ITIC Investors Title Company

Investors Title Company (Nasdaq: ITIC) today announced results for the third quarter ended September 30, 2022. The Company reported net income of $7.9 million, or $4.17 per diluted share, for the three months ended September 30, 2022, compared to $14.5 million, or $7.63 per diluted share, for the prior year period.

Revenues decreased 4.2% to $78.0 million, compared with $81.4 million for the prior year quarter. The reduction in revenue is attributable to recognition of a $4.6 million unrealized loss in the Company’s equity portfolio, and a 7.9% decrease in net premiums written, partially offset by realized gains on sales of equity investments as well as increases in revenue from escrow fees and other title-related fees, and non-title services. The reduction in premiums stems from an overall decline in the level of real estate transaction volume following the rise in mortgage interest rates over the course of the year. Although overall premium revenue was down, escrow and other title-related fees increased 54.4% due to an increase in business in markets that generate escrow income, and fee income associated with commercial activity. Revenue from non-title services increased 57.5%, mainly due to an increase in like-kind exchange revenues. Realized gains from sales of equity securities were $2.2 million higher than the prior year period.

Operating expenses increased 7.8% compared to the prior year quarter, primarily due to increases in personnel costs, title fees, and office and technology expenses. Commissions to agents decreased commensurate with the decrease in agent premium volume. Personnel costs were 39.7% higher than the prior year quarter due to staffing of new offices, hiring to support growth initiatives, and increased employee benefit costs. Office, technology, and other operating expenses increased 36.7% in support of expanding our geographic footprint and ongoing technology initiatives. Claims expense was essentially flat compared to the prior year quarter.

Income before income taxes decreased 45.3% to $10.1 million for the current quarter versus $18.4 million in the prior year period. Excluding the impact of changes in the estimated fair value of equity security investments, income before income taxes (non-GAAP) decreased 23.5% to $14.7 million for the third quarter versus $19.2 million in the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).

For the nine months ended September 30, 2022, net income decreased $31.7 million to $16.4 million, or $8.63 per diluted share, versus $48.1 million, or $25.34 per diluted share, for the prior year period. Revenues decreased 8.6% to $217.9 million compared with $238.5 million for the prior year period. Operating expenses increased 11.1% to $197.1 million, mainly due to increases in personnel and office, technology, and other operating expenses. Aside from a non-recurring gain on the sale of property in the prior year period, overall results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter.

Chairman J. Allen Fine commented, “We are pleased to report another quarter of solid operating performance, despite market headwinds. Rising mortgage interest rates resulted in the continued moderation of the real estate market, reducing home affordability which in turn has softened demand.

“Although overall transaction volumes were lower than the prior year quarter, our recent successes in expanding our market footprint materially contributed to lessening the impact of the market slowdown on our operating performance. We believe the Company is well-positioned as we transition to a different stage of the real estate cycle, and plan to continue to make targeted investments in our business to expand our geographic presence, improve our operating performance, and deliver value to our customers and business partners.”

Investors Title Company’s subsidiaries issue and underwrite title insurance policies. The Company also provides investment management services and services in connection with tax-deferred exchanges of like-kind property.

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Cautionary Statements Regarding Forward-Looking Statements

Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words such as “plan,” expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “should,” “could,” “would,” and other expressions that indicate future events and trends. Such statements include, among others, any statements regarding the Company’s expected performance for this year, projections regarding U.S. recovery from the COVID-19 pandemic, future home price fluctuations, changes in home purchase or refinance demand, activity and the mix thereof, interest rate changes, expansion of the Company’s market presence, enhancing competitive strengths, development in housing affordability, wages, unemployment or overall economic conditions or statements regarding our actuarial assumptions and the application of recent historical claims experience to future periods. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from anticipated and historical results. Such risks and uncertainties include, without limitation: the impact of the COVID-19 pandemic (including any of its variants) on the economy and the Company’s business; the cyclical demand for title insurance due to changes in the residential and commercial real estate markets; the occurrence of fraud, defalcation or misconduct; variances between actual claims experience and underwriting and reserving assumptions, including the limited predictive power of historical claims experience; declines in the performance of the Company’s investments; government regulations; changes in the economy; the potential impact of inflation and responses by government regulators, including the Federal Reserve; loss of agency relationships, or significant reductions in agent-originated business; difficulties managing growth, whether organic or through acquisitions and other considerations set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission, and in subsequent filings.

Investors Title Company and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

66,658

 

 

$

72,345

 

 

$

199,409

 

 

$

201,349

Escrow and other title-related fees

 

 

5,963

 

 

 

3,863

 

 

 

17,236

 

 

 

10,148

Non-title services

 

 

3,852

 

 

 

2,446

 

 

 

9,114

 

 

 

6,932

Interest and dividends

 

 

1,229

 

 

 

893

 

 

 

3,055

 

 

 

2,807

Other investment income

 

 

2,173

 

 

 

2,186

 

 

 

4,616

 

 

 

4,610

Net realized investment gains

 

 

2,481

 

 

 

268

 

 

 

6,266

 

 

 

771

Changes in the estimated fair value of equity security investments

 

 

(4,635

)

 

 

(802

)

 

 

(22,722

)

 

 

7,266

Other

 

 

277

 

 

 

217

 

 

 

924

 

 

 

4,572

Total Revenues

 

 

77,998

 

 

 

81,416

 

 

 

217,898

 

 

 

238,455

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

 

33,478

 

 

 

37,570

 

 

 

97,161

 

 

 

102,458

Provision for claims

 

 

1,966

 

 

 

1,993

 

 

 

3,452

 

 

 

5,020

Personnel expenses

 

 

21,586

 

 

 

15,457

 

 

 

63,738

 

 

 

47,524

Office and technology expenses

 

 

4,274

 

 

 

3,175

 

 

 

12,930

 

 

 

9,128

Other expenses

 

 

6,606

 

 

 

4,784

 

 

 

19,783

 

 

 

13,285

Total Operating Expenses

 

 

67,910

 

 

 

62,979

 

 

 

197,064

 

 

 

177,415

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

10,088

 

 

 

18,437

 

 

 

20,834

 

 

 

61,040

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

2,175

 

 

 

3,934

 

 

 

4,457

 

 

 

12,932

 

 

 

 

 

 

 

 

 

Net Income

 

$

7,913

 

 

$

14,503

 

 

$

16,377

 

 

$

48,108

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

4.17

 

 

$

7.66

 

 

$

8.63

 

 

$

25.40

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

 

1,897

 

 

 

1,894

 

 

 

1,897

 

 

 

1,894

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

4.17

 

 

$

7.63

 

 

$

8.63

 

 

$

25.34

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

 

1,897

 

 

 

1,900

 

 

 

1,898

 

 

 

1,899

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2022 and December 31, 2021

(in thousands)

(unaudited)

 

 

September 30, 2022

 

December 31, 2021

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

41,380

 

 

$

37,168

 

 

 

 

Investments:

 

 

 

Fixed maturity securities, available-for-sale, at fair value

 

55,307

 

 

 

79,791

Equity securities, at fair value

 

52,657

 

 

 

76,853

Short-term investments

 

80,785

 

 

 

45,930

Other investments

 

19,673

 

 

 

20,298

Total investments

 

208,422

 

 

 

222,872

 

 

 

 

Premiums and fees receivable

 

23,194

 

 

 

22,953

Accrued interest and dividends

 

971

 

 

 

817

Prepaid expenses and other receivables

 

12,527

 

 

 

11,721

Property, net

 

16,613

 

 

 

13,033

Goodwill and other intangible assets, net

 

17,954

 

 

 

15,951

Operating lease right-of-use assets

 

6,258

 

 

 

5,202

Other assets

 

2,320

 

 

 

1,771

Current income taxes recoverable

 

3,164

 

 

 

—

Total Assets

$

332,803

 

 

$

331,488

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

Reserve for claims

$

37,630

 

 

$

36,754

Accounts payable and accrued liabilities

 

41,938

 

 

 

43,868

Operating lease liabilities

 

6,389

 

 

 

5,329

Current income taxes payable

 

—

 

 

 

3,329

Deferred income taxes, net

 

7,805

 

 

 

13,121

Total liabilities

 

93,762

 

 

 

102,401

 

 

 

 

Stockholders’ Equity:

 

 

 

Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)

 

—

 

 

 

—

Retained earnings

 

239,792

 

 

 

225,861

Accumulated other comprehensive (loss) income

 

(751

)

 

 

3,226

Total stockholders’ equity

 

239,041

 

 

 

229,087

Total Liabilities and Stockholders’ Equity

$

332,803

 

 

$

331,488

Investors Title Company and Subsidiaries

Direct and Agency Net Premiums Written

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands)

(unaudited)

 

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2022

%

2021

%

2022

%

2021

%

Direct

$

21,818

32.7

$

21,803

30.1

$

68,478

34.3

$

61,619

30.6

 

 

 

 

 

 

 

 

 

Agency

 

44,840

67.3

 

50,542

69.9

 

130,931

65.7

 

139,730

69.4

 

 

 

 

 

 

 

 

 

Total

$

66,658

100.0

$

72,345

100.0

$

199,409

100.0

$

201,349

100.0

Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Nine Months Ended September 30, 2022 and 2021

(in thousands)

(unaudited)

 

Management uses various financial and operational measurements, including financial information not prepared in accordance with generally accepted accounting principles ("GAAP"), to analyze Company performance. This includes adjusting revenues to remove the impact of changes in the estimated fair value of equity security investments, which are recognized in net income under GAAP. Management believes that these measures are useful to evaluate the Company's internal operational performance from period to period because they eliminate the effects of external market fluctuations. The Company also believes users of the financial results would benefit from having access to such information, and that certain of the Company’s peers make available similar information. This information should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with GAAP, and may be different from similarly titled non-GAAP financial measures used by other companies.

 

The following tables reconcile non-GAAP financial measurements used by Company management to the comparable measurements using GAAP:

 

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2022

 

2021

2022

 

2021

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Total revenues (GAAP)

$

77,998

 

$

81,416

$

217,898

 

$

238,455

 

Add (Subtract): Changes in the estimated fair value of equity security investments

 

4,635

 

 

802

 

22,722

 

 

(7,266

)

Adjusted revenues (non-GAAP)

$

82,633

 

$

82,218

$

240,620

 

$

231,189

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

 

 

 

 

Income before income taxes (GAAP)

$

10,088

 

$

18,437

$

20,834

 

$

61,040

 

Add (Subtract): Changes in the estimated fair value of equity security investments

 

4,635

 

 

802

 

22,722

 

 

(7,266

)

Adjusted income before income taxes (non-GAAP)

$

14,723

 

$

19,239

$

43,556

 

$

53,774

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221103005852/en/

Elizabeth B. Lewter Telephone: (919) 968-2200