Stewart Information Services Corporation

11/04/2026 | Press release | Distributed by Public on 11/04/2026 16:06

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT'S OVERVIEW
Third quarter 2026 overview. We reported net income attributable to Stewart of $30.3 million ($0.98 per diluted share) for the third quarter 2026, compared to net income attributable to Stewart of $44.3 million ($1.55 per diluted share) for the third quarter 2025. Pretax income before noncontrolling interests for the third quarter 2026 was $45.6 million compared to pretax income before noncontrolling interests of $61.2 million for the prior year quarter 2025. Third quarter 2025 results included $5.6 million of pretax net realized and unrealized gains, primarily driven by $4.3 million of net unrealized gains on fair value changes of equity securities investments in the title segment and a $1.2 million realized gain on a sale of real property in the corporate segment.
Summary results of the title segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended September 30,
2026 2025 % Change
Operating revenues 690.5 659.9 5 %
Investment income 13.7 14.8 (8) %
Net realized and unrealized gains
- 4.2 (100) %
Pretax income 47.5 62.0 (23) %
Pretax margin 6.7 % 9.1 %
Title segment operating revenues increased $30.6 million (5%) in the third quarter 2026 compared to the third quarter 2025, primarily driven by growth in agency title revenues. Agency gross title revenues increased $24.6 million (7%), while direct title revenues increased $6.1 million (2%), primarily due to higher domestic commercial activity during the third quarter 2026. Net of agency retention, agency title revenues increased $5.0 million (8%) consistent with the gross agency revenue growth.
The title segment's combined employee costs and other operating expenses increased $16.5 million (6%) in the third quarter 2026 compared to the prior year quarter, primarily driven by higher title revenues, which resulted in increased salaries and employee benefits and higher title search and third-party service fees, and investment in talent to support growth initiatives. As a percentage of title operating revenues, these expenses were approximately 44%, which is comparable to the third quarter 2025. Title loss expense increased $4.0 million (20%) in the third quarter 2026, primarily due to higher title revenues, while the title loss ratio, as a percentage of title operating revenues, remained comparable to the prior year quarter.
Investment income decreased $1.1 million (8%) in the third quarter 2026, primarily due to lower interest income resulting from reduced eligible escrow balances compared to the prior year quarter. Net realized and unrealized gains in the third quarter 2026 were insignificant, while the third quarter 2025 activity was primarily related to net unrealized gains on fair value changes of equity securities investments. Included in the title segment's pretax income in the third quarters 2026 and 2025 were acquisition-related intangible asset amortization expenses of $2.1 million and $2.8 million, respectively.
Summary results of the real estate solutions segment are as follows ($ in millions, except pretax margin):
For the Three Months
Ended September 30,
2026 2025 % Change
Operating revenues
196.5 116.6 68 %
Pretax income 10.3 7.3 41 %
Pretax margin 5.2 % 6.2 %
Real estate solutions segment revenues increased $79.9 million (68%) in the third quarter 2026 compared to the third quarter 2025, primarily driven by the recent MCS acquisition and higher revenues from credit information and valuation services. Combined segment employee costs and other operating expenses increased $72.7 million (71%) in the third quarter 2026, primarily due to higher costs of services associated with revenue growth and increased employee count from acquisitions. The segment's pretax income in the third quarters 2026 and 2025 included acquisition-related intangible asset amortization expenses of $9.3 million and $5.8 million, respectively, with the higher amortization expense in the third quarter 2026 primarily being driven by the MCS acquisition.
In regard to the corporate segment, pretax results were primarily driven by expenses attributable to corporate operations, which increased to $12.2 million in the third quarter 2026, compared to $9.5 million in the third quarter 2025, primarily due to higher interest expense on increased debt balances.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Company's condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures surrounding contingencies and commitments. Actual results can differ from our accounting estimates. While we do not anticipate significant changes in our estimates, there is a risk that such changes could have a material impact on our consolidated financial condition or results of operations for future periods. During the nine months ended September 30, 2026, we made no material changes to our critical accounting estimates as previously disclosed in Management's Discussion and Analysis in the 2025 Form 10-K.
Operations. Our primary business is title insurance and settlement-related services. We close transactions and issue title policies on homes, commercial and other real properties located in all 50 states, the District of Columbia and international markets through policy-issuing offices, agencies and centralized title services centers. Our real estate solutions operations include credit and real estate information services, property preservation and field services, valuation services, and online notarization and closing solutions. The corporate segment includes our parent holding company and centralized support services departments.
Factors affecting revenues. The principal factors that contribute to changes in our operating revenues include:
•interest rates;
•availability of mortgage loans;
•number and average value of mortgage loan originations;
•ability of potential purchasers to qualify for loans;
•inventory of existing homes available for sale;
•ratio of purchase transactions compared with refinance transactions;
•ratio of closed orders to open orders;
•home prices;
•consumer confidence, including employment trends;
•demand by buyers;
•premium rates and related state regulations;
•foreign currency exchange rates;
•market share;
•ability to attract and retain highly productive sales associates;
•independent agency remittance rates;
•opening and integration of new offices and acquisitions;
•office closures;
•number and value of commercial transactions, which typically yield higher premiums;
•government or regulatory initiatives;
•acquisitions or divestitures of businesses;
•volume of distressed property transactions; and
•seasonality and/or weather.
Premiums are determined in part by the values of the transactions we handle. To the extent inflation or market conditions cause increases in the prices of homes and other real estate, premium revenues are also increased. Conversely, falling home prices cause premium revenues to decline. Home price changes may override the seasonal nature of the title insurance business. Historically, our first quarter is the least active in terms of title insurance revenues as home buying is generally depressed during winter months. Our second and third quarters are typically the most active as the summer is the traditional home buying season, and while commercial transaction closings are skewed to the end of the year, individually large commercial transactions can occur any time of the year. On average, title premium rates for refinance orders are lower compared to a similarly priced purchase transaction.
RESULTS OF OPERATIONS
Comparisons of our results of operations for the three and nine months ended September 30, 2026 with the corresponding periods in the prior year are set forth below. Factors contributing to fluctuations in the results of operations are presented in the order of their monetary significance, and we have quantified, when necessary, significant changes. Segment results are included in the discussions and, when relevant, are discussed separately.
Our statements on home sales, interest rates and loan activity are based on published U.S. industry data from sources including Fannie Mae, the Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and the U.S. Census Bureau as of September 30, 2026. We also use information from our direct operations.
Operating environment. According to NAR, existing home sales (seasonally-adjusted basis) totaled approximately 3.99 million units in September 2026, representing a 2% decrease from the prior year and a 2% increase from August 2026. NAR noted that home sales activity in August and September were the lowest for the year, primarily due to elevated mortgage interest rates and affordability challenges. The median existing home price in September 2026 increased to $417,500, representing a 1% increase from the prior year and the 39th consecutive month of year-over-year price appreciation. Additionally, U.S. residential construction activity remained constrained during September 2026, as total housing starts decreased 7% and 5% compared to September 2025 and August 2026, respectively, while newly issued building permits were 3% below prior-year levels and unchanged from August 2026.
Based on averaged estimates by Fannie Mae and MBA as of September 2026, total U.S. single-family mortgage originations were $514 billion in the third quarter 2026, or 1% lower compared to the third quarter 2025, primarily driven by 4% lower refinancing activity. The average 30-year fixed mortgage interest rate remained elevated during the third quarter 2026 at 6.7%, compared to 6.6% in the third quarter 2025 and 6.4% in the second quarter 2026. Mortgage rates rose throughout the quarter and exceeded 7.0% by the end of the third quarter, primarily due to the sharp increase in the 10-year Treasury yield, which reached its highest level since 2022. The 30-year fixed mortgage rate is expected to average 7.4% in the fourth quarter 2026. As a result, fourth quarter 2026 total mortgage originations are expected to be 23% lower, largely due to lower expected refinancing activity, while total home sales are projected to be 5% lower compared to the fourth quarter 2025.
Title revenues. Direct title revenues information is presented below:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 Change
% Chg
2026 2025 Change % Chg
(in $ millions)
($ in millions)
Non-commercial:
Domestic 179.8 176.8 3.0 2 % 503.3 490.8 12.5 3 %
International 32.3 32.5 (0.2) (1) % 87.4 84.3 3.1 4 %
212.1 209.3 2.8 1 % 590.7 575.1 15.6 3 %
Commercial:
Domestic 86.4 79.1 7.3 9 % 270.0 223.0 47.0 21 %
International 7.3 11.3 (4.0) (35) % 21.8 24.5 (2.7) (11) %
93.7 90.4 3.3 4 % 291.8 247.5 44.3 18 %
Total direct title revenues 305.8 299.7 6.1 2 % 882.5 822.6 59.9 7 %
Domestic commercial revenues improved $7.3 million, or 9%, and $47.0 million, or 21%, in the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. The increases were primarily driven by higher commercial transaction volume across multiple asset classes, including retail and multi-family in the third quarter, and data center, energy, retail and multi-family properties during the first nine months of 2026. The average domestic commercial fee per file for the third quarter 2026 was $16,300, an 8% decline from the prior year quarter, primarily due to asset class transaction mix, while the average fee per file for the nine months of 2026 increased 7% to $17,900, primarily driven by increased size of energy transactions compared to the same period in 2025.
Domestic non-commercial revenues increased $3.0 million, or 2%, in the third quarter 2026, primarily due to contributions from acquisitions, and increased $12.5 million, or 3%, in the first nine months of 2026, primarily driven by an increased average fee per file. The average domestic residential fee per file was $3,200 for both the third quarter and first nine months of 2026, compared to $3,200 and $3,100, respectively, for the same periods in 2025.
Total international revenues declined $4.2 million, or 10%, in the third quarter 2026, primarily driven by a large commercial transaction that closed in the prior year quarter, while total international revenues in the first nine months of 2026 were comparable to the same period in 2025.
Orders information is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2026
2025
Change
% Chg
2026 2025 Change % Chg
Opened Orders:
Commercial 5,548 4,520 1,028 23 % 16,901 13,374 3,527 26 %
Purchase 48,578 50,661 (2,083) (4) % 144,339 149,704 (5,365) (4) %
Refinance 18,221 22,399 (4,178) (19) % 61,724 59,697 2,027 3 %
Other*
13,660 9,823 3,837 39 % 40,298 33,217 7,081 21 %
Total 86,007 87,403 (1,396) (2) % 263,262 255,992 7,270 3 %
Closed Orders:
Commercial 5,302 4,478 824 18 % 15,085 13,283 1,802 14 %
Purchase 34,329 36,209 (1,880) (5) % 96,232 98,875 (2,643) (3) %
Refinance 11,439 12,778 (1,339) (10) % 38,000 34,841 3,159 9 %
Other*
10,694 5,847 4,847 83 % 22,383 24,580 (2,197) (9) %
Total 61,764 59,312 2,452 4 % 171,700 171,579 121 - %
*Other orders are primarily related to real estate investor and reverse mortgage transactions.
Gross revenues from independent agency operations increased $24.6 million, or 7%, and $165.8 million, or 18%, in the third quarter and first nine months of 2026, respectively, primarily due to improved residential and commercial volumes in our key agency states, including Florida, Michigan, New York and Pennsylvania. Agency revenues, net of retention, increased $5.0 million, or 8%, and $28.7 million, or 18%, in the third quarter and first nine months of 2026, respectively, consistent with the gross agency revenue growth. Refer further to the "Retention by agencies" discussion under Expenses below.
Real estate solutions revenues. Real estate solutions revenues improved $79.8 million, or 69%, in the third quarter 2026 and $228.8 million, or 70%, in the first nine months of 2026 compared to the same periods in 2025, primarily driven by our recently acquired MCS business and higher revenues from our credit information and valuation services businesses.
Investment income. Investment income in the third quarter and first nine months of 2026 decreased $1.1 million, or 8%, and $1.3 million, or 3%, respectively, compared to the same periods in 2025, primarily driven by lower interest income resulting from reduced eligible escrow balances.
Net realized and unrealized gains. Refer to Note 5 to the condensed consolidated financial statements.
Expenses. An analysis of expenses is shown below:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 Change* % Chg 2026 2025 Change* % Chg
(in $ millions)
($ in millions)
Amounts retained by agencies 319.1 299.5 19.5 7 % 910.1 773.0 137.1 18 %
As a % of agency title revenues
82.9 % 83.2 % 83.1 % 83.2 %
Employee costs 230.9 211.2 19.7 9 % 693.1 605.2 87.8 15 %
As a % of operating revenues 26.0 % 27.2 % 27.4 % 29.1 %
Other operating expenses 254.7 185.2 69.6 38 % 713.3 519.6 193.7 37 %
As a % of operating revenues 28.7 % 23.8 % 28.2 % 25.0 %
Title losses and related claims 23.5 19.5 4.0 20 % 64.0 58.7 5.3 9 %
As a % of title revenues 3.4 % 3.0 % 3.2 % 3.4 %
*May not foot due to rounding.
Retention by agencies. Amounts retained by title agencies are based on agreements between agencies and our title underwriters. Amounts retained by independent agencies, as a percentage of revenues generated by them, averaged 82.9% and 83.1% in the third quarter and first nine months of 2026, respectively, compared to 83.2% in both periods in 2025. The average retention percentage may vary from period to period due to the geographical mix of agency operations, the volume of title revenues and, in some states, laws or regulations. Due to the variety of such laws or regulations, as well as competitive factors, the average retention rate can differ significantly from state to state. In addition, a high proportion of our independent agencies are in states with retention rates greater than 80%. We continue to focus on increasing profit margins in every state, increasing premium revenue in states where remittance rates are higher, and maintaining the quality of our agency network, which we believe to be the industry's best, in order to mitigate claims risk and drive consistent future performance. While market share is important in our agency operations channel, it is not as important as margins, risk mitigation and profitability.
Employee costs. Consolidated employee costs increased $19.7 million, or 9%, and $87.8 million, or 15%, in the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025, primarily driven by higher costs of services associated with increased revenues, increased employee count from recent acquisitions and investment in talent to support growth initiatives. Employee costs in the title segment increased $11.5 million, or 6%, and $61.1 million, or 11%, while employee costs in the real estate solutions segment increased $9.0 million, or 56%, and $27.6 million, or 61%, in the third quarter and first nine months of 2026, respectively.
Total employee costs, as a percentage of total operating revenues, improved to 26.0% and 27.4% in the third quarter and first nine months of 2026, respectively, from 27.2% and 29.1% in the same periods of 2025, primarily due to higher operating revenues in 2026. During the third quarter and first nine months of 2026, we had an average of approximately 8,400 and 8,200 employees, respectively, compared to approximately 7,500 and 7,200 in the same periods of 2025, primarily driven by volume growth, acquisitions and investment in talent to support growth. Average cost per employee for the third quarter and first nine months of 2026 remained comparable with the third quarter and first nine months of 2025.
Other operating expenses. Other operating expenses include costs that are primarily fixed in nature, costs that follow, to varying degrees, changes in transaction volumes and revenues (variable costs) and costs that fluctuate independently of revenues (independent costs). Costs that are primarily fixed in nature include rent and other occupancy expenses, equipment rental, insurance, repairs and maintenance, technology costs and telecommunications expenses. Variable costs include third-party service and appraiser expenses related to real estate solutions operations, third-party title search and service fees, attorney fee splits, credit losses (on receivables), copy supplies, delivery fees, postage, premium taxes and title plant maintenance expenses. Independent costs include general supplies, litigation defense, business promotion and marketing, and travel.
Consolidated other operating expenses increased $69.6 million, or 38%, and $193.7 million, or 37%, in the third quarter and first nine months of 2026 compared to the same periods in 2025. Total variable costs in the third quarter and first nine months of 2026 increased $58.7 million, or 48%, and $163.7 million, or 48%, respectively, primarily due to higher real estate solutions third-party service and appraiser expenses and increased third-party title search and service fees related to operating revenue growth. Total costs that are primarily fixed in nature increased by $5.5 million, or 12%, and $11.8 million, or 9%, in the third quarter and first nine months of 2026, respectively, primarily driven by higher external technology costs. Independent costs increased $5.3 million, or 33%, and $18.3 million, or 41%, in the third quarter and first nine months of 2026, respectively, primarily resulting from MCS acquisition integration expenses and higher business promotion and marketing costs, travel expenses and bank fees.
As a percentage of total operating revenues, consolidated other operating expenses in the third quarter and first nine months of 2026 increased to 28.7% and 28.2%, respectively, compared to 23.8% and 25.0% in the same periods of 2025, primarily due to the increased size of our real estate solutions operations, which typically incur higher service costs as a percentage of revenue.
Title losses. Provisions for title losses, as a percentage of title operating revenues, were 3.4% and 3.2% for the third quarter and first nine months of 2026, respectively, compared to 3.0% and 3.4% in the same periods in 2025. Title loss expense in the third quarter and first nine months of 2026 increased $4.0 million, or 20%, and $5.3 million, or 9%, respectively, primarily due to increased title revenues. The title loss ratio in any given quarter can be significantly influenced by changes in large claims incurred, escrow losses and adjustments to reserves for existing large claims.
The composition of title policy loss expense is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 Change % Chg 2026 2025 Change % Chg
(in $ millions)
($ in millions)
Provisions - known claims:
Current year 3.6 2.8 0.8 29 % 8.7 7.7 1.0 13 %
Prior policy years 26.2 18.2 8.0 44 % 44.9 47.7 (2.8) (6) %
29.8 21.0 8.8 42 % 53.6 55.4 (1.8) (3) %
Provisions - IBNR
Current year 18.6 15.9 2.7 17 % 52.9 49.4 3.5 7 %
Prior policy years 1.3 0.8 0.5 63 % 2.4 1.6 0.8 50 %
19.9 16.7 3.2 19 % 55.3 51.0 4.3 8 %
Transferred from IBNR to known claims (26.2) (18.2) (8.0) (44) % (44.9) (47.7) 2.8 (6) %
Total provisions 23.5 19.5 4.0 20 % 64.0 58.7 5.3 9 %
Provisions for known claims arise primarily from prior policy years as claims are not typically reported until several years after policies are issued. Provisions - Incurred But Not Reported (IBNR) are estimates of claims expected to be incurred over the next 20 years; therefore, it is not unusual or unexpected to experience changes to those estimated provisions in both current and prior policy years as additional loss experience on policy years is obtained. This loss experience may result in changes to our estimate of total ultimate losses expected (i.e., the IBNR policy loss reserve). Current year provisions - IBNR are recorded on policies issued in the current year as a percentage of premiums earned (provisioning rate). As claims become known, provisions are reclassified from IBNR to known claims. Adjustments relating to large losses (those individually in excess of $1.0 million) may impact provisions either for known claims or for IBNR.
Total known claims provision increased $8.8 million, or 42%, in the third quarter 2026, primarily due to higher reported non-large and large claims related to prior policy years, while total known claims provision decreased $1.8 million, or 3%, in the first nine months of 2026, compared to the same periods in 2025. Current year IBNR provisions increased $2.7 million, or 17%, and $3.5 million, or 7%, for the third quarter and first nine months of 2026, respectively, primarily due to an increase in title premiums in 2026. As a percentage of title operating revenues, provisions - IBNR for the current policy year were 2.7% for both the third quarter and first nine months of 2026, compared to 2.4% and 2.8% for the same periods in 2025.
Total claim payments increased $0.9 million, or 4%, and $8.5 million, or 15%, in the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025, primarily due to higher payments on large and non-large claims relating to prior policy years. We continue to manage and resolve large claims prudently and in keeping with our commitments to our policyholders.
In addition to title policy claims, we incur losses in our direct operations from escrow, closing and disbursement functions. These escrow losses typically relate to errors or other miscalculations of amounts to be paid at closing, including timing or amount of a mortgage payoff, payment of property or other taxes and payment of homeowners' association fees, and wire fraud. In those cases, the title insurer incurs the loss under its obligation to ensure that an unencumbered title is conveyed and performs various recovery actions to offset or reduce the impact to the title insurer. These escrow losses are recognized as expenses (net of any recovery) when discovered or when contingencies associated with them (such as litigation) are resolved and are typically paid less than 12 months after the loss is recognized.
Total title policy loss reserve balances are as follows:
September 30, 2026 December 31, 2025
(in $ millions)
Known claims 74.1 84.8
IBNR 447.4 439.7
Total estimated title losses 521.5 524.5
The actual timing of estimated title loss payments may vary since claims, by their nature, are complex and paid over long periods of time. Based on historical payment patterns, the outstanding loss reserves are substantially paid out within eight years. As a result, the estimate of the ultimate amount to be paid on any claim may be modified over that time period. Due to the inherent uncertainty in predicting future title policy losses, significant judgment is required by both our management and our third party actuaries in estimating reserves. As a consequence, our ultimate liability may be materially greater or less than current reserves and/or our third party actuary's calculated estimates.
Depreciation and amortization. Total depreciation and amortization expenses in the third quarter and first nine months of 2026 increased $3.9 million, or 25%, and $7.9 million, or 17%, respectively, compared to the same periods in 2025, primarily due to increased intangible amortization and depreciation expenses related to our recent MCS acquisition, partially offset by lower amortization expenses resulting from several assets becoming fully amortized in 2026.
Income taxes. The effective tax rate (calculated on income before taxes after deducting income attributable to noncontrolling interests) increased to 28% in the third quarter 2026, compared to 23% in the third quarter 2025, primarily due to the proportion of income earned in foreign jurisdictions with higher tax rates, effect of non-deductible expenses on lower pretax income, and lower discrete income tax benefits in the third quarter 2026. The effective tax rate for the first nine months of 2026 increased to 26%, compared to 24% in the corresponding period in 2025, primarily as a result of the proportion of income earned in foreign jurisdictions with higher tax rates in 2026 and higher discrete income tax benefits recognized in 2025. The higher discrete tax benefits recognized in the third quarter and first nine months of 2025 were primarily related to the filing of the 2024 federal tax return.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources reflect our ability to generate cash flow to meet our obligations to stockholders, customers (payments to satisfy claims on title policies), vendors, employees, lenders and others. As of September 30, 2026, our total cash and investments, including amounts reserved pursuant to statutory requirements, aggregated $802.1 million, of which $370.7 million ($145.7 million, net of statutory reserve funds) was held in the United States and the rest internationally (principally in Canada).
As a holding company, the parent company is funded principally by cash from its subsidiaries' earnings in the form of dividends, operating and other administrative expense reimbursements and pursuant to intercompany tax sharing agreements. Cash held at the parent company and its unregulated subsidiaries (which totaled $41.8 million at September 30, 2026) is available for funding the parent company's operating expenses, interest payments on debt and dividend payments to common stockholders. The parent company also receives distributions from Stewart Title Guaranty Company (Guaranty), its regulated title insurance underwriter, to meet cash requirements for acquisitions and other strategic investments.
A substantial majority of our consolidated cash and investments as of September 30, 2026 was held by Guaranty and its subsidiaries. The use and investment of these funds, dividends to the parent company, and cash transfers between Guaranty and its subsidiaries and the parent company are subject to certain legal and regulatory restrictions. In general, Guaranty uses its cash and investments in excess of its legally-mandated statutory premium reserve (established in accordance with requirements under Texas law) to fund its insurance operations, including claims payments. Guaranty may also, subject to certain limitations, provide funds to its subsidiaries (whose operations consist principally of field title offices and real estate solutions operations) for their operating and debt service needs.
We maintain investments in accordance with certain statutory requirements for the funding of statutory premium reserves. Statutory reserve funds are required to be fully funded and invested in high-quality securities and short-term investments. Statutory reserve funds are not available for current claim payments, which must be funded from current operating cash flow. Included in investments in debt and equity securities are statutory reserve funds of approximately $507.8 million and $492.0 million at September 30, 2026 and December 31, 2025, respectively. In addition, included within cash and cash equivalents are statutory reserve funds of approximately $3.7 million and $4.4 million at September 30, 2026 and December 31, 2025, respectively. As of September 30, 2026, our known claims reserve totaled $74.1 million and our estimate of claims that may be reported in the future, under generally accepted accounting principles, totaled $447.4 million. In addition to this, we had cash and investments (at amortized cost and excluding equity method investments) of $204.6 million, which are available for underwriter operations, including claims payments, and acquisitions.
The ability of Guaranty to pay dividends to its parent is governed by Texas insurance law. The Texas Department of Insurance (TDI) must be notified of any dividend declared, and any dividend in excess of the greater of the statutory net operating income or 20% of surplus (which was approximately $165.4 million as of December 31, 2025) would be, by regulation, considered extraordinary and subject to pre-approval by the TDI. Also, the Texas Insurance Commissioner may raise an objection to a planned distribution during the notification period. Guaranty's actual ability or intent to pay dividends to its parent may be constrained by business and regulatory considerations, such as the impact of dividends on surplus and liquidity, which could affect its ratings and competitive position, the amount of insurance it can write and its ability to pay future dividends. Guaranty paid $50.0 million of dividends to the parent company during the first nine months of 2025 and none during the first nine months of 2026.
As the parent company conducts no operations apart from its wholly-owned subsidiaries, the discussion below focuses on consolidated cash flows.
Nine Months Ended September 30,
2026 2025
(in $ millions)
Net cash provided by operating activities 102.6 116.1
Net cash used by investing activities (218.5) (92.0)
Net cash used by financing activities (53.1) (54.7)
Operating activities. Our principal sources of cash from operations are premiums on title policies and revenue from title service-related transactions, real estate solutions and other operations. Our independent agencies remit cash to us net of their contractual retention. Our principal cash expenditures for operations are employee costs, operating costs and title claims payments.
Net cash provided by operations decreased by $13.5 million to $102.6 million during the first nine months of 2026, from $116.1 million during the same period in 2025, primarily due to higher payments of claims and operating liabilities, partially offset by higher net income. Although our business is labor intensive, we are focused on a cost-effective, scalable business model which includes utilization of technology, centralized back and middle office functions and business process outsourcing. We are continuing our emphasis on disciplined cost management, especially in light of the current economic environment due to elevated mortgage interest rates, specifically focusing on lowering unit costs of production and improving operating margins in our direct title and real estate solutions operations. Our plans to improve margins include additional automation of manual processes, further consolidation of our various systems and production operations, and full integration of acquisitions. We continue to invest in the technology necessary to accomplish these goals.
Investing activities. Cash used and provided by investing activities is primarily related to proceeds from matured and sold investments, purchases of investments, capital expenditures and acquisition of businesses. During the first nine months of 2026 and 2025, total proceeds from securities investments sold and matured were $90.2 million and $112.3 million, respectively, while cash used for purchases of securities investments was $102.1 million and $100.6 million, respectively. Additionally, during the first nine months of 2026 and 2025, we used cash of $62.9 million and $46.2 million, respectively, for expenditures related to property and equipment and other long-lived assets, while we used net cash of $134.1 million and $38.6 million, respectively, for acquisitions of title and real estate solutions businesses. We maintain investment in capital expenditures at a level that enables us to implement technologies for increasing our operational and back-office efficiencies and to pursue growth in key markets.
Financing activities and capital resources. Total debt and stockholders' equity were $654.9 million and $1.68 billion, respectively, as of September 30, 2026. At September 30, 2026, our debt-to-equity and debt-to-capitalization ratios (excluding our Section 1031 tax-deferred property exchange notes) were approximately 39% and 28%, respectively, which were consistent with December 31, 2025.
As of September 30, 2026, the outstanding balance of our Senior Notes was $446.6 million, while our line of credit facility had an outstanding balance of $208.0 million, with a remaining borrowing capacity of $89.5 million and an option to increase the line of credit facility by up to $125.0 million. Total interest expense during the first nine months of 2026 increased by $7.9 million, or 53%, compared to the same period in 2025, primarily due to the higher outstanding balance on the line of credit facility. During the first nine months of 2026 and 2025, payments on notes payable of $2.8 million and $1.1 million, respectively, and notes payable additions of $2.8 million and $1.0 million, respectively, were related to our Section 1031 business, which had an outstanding balance of $0.2 million as of September 30, 2026.
During the first nine months of 2026, we paid total dividends of $49.7 million ($1.60 per common share), compared to total dividends paid of $42.6 million ($1.53 per common share) during the same period in 2025.
We believe we have sufficient liquidity and capital resources to meet the cash needs of our ongoing operations, including consideration of the current economic and real estate environment created by the elevated mortgage interest rates. However, we may determine that additional debt or equity funding is warranted to provide liquidity for achievement of strategic goals or acquisitions or for unforeseen circumstances. Other than scheduled maturities of debt, operating lease payments and anticipated claims payments, we have no material contractual commitments. We expect that cash flows from operations and cash available from our underwriters, subject to regulatory restrictions, will be sufficient to fund our operations, including title claims payments. However, to the extent that these funds are not sufficient, we may be required to borrow funds on terms less favorable than we currently have or seek funding from the equity market, which may not be successful or may be on terms that are dilutive to existing stockholders.
Contingent liabilities and commitments. See discussion of contingent liabilities and commitments in Note 10 to the condensed consolidated financial statements.
Other comprehensive (loss) income. Unrealized gains and losses on available-for-sale debt securities investments and changes in foreign currency exchange rates are reported net of deferred taxes in accumulated other comprehensive income (loss), a component of stockholders' equity, until they are realized. During the first nine months of 2026, net unrealized investment losses of $12.5 million, net of taxes, which increased our other comprehensive loss, were primarily related to net decreases in the fair values of our corporate, foreign, and government bond securities investments which were influenced by higher interest rates. During the first nine months of 2025, net unrealized investment gains of $9.7 million, net of taxes, which increased our other comprehensive income, were primarily related to net increases in the fair values of our foreign and corporate bond securities investments resulting from lower interest rates.
Changes in foreign currency spot exchange rates (primarily related to our Canadian and United Kingdom operations) resulted in other comprehensive loss, net of taxes, of $5.5 million in the first nine months of 2026, primarily due to the depreciation of the Canadian dollar relative to the U.S. dollar. In the first nine months of 2025, both the Canadian dollar and the British pound appreciated relative to the U.S. dollar, primarily resulting in other comprehensive income, net of taxes, of $9.2 million.
Off-balance sheet arrangements. We do not have any material source of liquidity or financing that involves off-balance sheet arrangements. We also routinely hold funds in segregated escrow accounts pending the closing of real estate transactions and have qualified intermediaries in tax-deferred property exchanges for customers pursuant to Section 1031 of the Internal Revenue Code. The Company holds the proceeds from these transactions until a qualifying exchange can occur. In accordance with industry practice, these segregated accounts are not included on the balance sheet. See Note 15 in our 2025 Form 10-K.
Forward-looking statements. Certain statements in this report are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements relate to future, not past, events and often address our expected future business and financial performance. These statements often contain words such as "may," "expect," "anticipate," "intend," "plan," "believe," "seek," "will," "foresee" or other similar words. Forward-looking statements by their nature are subject to various risks and uncertainties that could cause our actual results to be materially different than those expressed in the forward-looking statements. These risks and uncertainties include, among other things, the following:
•the volatility of economic conditions, including economic changes that may result from new or increased tariffs, trade restrictions, prolonged federal government shutdowns or geopolitical tensions;
•adverse changes in the level of real estate activity;
•changes in mortgage interest rates, existing and new home sales, and availability of mortgage financing;
•our ability to respond to and implement technology changes, including the completion of the implementation of our enterprise systems;
•the impact of unanticipated title losses or the need to strengthen our policy loss reserves;
•any effect of title losses on our cash flows and financial condition;
•the ability to attract and retain highly productive sales associates;
•the impact of vetting our agency operations for quality and profitability;
•independent agency remittance rates;
•changes to the participants in the secondary mortgage market and the rate of refinancing that affects the demand for title insurance products;
•regulatory non-compliance, fraud or defalcations by our title insurance agencies or employees;
•our ability to timely and cost-effectively respond to significant industry changes and introduce new products and services;
•our ability to realize anticipated benefits of our previous acquisitions;
•the outcome of pending litigation;
•our ability to manage risks associated with potential cybersecurity or other privacy or data security breaches;
•the impact of changes in governmental and insurance regulations, including any future reductions in the pricing of title insurance products and services;
•our dependence on our operating subsidiaries as a source of cash flow;
•our ability to access the equity and debt financing markets when and if needed;
•effects of seasonality and weather; and
•our ability to respond to the actions of our competitors.
The above risks and uncertainties, as well as others, are discussed in more detail in our documents filed with the Securities and Exchange Commission, including in Part I, Item 1A "Risk Factors" in our 2025 Form 10-K, and as may be further updated and supplemented from time to time in our future Quarterly Reports on Form 10-Q, and our Current Reports on Form 8-K filed subsequently. All forward-looking statements included in this report are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statements contained in this report to reflect events or circumstances that may arise after the date hereof, except as may be required by applicable law.
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