Malcolm S. Morris, a vice chairman and member of the executive committee of Stewart Information Services Corporation (NYSE: STC), is a prime example of a values-oriented approach to managing a major corporation. Indeed, the self-effacing Morris is hardly shy about proclaiming God's role in his work and his life. As he says, "I don't pretend to be an expert on anything. I just go where the Lord guides me."
Morris obviously seeks that guidance frequently. He tells an amusing story about visiting with a friend of another faith and asking, "Do you really pray five times a day"? When this friend quickly affirmed that indeed he did, Morris's next question was "How do you get by only praying five times a day?" Morris commented that there are decisions made all day long that he prays about. It's not difficult to ascribe much of Stewart's lengthy success to management's determination to frequently consult with the Lord.
Houston-based Stewart dates its formation back to 1893, when a young lawyer named Maco Stewart obtained a waiver of his disabilities as a minor to open a law office in the island city of Galveston, south of Houston. The current line of business began to accelerate after 1907, the year that the Texas legislature passed a bill authorizing the organization of a title insurance company. The following year the business was incorporated as a title insurer. Its initial public offering occurred nearly 65 years later, in 1972.
Malcolm Morris, an attorney, joined Stewart in 1956. As he jokes today, "There were no child labor laws then." When he took the helm as chief executive officer in 1990, the company operated about 500 offices, mostly in the southern United States. As such, his first major task involved guiding Stewart's expansion into national underwriter status.
Today the company provides title insurance, along with real estate products and services, across North America and through much of Europe, the Americas and Australia. It's able to insure properties in more than 70 countries from its offices in in Australia, The Caribbean, Canada, Europe, Latin America and the United States. According to Morris, one closing about a decade ago involved from the transfer of real estate in 10 separate countries.
In addition to its title research and insurance, Stewart has also grown into other real estate and mortgage services aimed at supporting the real estate transaction process. Morris says that about 80% of the dollars spent in the title arena involve the process of risk elimination. As he notes, "Five claims per thousand transactions would eat up 100% of a title insurer's risk revenue. Title insurance is a business of risk elimination. Our job is done best if the property owner does not have to deal with an adverse claim to their title."
While several competitors have been decimated through the years by the cyclicality inherent in real estate, Stewart has focused on intentional steady growth. Since ratings began, Stewart maintained an "A" level rating. Although it was assigned a B level rating in the financial crisis, Fitch Ratings recently upped its Insurer Financial Strength (IFS) grade on the company's insurance subsidiaries to "A-" from a prior "BBB+" rating.
Stewart associates, and consequently members of senior management -- his son Matt is now the company's CEO -- maintain an open door policy. While associates are encouraged to take their suggestions to their managers first, there is openness whereby managers allow the associates to take their ideas to upper management, even if their direct managers are not favorable toward those ideas. "If you're not serving your associates within the company, they're not serving the customer," Malcolm Morris says.
Morris's own Christ-centered approach to life hardly shrinks when he leaves his office. Some years ago he was part of a group of travelers to Kenya, who were astounded by the near absence of clean drinking water. The result was his co-founding of Living Water International, a faith-based, non-profit organization that aids developing countries in acquiring safe drinking water. Beyond that it teaches appropriate hygiene methods in the locations where it operates. The obvious object is to improve community health and economic development preventing failed states.
Living Water International, which clearly is important to Morris, is also Houston-based. Its operations now span 26 countries, including India and much of Africa and Central America. It also is a founding member of the Millennium Water Alliance of 14 organizations, which he chairs with the goal of bringing water to a half billion people through advocacy and replicable development projects at the community level. The alliance includes both humanitarian and faith-based organizations whose primary objective is a substantial reduction in extreme poverty with safe water, sanitation and health and hygiene education (WASH).
There are a number of other aspects of Morris's Christian walk and its positive effect on both Stewart and the other areas of his life, including his role as a father and grandfather and his many charitable involvements. All are inspirational. But from an investment perspective, it's clear that Malcolm Morris strongly personifies the notion that, more often than not, quality managements beget quality companies.