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

    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number 001-02658
 STEWART INFORMATION SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1677330
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1360 Post Oak Blvd.,Suite 100 
Houston,Texas77056
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713) 625-8100
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1 par value per shareSTCNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerNon-accelerated filerEmerging growth company
Accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No
On AprilJuly 27, 2021, there were 26,811,242were 26,884,372 outstanding shares of the issuer's Common Stock.



FORM 10-Q QUARTERLY REPORT
QUARTER ENDED MARCH 31,JUNE 30, 2021
TABLE OF CONTENTS
 
ItemItem PageItem Page
PART I – FINANCIAL INFORMATIONPART I – FINANCIAL INFORMATION
1.1.1.
2.2.2.
3.3.3.
4.4.4.
PART II – OTHER INFORMATIONPART II – OTHER INFORMATION
1.1.1.
1A.1A.1A.
2.2.2.
5.5.5.
6.6.6.
As used in this report, “we,” “us,” “our,” "Registrant," the “Company” and “Stewart” mean Stewart Information Services Corporation and our subsidiaries, unless the context indicates otherwise.




















2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted, except per share) ($000 omitted, except per share)
RevenuesRevenuesRevenues
Title revenues:Title revenues:Title revenues:
Direct operationsDirect operations279,504 198,283 Direct operations353,502 218,214 633,007 416,496 
Agency operationsAgency operations345,932 242,030 Agency operations390,330 277,387 736,261 519,417 
Ancillary servicesAncillary services55,931 5,461 Ancillary services58,193 11,155 114,124 16,616 
Operating revenuesOperating revenues681,367 445,774 Operating revenues802,025 506,756 1,483,392 952,529 
Investment incomeInvestment income3,945 5,218 Investment income5,130 4,285 9,074 9,503 
Net realized and unrealized gains (losses)Net realized and unrealized gains (losses)3,274 (11,091)Net realized and unrealized gains (losses)11,654 5,064 14,929 (6,027)
688,586 439,901 818,809 516,105 1,507,395 956,005 
ExpensesExpensesExpenses
Amounts retained by agenciesAmounts retained by agencies283,935 199,366 Amounts retained by agencies322,020 228,720 605,955 428,086 
Employee costsEmployee costs169,397 135,652 Employee costs188,467 137,528 357,864 273,180 
Other operating expensesOther operating expenses125,482 71,858 Other operating expenses137,796 74,613 263,279 146,473 
Title losses and related claimsTitle losses and related claims28,773 18,632 Title losses and related claims33,569 21,541 62,342 40,172 
Depreciation and amortizationDepreciation and amortization6,430 4,231 Depreciation and amortization6,819 4,061 13,249 8,292 
InterestInterest567 892 Interest682 622 1,248 1,513 
614,584 430,631 689,353 467,085 1,303,937 897,716 
Income before taxes and noncontrolling interestsIncome before taxes and noncontrolling interests74,002 9,270 Income before taxes and noncontrolling interests129,456 49,020 203,458 58,289 
Income tax expenseIncome tax expense(16,880)(1,896)Income tax expense(30,616)(11,340)(47,496)(13,235)
Net incomeNet income57,122 7,374 Net income98,840 37,680 155,962 45,054 
Less net income attributable to noncontrolling interestsLess net income attributable to noncontrolling interests2,886 2,197 Less net income attributable to noncontrolling interests4,021 3,534 6,907 5,731 
Net income attributable to StewartNet income attributable to Stewart54,236 5,177 Net income attributable to Stewart94,819 34,146 149,055 39,323 
Net incomeNet income57,122 7,374 Net income98,840 37,680 155,962 45,054 
Other comprehensive income (loss), net of taxes:Other comprehensive income (loss), net of taxes:Other comprehensive income (loss), net of taxes:
Foreign currency translation adjustmentsForeign currency translation adjustments1,867 (11,442)Foreign currency translation adjustments1,379 4,194 3,246 (7,248)
Change in net unrealized gains and losses on investmentsChange in net unrealized gains and losses on investments(9,156)(2,580)Change in net unrealized gains and losses on investments1,009 16,715 (8,147)14,135 
Reclassification adjustment for realized gains and losses on investmentsReclassification adjustment for realized gains and losses on investments(145)(80)Reclassification adjustment for realized gains and losses on investments(418)(21)(563)(101)
Other comprehensive loss, net of taxes:(7,434)(14,102)
Comprehensive income (loss)49,688 (6,728)
Other comprehensive income (loss), net of taxes:Other comprehensive income (loss), net of taxes:1,970 20,888 (5,464)6,786 
Comprehensive incomeComprehensive income100,810 58,568 150,498 51,840 
Less net income attributable to noncontrolling interestsLess net income attributable to noncontrolling interests2,886 2,197 Less net income attributable to noncontrolling interests4,021 3,534 6,907 5,731 
Comprehensive income (loss) attributable to Stewart46,802 (8,925)
Comprehensive income attributable to StewartComprehensive income attributable to Stewart96,789 55,034 143,591 46,109 
Basic average shares outstanding (000)Basic average shares outstanding (000)26,736 23,638 Basic average shares outstanding (000)26,798 23,656 26,767 23,647 
Basic earnings per share attributable to StewartBasic earnings per share attributable to Stewart2.03 0.22 Basic earnings per share attributable to Stewart3.54 1.44 5.57 1.66 
Diluted average shares outstanding (000)Diluted average shares outstanding (000)26,984 23,749 Diluted average shares outstanding (000)27,123 23,756 27,038 23,757 
Diluted earnings per share attributable to StewartDiluted earnings per share attributable to Stewart2.01 0.22 Diluted earnings per share attributable to Stewart3.50 1.44 5.51 1.66 
See notes to condensed consolidated financial statements.
3


CONDENSED CONSOLIDATED BALANCE SHEETS
As of 
 March 31, 2021 (Unaudited)
As of 
 December 31, 2020
As of 
 June 30, 2021 (Unaudited)
As of 
 December 31, 2020
($000 omitted) ($000 omitted)
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents412,763 432,683 Cash and cash equivalents400,542 432,683 
Short-term investmentsShort-term investments17,855 20,678 Short-term investments17,628 20,678 
Investments in debt and equity securities, at fair valueInvestments in debt and equity securities, at fair value682,799 684,387 Investments in debt and equity securities, at fair value711,398 684,387 
Receivables:Receivables:Receivables:
Premiums from agenciesPremiums from agencies37,713 34,507 Premiums from agencies46,449 34,507 
Trade and otherTrade and other63,106 56,054 Trade and other72,061 56,054 
Income taxesIncome taxes172 501 Income taxes2,034 501 
NotesNotes1,531 1,557 Notes1,461 1,557 
Allowance for uncollectible amountsAllowance for uncollectible amounts(5,393)(4,807)Allowance for uncollectible amounts(5,168)(4,807)
97,129 87,812 116,837 87,812 
Property and equipment:Property and equipment:Property and equipment:
LandLand2,964 2,964 Land2,964 2,964 
BuildingsBuildings22,617 22,598 Buildings16,645 22,598 
Furniture and equipmentFurniture and equipment172,874 168,147 Furniture and equipment181,690 168,147 
Accumulated depreciationAccumulated depreciation(144,723)(142,038)Accumulated depreciation(146,711)(142,038)
53,732 51,671 54,588 51,671 
Operating lease assetsOperating lease assets110,586 106,479 Operating lease assets112,351 106,479 
Title plants, at costTitle plants, at cost73,113 72,863 Title plants, at cost73,113 72,863 
Investments on equity method basisInvestments on equity method basis20,537 6,765 Investments on equity method basis22,051 6,765 
GoodwillGoodwill480,159 431,477 Goodwill549,991 431,477 
Intangible assets, net of amortizationIntangible assets, net of amortization38,912 37,382 Intangible assets, net of amortization36,798 37,382 
Deferred tax assetsDeferred tax assets4,359 4,330 Deferred tax assets4,330 4,330 
Other assetsOther assets50,862 42,048 Other assets68,707 42,048 
2,042,806 1,978,575 2,168,334 1,978,575 
LiabilitiesLiabilitiesLiabilities
Notes payableNotes payable125,572 101,773 Notes payable127,662 101,773 
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities212,774 225,180 Accounts payable and accrued liabilities229,054 225,180 
Operating lease liabilitiesOperating lease liabilities123,121 119,089 Operating lease liabilities124,038 119,089 
Estimated title lossesEstimated title losses509,541 496,275 Estimated title losses524,983 496,275 
Deferred tax liabilitiesDeferred tax liabilities23,900 23,852 Deferred tax liabilities26,524 23,852 
994,908 966,169 1,032,261 966,169 
Contingent liabilities and commitmentsContingent liabilities and commitments00Contingent liabilities and commitments00
Stockholders’ equityStockholders’ equityStockholders’ equity
Common Stock ($1 par value) and additional paid-in capitalCommon Stock ($1 par value) and additional paid-in capital300,978 301,937 Common Stock ($1 par value) and additional paid-in capital301,251 301,937 
Retained earningsRetained earnings733,973 688,819 Retained earnings819,834 688,819 
Accumulated other comprehensive income (loss):Accumulated other comprehensive income (loss):Accumulated other comprehensive income (loss):
Foreign currency translation adjustmentsForeign currency translation adjustments(6,371)(8,238)Foreign currency translation adjustments(4,992)(8,238)
Net unrealized gains on debt securities investmentsNet unrealized gains on debt securities investments15,959 25,260 Net unrealized gains on debt securities investments16,550 25,260 
Treasury stock – 352,161 common shares, at costTreasury 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 StewartStockholders’ equity attributable to Stewart1,041,873 1,005,112 Stockholders’ equity attributable to Stewart1,129,977 1,005,112 
Noncontrolling interestsNoncontrolling interests6,025 7,294 Noncontrolling interests6,096 7,294 
Total stockholders’ equity (26,806,025 and 26,728,242 shares outstanding)1,047,898 1,012,406 
Total stockholders’ equity (26,825,233 and 26,728,242 shares outstanding)Total stockholders’ equity (26,825,233 and 26,728,242 shares outstanding)1,136,073 1,012,406 
2,042,806 1,978,575 2,168,334 1,978,575 
See notes to condensed consolidated financial statements.
4


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended 
 March 31,
Six Months Ended 
 June 30,
20212020 20212020
($000 omitted) ($000 omitted)
Reconciliation of net income to cash provided by operating activities:Reconciliation of net income to cash provided by operating activities:Reconciliation of net income to cash provided by operating activities:
Net incomeNet income57,122 7,374 Net income155,962 45,054 
Add (deduct):Add (deduct):Add (deduct):
Depreciation and amortizationDepreciation and amortization6,430 4,231 Depreciation and amortization13,249 8,292 
Provision for bad debtProvision for bad debt708 154 Provision for bad debt846 106 
Net realized and unrealized (gains) lossesNet realized and unrealized (gains) losses(3,274)11,091 Net realized and unrealized (gains) losses(14,929)6,027 
Amortization of net premium on debt securities investmentsAmortization of net premium on debt securities investments938 1,144 Amortization of net premium on debt securities investments1,904 2,253 
Payments for title losses less than (in excess of) provisions12,234 (2,809)
Payments for title losses less than provisionsPayments for title losses less than provisions26,222 1,236 
Adjustments for insurance recoveries of title lossesAdjustments for insurance recoveries of title losses(205)173 Adjustments for insurance recoveries of title losses228 
(Increase) decrease in receivables – net(Increase) decrease in receivables – net(3,513)11,542 (Increase) decrease in receivables – net(22,366)8,792 
Increase in other assets – netIncrease in other assets – net(7,869)(3,813)Increase in other assets – net(3,327)(3,743)
Decrease in accounts payable and other liabilities – netDecrease in accounts payable and other liabilities – net(20,116)(43,165)Decrease in accounts payable and other liabilities – net(15,390)(22,817)
Change in net deferred income taxesChange in net deferred income taxes2,007 1,495 Change in net deferred income taxes4,122 2,277 
Net income from equity method investmentsNet income from equity method investments(924)(645)Net income from equity method investments(3,412)(1,356)
Dividends received from equity method investmentsDividends received from equity method investments764 1,235 Dividends received from equity method investments1,739 1,549 
Stock-based compensation expenseStock-based compensation expense3,174 887 Stock-based compensation expense5,879 2,449 
Other – netOther – net(34)(254)Other – net(47)(237)
Cash provided (used) by operating activities47,442 (11,360)
Cash provided by operating activitiesCash provided by operating activities150,452 50,110 
Investing activities:Investing activities:Investing activities:
Proceeds from sales of investments in securitiesProceeds from sales of investments in securities3,051 11,796 Proceeds from sales of investments in securities14,744 15,499 
Proceeds from matured investments in debt securitiesProceeds from matured investments in debt securities42,836 18,814 Proceeds from matured investments in debt securities51,034 33,096 
Purchases of investments in securitiesPurchases of investments in securities(47,881)(30,703)Purchases of investments in securities(89,198)(50,856)
Net sales (purchases) of short-term investments2,648 2,982 
Purchases of property and equipment, and real estate – net(5,721)(4,781)
Net sales of short-term investmentsNet sales of short-term investments2,747 2,763 
Purchases of property and equipment, and real estatePurchases of property and equipment, and real estate(16,430)(6,796)
Proceeds from sale of buildingsProceeds from sale of buildings10,583 
Cash paid for acquisition of businessesCash paid for acquisition of businesses(52,575)(1,449)Cash paid for acquisition of businesses(131,906)(33,417)
Cash paid for acquisition of equity method investmentCash paid for acquisition of equity method investment(16,080)Cash paid for acquisition of equity method investment(16,080)
Other – netOther – net131 38 Other – net855 1,278 
Cash used by investing activitiesCash used by investing activities(73,591)(3,303)Cash used by investing activities(173,651)(38,433)
Financing activities:Financing activities:Financing activities:
Proceeds from notes payableProceeds from notes payable178,975 204 Proceeds from notes payable181,755 404 
Payments on notes payablePayments on notes payable(154,910)(8,223)Payments on notes payable(157,662)(9,334)
Distributions to noncontrolling interestsDistributions to noncontrolling interests(3,844)(3,326)Distributions to noncontrolling interests(7,253)(5,957)
Repurchases of Common StockRepurchases of Common Stock(1,935)(393)Repurchases of Common Stock(2,002)(468)
Proceeds from stock option exercisesProceeds from stock option exercises61 Proceeds from stock option exercises181 
Cash dividends paidCash dividends paid(8,840)(7,099)Cash dividends paid(17,688)(14,198)
Purchase of remaining interest in consolidated subsidiary(2,570)
Payment of contingent consideration related to an acquisitionPayment of contingent consideration related to an acquisition(75)
Purchase of remaining interest in consolidated subsidiariesPurchase of remaining interest in consolidated subsidiaries(5,616)
Other - netOther - net(777)Other - net(777)
Cash provided (used) by financing activities6,160 (18,837)
Cash used by financing activitiesCash used by financing activities(9,137)(29,553)
Effects of changes in foreign currency exchange ratesEffects of changes in foreign currency exchange rates69 (3,510)Effects of changes in foreign currency exchange rates195 (1,927)
Change in cash and cash equivalentsChange in cash and cash equivalents(19,920)(37,010)Change in cash and cash equivalents(32,141)(19,803)
Cash and cash equivalents at beginning of periodCash and cash equivalents at beginning of period432,683 330,609 Cash and cash equivalents at beginning of period432,683 330,609 
Cash and cash equivalents at end of periodCash and cash equivalents at end of period412,763 293,599 Cash and cash equivalents at end of period400,542 310,806 
See notes to condensed consolidated financial statements.
5


CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common StockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockNoncontrolling interestsTotalCommon StockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockNoncontrolling interestsTotal
($000 omitted)($000 omitted)
Three Months Ended March 31, 2021
Six Months Ended June 30, 2021Six Months Ended June 30, 2021
Balance at December 31, 2020Balance at December 31, 202027,080 274,857 688,819 17,022 (2,666)7,294 1,012,406 Balance at December 31, 202027,080 274,857 688,819 17,022 (2,666)7,294 1,012,406 
Net income attributable to StewartNet income attributable to Stewart— — 54,236 — — — 54,236 Net income attributable to Stewart— — 149,055 — — — 149,055 
Dividends on Common Stock ($0.33 per share)— — (9,082)— — — (9,082)
Dividends on Common Stock ($0.66 per share)Dividends on Common Stock ($0.66 per share)— — (18,040)— — — (18,040)
Stock-based compensationStock-based compensation113 3,061 — — — — 3,174 Stock-based compensation131 5,748 — — — — 5,879 
Stock repurchasesStock repurchases(37)(1,898)— — — — (1,935)Stock repurchases(39)(1,963)— — — — (2,002)
Stock option exercisesStock option exercises59 — — — — 61 Stock option exercises176 — — — — 181 
Purchase of remaining interest in consolidated subsidiary— (2,259)— — — (311)(2,570)
Purchase of remaining interest in consolidated subsidiariesPurchase of remaining interest in consolidated subsidiaries— (4,744)— — — (872)(5,616)
Change in net unrealized gains and losses on investments, net of taxesChange in net unrealized gains and losses on investments, net of taxes— — — (9,156)— — (9,156)Change in net unrealized gains and losses on investments, net of taxes— — — (8,147)— — (8,147)
Reclassification adjustment for realized gains and losses on investments, net of taxesReclassification adjustment for realized gains and losses on investments, net of taxes— — — (145)— — (145)Reclassification adjustment for realized gains and losses on investments, net of taxes— — — (563)— — (563)
Foreign currency translation adjustments, net of taxesForeign currency translation adjustments, net of taxes— — — 1,867 — — 1,867 Foreign currency translation adjustments, net of taxes— — — 3,246 — — 3,246 
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests— — — — — 2,886 2,886 Net income attributable to noncontrolling interests— — — — — 6,907 6,907 
Distributions to noncontrolling interestsDistributions to noncontrolling interests— — — — — (3,844)(3,844)Distributions to noncontrolling interests— — — — — (7,253)(7,253)
Net effect of other changes in ownershipNet effect of other changes in ownership— — — — — 20 20 
Balance at June 30, 2021Balance at June 30, 202127,177 274,074 819,834 11,558 (2,666)6,096 1,136,073 
Balance at March 31, 202127,158 273,820 733,973 9,588 (2,666)6,025 1,047,898 
Three Months Ended March 31, 2020
Six Months Ended June 30, 2020Six Months Ended June 30, 2020
Balance at December 31, 2019Balance at December 31, 201924,062 164,217 564,392 (2,699)(2,666)6,453 753,759 Balance at December 31, 201924,062 164,217 564,392 (2,699)(2,666)6,453 753,759 
Net income attributable to StewartNet income attributable to Stewart— — 5,177 — — — 5,177 Net income attributable to Stewart— — 39,323 — — — 39,323 
Dividends on Common Stock ($0.30 per share)— — (7,124)— — — (7,124)
Dividends on Common Stock ($0.60 per share)Dividends on Common Stock ($0.60 per share)— — (14,291)— — — (14,291)
Stock-based compensationStock-based compensation(20)907 — — — — 887 Stock-based compensation2,447 — — — — 2,449 
Stock repurchasesStock repurchases(10)(383)— — — — (393)Stock repurchases(12)(456)— — — — (468)
Change in net unrealized gains and losses on investments, net of taxesChange in net unrealized gains and losses on investments, net of taxes— — — (2,580)— — (2,580)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, net of taxesReclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — (80)— — (80)Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — (101)— — (101)
Foreign currency translation adjustments, net of taxesForeign currency translation adjustments, net of taxes— — — (11,442)— — (11,442)Foreign currency translation adjustments, net of taxes— — — (7,248)— — (7,248)
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests— — — — — 2,197 2,197 Net income attributable to noncontrolling interests— — — — — 5,731 5,731 
Distributions to noncontrolling interestsDistributions to noncontrolling interests— — — — — (3,326)(3,326)Distributions to noncontrolling interests— — — — — (5,957)(5,957)
Balance at March 31, 202024,032 164,741 562,445 (16,801)(2,666)5,324 737,075 
Balance at June 30, 2020Balance at June 30, 202024,052 166,208 589,424 4,087 (2,666)6,227 787,332 
See notes to condensed consolidated financial statements.

6



CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)

Common StockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Treasury stockNoncontrolling interestsTotal
($000 omitted)
Three Months Ended June 30, 2021
Balances at March 31, 202127,158 273,820 733,973 9,588 (2,666)6,025 1,047,898 
Net income attributable to Stewart— — 94,819 — — — 94,819 
Dividends on Common Stock ($0.33 per share)— — (8,958)— — — (8,958)
Stock-based compensation18 2,687 — — — — 2,705 
Stock repurchases(2)(65)— — — — (67)
Stock option exercises117 — — — — 120 
Purchase of remaining interest in consolidated subsidiaries— (2,485)— — — (561)(3,046)
Change in net unrealized gains and losses on investments, net of taxes— — — 1,009 — — 1,009 
Reclassification adjustment for realized gains and losses on investments, net of taxes— — — (418)— — (418)
Foreign currency translation adjustments, net of taxes— — — 1,379 — — 1,379 
Net income attributable to noncontrolling interests— — — — — 4,021 4,021 
Distributions to noncontrolling interests— — — — — (3,409)(3,409)
Net effect of other changes in ownership— — — — — 20 20 
Balance at June 30, 202127,177 274,074 819,834 11,558 (2,666)6,096 1,136,073 
Three Months Ended June 30, 2020
Balances at March 31, 202024,032 164,741 562,445 (16,801)(2,666)5,324 737,075 
Net income attributable to Stewart— — 34,146 — — — 34,146 
Dividends on Common Stock ($0.30 per share)— — (7,167)— — — (7,167)
Stock-based compensation22 1,540 — — — — 1,562 
Stock repurchases(2)(73)— — — — (75)
Change in net unrealized gains and losses on investments, net of taxes— — — 16,715 — — 16,715 
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes— — — (21)— — (21)
Foreign currency translation adjustments, net of taxes— — — 4,194 — — 4,194 
Net income attributable to noncontrolling interests— — — — — 3,534 3,534 
Distributions to noncontrolling interests— — — — — (2,631)(2,631)
Balance at June 30, 202024,052 166,208 589,424 4,087 (2,666)6,227 787,332 
See notes to condensed consolidated financial statements.

7


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

Interim financial statements. The financial information contained in this report for the three and six months ended March 31,June 30, 2021 and 2020, and as of March 31,June 30, 2021, 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, 2020 filed with the Securities and Exchange Commission on March 1, 2021 (2020 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 $491.3$517.8 million and $496.6 million at March 31,June 30, 2021 and December 31, 2020, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $25.6$16.6 million and $20.0 million at March 31,June 30, 2021 and December 31, 2020, 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 to line of credit agreement. On March 23, 2021, in relation to its line of credit facility (as disclosed in Note 10 of the 2020 Form 10-K), the Company entered into a second amendment and restated credit agreement (Second Amendment), which increased the available unsecured line of credit commitment from $200 million to $350 million, and extended the maturity of the line of credit to March 2026. Other changes that the Second Amendment made effective were: the addition of new lender banks to the lenders group, the increase of the restricted payment limitation from $40 million to $100 million, the increase of the additional unsecured indebtedness provision from $100 million to $250 million, the removal of the annual capital expenditures limit, and the new definitions of EBITDA and fixed charge coverage ratio. The additional $50 million that the Company can request in addition to the line of credit commitment was not changed.
7


NOTE 2

Revenues. The Company's operating revenues, summarized by type, are as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted)($000 omitted)
Title insurance premiums:Title insurance premiums:Title insurance premiums:
DirectDirect194,993 138,283 Direct243,638 149,745 438,631 288,028 
AgencyAgency345,932 242,030 Agency390,330 277,387 736,261 519,417 
Escrow feesEscrow fees56,649 33,086 Escrow fees63,534 41,433 120,183 74,519 
Appraisal management, abstract and other ancillary servicesAppraisal management, abstract and other ancillary services68,620 16,077 Appraisal management, abstract and other ancillary services80,712 22,829 149,332 38,906 
Other revenuesOther revenues15,173 16,298 Other revenues23,811 15,362 38,985 31,659 
681,367 445,774 802,025 506,756 1,483,392 952,529 


8


NOTE 3

Investments in debt and equity securities. The total fair values of the Company's investments in debt and equity securities are as follows:
March 31, 2021December 31, 2020 June 30, 2021December 31, 2020
($000 omitted)($000 omitted)
Investments in:Investments in:Investments in:
Debt securitiesDebt securities615,445 631,386 Debt securities635,162 631,386 
Equity securitiesEquity securities67,354 53,001 Equity securities76,236 53,001 
682,799 684,387 711,398 684,387 

As of March 31,June 30, 2021 and December 31, 2020, the net unrealized investment gains relating to investments in equity securities held were $9.9were $13.6 million and $4.4 million, respectively (refer to Note 5).

The amortized costs and fair values of investments in debt securities are as follows:
March 31, 2021December 31, 2020 June 30, 2021December 31, 2020
Amortized
costs
Fair
values
Amortized
costs
Fair
values
Amortized
costs
Fair
values
Amortized
costs
Fair
values
($000 omitted) ($000 omitted)
MunicipalMunicipal42,015 44,089 45,138 47,603 Municipal40,466 42,462 45,138 47,603 
CorporateCorporate276,870 289,159 285,962 305,450 Corporate291,413 305,229 285,962 305,450 
ForeignForeign269,792 275,585 261,748 271,711 Foreign275,764 280,861 261,748 271,711 
U.S. Treasury BondsU.S. Treasury Bonds6,567 6,612 6,564 6,622 U.S. Treasury Bonds6,570 6,610 6,564 6,622 
595,244 615,445 599,412 631,386 614,213 635,162 599,412 631,386 

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

8


Gross unrealized gains and losses on investments in debt securities are as follows:
March 31, 2021December 31, 2020 June 30, 2021December 31, 2020
GainsLossesGainsLosses GainsLossesGainsLosses
($000 omitted) ($000 omitted)
MunicipalMunicipal2,077 2,465 Municipal1,997 2,465 
CorporateCorporate13,124 835 19,594 106 Corporate14,320 504 19,594 106 
ForeignForeign6,572 779 10,024 61 Foreign5,767 670 10,024 61 
U.S. Treasury BondsU.S. Treasury Bonds70 25 82 24 U.S. Treasury Bonds65 25 82 24 
21,843 1,642 32,165 191 22,149 1,200 32,165 191 

Debt securities as of March 31,June 30, 2021 mature, according to their contractual terms, as follows (actual maturities may differ due to call or prepayment rights):
Amortized
costs
Fair
values
Amortized
costs
Fair
values
($000 omitted) ($000 omitted)
In one year or lessIn one year or less58,344 59,145 In one year or less59,019 59,695 
After one year through five yearsAfter one year through five years311,487 321,937 After one year through five years375,721 385,551 
After five years through ten yearsAfter five years through ten years194,553 201,439 After five years through ten years148,716 156,299 
After ten yearsAfter ten years30,860 32,924 After ten years30,757 33,617 
595,244 615,445 614,213 635,162 

9


Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31,June 30, 2021, were:
Less than 12 monthsMore than 12 monthsTotal Less than 12 monthsMore than 12 monthsTotal
LossesFair valuesLossesFair valuesLossesFair values LossesFair valuesLossesFair valuesLossesFair values
($000 omitted) ($000 omitted)
MunicipalMunicipal130 130 Municipal96 96 
CorporateCorporate835 27,208 835 27,208 Corporate504 31,489 504 31,489 
ForeignForeign756 65,568 23 254 779 65,822 Foreign645 74,153 25 254 670 74,407 
U.S. Treasury BondsU.S. Treasury Bonds109 24 1,022 25 1,131 U.S. Treasury Bonds109 24 1,022 25 1,131 
1,595 93,015 47 1,276 1,642 94,291 1,151 105,847 49 1,276 1,200 107,123 

The number of specific debt investment holdings held in an unrealized loss position as of March 31,June 30, 2021 was 47.51. Of these securities, 3 were in unrealized loss positions for more than 12 months. Since the Company does not intend to sell and will more likely than not maintain each investment security until its maturity or anticipated recovery in value, and no significant credit risk is deemed to exist, these investments are not considered as other-than-temporarily impaired.credit-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.

9


Gross unrealized losses on investments in debt securities and the fair values of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020, were:
 Less than 12 monthsMore than 12 monthsTotal
 LossesFair valuesLossesFair valuesLossesFair values
 ($000 omitted)
Municipal
Corporate106 13,518 106 13,518 
Foreign40 2,912 21 254 61 3,166 
U.S. Treasury Bonds24 1,022 24 1,022 
146 16,430 45 1,276 191 17,706 


NOTE 4

Fair value measurements. Fair value is defined 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. Under U.S. GAAP, there is 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.

10


As of March 31,June 30, 2021, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal44,089 44,089 
Corporate289,159 289,159 
Foreign275,585 275,585 
U.S. Treasury Bonds6,612 6,612 
Equity securities67,354 67,354 
67,354 615,445 682,799 
10


Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal42,462 42,462 
Corporate305,229 305,229 
Foreign280,861 280,861 
U.S. Treasury Bonds6,610 6,610 
Equity securities76,236 76,236 
76,236 635,162 711,398 

As of December 31, 2020, financial instruments measured at fair value on a recurring basis are summarized below:
Level 1Level 2
Fair value
measurements
 ($000 omitted)
Investments in securities:
Debt securities:
Municipal47,603 47,603 
Corporate305,450 305,450 
Foreign271,711 271,711 
U.S. Treasury Bonds6,622 6,622 
Equity securities53,001 53,001 
53,001 631,386 684,387 

As of March 31,June 30, 2021 and December 31, 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.


NOTE 5

Net realized and unrealized gains (losses) gains.. Realized and unrealized gains and losses are detailed as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted) ($000 omitted)
Realized gainsRealized gains170 153 Realized gains7,909 1,355 8,080 1,508 
Realized lossesRealized losses(2,469)(690)Realized losses(657)(2,469)(1,347)
Net unrealized investment (losses) gains recognized on equity securities still held at end of period5,573 (10,554)
Net unrealized investment gains (losses) recognized on equity securities still held at end of periodNet unrealized investment gains (losses) recognized on equity securities still held at end of period3,745 4,366 9,318 (6,188)
3,274 (11,091)11,654 5,064 14,929 (6,027)

Net
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Realized gains and losses during the second quarter 2021 included $7.3 million of gains on sales of buildings, while realized gains and losses during the second quarter 2020 included $1.1 million of gains from settlements of equity investments with no previously readily determinable fair values. Additionally, realized gains and losses for the first quartersix months of 2021 included a $2.5 million loss related to a disposal of an equity method investment.

Investment gains and losses recognized related to investments in equity securities are as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
202120202021202020212020
($000 omitted)($000 omitted)
Net investment gains (losses) recognized on equity securities during the periodNet investment gains (losses) recognized on equity securities during the period5,582 (11,061)Net investment gains (losses) recognized on equity securities during the period3,780 3,966 9,361 (7,095)
Less: Net realized gains (losses) on equity securities sold during the periodLess: Net realized gains (losses) on equity securities sold during the period(507)Less: Net realized gains (losses) on equity securities sold during the period35 (400)43 (907)
Net unrealized investment gains (losses) recognized on equity securities still held at end of periodNet unrealized investment gains (losses) recognized on equity securities still held at end of period5,573 (10,554)Net unrealized investment gains (losses) recognized on equity securities still held at end of period3,745 4,366 9,318 (6,188)

11


Proceeds from sales of investments in securities are as follows: 
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted) ($000 omitted)
Proceeds from sales of debt securitiesProceeds from sales of debt securities115 11,503 Proceeds from sales of debt securities11,634 3,270 14,571 14,773 
Proceeds from sales of equity securitiesProceeds from sales of equity securities2,936 293 Proceeds from sales of equity securities59 433 173 726 
Total proceeds from sales of investments in securitiesTotal proceeds from sales of investments in securities3,051 11,796 Total proceeds from sales of investments in securities11,693 3,703 14,744 15,499 


NOTE 6

Goodwill and other intangibles.Goodwill. The summary of changes in goodwill is as follows.
TitleAncillary Services and CorporateConsolidated TotalTitleAncillary Services and CorporateConsolidated Total
($000 omitted)($000 omitted)
Balances at December 31, 2020Balances at December 31, 2020361,433 70,044 431,477 Balances at December 31, 2020361,433 70,044 431,477 
AcquisitionsAcquisitions32,619 20,202 52,821 Acquisitions102,546 20,202 122,748 
Purchase accounting adjustmentsPurchase accounting adjustments(4,397)258 (4,139)Purchase accounting adjustments(4,492)258 (4,234)
Balances at March 31, 2021389,655 90,504 480,159 
Balances at June 30, 2021Balances at June 30, 2021459,487 90,504 549,991 

During the first quartersix months ended June 30, 2021, goodwill acquiredrecorded in the title segment was related to an acquisitionacquisitions of a title search and support services provider, while goodwill acquireda digital customer engagement platform provider, and a number of title offices operating in the states of Arizona, New Mexico and Texas. Goodwill recorded in the ancillary services and corporate segment was related to an acquisition of an online notarization and closing solutions provider. The goodwill balances for boththe 2021 acquisitions were based on the Company's preliminary purchase accounting, which is expected to be finalized inwithin a year after the second half of 2021.acquisitions closed.
12



NOTE 7

Estimated title losses. A summary of estimated title losses for the threesix months ended March 31June 30 is as follows:
2021202020212020
($000 omitted) ($000 omitted)
Balances at January 1Balances at January 1496,275 459,053 Balances at January 1496,275 459,053 
Provisions:Provisions:Provisions:
Current yearCurrent year28,407 18,521 Current year61,147 39,811 
Previous policy yearsPrevious policy years366 111 Previous policy years1,195 361 
Total provisionsTotal provisions28,773 18,632 Total provisions62,342 40,172 
Payments, net of recoveries:Payments, net of recoveries:Payments, net of recoveries:
Current yearCurrent year(3,606)(2,214)Current year(7,682)(5,420)
Previous policy yearsPrevious policy years(12,933)(19,227)Previous policy years(28,438)(33,516)
Total payments, net of recoveriesTotal payments, net of recoveries(16,539)(21,441)Total payments, net of recoveries(36,120)(38,936)
Effects of changes in foreign currency exchange ratesEffects of changes in foreign currency exchange rates1,032 (8,662)Effects of changes in foreign currency exchange rates2,486 (4,264)
Balances at March 31509,541 447,582 
Balances at June 30Balances at June 30524,983 456,025 
Loss ratios as a percentage of title operating revenues:Loss ratios as a percentage of title operating revenues:Loss ratios as a percentage of title operating revenues:
Current year provisionsCurrent year provisions4.5 %4.2 %Current year provisions4.5 %4.3 %
Total provisionsTotal provisions4.6 %4.2 %Total provisions4.6 %4.3 %

12


Provisions in the first quartersix months of 2021 increased compared to the first quartersame period in 2020, primarily as a result of increased title revenues. Claim payments in the first quarter 2021 decreased compared to the same period in 2020, primarily due to lower payments on large and non-large claims relating to prior policy years;revenues, while the effect of changes in foreign currency exchange rates for the first quarterssix months of 2021 and 2020 were primarily influenced by the appreciation and depreciation, respectively, of the Canadian dollar against the U.S. dollar during those periods.


NOTE 8

Share-based payments. As part of its incentive compensation program for executives and senior management employees, the Company provides share-based awards, which include time-based restricted units, performance-based restricted stock units, and stock options. 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 and employee service requirement over a period of approximately three years. The stock options vest 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. Each vested stock option can be exercised to purchase a share of the Company's common stock at the strike price set by the Company at the grant date. The compensation expense associated with the share-based awards is calculated based on the fair value of the related award and recognized over the corresponding vesting period.

During the first quartersix months of 2021, the aggregate grant-date fair values of restricted stock unit and stock option awards, respectively, were $8.3$8.9 million (155,000(166,000 units with an average grant price per unit of $53.24)$53.71) and $1.3 million (139,000 options with an average grant price per option of $9.24 and exercise strike price of $53.24). During the first quartersix months of 2020, the aggregate grant-date fair values of restricted stock unit and stock option awards, respectively, were $2.4 million (60,000 units with an average grant price per unit of $39.76) and $3.4 million (650,000 options with an average grant price per option of $5.32 and exercise strike price of $39.76), respectively..


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NOTE 9

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 sharesunits and unitsshares 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.

13


The calculation of the basic and diluted EPS is as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted, except per share)($000 omitted, except per share)
Numerator:Numerator:Numerator:
Net income attributable to StewartNet income attributable to Stewart54,236 5,177 Net income attributable to Stewart94,819 34,146 149,055 39,322 
Denominator (000):Denominator (000):Denominator (000):
Basic average shares outstandingBasic average shares outstanding26,736 23,638 Basic average shares outstanding26,798 23,656 26,767 23,647 
Average number of dilutive shares relating to optionsAverage number of dilutive shares relating to options103 Average number of dilutive shares relating to options189 154 
Average number of dilutive shares relating to grants of restricted units and sharesAverage number of dilutive shares relating to grants of restricted units and shares145 111 Average number of dilutive shares relating to grants of restricted units and shares136 100 117 110 
Diluted average shares outstandingDiluted average shares outstanding26,984 23,749 Diluted average shares outstanding27,123 23,756 27,038 23,757 
Basic earnings per share attributable to StewartBasic earnings per share attributable to Stewart2.03 0.22 Basic earnings per share attributable to Stewart3.54 1.44 5.57 1.66 
Diluted earnings per share attributable to StewartDiluted earnings per share attributable to Stewart2.01 0.22 Diluted earnings per share attributable to Stewart3.50 1.44 5.51 1.66 


NOTE 10

Contingent liabilities and commitments. In the ordinary course of business, the Company guarantees the third-party indebtedness of certain of its consolidated subsidiaries. As of March 31,June 30, 2021, 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 March 31,June 30, 2021, the Company also had unused letters of credit aggregating $4.9 million related to workers’ compensation and other insurance. The Company does not expect to make any payments on these guarantees.


NOTE 11

Regulatory and legal developments. The Company is subject to claims and lawsuits arising in the ordinary course of its business, most of which involve disputed policy claims. In some of these lawsuits, the 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 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.
14



The Company is subject to non-ordinary course of business claims or lawsuits from time to time. To the extent the Company is currently the subject of these types of lawsuits, the Company has determined either that a loss is not reasonably possible or that the estimated loss or range of loss, if any, will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Additionally, the Company occasionally 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.

14


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

NOTE 12

Segment information. The Company reports 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.exchanges, and digital customer engagement platform services. The ancillary services and corporate segment includes appraisal management services, search and valuation services, and online notarization and closing solutions, which are the principal offerings of ancillary services, 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 income information related to these segments is as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted) ($000 omitted)
Title segment:Title segment:Title segment:
RevenuesRevenues632,585 434,440 Revenues753,119 504,436 1,385,704 938,875 
Depreciation and amortizationDepreciation and amortization4,314 3,821 Depreciation and amortization4,709 3,733 9,022 7,554 
Income before taxes and noncontrolling interestIncome before taxes and noncontrolling interest77,089 14,836 Income before taxes and noncontrolling interest125,671 54,795 202,761 69,629 
Ancillary services and corporate segment:Ancillary services and corporate segment:Ancillary services and corporate segment:
RevenuesRevenues56,001 5,461 Revenues65,690 11,669 121,691 17,130 
Depreciation and amortizationDepreciation and amortization2,116 410 Depreciation and amortization2,110 328 4,227 738 
Loss before taxes and noncontrolling interest(3,087)(5,566)
Income (loss) before taxesIncome (loss) before taxes3,785 (5,775)697 (11,340)
Consolidated Stewart:Consolidated Stewart:Consolidated Stewart:
RevenuesRevenues688,586 439,901 Revenues818,809 516,105 1,507,395 956,005 
Depreciation and amortizationDepreciation and amortization6,430 4,231 Depreciation and amortization6,819 4,061 13,249 8,292 
Income before taxes and noncontrolling interestIncome before taxes and noncontrolling interest74,002 9,270 Income before taxes and noncontrolling interest129,456 49,020 203,458 58,289 

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

15


Revenues generated in the United States and all international operations are as follows:
Three Months Ended 
 March 31,
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
20212020 2021202020212020
($000 omitted) ($000 omitted)
United StatesUnited States652,582 414,128 United States762,344 489,945 1,414,926 904,072 
InternationalInternational36,004 25,773 International56,465 26,160 92,469 51,933 
688,586 439,901 818,809 516,105 1,507,395 956,005 


15


NOTE 13
Other comprehensive loss.income (loss). Changes in the balances of each component of other comprehensive lossincome (loss) and the related tax effects are as follows:
Three Months Ended 
 March 31, 2021
Three Months Ended 
 March 31, 2020
Three Months Ended 
 June 30, 2021
Three Months Ended 
 June 30, 2020
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)($000 omitted)
Net unrealized gains and losses on investments:Net unrealized gains and losses on investments:Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investmentsChange in net unrealized gains and losses on investments(11,589)(2,433)(9,156)(3,267)(687)(2,580)Change in net unrealized gains and losses on investments1,277 268 1,009 21,159 4,444 16,715 
Reclassification adjustment for realized gains and losses on investmentsReclassification adjustment for realized gains and losses on investments(184)(39)(145)(101)(21)(80)Reclassification adjustment for realized gains and losses on investments(529)(111)(418)(27)(6)(21)
(11,773)(2,472)(9,301)(3,368)(708)(2,660)748 157 591 21,132 4,438 16,694 
Foreign currency translation adjustmentsForeign currency translation adjustments2,351 484 1,867 (13,659)(2,217)(11,442)Foreign currency translation adjustments1,760 381 1,379 5,174 980 4,194 
Other comprehensive loss(9,422)(1,988)(7,434)(17,027)(2,925)(14,102)
Other comprehensive incomeOther comprehensive income2,508 538 1,970 26,306 5,418 20,888 

Six Months Ended June 30, 2021Six Months Ended June 30, 2020
Before-Tax AmountTax Expense (Benefit)Net-of-Tax AmountBefore-Tax AmountTax Expense (Benefit)Net-of-Tax Amount
($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments(10,312)(2,165)(8,147)17,892 3,757 14,135 
Reclassification adjustment for realized gains and losses on investments(713)(150)(563)(128)(27)(101)
(11,025)(2,315)(8,710)17,764 3,730 14,034 
Foreign currency translation adjustments4,111 865 3,246 (8,485)(1,237)(7,248)
Other comprehensive income (loss)(6,914)(1,450)(5,464)9,279 2,493 6,786 


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

MANAGEMENT’S OVERVIEW

FirstSecond quarter 2021 overview. We reported net income attributable to Stewart for the first quarter 2021 of $54.2$94.8 million ($2.013.50 per diluted share), for the second quarter 2021, compared to net income attributable to Stewart of $5.2$34.1 million ($0.221.44 per diluted share) for the firstsecond quarter 2020. Excluding net realized and unrealized gains and losses and severance expenses described below, Stewart’s firstsecond quarter 2021 net income of $51.7$86.0 million ($1.923.17 per diluted share) increased $38.4$53.5 million, or 289%165%, from $13.3$32.5 million ($0.561.37 per diluted share) in the firstsecond quarter 2020. FirstSecond quarter 2021 pretax income before noncontrolling interests was $74.0$129.5 million compared to pretax income before noncontrolling interests of $9.3$49.0 million for the firstsecond quarter 2020.

FirstSecond quarter 2021 results included $3.3$11.7 million of pretax net realized and unrealized gains, primarily related towhich included $7.3 million of realized gains from sales of buildings in the ancillary services and corporate segment and $3.7 million of net unrealized gains on fair value changes of equity securities investments recorded in the title segment. FirstSecond quarter 2020 results included $11.1$5.1 million of pretax net realized and unrealized losses,gains, which included $10.6$4.4 million of net unrealized lossesgains on fair value changes of equity securities investments recorded in the title segment, and $2.8 million of severance expenses related to cost savings initiatives recorded within employee costs in the title segment.

Summary results of the title segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended March 31,
For the Three Months
Ended June 30,
20212020% Change 20212020% Change
Operating revenuesOperating revenues625.4 440.3 42 %Operating revenues743.8 495.6 50 %
Investment incomeInvestment income3.9 5.2 (24)%Investment income5.1 4.3 20 %
Net realized and unrealized gains (losses)3.2 (11.1)129 %
Net realized and unrealized gainsNet realized and unrealized gains4.2 4.6 (9)%
Pretax incomePretax income77.1 14.8 420 %Pretax income125.7 54.8 129 %
Pretax marginPretax margin12.2 %3.4 %Pretax margin16.7 %10.9 %

TitlePretax income for the title segment pretax income improvedincreased by $62.3$70.9 million, or 420%, while pretax margin increased 880improved 580 basis points to 12.2%16.7% in the firstsecond quarter 2021 compared to the prior year quarter. Title operating revenues grew $185.1increased $248.2 million, or 42%, as a result of improvements in direct title revenues of $81.2 million, or 41%, and gross independent agency revenues of $103.9grew $135.3 million, or 43%. Consistent62%, and $112.9 million, or 41%, respectively. In line with the increased title revenues, overall segment operating expenses in the second quarter 2021 increased $135.9$177.8 million, or 32%40%, in the first quarter 2021, withwhich included 41% and 37% higher agency retention expenses and combined title employee costs and other operating expenses, increasing 42% and 21%, respectively, fromcompared to the firstsecond quarter 2020. Average independent agency remittance rate improved to 17.9% in the firstsecond quarter 2021 comparedwas 17.5%, similar to 17.6% in the prior year quarter, while combined title employee costs and other operating expenses, as a percentage of title revenues, improved to 38.1%35.9% in the firstsecond quarter 2021 from 44.9%compared to 39.5% in the firstsecond quarter 2020.

Title loss expense increased $10.1$12.0 million, or 54%56%, primarily as a result of higher title revenues in the firstsecond quarter 2021 compared to the prior year quarter, primarily as a result of increased title revenues.quarter. As a percentage of title revenues, the title loss expense in the firstsecond quarter 2021 was 4.6%4.5% compared to 4.2%4.3% from the prior year quarter.

The segment’s investment income decreased $1.3increased $0.8 million, or 24%, primarily as a result ofdue to higher dividend income on cost-basis investments, which was partially offset by reduced interest income resulting from lower interest rates applicable to our short-term and securities investments during the firstsecond quarter 2021 compared to the first quarter 2020.last year’s quarter. Net realized and unrealized gains and losses for the firstsecond quarters 2021 and 2020 consistedwere primarily of netdriven by unrealized gains and losses related to fair value changes of equity securities investments, as mentioned above.



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Direct title revenues (refer to schedule in Results of Operations - Title Revenues section) increased in the first quarter 2021, primarily driven by the $92.9 million, or 61%, growth in non-commercial revenues resulting from increased transactions from both existing and recently-acquired title offices. Total residential purchase and refinancing closed orders in the first quarter 2021 increased 35% and 107%, respectively, compared to the prior year quarter. However, the non-commercial revenue increase was partially offset by lower commercial revenues in the first quarter 2021, resulting from lower commercial transaction size and volume compared to the first quarter 2020. Domestic commercial fee per file in the first quarter 2021 was approximately $8,700, compared to $11,400 from the first quarter 2020; while domestic residential fee per file was approximately $1,900, which is 5% lower than the prior year quarter’s average fee per file, primarily due to the higher mix of refinancing compared to purchase transactions in the first quarter 2021. Total international revenues increased $10.2 million, or 42%, primarily due to higher volumes in our Canadian operations.

Summary results of the ancillary services and corporate segment are as follows ($ in millions):
For the Three Months
Ended March 31,
For the Three Months
Ended June 30,
20212020% Change 20212020% Change
Operating revenuesOperating revenues55.9 5.5 924 %Operating revenues58.2 11.2 422 %
Pretax loss(3.1)(5.6)45 %
Net realized gainsNet realized gains7.5 0.5 1,359 %
Pretax income (loss)Pretax income (loss)3.8 (5.8)166 %

The segment’s operating revenues increased $50.5$47.0 million in the firstsecond quarter 2021, compared to the prior year quarter, primarily due to revenues generated by recent acquisitions.acquisitions, which were partially offset by lower revenues from our legacy valuation services business due to lower home equity volume. The ancillary services operations generated pretax income of $2.7$2.2 million (which included $1.7$1.6 million of purchased intangibles amortization) in the firstsecond quarter 2021, compared to a pretax loss of $0.5$0.8 million in the prior year quarter.second quarter 2020. Net realized gains during the second quarter 2021 were primarily driven by $7.3 million of realized gains resulting from sales of buildings within corporate operations. Net expenses attributable to parent company and corporate operations for the firstsecond quarters 2021 and 2020 were approximately $5.7$5.9 million and $5.1$5.5 million, respectively.

We continue to implement our strategy of improving operational performance through targeted growth, focused management, and broader technology and services offerings. We aim to gain scale in attractive direct markets and improve service and digital capabilities to provide a seamless customer experience. During the firstsecond quarter 2021, we acquired A.S.K. Services, Inc.,Cloudvirga, a provider of a digital customer engagement platform, and title searchcompanies Thomas Title & Escrow and support services provider, consistentPrima Title, LLC with our plan to strengthencombined operations in the states of Arizona, New Mexico and expand title production resources for our independent agency partners; while our acquisition of Signature Closers, LLC, an online notarization and closing solutions provider, further advances our digital strategy and vision of streamlining closings, while providing a best-in-class customer experience.Texas. We expect these acquisitions to further leverage our position in the evolving real estate closing experience and improve scale and synergies within our title and ancillary services businesses.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. We continue to operate under our business continuity plan that we deployed in March 2020 when the pandemic started. While the distribution of vaccines is ramping up and states and certain businesses have reopened, ourOur employees have not fully transitioned back to the workplace. We continue to takeworkplace and we are still implementing appropriate measures to protect the safety of all our employees and customers in carrying out our business operations which is generally considered(considered as essential business in the U.S. We are proactively taking advantage of) using digital tools and innovative solutions, in facilitating real estate transactions when possible during this challenging environment. Currently,possible. As various states have opened up and relaxed or removed restrictions on businesses and social gatherings, we are gathering information and insightformulating a plan of safe return to workplace to be announced at a later time. We are taking into account insights gathered from our associates, monitoring the evolving effects of the COVID-19 pandemic andrecommendations from managers, guidance from health and governmental bodies, and evaluatingdevelopments relating to the next phase of our return to workplace approach.COVID-19 pandemic.


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.

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Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the threesix months ended March 31,June 30, 2021, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the 2020 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, which are principally appraisal management services, online notarization and closing services, and search and valuation services.

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Factors affecting revenues. The principal factors that contribute to changes in operating revenues for our title and ancillary services and corporate segments include:
mortgage interest rates;
availability of mortgage loans;
number and average value of mortgage loan originations;
ability of potential purchasers to qualify for loans;
inventory of existing homes available for sale;
ratio of purchase transactions compared with refinance transactions;
ratio of closed orders to open orders;
home prices;
consumer confidence, including employment trends;
demand by buyers;
premium rates;
foreign currency exchange rates;
market share;
ability to attract and retain highly productive sales associates;
departure of revenue-attached employees;
independent agency remittance rates;
opening of new offices and acquisitions;
office closures;
number and value of commercial transactions, which typically yield higher premiums;
government or regulatory initiatives, including tax incentives and the implementation of the new integrated disclosure requirements;
acquisitions or divestitures of businesses;
volume of distressed property transactions;
seasonality and/or weather; and
outbreaks of diseases 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.


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RESULTS OF OPERATIONS

Comparisons of our results of operations for the three and six months ended March 31,June 30, 2021 with the three months ended March 31, 2020corresponding periods in the prior year 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.Bureau as of June 30, 2021. We also use information from our direct operations.

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Operating environment. Existing home sales (seasonally-adjusted basis) in MarchJune 2021 fell 4%improved 23% from FebruaryJune 2020 and also increased 1% from May 2021 marking twoafter four consecutive month of declines, according to NAR. The increased sales are primarily due to modestly improved supply in recent months of consecutive declines, but grew 12% compared to March 2020.resulting from more housing starts and existing homeowners listing their homes. According to NAR, consumers are facing much higher homes prices, rising mortgage rates, and falling affordability and inventory, which all contributedNAR's analysis, the current existing home sales continue to run at a pace above the lower existing homes sales in March 2021 versus earlier months.rate seen before the COVID-19 pandemic. On non-seasonally-adjusted basis, existing home sales in the firstsecond quarter 2021 improved 14%32% from the same quarter last year. year, while JuneMarch 2021 median and average home prices increased approximately 17%23% and 12%16%, respectively, compared to MarchJune 2020 prices, with MarchJune 2021 being the 109th112th consecutive month of year-over-year median home price increase. In regardrelation to new residential construction, U.S. housing starts in MarchJune 2021 improved 37%29% and 6% from MarchJune 2020 and 19% sequentially from FebruaryMay 2021, respectively, while newly issued building permits in MarchJune 2021 also improved 30% and 3%increased 23% from March 2020 and February 2021, respectively.a year ago, but decreased 5% sequentially from May 2021.

According to Fannie Mae and MBA (averaged), one-to-four family mortgage originations improved 77% to approximately $1.2 trillion in the first quarter 2021 from $658 billion in the first quarter 2020, primarily driven by a 115% increase in refinancing originations resulting from the current lower mortgage interest rate environment. Purchase originations increased 24% in the first quarter 2021 compared to the first quarter 2020 as the real estate market continues to recover from the effects of the COVID-19 pandemic.

Forduring the second quarter 2021 Fannie Maeimproved 11% to approximately $1.1 trillion compared to the second quarter 2020, as a result of a 35% increase in purchase originations, which was partially offset by 2% lower refinancing originations. Refinancing transactions, which significantly improved in 2020 as a result of lower mortgage interest rates due to the COVID-19 pandemic, are expected to normalize to pre-pandemic levels as interest rates gradually increase and MBA are forecasting thatlenders focus on purchase transactions. This trend is expected to result in 34% and 48% lower total mortgage originations in the third and fourth quarters of 2021, respectively, compared to same quarters in 2020.

Despite the current strong demand for housing, existing and new home sales will improve 43% and 28%, respectively, compared to last year's second quarter. Total mortgage originations for the secondthird quarter 2021 are expected to decline 3%5% and 7%, respectively, compared to the secondthird quarter 2020, primarily due to last year's surge in refinancing transactions resulting from lower interest rateslow inventories and expectationssoftening pace of lower refinancing transactions in 2021 as interest rates are beginningnew construction due to gradually increase. However, purchase lending transactions are predictedsupply constraints. The strong housing demand with a lack of supply is primarily contributing to improve 41%the rapid home price gains observed over the past year, which Fannie Mae forecasts to continue in the second quarter 2021 compared to last year's second quarter, partially offsetting the impact of reduced refinancing lending volumes. Compared to 2.95% in 2020, the average 30-year fixed mortgage interest rate is expected to increase to 3.35% in 2021.near term.

Title revenues. Direct title revenue information is presented below:
Three Months Ended March 31, Three Months Ended June 30,Six Months Ended June 30,
20212020 Change% Change 20212020 Change% Change20212020 Change% Change
($ in millions) ($ in millions)($ in millions)
Non-commercialNon-commercialNon-commercial
DomesticDomestic216.0 132.8 83.2 63 %Domestic239.0 162.7 76.3 47 %453.2 295.6 157.6 53 %
InternationalInternational28.8 19.1 9.7 51 %International51.4 20.9 30.5 146 %80.2 40.0 40.2 101 %
244.8 151.9 92.9 61 %290.4 183.6 106.8 58 %533.4 335.6 197.8 59 %
Commercial:Commercial:Commercial:
DomesticDomestic29.2 41.4 (12.2)(29)%Domestic60.5 30.7 29.8 97 %91.5 72.0 19.5 27 %
InternationalInternational5.5 5.0 0.5 10 %International2.6 3.9 (1.3)(33)%8.1 8.9 (0.8)(9)%
34.7 46.4 (11.7)(25)%63.1 34.6 28.5 82 %99.6 80.9 18.7 23 %
Total direct title revenuesTotal direct title revenues279.5 198.3 81.2 41 %Total direct title revenues353.5 218.2 135.3 62 %633.0 416.5 216.5 52 %

Direct title revenues increased in the second quarter and first six months of 2021 compared to the same periods in 2020, as a result of overall revenue improvements in both non-commercial and commercial operations. Non-commercial revenues improved, primarily driven by increased transactions from both existing and recently-acquired title offices, with combined residential purchase and refinancing closed orders increasing 26% and 44% in the second quarter and first six months of 2021, respectively, compared to the same periods in 2020. Commercial revenues also increased in the second quarter and first six months of 2021, primarily due to growth in commercial transaction size and volume. Domestic commercial fees per file in the second quarter and first six months of 2021 were approximately $12,600 and $11,000, respectively, which were 28% and 3% higher, respectively, compared to the same periods in 2020. Residential fees per file in the second quarter and first six months of 2021 were approximately $2,100 and $2,000, respectively, which were 15% and 6% higher, respectively, compared to the same periods in 2020. Total international revenues in the second quarter and first six months of 2021 increased $29.2 million, or 118%, and $39.4 million, or 81%, respectively, primarily due to improved volumes in our Canadian operations and the stronger average Canadian dollar exchange rate against the U.S. dollar in the second quarter and first six months of 2021 compared to the same periods last year.
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Direct title revenues improved in the first quarter 2021, compared to last year's first quarter, primarily driven by the $92.9 million, or 61%, increase in non-commercial revenues resulting from increased transactions from both existing and recently-acquired title offices. Total residential purchase and refinancing closed orders in the first quarter 2021 increased 35% and 107%, respectively, compared to the prior year quarter. However, the non-commercial revenue increase was partially offset by lower commercial revenues in the first quarter 2021, resulting from lower commercial transaction size and volume compared to the first quarter 2020. Domestic commercial fee per file in the first quarter 2021 was approximately $8,700, compared to $11,400 from the first quarter 2020; while domestic residential fee per file was approximately $1,900, which is 5 percent lower than the prior year quarter’s average fee per file, primarily due to the higher mix of refinancing compared to purchase transactions in the first quarter 2021. Total international revenues increased $10.2 million, or 42%, primarily due to higher volumes in our Canadian operations.

Orders information for the three and six months ended March 31June 30 is as follows:
Three Months Ended March 31,Three Months Ended June 30,Six Months Ended June 30,
20212020Change% Change20212020Change% Change20212020Change% Change
Opened Orders:Opened Orders:Opened Orders:
CommercialCommercial3,569 4,153 (584)(14)%Commercial5,594 3,425 2,169 63 %9,163 7,578 1,585 21 %
PurchasePurchase70,789 53,636 17,153 32 %Purchase76,418 56,920 19,498 34 %147,207 110,556 36,651 33 %
RefinanceRefinance81,750 64,189 17,561 27 %Refinance59,607 72,306 (12,699)(18)%141,357 136,495 4,862 %
OtherOther1,810 730 1,080 148 %Other1,682 496 1,186 239 %3,492 1,226 2,266 185 %
TotalTotal157,918 122,708 35,210 29 %Total143,301 133,147 10,154 %301,219 255,855 45,364 18 %
Closed Orders:Closed Orders:Closed Orders:
CommercialCommercial3,377 3,628 (251)(7)%Commercial4,955 3,122 1,833 59 %8,332 6,750 1,582 23 %
PurchasePurchase45,483 33,715 11,768 35 %Purchase58,599 37,407 21,192 57 %104,082 71,122 32,960 46 %
RefinanceRefinance65,666 31,746 33,920 107 %Refinance52,539 51,133 1,406 %118,205 82,879 35,326 43 %
OtherOther1,175 444 731 165 %Other1,096 317 779 246 %2,271 761 1,510 198 %
TotalTotal115,701 69,533 46,168 66 %Total117,189 91,979 25,210 27 %232,890 161,512 71,378 44 %


Gross revenues fromfrom independent agency operations increased $103.9$112.9 million, or 43%41%, in the second quarter 2021 and increased $216.8 million, or 42%, in the first quartersix months of 2021, compared to last year's first quarter,same periods in 2020, which was consistent with the improved real estate market trends in the first quarter 2021 and the continued return of agents to Stewart after the termination of the proposed merger in the third quarter 2019. Agency revenues, net of retention, increased $19.3improved $19.6 million, or 45%40%, and $39.0 million, or 43%, in the second quarter and first quartersix months of 2021, respectively, compared to the same period in 2020,periods last year, generally in line with theincreased gross agency revenue change.revenues. Refer further to the "Retention by agencies" discussion under Expenses below.

Ancillary services revenues. Ancillary services operating revenues increased to $55.9$47.0 million, or 422%, and $97.5 million, or 587%, in the second quarter and first quartersix months of 2021, respectively, compared to $5.5 millionthe same periods in the first quarter 2020. The revenue growth was primarily due to revenues generated by recent acquisitions of appraisal management and online notarization and closing services companies, partially offset by lower revenues from our legacy valuation services revenuesbusiness due to reduced capital market customer orders.lower home equity volume.

Investment income. InvestmentThe increase in investment income recorded in the second quarter 2021, compared to the same period in 2020, was primarily driven by higher dividend income received on cost-basis investments, however, for the first quartersix months of 2021, decreased $1.3 million, or 24%, primarily as a result ofcompared to the same period in 2020, such increase was offset by the lower interest rates applicable to our short-term and securities investments during the first quarter 2021 compared to the first quarter 2020.2021.

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

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Expenses. An analysis of expenses is shown below:
Three Months Ended March 31, Three Months Ended June 30,Six Months Ended June 30,
20212020Change% Change 20212020Change% Change20212020Change% Change
($ in millions) ($ in millions)($ in millions)
Amounts retained by agenciesAmounts retained by agencies283.9 199.4 84.6 42 %Amounts retained by agencies322.0 228.7 93.3 41 %606.0 428.1 177.9 42 %
As a % of agency revenuesAs a % of agency revenues82.1 %82.4 %As a % of agency revenues82.5 %82.5 %82.3 %82.4 %
Employee costsEmployee costs169.4 135.7 33.7 25 %Employee costs188.5 137.5 50.9 37 %357.9 273.2 84.7 31 %
As a % of operating revenuesAs a % of operating revenues24.9 %30.4 %As a % of operating revenues23.5 %27.1 %24.1 %28.7 %
Other operating expensesOther operating expenses125.5 71.9 53.6 75 %Other operating expenses137.8 74.6 63.2 85 %263.3 146.5 116.8 80 %
As a % of operating revenuesAs a % of operating revenues18.4 %16.1 %As a % of operating revenues17.2 %14.7 %17.7 %15.4 %
Title losses and related claimsTitle losses and related claims28.8 18.6 10.1 54 %Title losses and related claims33.6 21.5 12.0 56 %62.3 40.2 22.2 55 %
As a % of title revenuesAs a % of title revenues4.6 %4.2 %As a % of title revenues4.5 %4.3 %4.6 %4.3 %

Retention by agencies. AmountsAmounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged 82.1% for82.5% and 82.3% in the second quarter and first quartersix months of 2021, respectively, as compared to 82.5% and 82.4% in the first quartersame periods in 2020. 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 in the second quarter and first six months of 2021 increased $33.7$50.9 million, or 25%37%, in the first quarter 2021,and $84.7 million, or 31%, respectively, compared to the same periodperiods in 2020, primarily due to higher salaries expense driven by a 12%21% and 17%, respectively, higher average employee count, increased incentive compensation on improved overall operating results, and additional employee costs related to higher order volumes. As a percentage of total operating revenues, consolidated employee costs improved to 24.9%23.5% and 24.1% in the second quarter and first quartersix months of 2021, from 30.4%respectively, compared to 27.1% and 28.7% in the prior yearsecond quarter which wasand first six months of 2020, respectively, primarily influenced by our continued focus on managing operating costs.

Employee costs in the title segment increased $28.8$45.9 million, or 22%35%, and $74.7 million, or 28%, in the second quarter and first quartersix months of 2021, respectively, compared to the first quartersame periods in 2020, primarily due to increased salaries expense driven by a higher average employee count,counts, mostly from recent title office acquisitions, increased incentive compensation on improved title operating results, and additional employee costs related to higher order volumes. Employee costs in the ancillary services and corporate segment increased $4.9$5.0 million, or 98%90%, and $10.0 million, or 94%, in the second quarter and first quartersix months of 2021, respectively, compared to the first quartersame periods in 2020, primarily due to increased average employee countcounts driven by recent acquisitions in the ancillary services operations.

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 (variable costs) and costs that fluctuate independently of revenues (independent costs). 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. Variable costs include appraiser and notaryservice expenses related to ancillary services operations, outside search and valuation fees, attorney fee splits, bad debt expenses, copy supplies, delivery fees, postage, premium taxes and title plant maintenance expenses. Independent costs include general supplies, litigation defense, business promotion and marketing and travel.

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Consolidated other operating expenses increased $53.6$63.2 million, or 75%85%, and $116.8 million, or 80%, in the second quarter and first quartersix months of 2021, respectively, compared to last year's first quarter. This increase was primarily due to increased appraisal and notary expenses by recently-acquired ancillary services businesses, higher outside title search and premium tax expenses on higher title revenues, and increased professional fees and rent expenses, partially offset by lower travel and marketing expenses. As a percentage of total operating revenues, consolidated other operating expenses for the first quarter 2021 increased to 18.4% compared to 16.1%same periods in the first quarter 2020, primarily due to appraisal and notary costs related to our recently acquired ancillary services businesses.

as a result of recently-acquired businesses in 2021. Total variable costs increased $45.3$50.0 million, or 142%133%, and $95.3 million, or 137%, in the second quarter and first quartersix months of 2021, compared to the same period in 2020,respectively, mainly due to higher appraisal and notaryservice expenses by recently-acquired ancillary services businesses, and increased outside search and premium taxes consistent with higher title operating revenues. Total costs that are fixed in nature increased $6.3$8.4 million, or 20%27%, and $14.6 million, or 23%, in the second quarter and first quartersix months of 2021, compared to the same period in 2020,respectively, primarily due to increased professional fees, rent expenseand occupancy expenses and technology costs. Independent costs increased $2.0$5.6 million, or 25%111%, and $7.7 million, or 58%, in the second quarter and first six months of 2021, respectively, primarily due to higher bank fees, litigation-related accruals, office closures expenses and charitable contributions. As a percentage of total operating revenues, consolidated other operating expenses in the second quarter and first six months of 2021 increased to 17.2% and 17.7%, respectively, compared to 14.7% and 15.4% in the same periodperiods in 2020, primarily due to higher office closuresappraisal and service expenses litigation-related accruals and bank fees, partially offset by lower travel and marketing expenses.related to our recently-acquired ancillary services businesses.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were 4.5% and 4.6% infor the second quarter and first quartersix months of 2021, respectively, compared to 4.2% in4.3% for both the second quarter and first quartersix months of 2020. Title loss expense increased $10.1$12.0 million or 54%,and $22.2 million in the second quarter and first quartersix months of 2021, respectively, compared to the prior year quarter,same periods in 2020, primarily as a result of increased title revenues. 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.

The composition of title policy loss expense is as follows:
Three Months Ended March 31, Three Months Ended June,Six Months Ended June,
20212020Change% Change 20212020Change% Change20212020Change% Change
($ in millions) ($ in millions)($ in millions)
Provisions – known claims:Provisions – known claims:Provisions – known claims:
Current yearCurrent year2.2 1.3 0.9 69 %Current year4.3 3.4 0.9 26 %6.5 4.6 1.9 41 %
Prior policy yearsPrior policy years13.3 12.6 0.7 %Prior policy years14.4 15.6 (1.2)(8)%27.7 28.1 (0.4)(1)%
15.5 13.9 1.6 12 %18.7 19.0 (0.3)(2)%34.2 32.7 1.5 %
Provisions – IBNRProvisions – IBNRProvisions – IBNR
Current yearCurrent year26.2 17.2 9.0 52 %Current year28.5 17.9 10.6 59 %54.6 35.2 19.4 55 %
Prior policy yearsPrior policy years0.4 0.1 0.3 300 %Prior policy years0.8 0.2 0.6 300 %1.2 0.4 0.8 200 %
26.6 17.3 9.3 54 %29.3 18.1 11.2 62 %55.8 35.6 20.2 57 %
Transferred from IBNR to known claimsTransferred from IBNR to known claims(13.3)(12.6)(0.7)%Transferred from IBNR to known claims(14.4)(15.6)1.2 (8)%(27.7)(28.1)0.4 (1)%
Total provisionsTotal provisions28.8 18.6 10.2 55 %Total provisions33.6 21.5 12.0 56 %62.3 40.2 22.2 55 %

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

Total known claims provisions increased $1.6 million, or 12%, in the first quarter 2021 compared to the same period last year, primarily as a result of higher reported claims relating to current and prior year policies. Current year IBNR provisions in the second quarter and first quartersix months of 2021 increased $9.0$10.6 million, or 52%59%, and $19.4 million, or 55%, respectively, compared to the first quarter 2020,same periods in 2020, primarily due to increased title premiums in 2021. As a percentage of title operating revenues, provisions - IBNR for the current policy year were 4.2%3.8% and 4.0% in the second quarter and first quartersix months of 2021, respectively, compared to with 3.9%3.6% and 3.8% in the second quarter and first quarter 2020.six months of 2020, respectively.

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Cash claim payments decreased $4.9increased $2.1 million, or 23%12%, in the firstsecond quarter 2021 compared to the last year'sprior year quarter, due to increased payments on both large and non-large claims mostly related to prior policy years. Cash claim payments decreased $2.8 million, or 7%, in the first quarter, primarilysix months of 2021 compared to the same period in 2020, due to lower payments on large and non-large claims relatingrelated to prior policy years.years, partially offset by higher payments related to current year policies. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.policyholders.

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

Total title policy loss reserve balances are as follows:
March 31, 2021December 31,
2020
June 30, 2021December 31,
2020
($ in millions) ($ in millions)
Known claimsKnown claims67.8 68.9 Known claims67.0 68.9 
IBNRIBNR441.7 427.4 IBNR458.0 427.4 
Total estimated title lossesTotal estimated title losses509.5 496.3 Total estimated title losses525.0 496.3 

The actual timing of estimated title loss payments may vary since claims, by their nature, are complex and paid over long periods of time. Based on historical payment patterns, the outstanding loss reserves are paid out within six years. As a result, the estimate of the ultimate amount to be paid on any claim may be modified over that time period. Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary’s calculated estimates.

Depreciation and amortization. Depreciation and amortization expenses increased $2.2$2.8 million, or 52%68%, and $5.0 million, or 60%, in the second quarter and first quartersix months of 2021, compared to the first quartersame periods in 2020, primarily due to incremental intangible asset amortization and fixed asset depreciation expenses related to recent acquisitions.

Income taxes. Our effective tax rate, based on income before taxes and after deducting income attributable to noncontrolling interests, for the first quarter 2021 was 24% for both the second quarter and first six months of 2021 compared to 27%25% for both the first quartersame periods in 2020. The lower effective tax rate in the second quarter and first quartersix months of 2021 was primarily due to increased year over year annualized pretax income and reductions in expected nondeductible expenses relative to pretax income in 2021.


LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to stockholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of March 31,June 30, 2021, our cash and investments, including amounts reserved pursuant to statutory requirements, aggregated $1.1$1.13 billion ($596.5595.2 million, net of statutory reserves on cash and investments). Of our total cash and investments at March 31,June 30, 2021, $782.2$766.3 million ($518.7491.1 million, net of statutory reserves) was held in the United States and the rest internationally, principally in Canada.

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Cash held at the parent company totaled $32.5$17.5 million at March 31,June 30, 2021. As a holding company, the parent company is funded principally by cash from its subsidiaries in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. The expense reimbursements are paid in accordance with management agreements, approved by the Texas Department of Insurance (TDI), among us and our subsidiaries. In addition to funding operating expenses, cash held at the parent company is used for dividend payments to common stockholders and for stock repurchases, if any. To the extent such uses exceed cash available, the parent company is dependent on distributions from its regulated title insurance underwriter, Stewart Title Guaranty Company (Guaranty).

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A substantial majority of our consolidated cash and investments as of March 31,June 30, 2021 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty may use its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claim payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and ancillary services operations) for their operating and debt service needs.

We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $491.3$517.8 million and $496.6 million at March 31,June 30, 2021 and December 31, 2020, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $25.6$16.6 million and $20.0 million at March 31,June 30, 2021 and December 31, 2020, respectively. As of March 31,June 30, 2021, our known claims reserve totaled $67.8$67.0 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled $441.7$458.0 million. In addition to this, we had cash and investments (excluding equity method investments) of $421.3$397.6 million, which are available for underwriter operations, including claims payments, and acquisitions.

The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The TDI must be notified of any dividend declared, and any dividend in excess of the statutory maximum of 20% of surplus (approximately $158.9 million as of December 31, 2020) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty’s actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and liquidity, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. During the threesix months ended March 31,June 30, 2021 and in all of 2020, Guaranty paid dividends of $40.0$100.0 million and $30.0 million, respectively, to its parent.

As the parent company conducts no operations apart from its wholly-owned subsidiaries, the discussion below focuses on consolidated cash flows.
 Three Months Ended March 31,
 20212020
 ($ in millions)
Net cash provided (used) by operating activities47.4 (11.4)
Net cash used by investing activities(73.6)(3.3)
Net cash provided (used) by financing activities6.2 (18.8)
 Six Months Ended June 30,
 20212020
 ($ in millions)
Net cash provided by operating activities150.5 50.1 
Net cash used by investing activities(173.7)(38.4)
Net cash used by financing activities(9.1)(29.6)

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

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Net cash provided by operations in the first quartersix months of 2021 was $47.4improved to $150.5 million, compared to net cash usedprovided by operations of $11.4$50.1 million in the priorsame period last year, quarter. The improvement in cash from operations was primarily driven bydue to the higher net income and lower payments of claims and accounts payables.in the first six months of 2021. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We are continuing our emphasis on cost management, especially in light of the current economic environment due to the COVID-19 pandemic, specifically focusing on lowering unit costs of production and improving operating margins in our direct title and ancillary services businesses. Our plans to improve margins include additional automation of manual processes, and further consolidation of our various systems and production operations. We continue to invest in the technology necessary to accomplish these goals.

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Investing activities. Net cash used by investing activities is primarily driven by proceeds from matured and sold investments, purchases of investments, capital expenditures and acquisition of title offices and other businesses. During the first quartersix months of 2021, total proceeds from securities investments sold and matured were $45.9$65.8 million, compared to $30.6$48.6 million during the same period in 2020. Cash used for purchases of securities investments was $47.9$89.2 million during first six months of 2021, compared to $50.9 million during the first quarter 2021, compared to $30.7 million during the first quartersix months of 2020.

We used $52.6$131.9 million and $1.4$33.4 million of cash for several acquisitions of title and ancillary services businesses during the first quartersix months of 2021 and 2020, respectively, and alsorespectively. We used $16.0$16.1 million of cash during the first quarter 2021 in acquiring an equity method investment in a title company. Duringcompany and generated total proceeds of $10.6 million from sales of our buildings during the first quarters 2021 and 2020, wesix months of 2021. We used $5.7$16.4 million and $4.8$6.8 million respectively, of cash for purchases of property and equipment.equipment during the first six months of 2021 and 2020, respectively. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.

Financing activities and capital resources. Total debt and stockholders’ equity were $125.6$127.7 million and $1,047.9$1,136.1 million, respectively, as of March 31,June 30, 2021. PaymentsDuring the first six months of 2021 and 2020, payments on notes payable during the first quarters 2021 and 2020 of $154.7$157.2 million and $7.7$8.4 million, respectively, and notes payable additions of $154.0$156.8 million and $0.2$0.4 million, respectively, were related to short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business. During the first quarter 2021, we amended our line of credit agreement, resulting in an increase in the total line of credit commitment from our lenders from $200 million to $350 million (refer to Note 1-D for additional details on the amendment).million. At March 31,June 30, 2021, the outstanding balance of our line of credit facility was $125.6$123.9 million, which included the $25.0 million we drew from the facility during the first quarter 2021;six months of 2021, while the available balance of the line of credit was $223.6 million, net of an unused $2.5 million letter of credit. At March 31,June 30, 2021, our debt-to-equity ratio, excluding our Section 1031 notes, was approximately 12.0%11%.

During the first quartersix months of 2021, we paid total dividends of $8.8$17.7 million ($0.330.66 per common share), compared to the total dividends paid in the first quartersix months of 2020 of $7.1$14.2 million ($0.300.60 per common share).


Effect of changes in foreign currency exchange rates. The effect of changes in foreign currency exchange rates on our cash and cash equivalents on the consolidated statements of cash flows was minimala net increase of $0.2 million during the first quartersix months of 2021, compared to a net decrease of $3.5$1.9 million during the first quartersix months of 2020. Our principal foreign operating unit is in Canada, and, on average, the value of the Canadian dollar relative to the U.S. dollar did not significantly changeappreciated in 2021, while it depreciated in 2020.

***********
We believe we have sufficient liquidity and capital resources to meet the cash needs of our ongoing operations, including in the current economic and real estate environment created by the COVID-19 pandemic. However, we may determine that additional debt or equity funding is warranted to provide liquidity for achievement of strategic goals or acquisitions or for unforeseen circumstances. Other than scheduled maturities of debt, operating lease payments and anticipated claims payments, we have no material contractual commitments. We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, including claims payments. However, to the extent that these funds are not sufficient, we may be required to borrow funds on terms less favorable than we currently have or seek funding from the equity market, which may not be successful or may be on terms that are dilutive to existing stockholders.

Contingent liabilities and commitments. See discussion of contingent liabilities and commitments in Note 10 to the condensed consolidated financial statements.

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Other comprehensive income (loss). Unrealized gains and losses on available-for-sale debt securities investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive income (loss), a component of stockholders’ equity, until they are realized. During the first quartersix months of 2021, net unrealized investment losses of $9.3$8.7 million, net of taxes, which increased our other comprehensive loss, were primarily related to a net decrease in the fair values of our overall bond securities investment portfolio mainly driven by the effect of rising interest rates. During the first quartersix months of 2020, net unrealized investment losses of $2.7$14.0 million, net of taxes, which increased our other comprehensive loss,income, were primarily related to a net decrease in the fair values of our overall bond securities investment portfolio mainly driven by increased credit spreads.
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Changes in foreign currency exchange rates, primarily related to our Canadian and United Kingdom operations, reduced our other comprehensive loss, net of taxes, by $1.9$3.2 million in the first quartersix months of 2021; while they increasedreduced our other comprehensive loss,income, net of taxes, by $11.4$7.2 million for the same period in 2020.

Off-balance sheet arrangements. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements, other than our contractual obligations under operating leases. We also routinely hold funds in segregated escrow accounts pending the closing of real estate transactions and have qualified intermediaries in tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code. The Company holds the proceeds from these transactions until a qualifying exchange can occur. In accordance with industry practice, these segregated accounts are not included on the balance sheet. See Note 16 in our 2020 Form 10-K.

Forward-looking statements. Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as “may,” "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the volatility of economic conditions, including the duration and effectsultimate impact of the COVID-19 pandemic; adverse changes in the level of real estate activity; changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing; our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems; the impact of unanticipated title losses or the need to strengthen our policy loss reserves; any effect of title losses on our cash flows and financial condition; the ability to attract and retain highly productive sales associates; the impact of vetting our agency operations for quality and profitability; independent agency remittance rates; changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products; regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees; our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services; the outcome of pending litigation; the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services; our dependence on our operating subsidiaries as a source of cash flow; our ability to access the equity and debt financing markets when and if needed; our ability to grow our international operations; seasonality and weather; and our ability to respond to the actions of our competitors. These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including in Part I, Item 1A "Risk Factors" in our 2020 Form 10-K, and as maybe further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K filed subsequently. All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes during the quarter ended March 31,June 30, 2021 in our investment strategies, types of financial instruments held or the risks associated with such instruments that would materially alter the market risk disclosures made in our 2020 Form 10-K.


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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our principal executive officer and principal financial officer are responsible for establishing and maintaining disclosure controls and procedures. They evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31,June 30, 2021, and have concluded that, as of such date, our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting during the quarter ended March 31,June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings

See discussion of legal proceedings in Note 11 to the condensed consolidated financial statements included in Item 1 of Part I of this Report, which is incorporated by reference into this Part II, Item 1, as well as Item 3. Legal Proceedings, in our Annual Report on Form 10-K for the year ended December 31, 2020.


Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes to our risk factors during the threesix months ended March 31,June 30, 2021 since our Annual Report on Form 10-K for the year ended December 31, 2020.


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

There were no repurchases of our Common Stock during the threesix months ended March 31,June 30, 2021, except for repurchases of approximately 37,30038,500 shares (aggregate purchase price of approximately $1.9$2.0 million) related to the statutory income tax withholding on the vesting of restricted share and unit grants to executives and senior management.


Item 5. Other Information

Book value per share. Our book value per share was $38.87$42.12 and $37.60 as of March 31,June 30, 2021 and December 31, 2020, respectively. As of March 31,June 30, 2021, our book value per share was based on approximately $1,041.9$1,130.0 million of stockholders’ equity attributable to Stewart and 26,806,02526,825,233 shares of Common Stock outstanding. As of December 31, 2020, our book value per share was based on approximately $1,005.1 million of stockholders’ equity attributable to Stewart and 26,728,242 shares of Common Stock outstanding.


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Item 6. Exhibits
Exhibit  
3.1
3.2
10.1†*
10.2†*
10.3†*
10.4†*
10.5†*
10.6†*
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Exhibit
10.7†*
10.8†*
10.9†*
10.10†*
10.11†*
10.12†*
10.13†*
10.14†*
10.15†*
10.16†*
31.1*
31.2*
32.1*
32.2*
101.INS*XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*XBRL Taxonomy Extension Schema Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Label Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
† Management contract or compensatory plan


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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
May 4,August 3, 2021
Date
 Stewart Information Services Corporation
 Registrant
By: /s/ David C. Hisey
 David C. Hisey, Chief Financial Officer, Secretary and Treasurer
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