Stewart Information Services (STC)

Title insurance provider Stewart Information Services (NYSE:STC) announced better-than-expected revenue in Q3 CY2025, with sales up 16.3% year on year to $776.5 million. Its GAAP profit of $1.55 per share increased from $1.07 in the same quarter last year.

Company Overview

Founded in 1893 during America's westward expansion when property records were often disputed, Stewart Information Services (NYSE:STC) provides title insurance and real estate services, helping homebuyers, sellers, and lenders verify property ownership and protect against title defects.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Stewart Information Services competes primarily with three larger title insurance providers: Fidelity National Financial (NYSE:FNF), which operates Fidelity National Title and Chicago Title; First American Financial (NYSE:FAF), which includes First American Title Insurance; and Old Republic International (NYSE:ORI), which operates Old Republic National Title Insurance.

Big picture, insurers generate revenue from three key sources. The first is the core business of underwriting policies. The second source is income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities. The third is fees from various sources such as policy administration, annuities, or other value-added services. Regrettably, Stewart Information Services’s revenue grew at a mediocre 6.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the insurance sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Stewart Information Services’s annualized revenue growth of 9.2% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Stewart Information Services reported year-on-year revenue growth of 16.3%, and its $776.5 million of revenue exceeded Wall Street’s estimates by 27.7%.

Net premiums earned made up 87% of the company’s total revenue during the last five years, meaning Stewart Information Services barely relies on non-insurance activities to drive its overall growth.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Stewart Information Services’s net premiums earned has grown at a 3.1% annualized rate over the last five years, worse than the broader insurance industry and slower than its total revenue.

When analyzing Stewart Information Services’s net premiums earned over the last two years, we can see that growth accelerated to 4.8% annually. Since two-year net premiums earned grew slower than total revenue over this period, it’s implied that other line items such as investment income grew at a faster rate. While these additional streams certainly contribute to the bottom line, their impact can vary. Some firms have shown greater success and long-term consistency in investing their float compared to peers. However, sharp fluctuations in the fixed income and equity markets can significantly affect short-term performance.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio is:

• The costs of underwriting (salaries, commissions, overhead) + what an insurer pays out in claims, all divided by net premiums earned

If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, Stewart Information Services’s combined ratio has increased by 7.1 percentage points, hitting 28.4% for the past 12 months. It has also worsened by 1.6 percentage points on a two-year basis, showing its expenses have consistently increased at a faster rate than revenue. This usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

In Q3, Stewart Information Services’s combined ratio was 26.8%. This result was 1 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Stewart Information Services, its EPS declined by 1.5% annually over the last five years while its revenue grew by 6.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Stewart Information Services, its two-year annual EPS growth of 67.5% was higher than its five-year trend. This acceleration made it one of the faster-growing insurance companies in recent history.

In Q3, Stewart Information Services reported EPS of $1.55, up from $1.07 in the same quarter last year. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

Insurance companies are balance sheet businesses, collecting premiums upfront and paying out claims over time. The float–premiums collected but not yet paid out–are invested, creating an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality because it reflects long-term capital growth and is harder to manipulate than more commonly-used metrics like EPS.

Stewart Information Services’s BVPS grew at a decent 8.3% annual clip over the last five years. However, BVPS growth has recently decelerated to 3.1% annual growth over the last two years (from $49.42 to $52.58 per share).

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Stewart Information Services currently has $571.1 million of debt and $1.48 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.4×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on Equity, or ROE, ties everything together and is a vital metric. It tells us how much profit the insurer generates for each dollar of shareholder equity entrusted to management. Over a long period, insurers with higher ROEs tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Stewart Information Services has averaged an ROE of 13.2%, respectable for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired.

We were impressed by how significantly Stewart Information Services blew past analysts’ revenue expectations this quarter. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $75 immediately following the results.

Updated: December 3, 2025 at 11:28 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Stewart Information Services, you should also grasp the company’s longer-term business quality and valuation.

Stewart Information Services’s business quality ultimately falls short of our standards. To begin with, its revenue growth was mediocre over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its declining EPS over the last five years makes it a less attractive asset to the public markets. On top of that, its net premiums earned growth was weak over the last five years.

Stewart Information Services’s P/B ratio based on the next 12 months is 1.4x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $80 on the company (compared to the current share price of $76.43).