Stewart Reports First Quarter 2023 Results

HOUSTON, April 26, 2023

First quarter 2023 results included $1.8 million of pretax net realized and unrealized losses, primarily composed of net unrealized losses on fair value changes of equity securities investments and realized losses on sales of investment securities. First quarter 2022 results included $4.1 million of pretax net realized and unrealized gains, primarily composed of net unrealized gains on fair value changes of equity securities investments and realized gains on title plant and other asset sales.

"Our first quarter results were impacted by historically low transaction volumes, driven by an elevated interest rate environment, as well as a seasonally slower first quarter," commented Fred Eppinger, chief executive officer. "We remain focused on our long-term strategies of transforming Stewart into a stronger and more resilient company. We are managing our operations in this challenging environment by balancing cost discipline with investment opportunities that we expect will have a positive impact on our business over the long term. Stewart has made significant progress in becoming a stronger company and will continue to invest opportunistically to build a more resilient company." 

Selected Financial Information

Summary results of operations are as follows (dollars in millions, except per share amounts, and amounts may not add as presented due to rounding):

		Quarter Ended ARIVA.DE Börsen-Geflüster Kurse Stewart Information Services 62,45 $ +1,31% March 31,
		2023		2022
Total revenues		524.3		852.9
Pretax (loss) income before noncontrolling interests		(10.2)		79.6
Income tax benefit (expense)		4.9		(17.7)
Net income attributable to noncontrolling interests		(3.0)		(4.0)
Net (loss) income attributable to Stewart		(8.2)		57.9
Non-GAAP adjustments, after taxes		1.4		(2.1)
Adjusted net (loss) income attributable to Stewart*		(6.8)		55.8
Net (loss) income per diluted Stewart share		(0.30)		2.11
Adjusted net (loss) income per diluted Stewart share*		(0.25)		2.03
* Adjusted net (loss) income and adjusted net (loss) income per diluted share are non-GAAP measures. See Appendix A for explanation and reconciliation of non-GAAP adjustments.

Title Segment

Summary results of the title segment are as follows (dollars in millions, except pretax margin):

Title segment operating revenues for the first quarter 2023 decreased $265.1 million, or 37 percent, compared to the first quarter 2022, primarily due to volume declines in our direct title and agency operations, while total segment operating expenses decreased $184.3 million, or 28 percent, primarily due to lower revenues. Agency retention expenses in the first quarter 2023 decreased $125.5 million, or 38 percent, due to reduced gross agency revenues, while the average independent agency remittance rate in the first quarter 2023 was 17.4 percent compared to 18.1 percent in the prior year quarter.

Total employee costs and other operating expenses in the first quarter 2023 decreased $49.6 million, or 18 percent, compared to the prior year quarter, and as a percentage of operating revenues, these expenses were 50.4 percent in the first quarter 2023 compared to 38.8 percent in the first quarter 2022, primarily due to lower revenues in the first quarter 2023. Title loss expense in the first quarter 2023 decreased $11.5 million, or 40 percent, compared to the prior year quarter, primarily due to lower title revenues. As a percentage of title revenues, title loss expense was 3.9 percent in the first quarter 2023 compared to 4.0 percent in the first quarter 2022.

The title segment's net realized and unrealized losses and gains in the first quarters 2023 and 2022 were primarily driven by fair value changes of equity securities investments and realized losses and gains on sale of investment securities. Additionally, the segment recorded a realized gain of $1.0 million on a title plant sale during the first quarter 2022. Investment income in the first quarter 2023 increased $3.0 million, compared to the prior year quarter, primarily as a result of higher interest income resulting from increased interest rates and higher short-term investments in the first quarter 2023. Included in the total non-GAAP adjustments to pretax (loss) income were total acquired intangible asset amortization expenses in the first quarters 2023 and 2022 of $2.8 million and $1.8 million, respectively.

Direct title revenues information is presented below (dollars in millions):

		Quarter Ended March 31,
		2023	2022	% Change
	Non-commercial:
	Domestic	150.3	220.2	(32 %)
	International	19.2	31.5	(39 %)
		169.5	251.7	(33 %)
	Commercial:
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