpus Christi, Texas
We have audited the Statement of Assets and Liabilities of Trust [Escrow] Fund
Accounts as of December 31, 1998, prepared from the accounts maintained at your
office at Corpus Christi, 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 of the financial statement 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 Corpus
Christi, Inc., as of December 31, 1998, 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.
/s/ FANCHER AND COMPANY
FANCHER AND COMPANY
February 4,1999
F-39
<PAGE> 56
REPORT OF INDEPENDENT ACCOUNTANT
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, 1998 and 1997, prepared from the accounts
maintained at your office at 7802 Indiana Avenue, Lubbock, Texas 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 audits 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 audit provides a reasonable base for
my opinions.
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 escrow accounts handled by Stewart Title of
Lubbock, Inc., as of December 31, 1998 and 1997, 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 CPA
Jesus Yepez
Certified Public Accountant
Lubbock, Texas
January 21, 1999
F-40
<PAGE> 57
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, 1998 and 1997, 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 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 accounts handled by Stewart Title of Texarkana as of
December 31, 1998 and 1997, 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 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/ WILLIAMS & PEARCY
Williams & Pearcy, P.C.
February 3, 1999
F-41
<PAGE> 58
Independent Auditor's Report
Stewart Title Company of Rockport, Inc.
Rockport, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1998 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, 1998, 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 and Form T-19, 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
January 19, 1999
F-42
<PAGE> 59
Independent Auditors' 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, 1998 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, 1998, 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 fairly stated
in all material respects in relation to the basic statement of assets and
liabilities, taken as a whole.
/s/ JENNINGS, HAWLEY & CO. P.C.
Corpus Christi, Texas
January 18, 1999
F-43
<PAGE> 60
SCHEDULE II
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
INCOME AND RETAINED EARNINGS INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================
Year Ended December 31,
----------------------------------------
1998 1997 1996
------- --------- ---------
(In thousands)
===================================================================================================================
<S> <C> <C> <C>
Revenues
Investment income .................................................. $ 583 $ 701 $ 439
Other income ....................................................... -- 3 --
------- --------- ---------
583 704 439
Expenses
Employee costs ..................................................... 229 201 163
Other operating expenses ........................................... 3,006 2,098 1,515
Depreciation and amortization ...................................... 92 90 100
------- --------- ---------
3,327 2,389 1,778
Loss before taxes and equity in earnings of investees ................. (2,744) (1,685) (1,339)
Income taxes (benefit) ................................................ (566) (502) (458)
Equity in earnings of investees ....................................... 49,216 16,471 15,318
------- --------- ---------
Net income ............................................................ 47,038 15,288 14,437
Retained earnings at beginning of year ................................ 145,140 131,496 118,547
Cash dividends on Common Stock ($.28, $.26 and $.24 per
share) ............................................................ (1,815) (1,644) (1,488)
------- --------- ---------
Retained earnings at end of year ...................................... 190,363 $ 145,140 $ 131,496
======= ========= =========
</TABLE>
See accompanying note to financial statements.
(Schedule continued on following page.)
S-1
<PAGE> 61
SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
======================================================================================================================
December 31,
------------------------
1998 1997
--------- ---------
(In thousands)
======================================================================================================================
<S> <C> <C>
Assets
Cash and cash equivalents............................................................. $ 13 $ 13
--------- ---------
Short-term investments................................................................ 11,439 9,001
--------- ---------
Receivables:
Notes, including $6,918 and $7,324 from affiliates.................................. 7,471 7,435
Other, including $3,275 and $9,521 from affiliates.................................. 4,038 10,522
Less allowance for uncollectible amounts............................................ (20) (20)
--------- ---------
11,489 17,937
Furniture and equipment at cost....................................................... 202 183
Less accumulated depreciation......................................................... (104) (95)
--------- ---------
98 88
Title plants, at cost................................................................. 48 48
Investments in investees.............................................................. 238,095 182,754
Other assets.......................................................................... 4,313 3,482
--------- ---------
$ 265,495 $ 213,323
========= =========
Liabilities
Notes payable, including $ - and $ - from affiliates................................ $ 1,097 685
Accounts payable and accrued liabilities............................................ 3,955 3,134
Contingent liabilities and commitments
Stockholders' equity
Common - $1 par, authorized 15,000,000 issued and outstanding 6,539,965 and
6,381,046.......................................................................... 6,540 6,381
Class B Common - $1 par, authorized 1,500,000 and outstanding 525,006................. 525 525
Additional paid-in-capital............................................................ 56,886 52,922
Retained earnings (1)................................................................. 190,363 145,140
Accumulated other comprehensive earnings.............................................. 6,129 4,536
--------- ---------
Total stockholders' equity ($36.86 and $30.34 per share)....................... 260,443 209,504
--------- ---------
$ 265,495 $ 213,323
========= =========
</TABLE>
(1) Includes undistributed earnings of subsidiaries of $184,179 in 1998 and
$142,596 in 1997.
See accompanying note to financial statements.
(Schedule continued on following page.)
S-2
<PAGE> 62
SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
===================================================================================================================
Year Ended December 31,
-------------------------------------------
1998 1997 1996
--------- --------- ---------
(In thousands)
===================================================================================================================
<S> <C> <C> <C>
Cash flow from operating activities (Note)........................... $ (2,805) $ (3,645) $ (3,956)
Cash flow from investing activities:
Proceeds from investments sold.................................... -- 1,619 --
Purchases of investments, excluding mortgage loans................ (2,438) -- (6,247)
Dividends received from unconsolidated subsidiaries............... 7,633 4,583 11,090
Increases in mortgages and other notes receivable................. (300) (364) (70)
Collections on mortgages and other notes receivable............... 265 23 227
Cash paid for the acquisition of subsidiaries..................... (2,500) (900) (101)
--------- --------- ---------
Cash provided (used) by investing activities......................... 2,660 4,961 4,899
--------- --------- ---------
Cash flow from financing activities:
Dividends paid.................................................... (1,815) (1,644) (1,488)
Proceeds of notes payable......................................... 417 106 610
Payments on notes payable......................................... -- -- (30)
Proceeds from issuance of stock................................... 1,543 135 11
--------- --------- ---------
Cash provided (used) by financing activities......................... 145 (1,403) (897)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents..................... $ -- $ (87) $ 46
========= ========= =========
Note: Reconciliation of net income to the above amounts:
Net income........................................................ $ 47,038 $ 15,288 $ 14,437
Add (deduct):
Depreciation and amortization.................................. 92 90 100
Provision for uncollectible amounts - net...................... -- -- 20
Increase in accounts receivable - net.......................... (1,060) (3,267) (3,207)
Increase (decrease) in accounts payable and accrued
liabilities - net........................................... 508 671 264
Equity in net earnings of investees............................ (49,216) (16,471) (15,318)
Stock bonuses paid............................................. 577 409 328
Treasury stock acquired........................................ (576) -- --
Other - net.................................................... (152) (365) (580)
--------- --------- ---------
Cash used by operating activities.................................... $ (2,805) $ (3,645) $ (3,956)
========= ========= =========
Supplemental information:
Income taxes paid .............................................. -- -- --
Interest paid .................................................. -- -- --
</TABLE>
See accompanying note to financial statements.
(Schedule continued on following page.)
S-3
<PAGE> 63
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.
Certain amounts in the 1997 and 1996 Parent Company financial
statements have been reclassified for comparative purposes. Net earnings, as
previously reported, were not affected.
Total dividends received from unconsolidated subsidiaries for 1998,
1997 and 1996 were $90,000, $9,633,000, and $8,583,000, respectively.
S-4
<PAGE> 64
SCHEDULE V
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
=========================================================================================================================
Col. A Col. B Col. C Col. D Col. E
Additions
=========================================================================================================================
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, 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
Year ended December 31, 1997:
Estimated title losses.............. 150,331,563 29,794,444 -- 23,334,625 (A) 156,791,382
Allowance for uncollectible
amounts............................ 6,669,591 1,596,000 -- 2,713,742 (B) 5,551,849
Year ended December 31, 1998:
Estimated title losses.............. 156,791,382 39,226,182 787,000 (C) 25,041,558 (A) 171,763,006
Allowance for uncollectible
amounts.......................... 5,551,849 2,110,000 -- 2,859,144 (B) 4,802,705
Stewart Information Services
Corporation - Parent:
Year ended December 31, 1996:
Allowance for uncollectible amounts.. -- $ 20,000 -- -- $ 20,000
Year ended December 31, 1997:
Allowance for uncollectible amounts.. 20,000 -- -- -- 20,000
Year ended December 31, 1998:
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 estimated title loss reserve acquired.
S-5
<PAGE> 65
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
3.1 - Certificate of Incorporation of the Registrant, as amended April 30, 1993
(incorporated by reference herein from Exhibit 3.1 of Annual Report on Form
10-K for the fiscal year ended December 31, 1997)
3.2 - By-Laws of the Registrant , as amended September 1, 1998 (incorporated by
reference herein from Exhibit 3.2 of Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998
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, amended July 24, 1990
and October 30, 1992, between the Registrant and certain executive officers
(incorporated by reference herein from Exhibit 10.2 of Annual Report on Form
10-K for the fiscal year ended December 31, 1997)
21 - Subsidiaries of the Registrant
23 - Consents of Independent Certified Public Accountants, including consents of
incorporation by reference of their reports to previously filed Securities Act
registration statements
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
MATERIAL CONTRACTS
DECEMBER 31, 1998
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 .75% of the
profits exceeding $20,000,000. For the calendar year 1998, Mr. Morris shall
receive no less that $125,000 in bonus compensation and his total compensation
from base salaries and bonuses shall not exceed $500,000. For the calendar year
1998, Mr. Morris received $370,000 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 .75% of the profits exceeding $20,000,000. For the calendar year 1998, Mr.
Morris shall receive no less that $125,000 in bonus compensation and his total
compensation from base salaries and bonuses shall not exceed $500,000. For the
calendar year 1998, Mr. Morris received $370,000 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% of the first $20,000,000 of the consolidated income
before taxes of Stewart Title Guaranty Company as reported to its stockholders
and .75% of the profits exceeding $20,000,000. For the calendar year 1998, Mr.
Morris shall receive no less than $125,000 in bonus compensation and his total
compensation from base salaries and bonuses shall not exceed $500,000. For the
calendar year 1998 Mr. Morris received $365,000 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% of the first $20,000,000 of the consolidated income
before taxes of Stewart Title Guaranty Company as reported to its stockholders
and .75% of the profits exceeding $20,000,000. For the calendar year 1998, Mr.
Morris shall receive no less than $125,000 in bonus compensation and his total
compensation from base salaries and bonuses shall not exceed $500,000. For the
calendar year 1998 Mr. Morris received $365,000 in bonus compensation. Total
compensation shall exclude any insurance premiums, board fees or stock options
granted.
MAX CRISP, as Vice President - Finance, shall receive in addition to his
salary, .4% of the consolidated income before taxes of Stewart Title Guaranty
Company as reported to its stockholders. For the calendar year 1998, Mr. Crisp
shall receive no less than $68,000 in bonus compensation and his total
compensation from base salaries and bonuses shall not exceed $425,000. For the
calendar year 1998 Mr. Crisp received $285,000 in bonus compensation. Total
compensation shall exclude any insurance premiums, board fees or stock options
granted.
<PAGE> 1
EXHIBIT 21
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
Stewart Title of Mobile, Inc. ..................... Alabama
Stewart Title of Anchorage......................... Alaska
Citizens Title & Trust ............................ Arizona
Stewart Title & Trust of Phoenix, Inc. ............ Arizona
Stewart Title & Trust of Tucson ................... Arizona
Arkansas Closing and Title Company ................ Arkansas
Arkansas Title Insurance Company .................. Arkansas
First Arkansas Title Company....................... Arkansas
Garland County Title Company ...................... Arkansas
Landata of Arkansas ............................... Arkansas
McDonald Abstract Company.......................... Arkansas
Stewart Title of Arkansas ......................... Arkansas
Airborne Systems, Inc. ............................ California
API Properties Corp. .............................. California
Asset Preservation, Inc. .......................... California
GPMD, Inc. ........................................ California
Granite Bay Holding Corp. ......................... California
Granite Properties, Inc. .......................... California
Landata, Inc. of Los Angeles ...................... California
Landata, Inc. of the West Coast ................... California
Online Documents, Inc. ............................ California
Stewart Title of California ....................... California
Stewart Valuations ................................ California
WTI Properties, Inc. .............................. California
Landata, Inc. of the Rocky Mountains .............. Colorado
Stewart Title Company of Colorado Springs ......... Colorado
Stewart Title of Aspen, Inc. ...................... Colorado
Stewart Title of Denver, Inc. ..................... Colorado
Stewart Title of Eagle County, Inc. ............... Colorado
Stewart Title of Glenwood Springs, Inc. ........... Colorado
Stewart Title of Larimer County, Inc. ............. Colorado
Stewart Title of Pueblo ........................... Colorado
Stewart Title of Steamboat Springs ................ Colorado
Advance Homestead Title, Inc. ..................... Florida
Bay Title Services, Inc. .......................... Florida
Landata Foresight ................................. Florida
Landata, Inc. of Florida .......................... Florida
New Century Title of Orlando ...................... Florida
New Century Title of Sarasota ..................... Florida
New Century Title of Tampa ........................ Florida
Stewart Approved Title, Inc. ...................... Florida
Stewart Insurance Services, Inc. .................. Florida
Stewart River City Title .......................... Florida
Stewart Title Company of Sarasota, Inc. ......... . Florida
Stewart Title of Clearwater, Inc. ................. Florida
Stewart Title of Jacksonville, Inc. ............... Florida
Stewart Title of Martin County .................... Florida
Stewart Title of Northwestern Florida ............. Florida
Stewart Title of Orange County, Inc. .............. Florida
Stewart Title of Pensacola ........................ Florida
Stewart Title of Pinellas, Inc. ................... Florida
Stewart Title of Polk County, Inc. ................ Florida
Stewart Title of Tallahassee, Inc. ................ Florida
Stewart Title of Tampa ............................ Florida
(continued)
<PAGE> 2
EXHIBIT 21
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
Stewart Properties of Tampa ....................... Florida
Blaine County Title, Inc. ......................... Idaho
Stewart Title Company of Idaho, Inc. .............. Idaho
Stewart Title of Canyon County .................... Idaho
Stewart Title of North Idaho, Inc. ................ Idaho
Stewart Title of Pocatello ........................ Idaho
Information Services of Illinois .................. Illinois
Landata, Inc. of Illinois ......................... Illinois
Stewart Title Company of Illinois ................. Illinois
Mortgage Services of Indiana ...................... Indiana
Stewart Title Services of Indiana, Inc. ........... Indiana
O'Rourke Title Company ............................ Kansas
Stewart Title of Louisiana, Inc. .................. Louisiana
Cambridge Landata, Incorporated ................... Maryland
Stewart Title Company of Maryland ................. Maryland
Stewart Title of Detroit, Inc. .................... Michigan
Stewart Title Company of Minnesota ................ Minnesota
Stewart Title of the Gulf Coast ................... Mississippi
Stewart Title of Mississippi ...................... Mississippi
Stewart Title, Inc. (Kansas City) ................. Missouri
Stewart Title of Carson City ...................... Nevada
Stewart Title of Churchill County ................. Nevada
Stewart Title of Douglas County ................... Nevada
Stewart Title of Nevada ........................... Nevada
Stewart Title of Northeastern Nevada .............. Nevada
Stewart Title of Northern Nevada .................. Nevada
Northeast Land Title .............................. New Hampshire
Stewart Title of Bergen County .................... New Jersey
Stewart Title of Central Jersey, Inc. ............. New Jersey
Stewart Title Services of North Jersey, L.L.C...... New Jersey
Stewart-Princeton Abstract ........................ New Jersey
Santa Fe Abstract Limited ......................... New Mexico
Stewart Title Limited ............................. New Mexico
River City Abstract, L.L.C. ....................... New York
Stewart Title Insurance Company ................... New York
Stewart Title of North Carolina, Inc. ............. North Carolina
Stewart Title of the Piedmont ..................... North Carolina
Stewart Title Agency of Columbus, Ltd. L.L.C.. .... Ohio
Stewart Title Agency of Ohio, Inc. ................ Ohio
Landata Research .................................. Oklahoma
Stewart Abstract & Title Co. of Oklahoma .......... Oklahoma
Stewart Escrow & Title Services of Lawton ......... Oklahoma
Stewart Title Insurance Company of Oregon ......... Oregon
Stewart Title of Oregon ........................... Oregon
Stewart Title - Newport, LLC ...................... Rhode Island
Stewart Title of Rhode Island, Inc. ............... Rhode Island
Allecon Title, LLC ................................ Texas
Baca-Landata, Inc. ................................ Texas
Brazoria County Abstract .......................... Texas
(continued)
<PAGE> 3
EXHIBIT 21
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
East-West, Inc. .................................. Texas
Electronic Closing Services, Inc. ................ Texas
Fulghum, Inc. .................................... Texas
GC Acquisition, Inc. ............................. Texas
General American Resources ....................... Texas
Gracy Title Co., L.C. ............................ Texas
Landata Field Services ........................... Texas
Landata Geo Services, Inc. ....................... Texas
Landata Group, Inc. .............................. Texas
Landata of the Midwest ........................... Texas
Landata RE-Source, Inc. .......................... Texas
Landata Site Services ............................ Texas
Landata Systems, Inc. ............................ Texas
Landata Technologies ............................. Texas
MHI Title Company of Houston, L.C. ............... Texas
Mortgage Outsource Services, LLC ................. Texas
Nacogdoches Abstract & Title ..................... Texas
Ortem Investments, Inc. .......................... Texas
Pacific Title, L.C. .............................. Texas
Premier Title, L.C. .............................. Texas
Primero, Inc. .................................... Texas
Priority Title - Dallas .......................... Texas
Priority Title - Houston ......................... Texas
Southland Information, Inc. ...................... Texas
Stewart - U.A.M., Inc. ........................... Texas
Stewart Information International, Inc. .......... Texas
Stewart Investment Services Corporation .......... Texas
Stewart Management Information, Inc. ............. Texas
Stewart Mortgage Information Company ............. Texas
Stewart Mortgage Processing ...................... Texas
Stewart National Order Center .................... Texas
Stewart Title Austin, Inc. ....................... Texas
Stewart Title Company ............................ Texas
Stewart Title Company of Rockport, Inc. .......... Texas
Stewart Title Guaranty Company ................... Texas
Stewart Title of Corpus Christi .................. Texas
Stewart Title of Eagle Pass ...................... Texas
Stewart Title of Lubbock, Inc. ................... Texas
Stewart Title of Montgomery County ............... Texas
Stewart Title of North Texas ..................... Texas
Stewart Title of San Patricio County, Inc. ....... Texas
Stewart Trust Company ............................ Texas
Texarkana Title and Abstract, Inc. ............... Texas
Landata Inc. of Utah ............................. Utah
Cedar Run Title & Abstract ....................... Virginia
Greenbrier Title, LLC ............................ Virginia
Howell Title, LLC ................................ Virginia
Land Title Research, Inc. ........................ Virginia
Potomac Title & Escrow ........................... Virginia
Resource Title, LLC .............................. Virginia
(continued)
<PAGE> 4
EXHIBIT 21
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
STATE OF
NAME OF SUBSIDIARY INCORPORATION
------------------ -------------
Signature & Stewart Settlements, L.C. ............ Virginia
Stewart Services of Greater Virginia ............. Virginia
Stewart Title - Shenandoah Valley, L.C. .......... Virginia
Stewart Title & Settlement Services, Inc. ........ Virginia
Stewart Title and Escrow, Inc. ................... Virginia
Stewart Title Services of Virginia, L.C. ......... Virginia
Pacific Northwest Holding Company ................ Washington
Sheboygan Title Services, Inc. ................... Wisconsin
Stewart Title of Gillette, Inc. .................. Wyoming
INTERNATIONAL
Landata Inc. of Belize ........................... Belize
Stewart Costa Rica ............................... Costa Rica
Stewart Information Hungary ...................... Hungary
Stewart Title Guaranty de Mexico, ABC ............ Mexico
Stewart Data Slovakia ............................ Slovakia
Stewart Title Great Britain ...................... United Kingdom
Stewart Title Insurance Company Limited .......... United Kingdom
<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, No.
333-03981, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart
Information Services Corporation of our report dated February 10, 1999,
relating to the consolidated balance sheets of Stewart Information Services
Corporation and subsidiaries as of December 31, 1998 and 1997 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, 1998, and all
related schedules, which report appears in the December 31, 1998 annual report
on Form 10-K of Stewart Information Services Corporation.
/s/ KPMG LLP
Houston, Texas
March 19, 1999
<PAGE> 2
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our reports which appear in the December 31, 1998
annual report of 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.
Signed /s/ GRANT BENNETT ACCOUNTANTS
------------------------------
Sacramento, California
March 8, 1999
<PAGE> 3
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, No. 333-03981,
No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information Services
Corporation of our report, which appears in the December 31, 1998 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
March 2, 1999
<PAGE> 4
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,
No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information Services
Corporation of our report which appears in the December 31, 1998 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/ M. TIMOTHY O'ROARK
- -----------------------------------
M. TIMOTHY O'ROARK
El Paso, Texas
January 20, 1999
<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, No.
33-62535, No. 333-03981, No. 333-24075 and No.333-65971) on Form S-8 of Stewart
Information Services Corporation of our reports, which appear in the December
31, 1998 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
March 9, 1999
<PAGE> 6
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our reports which appear in the December 31, 1998
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.
Signed /s/ GRATZER, CLEM & COMPANY, P.C.
--------------------------------------
Lake Jackson, TX
March 11, 1999
<PAGE> 7
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart
Information Services Corporation of our report which appears in the December
31, 1998 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
EDGAR, KIKER & CROSS, LLP
Certified Public Accountants and Consultants
Beaumont, Texas
March 3, 1999
<PAGE> 8
The Board of Directors
Stewart Information Services Corporation
I consent to the use of my report incorporated herein by reference and to the
reference to my firm under the heading "Interests of Named Experts and Counsel"
in the Registration Statement.
/s/ JIM S. WALKER
- -----------------------------------
Jim S. Walker
January 20, 1999
<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, No.
333-03981, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our report which appears in the December 31, 1998
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
March 8, 1999
<PAGE> 10
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our report which appear in the December 31, 1998 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.
Signed /s/ FANCHER & COMPANY
----------------------------
Corpus Christi, Texas
Date 3/2/99
----------------------
<PAGE> 11
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, No.
333-03981, No. 333-24075 and No. 333-65971) on Forms S-8 of Stewart Information
Services Corporation of my report which appears in the December 31, 1998
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.
Signed /s/ JESUS YEPEZ CPA
----------------------------
Lubbock, Texas
March 2, 1999
<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, No. 333-03981,
No, 333-24075 and No. 333-65971) on Form S-8 of Stewart Information Services
Corporation of our report, which appears in the December 31, 1998 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/ WILLIAMS & PEARCY
- -------------------------------
Williams & Pearcy, P.C.
Texarkana, USA
February 3, 1999
<PAGE> 13
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our reports which appear in the December 31, 1998
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
March 3, 1999
<PAGE> 14
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, No. 333-24075 and No. 333-65971) on Form S-8 of Stewart Information
Services Corporation of our report which appears in the December 31, 1998
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.
Signed /s/ JENNINGS, HAWLEY & CO. P.C.
-------------------------------------
Corpus Christi, Texas
March 9, 1999
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF DECEMBER 31, 1998 AND THE RELATED STATEMENT OF EARNINGS FOR THE YEAR
ENDED DECEMBER 31, 1998 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-31-1998
<PERIOD-END> DEC-31-1998
<DEBT-HELD-FOR-SALE> 227,312
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 286,758
<CASH> 44,883
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 498,481
<POLICY-LOSSES> 171,763
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 16,194
0
0
<COMMON> 7,065
<OTHER-SE> 253,378
<TOTAL-LIABILITY-AND-EQUITY> 498,481
950,045
<INVESTMENT-INCOME> 18,515
<INVESTMENT-GAINS> 201
<OTHER-INCOME> 0
<BENEFITS> 39,226
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 76,327
<INCOME-TAX> 29,289
<INCOME-CONTINUING> 47,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,038
<EPS-PRIMARY> 6.73
<EPS-DILUTED> 6.65
<RESERVE-OPEN> 156,791<F1>
<PROVISION-CURRENT> 37,114
<PROVISION-PRIOR> 2,899
<PAYMENTS-CURRENT> 5,977
<PAYMENTS-PRIOR> 19,064
<RESERVE-CLOSE> 171,763
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>INCLUDES RESERVE BALANCE INCREASE OF $787 FROM THE ACQUISITION OF AN EXISTING
UNDERWRITER.
</FN>
</TABLE>
