SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2020

Registrant’s telephone number, including area code: (~~713~~) (713) 625-8100

Securities registered pursuant to Section 12(b) of the Act:

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.

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 ☑ 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.

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 ☑

On ~~July 27,~~October 29, 2020, there were ~~23,700,919~~26,719,342 outstanding shares of the issuer's Common Stock.

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 INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,
	2020	2019
	($000 omitted)
Reconciliation of net income to cash provided by operating activities:
Net income	105,339	87,209
Add (deduct):
Depreciation and amortization	13,436	17,458
Provision for bad debt	363	889
Net realized and unrealized losses (gains)	6,035	(730)
Amortization of net premium on debt securities investments	3,280	3,790
Payments for title losses less than (in excess of) provisions	9,615	(11,266)
Adjustment for insurance recoveries of title losses	(73)	175
Increase in receivables – net	(4,290)	(8,838)
(Increase) decrease in other assets – net	(1,702)	2,910
Decrease in accounts payable and other liabilities – net	1,301	6,753
Change in net deferred income taxes	3,576	5,563
Net income from equity investees	(2,385)	(1,996)
Dividends received from equity investees	2,499	1,964
Stock-based compensation expense	4,234	3,380
Other – net	(367)	28
Cash provided by operating activities	140,861	107,289
Investing activities:
Proceeds from sales of investments in securities	25,772	20,899
Proceeds from matured investments in debt securities	46,677	44,685
Purchases of investments in securities	(75,487)	(2,187)
Net sales (purchases) of short-term investments	2,431	(193)
Purchases of property and equipment, and real estate – net	(10,492)	(11,957)
Cash paid for acquisition of businesses	(146,518)	0

Other – net	1,524	2,111
Cash (used) provided by investing activities	(156,093)	53,358
Financing activities:
Proceeds from notes payable	2,361	23,514
Payments on notes payable	(11,737)	(26,179)
Distributions to noncontrolling interests	(9,572)	(8,578)

Issuance of new Common Stock	108,961	0
Repurchases of Common Stock	(826)	(481)
Cash dividends paid	(22,214)	(21,257)



Other - net	(311)	25
Cash provided (used) by financing activities	66,662	(32,956)
Effects of changes in foreign currency exchange rates	(479)	1,202
Increase in cash and cash equivalents	50,951	128,893
Cash and cash equivalents at beginning of period	330,609	192,067
Cash and cash equivalents at end of period	381,560	320,960

Six Months Ended
June 30,
2020 2019
($000 omitted)
Reconciliation of net income to cash provided (used) by operating activities:
Net income 45,054
17,541
Add (deduct):
Depreciation and amortization 8,292
11,764
Provision for bad debt 106
462
Net realized and unrealized losses (gains) 6,027
(3,826 )
Amortization of net premium on debt securities investments 2,253
2,628
Payments for title losses less than (in excess of) provisions 1,236
(11,178 )
Adjustment for insurance recoveries of title losses 228
314
Decrease (increase) in receivables – net 8,792
(16,865 )
Increase in other assets – net (3,743 ) (1,111 )
Decrease in accounts payable and other liabilities – net (22,817 ) (11,588 )
Change in net deferred income taxes 2,277
1,185
Net income from equity investees (1,356 ) (1,047 )
Dividends received from equity investees 1,549
1,220
Stock-based compensation expense 2,449
2,057
Other – net (237 ) 15
Cash provided (used) by operating activities 50,110
(8,429 )
Investing activities:
Proceeds from sales of investments in securities 15,499
9,952
Proceeds from matured investments in debt securities 33,096
35,884
Purchases of investments in securities (50,856 ) (1,263 )
Net sales (purchases) of short-term investments 2,763
(58 )
Purchases of property and equipment, and real estate – net (6,796 ) (7,889 )
Cash paid for acquisition of businesses (33,417 ) —
Other – net 1,278
1,705
Cash (used) provided by investing activities (38,433 ) 38,331
Financing activities:
Proceeds from notes payable 404
20,506
Payments on notes payable (9,334 ) (23,139 )
Distributions to noncontrolling interests (5,957 ) (5,487 )
Repurchases of common stock (468 ) (471 )
Cash dividends paid (14,198 ) (14,167 )
Cash used by financing activities (29,553 ) (22,758 )
Effects of changes in foreign currency exchange rates (1,927 ) 1,994
(Decrease) increase in cash and cash equivalents (19,803 ) 9,138
Cash and cash equivalents at beginning of period 330,609
192,067
Cash and cash equivalents at end of period 310,806
201,205

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) income	Treasury stock	Noncontrolling interests	Total
	($000 omitted)
Nine Months Ended September 30, 2020
Balance at December 31, 2019	24,062	164,217	564,392	(2,699)	(2,666)	6,453	753,759

Net income attributable to Stewart	—	—	95,232	—	—	—	95,232
Dividends on Common Stock ($0.90 per share)	—	—	(22,401)	—	—	—	(22,401)
Issuance of Common Stock	3,026	105,935	—	—	—	—	108,961
Stock-based compensation	4	4,230	—	—	—	—	4,234
Stock repurchases	(20)	(806)	—	—	—	—	(826)

Change in net unrealized gains and losses on investments, net of taxes	—	—	—	15,055	—	—	15,055
Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(276)	—	—	(276)
Foreign currency translation adjustments, net of taxes	—	—	—	(3,404)	—	—	(3,404)
Net income attributable to noncontrolling interests	—	—	—	—	—	10,107	10,107
Distributions to noncontrolling interests	—	—	—	—	—	(9,572)	(9,572)

Balance at September 30, 2020	27,072	273,576	637,223	8,676	(2,666)	6,988	950,869

Nine Months Ended September 30, 2019
Balance at December 31, 2018	24,072	162,642	514,248	(24,771)	(2,666)	6,312	679,837

Net income attributable to Stewart	—	—	78,648	—	—	—	78,648
Dividends on Common Stock ($0.90 per share)	—	—	(21,506)	—	—	—	(21,506)
Stock-based compensation	4	3,376	—	—	—	—	3,380
Stock repurchases	(11)	(470)	—	—	—	—	(481)

Change in net unrealized gains and losses on investments, net of taxes	—	—	—	17,985	—	—	17,985
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	120	—	—	120
Foreign currency translation adjustments, net of taxes	—	—	—	1,928	—	—	1,928
Net income attributable to noncontrolling interests	—	—	—	—	—	8,561	8,561
Distributions to noncontrolling interests	—	—	—	—	—	(8,578)	(8,578)
Net effect of other changes in ownership	—	—	—	—	—	(10)	(10)
Balance at September 30, 2019	24,065	165,548	571,390	(4,738)	(2,666)	6,285	759,884

Common Stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Noncontrolling interests Total
($000 omitted)
Six Months Ended June 30, 2020
Balance at December 31, 2019 24,062
164,217
564,392
(2,699 ) (2,666 ) 6,453
753,759
Net income attributable to Stewart —
—
39,323
—
—
—
39,323
Dividends on Common Stock ($0.60 per share) —
—
(14,291 ) —
—
—
(14,291 )
Stock-based compensation 2
2,447
—
—
—
—
2,449
Stock repurchases (12 ) (456 ) —
—
—
—
(468 )
Change in net unrealized gains and losses on investments, net of taxes —
—
—
14,135
—
—
14,135
Reclassification adjustment for realized gains and losses on investments, net of taxes —
—
—
(101 ) —
—
(101 )
Foreign currency translation adjustments, net of taxes —
—
—
(7,248 ) —
—
(7,248 )
Net income attributable to noncontrolling interests —
—
—
—
—
5,731
5,731
Distributions to noncontrolling interests —
—
—
—
—
(5,957 ) (5,957 )
Balance at June 30, 2020 24,052
166,208
589,424
4,087
(2,666 ) 6,227
787,332

Six Months Ended June 30, 2019
Balance at December 31, 2018 24,072
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 compensation 4
2,053
—
—
—
—
2,057
Stock repurchases (11 ) (460 ) —
—
—
—
(471 )
Change in net unrealized gains and losses on investments, net of taxes —
—
—
14,382
—
—
14,382
Reclassification adjustment for realized gains and losses on investments, net of taxes, 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
Balance at June 30, 2019 24,065
164,235
512,467
(3,114 ) (2,666 ) 5,840
700,827

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


																Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total
	Common Stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Noncontrolling interests		Total			($000 omitted)
Three Months Ended September 30, 2020															Three Months Ended September 30, 2020
Balances at June 30, 2020															Balances at June 30, 2020	24,052	166,208	589,424	4,087	(2,666)	6,227	787,332
	($000 omitted)
Three Months Ended June 30, 2020
Balances at March 31, 2020	24,032		164,741		562,445		(16,801	)	(2,666	)	5,324		737,075
Net income attributable to Stewart	—		—		34,146		—		—		—		34,146		Net income attributable to Stewart	—	—	55,909	—	—	—	55,909
Dividends on Common Stock ($0.30 per share)	—		—		(7,167	)	—		—		—		(7,167	)	Dividends on Common Stock ($0.30 per share)	—	—	(8,110)	—	—	—	(8,110)
Issuance of Common Stock															Issuance of Common Stock	3,026	105,935	—	—	—	—	108,961
Stock-based compensation	22		1,540		—		—		—		—		1,562		Stock-based compensation	2	1,783	—	—	—	—	1,785
Stock repurchases	(2	)	(73	)	—		—		—		—		(75	)	Stock repurchases	(8)	(350)	—	—	—	—	(358)

Change in net unrealized gains and losses on investments, net of taxes	—		—		—		16,715		—		—		16,715		Change in net unrealized gains and losses on investments, net of taxes	—	—	—	920	—	—	920
Reclassification adjustment for realized gains and losses on investments, net of taxes	—		—		—		(21	)	—		—		(21	)	Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(175)	—	—	(175)
Foreign currency translation adjustments, net of taxes	—		—		—		4,194		—		—		4,194		Foreign currency translation adjustments, net of taxes	—	—	—	3,844	—	—	3,844
Net income attributable to noncontrolling interests	—		—		—		—		—		3,534		3,534		Net income attributable to noncontrolling interests	—	—	—	—	—	4,376	4,376
Distributions to noncontrolling interests	—		—		—		—		—		(2,631	)	(2,631	)	Distributions to noncontrolling interests	—	—	—	—	—	(3,615)	(3,615)
Balance at June 30, 2020	24,052		166,208		589,424		4,087		(2,666	)	6,227		787,332

Three Months Ended June 30, 2019
Balances at March 31, 2019	24,052		163,087		500,335		(11,010	)	(2,666	)	5,106		678,904
Balance at September 30, 2020															Balance at September 30, 2020	27,072	273,576	637,223	8,676	(2,666)	6,988	950,869

Three Months Ended September 30, 2019															Three Months Ended September 30, 2019
Balances at June 30, 2019															Balances at June 30, 2019	24,065	164,235	512,467	(3,114)	(2,666)	5,840	700,827

Net income attributable to Stewart	—		—		19,306		—		—		—		19,306		Net income attributable to Stewart	—	—	66,108	—	—	—	66,108
Dividends on Common Stock ($0.30 per share)	—		—		(7,174	)	—		—		—		(7,174	)	Dividends on Common Stock ($0.30 per share)	—	—	(7,185)	—	—	—	(7,185)
Stock-based compensation	15		1,238		—		—		—		—		1,253		Stock-based compensation	0	1,323	—	—	—	—	1,323
Stock repurchases	(2	)	(90	)	—		—		—		—		(92	)	Stock repurchases	0	(10)	—	—	—	—	(10)

Change in net unrealized gains and losses on investments, net of taxes	—		—		—		5,371		—		—		5,371		Change in net unrealized gains and losses on investments, net of taxes	—	—	—	3,603	—	—	3,603
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—		—		—		50		—		—		50		Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(92)	—	—	(92)
Foreign currency translation adjustments, net of taxes	—		—		—		2,475		—		—		2,475		Foreign currency translation adjustments, net of taxes	—	—	—	(5,135)	—	—	(5,135)
Net income attributable to noncontrolling interests	—		—		—		—		—		3,019		3,019		Net income attributable to noncontrolling interests	—	—	—	—	—	3,560	3,560
Distributions to noncontrolling interests	—		—		—		—		—		(2,310	)	(2,310	)	Distributions to noncontrolling interests	—	—	—	—	—	(3,091)	(3,091)
Net effect of other changes in ownership	—		—		—		—		—		25		25		Net effect of other changes in ownership	—	—	—	—	—	(24)	(24)
Balance at June 30, 2019	24,065		164,235		512,467		(3,114	)	(2,666	)	5,840		700,827
Balance at September 30, 2019															Balance at September 30, 2019	24,065	165,548	571,390	(4,738)	(2,666)	6,285	759,884

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Interim financial statements. The financial information contained in this report for the three months ended ~~June~~September 30, 2020 and 2019, and as of ~~June~~September 30, 2020, 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, 2019 filed with the Securities and Exchange Commission on February 27, 2020 (2019 Form 10-K).

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 the United States (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% to 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 ~~$504.2~~$535.7 million and $483.4 million at ~~June~~September 30, 2020 and December 31, 2019, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately ~~$39.4~~$21.1 million and $39.7 million at ~~June~~September 30, 2020 and December 31, 2019, 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. ~~Amendment~~Issuance of Common Stock. On August 17, 2020, the Company issued an aggregate of 3,026,340 new shares of its Common Stock ($1 par value), which included shares purchased by the underwriters to the ~~line of credit facility.~~ On May 7, 2020, in relation to its line of credit facility (as disclosed in Note 10 of the 2019 Form 10-K), the Company entered into an amended and restated credit agreement (Amended Credit Agreement), which increased the available unsecured line of credit commitment from $150.0 million to $200.0 million and extended the maturity of the line of credit to May 2025. The terms of the Amended Credit Agreement, which includes an additional $50.0 million that the Company can request, did not significantly changetransaction. Proceeds from the ~~prior line~~Common Stock issuance, net of ~~credit agreement.~~issuance costs, amounted to $109.0 million.

E. Impact of the COVID-19 pandemic. In March 2020, a global pandemic escalated relating to a novel strain of coronavirus (COVID-19), which resulted in a slowdown in the global economy and a U.S. declaration of a national emergency. In response to the pandemic, health and governmental bodies, including the state of Texas where the Company is headquartered, issued travel restrictions, quarantine orders, temporary closures of non-essential businesses and other restrictive measures. To date, various levels of restrictions are still in place across the U.S. to address the ~~continuous~~ spread of COVID-19. Although the title insurance industry has been deemed essential in the U.S., the pandemic and measures to contain it have caused disruptions in the real estate market and in the Company's business operations. While the Company continues to close transactions on a daily basis, as it works through a pipeline of opened orders, there is near-term uncertainty regarding future real estate market transaction volumes and the impacts to the Company's results of operations. To the extent that the COVID-19 pandemic continues or worsens, it could adversely impact the Company's future operational and financial performance, which may result in impairments of its assets. The Company is currently unable to determine the effects the COVID-19 pandemic will have on the Company's future financial statements or results of operations.

Revenues. The Company's operating revenues, summarized by type, are as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
Title insurance premiums:
Direct	190,794	174,635	478,822	448,920
Agency	282,605	254,155	802,022	699,835
Escrow fees	53,384	38,666	127,903	100,570
Search, abstract and valuation services	42,627	20,922	81,533	63,109
Other revenues	21,266	19,473	52,926	52,307
	590,676	507,851	1,543,206	1,364,741

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
Title insurance premiums:
Direct 149,745
162,367
288,028
274,285
Agency 277,387
230,817
519,417
445,680
Escrow fees 41,433
36,611
74,519
61,904
Search, abstract and valuation services 22,829
19,248
38,906
42,187
Other revenues 15,362
17,455
31,659
32,834
506,756
466,498
952,529
856,890

Investments in debt and equity securities. The total fair values of the Company's investments in debt and equity securities are as follows:


	September 30, 2020	December 31, 2019
	($000 omitted)
Investments in:
Debt securities	617,895	605,721
Equity securities	32,704	39,318
	650,599	645,039

June 30, 2020 December 31, 2019
($000 omitted)
Investments in:
Debt securities 612,891
605,721
Equity securities 32,456
39,318
645,347
645,039

As of ~~June~~September 30, 2020 and December 31, 2019, the net unrealized investment gains relating to investments in equity securities held were $0.4 million and $6.9 million, respectively (refer to Note 5).

The amortized costs and fair values of investments in debt securities are as follows:


	September 30, 2020		December 31, 2019
	Amortized costs	Fair values	Amortized costs	Fair values
	($000 omitted)
Municipal	46,397	48,952	52,176	53,823
Corporate	301,297	320,348	299,074	309,142
Foreign	231,859	241,969	234,734	236,073
U.S. Treasury Bonds	6,562	6,626	6,664	6,683

	586,115	617,895	592,648	605,721

June 30, 2020 December 31, 2019

Amortized
costs

Fair
values

Amortized
costs

Fair
values
($000 omitted)
Municipal 47,635
50,068
52,176
53,823
Corporate 301,299
319,972
299,074
309,142
Foreign 226,561
236,224
234,734
236,073
U.S. Treasury Bonds 6,559
6,627
6,664
6,683
582,054
612,891
592,648
605,721

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:

Debt securities as of ~~June~~September 30, 2020 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):

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 ~~June~~September 30, 2020, were:


	Less than 12 months		More than 12 months		Total
	Losses	Fair values	Losses	Fair values	Losses	Fair values
	($000 omitted)
Municipal	0	0	0	0	0	0
Corporate	345	22,781	0	0	345	22,781
Foreign	1	4,106	20	240	21	4,346
U.S. Treasury Bonds	0	0	24	1,022	24	1,022

	346	26,887	44	1,262	390	28,149

Less than 12 months More than 12 months Total
Losses Fair values Losses Fair values Losses Fair values
($000 omitted)
Municipal 1
53
—
—
1
53
Corporate 253
7,618
—
—
253
7,618
Foreign —
—
17
231
17
231
U.S. Treasury Bonds —
—
24
1,022
24
1,022
254
7,671
41
1,253
295
8,924

The number of specific debt investment holdings held in an unrealized loss position as of ~~June~~September 30, 2020 was 8.15. Of these securities, 3 were in unrealized loss positions for more than 12 months. During 2020, the overall investment fair values increased, primarily resulting from the effect of lower interest rates which was partially offset by increased credit spreads. 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.

Fair value measurements. The Fair Value Measurements and Disclosures Topic (Topic 820) of the Financial Accounting Standards Board's 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 ~~June~~September 30, 2020, 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	0	48,952	48,952
Corporate	0	320,348	320,348
Foreign	0	241,969	241,969
U.S. Treasury Bonds	0	6,626	6,626
Equity securities	32,704	0	32,704
	32,704	617,895	650,599

Level 1 Level 2
Fair value
measurements
($000 omitted)
Investments in securities:
Debt securities:
Municipal —
50,068
50,068
Corporate —
319,972
319,972
Foreign —
236,224
236,224
U.S. Treasury Bonds —
6,627
6,627
Equity securities 32,456
—
32,456
32,456
612,891
645,347

As of December 31, 2019, 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	0	53,823	53,823
Corporate	0	309,142	309,142
Foreign	0	236,073	236,073
U.S. Treasury Bonds	0	6,683	6,683
Equity securities	39,318	0	39,318
	39,318	605,721	645,039

Level 1 Level 2
Fair value
measurements
($000 omitted)
Investments in securities:
Debt securities:
Municipal —
53,823
53,823
Corporate —
309,142
309,142
Foreign —
236,073
236,073
U.S. Treasury Bonds —
6,683
6,683
Equity securities 39,318
—
39,318
39,318
605,721
645,039

As of ~~June~~September 30, 2020, 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.

Net realized and unrealized ~~gains~~ (losses). gains. Realized and unrealized gains and losses are detailed as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
Realized gains	241	50,237	1,749	51,190
Realized losses	(209)	(3,038)	(1,556)	(3,402)
Net unrealized investment (losses) gains recognized on equity securities still held at September 30	(39)	(294)	(6,228)	2,942
	(7)	46,905	(6,035)	50,730

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
Realized gains 1,355
791
1,508
953
Realized losses (657 ) (59 ) (1,347 ) (363 )
Net unrealized investment gains (losses) recognized on equity securities still held at June 30 4,366
(310 ) (6,188 ) 3,236
5,064
422
(6,027 ) 3,826

~~Realized~~Net realized gains for the ~~second quarter~~first nine months of 2020 ~~and 2019~~ included ~~$1.1~~$1.3 million ~~and $0.7 million, respectively,~~ of gains from settlements of equity investments with no previously readily determinable fair values (cost-basis investments)~~. Realized~~, partially offset by net realized losses ~~for the second quarter and first six months~~ of ~~2020 included $0.6~~$1.1 million ~~and $1.2 million, respectively, of losses~~ from the sale of investment securities.

Net realized gains during both the third quarter and first nine months of 2019 included a $50.0 million realized gain related to the merger termination fee paid by Fidelity National Financial and a $2.7 million impairment charge on an equity method investment.

Investment gains and losses recognized related to investments in equity securities are as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
Net investment (losses) gains recognized on equity securities during the period	(41)	(171)	(7,136)	3,222
Less: Net realized (losses) gains on equity securities sold during the period	(2)	123	(908)	280
Net unrealized investment (losses) gains recognized on equity securities still held at September 30	(39)	(294)	(6,228)	2,942

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
Net investment gains (losses) recognized on equity securities during the period 3,966
(264 ) (7,095 ) 3,393
Less: Net realized (losses) gains on equity securities sold during the period (400 ) 46
(907 ) 157
Net unrealized investment gains (losses) recognized on equity securities still held at June 30 4,366
(310 ) (6,188 ) 3,236

Proceeds from sales of investments in securities are as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
Proceeds from sales of debt securities	10,218	10,227	24,990	19,279
Proceeds from sales of equity securities	56	720	782	1,620
Total proceeds from sales of investments in securities	10,274	10,947	25,772	20,899

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
Proceeds from sales of debt securities 3,270
2,734
14,773
9,052
Proceeds from sales of equity securities 433
260
726
900
Total proceeds from sales of investments in securities 3,703
2,994
15,499
9,952

Goodwill and other intangibles. The summary of changes in goodwill is as follows.


	Title	Ancillary Services and Corporate	Consolidated Total
		($000 omitted)
Balances at December 31, 2019	243,161	5,729	248,890
Acquisitions	113,642	19,703	133,345


Balances at September 30, 2020	356,803	25,432	382,235

Title Ancillary Services and Corporate Consolidated Total
($000 omitted)

Balances at December 31, 2019 243,161
5,729
248,890
Acquisitions 1,056
29,911
30,967
Balances at June 30, 2020 244,217
35,640
279,857

During the ~~second~~third quarter 2020, the Company recorded total goodwill of ~~$29.9~~$112.6 million under the ~~ancillary services and corporate~~title segment ~~relating to~~in connection with its acquisition of ~~a national appraisal management company providing residential property appraisals for mortgage lenders.~~several title offices. This goodwill adjustment was based on management's preliminary purchase accounting, which is expected to be finalized during the fourth quarter 2020.

During the second quarter 2020, the Company recorded goodwill under the ancillary services and corporate segment, which was based on management's preliminary purchase accounting related to its acquisition of U.S. Appraisals, a national appraisal management company providing residential property appraisals for mortgage lenders. During the third quarter ~~2020. Also, during~~2020, management completed the purchase accounting, which resulted in goodwill of $19.7 million. The Company also recognized from the acquisition other intangible assets of $19.6 million, primarily related to customer relationships and internally-developed technology, which have estimated useful lives of 10 and 5 years, respectively.

During the first quarter 2020, the Company acquired several title offices which generated a combined goodwill of ~~$1.1~~$1.0 million under the title segment. Subsequent to September 30, 2020, the Company acquired a national provider of appraisal management and residential real estate valuation services. Management expects to finalize the purchase accounting for this acquisition during the fourth quarter 2020.

Estimated title losses. A summary of estimated title losses for the ~~six~~nine months ended ~~June~~September 30 is as follows:


	2020		2019
	($000 omitted)
Balances at January 1	459,053		461,560
Provisions:
Current year	68,063		54,670
Previous policy years	537		863
Total provisions	68,600		55,533
Payments, net of recoveries:
Current year	(9,595)		(11,424)
Previous policy years	(49,390)		(55,375)
Total payments, net of recoveries	(58,985)		(66,799)

Effects of changes in foreign currency exchange rates	(1,856)		2,067
Balances at September 30	466,812		452,361
Loss ratios as a percentage of title operating revenues:
Current year provisions	4.5	%	4.1	%
Total provisions	4.6	%	4.2	%

2020 2019
($000 omitted)
Balances at January 1 459,053
461,560
Provisions:
Current year 39,811
33,833
Previous policy years 361
640
Total provisions 40,172
34,473
Payments, net of recoveries:
Current year (5,420 ) (5,722 )
Previous policy years (33,516 ) (39,929 )
Total payments, net of recoveries (38,936 ) (45,651 )
Effects of changes in foreign currency exchange rates (4,264 ) (174 )
Balances at June 30 456,025
450,208
Loss ratios as a percentage of title operating revenues:
Current year provisions 4.3 % 4.1 %
Total provisions 4.3 % 4.1 %

Provisions in the first ~~six~~nine months of 2020 increased compared to the same period in 2019, primarily as a result of increased title ~~revenues.~~revenues, higher domestic loss provisioning rates due to the current economic environment, and unfavorable loss development related to certain coverages in the Canadian operations. Claim payments in the first ~~six~~nine months of 2020 decreased compared to the same period in 2019, primarily due to lower payments on large and non-large claims ~~compared~~relating to ~~the corresponding period in 2019,~~prior policy years; while the ~~2020 reduction~~ effect ~~relating to~~of changes in foreign currency exchange ~~rate changes~~rates for the first nine months of 2020 and 2019 were primarily influenced by the depreciation and appreciation, respectively, of the Canadian dollar against the U.S. dollar during ~~the six months ended June 30, 2020.~~those periods.

Share-based payments. Prior to 2020, the Company granted 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. During the first ~~six~~nine months of 2020, the Company granted time-based restricted stock units and nonqualified stock options, in lieu of performance-based restricted stock units. The stock options vest and may be exercised at a strike price of $39.76 on each of the first three anniversaries of the grant date at a rate of 20%, 30% and 50%, chronologically, and expire 10 years after the grant date.

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 and stock option awards during the first ~~six~~nine months of 2020 were ~~$2.4~~$3.8 million ~~(60,000~~(96,000 units with an average grant price per unit of ~~$39.76)~~$39.36) and $3.4 million ~~(650,000~~(648,000 options with an average grant price per option of $5.32), respectively. During the first ~~six~~nine months of 2019, the aggregate grant-date fair value of restricted stock unit awards was ~~$4.5~~$5.0 million ~~(104,000~~(119,000 units with an average grant price per unit of ~~$43.22)~~$42.05).

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 restricted shares and units were vested and stock options were exercised. 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 September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted, except per share)
Numerator:


Net income attributable to Stewart	55,909	66,108	95,232	78,648

Denominator (000):
Basic average shares outstanding	25,148	23,616	24,151	23,608

Average number of dilutive shares relating to grants of restricted shares and units	149	157	105	172
Diluted average shares outstanding	25,297	23,773	24,256	23,780

Basic earnings per share attributable to Stewart	2.22	2.80	3.94	3.33

Diluted earnings per share attributable to Stewart	2.21	2.78	3.93	3.31

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted, except per share)
Numerator:
Net income attributable to Stewart 34,146
19,306
39,322
12,540

Denominator (000):
Basic average shares outstanding 23,656
23,614
23,647
23,605
Average number of dilutive shares relating to grants of restricted shares and units 100
144
110
145
Diluted average shares outstanding 23,756
23,758
23,757
23,750

Basic earnings per share attributable to Stewart 1.44
0.82
1.66
0.53

Diluted earnings per share attributable to Stewart 1.44
0.81
1.66
0.53

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 ~~June~~September 30, 2020, 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 lease obligations, as presented on the condensed consolidated balance sheets, plus lease operating expenses. As of ~~June~~September 30, 2020, the Company also had unused letters of credit aggregating $5.2 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees.

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 plaintiffs seek 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~~referred to 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, the Company receives various 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, where appropriate, 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.

Segment information. The Company reports 2 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 ~~operations~~income information related to these segments is as follows:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
Title segment:
Revenues	567,743	501,199	1,506,618	1,349,272
Depreciation and amortization	3,748	5,110	11,302	15,309
Income before taxes and noncontrolling interest	82,376	49,481	152,003	88,144

Ancillary services and corporate segment:
Revenues	27,953	58,309	45,083	80,830
Depreciation and amortization	1,396	584	2,134	2,149
(Loss) income before taxes and noncontrolling interest	(6,033)	41,580	(17,371)	25,043

Consolidated Stewart:
Revenues	595,696	559,508	1,551,701	1,430,102
Depreciation and amortization	5,144	5,694	13,436	17,458
Income before taxes and noncontrolling interest	76,343	91,061	134,632	113,187

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
Title segment:
Revenues 504,436
463,636
938,875
848,074
Depreciation and amortization 3,733
5,048
7,554
10,200
Income before taxes and noncontrolling interest 54,795
39,041
69,629
38,661

Ancillary services and corporate segment:
Revenues 11,669
8,439
17,130
22,521
Depreciation and amortization 328
727
738
1,564
Loss before taxes and noncontrolling interest (5,775 ) (9,689 ) (11,340 ) (16,535 )

Consolidated Stewart:
Revenues 516,105
472,075
956,005
870,595
Depreciation and amortization 4,061
5,775
8,292
11,764
Income before taxes and noncontrolling interest 49,020
29,352
58,289
22,126

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 September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
	($000 omitted)
United States	559,057	522,159	1,463,129	1,340,254
International	36,639	37,349	88,572	89,848
	595,696	559,508	1,551,701	1,430,102

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
($000 omitted)
United States 489,945
441,614
904,072
818,096
International 26,160
30,461
51,933
52,499
516,105
472,075
956,005
870,595

Other comprehensive ~~income.~~income (loss). Changes in the balances of each component of other comprehensive income and the related tax effects are as follows:


	Three Months Ended September 30, 2020			Three Months Ended September 30, 2019
	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	1,164	244	920	4,560	957	3,603
Reclassification adjustment for realized gains and losses on investments	(221)	(46)	(175)	(116)	(24)	(92)
	943	198	745	4,444	933	3,511

Foreign currency translation adjustments	4,384	540	3,844	(6,176)	(1,041)	(5,135)

Other comprehensive income (loss)	5,327	738	4,589	(1,732)	(108)	(1,624)

Three Months Ended
June 30, 2020 Three Months Ended
June 30, 2019
Before-Tax Amount Tax Expense (Benefit) Net-of-Tax Amount Before-Tax Amount Tax Expense (Benefit) Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments 21,159
4,444
16,715
6,800
1,429
5,371
Reclassification adjustment for realized gains and losses on investments (27 ) (6 ) (21 ) 63
13
50
21,132
4,438
16,694
6,863
1,442
5,421
Foreign currency translation adjustments 5,174
980
4,194
3,378
903
2,475
Other comprehensive income 26,306
5,418
20,888
10,241
2,345
7,896


	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	19,056	4,001	15,055	22,766	4,781	17,985
Reclassification adjustment for realized gains and losses on investments	(349)	(73)	(276)	152	32	120
	18,707	3,928	14,779	22,918	4,813	18,105

Foreign currency translation adjustments	(4,101)	(697)	(3,404)	2,750	822	1,928

Other comprehensive income	14,606	3,231	11,375	25,668	5,635	20,033

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Before-Tax Amount Tax Expense (Benefit) Net-of-Tax Amount Before-Tax Amount Tax Expense (Benefit) Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments 17,892
3,757
14,135
18,206
3,824
14,382
Reclassification adjustment for realized gains and losses on investments (128 ) (27 ) (101 ) 268
56
212
17,764
3,730
14,034
18,474
3,880
14,594
Foreign currency translation adjustments (8,485 ) (1,237 ) (7,248 ) 8,926
1,863
7,063
Other comprehensive income 9,279
2,493
6,786
27,400
5,743
21,657

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

MANAGEMENT’S OVERVIEW

Third quarter 2020 overview. We reported net income attributable to Stewart of $55.9 million ($2.21 per diluted share) for the third quarter 2020, compared to net income attributable to Stewart of $66.1 million ($2.78 per diluted share) for the third quarter 2019. On an adjusted basis, Stewart’s third quarter 2020 net income of $55.9 million ($2.21 per diluted share) increased 84% from $30.4 million ($1.28 per diluted share) in the third quarter 2019. Third quarter 2020 pretax income before noncontrolling interests was $76.3 million compared to pretax income before noncontrolling interests of $91.1 million for the third quarter 2019.

Third quarter 2019 results included pretax items of:

•$46.9 million of net realized and unrealized gains, primarily composed of a $50.0 million gain recorded in the ancillary services and corporate segment related to the merger termination fee paid by Fidelity National Financial (FNF), and a $2.7 million impairment charge on an equity method investment recorded in the title segment, and

•$1.0 million of third-party advisory expenses related to the terminated FNF merger transaction recorded in other operating expenses within the ancillary services and corporate segment.

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


	For the Three Months Ended September 30,
	2020		2019		% Change

Operating revenues	562.7		499.2		13	%
Investment income	5.0		4.8		6	%
Net realized and unrealized gains (losses)	—		(2.8)		100	%
Pretax income	82.4		49.5		66	%
Pretax margin	14.5	%	9.9	%

Title segment pretax income grew $32.9 million, or 66%, while pretax margin also improved 460 basis points to 14.5% in the third quarter 2020 compared to the prior year quarter. Title operating revenues increased $63.5 million, or 13%, resulting from increases in direct title revenues of $35.0 million, or 14%, and gross independent agency revenues of $28.5 million, or 11%. The effect of changes in the fair value of equity securities investments was minimal during the third quarters of 2020 and 2019; however, during the third quarter 2019, the segment recorded a $2.7 million impairment charge on an equity method investment. Excluding the impairment charge, pretax income for the third quarter 2019 would have been $52.3 million (10.4% margin).

Consistent with the increased title revenues in the third quarter 2020, the segment’s overall operating expenses increased $33.6 million, or 7%, as agency retention expenses and combined title employee costs and other operating expenses increased 11% and 3%, respectively, from the third quarter 2019. Our average independent agency remittance rate for the third quarter 2020 improved to 18.2% compared to 17.8% in the prior year quarter; while combined title employee costs and other operating expenses, as percentage of title revenues, was 39.5% in the third quarter 2020 compared to 43.4% in the prior year quarter. Title loss expense increased in the third quarter 2020 primarily due to increased title revenues, higher domestic loss provisioning rates due to the current economic environment, and unfavorable loss development in our Canadian business. As percentage of title revenues, the title loss expense in the third quarter 2020 was 5.1% compared to 4.2% from the prior year quarter.

Direct title revenues (refer to schedule in Results of Operations - Title Revenues section) in the third quarter 2020 increased from the prior year quarter as a result of improved domestic non-commercial revenues, primarily driven by increased purchase and refinancing residential orders from both existing and newly acquired title offices. This increase was partially offset by decreased commercial revenues resulting from reduced transaction sizes and volumes. Domestic commercial fee per file in the third quarter 2020 was approximately $9,700, which was 23% lower than the third quarter 2019; while domestic residential fee per file was approximately $1,900, or 11% lower than the third quarter 2019, primarily due to a higher mix of refinancing compared to purchase transactions.

Summary results of the ancillary services and corporate segment are as follows ($ in millions):


	For the Three Months Ended September 30,
	2020	2019	% Change

Operating revenues	28.0	8.6	224	%
Net realized gains	—	49.7	(100)	%
Pretax loss	(6.0)	41.6	(115)	%

The segment’s results for the third quarter 2019 included a $50.0 million realized gain related to the FNF merger termination fee and $1.0 million of merger expenses. Excluding net realized gains and merger expenses, the segment’s pretax results for the third quarter 2020 improved $1.1 million, or 15%, compared to the prior year quarter. Third quarter segment operating revenues improved, primarily driven by $24.2 million of revenues generated by U.S. Appraisals, which were partially offset by a $4.8 million decline in search and valuation services’ revenues due to significantly lower customer orders. The segment’s results for the third quarter 2020 and 2019 included approximately $6.3 million and $7.3 million, respectively, of net expenses attributable to parent company and corporate operations, with the higher expenses in the third quarter 2019 being primarily driven by the FNF merger expenses mentioned above.

Consistent with our investment and growth strategy of focusing on attractive businesses and geographies where we can have sustained success and where additional scale can efficiently and effectively improve profitability and margins, we acquired a number of title offices in the states of Alaska, Arizona, Colorado and Nevada during the late third quarter 2020. These acquisitions realign Stewart to strongly compete in several strategic markets where we have traditionally been underrepresented. As expected, these acquisitions, along with our second quarter acquisition of U.S. Appraisals, were immediately accretive to Stewart, evidenced by positive contributions to our third quarter 2020 pretax results. Subsequent to September 30, 2020, we acquired a national provider of appraisal management and residential real estate valuation services. Along with U.S. Appraisals, we expect this acquisition to further leverage our position in the evolving real estate closing experience and improve scale and synergies within our ancillary services business. We believe our solid operating results and liquidity position will allow us to continue investing and growing to maximize our operational potential.

COVID-19 pandemic. In March 2020, a global pandemic escalated relating to a novel strain of coronavirus (COVID-19), which resulted in a slowdown in the global economy and a U.S. declaration of a national emergency. In response to the pandemic, health and governmental bodies, including the state of Texas where we are headquartered, issued travel restrictions, quarantine orders, temporary closures of non-essential businesses and other restrictive measures. ~~To date, various levels of restrictions are still in place across the U.S. and the rest of the world to address the continuous spread of COVID-19.~~ In response to the pandemic, we deployed our business continuity plan in March and continue to take appropriate measures to protect the safety of all our employees and customers, while monitoring the evolving effects of the COVID-19 pandemic on the national and international fronts. Within the U.S., our business has been deemed an essential business which allows us to continue underwriting and closing real estate transactions for our residential and commercial customers on a daily basis. WeWhen possible, we utilize our digital capabilities, including remote online notarization (RON), remote ink notarization (RIN), electronic signature platforms, virtual underwriting, and mobile earnest money transfer tools to aid our employees in ~~keeping the~~facilitating real estate ~~market open~~transactions during this challenging environment.

To date, various levels of restrictions to address the spread of COVID-19 are still in place across the U.S. and ~~operating in this very challenging time.~~

the rest of the world, with some economies gradually opening up and efforts to develop vaccines continue. We ~~will~~ continue to proactively manage our business through this crisis with the help of our exceptional employees and support of our customers. ~~Although uncertainty remains with respect~~While the pandemic continues to ~~the ongoing impact of the virus, its duration, and further governmental responses,~~persist, Stewart ~~as a company providing an essential service,~~ is committed to helping people safely navigate the real estate closing process. We believe our strong liquidity position will allow us to facilitate our customers’ purchase and refinance of real estate should macro-economic conditions become more challenging.

~~Second quarter 2020 overview~~. We reported net income attributable to Stewart of $34.1 million ($1.44 per diluted share) for the second quarter 2020, compared to net income attributable to Stewart of $19.3 million ($0.81 per diluted share) for the second quarter 2019. Second quarter 2020 pretax income before noncontrolling interests was $49.0 million compared to pretax income before noncontrolling interests of $29.4 million for the second quarter 2019.

~~Second quarter 2020 results included:~~

~~$4.6 million of net realized and unrealized gains recorded in the title segment primarily relating to changes in the fair value of equity securities investments,~~

~~Second quarter 2019 results included:~~

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

For the Three Months
Ended June 30,
2020 2019 % Change

Operating revenues 495.6
458.7
8 %
Investment income 4.3
5.2
(17 )%
Net realized and unrealized gains (losses) 4.6
(0.2 ) 2,178 %
Pretax income 54.8
39.0
40 %
Pretax margin 10.9 % 8.4 %

Title operating revenues in the second quarter 2020 increased $36.9 million, or 8%, compared to the prior year quarter. Second quarter 2020 gross independent agency revenues increased $46.6 million, or 20%, partially offset by lower direct title revenues of $9.7 million, or 4%. Investment income declined in the second quarter 2020 compared to the prior year quarter, primarily due to lower interest rates on short term investments and lower dividend income, primarily relating to the timing of an annual dividend on a cost-basis investment. The segment’s net realized and unrealized gains and losses during the second quarters 2020 and 2019 were primarily due to $4.4 million of net unrealized gains and $0.3 million of net unrealized losses, respectively, relating to changes to the fair value of equity securities investments.

With the net increase in title revenues, the segment’s overall operating expenses in the second quarter 2020 increased $25.0 million, or 6%, primarily driven by a 20% increase in agency retention expenses, which was partially offset by a 7% reduction in combined title employee costs and other operating expenses. Our average independent agency remittance rate slightly improved to 17.5% in the second quarter 2020, compared to 17.2% in the second quarter 2019; while combined title employee costs and other operating expenses, as a percentage of title revenues, improved to 39.5% in the second quarter, compared to 45.7% in the prior year quarter. Title loss expense increased 15% in the second quarter 2020, primarily as a result of increased title revenues. As a percentage of title revenues, the title loss expense in the second quarter 2020 was 4.3%, compared to 4.1% from the prior year quarter.

Direct title revenues (refer to schedule in Results of Operations - Title Revenues section) decreased primarily as a result of lower commercial transactions, partially offset by elevated refinancing orders which mainly contributed to the increased non-commercial domestic revenues in the second quarter 2020 compared to the prior year quarter. Domestic commercial fee per file in the second quarter 2020 was approximately $9,800, which was 15% lower versus the second quarter 2019; while domestic residential fee per file was approximately $1,800, a 20% decrease from last year’s quarter, primarily resulting from a higher mix of refinancing to purchase transactions. Total international title revenues decreased $3.9 million, or 14%, primarily due to lower volumes in our Canada and United Kingdom operations.

~~Summary results of the ancillary services and corporate segment are as follows ($ in millions):~~

At the end of May 2020, we completed our acquisition of United States Appraisals (U.S. Appraisals), a technology-enabled national appraisal management company providing residential property appraisals for mortgage lenders. U.S. Appraisals has a network of over 9,000 appraisers across the United States and manages the entire appraisal process from order intake to product delivery using its proprietary software platform. We believe this acquisition strengthens Stewart's digital real estate services offering in appraisal and valuation management and enhances our existing title and settlement services in supporting our customers in real estate transactions.

Segment operating revenues improved in the second quarter 2020 versus the prior year’s quarter, primarily driven by $7.1 million of revenues generated by U.S. Appraisals. Revenues from search and valuation services declined $3.6 million, or 48 percent, primarily due to significantly lower orders from several customers. The segment’s results for the second quarter 2020 and 2019 included approximately $5.5 million and $9.4 million, respectively, of net expenses attributable to parent company and corporate operations, with the higher expenses in the second quarter 2019 being primarily driven by the FNF merger expenses discussed above.

We believe our solid operating results and strong liquidity position will allow us to continue investing and growing to maximize our operational potential. Our investment and growth strategy will focus on attractive businesses and geographies where we can have sustained success and where additional scale can efficiently and effectively improve profitability and margins. We also intend to further leverage our strengths by increasing investment in areas where we hold a strong competitive position. A final component of our strategy will be to identify adjacent businesses and technologies that will allow us to further leverage our position in the evolving real estate closing experience, such as the acquisition of U.S. Appraisals mentioned above. During the first half of 2020, we have built a strong acquisition pipeline in each of these categories and expect to be opportunistic and reasonable in our capital deployment, while understanding the near-term uncertainty in market conditions.

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 ~~six~~nine months ended ~~June~~September 30, 2020, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the 2019 Form 10-K.

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 appraisal, and 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;

•consumer confidence, including employment trends;

•demand by buyers;

•number of households;

•foreign currency exchange rates;

•ability to attract and retain highly productive sales associates;

•departure of revenue-attached employees;

•independent agency remittance rates;

•opening of new offices and acquisitions;

•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;

•seasonality and/or weather; and

•outbreaks of disease, including the COVID-19 pandemic, and related quarantine orders and restrictions on

travel, trade and business operations.

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 approximately 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~~nine months ended ~~June~~September 30, 2020 with the three and ~~six~~nine months ended ~~June~~September 30, 2019 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 U.S. industry data from sources including Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors^® (NAR) and the U.S. Census Bureau. We also use information from our direct operations.

Operating environment. ~~Overall, second quarter 2020~~Existing home sales grew for the fourth consecutive month in September, according to NAR, and is attributed to the currently record-low interest rates and an abundance of buyers in the marketplace, despite lower housing ~~starts declined~~inventory levels compared to last year's quarter, primarily due to the continued effect of the COVID-19 pandemic. However, the real estate market has gradually improved as a result of the reopening the economy in many geographic locations and the continued low interest rate environment.year. Actual existing home sales in the ~~second~~third quarter 2020 ~~declined~~grew approximately ~~18%~~13% from the ~~second~~third quarter 2019. On a seasonally-adjusted basis, ~~June~~September 2020 existing home sales ~~declined 11%~~increased 21% and 9% from a year ago ~~but improved 21% from May 2020. June~~and August 2020, respectively. September 2020 median and average home prices increased approximately 4%15% and 3%12%, respectively, compared to ~~June~~September 2019 prices. ~~June~~September 2020 housing starts ~~declined 4%~~improved 2% and 11% from August 2020 and a year ago, ~~but improved 17% compared to May 2020.~~respectively. Newly issued building permits in ~~June~~September 2020 ~~were down 3%~~also improved, up 5% and 8% from ~~a year ago, but increased 2% sequentially from May 2020.~~August 2020 and September 2019, respectively.

As reported by Fannie Mae and MBA (averaged), one-to-four family mortgage originations improved ~~92%~~51% to approximately $1$1.1 trillion in the ~~second~~third quarter 2020 from ~~$521~~$702 billion in the ~~second~~third quarter 2019, primarily driven by ~~a more than 300%~~an approximately 91% increase in refinancing originations resulting from the current lower mortgage interest ~~rates. Purchase~~rate environment. While purchase originations decreased 9% in the second quarter 2020 on a year-on-year basis, third quarter 2020 purchase originations improved 23% sequentially from the second quarter 2020 and also increased 15% compared the third quarter 2019, as the real estate market continues to recover from the ~~prior year quarter, primarily influenced by increased consumer caution and financial uncertainty stemming from~~effects of the COVID-19 pandemic.

For the ~~third~~fourth quarter 2020, Fannie Mae and MBA are forecasting that existing and new home sales will ~~decline 2%~~improve 10% and 3%35%, respectively, ~~versus~~compared to last year's fourth quarter, but consistent with the seasonality of the market, will sequentially decline 1% and 5%, respectively, compared to the third quarter ~~2019, but sequentially will improve 21% and 1%, respectively, from the second quarter~~ 2020. ~~Mortgage~~Total mortgage originations for the ~~third~~fourth quarter 2020 are expected to improve ~~12%~~17% from last year's fourth quarter, ~~primarily~~ driven by 23% and 13% higher purchase and refinancing lending. Sequentially, total originations in the third quarter 2020 are expected to decline 24% from the second quarter 2020, as refinancing originations going forward are expected to trend down back to 2019 levels, while purchase originations are expected to improve 18% from the second quarter 2020.lending, respectively. The 30-year mortgage interest rate is expected to average approximately ~~3.3%~~3.1% for the year 2020, compared to the 2019 average of 3.8%.

Title revenues. Direct title revenue information is presented below:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020	2019	Change	% Change		2020	2019	Change	% Change
	($ in millions)					($ in millions)
Non-commercial
Domestic	208.2	160.5	47.7	30	%	503.8	416.8	87.0	21	%
International	30.4	28.8	1.6	6	%	70.4	66.8	3.6	5	%
	238.6	189.3	49.3	26	%	574.2	483.6	90.6	19	%
Commercial:
Domestic	36.7	49.7	(13.0)	(26)	%	108.7	133.7	(25.0)	(19)	%
International	4.8	6.1	(1.3)	(21)	%	13.7	16.9	(3.2)	(19)	%
	41.5	55.8	(14.3)	(26)	%	122.4	150.6	(28.2)	(19)	%
Total direct title revenues	280.1	245.1	35.0	14	%	696.6	634.2	62.4	10	%

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 Change % Change 2020 2019 Change % Change
($ in millions) ($ in millions)
Non-commercial
Domestic 162.7
148.9
13.8
9 % 295.6
256.2
39.4
15 %
International 20.9
22.4
(1.5 ) (7 )% 40.0
38.1
1.9
5 %
183.6
171.3
12.3
7 % 335.6
294.3
41.3
14 %
Commercial:
Domestic 30.7
50.3
(19.6 ) (39 )% 72.0
84.0
(12.0 ) (14 )%
International 3.9
6.3
(2.4 ) (38 )% 8.9
10.8
(1.9 ) (18 )%
34.6
56.6
(22.0 ) (39 )% 80.9
94.8
(13.9 ) (15 )%
Total direct title revenues 218.2
227.9
(9.7 ) (4 )% 416.5
389.1
27.4
7 %

Revenues from direct title operations, which include residential, commercial and international transactions, decreased in the second quarter 2020 compared to the prior year quarter, primarily as a result of lower commercial transactions and lower international revenues, partially offset by higher residential revenues primarily resulting from elevated refinancing orders. Direct title revenues improved in the third quarter and first ~~six~~nine months of 2020, compared to the same ~~period in 2019,~~periods last year, primarily ~~due to improved residential revenues related to refinancing orders, which was partially offset by lower commercial revenues~~ as a result of ~~fewer~~higher domestic non-commercial revenues driven by increased purchase and refinancing residential orders from existing offices and revenues generated by newly acquired title offices, which were approximately $10.3 million for the third quarter and first nine months of 2020. These increases were partially offset by decreased commercial ~~orders. Overall, total~~revenues resulting from reduced transaction sizes and volumes. Total refinancing and purchased closed orders increased ~~32%~~47% and ~~34%~~42% in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively; while commercial closed orders decreased 4% and 11%, respectively, compared to the same periods in ~~2019, largely influenced by the rise in refinancing transactions.~~2019.

Domestic residential fee per file for both the ~~second~~third quarter and first ~~six~~nine months of 2020 ~~were~~was approximately ~~$1,800 and~~ $1,900, ~~respectively, which were 20% and 16%, respectively,~~ lower ~~than~~compared to $2,200 for both the same periods in 2019 primarily as a result of a higher mix of refinancing compared to purchase transactions in 2020. Domestic commercial fee per file in the ~~second~~third quarter and first nine months of 2020 ~~was~~declined to approximately ~~$9,800, or 15% lower~~$9,700 and $10,300, respectively, compared to ~~the second quarter 2019,~~$12,600 and $11,300, respectively, in the ~~first six months of 2020 was approximately $10,700, which was comparable~~same periods in 2019, primarily due to the ~~same period last year.~~slowdown in the commercial real estate market resulting from the COVID-19 pandemic. Total international revenues in the ~~second~~third quarter ~~2020 decreased $3.9 million, or 14%, compared to the second quarter 2019, primarily due to lower volumes from our Canada~~ and ~~United Kingdom operations; while revenues in the~~ first ~~six~~nine months of 2020 were comparable to the ~~same period in~~third quarter and first nine months of 2019, primarily as ~~increased revenues from~~a result of higher volumes ~~were~~generated by our Canada operations being offset by ~~the effect of the weaker average exchange rates of the Canadian dollar and British pound against the U.S. dollar during 2020.~~lower volumes from other international locations.

Orders information for the three and ~~six~~nine months ended ~~June~~September 30 is as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2020	2019	Change	% Change		2020	2019	Change	% Change
Opened Orders:
Commercial	3,703	4,251	(548)	(13)	%	11,308	13,209	(1,901)	(14)	%
Purchase	73,668	60,579	13,089	22	%	184,240	179,298	4,942	3	%
Refinance	86,823	45,387	41,436	91	%	223,322	101,913	121,409	119	%
Other	1,067	1,128	(61)	(5)	%	2,293	3,827	(1,534)	(40)	%
Total	165,261	111,345	53,916	48	%	421,163	298,247	122,916	41	%

Closed Orders:
Commercial	3,799	3,956	(157)	(4)	%	10,556	11,809	(1,253)	(11)	%
Purchase	52,407	46,080	6,327	14	%	123,548	124,994	(1,446)	(1)	%
Refinance	56,027	27,834	28,193	101	%	138,909	59,831	79,078	132	%
Other	555	604	(49)	(8)	%	1,316	2,555	(1,239)	(48)	%
Total	112,788	78,474	34,314	44	%	274,329	199,189	75,140	38	%

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 Change % Change 2020 2019 Change % Change
Opened Orders:
Commercial 3,425
4,660
(1,235 ) (27 )% 7,605
8,958
(1,353 ) (15 )%
Purchase 56,920
65,172
(8,252 ) (13 )% 110,572
118,719
(8,147 ) (7 )%
Refinance 72,306
33,342
38,964
117 % 136,499
56,526
79,973
141 %
Other 496
1,108
(612 ) (55 )% 1,226
2,699
(1,473 ) (55 )%
Total 133,147
104,282
28,865
28 % 255,902
186,902
69,000
37 %

Closed Orders:
Commercial 3,122
4,349
(1,227 ) (28 )% 6,757
7,853
(1,096 ) (14 )%
Purchase 37,407
45,596
(8,189 ) (18 )% 71,141
78,914
(7,773 ) (10 )%
Refinance 51,133
18,754
32,379
173 % 82,882
31,997
50,885
159 %
Other 317
955
(638 ) (67 )% 761
1,951
(1,190 ) (61 )%
Total 91,979
69,654
22,325
32 % 161,541
120,715
40,826
34 %

Gross revenues from independent agency operations increased ~~$46.6~~$28.5 million, or ~~20%~~11%, and ~~$73.7~~$102.2 million, or ~~17%~~15%, in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to the same periods last year, which was consistent with the improving real estate market trends and the continued return of agents after the FNF merger termination. Agency revenues, net of retention, increased ~~$8.9~~$6.4 million, or ~~23%~~14%, and ~~$13.2~~$19.6 million, or ~~17%~~16%, in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to the same periods in 2019, generally in line with the gross agency revenue change. Refer further to the "Retention by agencies" discussion under Expenses below.

Ancillary services revenues. Ancillary services operating revenues for the ~~second~~third quarter and first nine months of 2020 increased ~~$3.4~~$19.3 million, or ~~43%~~224%, ~~from the second quarter 2019, but decreased $5.5~~and $13.9 million, or ~~25%~~45%, ~~for first six months of 2020~~ compared to the same ~~period~~periods in 2019. ~~Excluding revenues generated by~~ U.S. Appraisals, which we acquired during the late second quarter 2020, ~~total ancillary service~~generated revenues of $24.2 million and $31.3 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, ~~decreased $3.7~~respectively. These revenues were partially offset by lower revenues from our existing search and valuation services of $4.9 million ~~or 48%,~~ and ~~$12.5~~$17.1 million or(both 57%,) in the third quarter and first nine months of 2020, respectively, compared to the same periods in 2019, primarily driven by ~~lower revenues from our existing search and valuation services on~~ significantly lower orders from several customers.

Investment income. Investment income ~~decreased $0.9 million, or 17%, in~~for both the ~~second~~third quarter and first nine months of 2020 ~~compared~~was generally comparable to the ~~prior year quarter,~~same periods in 2019, primarily as a result of increased dividend income offsetting the effect of reduced interest income due to the lower interest rates on ~~short term~~our investments ~~and lower dividend income primarily relating to the timing of an annual dividend on a cost-basis investment. This lower dividend income also primarily influenced the $0.4 million, or 4%, decline~~ in ~~investment income for the first six months of 2020 compared to the same period in 2019.~~2020.

Net realized and unrealized ~~gains~~ (losses). gains. Refer to Note 5 to the condensed consolidated financial statements.

Expenses. An analysis of expenses is shown below:


	Three Months Ended September 30,							Nine Months Ended September 30,
	2020		2019		Change	% Change		2020		2019		Change	% Change
	($ in millions)							($ in millions)

Amounts retained by agencies	231.1		209.0		22.1	11	%	659.1		576.6		82.5	15	%
As a % of agency revenues	81.8	%	82.2	%				82.2	%	82.4	%
Employee costs	155.6		143.8		11.8	8	%	428.8		413.0		15.8	5	%
As a % of operating revenues	26.3	%	28.3	%				27.8	%	30.3	%
Other operating expenses	98.5		87.8		10.7	12	%	245.0		251.0		(6.0)	(2)	%
As a % of operating revenues	16.7	%	17.3	%				15.9	%	18.4	%
Title losses and related claims	28.4		21.1		7.4	35	%	68.6		55.5		13.1	24	%
As a % of title revenues	5.1	%	4.2	%				4.6	%	4.2	%

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 Change % Change 2020 2019 Change % Change
($ in millions) ($ in millions)

Amounts retained by agencies 228.7
191.1
37.6
20 % 428.1
367.6
60.5
17 %
As a % of agency revenues 82.5 % 82.8 % 82.4 % 82.5 %
Employee costs 137.5
139.9
(2.4 ) (2 )% 273.2
269.2
4.0
2 %
As a % of operating revenues 27.1 % 30.0 % 28.7 % 31.4 %
Other operating expenses 74.6
86.1
(11.5 ) (13 )% 146.5
163.2
(16.7 ) (10 )%
As a % of operating revenues 14.7 % 18.4 % 15.4 % 19.0 %
Title losses and related claims 21.5
18.8
2.8
15 % 40.2
34.5
5.7
17 %
As a % of title revenues 4.3 % 4.1 % 4.3 % 4.1 %

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 ~~82.5%~~81.8% and ~~82.4%~~82.2% in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, as compared to ~~82.8%~~82.2% and ~~82.5%~~82.4% in the same periods in 2019. 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. Consolidated employee costs ~~decreased 2%~~increased 8% and 5% in the ~~second~~third quarter and first nine months of 2020, compared to the ~~second quarter 2019. Employee costs~~same periods in ~~the title segment decreased $2.7 million, or 2%,~~2019, primarily ~~due~~as a result of acquisitions and higher incentive compensation related to improved overall operating results, partially offset by lower salaries ~~and other benefits~~ expenses resulting from an overall lower average employee count ~~and lower incentive compensation related to decreased direct title revenues, which~~(excluding acquisitions). Employee costs for the first nine months of 2020 were ~~partially offset~~also increased by severance expenses related to cost savings initiatives during the second quarter 2020. Employee costs in the ancillary services and corporate segment increased $0.4 million, or 7%, primarily due to increased employee counts relating to the U.S. Appraisals acquisition during the second quarter 2020.

~~Consolidated~~Total employee costs for the third quarter and first ~~six~~nine months of 2020 ~~increased 2% compared~~related to ~~the same period in 2019. Employee~~new acquisitions were $6.1 million and $6.6 million, respectively.

Excluding acquisitions, employee costs in the title segment in the third quarter and first nine months of 2020 increased ~~$4.9~~$6.3 million, or 2%5%, and $11.2 million, or 3%, respectively, primarily due to increased incentive compensation on ~~higher direct~~improved title revenues, ~~and severance~~partially offset by lower salaries expenses due to a lower average employee count. Severance expenses related to cost savings initiatives during the second quarter 2020 ~~partially offset by lower salaries and other benefits expenses resulting from a lower average~~also contributed to the employee ~~count. Employee~~cost increase during the first nine months of 2020 for the segment. Excluding U.S. Appraisals, employee costs in the ancillary services and corporate segment decreased ~~$0.8~~$0.6 million ~~or 7%,~~and $1.9 million (both 11%) in the third quarter and first nine months of 2020, respectively, compared to the same periods in 2019, primarily due to lower salaries ~~and other benefits~~ expenses resulting from a lower average employee ~~count, partially offset by the effect of increased employee counts relating to the U.S. Appraisals acquisition during the second quarter 2020.~~count.

As a percentage of total operating revenues, consolidated employee costs improved to ~~27.1%~~26.3% and ~~28.7%~~27.8% in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to ~~30.0%~~28.3% and ~~31.4%~~30.3% in the same periods in 2019, which were primarily influenced by our continued focus on managing operating costs.

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. 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. Costs that follow, to varying degrees, changes in transaction volumes and revenues include outside search and valuation fees, attorney fee splits, bad debt expenses, copy supplies, delivery 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.

Consolidated other operating expenses ~~decreased 13% and 10%~~increased 12% in the ~~second~~third quarter 2020 and decreased 2% in the first ~~six~~nine months of 2020, ~~respectively,~~ compared to the same periods in 2019. ~~During~~Included in other operating expenses were $21.7 million and $27.7 million of expenses related to new acquisitions for the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, which primarily consisted of outside valuation fees by U.S. Appraisals. Also, during the third quarter and first nine months of 2019, we incurred ~~$3.7~~$1.0 million and ~~$5.7~~$6.7 million, respectively, of third-party advisory expenses recorded in the ancillary services and corporate segment related to the terminated FNF merger transaction. ~~Additionally, we recorded during the first six months of 2019 $0.8 million of litigation expense related to a prior year lender services acquisition recorded in the ancillary services~~Excluding acquisitions and ~~corporate segment and $0.7 million of office closure costs included within the title segment. Excluding these~~ non-operating expenses, other operating expenses for the third quarter and first nine months of 2020 decreased $10.0 million, or 12%, and $27.0 million, or 11%, respectively, compared to the same periods in 2019, and as a percentage of operating revenues, were ~~14.7%~~13.8% and ~~15.4%~~14.5% in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to ~~18.4%~~17.1% and ~~19.0%~~17.9% in the same prior year periods.

~~Costs~~Total costs that follow, to varying degrees, changes in transaction volumes and revenues increased ~~$1.0~~$17.5 million, or 3%43%, and $17.6 million, or 16%, in the ~~second~~third quarter and first nine months of 2020, respectively, compared to the ~~second quarter~~same periods in 2019, ~~primarily~~mainly due to increased outside search and valuation fees primarily resulting from ~~new~~U.S. Appraisals' revenues ~~from U.S. Appraisals, partially offset by lower volumes from commercial~~ and ~~search and valuations services. These costs in the first six months of 2020 were comparable to the same period in 2019 as the~~ increased ~~costs on~~premium taxes consistent with higher direct title ~~revenues were offset by lower costs of ancillary services revenues due to lower volumes.~~

revenues. Excluding the non-operating expenses above, total costs that are fixed in nature in the ~~second~~third quarter and first ~~six~~nine months of 2020 decreased ~~$3.4~~$2.1 million, or ~~10%~~6%, and ~~$3.7~~$6.6 million, or 6%7%, respectively, compared to the same periods in 2019, primarily due to lower rent and occupancy ~~expenses and telecommunications~~ expenses. ~~Costs~~Total costs that fluctuate independently of revenues decreased ~~$5.9~~$3.6 million, or 4%31%, and ~~$6.6~~$10.3 million, or ~~33%~~32%, in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to the same periods in 2019, primarily due to decreased marketing and travel expenses mainly as a result of the COVID-19 pandemic.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were ~~4.3%~~5.1% and 4.6% for the third quarter and first nine months of 2020, respectively, compared to 4.2% for both the ~~second~~third quarter and first ~~six months of 2020, compared to 4.1% for both the second quarter and first six~~nine months of 2019. Title ~~losses~~loss expense increased ~~$2.8~~$7.4 million and ~~$5.7~~$13.1 million in the ~~second~~third quarter and first ~~six~~nine months of 2020, respectively, compared to the same periods in ~~2019, primarily due to increased title revenues.~~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. Cash claim payments decreased $4.7 million, or 21%, and $6.7 million, or 15%, in the second quarter and first six months of 2020, respectively, compared to the same periods in 2019, primarily due to lower payments on large claims relating to prior policy years. 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 September 30,					Nine Months Ended September 30,
	2020	2019	Change	% Change		2020	2019	Change	% Change
	($ in millions)					($ in millions)
Provisions – known claims:
Current year	3.0	4.1	(1.1)	(27)	%	7.6	8.4	(0.8)	(10)	%
Prior policy years	16.9	18.0	(1.1)	(6)	%	45.0	55.7	(10.7)	(19)	%
	19.9	22.1	(2.2)	(10)	%	52.6	64.1	(11.5)	(18)	%
Provisions – IBNR
Current year	25.3	16.7	8.6	51	%	60.5	46.2	14.3	31	%
Prior policy years	0.1	0.3	(0.2)	(67)	%	0.5	0.9	(0.4)	(44)	%
	25.4	17.0	8.4	49	%	61.0	47.1	13.9	30	%
Transferred from IBNR to known claims	(16.9)	(18.0)	1.1	(6)	%	(45.0)	(55.7)	10.7	(19)	%
Total provisions	28.4	21.1	7.4	35	%	68.6	55.5	13.1	24	%



Delaware		74-1677330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1360 Post Oak Blvd.,	Suite 100
Houston,	Texas	77056
(Address of principal executive offices)		(Zip Code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	STC	New York Stock Exchange


	As of June 30, 2020 (Unaudited)		As of December 31, 2019			As of September 30, 2020 (Unaudited)	As of December 31, 2019
	($000 omitted)					($000 omitted)
Assets					Assets
Cash and cash equivalents	310,806		330,609		Cash and cash equivalents	381,560	330,609
Short-term investments	20,560		23,527		Short-term investments	21,288	23,527
Investments in debt and equity securities, at fair value	645,347		645,039		Investments in debt and equity securities, at fair value	650,599	645,039

Receivables:					Receivables:
Premiums from agencies	29,342		26,405		Premiums from agencies	32,749	26,405
Trade and other	38,196		45,962		Trade and other	47,287	45,962
Income taxes	1,514		1,641		Income taxes	2,110	1,641
Notes	2,247		2,464		Notes	1,591	2,464
Allowance for uncollectible amounts	(4,442	)	(4,469	)	Allowance for uncollectible amounts	(4,456)	(4,469)
	66,857		72,003			79,281	72,003
Property and equipment:					Property and equipment:
Land	3,009		3,009		Land	2,964	3,009
Buildings	22,433		20,519		Buildings	22,423	20,519
Furniture and equipment	169,591		178,416		Furniture and equipment	174,079	178,416
Accumulated depreciation	(145,187	)	(151,483	)	Accumulated depreciation	(148,490)	(151,483)
	49,846		50,461			50,976	50,461
Operating lease assets	100,353		99,028		Operating lease assets	110,038	99,028
Title plants, at cost	72,650		72,627		Title plants, at cost	72,850	72,627
Investments on equity method basis	5,976		6,169		Investments on equity method basis	6,851	6,169
Goodwill	279,857		248,890		Goodwill	382,235	248,890
Intangible assets, net of amortization	3,843		4,623		Intangible assets, net of amortization	22,002	4,623
Deferred tax assets	4,407		4,407		Deferred tax assets	4,451	4,407
Other assets	39,732		35,402		Other assets	38,058	35,402
	1,600,234		1,592,785			1,820,189	1,592,785
Liabilities					Liabilities
Notes payable	101,702		110,632		Notes payable	101,256	110,632
Accounts payable and accrued liabilities	108,394		126,779		Accounts payable and accrued liabilities	143,207	126,779
Operating lease liabilities	113,292		113,843		Operating lease liabilities	122,475	113,843
Estimated title losses	456,025		459,053		Estimated title losses	466,812	459,053
Deferred tax liabilities	33,489		28,719		Deferred tax liabilities	35,570	28,719
	812,902		839,026			869,320	839,026
Contingent liabilities and commitments					Contingent liabilities and commitments
Stockholders’ equity					Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital	190,260		188,279		Common Stock ($1 par value) and additional paid-in capital	300,648	188,279
Retained earnings	589,424		564,392		Retained earnings	637,223	564,392
Accumulated other comprehensive income (loss):					Accumulated other comprehensive income (loss):
Foreign currency translation adjustments					Foreign currency translation adjustments	(16,430)	(13,027)
Net unrealized gains on debt securities investments	(20,275	)	10,328		Net unrealized gains on debt securities investments	25,106	10,328
Foreign currency translation adjustments	24,362		(13,027	)

Treasury stock – 352,161 common shares, at cost	(2,666	)	(2,666	)	Treasury stock – 352,161 common shares, at cost	(2,666)	(2,666)
Stockholders’ equity attributable to Stewart	781,105		747,306		Stockholders’ equity attributable to Stewart	943,881	747,306
Noncontrolling interests	6,227		6,453		Noncontrolling interests	6,988	6,453
Total stockholders’ equity (23,699,228 and 23,709,407 shares outstanding)	787,332		753,759
Total stockholders’ equity (26,719,342 and 23,709,407 shares outstanding)					Total stockholders’ equity (26,719,342 and 23,709,407 shares outstanding)	950,869	753,759
	1,600,234		1,592,785			1,820,189	1,592,785


	Amortized costs	Fair values		Amortized costs	Fair values
	($000 omitted)			($000 omitted)
In one year or less	69,702	70,474	In one year or less	68,394	69,164
After one year through five years	313,470	326,654	After one year through five years	299,977	313,410
After five years through ten years	165,852	179,896	After five years through ten years	186,766	201,134
After ten years	33,030	35,867	After ten years	30,978	34,187
	582,054	612,891		586,115	617,895


☑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~~


☐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~~


Item		Page	Item		Page
	PART I – FINANCIAL INFORMATION			PART I – FINANCIAL INFORMATION

1.	Financial Statements	3	1.	Financial Statements	3

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	Quantitative and Qualitative Disclosures About Market Risk	29	3.	Quantitative and Qualitative Disclosures About Market Risk	29

4.	Controls and Procedures	30	4.	Controls and Procedures	29
	PART II – OTHER INFORMATION			PART II – OTHER INFORMATION
1.	Legal Proceedings	30	1.	Legal Proceedings	30

1A.	Risk Factors	30	1A.	Risk Factors	30

2.	Unregistered Sales of Equity Securities and Use of Proceeds	30	2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

5.	Other Information	31	5.	Other Information	30

6.	Exhibits	31	6.	Exhibits	30

	Signature	32		Signature	31


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2019		2020		2019			2020	2019	2020	2019
	($000 omitted, except per share)									($000 omitted, except per share)
Revenues									Revenues
Title revenues:									Title revenues:
Direct operations	218,214		227,883		416,496		389,130		Direct operations	280,114	245,068	696,611	634,198
Agency operations	277,387		230,817		519,417		445,680		Agency operations	282,605	254,155	802,022	699,835
Ancillary services	11,155		7,798		16,616		22,080		Ancillary services	27,957	8,628	44,573	30,708
Operating revenues	506,756		466,498		952,529		856,890		Operating revenues	590,676	507,851	1,543,206	1,364,741
Investment income	4,285		5,155		9,503		9,879		Investment income	5,027	4,752	14,530	14,631
Net realized and unrealized gains (losses)	5,064		422		(6,027	)	3,826
Net realized and unrealized (losses) gains									Net realized and unrealized (losses) gains	(7)	46,905	(6,035)	50,730
	516,105		472,075		956,005		870,595			595,696	559,508	1,551,701	1,430,102
Expenses									Expenses
Amounts retained by agencies	228,720		191,091		428,086		367,586		Amounts retained by agencies	231,051	208,973	659,138	576,559
Employee costs	137,528		139,896		273,180		269,151		Employee costs	155,638	143,815	428,817	412,967
Other operating expenses	74,613		86,051		146,473		163,207		Other operating expenses	98,531	87,826	245,003	251,030
Title losses and related claims	21,541		18,786		40,172		34,473		Title losses and related claims	28,427	21,059	68,600	55,532
Depreciation and amortization	4,061		5,775		8,292		11,764		Depreciation and amortization	5,144	5,694	13,436	17,458
Interest	622		1,124		1,513		2,288		Interest	562	1,080	2,075	3,369
	467,085		442,723		897,716		848,469			519,353	468,447	1,417,069	1,316,915
Income before taxes and noncontrolling interests	49,020		29,352		58,289		22,126		Income before taxes and noncontrolling interests	76,343	91,061	134,632	113,187
Income tax expense	(11,340	)	(7,027	)	(13,235	)	(4,585	)	Income tax expense	(16,058)	(21,393)	(29,293)	(25,978)
Net income	37,680		22,325		45,054		17,541		Net income	60,285	69,668	105,339	87,209
Less net income attributable to noncontrolling interests	3,534		3,019		5,731		5,001		Less net income attributable to noncontrolling interests	4,376	3,560	10,107	8,561
Net income attributable to Stewart	34,146		19,306		39,323		12,540		Net income attributable to Stewart	55,909	66,108	95,232	78,648

Net income	37,680		22,325		45,054		17,541		Net income	60,285	69,668	105,339	87,209
Other comprehensive income (loss), net of taxes:									Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustments	4,194		2,475		(7,248	)	7,063		Foreign currency translation adjustments	3,844	(5,135)	(3,404)	1,928
Change in net unrealized gains and losses on investments	16,715		5,371		14,135		14,382		Change in net unrealized gains and losses on investments	920	3,603	15,055	17,985
Reclassification adjustment for realized gains and losses on investments	(21	)	50		(101	)	212		Reclassification adjustment for realized gains and losses on investments	(175)	(92)	(276)	120
Other comprehensive income, net of taxes:	20,888		7,896		6,786		21,657
Other comprehensive income (loss), net of taxes:									Other comprehensive income (loss), net of taxes:	4,589	(1,624)	11,375	20,033
Comprehensive income	58,568		30,221		51,840		39,198		Comprehensive income	64,874	68,044	116,714	107,242
Less net income attributable to noncontrolling interests	3,534		3,019		5,731		5,001		Less net income attributable to noncontrolling interests	4,376	3,560	10,107	8,561
Comprehensive income attributable to Stewart	55,034		27,202		46,109		34,197		Comprehensive income attributable to Stewart	60,498	64,484	106,607	98,681

Basic average shares outstanding (000)	23,656		23,614		23,647		23,605		Basic average shares outstanding (000)	25,148	23,616	24,151	23,608
Basic earnings per share attributable to Stewart	1.44		0.82		1.66		0.53		Basic earnings per share attributable to Stewart	2.22	2.80	3.94	3.33
Diluted average shares outstanding (000)	23,756		23,758		23,757		23,750		Diluted average shares outstanding (000)	25,297	23,773	24,256	23,780
Diluted earnings per share attributable to Stewart	1.44		0.81		1.66		0.53		Diluted earnings per share attributable to Stewart	2.21	2.78	3.93	3.31



	June 30, 2020	December 31, 2019
	($000 omitted)
Investments in:
Debt securities	612,891	605,721
Equity securities	32,456	39,318
	645,347	645,039



	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Before-Tax Amount		Tax Expense (Benefit)		Net-of-Tax Amount		Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	21,159		4,444		16,715		6,800	1,429	5,371
Reclassification adjustment for realized gains and losses on investments	(27	)	(6	)	(21	)	63	13	50
	21,132		4,438		16,694		6,863	1,442	5,421
Foreign currency translation adjustments	5,174		980		4,194		3,378	903	2,475
Other comprehensive income	26,306		5,418		20,888		10,241	2,345	7,896



	Six Months Ended June 30, 2020						Six Months Ended June 30, 2019
	Before-Tax Amount		Tax Expense (Benefit)		Net-of-Tax Amount		Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	17,892		3,757		14,135		18,206	3,824	14,382
Reclassification adjustment for realized gains and losses on investments	(128	)	(27	)	(101	)	268	56	212
	17,764		3,730		14,034		18,474	3,880	14,594
Foreign currency translation adjustments	(8,485	)	(1,237	)	(7,248	)	8,926	1,863	7,063
Other comprehensive income	9,279		2,493		6,786		27,400	5,743	21,657



	For the Three Months Ended June 30,
	2020		2019		% Change

Operating revenues	495.6		458.7		8	%
Investment income	4.3		5.2		(17	)%
Net realized and unrealized gains (losses)	4.6		(0.2	)	2,178	%
Pretax income	54.8		39.0		40	%
Pretax margin	10.9	%	8.4	%



	Three Months Ended June 30,						Six Months Ended June 30,
	2020	2019	Change		% Change		2020	2019	Change		% Change
	($ in millions)						($ in millions)
Non-commercial
Domestic	162.7	148.9	13.8		9	%	295.6	256.2	39.4		15	%
International	20.9	22.4	(1.5	)	(7	)%	40.0	38.1	1.9		5	%
	183.6	171.3	12.3		7	%	335.6	294.3	41.3		14	%
Commercial:
Domestic	30.7	50.3	(19.6	)	(39	)%	72.0	84.0	(12.0	)	(14	)%
International	3.9	6.3	(2.4	)	(38	)%	8.9	10.8	(1.9	)	(18	)%
	34.6	56.6	(22.0	)	(39	)%	80.9	94.8	(13.9	)	(15	)%
Total direct title revenues	218.2	227.9	(9.7	)	(4	)%	416.5	389.1	27.4		7	%


	September 30, 2020	December 31, 2019
	($ in millions)
Known claims	61.4	67.8
IBNR	405.4	391.3
Total estimated title losses	466.8	459.1


Exhibit


~~Exhibit~~
3.1			-
~~3.1~~	-	Restated Certificate of Incorporation of the Registrant, dated April 28, 2016 (incorporated by reference in this report from Exhibit 3.1 of the Current Report on Form 8-K filed April 29, 2016)

3.2			-	Third Amended and Restated By-Laws of the Registrant, as of April 27, 2016 (incorporated by reference in this report from Exhibit 3.2 of the Current Report on Form 8-K filed April 28, 2016)

~~10.1~~10.1*			-	~~First Amendment to Amended~~Asset Purchase and ~~Restated Credit~~Sale Agreement, dated effective as of May 7, 2020, by and among the Registrant, the guarantors named therein, BBVA USA, f/k/a Compass Bank, N.A., as administrative agent for the lenders, and the Lenders party thereto (incorporated by reference in this report from Exhibit 10.1 of the Current Report on Form 8-K filed May 11, 2020)

~~10.2†~~	-	~~Amended and Restated Employment Agreement entered as of June 1, 2020~~ and effective ~~as of January~~September 1, 2020, by and between the Registrant and ~~David C. Hisey (incorporated by reference in this report from Exhibit 10.1~~Unified Title Company, LLC, Unified Title Company of ~~the Current Report on Form 8-K filed June 4, 2020)~~Northern Colorado, LLC, Legacy Title Group, LLC, Empire West Title Agency, LLC, Western Title Company, LLC, Colorado Escrow and Title Services, LLC, Empire Title of Colorado Springs, LLC, Western Exchange Services, LLC, El Paso Title Plant, LLC, and ET Production Services, LLC

~~10.3†~~	-	Amended and Restated Employment Agreement entered as of June 1, 2020 and effective as of January 1, 2020, by and between the Registrant and Steven M. Lessack (incorporated by reference in this report from Exhibit 10.2 of the Current Report on Form 8-K filed June 4, 2020)



* Filed herewith
† Management contract or compensatory plan


						Stewart Information Services Corporation
						Registrant

By:						/s/ David C. Hisey
						David C. Hisey, Chief Financial Officer, Secretary and Treasurer