Investors Title Company today announced record results for the
fourth quarter and year ended December 31, 2020.
For the quarter, net income increased 46.2% to $16.6 million, or
$8.77 per diluted share, versus $11.4 million, or $6.00 per diluted
share, in the prior year period. For the year, net income increased
25.3% to $39.4 million, or $20.80 per diluted share, versus $31.5
million, or $16.59 per diluted share, in the prior year. The
Company set all-time quarterly and annual records for total
revenues, net premiums written and net income.
Quarterly results
Revenues for the quarter increased 45.8% to $77.1 million,
compared to $52.9 million in the prior year period. Net premiums
written increased 48.2% to $62.1 million, as lower average interest
rates continued to drive strong levels of refinance activity and
home sales. While escrow and title-related fees increased
commensurate with the growth in premiums, revenues from non-title
services decreased 10.5% mainly due to the impact of low interest
rates on our like-kind exchange business. Changes in the estimated
fair value of equity security investments resulted in a benefit to
revenues of $7.8 million, $3.7 million higher than the prior year
period, as equity markets continued to recover from the initial
impacts of the COVID-19 pandemic earlier in the year.
Operating expenses increased 45.4%, mainly due to a 55.5%
increase in commissions to agents commensurate with the increase in
agent premium volume. Claims expense was $830,000 higher than the
prior year period. While claims expense for both periods benefited
substantially from recognition of favorable loss development, the
prior year quarter also benefited from changes to actuarial
estimates for the active policy year. Personnel expenses were 36.7%
higher than the prior year due primarily to additions to staffing
in support of strategic growth initiatives, additional staffing
required to support volume increases, and increased levels of
incentive compensation.
Income before income taxes increased 46.9% to $21.4 million.
Excluding the impact of changes in the estimated fair value of
investments in equity securities, income before income taxes
(non-GAAP) increased 30.1% to $13.6 million (see Appendix A for a
reconciliation of this non-GAAP measure to the most directly
comparable GAAP measure).
Annual results
For the year, revenues increased 28.8% to $236.4 million, mainly
due to increases in both refinance and home buying activity levels
throughout the year, as well as strong increases in real estate
values. Changes in the estimated fair value of equity security
investments resulted in a benefit to revenues of $4.9 million,
which was $5.4 million lower than the prior year period. Operating
expenses increased 30.0%, mostly as a result of volume-related
increases. Income before income taxes increased 24.7% to $49.7
million. Excluding the impact of changes in the estimated fair
value of investments in equity securities, income before income
taxes (non-GAAP) increased 51.6% to $44.8 million (see Appendix A
for a reconciliation of this non-GAAP measure to the most directly
comparable GAAP measure).
Chairman’s commentary
Chairman J. Allen Fine commented, “We are pleased to report
another year of strong performance for the Company. For both the
quarter and the year, the Company set new records for revenues,
premiums, and earnings. Despite headwinds from the pandemic, we
experienced strong demand for home purchases and ongoing increases
in average real estate values in our operating markets. The decline
in interest rates during the year supported housing affordability
and drove a sharp increase in the level of refinance activity for
the second year in a row.
On the expense side, we continued to experience relatively low
levels of claims activity. The rate of residential mortgage
foreclosures, typically a driver of claims activity, dropped during
the year to its lowest level in a decade largely due to moratorium
and forbearance programs enacted in response to COVID-19.
Looking forward to 2021, we are cautiously optimistic that the
real estate sector is poised for another strong year. Many experts
predict that the economy and employment will continue to recover
during 2021, boosted by rollout of the coronavirus vaccine. We
believe economic recovery will lend support to housing demand,
while favorable interest rates will sustain high levels of
refinance activity, although likely reduced from 2020. Regardless
of market conditions, however, we will remain focused on enhancing
our competitive strengths and capitalizing on targeted
opportunities to expand our market presence.”
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.
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,
positive 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 severity
and duration of the COVID-19 pandemic and its effects (and the
effects of measures undertaken to combat it) 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;
changes resulting from the new administration and Congress; 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, 2019, 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 Twelve
Months Ended December 31, 2020 and 2019
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Revenues:
Net premiums written
$
62,107
$
41,900
$
205,418
$
145,842
Escrow and other title-related fees
2,307
1,858
8,321
7,474
Non-title services
2,217
2,478
8,693
9,922
Interest and dividends
1,051
1,147
4,393
4,752
Other investment income
1,487
1,147
3,723
3,191
Net realized investment gains
6
141
333
1,340
Changes in the estimated fair value of
equity security investments
7,771
4,085
4,904
10,303
Other
180
128
623
678
Total Revenues
77,126
52,884
236,408
183,502
Operating Expenses:
Commissions to agents
33,463
21,519
106,807
72,780
Provision (benefit) for claims
752
(78)
5,204
3,532
Personnel expenses
15,297
11,187
51,929
46,058
Office and technology expenses
2,623
2,451
9,951
9,254
Other expenses
3,580
3,234
12,856
12,055
Total Operating Expenses
55,715
38,313
186,747
143,679
Income before Income Taxes
21,411
14,571
49,661
39,823
Provision for Income Taxes
4,776
3,191
10,241
8,365
Net Income
$
16,635
$
11,380
$
39,420
$
31,458
Basic Earnings per Common Share
$
8.79
$
6.03
$
20.84
$
16.66
Weighted Average Shares Outstanding –
Basic
1,892
1,889
1,892
1,888
Diluted Earnings per Common
Share
$
8.77
$
6.00
$
20.80
$
16.59
Weighted Average Shares Outstanding –
Diluted
1,897
1,896
1,896
1,896
Investors Title Company and
Subsidiaries
Consolidated Balance
Sheets
As of December 31, 2020 and
2019
(in thousands)
(unaudited)
December 31,
2020
December 31, 2019
Assets
Cash and cash equivalents
$
13,723
$
25,949
Investments:
Fixed maturity securities,
available-for-sale, at fair value
117,713
104,638
Equity securities, at fair value
64,919
61,108
Short-term investments
15,170
13,134
Other investments
15,493
13,982
Total investments
213,295
192,862
Premiums and fees receivable
19,427
12,523
Accrued interest and dividends
1,038
1,033
Prepaid expenses and other receivables
9,418
5,519
Property, net
11,160
9,776
Goodwill and other intangible assets,
net
9,771
10,275
Operating lease right-of-use assets
3,533
4,469
Other assets
1,560
1,487
Total Assets
$
282,925
$
263,893
Liabilities and Stockholders’
Equity
Liabilities:
Reserve for claims
$
33,584
$
31,333
Accounts payable and accrued
liabilities
36,020
28,318
Operating lease liabilities
3,669
4,502
Current income taxes payable
638
1,340
Deferred income taxes, net
8,592
7,038
Total liabilities
82,503
72,531
Stockholders’ Equity:
Common stock – no par value (10,000
authorized shares; 1,892 and 1,889 shares issued and outstanding as
of December 31, 2020 and 2019, respectively, excluding in each
period 292 shares of common stock held by the Company's
subsidiary)
—
—
Retained earnings
196,096
188,262
Accumulated other comprehensive income
4,326
3,100
Total stockholders’ equity
200,422
191,362
Total Liabilities and Stockholders’
Equity
$
282,925
$
263,893
Investors Title Company and
Subsidiaries
Net Premiums Written By Branch
and Agency
For the Three and Twelve
Months Ended December 31, 2020 and 2019
(in thousands)
(unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
%
2019
%
2020
%
2019
%
Branch
$
14,840
23.9
$
11,527
27.5
$
53,204
25.9
$
40,638
27.9
Agency
47,267
76.1
30,373
72.5
152,214
74.1
105,204
72.1
Total
$
62,107
100.0
$
41,900
100.0
$
205,418
100.0
$
145,842
100.0
Investors Title Company and
Subsidiaries
Appendix A
Non-GAAP Measures
Reconciliation
For the Three and Twelve
Months Ended December 31, 2020 and 2019
(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
December 31,
Twelve Months Ended
December 31,
2020
2019
2020
2019
Revenues
Total revenues (GAAP)
$
77,126
$
52,884
$
236,408
$
183,502
Subtract: Changes in the estimated fair
value of equity security investments
(7,771)
(4,085)
(4,904)
(10,303)
Adjusted revenues (non-GAAP)
$
69,355
$
48,799
$
231,504
$
173,199
Income before Income Taxes
Income before income taxes (GAAP)
$
21,411
$
14,571
$
49,661
$
39,823
Subtract: Changes in the estimated fair
value of equity security investments
(7,771)
(4,085)
(4,904)
(10,303)
Adjusted income before income taxes
(non-GAAP)
$
13,640
$
10,486
$
44,757
$
29,520
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Elizabeth B. Lewter Telephone: (919) 968-2200
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