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,~~September 30, 2022

☐ 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,	Texas	77056
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1 par value per share	STC	New 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 filer

☐

Non-accelerated filer

☐

Emerging growth company

☐

Accelerated filer

☐

Smaller 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 ~~April 29,~~November 1, 2022, there were ~~27,017,045~~27,127,013 outstanding shares of the issuer's Common Stock.

FORM 10-Q QUARTERLY REPORT

QUARTER ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022

TABLE OF CONTENTS


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

1.	1.	Financial Statements	3	1.	Financial Statements	3

2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

3.	3.	Quantitative and Qualitative Disclosures About Market Risk	27	3.	Quantitative and Qualitative Disclosures About Market Risk	28

4.	4.	Controls and Procedures	27	4.	Controls and Procedures	29
		PART II – OTHER INFORMATION			PART II – OTHER INFORMATION
1.	1.	Legal Proceedings	28	1.	Legal Proceedings	30

1A.	1A.	Risk Factors	28	1A.	Risk Factors	30

2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	28	2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

5.	5.	Other Information	28	5.	Other Information	30

6.	6.	Exhibits	29	6.	Exhibits	31

		Signature	30		Signature	32

As used in this report, “we,” “us,” “our,” "Registrant," the “Company” and “Stewart” mean Stewart Information Services Corporation and our subsidiaries, unless the context indicates otherwise.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted, except per share)					($000 omitted, except per share)
Revenues	Revenues						Revenues
Title revenues:	Title revenues:						Title revenues:
Direct operations	Direct operations			317,834		279,504	Direct operations	307,408	366,091	976,364	999,098
Agency operations	Agency operations			404,145		345,932	Agency operations	340,470	401,762	1,154,546	1,138,023
Real estate solutions and other	Real estate solutions and other			123,230		55,931	Real estate solutions and other	69,737	61,934	281,152	176,057
Operating revenues	Operating revenues			845,209		681,367	Operating revenues	717,615	829,787	2,412,062	2,313,178
Investment income	Investment income			3,622		3,945	Investment income	5,158	4,053	15,519	13,127
Net realized and unrealized gains				4,085		3,274
Net realized and unrealized (losses) gains							Net realized and unrealized (losses) gains	(6,374)	2,887	(14,194)	17,816
				852,916		688,586		716,399	836,727	2,413,387	2,344,121
Expenses	Expenses						Expenses
Amounts retained by agencies	Amounts retained by agencies			331,191		283,935	Amounts retained by agencies	280,517	329,906	951,555	935,861
Employee costs	Employee costs			204,982		169,397	Employee costs	195,057	197,587	610,286	555,451
Other operating expenses	Other operating expenses			189,751		125,482	Other operating expenses	151,208	152,587	502,966	415,864
Title losses and related claims	Title losses and related claims			29,221		28,773	Title losses and related claims	25,486	30,345	81,105	92,687
Depreciation and amortization	Depreciation and amortization			13,748		6,430	Depreciation and amortization	14,067	9,144	42,103	22,394
Interest	Interest			4,412		567	Interest	4,553	712	13,471	1,960
				773,305		614,584		670,888	720,281	2,201,486	2,024,217
Income before taxes and noncontrolling interests	Income before taxes and noncontrolling interests			79,611		74,002	Income before taxes and noncontrolling interests	45,511	116,446	211,901	319,904
Income tax expense	Income tax expense			(17,699)		(16,880)	Income tax expense	(10,783)	(23,051)	(48,376)	(70,547)
Net income	Net income			61,912		57,122	Net income	34,728	93,395	163,525	249,357
Less net income attributable to noncontrolling interests				4,015		2,886
Less income attributable to noncontrolling interests							Less income attributable to noncontrolling interests	5,294	4,732	14,534	11,639
Net income attributable to Stewart	Net income attributable to Stewart			57,897		54,236	Net income attributable to Stewart	29,434	88,663	148,991	237,718

Net income	Net income			61,912		57,122	Net income	34,728	93,395	163,525	249,357
Other comprehensive loss, net of taxes:	Other comprehensive loss, net of taxes:						Other comprehensive loss, net of taxes:
Foreign currency translation adjustments	Foreign currency translation adjustments			620		1,867	Foreign currency translation adjustments	(15,300)	(4,243)	(22,861)	(997)
Change in net unrealized gains and losses on investments	Change in net unrealized gains and losses on investments			(19,898)		(9,156)	Change in net unrealized gains and losses on investments	(8,921)	(2,183)	(41,513)	(10,330)
Reclassification adjustments for realized gains and losses on investments	Reclassification adjustments for realized gains and losses on investments			(185)		(145)	Reclassification adjustments for realized gains and losses on investments	(385)	(355)	(687)	(918)
Other comprehensive loss, net of taxes:	Other comprehensive loss, net of taxes:			(19,463)		(7,434)	Other comprehensive loss, net of taxes:	(24,606)	(6,781)	(65,061)	(12,245)
Comprehensive income	Comprehensive income			42,449		49,688	Comprehensive income	10,122	86,614	98,464	237,112
Less net income attributable to noncontrolling interests				4,015		2,886
Less income attributable to noncontrolling interests							Less income attributable to noncontrolling interests	5,294	4,732	14,534	11,639
Comprehensive income attributable to Stewart	Comprehensive income attributable to Stewart			38,434		46,802	Comprehensive income attributable to Stewart	4,828	81,882	83,930	225,473

Basic average shares outstanding (000)	Basic average shares outstanding (000)			26,960		26,736	Basic average shares outstanding (000)	27,113	26,873	27,031	26,803
Basic earnings per share attributable to Stewart	Basic earnings per share attributable to Stewart			2.15		2.03	Basic earnings per share attributable to Stewart	1.09	3.30	5.51	8.87
Diluted average shares outstanding (000)	Diluted average shares outstanding (000)			27,444		26,984	Diluted average shares outstanding (000)	27,371	27,238	27,359	27,090
Diluted earnings per share attributable to Stewart	Diluted earnings per share attributable to Stewart			2.11		2.01	Diluted earnings per share attributable to Stewart	1.08	3.26	5.45	8.78

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS


		March 31, 2022 (Unaudited)	December 31, 2021		September 30, 2022 (Unaudited)	December 31, 2021
		($000 omitted)			($000 omitted)
Assets	Assets			Assets
Cash and cash equivalents	Cash and cash equivalents	396,649	485,919	Cash and cash equivalents	320,933	485,919
Short-term investments	Short-term investments	18,054	17,650	Short-term investments	18,077	17,650
Investments in debt and equity securities, at fair value		692,415	679,214

Investments, at fair value:				Investments, at fair value:
Debt securities (amortized cost of $624,272 and $578,165)				Debt securities (amortized cost of $624,272 and $578,165)	582,461	589,772
Equity securities				Equity securities	87,166	89,442
					669,627	679,214
Receivables:	Receivables:			Receivables:
Premiums from agencies	Premiums from agencies	44,608	45,428	Premiums from agencies	43,426	45,428
Trade and other	Trade and other	72,994	75,079	Trade and other	65,620	75,079
Income taxes	Income taxes	2,074	5,420	Income taxes	9,395	5,420
Notes	Notes	3,544	1,124	Notes	5,995	1,124
Allowance for uncollectible amounts	Allowance for uncollectible amounts	(7,435)	(7,711)	Allowance for uncollectible amounts	(7,577)	(7,711)
		115,785	119,340		116,859	119,340
Property and equipment:	Property and equipment:			Property and equipment:
Land	Land	2,545	2,545	Land	2,545	2,545
Buildings	Buildings	19,277	19,303	Buildings	18,553	19,303
Furniture and equipment	Furniture and equipment	218,244	216,261	Furniture and equipment	220,224	216,261
Accumulated depreciation	Accumulated depreciation	(167,688)	(165,653)	Accumulated depreciation	(160,715)	(165,653)
		72,378	72,456		80,607	72,456
Operating lease assets	Operating lease assets	141,033	134,578	Operating lease assets	130,316	134,578
Title plants, at cost	Title plants, at cost	76,859	76,859	Title plants, at cost	73,358	76,859
Investments on equity method basis	Investments on equity method basis	4,525	4,754	Investments on equity method basis	4,341	4,754
Goodwill	Goodwill	932,556	924,837	Goodwill	961,726	924,837
Intangible assets, net of amortization	Intangible assets, net of amortization	230,245	229,804	Intangible assets, net of amortization	174,430	229,804
Deferred tax assets	Deferred tax assets	3,732	3,846	Deferred tax assets	4,328	3,846
Other assets	Other assets	76,756	64,105	Other assets	150,858	64,105
		2,760,987	2,813,362		2,705,460	2,813,362
Liabilities	Liabilities			Liabilities
Notes payable	Notes payable	445,936	483,491	Notes payable	446,372	483,491
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	233,135	287,326	Accounts payable and accrued liabilities	184,065	287,326
Operating lease liabilities	Operating lease liabilities	154,974	149,417	Operating lease liabilities	146,309	149,417
Estimated title losses	Estimated title losses	560,718	549,614	Estimated title losses	547,214	549,614
Deferred tax liabilities	Deferred tax liabilities	41,436	48,779	Deferred tax liabilities	23,999	48,779
		1,436,199	1,518,627		1,347,959	1,518,627
Contingent liabilities and commitments	Contingent liabilities and commitments	0	0	Contingent liabilities and commitments
Stockholders’ equity	Stockholders’ equity			Stockholders’ equity
Common Stock ($1 par value) and additional paid-in capital	Common Stock ($1 par value) and additional paid-in capital	311,891	309,622	Common Stock ($1 par value) and additional paid-in capital	321,492	309,622
Retained earnings	Retained earnings	1,022,456	974,800	Retained earnings	1,090,938	974,800
Accumulated other comprehensive income (loss):	Accumulated other comprehensive income (loss):			Accumulated other comprehensive income (loss):
Foreign currency translation adjustments	Foreign currency translation adjustments	(8,297)	(8,917)	Foreign currency translation adjustments	(31,778)	(8,917)
Net unrealized (losses) gains on debt securities investments	Net unrealized (losses) gains on debt securities investments	(10,913)	9,170	Net unrealized (losses) gains on debt securities investments	(33,030)	9,170

Treasury stock – 352,161 common shares, at cost	Treasury stock – 352,161 common shares, at cost	(2,666)	(2,666)	Treasury stock – 352,161 common shares, at cost	(2,666)	(2,666)
Stockholders’ equity attributable to Stewart	Stockholders’ equity attributable to Stewart	1,312,471	1,282,009	Stockholders’ equity attributable to Stewart	1,344,956	1,282,009
Noncontrolling interests	Noncontrolling interests	12,317	12,726	Noncontrolling interests	12,545	12,726
Total stockholders’ equity (27,015,078 and 26,893,430 shares outstanding)		1,324,788	1,294,735
Total stockholders’ equity (27,123,388 and 26,893,430 shares outstanding)				Total stockholders’ equity (27,123,388 and 26,893,430 shares outstanding)	1,357,501	1,294,735
		2,760,987	2,813,362		2,705,460	2,813,362

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Three Months Ended March 31,			Nine Months Ended September 30,
		2022	2021		2022	2021
		($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 income	Net income	61,912	57,122	Net income	163,525	249,357
Add (deduct):	Add (deduct):			Add (deduct):
Depreciation and amortization	Depreciation and amortization	13,748	6,430	Depreciation and amortization	42,103	22,394
Provision for bad debt		14	708
Net realized and unrealized gains		(4,085)	(3,274)
Adjustments for bad debt provisions				Adjustments for bad debt provisions	812	1,871
Net realized and unrealized losses (gains)				Net realized and unrealized losses (gains)	14,194	(17,816)
Amortization of net premium on debt securities investments	Amortization of net premium on debt securities investments	690	938	Amortization of net premium on debt securities investments	1,870	2,794
Payments for title losses less than provisions	Payments for title losses less than provisions	8,959	12,234	Payments for title losses less than provisions	10,950	39,761
Adjustments for insurance recoveries of title losses	Adjustments for insurance recoveries of title losses	220	(205)	Adjustments for insurance recoveries of title losses	220	—
Decrease (increase) in receivables – net	Decrease (increase) in receivables – net	6,226	(3,513)	Decrease (increase) in receivables – net	9,521	(20,771)
Increase in other assets – net	Increase in other assets – net	(5,046)	(7,869)	Increase in other assets – net	(4,343)	(3,725)
Decrease in accounts payable and other liabilities – net	Decrease in accounts payable and other liabilities – net	(50,808)	(20,116)	Decrease in accounts payable and other liabilities – net	(81,987)	(30,385)
Change in net deferred income taxes	Change in net deferred income taxes	265	2,007	Change in net deferred income taxes	25	7,024
Net income from equity method investments	Net income from equity method investments	(736)	(924)	Net income from equity method investments	(2,536)	(6,852)
Dividends received from equity method investments	Dividends received from equity method investments	1,167	764	Dividends received from equity method investments	3,135	5,496
Stock-based compensation expense	Stock-based compensation expense	2,239	3,174	Stock-based compensation expense	9,239	8,494
Other – net	Other – net	110	(34)	Other – net	312	(325)
Cash provided by operating activities	Cash provided by operating activities	34,875	47,442	Cash provided by operating activities	167,040	257,317
Investing activities:	Investing activities:			Investing activities:
Proceeds from sales of investments in securities	Proceeds from sales of investments in securities	17,650	3,051	Proceeds from sales of investments in securities	47,954	19,726
Proceeds from matured investments in debt securities	Proceeds from matured investments in debt securities	15,923	42,836	Proceeds from matured investments in debt securities	28,754	68,653
Purchases of investments in securities	Purchases of investments in securities	(66,882)	(47,881)	Purchases of investments in securities	(165,130)	(111,107)
Net (purchases) sales of short-term investments	Net (purchases) sales of short-term investments	(60)	2,648	Net (purchases) sales of short-term investments	(1,632)	2,734
Purchases of property and equipment, and real estate	Purchases of property and equipment, and real estate	(12,291)	(5,721)	Purchases of property and equipment, and real estate	(35,274)	(26,213)
Proceeds from sale of property and equipment and other assets	Proceeds from sale of property and equipment and other assets	829	—	Proceeds from sale of property and equipment and other assets	977	10,552
Cash paid for acquisition of businesses	Cash paid for acquisition of businesses	(17,904)	(52,575)	Cash paid for acquisition of businesses	(102,864)	(149,921)
Cash paid for acquisition of equity method investment	Cash paid for acquisition of equity method investment	(69)	(16,080)	Cash paid for acquisition of equity method investment	(69)	(16,080)
Other – net	Other – net	(2,412)	131	Other – net	1,941	988
Cash used by investing activities	Cash used by investing activities	(65,216)	(73,591)	Cash used by investing activities	(225,343)	(200,668)
Financing activities:	Financing activities:			Financing activities:
Proceeds from notes payable	Proceeds from notes payable	140	178,975	Proceeds from notes payable	38,012	331,755
Payments on notes payable	Payments on notes payable	(37,819)	(154,910)	Payments on notes payable	(75,505)	(158,031)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(4,568)	(3,844)	Distributions to noncontrolling interests	(14,863)	(11,683)

Repurchases of Common Stock	Repurchases of Common Stock	(2,462)	(1,935)	Repurchases of Common Stock	(3,168)	(2,145)
Proceeds from stock option and employee stock purchase plan exercises	Proceeds from stock option and employee stock purchase plan exercises	2,492	61	Proceeds from stock option and employee stock purchase plan exercises	5,799	2,715
Cash dividends paid	Cash dividends paid	(10,119)	(8,840)	Cash dividends paid	(32,464)	(26,558)
Payment of contingent consideration related to acquisitions	Payment of contingent consideration related to acquisitions	(6,262)	—	Payment of contingent consideration related to acquisitions	(15,997)	(9,489)
Purchase of remaining interest in consolidated subsidiaries	Purchase of remaining interest in consolidated subsidiaries	—	(2,570)	Purchase of remaining interest in consolidated subsidiaries	(72)	(5,616)
Other - net	Other - net	36	(777)	Other - net	115	(777)
Cash (used) provided by financing activities	Cash (used) provided by financing activities	(58,562)	6,160	Cash (used) provided by financing activities	(98,143)	120,171
Effects of changes in foreign currency exchange rates	Effects of changes in foreign currency exchange rates	(367)	69	Effects of changes in foreign currency exchange rates	(8,540)	(1,898)
Change in cash and cash equivalents	Change in cash and cash equivalents	(89,270)	(19,920)	Change in cash and cash equivalents	(164,986)	174,922
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	485,919	432,683	Cash and cash equivalents at beginning of period	485,919	432,683
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	396,649	412,763	Cash and cash equivalents at end of period	320,933	607,605

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


		Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total		Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total
		($000 omitted)								($000 omitted)
Three Months Ended March 31, 2022
Nine Months Ended September 30, 2022									Nine Months Ended September 30, 2022
Balance at December 31, 2021	Balance at December 31, 2021	27,246	282,376	974,800	253	(2,666)	12,726	1,294,735	Balance at December 31, 2021	27,246	282,376	974,800	253	(2,666)	12,726	1,294,735

Net income attributable to Stewart	Net income attributable to Stewart	—	—	57,897	—	—	—	57,897	Net income attributable to Stewart	—	—	148,991	—	—	—	148,991
Dividends on Common Stock ($0.38 per share)		—	—	(10,241)	—	—	—	(10,241)
Dividends on Common Stock ($1.20 per share)									Dividends on Common Stock ($1.20 per share)	—	—	(32,853)	—	—	—	(32,853)

Stock-based compensation	Stock-based compensation	108	2,131	—	—	—	—	2,239	Stock-based compensation	155	9,084	—	—	—	—	9,239
Stock repurchases	Stock repurchases	(36)	(2,426)	—	—	—	—	(2,462)	Stock repurchases	(49)	(3,119)	—	—	—	—	(3,168)
Stock option and employee stock purchase plan exercises	Stock option and employee stock purchase plan exercises	49	2,443	—	—	—	—	2,492	Stock option and employee stock purchase plan exercises	124	5,675	—	—	—	—	5,799

Purchase of remaining interest in consolidated subsidiaries									Purchase of remaining interest in consolidated subsidiaries	—	—	—	—	—	(72)	(72)
Change in net unrealized gains and losses on investments, net of taxes	Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(19,898)	—	—	(19,898)	Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(41,513)	—	—	(41,513)
Reclassification adjustment for realized gains and losses on investments, net of taxes	Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(185)	—	—	(185)	Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(687)	—	—	(687)
Foreign currency translation adjustments, net of taxes	Foreign currency translation adjustments, net of taxes	—	—	—	620	—	—	620	Foreign currency translation adjustments, net of taxes	—	—	—	(22,861)	—	—	(22,861)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	—	—	—	—	—	4,015	4,015	Net income attributable to noncontrolling interests	—	—	—	—	—	14,534	14,534
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—	—	—	—	(4,568)	(4,568)	Distributions to noncontrolling interests	—	—	—	—	—	(14,863)	(14,863)
Net effect of other changes in ownership	Net effect of other changes in ownership	—	—	—	—	—	144	144	Net effect of other changes in ownership	—	—	—	—	—	220	220
Balance at March 31, 2022		27,367	284,524	1,022,456	(19,210)	(2,666)	12,317	1,324,788
Balance at September 30, 2022									Balance at September 30, 2022	27,476	294,016	1,090,938	(64,808)	(2,666)	12,545	1,357,501

Three Months Ended March 31, 2021
Nine Months Ended September 30, 2021									Nine Months Ended September 30, 2021
Balance at December 31, 2020	Balance at December 31, 2020	27,080	274,857	688,819	17,022	(2,666)	7,294	1,012,406	Balance at December 31, 2020	27,080	274,857	688,819	17,022	(2,666)	7,294	1,012,406

Net income attributable to Stewart	Net income attributable to Stewart	—	—	54,236	—	—	—	54,236	Net income attributable to Stewart	—	—	237,718	—	—	—	237,718
Dividends on Common Stock ($0.33 per share)		—	—	(9,082)	—	—	—	(9,082)
Dividends on Common Stock ($0.99 per share)									Dividends on Common Stock ($0.99 per share)	—	—	(27,009)	—	—	—	(27,009)

Stock-based compensation	Stock-based compensation	113	3,061	—	—	—	—	3,174	Stock-based compensation	139	8,355	—	—	—	—	8,494
Stock repurchases	Stock repurchases	(37)	(1,898)	—	—	—	—	(1,935)	Stock repurchases	(41)	(2,104)	—	—	—	—	(2,145)
Stock option and employee stock purchase plan exercises	Stock option and employee stock purchase plan exercises	2	59	—	—	—	—	61	Stock option and employee stock purchase plan exercises	64	2,651	—	—	—	—	2,715
Purchase of remaining interest in consolidated subsidiary	Purchase of remaining interest in consolidated subsidiary	—	(2,259)	—	—	—	(311)	(2,570)	Purchase of remaining interest in consolidated subsidiary	—	(4,744)	—	—	—	(872)	(5,616)
Change in net unrealized gains and losses on investments, net of taxes	Change 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	—	—	—	(10,330)	—	—	(10,330)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(145)	—	—	(145)	Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(918)	—	—	(918)
Foreign currency translation adjustments, net of taxes	Foreign currency translation adjustments, net of taxes	—	—	—	1,867	—	—	1,867	Foreign currency translation adjustments, net of taxes	—	—	—	(997)	—	—	(997)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	—	—	—	—	—	2,886	2,886	Net income attributable to noncontrolling interests	—	—	—	—	—	11,639	11,639
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—	—	—	—	(3,844)	(3,844)	Distributions to noncontrolling interests	—	—	—	—	—	(11,683)	(11,683)

Balance at March 31, 2021		27,158	273,820	733,973	9,588	(2,666)	6,025	1,047,898
Net effect of other changes in ownership									Net effect of other changes in ownership	—	—	—	—	—	2,426	2,426
Balance at September 30, 2021									Balance at September 30, 2021	27,242	279,015	899,528	4,777	(2,666)	8,804	1,216,700

See notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED)


	Common Stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive income (loss)	Treasury stock	Noncontrolling interests	Total
	($000 omitted)
Three Months Ended September 30, 2022
Balances at June 30, 2022	27,390	288,834	1,073,788	(40,202)	(2,666)	12,677	1,359,821

Net income attributable to Stewart	—	—	29,434	—	—	—	29,434
Dividends on Common Stock ($0.45 per share)	—	—	(12,284)	—	—	—	(12,284)

Stock-based compensation	29	2,770	—	—	—	—	2,799
Stock repurchases	(12)	(605)	—	—	—	—	(617)
Stock option and employee stock purchase plan exercises	69	3,017	—	—	—	—	3,086
Purchase of remaining interest in consolidated subsidiaries	—	—	—	—	—	(72)	(72)
Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(8,921)	—	—	(8,921)
Reclassification adjustment for realized gains and losses on investments, net of taxes	—	—	—	(385)	—	—	(385)
Foreign currency translation adjustments, net of taxes	—	—	—	(15,300)	—	—	(15,300)
Net income attributable to noncontrolling interests	—	—	—	—	—	5,294	5,294
Distributions to noncontrolling interests	—	—	—	—	—	(5,380)	(5,380)
Net effect of other changes in ownership	—	—	—	—	—	26	26
Balance at September 30, 2022	27,476	294,016	1,090,938	(64,808)	(2,666)	12,545	1,357,501

Three Months Ended September 30, 2021
Balances at June 30, 2021	27,177	274,074	819,834	11,558	(2,666)	6,096	1,136,073

Net income attributable to Stewart	—	—	88,663	—	—	—	88,663
Dividends on Common Stock ($0.33 per share)	—	—	(8,969)	—	—	—	(8,969)

Stock-based compensation	8	2,607	—	—	—	—	2,615
Stock repurchases	(2)	(141)	—	—	—	—	(143)
Stock option exercises	59	2,475					2,534

Change in net unrealized gains and losses on investments, net of taxes	—	—	—	(2,183)	—	—	(2,183)
Reclassification adjustment for realized gains and losses on investments, net of taxes, net of taxes	—	—	—	(355)	—	—	(355)
Foreign currency translation adjustments, net of taxes	—	—	—	(4,243)	—	—	(4,243)
Net income attributable to noncontrolling interests	—	—	—	—	—	4,732	4,732
Distributions to noncontrolling interests	—	—	—	—	—	(4,430)	(4,430)
Net effect of other changes in ownership	—	—	—	—	—	2,406	2,406
Balance at September 30, 2021	27,242	279,015	899,528	4,777	(2,666)	8,804	1,216,700

See notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1

Interim financial statements. The financial information contained in this report for the three and nine months ended ~~March 31,~~September 30, 2022 and 2021, and as of ~~March 31,~~September 30, 2022, 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, 2021 filed with the Securities and Exchange Commission on February 28, 2022 (2021 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 ~~$530.0~~$541.0 million and $523.5 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately ~~$20.3~~$10.5 million and $41.4 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. Although these cash statutory reserve funds are not restricted or segregated in depository accounts, they are required to be held pursuant to state statutes. If the Company fails to maintain minimum investments or cash and cash equivalents sufficient to meet statutory requirements, the Company may be subject to fines or other penalties, including potential revocation of its business license. These funds are not available for any other purpose. In the event that insurance regulators adjust the determination of the statutory premium reserves of the Company’s title insurers, these restricted funds as well as statutory surplus would correspondingly increase or decrease.

D. Recently enacted Inflation Reduction Act. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the Act) that includes, among other provisions, changes to the U.S. corporate income tax system, including a 15% minimum tax based on book income of certain large corporations for tax years beginning after December 31, 2022 and a 1% excise tax on net repurchases of stock starting in 2023. Management is still in the process of evaluating the Act and its requirements, however it does not believe that the Act will have a material impact on the Company's consolidated financial statements.

NOTE 2

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


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted)					($000 omitted)
Title insurance premiums:	Title insurance premiums:						Title insurance premiums:
Direct	Direct			205,562		194,993	Direct	209,477	248,738	646,760	687,369
Agency	Agency			404,145		345,932	Agency	340,470	401,762	1,154,546	1,138,023
Escrow fees	Escrow fees			55,792		56,649	Escrow fees	49,407	63,455	166,696	183,638
Real estate solutions and abstract fees	Real estate solutions and abstract fees			108,802		68,620	Real estate solutions and abstract fees	89,519	85,345	302,534	234,677
Other revenues	Other revenues			70,908		15,173	Other revenues	28,742	30,487	141,526	69,471
				845,209		681,367		717,615	829,787	2,412,062	2,313,178

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, 2022 December 31, 2021
($000 omitted)
Investments in:
Debt securities 589,396 589,772
Equity securities 103,019 89,442
692,415 679,214

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the net unrealized investment gains relating to investments in equity securities held ~~were $23.9~~were $8.0 million ~~and~~and $21.1 million, respectively (refer to Note 5).

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


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
		Amortized costs	Fair values	Amortized costs	Fair values		Amortized costs	Fair values	Amortized costs	Fair values
		($000 omitted)					($000 omitted)
Municipal	Municipal	32,934	33,182	34,739	36,323	Municipal	30,759	30,119	34,739	36,323
Corporate	Corporate	252,113	248,050	249,757	258,102	Corporate	279,392	257,575	249,757	258,102
Foreign	Foreign	311,239	301,284	287,240	288,883	Foreign	297,490	278,511	287,240	288,883
U.S. Treasury Bonds	U.S. Treasury Bonds	6,925	6,880	6,429	6,464	U.S. Treasury Bonds	16,631	16,256	6,429	6,464

		603,211	589,396	578,165	589,772		624,272	582,461	578,165	589,772

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

Gross unrealized gains and losses on investments in debt securities are as follows:


		March 31, 2022		December 31, 2021			September 30, 2022		December 31, 2021
		Gains	Losses	Gains	Losses		Gains	Losses	Gains	Losses
		($000 omitted)					($000 omitted)
Municipal	Municipal	278	30	1,585	1	Municipal	2	642	1,585	1
Corporate	Corporate	1,778	5,841	9,389	1,044	Corporate	226	22,043	9,389	1,044
Foreign	Foreign	534	10,489	3,285	1,642	Foreign	92	19,071	3,285	1,642
U.S. Treasury Bonds	U.S. Treasury Bonds	21	66	60	25	U.S. Treasury Bonds	7	382	60	25

		2,611	16,426	14,319	2,712		327	42,138	14,319	2,712

Debt securities as of ~~March 31,~~September 30, 2022 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 less	In one year or less	89,611	90,044	In one year or less	88,203	87,384
After one year through five years	After one year through five years	318,078	310,887	After one year through five years	355,367	333,584
After five years through ten years	After five years through ten years	166,600	159,971	After five years through ten years	155,555	140,592
After ten years	After ten years	28,922	28,494	After ten years	25,147	20,901
		603,211	589,396		624,272	582,461

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,~~September 30, 2022, were:


		Less than 12 months		More than 12 months		Total			Less than 12 months		More than 12 months		Total
		Losses	Fair values	Losses	Fair values	Losses	Fair values		Losses	Fair values	Losses	Fair values	Losses	Fair values
		($000 omitted)							($000 omitted)
Municipal	Municipal	30	6,033	—	—	30	6,033	Municipal	633	28,835	9	33	642	28,868
Corporate	Corporate	4,614	114,478	1,227	11,631	5,841	126,109	Corporate	17,822	224,128	4,221	29,888	22,043	254,016
Foreign	Foreign	8,749	236,540	1,740	30,281	10,489	266,821	Foreign	13,264	210,499	5,807	65,721	19,071	276,220
U.S. Treasury Bonds	U.S. Treasury Bonds	42	1,203	24	612	66	1,815	U.S. Treasury Bonds	323	13,116	59	951	382	14,067

		13,435	358,254	2,991	42,524	16,426	400,778		32,042	476,578	10,096	96,593	42,138	573,171

The number of specific debt investment holdings held in an unrealized loss position as of ~~March 31,~~September 30, 2022 was ~~197.~~355. Of these securities, 1949 were in unrealized loss positions for more than 12 months. Gross unrealized investment losses at ~~March 31,~~September 30, 2022 increased compared to December 31, 2021, primarily due to the market volatility influenced by higher interest rates and credit spreads during 2022. 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 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.


	Less than 12 months		More than 12 months		Total
	Losses	Fair values	Losses	Fair values	Losses	Fair values
	($000 omitted)
Municipal	1	130	—	—	1	130
Corporate	588	42,231	456	12,014	1,044	54,245
Foreign	1,502	118,943	140	3,394	1,642	122,337
U.S. Treasury Bonds	8	477	17	508	25	985

	2,099	161,781	613	15,916	2,712	177,697

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.

As of ~~March 31,~~September 30, 2022, financial instruments measured at fair value on a recurring basis are summarized below:


		Level 1	Level 2	Fair value measurements		Level 1	Level 2	Fair value measurements
		($000 omitted)				($000 omitted)
Investments in securities:	Investments in securities:				Investments in securities:
Debt securities:	Debt securities:				Debt securities:
Municipal	Municipal	—	33,182	33,182	Municipal	—	30,119	30,119
Corporate	Corporate	—	248,050	248,050	Corporate	—	257,575	257,575
Foreign	Foreign	—	301,284	301,284	Foreign	—	278,511	278,511
U.S. Treasury Bonds	U.S. Treasury Bonds	—	6,880	6,880	U.S. Treasury Bonds	—	16,256	16,256
Equity securities	Equity securities	103,019	—	103,019	Equity securities	87,166	—	87,166
		103,019	589,396	692,415		87,166	582,461	669,627

As of December 31, 2021, financial instruments measured at fair value on a recurring basis are summarized below:


	Level 1	Level 2	Fair value measurements
	($000 omitted)
Investments in securities:
Debt securities:
Municipal	—	36,323	36,323
Corporate	—	258,102	258,102
Foreign	—	288,883	288,883
U.S. Treasury Bonds	—	6,464	6,464
Equity securities	89,442	—	89,442
	89,442	589,772	679,214

As of ~~March 31,~~September 30, 2022 and December 31, 2021, 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. Realized and unrealized gains and losses are detailed as follows:


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted)					($000 omitted)
Realized gains	Realized gains			1,594		170	Realized gains	183	2,615	3,460	10,695
Realized losses	Realized losses			(168)		(2,469)	Realized losses	(65)	(47)	(3,904)	(2,516)
Net unrealized investment gains recognized on equity securities still held at end of period				2,659		5,573
Net unrealized investment (losses) gains recognized on equity securities still held at end of period							Net unrealized investment (losses) gains recognized on equity securities still held at end of period	(6,492)	319	(13,750)	9,637
				4,085		3,274		(6,374)	2,887	(14,194)	17,816

~~Net realized~~Realized gains and losses during the first ~~quarter~~nine months of 2022 included realized losses of $3.6 million from disposals of businesses, a $1.0 million gain from an acquisition contingent liability adjustment, and a $1.0 million realized gain related to a sale of a title plant copy. ~~Net realized~~

Realized gains and losses during the ~~first~~third quarter 2021 included $2.5 million gain related to an acquisition contingent liability adjustment. Additionally, realized gains and losses for the first nine months of 2021 included $7.3 million of gains on sales of buildings and 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,
2022 2021
($000 omitted)
Net investment gains recognized on equity securities during the period 2,785 5,582
Less: Net realized gains on equity securities sold during the period 126 9
Net unrealized investment gains recognized on equity securities still held at end of period 2,659 5,573


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
	($000 omitted)
Net investment (losses) gains recognized on equity securities during the period	(6,489)	345	(13,284)	9,706
Less: Net realized gains on equity securities sold during the period	3	26	466	69
Net unrealized investment (losses) gains recognized on equity securities still held at end of period	(6,492)	319	(13,750)	9,637

Proceeds from sales of investments in securities are as follows:


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted)					($000 omitted)
Proceeds from sales of debt securities	Proceeds from sales of debt securities			17,280		2,936	Proceeds from sales of debt securities	19,123	4,854	47,405	19,425
Proceeds from sales of equity securities	Proceeds from sales of equity securities			370		115	Proceeds from sales of equity securities	62	128	549	301
Total proceeds from sales of investments in securities	Total proceeds from sales of investments in securities			17,650		3,051	Total proceeds from sales of investments in securities	19,185	4,982	47,954	19,726

NOTE 6

Goodwill. The summary of changes in goodwill is as follows.


		Title	Real Estate Solutions	Corporate and Other	Consolidated Total		Title	Real Estate Solutions	Corporate and Other	Consolidated Total
		($000 omitted)					($000 omitted)
Balances at December 31, 2021	Balances at December 31, 2021	583,944	325,543	15,350	924,837	Balances at December 31, 2021	583,944	325,543	15,350	924,837
Acquisitions	Acquisitions	19,947	—	—	19,947	Acquisitions	25,325	—	—	25,325
Purchase accounting adjustments	Purchase accounting adjustments	(782)	(910)	(10,536)	(12,228)	Purchase accounting adjustments	345	26,961	(14,450)	12,856

Balances at March 31, 2022		603,109	324,633	4,814	932,556
Disposals						Disposals	(392)	—	(900)	(1,292)
Balances at September 30, 2022						Balances at September 30, 2022	609,222	352,504	—	961,726

During the first ~~quarter~~nine months of 2022, goodwill recorded in the title segment was related to ~~an acquisition~~acquisitions of a title search and support services ~~provider,~~providers, while purchase accounting adjustments were primarily related to measurements of intangible assets and deferred taxes, and adjustments to provisional estimates within one year of the related acquisitions.

NOTE 7

Estimated title losses. A summary of estimated title losses for the ~~three~~nine months ended ~~March 31~~September 30 is as follows:


		2022		2021			2022		2021
		($000 omitted)					($000 omitted)
Balances at January 1	Balances at January 1	549,614		496,275		Balances at January 1	549,614		496,275
Provisions:	Provisions:					Provisions:
Current year	Current year	28,882		28,407		Current year	81,108		91,259
Previous policy years	Previous policy years	339		366		Previous policy years	(3)		1,428
Total provisions	Total provisions	29,221		28,773		Total provisions	81,105		92,687
Payments, net of recoveries:	Payments, net of recoveries:					Payments, net of recoveries:
Current year	Current year	(3,192)		(3,606)		Current year	(14,191)		(12,181)
Previous policy years	Previous policy years	(17,070)		(12,933)		Previous policy years	(55,964)		(40,745)
Total payments, net of recoveries	Total payments, net of recoveries	(20,262)		(16,539)		Total payments, net of recoveries	(70,155)		(52,926)

Effects of changes in foreign currency exchange rates	Effects of changes in foreign currency exchange rates	2,145		1,032		Effects of changes in foreign currency exchange rates	(13,350)		(1,485)
Balances at September 30	Balances at September 30	560,718		509,541		Balances at September 30	547,214		534,551
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 provisions	Current year provisions	4.0	%	4.5	%	Current year provisions	3.8	%	4.3	%
Total provisions	Total provisions	4.0	%	4.6	%	Total provisions	3.8	%	4.3	%

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 usually include a combination of time-based restricted stock 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 generally 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 an 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 ~~quarter~~nine months of 2022, the Company granted time-based and performance-based restricted stock units with an aggregate grant-date fair value ~~$10.5~~of $11.7 million ~~(163,000~~(183,000 units with an average grant price per unit of ~~$64.43)~~$63.68). During the first ~~quarter~~nine months of 2021, the aggregate grant-date fair values of restricted stock unit and stock option awards, respectively, were ~~$8.3~~$9.2 million ~~(155,000~~(170,000 units with an average grant price per unit of ~~$53.24)~~$53.70) and $1.3 million ~~(139,000~~(141,000 options with an average grant price per option of $9.24 and exercise strike price of $53.24).

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 units and shares were vested and stock options were exercised. In periods of loss, dilutive shares are excluded from the calculation of the diluted EPS and diluted EPS is computed in the same manner as basic EPS.

The calculation of the basic and diluted EPS is as follows:


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted, except per share)					($000 omitted, except per share)
Numerator:	Numerator:						Numerator:

Net income attributable to Stewart	Net income attributable to Stewart			57,897		54,236	Net income attributable to Stewart	29,434	88,663	148,991	237,718

Denominator (000):	Denominator (000):						Denominator (000):
Basic average shares outstanding	Basic average shares outstanding			26,960		26,736	Basic average shares outstanding	27,113	26,873	27,031	26,803
Average number of dilutive shares relating to options	Average number of dilutive shares relating to options			265		103	Average number of dilutive shares relating to options	124	190	181	160
Average number of dilutive shares relating to grants of restricted units and shares	Average number of dilutive shares relating to grants of restricted units and shares			219		145	Average number of dilutive shares relating to grants of restricted units and shares	134	175	147	127
Diluted average shares outstanding	Diluted average shares outstanding			27,444		26,984	Diluted average shares outstanding	27,371	27,238	27,359	27,090

Basic earnings per share attributable to Stewart	Basic earnings per share attributable to Stewart			2.15		2.03	Basic earnings per share attributable to Stewart	1.09	3.30	5.51	8.87

Diluted earnings per share attributable to Stewart	Diluted earnings per share attributable to Stewart			2.11		2.01	Diluted earnings per share attributable to Stewart	1.08	3.26	5.45	8.78

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,~~September 30, 2022, 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,~~September 30, 2022, 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.

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.

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. Prior to 2022, the Company reported 2two operating segments: the title insurance and related services (title) segment, and the ancillary services and corporate segment. Effective in the first quarter 2022, the Company began reporting 3three operating segments: the title segment, the real estate solutions segment, and the corporate and other segment. The new segment presentation is primarily due to the increased size of the real estate solutions operations (formerly, ancillary services operations) resulting from strategic acquisitions. Previously, the real estate solutions operations were combined in one segment with the Company's corporate operations, which consist of expenses of the parent holding company and other centralized administrative services departments.

Under the revised segment presentation, the composition of each of the title and real estate solutions segments is substantially unchanged, while the corporate and other segment primarily includes corporate operations and other businesses not related to title or real estate solutions operations. The title segment provides services needed to transfer title to property in a real estate transaction and includes services such as searching, abstracting, examining, closing and insuring the condition of the title to the property. In addition, the title segment includes home and personal insurance services, Internal Revenue Code Section 1031 tax-deferred exchanges, and digital customer engagement platform services. The real estate solutions segment primarily ~~include~~includes appraisal management services, online notarization and closing services, credit and real estate information services, and search and valuation services. ~~Also,~~Amounts for 2021 ~~amounts~~ were recast in the following table to conform with the new segment presentation.

Selected statement of income information related to these segments is as follows:


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted)					($000 omitted)
Title segment:	Title segment:						Title segment:
Revenues	Revenues			729,359		632,585	Revenues	646,607	772,246	2,135,000	2,157,949
Depreciation and amortization	Depreciation and amortization			6,141		4,314	Depreciation and amortization	7,467	4,556	21,098	13,579
Income before taxes and noncontrolling interest	Income before taxes and noncontrolling interest			82,783		77,089	Income before taxes and noncontrolling interest	51,837	119,147	228,212	321,907

Real estate solutions segment:	Real estate solutions segment:						Real estate solutions segment:
Revenues	Revenues			89,391		55,931	Revenues	69,738	64,425	241,993	178,549
Depreciation and amortization	Depreciation and amortization			6,796		1,894	Depreciation and amortization	6,204	4,376	19,381	8,155
Income before taxes	Income before taxes			6,791		2,657	Income before taxes	3,364	2,791	16,249	7,655

Corporate and other segment:	Corporate and other segment:						Corporate and other segment:
Revenues	Revenues			34,166		70	Revenues	54	56	36,394	7,623
Depreciation and amortization	Depreciation and amortization			811		222	Depreciation and amortization	396	212	1,624	660
Loss before taxes	Loss before taxes			(9,963)		(5,744)	Loss before taxes	(9,690)	(5,492)	(32,560)	(9,658)

Consolidated Stewart:	Consolidated Stewart:						Consolidated Stewart:
Revenues	Revenues			852,916		688,586	Revenues	716,399	836,727	2,413,387	2,344,121
Depreciation and amortization	Depreciation and amortization			13,748		6,430	Depreciation and amortization	14,067	9,144	42,103	22,394
Income before taxes and noncontrolling interest	Income before taxes and noncontrolling interest			79,611		74,002	Income before taxes and noncontrolling interest	45,511	116,446	211,901	319,904

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

Total revenues generated in the United States and all international operations are as follows:


		Three Months Ended March 31,			Three Months Ended September 30,				Nine Months Ended September 30,
				2022		2021		2022	2021	2022	2021
			($000 omitted)					($000 omitted)
United States	United States			809,204		652,582	United States	670,846	781,792	2,271,497	2,196,717
International	International			43,712		36,004	International	45,553	54,935	141,890	147,404
				852,916		688,586		716,399	836,727	2,413,387	2,344,121

1516

NOTE 13

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


		Three Months Ended March 31, 2022			Three Months Ended March 31, 2021				Three Months Ended September 30, 2022			Three Months Ended September 30, 2021
		Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount		Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax 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 investments	Change in net unrealized gains and losses on investments	(25,188)	(5,290)	(19,898)	(11,589)	(2,433)	(9,156)	Change in net unrealized gains and losses on investments	(11,292)	(2,371)	(8,921)	(2,764)	(581)	(2,183)
Reclassification adjustments for realized gains and losses on investments	Reclassification adjustments for realized gains and losses on investments	(234)	(49)	(185)	(184)	(39)	(145)	Reclassification adjustments for realized gains and losses on investments	(488)	(103)	(385)	(449)	(94)	(355)
		(25,422)	(5,339)	(20,083)	(11,773)	(2,472)	(9,301)		(11,780)	(2,474)	(9,306)	(3,213)	(675)	(2,538)

Foreign currency translation adjustments	Foreign currency translation adjustments	976	356	620	2,351	484	1,867	Foreign currency translation adjustments	(18,315)	(3,015)	(15,300)	(4,950)	(707)	(4,243)

Other comprehensive loss	Other comprehensive loss	(24,446)	(4,983)	(19,463)	(9,422)	(1,988)	(7,434)	Other comprehensive loss	(30,095)	(5,489)	(24,606)	(8,163)	(1,382)	(6,781)


	Nine Months Ended September 30, 2022			Nine Months Ended September 30, 2021
	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount	Before-Tax Amount	Tax Expense (Benefit)	Net-of-Tax Amount
	($000 omitted)
Net unrealized gains and losses on investments:
Change in net unrealized gains and losses on investments	(52,548)	(11,035)	(41,513)	(13,076)	(2,746)	(10,330)
Reclassification adjustment for realized gains and losses on investments	(870)	(183)	(687)	(1,162)	(244)	(918)
	(53,418)	(11,218)	(42,200)	(14,238)	(2,990)	(11,248)

Foreign currency translation adjustments	(26,668)	(3,807)	(22,861)	(839)	158	(997)

Other comprehensive loss	(80,086)	(15,025)	(65,061)	(15,077)	(2,832)	(12,245)

1617

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

MANAGEMENT’S OVERVIEW

~~First~~Third quarter 2022 overview. We reported net income attributable to Stewart of ~~$57.9~~$29.4 million ($~~2.11~~1.08 per diluted share) for the ~~first~~third quarter 2022, compared to net income attributable to Stewart of ~~$54.2~~$88.7 million ($~~2.01~~3.26 per diluted share) for the ~~first~~third quarter ~~2021, while first quarter 2022 pretax~~2021. Pretax income before noncontrolling interests for the third quarter 2022 was ~~$79.6~~$45.5 million compared to pretax income before noncontrolling interests of ~~$74.0~~$116.4 million for the ~~first quarter 2021.~~prior year quarter. The ~~first~~third quarter 2022 results included $6.4 million of pretax net realized and unrealized losses, primarily related to net unrealized losses on fair value changes of equity securities investments recorded in the title segment, while the third quarter 2021 results included ~~$4.1~~$2.9 million ~~and $3.3 million, respectively,~~ of pretax net realized and unrealized gains, ~~both of which were~~ primarily ~~related to net unrealized gains on fair value changes of equity securities investments.~~

~~As disclosed~~driven by an acquisition contingent liability adjustment recorded in ~~Note 12 to~~ the ~~condensed unaudited financial statements, we revised our segment presentation beginning with the first quarter 2022 using three reportable segments namely, title,~~ real estate solutions and corporate and other. This new segment presentation allows us to report distinct financial information relating to our real estate solutions operations (formerly, ancillary services operations). Under the revised segment presentation, the composition of each of the title and real estate solutions segments is substantially unchanged, while the corporate and other segment includes primarily our corporate operations, which consist of expenses of the parent holding company and other centralized administrative services departments. Accordingly, we recast the segments results for 2021 to conform to our new presentation.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 September 30
		2022		2021		% Change				2022		2021		% Chg

Operating revenues	Operating revenues	722.0		625.4		15	%		Operating revenues	647.9		767.9		(16)	%
Investment income	Investment income	3.6		3.9		(9)	%		Investment income	5.2		4.1		27	%
Net realized and unrealized gains		3.8		3.2		18	%
Net realized and unrealized (losses) gains									Net realized and unrealized (losses) gains	(6.4)		0.3		(2,042)	%
Pretax income	Pretax income	82.8		77.1		7	%		Pretax income	51.8		119.1		(56)	%
Pretax margin	Pretax margin	11.4	%	12.2	%				Pretax margin	8.0	%	15.4	%

~~Title~~The title segment’s pretax income in the first quarter 2022 increased by $5.7 million compared to the first quarter 2021, while pretax margin was 11.4% in the first quarter 2022 compared to 12.2% in the prior year quarter. Title operating revenues in the ~~first~~third quarter 2022 ~~improved $96.5~~decreased $120.0 million, or ~~15%~~16%, ~~as a result of revenue increases~~compared to the third quarter 2021, primarily due to volume declines in our direct title ~~operations of $38.3 million, or 14%,~~ and agency ~~operations of $58.2 million, or 17%.~~operations. Overall segment operating expenses in the ~~first~~third quarter 2022 ~~increased $91.1~~decreased $58 million, or ~~16%~~9%, compared to the prior year quarter, primarily ~~driven by 17% increases in both~~due to lower agency retention and title loss expenses, consistent with lower title revenues, and ~~combined title~~lower total employee costs and other operating ~~expenses, compared to the prior year quarter.~~expenses. Average independent agency remittance rate in the ~~first~~third quarter 2022 was ~~18.1%,~~17.6% compared to 17.9% in the ~~prior year quarter.~~third quarter 2021. As a percentage of ~~title~~operating revenues, combined title employee costs and other operating expenses ~~was 38.8%~~were 43.4% in the ~~first~~third quarter 2022 compared to ~~38.1%~~37.5% in the ~~first~~third quarter ~~2021.~~2021, primarily due to lower revenues in the third quarter 2022.

Title loss expense in the ~~first~~third quarter 2022 ~~was $29.2~~decreased by $4.9 million, ~~which was slightly higher than $28.8 million in~~or 16%, compared to the ~~first~~prior year quarter, ~~2021,~~ primarily due to ~~higher~~lower title ~~revenues which was partially offset by favorable claims experience.~~revenues. As a percentage of title revenues, ~~the~~ title loss expense in the ~~first~~third quarter 2022 was ~~4.0%~~3.9% compared to ~~4.6%~~4.0% in the ~~prior~~third quarter 2021. For the full year ~~quarter.~~2022, we anticipate our title losses will be approximately 4% of title revenues.

The segment’s net realized and unrealized losses and gains in the ~~first quarter~~third quarters 2022 ~~primarily included $2.7 million of net unrealized gains on fair value changes of equity securities investments, while net realized~~ and ~~unrealized gains in the first quarter~~ 2021, respectively, were ~~also~~ primarily related to ~~net unrealized gains on~~ fair value changes of equity securities investments. Investment income in the ~~first~~third quarter 2022 ~~was slightly lower~~increased compared to the prior year quarter, primarily ~~due to~~as a result of higher interest income driven by the ~~higher mix of lower~~increased interest rate ~~investments~~environment in the ~~first~~third quarter 2022.

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


		For the Three Months Ended March 31						For the Three Months Ended September 30
		2022		2021		% Change				2022		2021		% Chg

Operating revenues	Operating revenues	89.4		55.9		60	%		Operating revenues	69.7		61.9		13	%
Net realized gains									Net realized gains	—		2.5		(100)	%
Pretax income	Pretax income	6.8		2.7		156	%		Pretax income	3.4		2.8		21	%
Pretax margin	Pretax margin	7.6	%	4.8	%				Pretax margin	4.8	%	4.3	%

~~The segment’s pretax~~

Pretax income for the segment improved ~~to $6.8 million~~ in the ~~first~~third quarter 2022, compared to ~~$2.7 million in~~ the prior year quarter, primarily due to ~~higher operating~~$7.8 million, or 13%, net increased revenues, ~~resulting~~driven by revenues from ~~recent acquisitions.~~fourth quarter 2021 acquisitions, partially offset by lower revenues from appraisal management and notary solutions operations due to reduced market activity. Total ~~segment~~ operating expenses increased ~~$29.3~~$4.7 million, or ~~55%~~8%, ~~primarily due~~driven by higher employee costs related to increased employee count resulting from acquisitions and higher purchased intangible asset amortization expenses in the ~~first~~third quarter 2022 compared to the prior year quarter. Total intangible asset amortization expenses in the ~~first~~third quarters 2022 and 2021 were ~~$6.4~~$5.8 million and ~~$1.7~~$4.2 million, respectively.

~~Summary results of~~In regard to the corporate and other segment, ~~are as follows ($ in millions):~~

For the Three Months
Ended March 31
2022 2021 % Change
Operating revenues 33.9 — 100 %
Realized gains 0.3 0.1 347 %
Pretax loss (10.0) (5.7) (73) %

~~Segment operating revenues in the first quarter 2022 were related to a recently acquired real estate brokerage company, which was subsequently sold in the second quarter 2022. Net~~net expenses attributable to corporate operations in the ~~first~~third quarter 2022 increased $4.2 million, or 76%, to ~~$8.9~~$9.7 million, compared to ~~$5.8~~$5.5 million in the ~~prior year~~third quarter 2021, primarily ~~due to increased~~as a result of higher interest expense resulting from ~~our recently~~debt issued ~~debt. Excluding~~in the ~~impact~~fourth quarter 2021.

Effective October 1, 2022, Stewart closed on the acquisition of FNC Title Services, LLC and its affiliates (FNC Group), which provides title insurance and settlement services to the ~~recently sold real estate brokerage company,~~reverse mortgage industry on a nationwide basis. The FNC Group operates from offices located in the ~~segment’s pretax loss this quarter would have been $8.6 million.~~states of Alabama, Louisiana, Maryland, Nevada, Texas and Utah.

CRITICAL ACCOUNTING ESTIMATES

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

Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the ~~three~~nine months ended ~~March 31,~~September 30, 2022, we made no material changes to our critical accounting estimates as previously disclosed in Management’s Discussion and Analysis in the 2021 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 real estate solutions operations include appraisal management services, online notarization and closing services, credit and real estate information services, and search and valuation services. The corporate and other segment includes our parent holding company expenses and certain enterprise-wide overhead costs, along with other businesses not related to title or real estate solutions operations.

Factors affecting revenues. The principal factors that contribute to changes in our operating revenues 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 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 typically the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of year. On average, refinance title premium rates are 60% of the premium rates for a similarly priced sale transaction.

RESULTS OF OPERATIONS

Comparisons of our results of operations for the three and nine months ended ~~March 31,~~September 30, 2022 with the corresponding 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 as of ~~March 31,~~September 30, 2022. We also use information from our direct operations.

Operating environment. Existing home sales in ~~March~~September 2022, on a seasonally-adjusted basis, ~~declined 4%~~decreased for the eighth consecutive month, decreasing 2% and 3%24% compared to August 2022 and a year ago, ~~and February 2022,~~ respectively. According to NAR, the ~~decline in~~ existing homes sales decline was primarily due to ~~slower demand, impacted~~the continuous rise in interest rates, accompanied by ~~rising mortgage rates and higher inflation affecting consumer purchasing power. Median and average~~lower housing inventory levels. Existing home prices continued to ~~rise, increasing 15% and 10%, respectively,~~climb, with the median price in ~~March~~September 2022 being 8% higher compared to a year ago, which marked ~~the 121st~~a record 127th consecutive month of year-over-year median home price increases. ~~With regard~~In relation to new residential construction, U.S. housing starts in ~~March~~September 2022 ~~improved 4% from March~~were 8% lower compared to both August 2022 and September 2021, while ~~newly issued~~newly-issued building permits in ~~March~~September 2022 were 7%1% higher than August 2022, but 3% lower compared to a year ago. ~~Both March 2022 housing starts and issued building permits were comparable to February 2022.~~

According to Fannie Mae and MBA (averaged), ~~one-to-four~~total single family mortgage originations during the ~~first~~third quarter 2022 decreased ~~37%~~55% to approximately ~~$732~~$494 billion compared to the ~~first~~third quarter 2021, primarily ~~driven by~~due to lower refinancing and purchase transactions resulting from the ~~expected decline in refinancing originations as~~elevated interest ~~rates continue to rise as a result of high inflation rates~~rates. Refinancing and ~~related federal monetary actions. However, this decline was partially offset by an 11% improvement in~~ purchase originations during the ~~first~~third quarter 2022 were 84% and 22% lower compared to ~~last year.~~ the third quarter 2021.

As of ~~March~~September 2022, the average 30-year fixed interest rate is expected to average 5.3% for 2022 ~~is 4.2%, which is significantly higher than~~compared to the 3.1% average interest rate observed during 2021. ~~Second~~For the fourth quarter 2022, it is expected that total mortgage originations ~~are expected to~~will be ~~32%~~50% lower, ~~than last year's second quarter, with a 10% increase in purchase originations softening the impact of the continued drop in refinancing volumes. However, on a seasonally-adjusted basis,~~while existing and new home sales ~~are expected to improve 1%~~will decline 23% and ~~17%~~21%, respectively, ~~in the second quarter 2022~~ compared to the ~~second~~fourth quarter 2021.

Title revenues. Direct title revenue information is presented below:


		Three Months Ended March 31,			Three Months Ended September 30,								Nine Months Ended September 30,
				2022		2021		Change	% Change			2022	2021		Change	% Chg		2022	2021	Change	% Chg
			($ in millions)				($ in millions)							($ in millions)
Non-commercial	Non-commercial										Non-commercial
Domestic	Domestic			220.2		216.0		4.2	2	%	Domestic	204.4	249.1		(44.7)	(18)	%	659.1	709.1	(50.0)	(7)	%
International	International			31.5		28.8		2.7	9	%	International	33.8	44.2		(10.4)	(24)	%	106.6	118.8	(12.2)	(10)	%
				251.7		244.8		6.9	3	%		238.2	293.3		(55.1)	(19)	%	765.7	827.9	(62.2)	(8)	%
Commercial:	Commercial:										Commercial:
Domestic	Domestic			56.4		29.2		27.2	93	%	Domestic	61.0	64.5		(3.5)	(5)	%	184.5	149.2	35.3	24	%
International	International			9.7		5.5		4.2	76	%	International	8.2	8.3		(0.1)	(1)	%	26.2	22.0	4.2	19	%
				66.1		34.7		31.4	90	%		69.2	72.8		(3.6)	(5)	%	210.7	171.2	39.5	23	%
Total direct title revenues	Total direct title revenues			317.8		279.5		38.3	14	%	Total direct title revenues	307.4	366.1		(58.7)	(16)	%	976.4	999.1	(22.7)	(2)	%

~~Direct title~~Non-commercial revenues ~~increased~~declined in the third quarter and first ~~quarter~~nine months of 2022, compared to the ~~first quarter~~same periods in 2021, ~~as a result of overall revenue growth in both non-commercial and commercial operations. Non-commercial revenues increased~~ primarily due to ~~improved residential~~lower purchase ~~transactions~~ and ~~scale, which were partially offset by lower~~ refinancing transactions driven by the high mortgage interest rate environment. Compared to the same periods in 2021, combined purchase and refinancing orders closed decreased 42% and 32% in the third quarter and first ~~quarter 2022. The lower refinancing volume was expected and consistent with the housing market's trend~~nine months of ~~declining refinancing origination volume, which is primarily influenced by rising interest rates. Purchase orders closed improved 4%,~~2022, respectively, while average residential fee per file increased ~~37%~~38% to ~~approximately $2,600~~$3,300 and 36% to $2,900 in the third quarter and first ~~quarter~~nine months of 2022, ~~compared to the first quarter 2021,~~respectively, primarily due to the higher mix of purchase ~~transactions.~~transactions and higher average home prices.

~~Commercial~~Domestic commercial revenues ~~increased~~in the third quarter 2022 decreased primarily due to reduced transaction size, while revenues in the first ~~quarter~~nine months of 2022 ~~compared to the prior year quarter,~~improved primarily due to ~~growth in~~increased commercial transaction size and ~~volume.~~volume, compared to the same periods in 2021. Domestic commercial orders closed ~~improved 31%,~~in third quarter and first nine months of 2022 were 6% and 12% higher, respectively, while average domestic commercial fee per file ~~increased 47%~~decreased 11% to ~~$12,700~~$13,700 in the third quarter 2022 and increased 11% to $13,200 in first ~~quarter~~nine months of 2022, compared to the ~~first quarter~~same periods in 2021.

Total international revenues in the third quarter and first ~~quarter~~nine months of 2022 ~~increased $6.9~~decreased by $10.5 million, or 20%, and $8.0 million, or 6%, compared to the same periods in 2021, primarily due to ~~improved~~lower transaction ~~volumes~~volume in our Canadian operations ~~compared to~~and the ~~prior year quarter.~~

weaker foreign currency exchange rates against the U.S. dollar.

Orders information for the three and nine months ended ~~March 31~~September 30 is as follows:


		Three Months Ended March 31,			Three Months Ended September 30,							Nine Months Ended September 30,
			2022	2021		Change	% Change			2022	2021	Change	% Chg		2022	2021	Change	% Chg
Opened Orders:	Opened Orders:								Opened Orders:
Commercial	Commercial		6,042	3,569		2,473	69	%	Commercial	4,456	4,461	(5)	—	%	16,028	13,635	2,393	18	%
Purchase	Purchase		68,498	70,789		(2,291)	(3)	%	Purchase	60,646	73,558	(12,912)	(18)	%	201,228	220,979	(19,751)	(9)	%
Refinance	Refinance		40,574	81,750		(41,176)	(50)	%	Refinance	20,047	64,374	(44,327)	(69)	%	85,574	205,834	(120,260)	(58)	%
Other	Other		1,642	1,810		(168)	(9)	%	Other	1,825	1,762	63	4	%	4,546	5,254	(708)	(13)	%
Total	Total		116,756	157,918		(41,162)	(26)	%	Total	86,974	144,155	(57,181)	(40)	%	307,376	445,702	(138,326)	(31)	%

Closed Orders:	Closed Orders:								Closed Orders:
Commercial	Commercial		4,431	3,377		1,054	31	%	Commercial	4,444	4,204	240	6	%	14,007	12,538	1,469	12	%
Purchase	Purchase		47,326	45,483		1,843	4	%	Purchase	46,592	56,570	(9,978)	(18)	%	149,272	160,763	(11,491)	(7)	%
Refinance	Refinance		34,487	65,666		(31,179)	(47)	%	Refinance	14,343	47,549	(33,206)	(70)	%	71,507	165,843	(94,336)	(57)	%
Other	Other		1,640	1,175		465	40	%	Other	1,419	1,139	280	25	%	4,778	3,492	1,286	37	%
Total	Total		87,884	115,701		(27,817)	(24)	%	Total	66,798	109,462	(42,664)	(39)	%	239,564	342,636	(103,072)	(30)	%

Gross revenues from independent agency operations in the ~~first~~third quarter 2022 ~~increased $58.2~~declined $61.3 million, or ~~17%~~15%, compared to the ~~prior year~~third quarter ~~similar~~2021 primarily due to the ~~improvement seen~~effect of higher mortgage interest rates on the market in ~~our direct title operations.~~the third quarter 2022. Gross agency revenues during the first nine months of 2022 were $16.5 million, or 2%, higher than the same period in 2021 primarily due to increased market activity during the early part of 2022. Agency revenues, net of retention, ~~improved $11.0~~decreased $11.9 million, or ~~18%~~17%, in the ~~first~~third quarter 2022 ~~from~~and were flat in the first ~~quarter~~nine months of 2022 compared to the same periods in 2021, generally driven by changes in ~~line with increased~~ gross agency revenues. Refer further to the "Retention by agencies" discussion under Expenses below.

Real estate solutions and other revenues. Real estate solutions and other revenues are comprised of revenues generated by our real estate solutions operations and, for the first half of 2022, by a ~~recently acquired~~ real estate brokerage company ~~(which was subsequently sold during the second quarter 2022).~~which we recently sold. These revenues increased ~~by $67.3~~$7.8 million, or ~~120%~~13%, and $105.1 million, or 60%, in the third quarter and first ~~quarter~~nine months of 2022, respectively, compared to the ~~first quarter~~same periods in 2021, primarily due to ~~$33.4 million~~ additional revenues from acquisitions completed in the fourth quarter 2021, which were partially offset by reduced revenues from our ~~real estate~~appraisal management and notary solutions operations ~~which was driven by recent acquisitions of credit and information services companies, and $33.9 million of revenues from the subsequently-sold real estate brokerage company.~~due to reduced market activity.

Investment income. Investment income increased $1.1 million, or 27%, and $2.4 million, or 18%, in the third quarter and first ~~quarter~~nine months of 2022, ~~decreased $0.3 million, or 8%,~~respectively, primarily due to ~~the~~ higher ~~mix of lower~~ interest ~~rate bond~~income driven by increased interest rates and higher dividend income from investments in ~~the first quarter~~ 2022, compared to the ~~prior year quarter. This was partially offset by higher dividend income resulting from increased investments~~same periods in ~~equity securities in the first quarter 2022 compared to the first quarter~~ 2021.

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

Expenses. An analysis of expenses is shown below:


		Three Months Ended March 31,				Three Months Ended September 30,									Nine Months Ended September 30,
				2022			2021		Change	% Change			2022		2021			Change*	% Chg		2022		2021		Change*	% Chg
			($ in millions)					($ in millions)									($ in millions)

Amounts retained by agencies	Amounts retained by agencies			331.2			283.9		47.3	17	%	Amounts retained by agencies	280.5		329.9			(49.4)	(15	%)	951.6		935.9		15.7	2	%
As a % of agency revenues	As a % of agency revenues			81.9	%		82.1	%				As a % of agency revenues	82.4	%	82.1	%					82.4	%	82.2	%
Employee costs	Employee costs			205.0			169.4		35.6	21	%	Employee costs	195.1		197.6			(2.5)	(1	%)	610.3		555.5		54.8	10	%
As a % of operating revenues	As a % of operating revenues			24.3	%		24.9	%				As a % of operating revenues	27.2	%	23.8	%					25.3	%	24.0	%
Other operating expenses	Other operating expenses			189.8			125.5		64.3	51	%	Other operating expenses	151.2		152.6			(1.4)	(1	%)	503.0		415.9		87.1	21	%
As a % of operating revenues	As a % of operating revenues			22.5	%		18.4	%				As a % of operating revenues	21.1	%	18.4	%					20.9	%	18.0	%
Title losses and related claims	Title losses and related claims			29.2			28.8		0.4	1	%	Title losses and related claims	25.5		30.3			(4.9)	(16	%)	81.1		92.7		(11.6)	(12	%)
As a % of title revenues	As a % of title revenues			4.0	%		4.6	%				As a % of title revenues	3.9	%	4.0	%					3.8	%	4.3	%

*Amounts change may not add due to rounding.

Retention by agencies. Amounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged ~~81.9%~~82.4% in both the third quarter and first ~~quarter~~nine months of 2022 as compared to 82.1% and 82.2%, respectively, in the ~~first quarter~~same periods in 2021 primarily due to higher revenues generated by our agents from higher ~~remitting~~retention states. 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 ~~increased $35.6~~decreased $2.5 million, or ~~21%~~1%, in the third quarter 2022 and increased $54.8 million, or 10%, in the first ~~quarter~~nine months of 2022, compared to the ~~prior year~~same periods in 2021. Employee costs decreased in the third quarter 2022 due to reduced incentive compensation and temporary labor costs driven by lower volumes, partially offset by higher salaries and employee benefits primarily resulting from acquisitions. Employee costs increased in the first nine months of 2022 primarily due to higher salaries and employee benefits resulting from increased employee counts driven by ~~a 23% increase in average~~acquisitions. Average employee counts ~~resulting from acquisitions.~~in the third quarter and first nine months of 2022 increased 16% and 21%, respectively, compared to the same periods in 2021. Employee costs, as a percentage of total operating revenues, ~~improved slightly to 24.3%~~were higher at 27.2% and 25.3% in the third quarter and first ~~quarter~~nine months of 2022, respectively, compared to ~~24.9%~~23.8% and 24.0% in the ~~first quarter 2021.~~same periods in 2021, primarily due to lower revenues in 2022.

~~Employee~~Compared to the same periods in 2021, employee costs in the title segment decreased $7.2 million, or 4%, in the third quarter 2022 and increased $33.9 million, or 6%, in the first nine months of 2022 due to the factors mentioned above. Employee costs in the real estate solutions segment increased ~~$25.6~~$4.8 million, or ~~16%~~63%, and ~~$6.5~~$16.5 million, or ~~94%~~75%, in the third quarter and first nine months of 2022, respectively, primarily due to acquisitions. During the third quarter and first nine months of 2022, average employee counts in the title segment increased 12% and 17%, respectively, while average employee counts in the ~~first quarter 2022~~real estate solutions segment increased 64% and 68%, respectively, compared to the ~~prior year quarter, primarily due to higher average employee counts, principally from recent acquisitions.~~same periods in 2021. Employee costs in the corporate and other segment in the third quarter 2022 were flat, and increased ~~$3.5~~$4.4 million, or ~~116%~~49%, in the first nine months of 2022, compared to the same periods in 2021, primarily due to the ~~subsequently-sold~~acquired real estate brokerage company which ~~was acquired during~~we sold in the ~~fourth~~second quarter ~~2021.~~2022.

As of ~~March 31,~~September 30, 2022, we had approximately ~~7,300~~7,400 employees compared to approximately ~~6,100~~6,600 employees as of ~~March 31,~~September 30, 2021.

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 service expenses related to real estate solutions 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.

Consolidated other operating expenses in the ~~first~~third quarter 2022 ~~increased $64.3~~decreased $1.4 million, ~~or 51%~~1%, compared to the ~~prior year~~third quarter 2021, primarily ~~as a result~~due to decreased costs tied to lower title and appraisal management and notary services revenues, partially offset by higher technology and office closure costs. Consolidated other operating expenses in the first nine months of 2022 increased $87.1 million, or 21%, compared to the same period in 2021, primarily due to higher service expenses tied to increased ~~revenues from~~ real estate solutions ~~operations,~~revenues, higher technology, marketing and travel costs, and increased ~~outside~~rent and other occupancy expenses resulting from acquisitions, partially offset by lower title-related expenses related to decreased title ~~search and premium tax expenses on higher title revenue.~~ revenues.

Total variable costs ~~increased $49.2~~decreased $15.7 million, or ~~64%~~16%, in the third quarter 2022 primarily due to lower title and appraisal management and notary services revenues, while these costs increased $44.8 million, or 17%, in the first nine months of 2022 primarily driven by acquisitions in the fourth quarter ~~2022, mainly due to higher services expenses from our real estate solutions operations and increased outside search and premium tax expenses from direct title operations.~~2021, which were partially offset by lower volumes in existing businesses. Total costs that are fixed in nature increased ~~$11.5~~$8.6 million, or ~~30%~~21%, and $29.0 million, or 25%, in the third quarter and first ~~quarter~~nine months of 2022, respectively, primarily due to higher technology costs, ~~increased~~ rent and occupancy expenses, ~~mainly related to acquisitions~~ and ~~increased~~ insurance costs. Independent costs increased ~~$3.5~~$5.7 million, or ~~35%~~47%, and $13.3 million, or 41%, in the third quarter and first ~~quarter~~nine months of 2022, respectively, primarily due to office closure costs and higher marketing and travel costs ~~partially offset by lower office closure expenses and litigation-related accruals.~~due to increased activity following the pandemic period.

As a percentage of total operating revenues, consolidated other operating expenses in the third quarter and first ~~quarter~~nine months of 2022, increased to ~~22.5%~~21.1% and 20.9%, respectively, compared to 18.4% and 18.0% in the ~~prior year quarter,~~same periods in 2021, primarily due to lower title operating revenues and the increased size of our real estate solutions operations which typically have higher other operating expenses.

Title losses. Provisions for title losses, as a percentage of title operating revenues, were ~~4.0%~~3.9% and 3.8% for the third quarter and first ~~quarter~~nine months of 2022, compared to ~~4.6%~~4.0% and 4.3% for the third quarter and first ~~quarter~~nine months of 2021. Title loss expense in the third quarter and first ~~quarter~~nine months of 2022 ~~was $29.2~~decreased $4.9 million, ~~which was slightly higher than $28.8~~or 16%, and $11.6 million, inor 12%, respectively, compared to the ~~first quarter~~same periods in 2021, primarily due to ~~higher~~favorable claims experience and lower title revenues ~~which was partially offset by favorable claims experience.~~during 2022. 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 September 30,								Nine Months Ended September 30,
				2022		2021		Change	% Change			2022	2021	Change	% Chg		2022	2021	Change	% Chg
			($ in millions)				($ in millions)							($ in millions)
Provisions – known claims:	Provisions – known claims:										Provisions – known claims:
Current year	Current year			4.8		2.2		2.6	118	%	Current year	4.4	4.2	0.2	5	%	12.9	10.8	2.1	19	%
Prior policy years	Prior policy years			14.9		13.3		1.6	12	%	Prior policy years	25.3	13.8	11.5	83	%	56.9	41.5	15.4	37	%
				19.7		15.5		4.2	27	%		29.7	18.0	11.7	65	%	69.8	52.3	17.5	33	%
Provisions – IBNR	Provisions – IBNR										Provisions – IBNR
Current year	Current year			24.1		26.2		(2.1)	(8)	%	Current year	21.0	25.9	(4.9)	(19)	%	68.2	80.5	(12.3)	(15)	%
Prior policy years	Prior policy years			0.3		0.4		(0.1)	(25)	%	Prior policy years	0.1	0.2	(0.1)	(50)	%	—	1.4	(1.4)	(100)	%
				24.4		26.6		(2.2)	(8)	%		21.1	26.1	(5.0)	(19)	%	68.2	81.9	(13.7)	(17)	%
Transferred from IBNR to known claims	Transferred from IBNR to known claims			(14.9)		(13.3)		(1.6)	12	%	Transferred from IBNR to known claims	(25.3)	(13.8)	(11.5)	83	%	(56.9)	(41.5)	(15.4)	37	%
Total provisions	Total provisions			29.2		28.8		0.4	1	%	Total provisions	25.5	30.3	(4.8)	(16)	%	81.1	92.7	(11.6)	(13)	%

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.

Current year IBNR provisions in the third quarter and first ~~quarter~~ nine months of 2022 decreased ~~$2.1~~$4.9 million, or 8%19%, and $12.3 million, or 15%, respectively, compared to the same ~~period~~periods in 2021, due to ~~the effect~~ ~~of lowered provisioning rates~~lower title loss provisions resulting from favorable claims ~~experience.~~experience and lower title revenues. As a percentage of title operating revenues, provisions - IBNR for the current policy year were ~~3.3%~~3.2% for both the third quarter and ~~4.2%~~first nine months of 2022, compared to 3.4% and 3.8% in the third quarter and first ~~quarters 2022 and~~nine months of 2021, respectively. Cash claim payments in the third quarter and first nine months of 2022 increased ~~$3.7~~$14.6 million, or ~~23%~~87%, and $17.2 million, or 33%, respectively, primarily as a result of increased large claim payments in ~~the first quarter~~ 2022 compared to the ~~prior year quarter, primarily due to payments on large claims.~~same periods in 2021. We continue to manage and resolve large claims prudently and in keeping with our commitments to our 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, 2022	December 31, 2021		September 30, 2022	December 31, 2021
		($ in millions)			($ in millions)
Known claims	Known claims	75.4	75.9	Known claims	75.6	75.9
IBNR	IBNR	485.3	473.7	IBNR	471.6	473.7
Total estimated title losses	Total estimated title losses	560.7	549.6	Total estimated title losses	547.2	549.6

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 substantially paid out within seven 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 ~~$7.3~~$4.9 million, or ~~114%~~54%, and $19.7 million, or 88%, in the third quarter and first ~~quarter~~nine months of 2022 compared to the ~~first quarter~~same periods in 2021, primarily due to ~~recent~~ acquisitions, which generated ~~$6.2 million~~ higher ~~purchased~~ intangible asset amortization expenses of $2.4 million and ~~$0.7~~$14.6 million, respectively, and higher ~~fixed asset~~ depreciation ~~expenses.~~expense resulting from increased capital expenditures.

Income taxes. Our effective tax rates, based on income before taxes and after deducting income attributable to noncontrolling interests, were ~~23.4%~~27% and 25% in the third quarter and first ~~quarter~~nine months of 2022, respectively, compared to ~~23.7%~~21% and 23% in the ~~first~~corresponding periods in 2021. The higher rates in 2022 were primarily due to third quarter ~~2021. There were no significant~~ discrete adjustments related to the annual filing of our federal income tax ~~items during both periods.~~return, which resulted in an additional income tax expense compared to an income tax benefit 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,~~September 30, 2022, our total cash and investments, including amounts reserved pursuant to statutory requirements aggregated ~~$1.1~~$1.01 billion. Of our total cash and investments at ~~March 31,~~September 30, 2022, ~~$709.6~~$637.3 million ($~~440.7~~340.7 million, net of statutory reserves) was held in the United States and the rest internationally (principally in Canada).

As a holding company, the parent company is funded principally by cash from its subsidiaries' earnings in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. Cash held at the parent company and its unregulated subsidiaries (which totaled ~~$65.7~~$28.3 million at ~~March 31,~~September 30, 2022) is available for funding the parent company's operating expenses, interest payments on debt and dividend payments to common stockholders. The parent company also receives distributions from Stewart Title Guaranty Company (Guaranty), its regulated title insurance underwriter, to meet cash requirements for acquisitions and other strategic investments.

A substantial majority of our consolidated cash and investments as of ~~March 31,~~September 30, 2022 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 uses its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and real estate solutions 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 ~~$530.0~~$541.0 million and $523.5 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately ~~$20.3~~$10.5 million and $41.4 million at ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. As of ~~March 31,~~September 30, 2022, our known claims reserve totaled ~~$75.4~~$75.6 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled ~~$485.3~~$471.6 million. In addition to this, we had cash and investments (excluding equity method investments) of ~~$373.7~~$330.3 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 Texas Department of Insurance (TDI) must be notified of any dividend declared, and any dividend in excess of the greater of the statutory net operating income or 20% of surplus (approximately $210.1 million as of December 31, 2021) 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 nine months ended September 30, 2022 and 2021, Guaranty paid no dividends of $70.0 million and $158.9 million, respectively, to ~~its~~the parent ~~during the three months ended March 31, 2022, compared to $40.0 million paid during the three months ended March 31, 2021.~~company.

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,			Nine Months Ended September 30,
		2022	2021		2022	2021
		($ in millions)			($ in millions)
Net cash provided by operating activities	Net cash provided by operating activities	34.9	47.4	Net cash provided by operating activities	167.0	257.3
Net cash used by investing activities	Net cash used by investing activities	(65.2)	(73.6)	Net cash used by investing activities	(225.3)	(200.7)
Net cash (used) provided by financing activities	Net cash (used) provided by financing activities	(58.6)	6.2	Net cash (used) provided by financing activities	(98.1)	120.2

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

Net cash provided by operations in the first ~~quarter~~nine months of 2022 decreased $90.3 million compared to ~~$34.9 million from $47.4 million~~the same period in ~~the prior year quarter,~~2021, primarily due to lower net income and higher payments of previously-outstanding operating liabilities ~~outstanding at December 31, 2021, partially offset by a higher net income~~ in ~~the first quarter~~ 2022. 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 rising mortgage interest and inflation rates, specifically focusing on lowering unit costs of production and improving operating margins in our direct title and real estate solutions operations. 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.

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 businesses. During the first ~~quarter~~nine months of 2022, total proceeds from securities investments sold and matured were ~~$33.6~~$76.7 million, compared to ~~$45.9~~$88.4 million during the ~~prior year quarter.~~first nine months of 2021. Cash used for purchases of securities investments was ~~$66.9~~$165.1 million during the first ~~quarter~~nine months of 2022 compared to ~~$47.9~~$111.1 million during the same period in 2021.

We used ~~$17.9~~$102.9 million of net cash for ~~an acquisition~~acquisitions in the title segment during the first ~~quarter~~nine months of 2022, compared to net cash used of ~~$52.6~~$149.9 million for ~~several~~ acquisitions in the title and real estate solutions ~~segment~~segments and $16.1 million for acquiring an equity method investment in a title company during the ~~prior year quarter.~~same period in 2021. We used ~~$12.3~~$35.3 million and ~~$5.7~~$26.2 million of cash for purchases of property and equipment during the first ~~quarter~~nine months of 2022 and 2021, 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 ~~$445.9~~$446.4 million and ~~$1.32~~$1.36 billion, respectively, as of ~~March 31,~~September 30, 2022. During the first ~~quarter~~nine months of 2022 and 2021, payments on notes payable of ~~$37.3~~$73.6 million and ~~$154.7~~$157.3 million, respectively, and notes payable additions of ~~$0.1~~$38.0 million and ~~$154.0~~$156.8 million, respectively, were related to short-term loan agreements in connection with our Section 1031 tax-deferred property exchange (Section 1031) business.

At ~~March 31,~~September 30, 2022, our line of credit facility was fully available, while our debt-to-equity and debt-to-capitalization ratios, excluding our Section 1031 notes, were approximately ~~34%~~33% and 25%, respectively. During the first ~~quarter~~nine months of 2022, we paid total dividends of ~~$10.1~~$32.5 million ($~~0.375~~1.20 per common share), compared to the total dividends paid in the ~~first quarter~~same period in 2021 of ~~$8.8~~$26.6 million ($~~0.33~~0.99 per common share).

***********

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 increasing mortgage interest and inflation rates. 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.

Other comprehensive 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 ~~quarter~~nine months of 2022, net unrealized investment losses of ~~$20.1~~$42.2 million, net of taxes, which increased our other comprehensive loss, were primarily related to net decreases in the fair values of our corporate and foreign bond securities investments, primarily driven by the effect of higher interest rates and credit ~~spreads.~~spreads in 2022. During the first ~~quarter~~nine months of 2021, net unrealized investment losses of ~~$9.3~~$11.2 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.

Changes in foreign currency exchange rates, primarily related to our Canadian and United Kingdom operations, ~~reduced~~increased our other comprehensive loss, net of taxes, by ~~$0.6~~$22.9 million and $1.0 million in the first ~~quarter 2022; while they decreased our other comprehensive loss, net~~nine months of ~~taxes, by $1.9 million in the prior year quarter.~~2022 and 2021, respectively.

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 15 in our 2021 Form 10-K.

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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 following:

•the volatility of economic conditions;

•adverse changes in the level of real estate activity;

•changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing;

•our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems;

•our ability to prevent and mitigate cyber risks;

•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;

•our ability to realize anticipated benefits of our previous acquisitions;

•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~~

The above 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 2021 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,~~September 30, 2022 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 2021 Form 10-K.

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,~~September 30, 2022, 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,~~September 30, 2022, 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 2021 Form 10-K.

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 2021 Form 10-K. There have been no material changes to our risk factors since our 2021 Form 10-K.

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

There were no repurchases of our Common Stock during the ~~three~~nine months ended ~~March 31,~~September 30, 2022, except for repurchases of approximately ~~35,600~~48,800 shares (aggregate purchase price of approximately ~~$2.5~~$3.2 million) related to the statutory income tax withholding on the vesting of restricted unit grants to executives and senior management employees.

Item 5. Other Information

Book value per share. Our book value per share was ~~$48.58~~$49.59 and $47.67 as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively. As of ~~March 31,~~September 30, 2022, our book value per share was based on approximately ~~$1.31~~$1.34 billion of stockholders’ equity attributable to Stewart and ~~27,015,078~~27,123,388 shares of Common Stock outstanding. As of December 31, 2021, our book value per share was based on approximately $1.28 billion of stockholders’ equity attributable to Stewart and 26,893,430 shares of Common Stock outstanding.

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Item 6. Exhibits


Exhibit


3.1	—	Restated Certificate of Incorporation of the Registrant, dated April 28, 2016 (incorporated by reference in this report from Exhibit 3.1 of the Current Report on Form 8-K filed April 29, 2016)
3.2	—	Third Amended and Restated By-Laws of the Registrant, as of April 27, 2016 (incorporated by reference in this report from Exhibit 3.2 of the Current Report on Form 8-K filed April 28, 2016)
10.1†*		~~Restricted Performance Unit~~Amended and Restated Employment Agreement, effective ~~March 9,~~October 13, 2022, by and between the Registrant and Frederick Eppinger
10.2†*		~~Stock Unit Award Agreement, effective March 9, 2022, by and between the Registrant and Frederick Eppinger~~
10.3†*	—	~~Restricted Performance Unit Agreement, effective March 9, 2022, by and between the Registrant and David Hisey~~
10.4†*	—	~~Stock Unit Award Agreement, effective March 9, 2022, by and between the Registrant and David Hisey~~
10.5†*	—	~~Stock Unit Award Agreement (cliff), effective March 9, 2022, by and between the Registrant and David Hisey~~
10.6†*	—	~~Restricted Performance Unit Agreement, effective March 9, 2022, by and between the Registrant and John Killea~~
10.7†*	—	~~Stock Unit Award Agreement, effective March 9, 2022, by and between the Registrant and John Killea~~
10.8†*		~~Stock Unit Award Agreement (cliff), effective March 9, 2022, by and between the Registrant and John Killea~~
10.9†*		~~Restricted Performance Unit Agreement, effective March 9, 2022, by and between the Registrant and Steven Lessack~~
10.10†*		~~Stock Unit Award Agreement, effective March 9, 2022, by and between the Registrant and Steven Lessack~~
10.11†*		~~Restricted Performance Unit Agreement, effective March 9, 2022, by and between the Registrant and Tara Smith~~
10.12†*		~~Stock Unit Award Agreement, effective March 9, 2022, by and between the Registrant and Tara Smith~~
31.1*	—	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	—	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	—	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	—	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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
104*	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


* 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 6,~~November 8, 2022
Date


						Stewart Information Services Corporation
						Registrant

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

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