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Stewart Information (STC) Consolidates Western U.S. Presence

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Stewart Information Services Corporation (STC - Free Report) acquired 57 title offices in the states of Arizona, Colorado and Nevada from ET Investments for $105 million. The acquisition is in sync with the acquirer’s strategy to improve scale and competitive position in priority markets where it has been underrepresented. Shares of the company gained 5.9% in yesterday’s trading session, reflecting investor optimism.

These title offices have generated more than $20 million in pre-tax income. Stewart Information Services expects the transaction to be accretive immediately to recent equity raise of more than $100 million. The acquisition will help boost the company’s presence in western United States.

This Zacks Rank #1 (Strong Buy) global real estate services company remains focused on growing its core Title business and thus has a sizable merger and acquisition pipeline. The acquisition of United States Appraisals in June 2020 adds scales to existing business as well as provides cross-selling opportunities with adjacent services. The acquisition is expected to generate revenues and expense synergies while enhancing the technology platform.

The company operates in the housing market and has been benefiting from positive demographic tailwinds and attractive mortgage rates. It expects purchase volumes to grow through 2022, with strong refinancing volume in 2020 driven by a low rate environment. Stewart Information Services is well poised to capitalize on the opportunities for long-term growth, given its focus on Title insurance and the real-estate closing process.

Stewart Information Services boasts a strong balance sheet with all-time high statutory surplus of $630 million with access to about $100 million of undrawn revolver capacity supporting growth initiatives.

Shares of Stewart Information Services have gained 10.8% year to date against the industry's decline of 6.8%. Solid Title insurance business and a sturdy financial position will help shares retain the momentum.


 

There have been a host of acquisitions in the insurance space of late, given the significant capital available. Berkshire Hathaway (BRK.B - Free Report) has inked a deal to buy the natural gas transmission and storage assets of utility company, Dominion Energy (D - Free Report) . Arthur J. Gallagher (AJG - Free Report) acquired Insight Insurance & Risk Management Ltd.

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