Stewart Reports Third Quarter 2023 Results

HOUSTON, Oct. 25, 2023

Third quarter 2023 and 2022 results included $1.9 and $6.4 million, respectively, of pretax net realized and unrealized losses primarily driven by net unrealized losses on fair value changes of equity securities investments in the title segment.

"Our third quarter results reflect the continuing slowdown in real estate market activity due to the higher interest rate environment coupled with the normal seasonality of late summer. As we expect that higher interest rates will continue for several quarters before beginning to moderate, we will continue to balance thoughtful cost discipline with investment in long-term enterprise initiatives," commented Fred Eppinger, chief executive officer. "Our focus remains on these long-term strategies that will create a stronger and more resilient company, and I am pleased with the significant progress on these important enterprise initiatives this quarter."

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 September 30, ARIVA.DE Börsen-Geflüster Kurse Stewart Information Services 62,45 $ +1,31%			Nine Months Ended September  30,
	2023	2022		2023	2022
Total revenues	601.7	716.4		1,675.2	2,413.4
Pretax income before noncontrolling interests	27.1	45.5		42.1	211.9
Income tax expense	(9.1)	(10.8)		(9.6)	(48.4)
Net income attributable to noncontrolling interests	(3.9)	(5.3)		(10.9)	(14.5)
Net income attributable to Stewart	14.0	29.4		21.6	149.0
Non-GAAP adjustments, after taxes*	9.9	13.9		27.7	33.3
Adjusted net income attributable to Stewart*	23.9	43.3		49.4	182.3
Net income per diluted Stewart share	0.51	1.08		0.79	5.45
Adjusted net income per diluted Stewart share*	0.86	1.58		1.80	6.66
* Adjusted net income and adjusted net income per diluted share are non-GAAP measures. See Appendix A for explanation    and reconciliation of non-GAAP adjustments.

Effective this quarter, we revised our presentation of non-GAAP measures related to adjusted net income and adjusted net income per diluted share by excluding acquired intangible asset amortization from the calculation. Acquired intangible asset amortization for the third quarter and first nine months of 2023 was $9.6 million ($0.26 per diluted share) and $27.3 million ($0.75 per diluted share), respectively, compared to $7.8 million ($0.22 per diluted share) and $24.7 million ($0.68 per diluted share) for the third quarter and first nine months of 2022, respectively. Excluding this adjustment for acquired intangible asset amortization, adjusted net income per diluted share would have been $0.60 and $1.05 for the third quarter and first nine months of 2023, respectively, compared to $1.36 and $5.98 for the third quarter and first nine months of 2022, respectively. Acquired intangible asset amortization is a non-cash expense related to acquisitions that management believes is not indicative of the ongoing performance of the acquired operations. This revised presentation also allows us to present our non-GAAP consolidated results consistent with the presentation of our non-GAAP measures related to our title and real estate solutions segments. Refer to Appendix B for the restated non-GAAP consolidated results for all quarters of 2022 and the first two quarters of 2023.

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

Title segment operating revenues in the third quarter 2023 decreased $125.8 million, or 19 percent, compared to the third quarter 2022, due to transaction volume declines in our direct and agency title businesses. Total segment operating expenses in the third quarter 2023 decreased $96.5 million, or 16 percent, primarily driven by lower operating revenues. Agency retention expenses in the third quarter 2023 decreased $61.5 million, or 22 percent, in line with lower gross agency revenues of $74.8 million, or 22 percent, while the average independent agency remittance rate in the third quarter 2023 was comparable to the prior year quarter.

Total employee costs and other operating expenses in the third quarter 2023 decreased $33.8 million, or 12 percent, compared to the prior year quarter, while as a percentage of operating revenues, these expenses were 47.4 percent in the third quarter 2023 compared to 43.4 percent in the third quarter 2022. Title loss expense in the third quarter 2023 decreased $3.2 million, or 13 percent, compared to the prior year quarter, primarily as a result of lower title revenues. As a percentage of title revenues, title loss expense was 4.3 percent in the third quarter 2023 compared to 3.9 percent in the third quarter 2022, which benefited from last year's favorable claims experience.

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