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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-12688
STEWART INFORMATION SERVICES CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74-1677330
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1980 Post Oak Blvd., Houston TX 77056
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(713) 625-8100
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 2003.
Common 16,718,248
Class B Common 1,050,012
FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 2003
TABLE OF CONTENTS
Item No. Page
- -------- ----
Part I - FINANCIAL INFORMATION
1. Financial Statements 1
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
3. Quantitative and Qualitative Disclosures About
Market Risk 8
4. Controls and Procedures 9
Part II - OTHER INFORMATION
1. Legal Proceedings 10
5. Other Information 10
6. Exhibits and Reports on Form 8-K 11
Signature 12
Certifications Pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002 13
As used in this report, "we", "us", "our" and "Stewart" mean Stewart Information
Services Corporation and our subsidiaries unless the context indicates
otherwise.
STEWART INFORMATION SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 and 2002
THREE MONTHS ENDED
--------------------
MAR 31 MAR 31
2003 2002
-------- --------
($000 Omitted)
Revenues
Title insurance:
Direct operations 193,293 146,405
Agency operations 224,002 180,272
Real estate information services 19,050 16,042
Investment income 4,783 4,903
Investment (losses) gains - net (204) 352
-------- --------
440,924 347,974
Expenses
Amounts retained by agents 184,749 148,289
Employee costs 132,002 104,565
Other operating expenses 66,848 55,204
Title losses and related claims 17,956 14,366
Depreciation 5,909 5,385
Interest 215 255
Minority interests 2,338 1,530
-------- --------
410,017 329,594
-------- --------
Earnings before taxes 30,907 18,380
Income taxes 11,032 7,036
-------- --------
Net earnings 19,875 11,344
======== ========
Average number of shares outstanding -
assuming dilution (000) 17,831 17,957
Earnings per share - basic 1.12 0.64
Earnings per share - diluted 1.11 0.63
======== ========
Comprehensive earnings:
Net earnings 19,875 11,344
Changes in other comprehensive earnings,
net of taxes of $470 and $(1,255), respectively 872 (2,330)
-------- --------
Comprehensive earnings 20,747 9,014
======== ========
See notes to condensed consolidated financial statements.
-1-
STEWART INFORMATION SERVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
MAR 31 DEC 31
2003 2002
-------- --------
($000 Omitted)
Assets
Cash and cash equivalents 122,813 139,156
Short-term investments 52,117 50,673
Investments - statutory reserve funds 327,042 306,501
Investments - other 74,429 69,260
Receivables 61,360 69,041
Property and equipment 63,851 60,592
Title plants 41,332 40,307
Goodwill 72,779 66,885
Other 40,568 39,858
-------- --------
856,291 842,273
======== ========
Liabilities
Notes payable 18,373 14,195
Accounts payable and accrued liabilities 62,510 82,248
Estimated title losses 237,624 230,058
Deferred income taxes 11,326 11,284
Minority interests 11,331 10,896
Contingent liabilities and commitments
Stockholders' equity
Common and Class B Common Stock and
additional paid-in capital 135,715 134,927
Retained earnings 373,101 353,226
Accumulated other comprehensive earnings 10,216 9,344
Treasury stock - 325,669 shares (3,905) (3,905)
-------- --------
Total stockholders' equity 515,127 493,592
-------- --------
856,291 842,273
======== ========
See notes to condensed consolidated financial statements.
-2-
STEWART INFORMATION SERVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
THREE MONTHS ENDED
--------------------
MAR 31 MAR 31
2003 2002
-------- --------
($000 Omitted)
Cash provided by operating activities (Note) 22,538 17,115
Investing activities:
Purchases of property and equipment and title plants - net (8,650) (5,561)
Proceeds from investments matured and sold 48,829 31,205
Purchases of investments (71,436) (30,809)
Increases in notes receivable (333) (630)
Collections on notes receivable 446 579
Cash paid for the acquisition of subsidiaries - net (9,517) --
-------- --------
Cash used by investing activities (40,661) (5,216)
Financing activities:
Distribution to minority interests (1,907) (1,320)
Proceeds from issuance of stock -- 32
Proceeds of notes payable 5,885 444
Payments on notes payable (2,198) (1,931)
-------- --------
Cash provided (used) by financing activities 1,780 (2,775)
-------- --------
(Decrease) increase in cash and cash equivalents (16,343) 9,124
======== ========
NOTE: Reconciliation of net earnings to the above amounts -
Net earnings 19,875 11,344
Add (deduct):
Depreciation and amortization 5,909 5,385
Provision for title losses in excess of payments 6,384 4,062
Provision for uncollectible amounts - net 1,195 722
Decrease in accounts receivable - net 6,985 6,756
Decrease in accounts payable and accrued
liabilities - net (20,483) (11,883)
Minority interest expense 2,338 1,530
Equity in net earnings of investees (1,160) (543)
Dividends from equity investees 1,321 548
Realized investment losses (gains) - net 204 (352)
Stock bonuses 787 634
Change in deferred taxes (427) 841
Increase in other assets (308) (1,756)
Other - net (82) (173)
-------- --------
Cash provided by operating activities 22,538 17,115
======== ========
Supplemental information:
Assets acquired (purchase method)
Goodwill 6,233 --
Title plants 1,000 --
Other 4,902 --
Liabilities assumed (2,618) --
Common Stock acquired (issued) -- --
Debt issued to sellers -- --
-------- --------
Cash paid for the acquisition of subsidiaries - net 9,517 --
======== ========
See notes to condensed consolidated financial statements.
-3-
STEWART INFORMATION SERVICES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Interim Financial Statements
The financial information contained in this report for the three month periods
ended March 31, 2003 and 2002, and as of March 31, 2003, is unaudited. In the
opinion of our management, all adjustments necessary for a fair presentation of
this information for all unaudited periods, consisting only of normal recurring
accruals, have been made. The results of operations for the interim periods are
not necessarily indicative of results for a full year. This report should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 2002.
Certain amounts in the 2002 condensed consolidated financial statements have
been reclassified for comparative purposes. Net earnings, as previously
reported, were not affected.
Note 2: Segment Information
Our two reportable segments are title and real estate information. Selected
financial information related to these segments follows:
Real estate
Title information Total
----- ----------- -----
($000 Omitted)
Revenues:
- ---------
Three months ended
3/31/03 421,874 19,050 440,924
3/31/02 331,932 16,042 347,974
Pretax earnings:
- ----------------
Three months ended
3/31/03 27,896 3,011 30,907
3/31/02 17,716 664 18,380
Identifiable assets:
- --------------------
3/31/03 811,762 44,529 856,291
12/31/02 797,854 44,419 842,273
Note 3: Earnings Per Share
Our 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. The only potentially dilutive effect on
earnings per share relates to our 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 88,000 and 147,000 for the three month
period ended March 31, 2003 and 2002, respectively.
-4-
Note 4: Stock-based Compensation
The Company has two fixed stock-based employee compensation plans. The Company
accounts for the plans under the intrinsic value method. Accordingly, no
stock-based employee compensation cost is reflected in net earnings, as all
options granted under the plans had an exercise price equal to the market value
of the underlying Common Stock on the date of grant.
The Company applies APB No. 25 and related Interpretations in accounting for its
plans. Under SFAS No. 123, compensation cost would be 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%, an expected
life of ten years for each option, expected volatility of 37.2% and 40.8% and a
risk-free interest rate of 4.3% and 4.8% for the two quarters ended March 31,
2003 and 2002, respectively.
Had compensation cost for the Company's plans been determined consistent with
SFAS No. 123, the Company's net earnings and earnings per share would have been
reduced to the pro forma amounts indicated below:
THREE MONTHS ENDED
---------------------
MAR 31 MAR 31
2003 2002
-------- --------
($000 Omitted)
Net Earnings:
- -------------
As reported 19,875 11,344
Stock-based employee compensation
determined under fair value method (529) (495)
------- -------
Pro forma 19,346 10,849
Earnings per share:
- -------------------
Net earnings - basic 1.12 0.64
Pro forma - basic 1.09 0.61
Net earnings - diluted 1.11 0.63
Pro forma - diluted 1.08 0.60
Note 5: Equity in Investees
The amount of earnings from equity investments was $1.2 million and $0.5 million
for the three month periods ended March 31, 2003 and 2002, respectively. These
amounts are included in "title insurance revenues - direct operations" in the
condensed consolidated statements of earnings and comprehensive earnings.
Note 6: Contingent Liabilities and Commitments
We adopted the disclosure requirements for guarantees required by FASB
Interpretation No. 45 effective December 31, 2002. We have also adopted the
initial recognition and measurement provision of the non-contingent aspects of
guarantees issued or modified after December 31, 2002.
On March 31, 2003 the Company was contingently liable for guarantees of
indebtedness owed primarily to banks and others by unconsolidated equity
investees and other third parties. The guarantees relate primarily to business
expansion and generally expire no later than December 15, 2006. The maximum
potential future payments on the guarantees amount to $1,868,000 for equity
investees and $7,417,000 for other third parties. Management believes that the
collateral available, primarily title plants and the guarantees of corporate
stock, would enable the Company to recover the amounts paid under the
guarantees. The Company believes no provision for losses is needed because no
loss is expected on these guarantees.
In the ordinary course of business the Company guarantees the third party
indebtedness of its consolidated subsidiaries. On March 31, 2003 the maximum
potential future payments on the guarantees is not more than the notes payable
recorded on the consolidated balance sheets.
-5-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL. Our primary business is title insurance. We close transactions and
issue policies on homes and other real property located in all 50 states, the
District of Columbia, U.S. territories and several foreign countries through
more than 6,600 issuing locations. Our direct operations include affiliated
agencies while agency operations include nonaffiliated agencies that have
underwriting contracts with us. We also sell electronically delivered real
estate services and information, as well as mapping products and geographic
information systems, to domestic and foreign governments and private entities.
Our business has two main segments: title insurance and real estate
information (REI). These segments are closely related due to the nature of their
operations and common customers. The segments provide services throughout the
United States through a network of offices, including both direct operations and
agencies. Although we conduct operations in several international markets, at
current levels non-USA operations are immaterial with respect to our
consolidated financial results.
Generally, the principal factors that contribute to increases in our
operating revenues for our title and REI segments include:
o declining mortgage interest rates, which usually increase home
sales and refinancing transactions;
o rising home prices;
o higher premium rates;
o increased market share;
o opening of new offices and acquisitions; and
o a higher ratio of commercial transactions that, although relatively
few in number, typically yield higher premiums.
These factors may override the seasonal nature of the title business.
CRITICAL ACCOUNTING POLICIES. We believe the accounting policies that are the
most critical to our financial statements, and that are subject to the most
judgment and estimates, are those relating to title loss reserves, premium
revenue recognition and recoverability of long-lived assets, such as goodwill
and title plants.
Title loss reserves represent the aggregate future payments, net of
recoveries, that we expect to incur on policy and escrow losses and in costs to
settle claims. Future title loss payments are difficult to estimate due to the
complex nature of title claims, the length of time over which claims are paid,
the significantly varying dollar amounts of individual claims and other factors.
Loss provision amounts are based on reported claims, historical loss experience,
title industry averages, the current legal environment and the types of policies
written. The title loss reserves are continually reviewed and adjusted, as
appropriate. Independent actuaries review the adequacy of the reserves on an
annual basis.
Premium revenues on title insurance written by our direct title
operations are recognized as revenue at the time of the closing of the related
real estate transaction. Premium revenues on title insurance policies written by
agencies are recognized primarily when policies are reported to us. Revenues are
recorded on a total premium basis versus net to the underwriter. We accrue for
unreported policies where reasonable estimates can be made based on historical
reporting patterns of agencies, current trends and known information about
agencies.
We review the carrying values of title plants and other long-lived
assets if certain events occur that may indicate impairment. Impairment is
indicated when the projected undiscounted cash flow over the estimated life of
an asset is less than its carrying value. If impairment is determined by
management and an independent valuation, the book amount is written down to fair
value by calculating the discounted value of the projected cash flow. In
accordance with SFAS No. 142 "Goodwill and Other Intangible Assets", goodwill
for each reporting unit is tested for impairment annually and goodwill
determined to be impaired is expensed to current operations.
RESULTS OF OPERATIONS
A comparison of the results of operations of the Company for the three
months ended March 31, 2003 with the three months ended March 31, 2002 follows.
OPERATING ENVIRONMENT. According to published industry data, interest rates for
30-year fixed rate mortgages, excluding points, for the first three months of
2003 averaged 5.8% as compared with 7.0% in 2002. Comparable rates averaged 6.5%
in the full year 2002.
-6-
In 2002 rates were steady at about 7% until April. Rates then declined
through December 2002, reaching a low of 5.9%. At the end of March 2003, rates
were at a level of about 5.9%.
Operating in these mortgage interest rate environments, real estate
activity was much stronger in the first quarter of 2003 as compared with the
first quarter of 2002. Nationwide, refinancing transactions remained strong in
2003. The ratio of refinancings to total loan applications was 77.0% for the
first quarter of 2003, compared with 49.7% for the same period in 2002.
Refinancings usually have lower title insurance premium rates than real property
sales. Existing home sales increased 1.4% in 2003 over 2002.
TITLE REVENUES. Our revenues from title operations increased 27.7% in the first
quarter of 2003 over the first quarter in 2002. Revenues from direct operations
increased 32.0% in 2003, as the number of direct closings we handled increased
30.6%. The largest revenue increases in both years were primarily in California,
Florida, New York and Texas. Direct closings relate only to files closed by our
underwriters and subsidiaries and do not include closings by agencies. The
average revenue per closing increased 0.3% in 2003.
Premium revenues from agencies increased 24.3% to $224.0 million in 2003
from $180.3 million in 2002. The increase in 2003 was primarily due to the
increases in both refinancings and real property sales. The largest revenue
increases in both years were primarily in New York, California, Florida and
Pennsylvania.
REI REVENUES. Real estate information revenues were $19.1 million in 2003 and
$16.0 million in 2002. The increase in 2003 resulted primarily from an increased
number of product and service deliveries resulting from the large volume of real
estate transactions.
INVESTMENTS. Investment income decreased 2.4% in 2003 primarily because of lower
yields, partially offset by increases in average balances invested. Certain
investment gains and losses were realized as part of the ongoing management of
the investment portfolio for the purpose of improving performance.
AGENCY RETENTION. The amounts retained by agencies, as a percentage of revenues
from agency operations, were 82.5% and 82.3% in 2003 and 2002. Amounts retained
by title agencies are based on contracts between agencies and our title
underwriters. The percentage that amounts retained by agencies bears to agency
revenues may vary from year to year because of the geographical mix of agency
operations and the volume of title revenues.
EMPLOYEE COSTS. Employee costs for the combined business segments increased
26.2% in 2003. The number of persons we employed at March 31, 2003 and March 31,
2002 was approximately 8,100 and 7,100, respectively. The increase in staff in
2003 was primarily due to the increased title and REI volume and the acquisition
of new offices. In our REI segment, employee costs increased in 2003 primarily
due the increase in REI volume.
OTHER OPERATING EXPENSES. Other operating expenses for the combined business
segments increased 21.1% in 2003. The increase was primarily in new offices,
search fees, REI expenses and business promotion. Other operating expenses also
include rent, supplies, telephone, title plant expenses, travel and auto. Most
of these operating expenses follow, to varying degrees, the changes in
transaction volume and revenues.
Our employee costs 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 we handle.
TITLE LOSSES. Provisions for title losses, as a percentage of title operating
revenues, were 4.3% in 2003 and 4.4% in 2002. We continue to experience low loss
ratios because of our improved practices. Also, increases in refinancing
transactions, which generally result in lower loss exposure, have led to lower
loss ratios.
INCOME TAXES. The provisions for federal, state and foreign income taxes
represented effective tax rates of 35.7% and 38.3% in 2003 and 2002,
respectively. The effective tax rate for the first quarter of 2003 includes a
reduction for foreign taxes that amounts to 2.4%. The annual effective tax rate
for 2003 is estimated to be approximately 37.5%.
LIQUIDITY AND CAPITAL RESOURCES. Cash provided by operations was $22.5 million
and $17.1 million in 2003 and 2002, respectively. Cash flow from operations has
been the primary source of financing for additions to property and equipment,
expanding operations and other requirements. This source may be supplemented by
bank borrowings. We do not have any material source of liquidity or financing
that involves off-balance sheet arrangements.
-7-
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 2 and 3 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2002.
Our liquidity, excluding Guaranty and its subsidiaries, is comprised of
cash and investments aggregating $10.2 million and short-term liabilities of
$0.4 million at March 31, 2003. We know of no commitments or uncertainties that
are likely to materially affect our ability to fund cash needs.
We consider our capital resources to be adequate. Our capital resources
are represented by a low debt-to-equity ratio, in which notes payable is $18.4
million and stockholders' equity is $515.1 million at March 31, 2003. We are not
aware of any trends, either favorable or unfavorable, that would materially
affect notes payable or stockholders' equity and we do not expect any material
changes to the cost of such resources. However, significant acquisitions in the
future could materially affect the notes payable or stockholders' equity
balances.
FORWARD-LOOKING STATEMENTS. All statements included in this report, other than
statements of historical fact, addressing activities, events or developments
that we expect or anticipate 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, legislation (primarily legislation related
to title insurance) and other risks and uncertainties discussed in our filings
with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our investment strategies, types
of financial instruments held or the risks associated with such instruments
which would materially alter the market risk disclosures made in our Annual
Statement on Form 10-K for the year ended December 31, 2002.
-8-
Item 4. Controls and Procedures
In Release No. 34-46427, effective August 29, 2002, the Securities and
Exchange Commission, among other things, adopted rules requiring reporting
companies to maintain disclosure controls and procedures to provide reasonable
assurance that a registrant is able to record, process, summarize and report the
information required in the registrant's quarterly and annual reports under the
Securities Exchange Act of 1934 (the "Exchange Act"). While we believe that our
existing disclosure controls and procedures have been effective to accomplish
these objectives, we intend to continue to examine, refine and formalize our
disclosure controls and procedures and to monitor ongoing developments in this
area.
Our principal executive officers and our principal financial officer,
based upon their evaluation of our disclosure controls and procedures conducted
as of a date within 90 days before the filing date of this quarterly report (as
defined in Rule 13a-14(c) and Rule 15d-14(c) under the Exchange Act), have
concluded that those disclosure controls and procedures are effective.
There have been no changes in our internal controls or in other factors
known to us that could significantly affect these controls subsequent to their
evaluation, nor were any corrective actions necessary with regard to significant
deficiencies and material weaknesses.
-9-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to routine lawsuits incidental to our 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. We do not expect that any of these
proceedings will have a material adverse effect on our consolidated financial
condition.
ITEM 5. OTHER INFORMATION
We paid regular quarterly cash dividends on our common stock from 1972
through 1999. During 1999, our Board of Directors approved a plan to repurchase
up to 5 percent (680,000 shares) of our outstanding common stock. Our Board also
decided to discontinue our regular quarterly dividend in favor of returning
those and additional funds to stockholders' equity through the stock repurchase
plan. Under this plan, we repurchased 116,900 shares of common stock during
2000. We did not repurchase any shares of our common stock in 2001, 2002 or in
the first three months of 2003.
An additional 208,769 shares of treasury stock were acquired primarily
in the second quarter of 2002. The majority of these shares were acquired as a
result of the consolidation of a majority owned subsidiary that was previously
held as an equity method investment. All of these shares were held by our Parent
Company at March 31, 2003.
-10-
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
3.1 - Certificate of Incorporation of the Registrant, as amended March
19, 2001 (incorporated by reference in this report from Exhibit 3.1
of Annual Report on Form 10-K for the fiscal year ended December
31, 2000)
3.2 - By-Laws of the Registrant, as amended March 13, 2000
(incorporated by reference in this report from Exhibit 3.2 of
Annual Report on Form 10-K for the fiscal year ended December
31, 2000)
4. - Rights of Common and Class B Common Stockholders
* 10.1 - Summary of agreements as to payment of bonuses to certain executive
officers (incorporated by reference in this report from Exhibit
10.1 of Annual Report on Form 10-K for the fiscal year ended
December 31, 2002)
* 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 in this report from
Exhibit 10.2 of Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
* 10.3 - Stewart Information Services Corporation 1999 Stock Option Plan
(incorporated by reference in this report from Exhibit 10.3 of
Annual Report on Form 10-K for the fiscal year ended December 31,
1999)
* 10.4 - Stewart Information Services Corporation 2002 Stock Option Plan for
Region Managers (incorporated by reference in this report from
Exhibit 10.4 of Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002)
99.1 - Details of Investments at March 31, 2003 and December 31, 2002
99.2 - Certificate of Co-Chief Executive Officer pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002
99.3 - Certificate of Co-Chief Executive Officer pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002
99.4 - Certificate of Chief Financial Officer pursuant to Section 906(a)
of the Sarbanes-Oxley Act of 2002
* A management compensation plan, contract or arrangement.
There were no reports on Form 8-K filed during the quarter ended March
31, 2003.
-11-
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, we have
duly caused this report to be signed on our behalf by the undersigned thereunto
duly authorized.
Stewart Information Services Corporation
----------------------------------------
(Registrant)
May 9, 2003
- -----------
Date
/s/ MAX CRISP
-------------------------------------------
Max Crisp
(Executive Vice President and
Chief Financial Officer,
Secretary-Treasurer, Director and Principal
Financial and Accounting Officer)
-12-
CERTIFICATIONS
Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
I, Malcolm S. Morris, certify that:
1. I have reviewed the quarterly report on Form 10-Q of Stewart Information
Services Corporation (registrant);
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed
such controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; (b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions); (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 9, 2003
/s/ MALCOLM S. MORRIS
------------------------------------
[Signature]
Title: Chairman of the Board and
Co-Chief Executive Officer
-13-
CERTIFICATIONS
Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
I, Stewart Morris, Jr., certify that:
1. I have reviewed the quarterly report on Form 10-Q of Stewart Information
Services Corporation (registrant);
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed
such controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; (b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions); (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 9, 2003
/s/ STEWART MORRIS, JR.
-------------------------------------
[Signature]
Title: President and Co-Chief
Executive Officer
-14-
CERTIFICATIONS
Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
I, Max Crisp, certify that:
1. I have reviewed the quarterly report on Form 10-Q of Stewart Information
Services Corporation (registrant);
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a and 15d-14) for the registrant and we have (a) designed
such controls and procedures to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this
quarterly report is being prepared; (b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions); (a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and (b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 9, 2003
/s/ MAX CRISP
------------------------------------
[Signature]
Title: Executive Vice President and
Chief Financial Officer, Secretary-
Treasurer, Director and Principal
Financial and Accounting Officer
-15-
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 - Certificate of Incorporation of the Registrant, as amended March
19, 2001 (incorporated by reference in this report from Exhibit 3.1
of Annual Report on Form 10-K for the fiscal year ended December
31, 2000)
3.2 - By-Laws of the Registrant, as amended March 13, 2000
(incorporated by reference in this report from Exhibit 3.2 of
Annual Report on Form 10-K for the fiscal year ended December
31, 2000)
4. - Rights of Common and Class B Common Stockholders
* 10.1 - Summary of agreements as to payment of bonuses to certain executive
officers (incorporated by reference in this report from Exhibit
10.1 of Annual Report on Form 10-K for the fiscal year ended
December 31, 2002)
* 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 in this report from
Exhibit 10.2 of Annual Report on Form 10-K for the fiscal year
ended December 31, 1997)
* 10.3 - Stewart Information Services Corporation 1999 Stock Option Plan
(incorporated by reference in this report from Exhibit 10.3 of
Annual Report on Form 10-K for the fiscal year ended December 31,
1999)
* 10.4 - Stewart Information Services Corporation 2002 Stock Option Plan for
Region Managers (incorporated by reference in this report from
Exhibit 10.4 of Quarterly Report on Form 10-Q for the quarter ended
March 31, 2002)
99.1 - Details of Investments at March 31, 2003 and December 31, 2002
99.2 - Certificate of Co-Chief Executive Officer pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002
99.3 - Certificate of Co-Chief Executive Officer pursuant to Section
906(a) of the Sarbanes-Oxley Act of 2002
99.4 - Certificate of Chief Financial Officer pursuant to Section 906(a)
of the Sarbanes-Oxley Act of 2002
* A management compensation plan, contract or arrangement.