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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-12688
STEWART INFORMATION SERVICES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 74-1677330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1980 POST OAK BLVD., 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:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1 PAR VALUE
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 [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of March 1, 1997, 6,256,801 shares of Common Stock, $1 par value, and
525,006 shares of Class B Common Stock, $1 par value, were outstanding. The
aggregate market value as of such date of the Common Stock (based upon the
closing sales price of the Common Stock as reported by the NYSE on February 28,
1997) of Stewart Information Services Corporation held by non-affiliates of the
Registrant was approximately $125,918,120.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Stewart Information Services Corporation Annual Report to
Stockholders for the year ended December 31, 1996 are incorporated by reference
in Parts I and II of this document.
Portions of the definitive proxy statement (the "Proxy Statement"),
relating to the annual meeting of the Registrant's stockholders to be held
April 25, 1997, are incorporated by reference in Parts III and IV of this
document.
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FORM 10-K
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PART I
ITEM
NO. PAGE
--- ----
1. Business . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties . . . . . . . . . . . . . . . . . . . . . . 3
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 4
4. Submission of Matters to a Vote of Security Holders . 4
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . 5
6. Selected Financial Data . . . . . . . . . . . . . . . . 6
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 6
8. Financial Statements and Supplementary Data . . . . . 6
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . 6
PART III
10. Directors and Executive Officers of the Registrant . . 7
11. Executive Compensation . . . . . . . . . . . . . . . . . 7
12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . . 7
13. Certain Relationships and Related Transactions . . . . . 7
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . 10
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P A R T I
ITEM 1. BUSINESS
Stewart's primary business is title insurance. Stewart issues policies through
more than 3,700 issuing locations on homes and other real property located in
all 50 states, the District of Columbia, Canada, Mexico, Belize (reinsurance),
the Bahamas, Guam, England and the Commonwealth of the Northern Marianas.
Stewart sells computer-related services and information, as well as mapping
products and geographic information systems to government and private entities,
both domestic and foreign.
Examination and closing. The purpose of a title examination is to ascertain the
ownership of the property being transferred, what debts are owed on it and what
the title policy coverage will be. This involves searching for and examining
documents such as deeds, mortgages, wills, divorce decrees, court judgments,
liens, paving assessments and tax records.
At the closing or "settlement", the seller executes a deed to the new owner.
The buyer signs new mortgage documents. Closing funds are then disbursed to the
seller, the prior mortgage company, real estate brokers, the title company and
others. The documents are then recorded in the public records. A title policy
is generally issued to both the lender and new owner.
Title policies. Lenders in the USA generally require title insurance as a
condition to making a loan on real estate, including securitized lending. This
is to assure lenders of the priority of their lien position. The purchasers of
the property want the assurance given in their policy against claims that may
arise against their ownership. The face amount of the policy is normally the
purchase price or the amount of the related loan.
Title insurance is substantially different from other types of insurance. Fire,
auto, health and life insurance protect against losses and events in the
future. In contrast, title insurance seeks to eliminate most risks through the
examination and settlement process.
Losses. Losses on policies occur because of a title defect not discovered
during the examination and settlement process. Other reasons for losses include
forgeries, misrepresentations, unrecorded construction liens, the failure to
pay off existing liens, mishandling of settlement funds, issuance by agents of
unauthorized coverages and other legal issues.
Some claimants seek damages in excess of policy limits. Such claims are based
on various legal theories usually alleging misrepresentation by an issuing
office. Although the Company vigorously defends against spurious claims, it has
from time to time incurred a loss in excess of policy limits.
Experience shows that most claims against policies and claim payments are made
in the first six years after the policy has been issued, although claims may be
made many years later. By their nature, claims are often complex, vary greatly
in dollar amounts and are affected by economic and market conditions and the
legal environment existing at the time of settlement of the claims.
Factors affecting revenues. Title revenues are closely related to the level of
activity in the real estate market and the prices at which real estate sales
are made. Real estate sales are directly affected by the availability and cost
of money to finance purchases. Other factors include demand by buyers, consumer
confidence and family incomes. These factors may override the seasonal nature
of the title business. Generally, the third quarter is the most active in terms
of real estate sales and the first quarter is the least active.
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Selected information for the national real estate industry follows (1996
amounts are preliminary):
1996 1995 1994
---------- ---------- ----------
Housing starts - millions........................... 1.47 1.35 1.46
Housing resales - millions.......................... 4.09 3.80 3.95
Housing resales - median sales price in $
thousands......................................... 118.1 112.9 109.8
Customers. The primary sources of title business are attorneys, builders,
developers, lenders and real estate brokers. No one customer was responsible
for as much as five percent of Stewart's title revenues in any of the last
three years. Titles insured included residential and commercial properties,
undeveloped acreage, farms and ranches.
Service, location, financial strength, size and related factors affect customer
acceptance. Increasing market share is accomplished primarily by providing
superior service. The parties to a closing are concerned with personal
schedules and the interest and other costs associated with the delays in the
settlement. The rates charged to customers are regulated to varying degrees by
different states.
Market share. Estimating a title insurer's market share is difficult. Stewart
believes it is the leading title insurer in Texas and in a number of cities
across the USA. Based on unconsolidated statutory revenues for 1995 (1996
amounts are not available), Stewart Title Guaranty Company ("Guaranty") is the
fourth largest title insurer in America.
Competitors include (names are abbreviated) Chicago Title, Commonwealth,
Fidelity, First American, Lawyers Title and Old Republic. As do most title
insurers, Stewart also competes with abstractors, attorneys who issue title
opinions and attorney-owned title insurance bar funds. A number of home
builders, financial institutions, real estate brokers and others own or control
title insurance agents, some of which issue policies underwritten by Guaranty.
This "controlled" business also provides competition for Stewart's agents.
Offices. The number of locations issuing Stewart policies was 3,763 at December
31, 1996, compared to 3,549 a year earlier and 3,312 two years earlier. Of
these totals, 3,488, 3,302 and 3,018 were independent agents at December 31,
1996, 1995 and 1994, respectively. Affiliated offices produced 77% to 80% of
consolidated revenues from title premiums and fees during each of the three
years ended December 31, 1996.
Title revenues by state. The approximate amounts and percentages of Stewart's
consolidated title revenues (excluding other revenues) by state for the last
three years were:
AMOUNTS
($MILLIONS) PERCENTAGES
======== ======= ======= ======= ======== ========
1996 1995 1994 1996 1995 1994
======== ======= ======= ======= ======== ========
Texas................. 73 61 73 24 25 27
California............ 65 59 68 22 24 25
Florida............... 26 21 22 9 9 8
Nevada................ 15 13 14 5 5 5
Colorado.............. 15 12 12 5 5 4
Arizona............... 14 12 14 5 5 5
New York ............. 13 9 7 4 4 3
All others............ 77 56 62 26 23 23
--- --- --- --- --- ---
298 243 272 100 100 100
=== === === === === ===
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Regulations. Title insurance companies are subject to extensive state
regulations covering rates, agent licensing, policy forms, trade practices,
reserve requirements, investments and the flow of funds between an insurer and
its parent or its subsidiaries and any similar related party transaction.
Kickbacks and similar practices are prohibited by certain state and federal
laws.
Employees. Stewart and its subsidiaries employed approximately 4,111 persons at
December 31, 1996.
ITEM 2. PROPERTIES
The Registrant and its wholly-owned subsidiary, Stewart Title
Guaranty Company and its subsidiaries ("Guaranty"), own or lease the following
properties:
The following table sets forth information about the Registrant's
other principal properties:
Location Type Use Size Acquired In
- ----------------------- ---------------------- ------------------- --------------- -----------
Houston, Texas Leased office building Executive office of 206,796 sq. ft. (1)
the Registrant and
Guaranty
Dallas, Texas Leased office building Office of Guaranty 25,117 sq. ft (2)
Austin, Texas Leased office building Office of Guaranty 14,278 sq. ft. (3)
Los Angeles, California Leased office building Office of Guaranty 22,466 sq. ft. (4)
San Diego, California Leased office building Office of Guaranty 20,020 sq. ft. (5)
Riverside, California Leased office building Office of Guaranty 20,968 sq. ft. (4)
San Antonio, Texas Owned office building Office of Guaranty 26,769 sq. ft. 1980 & 1982
Galveston, Texas Owned office building Office of Guaranty 50,000 sq. ft. 1905
Phoenix, Arizona Owned office building Office of Guaranty 24,459 sq. ft. 1981
Phoenix, Arizona Owned office building Office of Guaranty 17,500 sq. ft. 1985
Tucson, Arizona Owned office building Office of Guaranty 24,000 sq. ft. 1974
(1) The lease terminates in 2004.
(2) This lease terminates in 1999.
(3) This lease terminates in 2001.
(4) These leases terminate in 1998.
(5) This lease terminates in 2000.
The Registrant leases offices at approximately 304 locations. The
average term for all such leases is approximately six years. The leases expire
from 1997 to 2006. The Registrant believes it will not have any difficulty
obtaining renewals of leases as they expire or, alternatively, leasing
comparable property. The aggregate annual rental expense under all leases was
approximately $18,586,000.
All buildings and equipment owned or leased by the Registrant are
considered by the Registrant to be well maintained, adequately insured and
generally sufficient for the Registrant's purposes. Substantially all of the
Registrant's owned real property above is subject to mortgages.
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ITEM 3. LEGAL PROCEEDINGS
Guaranty and 18 other title insurers are defendants in a consolidated
class action proceeding originating from complaints first filed in April 1990.
The suit is currently pending in the United States District Court for the
District of Arizona. The plaintiffs allege that the defendants violated federal
antitrust law by participating in title insurance rating bureaus in Arizona and
Wisconsin in the early 1980s through which they allegedly agreed upon the
prices and other terms and conditions of sale for title search and examination
services. The plaintiffs request treble damages in an unspecified amount, costs
and attorneys' fees.
The Court has certified the proceeding as a class action and approved
a settlement pursuant to which members of the class would receive cash (not to
exceed approximately $4.1 million from all defendants) and additional coverage
under, and discounts on, title insurance policies. In addition, the Court has
awarded counsel for certain plaintiffs the negotiated sum of $1.3 million in
fees and expenses. The Court has awarded counsel for the remaining plaintiffs
fees and expenses totaling $0.5 million. The Court has under advisement the
motions of such plaintiff's counsel to amend and to reconsider that award.
James C. O'Brien and Ingrid K. O'Brien vs. Stewart Title Guaranty
Company, filed September 25, 1996, in the United States District Court,
Southern District of Florida. This purported class action is one of eight
similar suits filed against various underwriters in Florida, including
Guaranty. The alleged class would include all purchasers of title insurance or
evidence of title in Florida since 1990. Plaintiffs allege that Guaranty's
premium and cost sharing agreements with its Florida agents, which are governed
by and set in accordance with rates promulgated by the Florida Department of
Insurance, constitute violations of the Real Estate Settlement Procedures Act
and Florida law, including fraudulent and negligent misrepresentation.
Plaintiffs seek injunctive relief and treble damages of at least $60 million
based upon the title insurance premiums paid by the purported class. Guaranty
has filed a motion to dismiss the complaint on various grounds, including the
filed rate doctrine. The Court has deferred any action on the plaintiff's
motion to certify the proceedings as a class action pending disposition of
Guaranty's motion to dismiss. Guaranty believes that the plaintiff's
allegations are without merit and intends to vigorously defend this suit.
The Registrant is a party to routine lawsuits incidental to its
business most of which involve disputed policy claims. In many of these suits,
the plaintiff seeks exemplary or treble damages in excess of policy limits
based on the alleged malfeasance of an issuing agent of the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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P A R T II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the high and low sales prices of the Common
Stock for each fiscal period indicated, as reported by NYSE, and the amount of
cash dividends paid per share.
HIGH LOW DIVIDENDS
----- ----- ---------
1996:
First quarter . . . . . . . . . 21.38 19.63 .06
Second quarter. . . . . . . . . 21.25 19.63 .06
Third quarter . . . . . . . . . 21.00 20.00 .06
Fourth quarter. . . . . . . . . 22.63 20.25 .06
1995:
First quarter . . . . . . . . . 17.63 15.13 .05
Second quarter. . . . . . . . . 20.00 17.13 .05
Third quarter . . . . . . . . . 20.25 18.63 .05
Fourth quarter . . . . . . . . 22.50 18.63 .06
The Company has paid regular quarterly cash dividends on its Common Stock
since 1972. The Company's Certificate of Incorporation provides that no cash
dividends may be paid on the Class B Common Stock.
While it is the current intention of the Board of Directors to continue to
pay quarterly cash dividends on its Common Stock, the payment of future
dividends necessarily will depend on the earnings and financial needs of the
Company, as well as applicable legal restrictions.
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ITEM 6. SELECTED FINANCIAL DATA
Selected financial data have been included on Page 18 of the Registrant's
Annual Report to Stockholders for the year ended December 31, 1996, and such
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is set forth on Pages 18 through 21
of the Registrant's Annual Report to Stockholders for the year ended December
31, 1996, and such information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1996 Annual Report
to Stockholders
Page No.
Independent Auditors' Report ....................................... 21
Consolidated Statements of Earnings and Retained Earnings for the
Years Ended December 31, 1996, 1995 and 1994 ....................... 22
Consolidated Balance Sheets as of December 31, 1996 and 1995 ....... 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ................................... 24
Notes to Consolidated Financial Statements ......................... 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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P A R T III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the captions "Election of Directors" and
"Executive Compensation", and such information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Executive Compensation", and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Security Ownership of Certain
Beneficial Owners and Management", and such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is set forth in the Registrant's
Proxy Statement relating to the annual meeting of the Registrant's stockholders
to be held April 25, 1997, under the caption "Executive Compensation", and such
information is incorporated herein by reference.
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P A R T IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Financial Statement Schedules
Item 8 of this Report on Form 10-K lists certain consolidated financial
statements of the Registrant and its subsidiaries incorporated by reference to
the Annual Report to Stockholders for the year ended December 31, 1996, which
includes a reference to appropriate page numbers in such Annual Report.
Form 10-K
Page No.
---------
Independent Auditors' Report ................................................ 11
Reports of Independent Auditors ............................................. 12
Schedule II - Financial information of the Registrant (Parent Company) ..... 36
- Short-term borrowings ........................................ 40
Schedule V - Valuation and qualifying accounts ............................ 41
All other schedules are omitted, as the required information is inapplicable or
the information is presented in the consolidated financial statements or
related notes.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December
31, 1996.
(c) Exhibits
3.1 - Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Annual Report on Form
10-K for the year ended December 31, 1987)
3.2 - By-Laws of the Registrant
4 - Rights of Common and Class B Common Stockholders (incorporated by
reference to Exhibits 3.1 and 3.2 hereto)
10.1 - Summary of agreements as to payment of bonuses to certain executive
officers
10.2 - Deferred Compensation Agreements dated March 10, 1986 between the
Registrant and certain executive officers (incorporated by reference
to Exhibit 10.2 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987)
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13. - Annual Report to Stockholders for 1996 (the financial text of the
annual report incorporated herein by reference in Item 6 of Part II
of this report)
21. - Subsidiaries of the Registrant
23. - Consents of Independent Certified Public Accountants, including
consents to incorporation by reference of their reports into
previously filed Securities Act registration statements
27. - Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
STEWART INFORMATION SERVICES CORPORATION
(Registrant)
By: Carloss Morris
---------------------------------------------
Carloss Morris, Co-Chief Executive Officer and
Chairman of the Board of Directors
By: Stewart Morris
---------------------------------------------
Stewart Morris, Co-Chief Executive Officer,
President and Director
By: Max Crisp
---------------------------------------------
Max Crisp, Vice President-Finance, Secretary,
Treasurer, Director and Principal Financial
and Accounting Officer
Dated: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934 this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Max Crisp Director March 25, 1997
------------------------
(Max Crisp)
E. Douglas Hodo Director March 25, 1997
- -------------------------
(E. Douglas Hodo)
C. M. Hudspeth Director March 25, 1997
- -------------------------
(C. M. Hudspeth)
Carloss Morris Director March 25, 1997
- -------------------------
(Carloss Morris)
Stewart Morris Director March 25, 1997
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(Stewart Morris)
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Stewart Information Services Corporation:
Under date of February 7, 1997, we reported on the consolidated balance sheets
of Stewart Information Services Corporation and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of earnings and retained
earnings and cash flows for each of the years in the three-year period ended
December 31, 1996, as contained in the 1996 annual report to stockholders.
These consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year 1996. In connection
with our audits of the aforementioned consolidated financial statements, we
also audited the related financial statement schedules as listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK L.L.P.
- ---------------------------------------
Houston. Texas
February 7, 1997
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REPORT OF INDEPENDENT ACCOUNTANT
Stewart Title Company
El Paso, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 500 N. Mesa, Suite 300, El Paso, Texas.
This financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company, El
Paso, Texas, as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ M. TIMOTHY O'ROARK
--------------------------
M. TIMOTHY O'ROARK, C.P.A.
El Paso, Texas
February 18, 1997
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Stewart Title
We have audited the statements of operations, retained earnings, and cash flows
for the year ended December 31, 1994 (not presented separately herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and its cash flows for the
year ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG L.L.P.
-------------------------------
ERNST & YOUNG LLP
Century City
Los Angeles, California
January 20, 1995
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Stewart Title & Trust of Phoenix, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and retained earnings and of cash flows as of
and for each of the two years in the period ended December 31, 1994 present
fairly, in all material respects, the financial position, results of operations
and cash flows of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and
affiliate as of and for each of the two years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of Stewart Title & Trust of Phoenix, Inc. and its subsidiary and
affiliate for any period subsequent to December 31, 1994.
/s/ PRICE WATERHOUSE LLP
- ----------------------------------------
PRICE WATERHOUSE LLP
Phoenix, Arizona
January 20, 1995
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To the Board of Directors
Stewart Title of California
San Jose, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Stewart Title of California
at December 31, 1996 and 1995 and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of California as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
------------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 16, 1997
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To the Board of Directors
Stewart Title of Monterey County
Monterey, California
INDEPENDENT AUDITORS REPORT
We have audited the accompanying balance sheet of Stewart Title of Monterey
County at December 31, 1996 and 1995 and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of Monterey
County as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
------------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 7, 1997
-16-
19
To the Board of Directors
Stewart Title of Modesto
Modesto, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of Stewart Title of
Modesto at December 31, 1996 and 1995, and the related statements of income,
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Stewart Title of
Modesto as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
-----------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 7, 1997
-17-
20
To the Board of Directors
Stewart Title of Fresno County
Fresno, California
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of Stewart Title of Fresno
County at December 31, 1996 and 1995 and the related statements of income,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart Title of Fresno County
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ GRANT BENNETT ACCOUNTANTS
-----------------------------
GRANT BENNETT ACCOUNTANTS
A PROFESSIONAL CORPORATION
Certified Public Accountants
January 9, 1997
-18-
21
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title Dallas, Inc.
dba: Stewart Title North Texas, Inc.
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 5728 LBJ Freeway, Dallas, Texas.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Dallas, Inc.
dba: Stewart Title North Texas, Inc. as of December 31, 1996 in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and are not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ WILKERSON & ARTHUR
- ----------------------
Wilkerson & Arthur, P.C.
January 16, 1997
-19-
22
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Priority Title Company of Dallas, L.L.C.
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 5728 LBJ Freeway, Dallas, Texas.
This financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Priority Title Company of
Dallas, L.L.C. as of December 31, 1996 in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and are not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ WILKERSON & ARTHUR, P.C.
- ---------------------------------------
Wilkerson & Arthur, P.C.
January 16, 1997
-20-
23
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Austin, Inc.
Austin, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Austin, Inc. as of December 31, 1996
and 1995, prepared from the accounts maintained at your office at Austin,
Texas.
This financial statement is the responsibility Of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Austin, Inc., as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 16, 1997
/s/ AARONSON, WHITE & COMPANY
- ------------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-21-
24
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Company - Galveston
Galveston, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Company - Galveston as of December 31,
1996 and 1995, prepared from the accounts maintained at your office at
Galveston, Texas.
This financial statement is the responsibility Of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Company - Galveston, as of December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 10, 1997
/s/ AARONSON, WHITE & COMPANY
- ------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-22-
25
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title of Montgomery County, Inc.
The Woodlands, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title of Montgomery County, Inc. as of
December 31, 1996 and 1995, prepared from the accounts maintained at your
office at The Woodlands, Texas.
This financial statement is the responsibility of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
of Montgomery County, Inc., as of December 31, 1996 and 1995, in conformity
with generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 23, 1997
/s/ AARONSON, WHITE & COMPANY
- -------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-23-
26
REPORT OF INDEPENDENT ACCOUNTANTS
To: Stewart Title Company - Fort Bend
Sugarland, Texas
We have audited the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts of Stewart Title Company - Fort Bend as of December 31,
1996 and 1995, prepared from the accounts maintained at your office at
Sugarland, Texas.
This financial statement is the responsibility of the company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit in accordance with
generally accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust
(Escrow) Fund Accounts referred to above presents fairly, in all material
respects, the assets and liabilities of such accounts handled by Stewart Title
Company - Fort Bend, as of December 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the
basic financial statement taken as a whole. The supplemental information
contained in Exhibits C through F, inclusive, and Exhibit H of this report is
presented as additional information and is not a required part of the basic
financial statement. Such information has been subjected to the audit
procedures applied in the examination of the basic statement of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statement of assets and liabilities taken as a whole.
January 14, 1997
/s/ AARONSON, WHITE & COMPANY
- --------------------------------------
Aaronson, White & Company
16010 Barker's Point Lane
Suite 175
Houston, Texas 77079
-24-
27
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title - Houston Division
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of the National Title Services Division of Stewart Title Guaranty
Company as of December 31, 1996 and 1995, prepared from the accounts maintained
in your office at 1980 Post Oak Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by the National Title Services
Division of Stewart Title Guaranty Company as of December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
My audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- ------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-25-
28
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Stewart Title - Houston Division
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of the Houston Division of Stewart Title as of December 31, 1996 and
1995, prepared from the accounts maintained in your office at 1980 Post Oak
Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by the Houston Division of
Stewart Title as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
My audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- -------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-26-
29
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Priority Title Company of Houston, L.L.C.
I have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts of Priority Title Company of Houston, L. L. C. as of December 31, 1996
and 1995, prepared from the accounts maintained in your office at 1980 Post Oak
Boulevard, Houston, Texas.
The financial statement is the responsibility of the company's management. My
responsibility is to express an opinion on this financial statement based on my
audit. I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Priority Title Company of
Houston, L.L.C. as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
My audit has been made of or the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities, taken as a whole.
/s/ GINNY SANDERS MAY, CPA
- -----------------------------------------
Ginny Sanders May, CPA
January 21, 1997
-27-
30
EXHIBIT A
Independent Auditors' Report
Board of Directors
Stewart Title Company--Beaumont Division
Beaumont, Texas 77706
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996, prepared from the accounts maintained at your
office at 2390 N. Dowlen Road, Beaumont, Texas.
This financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company -
Beaumont Division. as of December 31, 1996, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through F, inclusive, and Exhibit H of this report are presented as
additional information and is not a required part of the basic financial
statement. Such information has been subjected to the audit procedures applied
in the examination of the basic statement of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statement of
assets and liabilities. taken as a whole.
Very truly yours,
/s/ EDGAR, KIKER, & CROSS
----------------------------
EDGAR, KIKER & CROSS, L.L.P.
Certified Public Accountants
-28-
31
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Stewart Title Company
Houston, Texas
I have examined the statements of assets and liabilities of trust (escrow) fund
accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office in San Antonio, Texas.
My examination, which was limited to such accounts, was made in accordance with
generally accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as I considered
necessary in the circumstances.
In my opinion, the aforementioned statements of assets and liabilities of trust
(escrow) fund accounts (not separately presented herein) present fairly the
assets and liabilities of such accounts handled by the San Antonio Division of
Stewart Title Company, as of December 31, 1996 and 1995, in accordance with
generally accepted accounting principles, applied on a consistent basis.
/s/ JIM S. WALKER
-----------------------------
Jim S. Walker
Certified Public Accountant
Beaumont, Texas
January 15, 1997
-29-
32
INDEPENDENT AUDITORS' REPORT
Board of Directors
Stewart Title Company
Amarillo, Texas District Office
We have audited the accompanying Statement of Assets and Liabilities of Trust
Fund Accounts as of December 31, 1996, prepared from the accounts maintained at
your office at Amarillo, Texas. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. we believe that our audits of the Statements of Assets and
Liabilities of Trust (Escrow) Fund Accounts provide a reasonable basis for our
opinion.
In our opinion, Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company, for
the years then ended in conformity with generally accepted accounting
principles.
Our audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examinations of the basic Statements of Assets and Liabilities, and is
fairly stated in all material respects in relation to the basic Statements of
Assets and Liabilities, taken as a whole.
/s/ DOSHIER, PICKENS & FRANCIS, P.C.
- ----------------------------------------
DOSHIER, PICKENS & FRANCIS, P.C.
January 14, 1997
-30-
33
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Stewart Title of Corpus Christi, Inc.
Corpus Christi, Texas
We have audited the Statements of Assets and Liabilities of Trust [Escrow] Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at Corpus Christi, Texas. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits of the financial statements
provide a reasonable basis for our opinion.
In our opinion, the Statements of Assets and Liabilities of Trust [Escrow] Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such accounts managed by Stewart Title Company, Corpus
Christi Branch, as of December 31, 1996 and 1995, in conformity with generally
accepted accounting principles.
Our audits have been made for the purpose of forming an opinion of the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examinations of the basic statements of assets and liabilities, and is
fairly stated in all material respects in relation to the basic statements of
assets and liabilities, taken as a whole.
/s/ FANCHER & COMPANY
- --------------------------------------
FANCHER AND COMPANY
January 27, 1997
-31-
34
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Stewart Title of Lubbock, Inc.
7802 Indiana Avenue
Lubbock, Texas 79423
I have audited the accompanying Statement of Assets and Liabilities of Trust
(Escrow) Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 7802 Indiana Avenue, Lubbock, TX 79423.
These financial statements are the responsibility of the company's
management. My responsibility is to express an opinion of these financial
statements based on my audits. I conducted my audit in accordance with
generally accepted auditing standards. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on
a test basis evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provides a
reasonable basis for my opinions.
In my opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such escrow accounts handled by Stewart Title of Lubbock,
Inc., as of December 31, 1996, and 1995 in conformity with generally accepted
accounting principles.
My audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information contained
in Exhibit C through F, inclusive, and Exhibit H of these reports, is presented
as additional information and is not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the examination of the basic Statement of Assets and Liabilities, and is
fairly stated in all material respects in relation to the basic statements of
assets and liabilities taken as a whole.
/s/ JESUS YEPEZ
Jesus Yepez
Certified Public Accountant
Lubbock, Texas
-32-
35
REPORT OF INDEPENDENT ACCOUNTANT
Board of Directors
Stewart Title Guaranty Company
Houston, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 and 1995, prepared from the accounts
maintained at your office at 2401 Moores Lane, Texarkana, Texas.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the Statements of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above present fairly, in all material respects, the assets
and liabilities of such accounts handled by Stewart Title of Texarkana as of
December 31, 1996 and 1995, in conformity with generally accepted accounting
principles.
Our audits have been made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information contained
in Exhibits C through F, inclusive, and Exhibit H of these reports are
presented as additional information and are not a required part of the basic
financial statements. Such information has been subjected to the audit
procedures applied in the examinations of the basic statements of assets and
liabilities, and is fairly stated in all material respects in relation to the
basic statements of assets and liabilities, taken as a whole.
/s/ WILLIAMS & PEARCY
Williams & Pearcy, P.C.
January 25, 1996
-33-
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Independent Auditor's Report
Stewart Title Company of Rockport, Inc.
Rockport, Texas 78382
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 prepared from the accounts maintained at your
office at Rockport, Texas.
The financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title Company of
Rockport, Inc. as of December 31, 1996, in conformity with generally accepted
accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through H, inclusive, of this report are presented as additional
information and is not a required part of the basic financial statement. Such
information has been subjected to the audit procedures applied in the
examination of the basic statement of assets and liabilities, and is fairly
stated in all material respects in relation to the basic statement of assets
and liabilities, taken as a whole.
/s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C.
Flusche, Van Beveren, Kilgore, P.C.
Corpus Christi, Texas
February 6, 1997
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37
Independent Auditor's Report
Stewart Title of San Patricio County, Inc.
Portland, Texas
We have audited the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts as of December 31, 1996 prepared from the accounts maintained at your
office at Portland, Texas.
The financial statement is the responsibility of the company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit. We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the Statement of Assets and Liabilities of Trust (Escrow) Fund
Accounts referred to above presents fairly, in all material respects, the
assets and liabilities of such accounts handled by Stewart Title of San
Patricio County, Inc. as of December 31, 1996, in conformity with generally
accepted accounting principles.
Our audit has been made for the purpose of forming an opinion on the basic
financial statement taken as a whole. The supplemental information contained in
Exhibits C through Exhibit H of this report are presented as additional
information and is not a required part of the basic financial statement. Such
information has been subjected to the audit procedures applied in the
examination of the basic statement of assets and liabilities, and is fairly
stated in all material respects in relation to the basic statement of assets
and liabilities, taken as a whole.
/s/ FLUSCHE, VAN BEVEREN, KILGORE, P.C.
Flusche, Van Beveren, Kilgore, P.C.
Corpus Christi, Texas
February 6, 1997
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SCHEDULE II
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
INCOME AND RETAINED EARNINGS INFORMATION
Year Ended December 31,
------------------------------
1996 1995 1994
-------- -------- --------
(In thousands)
Revenues
Investment income ..................................... $ 439 $ 224 $ 201
Other income............................................ - 12 28
-------- -------- --------
439 236 229
Expenses
Employee costs ......................................... 163 211 288
Other operating expenses ............................... 1,515 1,634 1,211
Depreciation and amortization .......................... 100 101 21
-------- -------- --------
1,778 1,946 1,520
Loss before taxes and equity in earnings of investees .... (1,339) (1,710) (1,291)
Income taxes (benefit) ................................... (458) (592) (444)
Equity in earnings of investees .......................... 15,318 8,125 10,525
-------- -------- --------
Net income ............................................... 14,437 7,007 9,678
Retained earnings at beginning of year ................... 118,547 112,754 106,262
Cash dividends on Common Stock ($.24, $.21 and $.20 per
share) ................................................. (1,488) (1,214) (1,118)
Stock dividend ........................................... - - (2,068)
-------- -------- --------
Retained earnings at end of year ......................... $131,496 $118,547 $112,754
======== ======== ========
See accompanying note to financial statements.
(Schedule continued on following page.)
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SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
BALANCE SHEET INFORMATION
December 31,
--------------------
1996 1995
-------- --------
(In thousands)
Assets
Cash and cash equivalents ...................................................... $ 100 $ 54
-------- --------
Short-term investments .......................................................... 10,620 4,373
-------- --------
Receivables:
Notes, including $6,960 and $7,057 from affiliates .............................. 7,094 7,251
Other, including $2,493 and $5,000 from affiliates .............................. 6,140 6,873
Less allowance for uncollectible amounts ........................................ (20) -
-------- --------
13,214 14,124
Furniture and equipment at cost ................................................. 167 167
Less accumulated depreciation ................................................... (85) (67)
-------- --------
82 100
Title plants, at cost ........................................................... 48 48
Investments in investees ......................................................... 168,243 155,408
Other assets ..................................................................... 3,168 3,241
-------- --------
$195,475 177,348
======== ========
Liabilities
Payables:
Notes, including $ - and $ - from affiliates ................................... $ 580 $ -
Accounts payable and accrued liabilities ....................................... 3,905 2,496
Contingent liabilities and commitments
Stockholders' equity
Common - $1 par, authorized 15,000,000, issued and outstanding 6,216,441 and
5,864,758 ................................................................ 6,216 5,865
Class B Common - $1 par, authorized 1,500,000, issued and outstanding 525,006... 525 525
Additional paid-in-capital ..................................................... 50,833 45,945
Net unrealized investment gains, net of deferred taxes ........................ 1,920 3,970
Retained earnings (1) ......................................................... 131,496 118,547
-------- --------
Total stockholders' equity ($28.33 and $27.36 per share) ............... 190,990 174,852
-------- --------
$195,475 $177,348
======== ========
(1) Includes undistributed earnings of subsidiaries of $130,708 in 1996
and $126,480 in 1995.
See accompanying note to financial statements.
(Schedule continued on following page.)
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SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
CASH FLOWS INFORMATION
Year Ended December 31,
----------------------------
1996 1995 1994
------- ------ --------
(In thousands)
Cash flow from operating activities (Note) ................... $ 7,033 $1,169 $ (281)
Cash flow from investing activities:
Purchases of furniture and equipment and title plants -
net......................................................... - - (56)
Proceeds from investments sold ............................. 11,520 7,011 4,076
Purchases of investments, excluding mortgage loans .......... (17,767) (6,865) (4,901)
Increases in mortgages and other notes receivable ........... (70) (262) -
Collections on mortgages and other notes receivable ......... 227 31 698
------- ------ --------
Cash used by investing activities ............................ (6,090) (85) (183)
------- ------ --------
Cash flow from financing activities:
Dividends paid .............................................. (1,488) (1,214) (1,118)
Proceeds of notes payable ................................... 610 - -
Payments on notes payable ................................... (30) - -
Proceeds from issuance of stock ............................. 11 - 837
------- ------ --------
Cash used by financing activities ............................ (897) (1,214) (281)
------- ------ --------
Increase (decrease) in cash and cash equivalents ............. $ 46 $ (130) $ (745)
======= ====== ========
Note: Reconciliation of net income to the above amounts:
Net income .................................................. $14,437 $7,007 $ 9,678
Add (deduct):
Depreciation and amortization .............................. 100 101 21
Provision for uncollectible amounts - net ................. 20 64 -
Increase in accounts receivable - net ...................... (3,207) (1,326) (378)
Increase (decrease) in accounts payable and accrued
liabilities - net ......................................... 264 (2,668) 195
Equity in net earnings of investees ........................ (15,318) (8,125) (10,525)
Dividends received from investees........................... 11,090 5,650 1,340
Stock bonuses .............................................. - - 61
Other - net ................................................ (353) 466 (673)
------- ------ --------
Cash provided (used) by operating activities ................. $ 7,033 $1,169 $ (281)
======= ====== ========
Supplemental information:
Income taxes paid .......................................... - - -
Interest paid .............................................. - - -
See accompanying note to financial statements.
(Schedule continued on following page.)
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SCHEDULE II
(continued)
STEWART INFORMATION SERVICES CORPORATION
(PARENT COMPANY)
NOTE TO FINANCIAL STATEMENT INFORMATION
The Registrant operates as a holding company transacting substantially all
business through its subsidiaries. The consolidated financial statements for
the Registrant and its subsidiaries are included in Part II, Item 8 of Form
10-K. The Parent Company financial statements should be read in conjunction
with the aforementioned consolidated financial statements and notes thereto and
financial statement schedules.
Total dividends received from unconsolidated subsidiaries for 1996, 1995
and 1994 were $8,583,000, $9,390,000 and $2,600,000, respectively.
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SCHEDULE II
(CONTINUED)
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1996
========================================================================================================================
Col. A Col. B Col. C Col. D Col. E Col. F
========================================================================================================= =============
Maximum Average Weighted
Weighted amount amount average
Balance average outstanding outstanding interest rate
Category of aggregate at end interest during the during the during the
short-term borrowings (1) of period rate period period (2) period (3)
========================================================================================================= =============
December 31, 1994:
Banks ........................................... $4,456,107 8.58% $4,456,107 $2,739,508 7.38%
========== ==== ========== ========== ====
December 31, 1995:
Banks ........................................... $3,380,430 8.61% $5,055,807 $4,487,714 8.82%
========== ==== ========== ========== ====
December 31, 1996:
Banks ........................................... $2,646,893 7.55% $4,046,900 $3,145,603 8.03%
========== ==== ========== ========== ====
(1) Bank borrowings represent short-term notes due within one year of the
loan's origination.
(2) Computed by summing each month-end balance and dividing the total by
twelve.
(3) Computed by dividing total yearly interest expense by the average of the
month-end principal balances.
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SCHEDULE V
STEWART INFORMATION SERVICES CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
===================================================================================================================================
Col. C
Col. A Col. B Additions Col. D Col. E
===================================================================================================================================
Balance Charged Charged to
at to other Balance
beginning cost and accounts -Deductions- at end
Description of period expenses describe described of period
===================================================================================================================================
Stewart Information Services
Corporation and subsidiaries:
Year ended December 31, 1994:
Estimated title losses .................... $117,585,559 $40,211,895 - $23,481,018(A) $134,316,436
Allowance for uncollectible
amounts .................................. 5,268,419 2,233,675 - 1,379,045(B) 6,123,049
Year ended December 31, 1995:
Estimated title losses .................... 134,316,436 29,590,891 - 25,594,793(A) 138,312,534
Allowance for uncollectible
amounts................................... 6,123,049 1,333,744 - 957,846(B) 6,498,947
Year ended December 31, 1996:
Estimated title losses .................... 138,312,534 33,829,851 - 21,810,822(A) 150,331,563
Allowance for uncollectible
amounts................................... 6,498,947 1,575,000 - 1,404,356(B) 6,669,591
Stewart Information Services
Corporation - Parent:
Year ended December 31, 1994:
Allowance for uncollectible amounts $ 8,198 - - - $ 8,198
Year ended December 31, 1995:
Allowance for uncollectible amounts 8,198 $ 64,382 - $ 72,580(C) -
Year ended December 31, 1996:
Allowance for uncollectible amounts - 20,000 - - 20,000
(A) Represents payments of policy losses and loss adjustment expenses during
the year, less salvage collections.
(B) Represents uncollectible accounts written off.
(C) Represents an adjustment to accounts receivable previously reserved and
current year write-off of uncollected accounts.
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INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Page
- ------- ------------
3.1 - Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of the
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1987)
3.2 - By-laws of the Registrant
4 - Rights of Common and Class B Common Stockholders
(incorporated by reference to Exhibits 3.1 and 3.2
hereto)
10.1 - Summary of agreements as to payment of bonuses to
certain executive officers
10.2 - Deferred Compensation Agreements dated March 10,
1986 between the Registrant and certain executive
officers (incorporated by reference to Exhibit 10.2
of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1987)
13. - Annual Report to Stockholders for 1996 (the
financial text of the annual report incorporated
herein by reference in Item 6 of Part II of this
report)
21. - Subsidiaries of the Registrant
23. - Consents of Independent Certified Public
Accountants, including consents to incorporation by
reference of their reports to previously filed
Securities Act registration statements
27. - Financial Data Schedule