Stewart earnings down amid mortgage services transformation
Company bottomline not reflective of new contract closings
Stewart Information Services Corporation (STC) recorded a net earnings of $17.5 million, or 72 cents per share, for the fourth quarter 2013, down from $61.8 million, or $2.56 per share last year.
Earnings were impacted by affected by atypical income taxes in both periods, which resulted from the partial release of deferred tax asset valuation allowances in both years’ fourth quarters and certain other tax adjustments reducing fourth quarter 2013 expense.
“During the latter half of 2013, the continued improvement in the housing market, although beneficial for our title operations overall, resulted in less demand for services related to distressed properties, which resulted in declining revenues in our mortgage services operations,” the company said in its earnings release.
However, the company entered into new contracts during the third and fourth quarters of 2013, and once fully implemented, those will result in additional revenues in the first half of 2014.
As a whole, in 2013 the company reported net earnings of $63 million, or $2.60 per share, a drop of $46.2 million from the same period in 2012 due to the higher adjustment to the tax asset valuation allowance in 2012 compared to 2013 and the decrease in earnings in our mortgage services segment.
In addition, total revenues for the fourth quarter hit $450.2 million, falling $70.8 million, or 13.6%, from $521 million a year prior.
Operating revenues declined 13.7% to $445.1 million in the fourth quarter 2013 compared to $515.6 million in the fourth quarter 2012.
When compared to a 2012, title revenues decreased 10.6% in the fourth quarter 2013, while mortgage services revenues decreased 46.5%.
Meanwhile, total revenues for 2013 came in at $1,928.0 million, an increase of $17.6 million, or 0.9%, from $1,910.4 million for 2012.
“Our 2013 results reflect transitions for Stewart and our industry during which we made significant progress adapting by focusing on our core business, aligning operations around delivery channels, enhancing productivity and reducing our risk profile,” said Matthew Morris, CEO.
“During the course of the quarter, we continued to transform our mortgage services operations from a default-centric operation to one that can provide high-quality offerings to mortgage lending clients across a more normalized market,” he added.
Desipte revenues continuing to decline significantly and the ramp-up of revenues from new products and services is taking longer than expected, Morris said that they remain confident in future opportunities.
“We remain optimistic regarding the outlook for real estate in 2014, as the industry continues to adapt to an origination market that is much smaller overall, and one that is purchase-driven rather than refinance-driven,” Morris said.