Business Wire | Nov 4, 2021 08:29AM EDT

Investors Title Company Announces Third Quarter 2021 Financial Results

Nov. 04, 2021

CHAPEL HILL, N.C.--(BUSINESS WIRE)--Nov. 04, 2021--Investors Title Company today announced results for the third quarter ended September 30, 2021. The Company reported net income of $14.5 million, or $7.63 per diluted share, for the three months ended September 30, 2021, compared to $15.3 million, or $8.07 per diluted share, for the prior year period. The Company set an all-time record for net premiums written in a quarter.

Revenues increased 20.4% to $81.4 million, compared with $67.6 million for the prior year quarter. Net premiums written increased 26.5% to $72.3 million, driven mainly by higher average home prices and continued low mortgage interest rates. Escrow and other title-related fees increased 79.3% primarily due to increases in commission income and title ancillary services. Revenue from non-title services increased 25.2%, mainly due to an increase in like-kind exchange activity. Changes in the estimated fair value of equity security investments resulted in the recognition of an $802 thousand loss, which was $4.4 million lower than the prior year quarter, as market values declined from the previous year's rebound.

Operating expenses increased 29.1% compared to the prior year quarter. Commissions to agents increased commensurate with the increase in agent premium volume. Personnel costs were 22.9% higher than the prior year due to staffing additions in support of strategic growth initiatives and volume increases. Higher premium volumes, increases in travel-related expenses and ongoing technology initiatives drove the increase in other operating expenses.

Income before income taxes decreased 2.2% to $18.4 million for the current quarter versus $18.9 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) increased 26.3% to $19.2 million for the current quarter versus $15.2 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, 2021, net income increased $25.3 million to $48.1 million, or $25.34 per diluted share, versus $22.8 million, or $12.02 per diluted share, for the prior year period. Revenues increased 49.7% to $238.5 million compared with $159.3 million for the prior year period. Operating expenses increased 35.4% to $177.4 million, mainly due to increases in agent commissions, personnel costs and other expenses. Aside from changes in the estimated fair value of equity security investments and a decrease in like-kind exchange activity, 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 added, "We are pleased to report a record level of net premiums written for the ninth consecutive quarter. Our results for the quarter and the year have been influenced predominately by continued strength in residential real estate demand as well as high levels of refinance activity. In addition, we have benefitted from recent investments to expand our market presence in key markets."

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 (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; changes resulting from President Biden's 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, 2020 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, 2021 and 2020

(in thousands, except per share amounts)

(unaudited)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenues:

Net premiums written $ 72,345 $ 57,205 $ 201,349 $ 143,311

Escrow and other 3,863 2,154 10,148 6,014 title-related fees

Non-title services 2,446 1,954 6,932 6,476

Interest and dividends 893 1,060 2,807 3,342

Other investment income 2,186 1,270 4,610 2,236

Net realized investment 268 186 771 327 gains

Changes in the estimatedfair value of equity (802 ) 3,619 7,266 (2,867 )security investments

Other 217 185 4,572 443

Total Revenues 81,416 67,633 238,455 159,282



Operating Expenses:

Commissions to agents 37,570 29,068 102,458 73,344

Provision for claims 1,993 1,552 5,020 4,452

Personnel expenses 15,457 12,575 47,524 36,632

Office and technology 3,175 2,456 9,128 7,328 expenses

Other expenses 4,784 3,125 13,285 9,276

Total Operating Expenses 62,979 48,776 177,415 131,032



Income before Income 18,437 18,857 61,040 28,250 Taxes



Provision for Income 3,934 3,556 12,932 5,465 Taxes



Net Income $ 14,503 $ 15,301 $ 48,108 $ 22,785



Basic Earnings per Common $ 7.66 $ 8.09 $ 25.40 $ 12.04 Share



Weighted Average Shares 1,894 1,892 1,894 1,892 Outstanding - Basic



Diluted Earnings per $ 7.63 $ 8.07 $ 25.34 $ 12.02 Common Share



Weighted Average Shares 1,900 1,895 1,899 1,896 Outstanding - Diluted

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2021 and December 31, 2020

(in thousands)

(unaudited)

September December 30, 31, 2021 2020

Assets



Cash and cash equivalents $ 48,510 $ 13,723



Investments:

Fixed maturity securities, available-for-sale, at 82,306 117,713 fair value

Equity securities, at fair value 69,525 64,919

Short-term investments 51,231 15,170

Other investments 15,957 15,493

Total investments 219,019 213,295



Premiums and fees receivable 22,939 19,427

Accrued interest and dividends 990 1,038

Prepaid expenses and other receivables 13,745 9,418

Property, net 15,310 11,160

Goodwill and other intangible assets, net 9,841 9,771

Operating lease right-of-use assets 3,306 3,533

Other assets 1,770 1,560

Total Assets $ 335,430 $ 282,925



Liabilities and Stockholders' Equity



Liabilities:

Reserve for claims $ 36,755 $ 33,584

Accounts payable and accrued liabilities 37,927 36,020

Operating lease liabilities 3,424 3,669

Current income taxes payable 704 638

Deferred income taxes, net 11,315 8,592

Total liabilities 90,125 82,503



Stockholders' Equity:

Common stock - no par value (10,000 authorizedshares; 1,894 and 1,892 shares issued and outstandingas of September 30, 2021 and December 31, 2020, - - respectively, excluding in each period 292 shares ofcommon stock held by the Company's subsidiary)

Retained earnings 241,833 196,096

Accumulated other comprehensive income 3,472 4,326

Total stockholders' equity 245,305 200,422

Total Liabilities and Stockholders' Equity $ 335,430 $ 282,925

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Nine Months Ended September 30, 2021 and 2020

(in thousands)

(unaudited)

Three Months Ended September 30, Nine Months Ended September 30,

2021 % 2020 % 2021 % 2020 %

Branch $ 18,496 25.6 $ 15,496 27.1 $ 52,904 26.3 $ 38,364 26.8



Agency 53,849 74.4 41,709 72.9 148,445 73.7 104,947 73.2



Total $ 72,345 100.0 $ 57,205 100.0 $ 201,349 100.0 $ 143,311 100.0

Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Nine Months Ended September 30, 2021 and 2020

(in thousands)

(unaudited)



Management uses various financial and operational measurements, includingfinancial information not prepared in accordance with generally acceptedaccounting principles ("GAAP"), to analyze Company performance. This includesadjusting revenues to remove the impact of changes in the estimated fair valueof equity security investments, which are recognized in net income under GAAP.Management believes that these measures are useful to evaluate the Company'sinternal operational performance from period to period because they eliminatethe effects of external market fluctuations. The Company also believes users ofthe financial results would benefit from having access to such information, andthat certain of the Company's peers make available similar information. Thisinformation should not be used as a substitute for, or considered superior to,measures of financial performance prepared in accordance with GAAP, and may bedifferent from similarly titled non-GAAP financial measures used by othercompanies.



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

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2021

2020

2021

2020

Revenues

Total revenues (GAAP)

$

81,416

$

67,633

$

238,455

$

159,282

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

802

(3,619

)

(7,266

)

2,867

Adjusted revenues (non-GAAP)

$

82,218

$

64,014

$

231,189

$

162,149

Income before Income Taxes

Income before income taxes (GAAP)

$

18,437

$

18,857

$

61,040

$

28,250

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

802

(3,619

)

(7,266

)

2,867

Adjusted income before income taxes (non-GAAP)

$

19,239

$

15,238

$

53,774

$

31,117

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