UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
(Mark One)


þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 001-02658
STEWART INFORMATION SERVICES CORPORATIONCORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1677330
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
19801360 Post Oak Blvd.,Suite 100
Houston, TXTexas 77056
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:(713) (713625-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par value per shareSTCNew York Stock Exchange (NYSE)
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 þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþ 
Accelerated
Non-accelerated filer¨ 
Non-accelerated filer  ¨
Emerging growth company
 
Smaller reporting company  ¨
Emerging growth company  ¨
     
Accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes No þ
On April 25,July 31, 2019, there were 23,700,47323,712,238 outstanding shares of the issuer's Common Stock, $1 par value per share.Stock.





FORM 10-Q QUARTERLY REPORT
QUARTER ENDED MARCH 31,JUNE 30, 2019
TABLE OF CONTENTS
 
Item Page Page
PART I – FINANCIAL INFORMATION PART I – FINANCIAL INFORMATION 
  
1.
  
2.
  
3.
  
4.
PART II – OTHER INFORMATION PART II – OTHER INFORMATION 
1.
  
1A.
  
2.
  
5.
  
6.
  
As used in this report, “we,” “us,” “our,” "Registrant," the “Company” and “Stewart” mean Stewart Information Services Corporation and our subsidiaries, unless the context indicates otherwise.










































PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSINCOME AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 20182019 2018 2019 2018
($000 omitted, except per share)($000 omitted, except per share)
Revenues           
Title revenues:           
Direct operations 161,247
 185,512
227,883
 224,240
 389,130
 409,752
Agency operations 214,863
 236,854
230,817
 247,257
 445,680
 484,111
Ancillary services 14,282
 11,831
7,798
 13,732
 22,080
 25,563
Operating revenues 390,392
 434,197
466,498
 485,229
 856,890
 919,426
Investment income 4,724
 4,704
5,155
 5,247
 9,879
 9,951
Investment and other gains (losses) – net 3,403
 (1,671)
Investment and other gains – net422
 2,393
 3,826
 722
 398,519
 437,230
472,075
 492,869
 870,595
 930,099
Expenses           
Amounts retained by agencies 176,494
 195,207
191,091
 203,793
 367,586
 399,000
Employee costs 129,256
 138,822
139,896
 146,278
 269,151
 285,101
Other operating expenses 77,155
 80,267
86,051
 85,953
 163,207
 166,220
Title losses and related claims 15,686
 18,981
18,786
 18,697
 34,473
 37,678
Depreciation and amortization 5,990
 6,234
5,775
 6,154
 11,764
 12,388
Interest 1,164
 974
1,124
 673
 2,288
 1,646
 405,745
 440,485
442,723
 461,548
 848,469
 902,033
Loss before taxes and noncontrolling interests (7,226) (3,255)
Income tax benefit 2,442
 1,294
Net loss (4,784) (1,961)
Income before taxes and noncontrolling interests29,352
 31,321
 22,126
 28,066
Income tax expense(7,027) (5,601) (4,585) (4,307)
Net income22,325
 25,720
 17,541
 23,759
Less net income attributable to noncontrolling interests 1,982
 1,819
3,019
 3,342
 5,001
 5,161
Net loss attributable to Stewart (6,766) (3,780)
Net income attributable to Stewart19,306
 22,378
 12,540
 18,598
           
Net loss (4,784) (1,961)
Net income22,325
 25,720
 17,541
 23,759
Other comprehensive income (loss), net of taxes:           
Foreign currency translation adjustments 4,588
 (1,592)2,475
 (4,038) 7,063
 (5,630)
Change in net unrealized gains and losses on investments 9,011
 (8,006)5,371
 (2,428) 14,382
 (10,434)
Reclassification adjustment for net losses (gains) included in net income 162
 (249)50
 (231) 212
 (480)
Other comprehensive income (loss), net of taxes: 13,761
 (9,847)7,896
 (6,697) 21,657
 (16,544)
Comprehensive income (loss) 8,977
 (11,808)
Comprehensive income30,221
 19,023
 39,198
 7,215
Less net income attributable to noncontrolling interests 1,982
 1,819
3,019
 3,342
 5,001
 5,161
Comprehensive income (loss) attributable to Stewart 6,995
 (13,627)
Comprehensive income attributable to Stewart27,202
 15,681
 34,197
 2,054
           
Basic and diluted average shares outstanding (000) 23,595
 23,508
Basic and diluted loss per share attributable to Stewart (0.29) (0.16)
Basic average shares outstanding (000)23,614
 23,546
 23,605
 23,527
Basic earnings per share attributable to Stewart0.82
 0.95
 0.53
 0.79
Diluted average shares outstanding (000)23,758
 23,625
 23,750
 23,607
Diluted earnings per share attributable to Stewart0.81
 0.95
 0.53
 0.79
See notes to condensed consolidated financial statements.


CONDENSED CONSOLIDATED BALANCE SHEETS
As of 
 March 31, 2019 (Unaudited)
 As of 
 December 31, 2018
As of 
 June 30, 2019 (Unaudited)
 As of 
 December 31, 2018
($000 omitted)($000 omitted)
Assets      
Cash and cash equivalents164,507
 192,067
201,205
 192,067
Short-term investments23,473
 22,950
23,064
 22,950
Investments in debt and equity securities, at fair value627,648
 636,017
617,349
 636,017
Receivables:      
Premiums from agencies29,421
 29,032
32,347
 29,032
Trade and other46,382
 43,568
52,471
 43,568
Income taxes1,982
 489
4,304
 489
Notes2,935
 2,987
2,889
 2,987
Allowance for uncollectible amounts(4,450) (4,614)(4,025) (4,614)
76,270
 71,462
87,986
 71,462
Property and equipment:      
Land3,512
 3,991
3,512
 3,991
Buildings21,552
 22,968
21,498
 22,968
Furniture and equipment216,901
 216,498
218,726
 216,498
Accumulated depreciation(184,773) (182,663)(186,439) (182,663)
57,192
 60,794
57,297
 60,794
Operating lease assets103,947
 
102,134
 
Title plants, at cost74,737
 74,737
74,737
 74,737
Investments on equity method basis8,611
 8,590
8,455
 8,590
Goodwill248,890
 248,890
248,890
 248,890
Intangible assets, net of amortization8,518
 9,727
7,340
 9,727
Deferred tax assets4,575
 4,575
4,575
 4,575
Other assets43,942
 43,121
44,007
 43,121
1,442,310
 1,372,930
1,477,039
 1,372,930
Liabilities      
Notes payable105,043
 108,036
105,404
 108,036
Accounts payable and accrued liabilities71,621
 109,283
85,436
 109,283
Operating lease liabilities115,307
 
114,022
 
Estimated title losses454,075
 461,560
450,208
 461,560
Deferred tax liabilities17,360
 14,214
21,142
 14,214
763,406
 693,093
776,212
 693,093
Contingent liabilities and commitments
 

 

Stockholders’ equity      
Common Stock ($1 par value) and additional paid-in capital187,139
 186,714
188,300
 186,714
Retained earnings500,335
 514,248
512,467
 514,248
Accumulated other comprehensive (loss) income:   
Accumulated other comprehensive income (loss):   
Net unrealized investment gains (losses) on debt securities investments3,907
 (5,266)9,328
 (5,266)
Foreign currency translation adjustments(14,917) (19,505)(12,442) (19,505)
Treasury stock – 352,161 common shares, at cost(2,666) (2,666)(2,666) (2,666)
Stockholders’ equity attributable to Stewart673,798
 673,525
694,987
 673,525
Noncontrolling interests5,106
 6,312
5,840
 6,312
Total stockholders’ equity (23,699,103 and 23,719,347 shares outstanding)678,904
 679,837
Total stockholders’ equity (23,712,238 and 23,719,347 shares outstanding)700,827
 679,837
1,442,310
 1,372,930
1,477,039
 1,372,930
See notes to condensed consolidated financial statements.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended 
 March 31,
Six Months Ended 
 June 30,
2019 20182019 2018
($000 omitted)($000 omitted)
Reconciliation of net loss to cash used by operating activities:   
Net loss(4,784) (1,961)
Reconciliation of net income to cash (used) provided by operating activities:   
Net income17,541
 23,759
Add (deduct):      
Depreciation and amortization5,990
 6,234
11,764
 12,388
Provision for bad debt446
 (143)462
 69
Investment and other (gains) losses – net(3,403) 1,671
Investment and other gains – net(3,826) (722)
Amortization of net premium on debt securities investments1,353
 1,587
2,628
 3,116
Payments for title losses (in excess of) less than provisions(7,781) 710
Payments for title losses in excess of provisions(11,178) (1,175)
Adjustment for insurance recoveries of title losses380
 1,198
314
 1,448
Increase in receivables – net(5,686) (3,321)(16,865) (4,363)
Increase in other assets – net(815) (4,853)(1,111) (2,626)
Decrease in accounts payable and other liabilities – net(26,212) (30,258)(11,588) (26,326)
Change in net deferred income taxes(252) (161)1,185
 (457)
Net income from equity investees(374) (243)(1,047) (768)
Dividends received from equity investees353
 431
1,220
 985
Stock-based compensation expense804
 140
2,057
 1,979
Other – net98
 43
15
 60
Cash used by operating activities(39,883) (28,926)
Cash (used) provided by operating activities(8,429) 7,367
Investing activities:      
Proceeds from sales of investments in securities6,958
 15,366
9,952
 25,722
Proceeds from matured investments in debt securities20,094
 4,603
35,884
 10,355
Purchases of investments in securities(561) (8,042)(1,263) (26,220)
Net (purchases) sales of short-term investments(456) 63
(58) 221
Purchases of property and equipment, and real estate – net(2,735) (1,993)(7,889) (5,690)
Cash paid for acquisition of businesses
 (11,978)
 (11,978)
Other – net1,287
 464
1,705
 458
Cash provided (used) by investing activities24,587
 (1,517)38,331
 (7,132)
Financing activities:      
Payments on notes payable(7,446) (5,029)(23,139) (5,993)
Proceeds from notes payable4,454
 
20,506
 26
Distributions to noncontrolling interests(3,177) (2,928)(5,487) (5,751)
Repurchases of common stock(379) (579)(471) (672)
Cash dividends paid(7,083) (7,061)(14,167) (14,127)
Purchase of remaining interest in consolidated subsidiary

(281)

(1,112)
Cash used by financing activities(13,631) (15,878)(22,758) (27,629)
Effects of changes in foreign currency exchange rates1,367
 (284)1,994
 (1,557)
Decrease in cash and cash equivalents(27,560) (46,605)
Increase (decrease) in cash and cash equivalents9,138
 (28,951)
Cash and cash equivalents at beginning of period192,067
 150,079
192,067
 150,079
Cash and cash equivalents at end of period164,507
 103,474
201,205
 121,128
      


See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

 Common Stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Noncontrolling interests Total
 ($000 omitted)
Six Months Ended June 30, 2019:             
Balances at December 31, 201824,072
 162,642
 514,248
 (24,771) (2,666) 6,312
 679,837
Net income attributable to Stewart
 
 12,540
 
 
 
 12,540
Dividends on Common Stock ($0.60 per share)
 
 (14,321) 
 
 
 (14,321)
Stock-based compensation4
 2,053
 
 
 
 
 2,057
Stock repurchases(11) (460) 
 
 
 
 (471)
Net change in unrealized gains and losses on investments, net of taxes
 
 
 14,382
 
 
 14,382
Net investment realized loss reclassification, net of taxes
 
 
 212
 
 
 212
Foreign currency translation adjustments, net of taxes
 
 
 7,063
 
 
 7,063
Net income attributable to noncontrolling interests
 
 
 
 
 5,001
 5,001
Distributions to noncontrolling interests
 
 
 
 
 (5,487) (5,487)
Net effect of other changes in ownership
 
 
 
 
 14
 14
Balances at June 30, 201924,065
 164,235
 512,467
 (3,114) (2,666) 5,840
 700,827
              
Six Months Ended June 30, 2018:             
Balances at December 31, 201724,072
 159,954
 491,698
 (847) (2,666) 6,599
 678,810
Cumulative effect adjustments on adoption of new accounting standards
 
 3,592
 (3,592) 
 
 
Net income attributable to Stewart
 
 18,598
 
 
 
 18,598
Dividends on Common Stock ($0.60 per share)
 
 (14,232) 
 
 
 (14,232)
Stock-based compensation42
 1,937
 
 
 
 
 1,979
Stock repurchases(17) (655) 
 
 
 
 (672)
Purchase of remaining interest in consolidated subsidiary
 (1,032) 
 
 
 (80) (1,112)
Net change in unrealized gains and losses on investments, net of taxes
 
 
 (10,434) 
 
 (10,434)
Net investment realized gain reclassification, net of taxes
 
 
 (480) 
 
 (480)
Foreign currency translation adjustments, net of taxes
 
 
 (5,630) 
 
 (5,630)
Net income attributable to noncontrolling interests
 
 
 
 
 5,161
 5,161
Distributions to noncontrolling interests
 
 
 
 
 (5,751) (5,751)
Balances at June 30, 201824,097
 160,204
 499,656
 (20,983) (2,666) 5,929
 666,237


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


Common Stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Noncontrolling interests TotalCommon Stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Noncontrolling interests Total
($000 omitted)($000 omitted)
Three-month period ended March 31, 2019:             
Balances at December 31, 201824,072
 162,642
 514,248
 (24,771) (2,666) 6,312
 679,837
Net loss attributable to Stewart
 
 (6,766) 
 
 
 (6,766)
Three Months Ended June 30, 2019:             
Balances at March 31, 201924,052
 163,087
 500,335
 (11,010) (2,666) 5,106
 678,904
Net income attributable to Stewart
 
 19,306
 
 
 
 19,306
Dividends on Common Stock ($0.30 per share)
 
 (7,147) 
 
 
 (7,147)
 
 (7,174) 
 
 
 (7,174)
Stock-based compensation(11) 815
 
 
 
 
 804
15
 1,238
 
 
 
 
 1,253
Stock repurchases(9) (370) 
 
 
 
 (379)(2) (90) 
 
 
 
 (92)
Net change in unrealized gains and losses on investments, net of taxes
 
 
 9,011
 
 
 9,011

 
 
 5,371
 
 
 5,371
Net investment realized loss reclassification, net of taxes
 
 
 162
 
 
 162

 
 
 50
 
 
 50
Foreign currency translation adjustments, net of taxes
 
 
 4,588
 
 
 4,588

 
 
 2,475
 
 
 2,475
Net income attributable to noncontrolling interests
 
 
 
 
 1,982
 1,982

 
 
 
 
 3,019
 3,019
Distributions to noncontrolling interests
 
 
 
 
 (3,177) (3,177)
 
 
 
 
 (2,310) (2,310)
Net effect of other changes in ownership
 
 
 
 
 (11) (11)
 
 
 
 
 25
 25
Balances at March 31, 201924,052
 163,087
 500,335
 (11,010) (2,666) 5,106
 678,904
Balances at June 30, 201924,065
 164,235
 512,467
 (3,114) (2,666) 5,840
 700,827
                          
Three-month period ended March 31, 2018:             
Balances at December 31, 201724,072
 159,954
 491,698
 (847) (2,666) 6,599
 678,810
Cumulative effect adjustments on adoption of new accounting standards
 
 3,592
 (3,592) 
 
 
Net loss attributable to Stewart
 
 (3,780) 
 
 
 (3,780)
Three Months Ended June 30, 2018:             
Balances at March 31, 201824,086
 159,300
 484,359
 (14,286) (2,666) 5,410
 656,203
Net income attributable to Stewart
 
 22,378
 
 
 
 22,378
Dividends on Common Stock ($0.30 per share)
 
 (7,151) 
 
 
 (7,151)
 
 (7,081) 
 
 
 (7,081)
Stock-based compensation28
 112
 
 
 
 
 140
14
 1,825
 
 
 
 
 1,839
Stock repurchases(14) (565) 
 
 
 
 (579)(3) (90) 
 
 
 
 (93)
Purchase of remaining interest in consolidated subsidiary
 (201) 
 
 
 (80) (281)
 (831) 
 
 
 
 (831)
Net change in unrealized gains and losses on investments, net of taxes
 
 
 (8,006) 
 
 (8,006)
 
 
 (2,428) 
 
 (2,428)
Net investment realized gain reclassification, net of taxes
 
 
 (249) 
 
 (249)
 
 
 (231) 
 
 (231)
Foreign currency translation adjustments, net of taxes
 
 
 (1,592) 
 
 (1,592)
 
 
 (4,038) 
 
 (4,038)
Net income attributable to noncontrolling interests
 
 
 
 
 1,819
 1,819

 
 
 
 
 3,342
 3,342
Distributions to noncontrolling interests
 
 
 
 
 (2,928) (2,928)
 
 
 
 
 (2,823) (2,823)
Balances at March 31, 201824,086
 159,300
 484,359
 (14,286) (2,666) 5,410
 656,203
Balances at June 30, 201824,097
 160,204
 499,656
 (20,983) (2,666) 5,929
 666,237
See notes to condensed consolidated financial statements.




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1


Interim financial statements. The financial information contained in this report for the three and six months ended March 31,June 30, 2019 and 2018, and as of March 31,June 30, 2019, is unaudited. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.


A. Management’s responsibility. The accompanying interim financial statements were prepared by management, who is responsible for their integrity and objectivity. These financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP), including management’s best judgments and estimates. In the opinion of management, all adjustments necessary for a fair presentation of this information for all interim periods, consisting only of normal recurring accruals, have been made. The Company’s results of operations for interim periods are not necessarily indicative of results for a full year and actual results could differ.


B. Consolidation. The condensed consolidated financial statements include all subsidiaries in which the Company owns more than 50% voting rights in electing directors. All significant intercompany amounts and transactions have been eliminated and provisions have been made for noncontrolling interests. Unconsolidated investees, in which the Company typically owns from 20% through 50% of the voting stock, are accounted for using the equity method.


C. Restrictions on cash and investments. The Company maintains investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $454.1$444.4 million and $462.2 million at March 31,June 30, 2019 and December 31, 2018, respectively, In addition, included within cash and cash equivalents are statutory reserve funds of approximately $49.6$65.7 million and $37.7 million at March 31,June 30, 2019 and December 31, 2018, respectively. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease.


D. Recently adopted accounting standard. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Topic 842:Leases (Topic 842) which updates the current guidance related to leases to increase transparency and comparability among organizations. Most prominent among the changes in the standard is the recognition of right-of-use lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases. Additional financial statement disclosures are required to enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Topic 842 is effective for annual and interim periods beginning after December 15, 2018. Topic 842 permits adoption using either a modified retrospective approach or an optional transition method. The optional transition method allows the application of the recognition and measurement requirements of the standard in the period of adoption and annual disclosures using the legacy lease guidance in Topic 840 for comparative periods.


The Company adopted Topic 842 effective January 1, 2019 using the optional transition method of adoption. In addition, the Company elected practical expedients permitted under the transition guidance of the standard, which among other things, allowed the carry forward of the historical lease classifications for existing leases. The adoption resulted in the recognition on the Company's January 1, 2019 consolidated balance sheet of approximately $99.8 million of operating lease assets and lease liabilities, and the reclassification of approximately $10.7 million of existing deferred rent liabilities from accounts payable and accrued liabilities to operating lease assets. There was no impact on the Company's 2019 consolidated statements of operations and comprehensive income and cash flows. The accounting treatment for finance leases remained substantially unchanged.





E. Merger Agreement update. In relation to the Company's agreement and plan of merger (Merger Agreement) with Fidelity National Financial, Inc. (FNF) (the Mergers), as disclosed in detail in Note 1-S of the Company’s 2018 Annual Report on Form 10-K and in Exhibit 2.1 to the Company's Current Report on Form 8-K filed on March 19, 2018 Form 8-K filed with the Securities and Exchange Commission, the Company continues to work with FNF in responding to gain approval for the Second Request ofmerger from the Federal Trade Commission (FTC).and the remaining state regulators, including Texas and New York. As set forth in the Risk Factors of the Company’s 2018 Annual Report on Form 10-K, no assurances can be given that the requisite approvals thereunder will be obtained, or that the approvals, if obtained, will not include conditions which will delay or materially increase the costs of the Mergers, or result in the abandonment of the Mergers.


Additionally, the Merger Agreement contains certain customary termination rights in favor of either the Company or FNF, which are exercisable (i) by mutual consent, (ii) upon the failure to complete the Mergers by March 18, 2019 (the End Date), subject to certain exceptions and subject to up to two (2) extensions of up to three (3) months each upon the election of either the Company or FNF if, as of such date, all closing conditions (other than the receipt of the Required Antitrust Regulatory Filings/Approvals, the receipt of the Required Insurance Regulatory Filings/Approvals and the absence of any law or court or other governmental order relating thereto) having been met or being capable of being satisfied as of such time, (iii) in the event of a final and non-appealable law or order that prohibits the consummation of the Mergers or (iv) if the Company’s stockholders do not vote to approve the Mergers. On March 11, 2019 and June 10, 2019, respectively, FNF exercised the first optionand second options to extend the Merger Agreement's End Date, by three months to Junewhich is now September 18, 2019.


The Company worked with FNF on its new Form A application with the New York State Department of Financial Services, which disapproved a prior application with respect to Stewart Title Insurance Company, the Company's New York domiciled title insurance underwriter. The Company will continue to respond to the FTC's Second Request and maintain discussions with all other necessary regulatory bodies to seek approval of the proposed merger.



NOTE 2


Revenues. The Company's operating revenues, summarized by type, are as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
Title insurance premiums:       
Direct162,367
 158,947
 274,285
 291,708
Agency230,817
 247,257
 445,680
 484,111
Escrow fees36,611
 35,468
 61,904
 63,335
Search, abstract and valuation services19,248
 25,114
 42,187
 46,901
Other revenues17,455
 18,443
 32,834
 33,371
 466,498
 485,229
 856,890
 919,426

  Three Months Ended 
 March 31,
  2019 2018
  ($000 omitted)
Title insurance premiums:    
Direct 111,918
 132,761
Agency 214,863
 236,854
Escrow fees 25,293
 27,867
Search, abstract and valuation services 22,939
 21,787
Other revenues 15,379
 14,928
  390,392
 434,197




NOTE 3


Investments in debt and equity securities. The total fair values of the Company's investments in debt and equity securities are as follows:
 June 30, 2019 December 31, 2018
 ($000 omitted)
Investments in:   
Debt securities579,823
 602,020
Equity securities37,526
 33,997
 617,349
 636,017
 March 31, 2019 December 31, 2018
 ($000 omitted)
Investments in:   
Debt securities590,115
 602,020
Equity securities37,533
 33,997
 627,648
 636,017


As of March 31,June 30, 2019 and December 31, 2018, the net unrealized investment gains relating to investments in equity securities held were $6.6$6.4 million and $2.9 million, respectively.


The amortized costs and fair values of investments in debt securities are as follows:
 June 30, 2019 December 31, 2018
 
Amortized
costs
 
Fair
values
 
Amortized
costs
 
Fair
values
 ($000 omitted)
Municipal60,141
 61,578
 61,779
 61,934
Corporate311,687
 319,745
 333,289
 328,495
Foreign189,650
 192,068
 200,667
 198,938
U.S. Treasury Bonds6,537
 6,432
 12,951
 12,653
 568,015
 579,823
 608,686
 602,020

 March 31, 2019 December 31, 2018
 
Amortized
costs
 
Fair
values
 
Amortized
costs
 
Fair
values
 ($000 omitted)
Municipal60,467
 61,348
 61,779
 61,934
Corporate322,993
 325,918
 333,289
 328,495
Foreign195,177
 196,430
 200,667
 198,938
U.S. Treasury Bonds6,533
 6,419
 12,951
 12,653
 585,170
 590,115
 608,686
 602,020


Foreign debt securities consist of Canadian government and corporate bonds, United Kingdom treasury and corporate bonds, and Mexican government bonds.


Gross unrealized gains and losses on investments in debt securities are as follows:
 June 30, 2019 December 31, 2018
 Gains Losses Gains Losses
 ($000 omitted)
Municipal1,439
 2
 482
 327
Corporate8,184
 126
 1,894
 6,688
Foreign3,022
 604
 1,402
 3,131
U.S. Treasury Bonds8
 113
 2
 300
 12,653
 845
 3,780
 10,446

 March 31, 2019 December 31, 2018
 Gains Losses Gains Losses
 ($000 omitted)
Municipal945
 64
 482
 327
Corporate4,014
 1,089
 1,894
 6,688
Foreign2,336
 1,083
 1,402
 3,131
U.S. Treasury Bonds2
 116
 2
 300
 7,297
 2,352
 3,780
 10,446


Debt securities as of March 31,June 30, 2019 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
 
Amortized
costs
 
Fair
values
 ($000 omitted)
In one year or less50,679
 50,634
After one year through five years330,611
 335,702
After five years through ten years155,433
 160,440
After ten years31,292
 33,047
 568,015
 579,823

 
Amortized
costs
 
Fair
values
 ($000 omitted)
In one year or less50,945
 50,822
After one year through five years326,286
 328,615
After five years through ten years176,344
 178,348
After ten years31,595
 32,330
 585,170
 590,115


Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31,June 30, 2019, were:
 Less than 12 months More than 12 months Total
 Losses Fair values Losses Fair values Losses Fair values
 ($000 omitted)
Municipal
 
 2
 506
 2
 506
Corporate1
 80
 125
 22,619
 126
 22,699
Foreign30
 21,616
 574
 59,053
 604
 80,669
U.S. Treasury Bonds
 
 113
 5,836
 113
 5,836
 31
 21,696
 814
 88,014
 845
 109,710

 Less than 12 months More than 12 months Total
 Losses Fair values Losses Fair values Losses Fair values
 ($000 omitted)
Municipal
 
 64
 9,099
 64
 9,099
Corporate28
 9,652
 1,061
 117,827
 1,089
 127,479
Foreign36
 16,905
 1,047
 88,177
 1,083
 105,082
U.S. Treasury Bonds
 
 116
 6,310
 116
 6,310
 64
 26,557
 2,288
 221,413
 2,352
 247,970



The number of specific debt investment holdings held in an unrealized loss position as of March 31,June 30, 2019 was 151.61. Of these securities, 13853 were in unrealized loss positions for more than 12 months. During 2019, the overall gross unrealized losses on debt securities decreasedimproved compared to the prior year-end, primarily due to the decrease in the overallreduced interest rate environmentrates and credit spreads which improved the market values of investments.increased investment fair values. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery, and no significant credit risk is deemed to exist, these investments are not considered as other-than-temporarily impaired. 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.


Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018, were:
 Less than 12 months More than 12 months Total
 Losses Fair values Losses Fair values Losses Fair values
 ($000 omitted)
Municipal91
 13,366
 236
 11,645
 327
 25,011
Corporate4,416
 201,965
 2,272
 71,044
 6,688
 273,009
Foreign158
 11,424
 2,973
 137,793
 3,131
 149,217
U.S. Treasury Bonds
 
 300
 12,544
 300
 12,544
 4,665
 226,755
 5,781
 233,026
 10,446
 459,781

 Less than 12 months More than 12 months Total
 Losses Fair values Losses Fair values Losses Fair values
 ($000 omitted)
Municipal91
 13,366
 236
 11,645
 327
 25,011
Corporate4,416
 201,965
 2,272
 71,044
 6,688
 273,009
Foreign158
 11,424
 2,973
 137,793
 3,131
 149,217
U.S. Treasury Bonds
 
 300
 12,544
 300
 12,544
 4,665
 226,755
 5,781
 233,026
 10,446
 459,781




NOTE 4


Fair value measurements. The Fair Value Measurements and Disclosures Topic (Topic 820) of the FASB Accounting Standards Codification (ASC) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal, or most advantageous, market for the asset or liability in an orderly transaction between market participants at the measurement date. Topic 820 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs when possible.


The three levels of inputs used to measure fair value are as follows:
 
Level 1 – quoted prices in active markets for identical assets or liabilities;
Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data; and
Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair values of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.


As of March 31,June 30, 2019, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1 Level 2 
Fair value
measurements
Level 1 Level 2 
Fair value
measurements
($000 omitted)($000 omitted)
Investments in securities:          
Debt securities:          
Municipal

 61,348
 61,348

 61,578
 61,578
Corporate

 325,918
 325,918

 319,745
 319,745
Foreign

 196,430
 196,430

 192,068
 192,068
U.S. Treasury Bonds

 6,419
 6,419

 6,432
 6,432
Equity securities37,533
 

 37,533
37,526
 
 37,526
37,533
 590,115
 627,648
37,526
 579,823
 617,349

As of December 31, 2018, financial instruments measured at fair value on a recurring basis are summarized below:
 Level 1 Level 2 
Fair value
measurements
 ($000 omitted)
Investments in securities:     
Debt securities:     
Municipal
 61,934
 61,934
Corporate
 328,495
 328,495
Foreign
 198,938
 198,938
U.S. Treasury Bonds
 12,653
 12,653
Equity securities33,997
 
 33,997
 33,997
 602,020
 636,017

 Level 1 Level 2 
Fair value
measurements
 ($000 omitted)
Investments in securities:     
Debt securities:     
Municipal
 61,934
 61,934
Corporate
 328,495
 328,495
Foreign
 198,938
 198,938
U.S. Treasury Bonds
 12,653
 12,653
Equity securities33,997
 
 33,997
 33,997
 602,020
 636,017


As of March 31,June 30, 2019, Level 1 financial instruments consist of equity securities. Level 2 financial instruments consist of municipal, governmental, and corporate bonds, both U.S. and foreign. In accordance with the Company’s policies and guidelines which incorporate relevant statutory requirements, the Company’s third-party registered investment manager invests only in securities rated as investment grade or higher by the major rating services, where observable valuation inputs are significant. The fair value of the Company's investments in debt and equity securities is primarily determined using a third-party pricing service provider. The third-party pricing service provider calculates the fair values using both market approach and model valuation methods, as well as pricing information obtained from brokers, dealers and custodians. Management ensures the reasonableness of the third-party service valuations by comparing them with pricing information from the Company's investment manager.




NOTE 5


Investment and other gains (losses) - net. Investments and other gains (losses) are detailed as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
Investment and other gains791
 603
 953
 1,166
Investment and other losses(59) (38) (363) (68)
Net unrealized investment (losses) gains recognized on equity securities still held at June 30(310) 1,828
 3,236
 (376)
 422
 2,393
 3,826
 722

  Three Months Ended 
 March 31,
  2019 2018
 ($000 omitted)
Investment and other gains 162
 720
Investment and other losses (305) (188)
Net unrealized investment gains (losses) recognized on equity securities held 3,546
 (2,203)
  3,403
 (1,671)



Net investmentInvestment gains (losses)and losses recognized during the three monthsperiods ended March 31,June 30, 2019 and 2018 related to investments in equity securities still heldare as of March 31, 2019 and 2018 are calculated as follows ($000 omitted):follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
Net investment (losses) gains recognized on equity securities during the period(264) 1,612
 3,393
 (614)
Less: Net realized gains (losses) on equity securities sold during the period46
 (216) 157
 (238)
Net unrealized investment (losses) gains recognized on equity securities still held at June 30(310) 1,828
 3,236
 (376)

 Three Months Ended 
 March 31,
 2019 2018
 ($000 omitted)
Net investment gains (losses) recognized on equity securities during the period3,657
 (2,226)
Less: Net realized gains (losses) on equity securities sold during the period111
 (23)
Net unrealized investment gains (losses) recognized on equity securities still held3,546
 (2,203)


Proceeds from sales of investments in securities are as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
Proceeds from sales of debt securities2,734
 8,003
 9,052
 21,149
Proceeds from sales of equity securities260
 2,353
 900
 4,573
Total proceeds from sales of investments in securities2,994
 10,356
 9,952
 25,722

  Three Months Ended 
 March 31,
  2019 2018
 ($000 omitted)
Proceeds from sales of debt securities 6,318
 13,146
Proceeds from sales of equity securities 640
 2,220
Total proceeds from sales of investment in securities 6,958
 15,366




NOTE 6


Estimated title losses. A summary of estimated title losses for the threesix months ended March 31June 30 is as follows:
 2019 2018
 ($000 omitted)
Balances at January 1461,560
 480,990
Provisions:   
Current year33,833
 41,372
Previous policy years640
 (3,694)
Total provisions34,473
 37,678
Payments, net of recoveries:   
Current year(5,722) (5,263)
Previous policy years(39,929) (33,590)
Total payments, net of recoveries(45,651) (38,853)
Effects of changes in foreign currency exchange rates(174) (4,355)
Balances at June 30450,208
 475,460
Loss ratios as a percentage of title operating revenues:   
Current year provisions4.1% 4.6%
Total provisions4.1% 4.2%

 2019 2018
 ($000 omitted)
Balances at January 1461,560
 480,990
Provisions:   
Current year15,526
 18,880
Previous policy years160
 101
Total provisions15,686
 18,981
Payments, net of recoveries:   
Current year(2,695) (2,564)
Previous policy years(20,772) (15,708)
Total payments, net of recoveries(23,467) (18,272)
Effects of changes in foreign currency exchange rates296
 (1,894)
Balances at March 31454,075
 479,805
Loss ratios as a percentage of title operating revenues:   
Current year provisions4.1% 4.5%
Total provisions4.2% 4.5%


ProvisionsTitle loss provisions during 2019 decreased during the three months ended March 31, 2019, compared to the same period in 2018, primarily due to the Company's lower loss provisioning rate as a result of better claimslower title premiums in 2019. During 2018, the Company recorded a $4.0 million net reduction in prior policy years' reserves, which was driven by its favorable loss experience. Claim payments increased during the three months ended March 31, 2019 compared to the same period in 2018, primarily due to higher payments on existing large and non-large claims.





NOTE 7


Share-based payments. Beginning in 2018, the Company grants time-based and performance-based restricted stock units to executives and senior management employees. Each restricted stock unit represents a contractual right to receive a share of the Company's common stock. The time-based units vest on each of the first three anniversaries of the grant date, while the performance-based units vest upon achievement of certain financial objectives over a period of approximately three years. Awards are made pursuant to the Company’s employee incentive compensation plans and the compensation expense associated with the awards is recognized over the corresponding vesting period. The aggregate grant-date fair values of restricted stock unit awards during the first quarterssix months of 2019 and 2018 were $3.7$4.5 million (87,000(104,000 units with an average grant price per unit of $43.06)$43.22) and $3.9$4.7 million (90,000(109,000 units with an average grant price per unit of $43.33)$43.39), respectively.





NOTE 8


Earnings per share. Basic earnings per share (EPS) attributable to Stewart is calculated by dividing net income attributable to Stewart by the weighted-average number of shares of Common Stock outstanding during the reporting periods. Outstanding shares of Common Stock granted to employees that are not yet vested (restricted shares) are excluded from the calculation of the weighted-average number of shares outstanding for calculating basic EPS. To calculate diluted EPS, the number of shares is adjusted to include the number of additional shares that would have been outstanding if the restricted shares and restricted units were vested. In periods of loss, dilutive shares are excluded from the calculation of the diluted EPS and diluted EPS is computed in the same manner as basic EPS.


The calculation of the basic and diluted EPS is as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted, except per share)
Numerator:       
Net income attributable to Stewart19,306
 22,378
 12,540
 18,598
        
Denominator (000):       
Basic average shares outstanding23,614
 23,546
 23,605
 23,527
Average number of dilutive shares relating to grants of restricted shares and units144
 79
 145
 80
Basic and diluted average shares outstanding23,758
 23,625
 23,750
 23,607
        
Basic earnings per share attributable to Stewart0.82
 0.95
 0.53
 0.79
        
Diluted earnings per share attributable to Stewart0.81
 0.95
 0.53
 0.79

  Three Months Ended 
 March 31,
  2019 2018
  ($000 omitted, except per share)
Numerator:    
Net loss attributable to Stewart (6,766) (3,780)
     
Denominator (000):    
Basic and diluted average shares outstanding 23,595
 23,508
     
Basic and diluted loss per share attributable to Stewart (0.29) (0.16)




NOTE 9


Leases. The Company primarily leases office space, storage units, data centers and equipment, and determines if an arrangement is a lease at inception. Operating leases are included in operating lease assets and operating lease liabilities on the consolidated balance sheets. Operating lease assets represent the right to use the underlying leased assets over the corresponding lease terms. Finance leases are included in furniture and equipment and notes payable on the consolidated balance sheets. Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company's leases do not provide an implicit rate, the Company's incremental borrowing rate based on the information available at the lease commencement date is used in determining the present value of the future lease payments. Lease options to extend or terminate that the Company is reasonably certain to exercise are considered in the present value calculation.


Operating lease expense, which is calculated on a straight-line basis over the lease term and presented as part of other operating expenses in the statement of operations, is composed of the amortization of the lease asset and the accretion of the lease liability. Finance lease expense is composed of the depreciation of the lease asset and accretion of the lease liability and presented as part of depreciation and amortization and interest expense, respectively, in the condensed consolidated statement of operations.income and comprehensive income.


The Company accounts for the lease and non-lease fixed payment components of a lease agreement as a single lease component for all its classes of assets. Variable lease payments are not capitalized and are recorded as lease expense when incurred or paid. Operating leases with initial terms of 12 months or less (short-term leases), which are not reasonably certain to be extended at the commencement date, are not capitalized on the balance sheet. Additionally, operating leases of equipment are not recorded on the balance sheet on the basis that they are relatively short-term in nature and considered as not material to the condensed consolidated balance sheet.


During the three and six months ended March 31,June 30, 2019, total operating lease expense was $11.5$11.4 million and $22.9 million, respectively, which included $1.0$1.1 million and $2.1 million, respectively, of lease expense related to short-term leases and equipment, while totalequipment. Total finance lease expense was $0.3 million.$0.5 million and $1.1 million, respectively, for the three and six months ended June 30, 2019.


Lease-related assets and liabilities as of March 31,June 30, 2019 are as follows ($000 omitted):
Assets:  
Operating lease assets, net of accumulated amortization 103,947102,134

Finance lease assets, net of accumulated depreciation 1,1511,369

Total lease assets 105,098103,503

   
Liabilities:  
Operating lease liabilities 115,307114,022

Finance lease liabilities 5,7604,975

Total lease liabilities 121,067118,997



Other information related to operating and finance leases during the threesix months ended March 31,June 30, 2019 is as follows:
  Operating Finance
   
Cash paid for amounts included in the measurement of lease liabilities ($000) 22,167
 1,734
Lease assets obtained in exchange for lease obligations ($000) 33,419
 
Weighted average remaining lease term (years): 4.7
 2.7
Weighted average discount rate 4.6% 5.0%

  Operating Finance
   
Cash paid for amounts included in the measurement of lease liabilities ($000) 11,095
 897
Lease assets obtained in exchange for lease obligations ($000) 25,244
 
Weighted average remaining lease term (years): 4.7
 2.8
Weighted average discount rate 4.5% 5.2%


Future minimum lease payments under operating and finance leases as of March 31,June 30, 2019 are as follows:
  Operating Finance
  ($000 omitted)
2019 (excludes the six months ended June 30, 2019) 20,396
 1,342
2020 33,926
 1,913
2021 25,264
 957
2022 18,186
 957
2023 12,907
 80
Thereafter 21,809
 
Total future minimum lease payments 132,488
 5,249
Less: imputed interest (18,466) (274)
Net future minimum lease payments 114,022
 4,975

  Operating Finance
  ($000 omitted)
2019 (excludes the three months ended March 31, 2019) 30,221
 2,180
2020 32,328
 1,913
2021 23,953
 957
2022 17,242
 957
2023 12,262
 80
Thereafter 20,928
 
Total future minimum lease payments 136,934
 6,087
Less: imputed interest (21,627) (327)
Net future minimum lease payments 115,307
 5,760





NOTE 10


Contingent liabilities and commitments. In the ordinary course of business, the Company guarantees the third-party indebtedness of certain of its consolidated subsidiaries. As of March 31,June 30, 2019, the maximum potential future payments on the guarantees are not more than the related notes payable recorded in the condensed consolidated balance sheets. The Company also guarantees the indebtedness related to lease obligations of certain of its consolidated subsidiaries. The maximum future obligations arising from these lease-related guarantees are not more than the Company’s future minimum lease payments. As of March 31,June 30, 2019, the Company also had unused letters of credit aggregating $5.4 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees.




NOTE 11


Regulatory and legal developments. The Company is subject to claims and lawsuits arising in the ordinary course of its business, most of which involve disputed policy claims. In some of these lawsuits, the plaintiff seeks exemplary or treble damages in excess of policy limits. The Company does not expect that any of these ordinary course proceedings will have a material adverse effect on its consolidated financial condition or results of operations. The Company believes that it has adequate reserves for the various litigation matters and contingencies discussed in this paragraph and that the likely resolution of these matters will not materially affect its consolidated financial condition or results of operations.


Additionally, the Company receives from time to time various other inquiries from governmental regulators concerning practices in the insurance industry. Many of these practices do not concern title insurance. To the extent the Company is in receipt of such inquiries, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of these inquiries will materially affect its consolidated financial condition or results of operations.


The Company is subject to various other administrative actions and inquiries into its business conduct in certain of the states in which it operates. While the Company cannot predict the outcome of the various regulatory and administrative matters, it believes that it has adequately reserved for these matters and does not anticipate that the outcome of any of these matters will materially affect its consolidated financial condition or results of operations.
 


NOTE 12


Segment information. The Company reports two operating segments: title and ancillary services and corporate. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes home and personal insurance services and Internal Revenue Code Section 1031 tax-deferred exchanges. The ancillary services and corporate segment includes search and valuation services, which are the principal offerings of ancillary services, and expenses of the parent holding company and certain other enterprise-wide overhead costs (net of centralized administrative services costs allocated to respective operating businesses).



Selected statement of operationsincome information related to these segments is as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
Title segment:       
Revenues463,636
 479,125
 848,074
 904,536
Depreciation and amortization5,048
 5,249
 10,200
 10,566
Income before taxes and noncontrolling interest39,041
 37,737
 38,661
 42,862
        
Ancillary services and corporate segment:       
Revenues8,439
 13,744
 22,521
 25,563
Depreciation and amortization727
 905
 1,564
 1,822
Loss before taxes and noncontrolling interest(9,689) (6,416) (16,535) (14,796)
        
Consolidated Stewart:       
Revenues472,075
 492,869
 870,595
 930,099
Depreciation and amortization5,775
 6,154
 11,764
 12,388
Income before taxes and noncontrolling interest29,352
 31,321
 22,126
 28,066

  Three Months Ended 
 March 31,
  2019 2018
 ($000 omitted)
Title segment:    
Revenues 384,437
 425,411
Depreciation and amortization 5,153
 5,317
(Loss) income before taxes and noncontrolling interest (379) 5,125
     
Ancillary services and corporate segment:    
Revenues 14,082
 11,819
Depreciation and amortization 837
 917
Loss before taxes and noncontrolling interest (6,847) (8,380)
     
Consolidated Stewart:    
Revenues 398,519
 437,230
Depreciation and amortization 5,990
 6,234
Loss before taxes and noncontrolling interest (7,226) (3,255)


The Company does not provide asset information by reportable operating segment as it does not routinely evaluate the asset position by segment.


Revenues generated in the United States and all international operations are as follows:
 Three Months Ended 
 June 30,
 Six Months Ended 
 June 30,
 2019 2018 2019 2018
 ($000 omitted)
United States441,614
 460,529
 818,096
 873,833
International30,461
 32,340
 52,499
 56,266
 472,075
 492,869
 870,595
 930,099

  Three Months Ended 
 March 31,
  2019 2018
 ($000 omitted)
United States 376,482
 413,304
International 22,037
 23,926
  398,519
 437,230




NOTE 13
Other comprehensive income (loss). Changes in the balances of each component of other comprehensive income (loss) and the related tax effects are as follows:
 Three Months Ended 
 June 30, 2019
 Three Months Ended 
 June 30, 2018
 Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
 ($000 omitted)
Net unrealized gains (losses) on investments:       
Change in net unrealized gains and losses on investments6,800
1,429
5,371
 (3,074)(646)(2,428)
Less: reclassification adjustment for net losses (gains) included in net income63
13
50
 (292)(61)(231)
 6,863
1,442
5,421
 (3,366)(707)(2,659)
Foreign currency translation adjustments3,378
903
2,475
 (4,575)(537)(4,038)
Other comprehensive income (loss)10,241
2,345
7,896
 (7,941)(1,244)(6,697)

 Three Months Ended 
 March 31, 2019
 Three Months Ended 
 March 31, 2018
 Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
 ($000 omitted)
Net unrealized gains (losses) on investments:       
Change in net unrealized gains and losses on investments11,406
2,395
9,011
 (10,134)(2,128)(8,006)
Less: reclassification adjustment for net losses (gains) included in net income205
43
162
 (315)(66)(249)
 11,611
2,438
9,173
 (10,449)(2,194)(8,255)
Foreign currency translation adjustments5,548
960
4,588
 (2,279)(687)(1,592)
Other comprehensive income (loss)17,159
3,398
13,761
 (12,728)(2,881)(9,847)


 Six Months Ended 
 June 30, 2019
 Six Months Ended 
 June 30, 2018
 Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount Before-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
 ($000 omitted)
Net unrealized gains (losses) on investments:       
Change in net unrealized gains and losses on investments18,206
3,824
14,382
 (13,208)(2,774)(10,434)
Less: reclassification adjustment for net losses (gains) included in net income268
56
212
 (607)(127)(480)
 18,474
3,880
14,594
 (13,815)(2,901)(10,914)
Foreign currency translation adjustments8,926
1,863
7,063
 (6,854)(1,224)(5,630)
Other comprehensive income (loss)27,400
5,743
21,657
 (20,669)(4,125)(16,544)






Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


MANAGEMENT’S OVERVIEW


We reported a net lossincome attributable to Stewart of $6.8$19.3 million ($0.290.81 per diluted share) for the firstsecond quarter 2019, compared to a net lossincome attributable to Stewart of $3.8$22.4 million ($0.160.95 per diluted share) for the firstsecond quarter 2018. Pretax lossincome before noncontrolling interests for the firstsecond quarter 2019 was $7.2$29.4 million compared to a pretax lossincome before noncontrolling interests of $3.3$31.3 million for the firstsecond quarter 2018.


FirstSecond quarter 2019 results included:
$3.5 million of net unrealized gains recorded in the title segment relating to changes in fair value of equity securities investments,
$2.03.7 million of third-party advisory expenses related to the Fidelity National Financial (FNF) merger transaction included in other operating expenses within the ancillary services and corporate segment,
$0.8 million of litigation expense related to a 2013 lender services acquisition includedrecorded in other operating expenses within the ancillary services and corporate segment, and
$0.70.4 million of office closure costs included in net investment and other operating expenses within the title segment.gains.


FirstSecond quarter 2018 results included:included $2.4 million in net investment and other gains.
$2.3 million of third party advisory expenses recorded in other operating expenses in the ancillary services and corporate segment relating to the strategic alternatives review, and
$2.2 million of net unrealized losses recorded in the title segment relating to changes in fair value of equity securities investments.


Summary results of the title segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended March 31,
For the Three Months
Ended June 30,
2019 2018 % Change2019 2018 % Change
          
Total operating revenues376.1
 422.4
 (11)%458.7
 471.5
 (3)%
Investment income and other net gains8.3
 3.0
 173 %4.9
 7.6
 (35)%
Pretax income(0.4) 5.1
 (107)%39.0
 37.7
 3 %
Pretax margin(0.1)% 1.2% 

8.4% 7.9% 7 %


Title operating revenues in the firstsecond quarter 2019 decreased 3% compared to the prior year quarter as direct title andprimarily due to the decrease in independent agency revenues decreased 13% and 9%, respectively.revenues. The segment’s overall operating expenses in the firstsecond quarter 2019 declined $35.5decreased $16.8 million, or 8%4%, compared to the prior year quarter, asprimarily driven by the 2% reduction in combined employee and other operating costs decreased 7% and title lossthe 6% lower agency retention expense decreased 17%. Excludinglargely resulting from lower agency gross revenues. The segment recognized $0.4 million of net unrealized losses in the effectssecond quarter 2019 and $1.8 million of net unrealized gains in the prior year quarter relating to changes in fair value of equity securities investments and office closures,investments. Excluding the effects of these equity securities’ fair value remeasurements, the title segment’s pretax loss was $3.3 millionincome in the firstsecond quarter 2019 was $39.4 million, an increase of $3.5 million, or 10%, compared to pretax income of $7.3$35.9 million in the firstsecond quarter 2018.
Included in the non-commercial
 For the Three Months
Ended June 30,
 2019 2018 % Change
 ($ in millions)  
Non-commercial     
Domestic148.9
 145.7
 2 %
International22.4
 22.8
 (2)%
 171.3
 168.5
 2 %
Commercial:     
Domestic50.3
 48.2
 4 %
International6.3
 7.5
 (16)%
 56.6
 55.7
 2 %
Total direct title revenues227.9
 224.2
 2 %


Non-commercial domestic revenues, (as shown under the Results of Operations - Title revenues section) werewhich include revenues from purchase transactions and centralized title operations, (primarily processing refinancing and default title orders) which, on a combined basis, declined $8.3 million primarilyincreased as a result of a total 10% declinethe increase in combined purchase and refinancing closed orders and the higher premium effect of increased home sale prices in the firstsecond quarter 2019 compared to the prior year quarter. The reduced orders were primarily influenced by the decline in total home sales and mortgage lendingDomestic commercial revenues increased due to a higher fee per file during the firstsecond quarter 2019, compared to the prior year quarter. Total commercial revenues decreased $13.4 million, or 26%, primarily due to fewer transactions during the firstsecond quarter 2019, compared to the first quarter 2018 which benefited from a few large portfolio transactions and carryover of some opened transactions from the fourth quarter 2017. First2018. Second quarter 2019 domestic commercial fee per file increased 9%25% to approximately $9,600, primarily due to$11,600, as a result of increased transaction sizes, while domestic residential fee per file increased 7%3% to approximately $2,300 as a result of the mix shiftprimarily due to more purchase transactions and home price appreciation. Total international title revenues decreased $2.2 million, or 10%, primarily driven by market conditions in Canada.appreciation, more than offsetting the effects of reduced fee per file from increased refinancing volume.



Gross revenues from independent agency operations declined 7% in the firstsecond quarter 2019, compared to last year’s quarter, primarily as a result of reductions in generally high agency volume states of Texas, New Jersey, Utah, Pennsylvania and California, partially offset by a revenue increase in the state of New York.quarter. The independent agency remittance rate in the firstsecond quarter 2019 was 17.9%17.2%, which was comparablecompared to 17.6% in the prior year quarter.


Summary results of the ancillary services and corporate segment are as follows ($ in millions):
For the Three Months
Ended March 31,
For the Three Months
Ended June 30,
2019 2018 % Change2019 2018 % Change
          
Total revenues14.1
 11.8
 19%8.4
 13.7
 (39)%
Pretax loss(6.8) (8.4) 18%(9.7) (6.4) (51)%


FirstExcluding the $3.7 million FNF merger-related expenses noted above for the segment, the second quarter 2019 pretax loss would have been $6.0 million, a 7% improvement compared to the prior year quarter. Second quarter 2019 segment revenues increaseddecreased $5.3 million compared to the prior year quarter, primarily due to a $3.1 million revenue increaselower revenues from search services. Excluding the non-operating charges noted above for the segment, the first quarter 2019 pretax loss would have been $4.0 million, an improvementand valuation services as a result of $2.1 million, or 34%, compared to the prior year quarter.lower customer orders. Additionally, the segment’s results for the firstsecond quarter 2019 and 2018 included approximately $7.5$9.4 million and $8.1$6.3 million, respectively, of net expenses attributable to parent company and corporate operations, (includingwith the above non-operating charges).increased expenses in the second quarter 2019 driven by the merger-related charges.



As set forth in Note 1-E to the condensed consolidated financial statements and in the Company’s 2018 Annual Report on Form 10-K, the proposed FNF merger is subject to the receipt of approvals, consents and clearances from various regulatory authorities. There can be no assurance that the necessary approvals, consents and clearances will be obtained, or if obtained, that any regulator will not impose conditions, terms, obligations or restrictions and that such conditions, terms, obligations or restrictions will not have the effect of delaying completion of the Mergers or imposing additional material costs on the Company. In addition, neither FNF nor Stewart can provide assurance that any such conditions, terms, obligations, restrictions or disapprovals will not result in the delay or abandonment of the Mergers.


CRITICAL ACCOUNTING ESTIMATES


The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures surrounding contingencies and commitments.


Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the threesix months ended March 31,June 30, 2019, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.


Operations. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, agencies and centralized title services centers. Our ancillary services and corporate segment includes our parent holding company expenses and certain enterprise-wide overhead costs, along with our ancillary services operations, principally search and valuation services.

Factors affecting revenues. The principal factors that contribute to changes in operating revenues for our title and ancillary services and corporate segments include:
mortgage interest rates;
availability of mortgage loans;
number and average value of mortgage loan originations;
ability of potential purchasers to qualify for loans;
inventory of existing homes available for sale;
ratio of purchase transactions compared with refinance transactions;
ratio of closed orders to open orders;
home prices;
consumer confidence, including employment trends;
demand by buyers;
number of households;
premium rates;
foreign currency exchange rates;
market share;
ability to attract and retain highly productive sales associates;
independent agency remittance rates;

opening of new offices and acquisitions;
office closures;
number and value of commercial transactions, which typically yield higher premiums;
government or regulatory initiatives, including tax incentives and the implementation of the new integrated disclosure requirements;
acquisitions or divestitures of businesses;
volume of distressed property transactions; and
seasonality and/or weather.


Premiums are determined in part by the values of the transactions we handle. To the extent inflation or market conditions cause increases in the prices of homes and other real estate, premium revenues are also increased. Conversely, falling home prices cause premium revenues to decline. As an overall guideline, a 5% change in median home prices results in an approximate 3.7% change in title premiums. Home price changes may override the seasonal nature of the title insurance business. Historically, our first quarter is the least active in terms of title insurance revenues as home buying is generally depressed during winter months. Our second and third quarters are the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of year. On average, refinance title premium rates are 60% of the premium rates for a similarly priced sale transaction.




RESULTS OF OPERATIONS


Comparisons of our results of operations for the three and six months ended March 31,June 30, 2019 with the three and six months ended March 31,June 30, 2018 are set forth below. Factors contributing to fluctuations in the results of operations are presented in the order of their monetary significance, and we have quantified, when necessary, significant changes. Segment results are included in the discussions and, when relevant, are discussed separately.


Our statements on home sales and loan activity are based on published industry data from sources including Fannie Mae, the National Association of Realtors® (NAR) and the U.S. Census Bureau. We also use information from our direct operations.


Operating environment. Actual existing home sales in the firstsecond quarter 2019 declined approximately 7%3% from the firstsecond quarter 2018. MarchJune 2019 existing home sales totaled 400,000,527,000, which was down (seasonally-adjusted) 5%2% both from a year ago and from FebruaryMay 2019. MarchJune 2019 median home price was $285,700, an all-time high and 4% increase from June 2018, while June 2019 average home prices rose approximately 4% andprice was $321,600, a 3%, respectively, increase from June 2018. June 2019 housing starts declined 1% compared to March 2018 prices. March 2019 housing starts were flat compared to FebruaryMay 2019, but declined 14%increased 6% from a year ago. Newly issued building permits in MarchJune 2019 were down 2%6% and 8%7% sequentially from FebruaryMay 2019 and from a year ago,June 2018, respectively. According to Fannie Mae, one-to-four family residential lending declined 11% to $331 billion in the firstsecond quarter 2019 totaled $498 billion, a 5% increase from $374 billion in the first quarter 2018,prior year quarter. This increase was primarily driven by $42$19 billion, or 29%15%, lowermore refinancing originations. Fannie Mae expects home salesoriginations in the second quarter 2019, compared to stabilize in 2019, primarilythe second quarter 2018, as a result of the lower mortgage interest rates, wage gains and home price deceleration. Total lending in 2019 is forecasted to increase $20rate environment. Purchase originations declined $12 billion, or 1%3%, from 2018,in the second quarter versus last year's quarter, primarily due to the moderate home price growth and lower inventories. Fannie Mae expects total origination volume to increase $134 billion, or 17%, in the second half of 2019, compared to the corresponding period in 2018, as refinancing activity is expected to continue improving, and new and existing home sales are expected to recover with increased expected purchase originations.home inventory and forecasted lower interest rates. The 30-year mortgage interest rate is expected to average 4.2%3.7% for the rest of 2019, after averaging 4.0% in 2019 compared to 4.5% in 2018.the second quarter 2019.



Title revenues.Direct title revenue information is presented below:
 Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
 2019 2018 % Change2019 2018 % Change 2019 2018 % Change
 ($ in millions)  ($ in millions)   ($ in millions)  
Non-commercial                 
Domestic 107.4
 115.7
 (7)%148.9
 145.7
 2 % 256.2
 261.5
 (2)%
International 15.6
 18.2
 (14)%22.4
 22.8
 (2)% 38.1
 41.0
 (7)%
 123.0
 133.9
 (8)%171.3
 168.5
 2 % 294.3
 302.5
 (3)%
Commercial:                 
Domestic 33.7
 47.5
 (29)%50.3
 48.2
 4 % 84.0
 95.7
 (12)%
International 4.5
 4.1
 10 %6.3
 7.5
 (16)% 10.8
 11.6
 (7)%
 38.2
 51.6
 (26)%56.6
 55.7
 2 % 94.8
 107.3
 (12)%
Total direct title revenues 161.2
 185.5
 (13)%227.9
 224.2
 2 % 389.1
 409.8
 (5)%
% of direct title revenues over total title revenues50% 48%   47% 46%  

Revenues from direct title operations which include residential, commercial, international and centralized title services transactions, decreased $24.3 million in the first quarter 2019, compared to the first quarter 2018, as a result of lower overall closed orders. Residential revenues decreased $4.9 million, or 5%, while revenues from centralized title operations, which primarily process refinancing and default title orders, decreased $3.4orders. Total direct title revenues were $3.6 million, or 42%2%, higher in the second quarter 2019 compared to the prior year quarter, primarily due to increased non-commercial and commercial domestic revenues. Non-commercial domestic revenues increased as a 10% decline in totalresult of increased combined purchase and refinancing closed orders and the higher premium effect of increased home sale prices in the firstsecond quarter 2019 compared to the sameprior year quarter. U.S. commercial revenues increased during the second quarter 2019 due to a higher commercial fee per file, which increased 25% to approximately $11,600 as a result of increased transaction sizes. Domestic residential fee per file increased 3% to approximately $2,300 primarily due to home price appreciation, more than offsetting the effects of reduced fee per file from increased refinancing volume. Total international revenues declined $1.5 million, or 5%, in the second quarter 2019 compared to last year's quarter, primarily driven by the weaker Canadian dollar and British pound against the U.S. dollar.

For the first six months of 2019, total direct title revenues decreased $20.7 million, or 5%, compared to the corresponding prior year period, in 2018. The reducedprimarily as a result of 8% lower overall closed orders, were largely influenced by the decline in total home sales and mortgage lending duringlending. Residential and centralized title operations revenues declined 1% and 25%, respectively, while total commercial revenues decreased $12.5 million, or 12%, in the first quartersix months of 2019 compared to the prior year quarter.
Our direct operations include local offices and international operations, and we generate commercial revenues both domestically and internationally. U.S. commercial revenues decreased $13.8 million primarily due to fewer commercial transactions, partially offset by a 9% improvementsame period in 2018. Respectively, domestic commercial feeand residential fees per file in the first quartersix months of 2019 were approximately $10,700 and $2,300, which were 19% and 5% higher than the same period in 2018. Total international revenues in the first six months of 2019 declined $3.7 million, or 7%, compared to the first quarter 2018. Total international revenues declined $2.2 million, or 10%, in the first quarter 2019 compared tosame period last year's quarter, year, primarily driven by lower volumes from our Canada operations partially offset by increased commercial revenues. Direct revenues constituted 43% and 44% of our total title revenues in the first quarters 2019weaker Canadian dollar and 2018, respectively.British pound against the U.S. dollar.

OrdersOrder information for the three monthsperiods ended March 31June 30 is as follows:
Three Months Ended June 30, Six Months Ended June 30,
20192018*Change% Change20192018*Change% Change 20192018*Change% Change
Opened Orders:    
Commercial4,298
7,439
(3,141)(42)%4,660
6,171
(1,511)(24)% 8,958
13,610
(4,652)(34)%
Purchase53,547
56,491
(2,944)(5)%65,172
66,074
(902)(1)% 118,719
122,565
(3,846)(3)%
Refinance23,184
23,132
52
 %33,342
21,615
11,727
54 % 56,526
44,747
11,779
26 %
Other1,591
3,013
(1,422)(47)%1,108
2,531
(1,423)(56)% 2,699
5,544
(2,845)(51)%
Total82,620
90,075
(7,455)(8)%104,282
96,391
7,891
8 % 186,902
186,466
436
 %
    
Closed Orders:    
Commercial3,504
5,395
(1,891)(35)%4,349
5,218
(869)(17)% 7,853
10,613
(2,760)(26)%
Purchase33,318
36,681
(3,363)(9)%45,596
49,069
(3,473)(7)% 78,914
85,750
(6,836)(8)%
Refinance13,243
14,879
(1,636)(11)%18,754
14,582
4,172
29 % 31,997
29,461
2,536
9 %
Other996
3,115
(2,119)(68)%955
2,536
(1,581)(62)% 1,951
5,651
(3,700)(65)%
Total51,061
60,070
(9,009)(15)%69,654
71,405
(1,751)(2)% 120,715
131,475
(10,760)(8)%
*Prior year commercial orders were updated to take into account changes to our domestic order tracking process and the exclusion of international orders.


Gross revenues from independent agency operations declined $22.0$16.4 million, or 9%7%, and $38.4 million, or 8%, in the second quarter and first quartersix months of 2019, respectively, compared to last year’s quarter, primarily as a result of reductionsthe same periods in generally high agency volume states of Texas, New Jersey, Utah, Pennsylvania and California, partially offset by a revenue increase in the state of New York. 2018. Agency revenues, net of retention, decreased $3.3$3.7 million, or 9%, and $7.0 million, or 8%, in the second quarter and first quartersix months of 2019, versusrespectively, compared to the first quartersame periods in 2018, primarily driven by the gross agency revenue decline accompanied by relatively comparable average agency remittance rates. Refer further to the "Retention by agencies" discussion under Expenses below.


Ancillary services revenues. Ancillary services operating revenues increased $2.5decreased $5.9 million, or 21%43%, and $3.5 million, or 14%, in the second quarter and first six months of 2019, respectively, compared to the same periods in 2018, as a result of lower revenues from our search and valuation services operations due to lower customer orders.

Investment income. Investment income during the second quarter and first six months of 2019 was comparable to the same periods in 2018.

Investment and other gains - net. Investment and other gains - net for the second quarter 2019 decreased $2.0 million compared to the prior year quarter, primarily as a result of increased revenues from our search services operations due to increased orders from existing customers.

Investment income. Investment income during the first quarter 2019 was comparable to the first quarter 2018.

Investment and other gains (losses) - net. Investment and other gains (losses) - net for the first quarters 2019 and 2018 were primarily driven by $3.5$1.8 million of net unrealized gains and $2.2 million of net unrealized losses, respectively,in the second quarter 2018 related to the fair value changes of equity securities investments. In the first six months of 2019, investments and other gains - net increased $3.1 million compared to the same period in 2018, primarily driven by $3.2 million of net unrealized gains related to the fair value changes of equity securities investments.


Expenses. An analysis of expenses is shown below:
Three Months Ended
March 31,
Three Months Ended
June 30,
 Six Months Ended
June 30,
2019 2018 % Change2019 2018 % Change 2019 2018 % Change
($ in millions)  ($ in millions)   ($ in millions)  
                
Amounts retained by agencies176.5
 195.2
 (10)%191.1
 203.8
 (6)% 367.6
 399.0
 (8)%
As a % of agency revenues82.1% 82.4%  82.8% 82.4%   82.5% 82.4%  
Employee costs129.3
 138.8
 (7)%139.9
 146.3
 (4)% 269.2
 285.1
 (6)%
As a % of operating revenues33.1% 32.0%  30.0% 30.1%   31.4% 31.0%  
Other operating expenses77.2
 80.3
 (4)%86.1
 86.0
  % 163.2
 166.2
 (2)%
As a % of operating revenues19.8% 18.5%  18.4% 17.7%   19.0% 18.1%  
Title losses and related claims15.7
 19.0
 (17)%18.8
 18.7
 1 % 34.5
 37.7
 (9)%
As a % of title revenues4.2% 4.5% 

4.1% 4.0% 

 4.1% 4.2% 


Retention by agencies. Amounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged 82.1%82.8% and 82.4% in the second quarters 2019 and 2018, respectively, and 82.5% and 82.4% in the first quarterssix months of 2019 and 2018, respectively. The average retention percentage may vary from period to period due to the geographical mix of agency operations, the volume of title revenues and, in some states, laws or regulations. Due to the variety of such laws or regulations, as well as competitive factors, the average retention rate can differ significantly from state to state. In addition, a high proportion of our independent agencies are in states with retention rates greater than 80%. We continue to focus on increasing profit margins in every state, increasing premium revenue in states where remittance rates are above 20%, and maintaining the quality of our agency network, which we believe to be the industry’s best, in order to mitigate claims risk and drive consistent future performance. While market share is important in our agency operations channel, it is not as important as margins, risk mitigation and profitability.


Employee costs. Total employee costs decreased $9.6$6.4 million and $16.0 million in the second quarter and first quartersix months of 2019, respectively, compared to the first quartersame periods in 2018, primarily due to lower salaries as a result ofand other benefits resulting from an approximately 10%8% and 9%, respectively, decrease in average employee counts. The reduced employee counts which waswere principally related to volume declines in our direct title operations and headcount reductions to align staffing with the performance of certain business units of our ancillary services operations.operations as well as increasing efficiencies in how we manage these businesses. Employee costs in the title and ancillary services and corporate segments decreased $8.5$3.5 million, or 6%3%, and $1.0$2.9 million, or 14%36%, respectively, in the firstsecond quarter 2019 compared to the prior year quarter.quarter, and also decreased $12.0 million, or 4%, and $3.9 million, or 26%, respectively, in the first six months of 2019 compared to the same period in 2018.



Other operating expenses. Other operating expenses include costs that are fixed in nature, costs that follow, to varying degrees, changes in transaction volumes and revenues, and costs that fluctuate independently of revenues. Costsrevenues, and costs that are fixed in nature include attorney and professional fees, third-party outsourcing provider fees, equipment rental, insurance, rent and other occupancy expenses, repairs and maintenance, technology costs, telecommunications and title plant expenses.nature. Costs that follow, to varying degrees, changes in transaction volumes and revenues include attorney fee splits, bad debt expenses, ancillary services cost of sales expenses, copy supplies, delivery fees, outside search fees, postage, premium taxes and title plant maintenance expenses. Costs that fluctuate independently of revenues include general supplies, litigation defense, business promotion and marketing and travel. Costs that are fixed in nature include attorney and professional fees, third-party outsourcing provider fees, equipment rental, insurance, rent and other occupancy expenses, repairs and maintenance, technology costs, telecommunications and title plant expenses.


Consolidated other operating expenses decreased $3.1of $86.1 million in the firstsecond quarter 2019 were comparable to the second quarter 2018, while consolidated other operating expenses in the first six months of 2019 were $163.2 million, a decrease of $3.0 million, or 2%, compared to the first quartersame period in 2018. During the second quarter and first quartersix months of 2019, we incurred $2.0$3.7 million and $5.7 million, respectively, of third-party advisory expenses recorded in the ancillary services and corporate segment related to the FNF merger transaction,transaction. Additionally, the first six months of 2019 included $0.8 million of litigation expense related to a 2013prior year lender services acquisition recorded in the ancillary services and corporate segment, and $0.7 million of office closure costs included within the title segment. In comparison, during the first quartersix months of 2018, we incurred $2.3 million of third-party advisory expenses related to the FNF merger transaction which waswere recorded in the ancillary services and corporate segment. Excluding these non-operating charges, other operating expenses, as a percentage of operating revenues, were 18.9%17.7% and 18.2% in the second quarter and first quartersix months of 2019, respectively, compared to 18.0%17.7% and 17.8% in the prior year quarter.second quarter and first six months of 2018, respectively.


Costs that follow, to varying degrees, changes in transaction volumes and revenues decreased $1.3$1.9 million, or 4%5%, in the firstsecond quarter 2019 compared to the firstprior year quarter, 2018, primarily due to reduced outside title search fees resulting from lower ancillary services revenues and lower title plant expenses. These costs also decreased $3.3 million, or 5%, in the first six months of 2019 compared to the same period in 2018, primarily driven by lower outside title search fees and attorney fee splits consistent with lower direct title and ancillary services revenues.

Costs that fluctuate independently of revenues were comparable for the second quarters 2019 and 2018. Excluding the litigation and office closures expenses mentioned above, these costs that fluctuate independently of revenues decreased $0.4$0.5 million or 4%2%, in the first quartersix months of 2019 compared to the prior year quartersame period in 2018, primarily due to decreasedreduced travel and general supplies expenses. Excluding the merger-related expenses mentioned above, costs that are fixed in nature decreased $2.3$1.0 million, or 7%3%, in the second quarter 2019 and decreased $3.3 million, or 5%, in the first quartersix months of 2019, compared to the same periodperiods in 2018, primarily due to lower telecommunicationsprofessional fees and insurance expenses, partially offset by increased rent expenses.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were 4.2%4.1% and 4.5%4.0% for the second quarters 2019 and 2018, respectively, and 4.1% and 4.2% for the first quarterssix months of 2019 and 2018, respectively. Title loss expense for the second quarter 2019 was $18.8 million compared to $18.7 million from the prior year quarter, while title losses decreased $3.3$3.2 million, or 17%9%, infor the first quartersix months of 2019 compared to the first quartersame period in 2018, primarily becauseas a result of lower loss provisioning rates resulting from our favorable loss development experience.title premiums in 2019. The title loss ratio in any given quarter can be significantly influenced by changes in new large claims incurred, escrow losses and adjustments to reserves for existing large claims. We expect our title loss expense for the year 2019 will range between 4.0% to 4.2% of title revenues.


Cash claim payments increased $5.2$1.6 million, or 28%8%, and $6.8 million, or 18%, in the second quarter and first quartersix months of 2019, respectively, compared to the first quartersame periods in 2018, primarily due to higher payments on existing large and non-large claims. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.


The composition of title policy loss expense is as follows:
 Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
 2019 20182019 2018 2019 2018
 ($ in millions)($ in millions)
Provisions – known claims:           
Current year 1.9
 1.5
2.4
 6.0
 4.4
 7.5
Prior policy years 17.3
 14.7
20.5
 15.5
 37.7
 30.2
 19.2
 16.2
22.9
 21.5
 42.1
 37.7
Provisions – IBNR           
Current year 13.6
 17.4
15.9
 16.5
 29.4
 33.9
Prior policy years 0.2
 0.1
0.5
 (3.8) 0.7
 (3.7)
 13.8
 17.5
16.4
 12.7
 30.1
 30.2
Transferred from IBNR to known claims (17.3) (14.7)(20.5) (15.5) (37.7) (30.2)
Total provisions 15.7
 19.0
18.8
 18.7
 34.5
 37.7



Provisions for known claims arise primarily from prior policy years as claims are not typically reported until several years after policies are issued. Provisions - Incurred But Not Reported (IBNR) are estimates of claims expected to be incurred over the next 20 years; therefore, it is not unusual or unexpected to experience changes to those estimated provisions in both current and prior policy years as additional loss experience on policy years is obtained. This loss experience may result in changes to our estimate of total ultimate losses expected (i.e., the IBNR policy loss reserve). Current year provisions - IBNR are recorded on policies issued in the current year as a percentage of premiums earned (provisioning rate). As claims become known, provisions are reclassified from IBNR to known claims. Adjustments relating to large losses (those individually in excess of $1.0 million) may impact provisions either for known claims or for IBNR.


Known claimsCurrent year provisions increased $3.0- IBNR decreased $0.6 million, or 19%4%, and $4.5 million, or 13%, in the second quarter and first six months of 2019, respectively, compared to the same periods in 2018, primarily due to lower title premiums in 2019. Prior policy years provisions - IBNR increased in the second quarter and first six months of 2019 compared to the last year'ssame periods in 2018, primarily due to the loss reserve reductions recorded in the second quarter primarily2018 as a result of higherfavorable loss experience. Current year known claims reported relating to prior policy years. Total provisions - IBNRdecreased $3.6 million, or 60%, and $3.1 million, or 41%, in the second quarter and first quartersix months of 2019, decreased $3.7 million, or 21%, compared to the first quartersame periods in 2018, primarily due to a decreasehigher claims reported in the loss provisioning rate related to the current year resulting from our favorable loss development experience. prior year. As a percentage of title operating revenues, provisions - IBNR for the current policy year were 3.6% and 4.1%3.5% in both the firstsecond quarters 2019 and 2018, and 3.5% and 3.8% in the first six months of 2019 and 2018, respectively.


In addition to title policy claims, we incur losses in our direct operations from escrow, closing and disbursement functions. These escrow losses typically relate to errors or other miscalculations of amounts to be paid at closing, including timing or amount of a mortgage payoff, payment of property or other taxes and payment of homeowners’ association fees. Escrow losses also arise in cases of fraud, and in those cases, the title insurer incurs the loss under its obligation to ensure that an unencumbered title is conveyed. Escrow losses are recognized as expense when discovered or when contingencies associated with them (such as litigation) are resolved and are typically paid less than 12 months after the loss is recognized. During the first quarterssix months of 2019 and 2018, we recorded approximately $0.6$1.5 million and $0.9$4.4 million, respectively, of policy loss reserves relating to escrow losses arising from fraud.


Total title policy loss reserve balances are as follows:
March 31, 2019 
December 31,
2018
June 30, 2019 
December 31,
2018
($ in millions)($ in millions)
Known claims62.6
 66.9
63.3
 66.9
IBNR391.5
 394.7
386.9
 394.7
Total estimated title losses454.1
 461.6
450.2
 461.6


The amount of the reserve represents the aggregate, non-discounted future payments (net of recoveries) that we expect to incur on policy and escrow losses and in costs to settle claims. Title claims are generally incurred three to five years after policy issuance and the timing of payments on these claims can significantly impact the balance of known claims. In many cases, claims may be open for several years before the resolution and payment of the claims occur; as a result, the estimate of the ultimate amount to be paid may be modified over that time period. Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary’s calculated estimates.


Depreciation and amortization. Depreciation and amortization expenses during the second quarter and first quartersix months of 2019 decreased $0.2$0.4 million, or 4%6%, and $0.6 million, or 5%, compared to the prior year quarter,same periods in 2018, primarily due to some assets becoming fully depreciated.


Income taxes. Our effective tax rates, for the first quarter 2019 and 2018, based on lossincome before taxes and after deducting income attributable to noncontrolling interests, were 27% for both the second quarter and first six months of 2019, compared to 20% and 19% for the second quarter and first six months of 2018, respectively. Excluding discrete income tax benefit effects of approximately $1.5 million (primarily related to a cumulative foreign currency adjustment on deemed repatriation of foreign earnings) in both the second quarter and first six months of 2018, our 2018 effective tax rates were 25% and 26%, respectively.





LIQUIDITY AND CAPITAL RESOURCES


Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to shareholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of March 31,June 30, 2019, our cash and investments, including amounts reserved pursuant to statutory requirements, aggregated $815.6$841.6 million ($311.9331.5 million, net of statutory reserves on cash and investments). Of our total cash and investments at March 31,June 30, 2019, $545.9$563.2 million ($246.2263.4 million, net of statutory reserves) was held in the United States (U.S.) and the rest internationally, principally in Canada.


Cash held at the parent company totaled $15.5$3.6 million at March 31,June 30, 2019. As a holding company, the parent company is funded principally by cash from its subsidiaries in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. The expense reimbursements are paid in accordance with management agreements, approved by the Texas Department of Insurance (TDI), among us and our subsidiaries. In addition to funding operating expenses, cash held at the parent company is used for dividend payments to common stockholders and for stock repurchases, if any. To the extent such uses exceed cash available, the parent company is dependent on distributions from its regulated title insurance underwriter, Stewart Title Guaranty Company (Guaranty).

A substantial majority of our consolidated cash and investments as of March 31,June 30, 2019 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty may use its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and ancillary services operations) for their operating and debt service needs.


We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $454.1$444.4 million and $462.2 million at March 31,June 30, 2019 and December 31, 2018, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $49.6$65.7 million and $37.7 million at March 31,June 30, 2019 and December 31, 2018, respectively. As of March 31,June 30, 2019, our known claims reserve totaled $62.6$63.3 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled $391.5$386.9 million. In addition to this, we had cash and investments (excluding equity method investments) of $239.5$251.5 million which are available for underwriter operations, including claims payments.


The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The TDI must be notified of any dividend declared, and any dividend in excess of the statutory maximum of 20% of surplus (approximately $115.0 million as of December 31, 2018) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and the liquidity ratio, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. As of December 31, 2018,June 30, 2019, our liquidity ratio for our principal underwriter was 109%110% based on its statutory balance sheet. No dividend was paid by Guaranty to its parent during the first threesix months of 2019 and 2018.



As the parent company conducts no operations apart from its wholly-owned subsidiaries, the discussion below focuses on consolidated cash flows.
For the Three Months
Ended March 31,
Six Months Ended June 30,
2019 20182019 2018
($ in millions)($ in millions)
Net cash used by operating activities(39.9) (28.9)
Net cash (used) provided by operating activities(8.4) 7.4
Net cash provided (used) by investing activities24.6
 (1.5)38.3
 (7.1)
Net cash used by financing activities(13.6) (15.9)(22.8) (27.6)


Operating activities. Our principal sources of cash from operations are premiums on title policies and revenue from title service-related transactions, ancillary services and other operations. Our independent agencies remit cash to us net of their contractual retention. Our principal cash expenditures for operations are employee costs, operating costs and title claims payments.


Net cash used by operations in the first quartersix months of 2019 increased to $39.9was $8.4 million, compared to net cash usedprovided of $28.9$7.4 million in the first quartersix months of 2018, primarily due to the higherlower net lossincome and increased payments of liabilities during the first quartersix months of 2019. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We are continuing our emphasis on cost management, specifically focusing on lowering unit costs of production, which will result in improved margins. Our plans to improve margins also include additional automation of manual processes, and further consolidation of our various systems and production operations. We are currently investing in the technology necessary to accomplish these goals.


Investing activities. Cash provided and used by investing activities is primarily driven by proceeds from matured and sold investments, purchases of investments, capital expenditures and acquisition of subsidiaries. During the first quartersix months of 2019, total proceeds from securities investments sold and matured were $27.1$45.8 million, compared to $20.0$36.1 million during the first quarter 2018; while cashsame period in 2018, primarily due to increased maturities of securities investments in 2019. Cash used for purchases of securities investments was $0.6$1.3 million during the first quartersix months of 2019, compared to $8.0$26.2 million during the prior year quarter.same period in 2018. The lower purchases of investments during 2019 was primarily due to our decision, as bonds matured, to invest in cash equivalents and short-term investments, which have attractive interest rates in the current markets on a risk adjusted basis.


During the first quarterssix months of 2019 and 2018, we used $2.7$7.9 million and $2.0$5.7 million, respectively, of cash for purchases of property and equipment, while we used $12.0 million of cash for acquisitions of new subsidiaries during the first quartersix months of 2018. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.


Financing activities and capital resources. Total debt and stockholders’ equity were $105.0$105.4 million and $678.9$700.8 million, respectively, as of March 31,June 30, 2019. Notes payable payments during the first quarterssix months of 2019 and 2018 of $6.6$21.5 million and $4.1 million, respectively, and notes payable additions of $20.5 million during the first six months of 2019 were related to short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business. At March 31,June 30, 2019, the outstanding balance of theour line of credit facility was $98.9 million, while the remainingavailable balance of the line of credit available for use was $48.6 million, net of an unused $2.5 million letter of credit. At March 31,June 30, 2019, our debt-to-equity ratio, excluding our Section 1031 notes, was approximately 15.4%14.8%, below the 20% we have set as our unofficial internal limit on leverage.


During each of the first quarterssix months of 2019, and 2018, we paid total dividends of $7.1$14.2 million, or $0.30$0.60 per common share.share, compared to total dividends paid of $14.1 million, or $0.60 per common share, during the first six months of 2018.


Effect of changes in foreign currency exchange rates. The effect of changes in foreign currency exchange rates on our cash and cash equivalents on the consolidated statements of cash flows was a net increase of $1.4$2.0 million during the first quartersix months of 2019 and a net decrease of $0.3$1.6 million during the same period in 2018. Our principal foreign operating unit is in Canada, and, on average, the value of the Canadian dollar relative to the U.S. dollar improved in the first quartersix months of 2019 and declined in the the same period in 2018.


***********

We believe we have sufficient liquidity and capital resources to meet the cash needs of our ongoing operations. However, we may determine that additional debt or equity funding is warranted to provide liquidity for achievement of strategic goals or acquisitions or for unforeseen circumstances. Other than scheduled maturities of debt, operating lease payments and anticipated claims payments, we have no material contractual commitments. We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, including claims payments. However, to the extent that these funds are not sufficient, we may be required to borrow funds on terms less favorable than we currently have or seek funding from the equity market, which may not be successful or may be on terms that are dilutive to existing stockholders.


Contingent liabilities and commitments. See discussion of contingent liabilities and commitments in Note 10 to the condensed consolidated financial statements included in Item 1 of Part I of this Report.


Other comprehensive income (loss). Unrealized gains and losses on available-for-sale debt securities investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive (loss) income, a component of stockholders’ equity, until realized. During the first quartersix months of 2019, net unrealized investment gains of $9.2$14.6 million, net of taxes, which increased our other comprehensive income, were primarily related to increases in the fair values of our overall bond securities investment portfolio driven by decreases in the overallreduced interest rate environment.rates and credit spreads. During the first quartersix months of 2018, net unrealized investment losses of $8.3$10.9 million, net of taxes, which increased our other comprehensive loss, were primarily related to decreases in the fair values of our corporate, municipal and foreignoverall bond securities investmentsinvestment portfolio which were influenced by the rising interest rate market environment.


Changes in foreign currency exchange rates, primarily related to our Canadian operations, increased our other comprehensive income, net of taxes, by $4.6$7.1 million in the first quartersix months of 2019; while they increased our other comprehensive loss, net of taxes, by $1.6$5.6 million for the same period in 2018.


Off-balance sheet arrangements. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements, other than our contractual obligations under operating leases. We also routinely hold funds in segregated escrow accounts pending the closing of real estate transactions and have qualified intermediaries in tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code. The Company holds the proceeds from these transactions until a qualifying exchange can occur. In accordance with industry practice, these segregated accounts are not included on the balance sheet. See Note 17 in our Annual Report on Form 10-K for the year ended December 31, 2018.



Forward-looking statements.Certain statements in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance.  These statements often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the completion or the termination of our merger agreement with Fidelity National Financial, Inc. dated March 18, 2018; the challenging economic conditions; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the ability to attract and retain highly productive sales associates; the impact of vetting our agency operations for quality and profitability; independent agency remittance rates; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; the continued realization of expense savings from our cost management program; our ability to successfully integrate acquired businesses; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; seasonality and weather; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2018, and if applicable, our Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K. All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.





Item 3. Quantitative and Qualitative Disclosures About Market Risk


There have been no material changes during the quarter ended March 31,June 30, 2019 in our investment strategies, types of financial instruments held or the risks associated with such instruments that would materially alter the market risk disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2018.




Item 4. Controls and Procedures


Evaluation of disclosure controls and procedures. Our principal executive officer and principal financial officer are responsible for establishing and maintaining disclosure controls and procedures. They evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31,June 30, 2019, and have concluded that, as of such date, our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.


Changes in internal control over financial reporting. There was no change in our internal control over financial reporting during the quarter ended March 31,June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings


See discussion of legal proceedings in Note 11 to the condensed consolidated financial statements included in Item 1 of Part I of this Report, which is incorporated by reference into this Part II, Item 1, as well as Item 3. Legal Proceedings, in our Annual Report on Form 10-K for the year ended December 31, 2018.




Item 1A. Risk Factors


There are no changes during the threesix months ended March 31,June 30, 2019 to our risk factors as listed in our Annual Report on Form 10-K for the year ended December 31, 2018.




Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


There were no repurchases of our Common Stock during the quartersix months ended March 31,June 30, 2019, except for repurchases of approximately 8,90011,000 shares (aggregate purchase price of approximately $0.4$0.5 million) related to the statutory income tax withholding on the vesting of restricted share and unit grants to executives and senior management.




Item 5. Other Information


Book value per share. Our book value per share was $28.65$29.56 and $28.66 as of March 31,June 30, 2019 and December 31, 2018, respectively. As of March 31,June 30, 2019, our book value per share was based on approximately $678.9$700.8 million in stockholders’ equity and 23,699,10323,712,238 shares of Common Stock outstanding. As of December 31, 2018, our book value per share was based on approximately $679.8 million in stockholders’ equity and 23,719,347 shares of Common Stock outstanding.




Item 6. Exhibits
Exhibit     
     
2.1 -  
   
3.1 -  
   
3.2 -  
10.1†*-
10.2†*-

31.1* -  
   
31.2* -  
   
32.1* -  
     
32.2* -  

101.INS* -  XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
   
101.SCH* -  XBRL Taxonomy Extension Schema Document
   
101.CAL* -  XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF* -  XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB* -  XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE* -  XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
† Management contract or compensatory plan








SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
May 1,August 7, 2019
Date
  Stewart Information Services Corporation
  Registrant
  
By: /s/ David C. Hisey
  David C. Hisey, Chief Financial Officer, Secretary and Treasurer


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