ITIC Investors Title Company

Investors Title Company (Nasdaq: ITIC) today announced results for the second quarter ended June 30, 2022. The Company reported net income of $2.3 million, or $1.20 per diluted share, compared to $19.8 million, or $10.42 per diluted share, for the prior year period.

Revenues for the quarter decreased 16.5% to $70.9 million, compared with $85.0 million for the prior year quarter. Total revenues were offset by the recognition of a $12.2 million unrealized loss in the Company’s equity portfolio. Net premiums written increased 3.1% versus the prior year period, driven by higher average home values and growth of our footprint in the Texas market, setting a second quarter record. Escrow and title-related fees increased 78.1% due to a larger share of business that generates escrow income, and fee income associated with commercial activity. Revenues from non-title services increased 17.8% due primarily to higher levels of property exchange transaction volumes. Realized gains from sales of equity securities were $1.9 million higher, while other income decreased $3.8 million due to a non-recurring gain on the sale of property which occurred in the prior year quarter.

Operating expenses increased 13.9%, compared to the prior year period, primarily due to increases in personnel costs, title fees, and office and technology expenses. Personnel costs were 31.3% higher than the prior year period due to staffing of new offices, hiring to support growth initiatives, and increased employee benefit costs. Office, technology, and other operating expenses increased 49.4% in support of expanding our geographic footprint and various ongoing technology initiatives.

Income before income taxes decreased $22.3 million to $3.0 million for the current quarter versus $25.3 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 26.1% to $15.1 million for the current quarter versus $20.5 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 six months ended June 30, 2022, net income decreased $25.1 million to $8.5 million, or $4.45 per diluted share, versus $33.6 million, or $17.70 per diluted share, for the prior year period. Net premiums written increased 2.9% to $132.8 million, versus $129.0 million in the prior year period. Operating expenses increased 12.9% to $129.2 million, mainly due to increases in personnel and office, technology, and other operating expenses. Overall results for the first six months have been shaped predominantly by the same factors that affected the second quarter.

Chairman J. Allen Fine added, “We are pleased to report a new record level of premiums written for the second quarter. Although net income is down for the quarter, much of the negative comparison is attributable to market losses in our equity portfolio and the gain on the sale of property in the prior year quarter.

The impact of higher mortgage rates has been varied as we have seen some slowing of activity in some markets but ongoing strength in others. Refinance activity has been more significantly impacted by higher rates than activity generated by home sales. We remain optimistic about the Company’s prospects for solid financial results and continue to focus on identifying opportunities to profitably expand our market presence, regardless of cyclical changes in the real estate market.”

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, 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 (including any of its variants) 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; 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 Six Months Ended June 30, 2022 and 2021

(in thousands, except per share amounts)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

69,626

 

 

$

67,527

 

$

132,751

 

 

$

129,004

Escrow and other title-related fees

 

 

6,209

 

 

 

3,487

 

 

 

11,273

 

 

 

6,285

 

Non-title services

 

 

2,836

 

 

 

2,408

 

 

 

5,262

 

 

 

4,486

 

Interest and dividends

 

 

911

 

 

 

898

 

 

 

1,826

 

 

 

1,914

 

Other investment income

 

 

1,106

 

 

 

1,483

 

 

 

2,443

 

 

 

2,424

 

Net realized investment gains

 

 

2,038

 

 

 

182

 

 

 

3,785

 

 

 

503

 

Changes in the estimated fair value of equity security investments

 

 

(12,172

)

 

 

4,829

 

 

 

(18,087

)

 

 

8,068

 

Other

 

 

348

 

 

 

4,147

 

 

 

647

 

 

 

4,355

 

Total Revenues

 

 

70,902

 

 

 

84,961

 

 

 

139,900

 

 

 

157,039

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

 

33,826

 

 

 

34,346

 

 

 

63,683

 

 

 

64,888

 

Provision for claims

 

 

1,310

 

 

 

1,436

 

 

 

1,486

 

 

 

3,027

 

Personnel expenses

 

 

20,898

 

 

 

15,914

 

 

 

42,152

 

 

 

32,067

 

Office and technology expenses

 

 

4,288

 

 

 

3,211

 

 

 

8,656

 

 

 

5,953

 

Other expenses

 

 

7,627

 

 

 

4,766

 

 

 

13,177

 

 

 

8,501

 

Total Operating Expenses

 

 

67,949

 

 

 

59,673

 

 

 

129,154

 

 

 

114,436

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

2,953

 

 

 

25,288

 

 

 

10,746

 

 

 

42,603

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

674

 

 

 

5,506

 

 

 

2,282

 

 

 

8,998

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

2,279

 

 

$

19,782

 

 

$

8,464

 

 

$

33,605

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

1.20

 

 

$

10.44

 

 

$

4.46

 

 

$

17.74

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

 

1,897

 

 

 

1,894

 

 

 

1,897

 

 

 

1,894

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

1.20

 

 

$

10.42

 

 

$

4.45

 

 

$

17.70

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

 

1,899

 

 

 

1,899

 

 

 

1,900

 

 

 

1,898

 

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2022 and December 31, 2021

(in thousands)

(unaudited)

 

 

 

 

 

 

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

35,486

 

$

37,168

 

 

 

 

Investments:

 

 

 

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

 

61,385

 

 

 

79,791

 

Equity securities, at fair value

 

54,901

 

 

 

76,853

 

Short-term investments

 

71,319

 

 

 

45,930

 

Other investments

 

19,693

 

 

 

20,298

 

Total investments

 

207,298

 

 

 

222,872

 

 

 

 

 

Premiums and fees receivable

 

25,377

 

 

 

22,953

 

Accrued interest and dividends

 

733

 

 

 

817

 

Prepaid expenses and other receivables

 

13,002

 

 

 

11,721

 

Property, net

 

15,698

 

 

 

13,033

 

Goodwill and other intangible assets, net

 

18,325

 

 

 

15,951

 

Operating lease right-of-use assets

 

6,561

 

 

 

5,202

 

Other assets

 

2,322

 

 

 

1,771

 

Current income taxes receivable

 

390

 

 

 

—

 

Total Assets

$

325,192

 

 

$

331,488

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

Reserve for claims

$

36,603

 

 

$

36,754

 

Accounts payable and accrued liabilities

 

40,044

 

 

 

43,868

 

Operating lease liabilities

 

6,704

 

 

 

5,329

 

Current income taxes payable

 

—

 

 

 

3,329

 

Deferred income taxes, net

 

8,662

 

 

 

13,121

 

Total liabilities

 

92,013

 

 

 

102,401

 

 

 

 

 

Stockholders’ Equity:

 

 

 

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

 

—

 

 

 

—

 

Retained earnings

 

232,759

 

 

 

225,861

 

Accumulated other comprehensive income

 

420

 

 

 

3,226

 

Total stockholders’ equity

 

233,179

 

 

 

229,087

 

Total Liabilities and Stockholders’ Equity

$

325,192

 

 

$

331,488

 

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Six Months Ended June 30, 2022 and 2021

(in thousands)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

%

 

2021

 

%

 

2022

 

%

 

2021

 

%

Branch

$

16,161

23.2

$

17,048

25.2

$

33,579

25.3

$

34,408

26.7

 

 

 

 

 

 

 

 

 

Agency

 

53,465

 

76.8

 

 

50,479

 

74.8

 

 

99,172

 

74.7

 

 

94,596

 

73.3

 

 

 

 

 

 

 

 

 

 

Total

$

69,626

 

100.0

 

$

67,527

 

100.0

 

$

132,751

 

100.0

 

$

129,004

 

100.0

 

Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Six Months Ended June 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 June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Total revenues (GAAP)

$

70,902

 

$

84,961

 

$

139,900

 

$

157,039

 

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

 

12,172

 

 

 

(4,829

)

 

18,087

 

 

 

(8,068

)

Adjusted revenues (non-GAAP)

$

83,074

 

 

$

80,132

 

$

157,987

 

 

$

148,971

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

 

 

 

 

Income before income taxes (GAAP)

$

2,953

 

 

$

25,288

 

$

10,746

 

 

$

42,603

 

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

 

12,172

 

 

 

(4,829

)

 

18,087

 

 

 

(8,068

)

Adjusted income before income taxes (non-GAAP)

$

15,125

 

 

$

20,459

 

$

28,833

 

 

$

34,535

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005724/en/

Elizabeth B. Lewter (919) 968-2200