Stewart Information Services (STC) 8-K Stewart Reports Financial Results for the Fourth Quarter and Year 2008

NEWS   from:

STEWART INFORMATION SERVICES CORPORATION P.O. Box 2029, Houston, Texas 77252-2029 www.stewart.com
Contact:	Ted C. Jones
	Director - Investor Relations
	(713) 625-8014

FOR RELEASE AT 6AM CDT

Stewart Reports Financial Results for the Fourth Quarter and Year 2008

Houston, February 19, 2009 – Stewart Information Services Corporation (NYSE: STC) today reported the results of its operations for the fourth quarter and the year ended December 31, 2008 (dollar amounts are in millions, except for per share figures):

	Fourth			Fourth
	Quarter			Quarter			Year			Year
	2008			2007			2008			2007
Total revenues	$	335.9		$	499.7		$	1,555.3		$	2,106.7
Pretax loss (A)		(109.8	)		(46.7	)		(234.5	)		(51.9	)
Net loss		(158.0	)		(31.3	)		(241.9	)		(40.2	)
Net loss per share		(8.72	)		(1.74	)		(13.37	)		(2.21	)

(A)   Before minority interests

The fourth quarter and full year 2008 included pretax charges as follows:

	Fourth		Fourth
	Quarter		Quarter			Year		Year
	2008		2007			2008		2007
Loss reserve strengthening,
including large claims and
defalcations	$	29.9	$	20.0		$	62.0	$	39.5
Provision for legal matters		19.3		.8			19.3		3.8
Impairment write-downs of
Investment securities and
Other assets		12.8					25.2
Office closing and
Restructuring costs		5.0		2.8			11.6		2.8
Gains on sales of subsidiaries,
real estate, and other assets				(2.3	)				(11.1	)
Other, net		1.7		0.3			1.0		(1.2	)
Total pre-tax charges		68.7		21.6			119.1		33.8
After tax charge – deferred
tax valuation allowance		85.9					85.9

The 2008 charge to income tax expense is to establish a valuation allowance against deferred tax assets in accordance with current accounting standards. As the Company expects a return to profitable operations in 2009, the valuation allowance will continue to be evaluated for reversal.

The Company recorded only its second full year loss since 1974.  Existing home sales in 2008 fell to their lowest level since 1997, according to the National Association of Realtors®.  New home sales were the lowest since 1963, the year recordkeeping began for this statistic.

The Company's title revenues, which are closely related to the volume and value of real estate transactions, declined by 24.0 percent and 28.1 percent for the year and fourth quarter 2008, respectively, compared with the same periods in 2007.  Title order counts in 2008, based on orders per workday, were 22.2 percent and 22.6 percent lower than 2007 for the year and fourth quarter, respectively.  However, open order counts for the month of December were up 45.9 percent compared with November driven by a surge of refinancing applications taking place due to record-low interest rates.

Overall, we reduced employee costs in 2008 by 19.6 percent when compared with the prior year, which reflects our aggressive efforts to reduce headcount.  The benefit of reductions in employee counts during the fourth quarter 2008 are not fully reflected in the fourth quarter results due to the timing of the reductions.  On an annualized basis, reduction in employee expenses in the fourth quarter of 2008 reflect a $226 million reduction compared to all of 2007.  In addition, other operating costs declined by 11.4 percent in 2008 when compared with 2007, although reductions made in these expenses were partially offset by provisions made in the fourth quarter of 2008 for certain legal matters.

Our results were negatively impacted by strengthening of policy loss reserves by $32.0 million as a result of unusually large claims payments and incurred claims history for policy years 2005, 2006, and 2007.  This brings the total strengthening for these policy years to $37.4 million.  We do not currently anticipate future reserve strengthening for these policy years.  Our policy loss reserves in 2008 also reflect charges of $41.7 million relating to large title losses and defalcations attributable to independent agencies. These charges were partially offset by insurance recoveries of $11.6 million received during the year.

In the fourth quarter of 2008, the Company established reserves aggregating $19.3 million for various pending legal matters as well as for disputes with certain state taxing authorities.  Based on developments during the quarter, the Company determined that losses arising from these matters were probable and estimable and recorded its best estimate of its financial exposure.

The Company paid an annual cash dividend of 10 cents per share on December 23, 2008, to owners of record as of December 8, 2008.  The 2007 annual dividend was 75 cents per share.

 “We have taken dramatic steps to return to profitability in 2009,” said Stewart Morris, Jr., president and co-chief executive officer. "In our direct title and real estate information operations in 2008, we closed 167 branches and offices, eliminated 2,120 staff (a reduction of 33.7 percent in those operations), completely restructured and compressed our management at all levels and reduced expenses throughout our operations.  For example, where we had seven top-level operations managers a year ago in our direct and agency operations, there are just three today.”

 “Our underwriting and corporate office operations have also been the target of improved efficiencies and significant cost cutting,” said Malcolm S. Morris, chairman and co-chief executive officer.  “We have accelerated our consolidation of back office operations to further shrink expenses while providing high-quality customer service to the front office.  In addition to the employee reductions at our title offices, we reduced our employee count throughout the remaining operations.”

 “This difficult economy placed significant financial pressures on owners of independent title agencies which resulted in increased escrow fund defalcations and, therefore, higher title losses for us,” said Mr. Morris. “To address this, and to reduce the overhead costs associated with low-premium volume agents, we cancelled more than 2,500 agencies during 2008.  This action, while lowering revenues an insignificant amount, results in an improved risk profile and profit potential for us in future periods.”

International operations were a bright spot in the year.  “International growth will remain a key focal point for Stewart,” said Michael B. Skalka, head of Stewart Global Underwriting Operations.  “The more we expand international business, the more opportunities we have  to service customers and offer timely products and services.   International growth and profitability will play a major role in our future.”

Stewart Information Services Corporation (NYSE-STC), is a customer-driven, technology-enabled, strategically competitive, real estate information, title insurance and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries throughout the United States and in international markets. Stewart also provides post-closing lender services, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found atwww.stewart.com.

Forward-looking statements. Certain statements in this news release are "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance.  These statements often contain words such as “expect”, ��anticipate”, “intend”, “plan”, “believe”, “seek”, “will” 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 severity and duration of current financial and economic conditions, the impact of recent significant decreases in the level of real estate activity, continued weakness or further adverse changes in the level of real estate activity, our ability to respond to and implement technology changes, the impact of unanticipated title losses on the need to further strengthen our policy loss reserves and any effect of title losses on our cash flows and financial condition, the impact of changes in governmental regulations, our dependence on our operating subsidiaries as a source of cash flow, the realization of expected expense savings resulting from our expense reduction steps taken in 2008, our ability to grow our international operations, and our ability to respond to the actions of our competitors.  These risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2007, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008, June 30, 2008 and September 30, 2008, and our Current Reports on Form 8-K.  We expressly disclaim any obligation to update any forward-looking statements contained in this news release to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.

STEWART INFORMATION SERVICES CORPORATION

STATEMENTS OF OPERATIONS

(In thousands of dollars, except per share amounts)

	Three months ended  December 31						Year ended  December 31
	2008			2007			2008			2007
Revenues
Title insurance:
Direct operations		147,657			213,138			706,745			947,342
Agency operations		190,065			256,410			803,189			1,040,719
Real estate information		9,345			16,497			44,473			66,037
Investment income		6,584			9,055			29,134			36,073
Investment and other (losses) gains–net.		(17,706	)		4,570			(28,247	)		16,520
		335,945			499,670			1,555,294			2,106,691
Expenses
Amounts retained by agencies		158,314			208,300			657,771			843,038
Employee costs		115,747			162,797			553,792			689,107
Other operating expenses		102,668			107,868			363,455			409,999
Title losses and related claims		58,868			54,884			167,828			168,501
Depreciation and amortization		8,547			10,688			40,959			41,125
Interest		1,625			1,788			5,995			6,842
		445,769			546,325			1,789,800			2,158,612
Loss before taxes
and minority interests		(109,824	)		(46,655	)		(234,506	)		(51,921	)
Income tax expense (benefit		47,685			(17,685	)		2,128			(23,926	)
Minority interests		497			2,342			5,226			12,225
Net loss		(158,006	)		(31,312	)		(241,860	)		(40,220	)
Loss per share		(8.72	)		(1.74	)		(13.37	)		(2.21	)
Average number of shares (000)		18,122			18,030			18,092			18,162
Segment information:
Title revenues		326,600			483,173			1,510,821			2,040,654
Title pretax loss
before minority interests		(106,916	)		(45,867	)		(219,341	)		(54,037	)
REI revenues		9,345			16,497			44,473			66,037
REI pretax (loss) earnings
before minority interests		(2,908	)		(788	)		(15,165	)		2,116
Selected financial information:
Cash (used) provided by operations		(34,946	)		(10,232	)		(106,652	)		4,578
Title loss payments – net of recoveries		36,479			35,317			136,751			117,550
Changes in other comprehensive earnings – net of taxes		(1,434	)		3,874			(19,261	)		11,781
Number of title orders opened (000):
October		31			48
November		26			42
December		44			38
Quarter		101			128
Number of title orders closed (000):
Quarter		66			93

	December 31		December 31
	2008		2007
Stockholders’ equity		493,842		754,059
Number of shares outstanding (000)		18,142		18,031
Book value per share		27.22		41.82

STEWART INFORMATION SERVICES CORPORATION

BALANCE SHEETS (condensed)

(In thousands of dollars)

	December  31,
	2008			2007
Assets
Cash and cash equivalents		72,361			78,797
Cash and cash equivalents – statutory reserve funds		13,885			30,442
Total cash and cash equivalents		86,246			109,239
Short-term investments		37,120			79,780
Investments – statutory reserve funds		452,368			518,586
Investments – other		78,407			98,511
Receivables – premiums from agencies		35,707			48,040
Receivables – other		89,365			93,335
Allowance for uncollectible amounts		(17,504	)		(11,613	)
Property and equipment		83,533			96,457
Title plants		78,363			78,245
Goodwill		210,901			208,824
Intangible assets		8,448			17,157
Investments – pledged		222,684			-
Other assets		83,588			105,413
		1,449,226			1,441,974
Liabilities
Notes payable		135,276			108,714
Line of credit (secured by pledged investments)		222,684			-
Accounts payable and accrued liabilities		110,769			108,658
Estimated title losses		461,532			441,324
Deferred income taxes		11,896			13,509
		942,157			672,205
Minority interests		13,227			15,710

Contingent liabilities and commitments
Stockholders' equity
Common and Class B Common Stock and
additional paid-in capital	143,811		141,196
Retained earnings	353,547		597,118
Accumulated other comprehensive earnings	581		19,842
Treasury stock	(4,097	)	(4,097	)
Total stockholders' equity	493,842		754,059
	1,449,226		1,441,974