Investors Title Company ITIC today announced its results for the quarter ended March 31, 2018. The Company reported net income attributable to the Company of $4.2 million, or $2.20 per diluted share, compared to $4.5 million, or $2.36 per diluted share, for the prior year period.
Revenues for the quarter decreased 10.6% to $33.8 million, primarily as a result of a decrease in net premiums written. Premiums decreased 9.7%, mainly due to lower levels of refinance activity following recent increases in mortgage interest rates. The volume decreases were partially offset by a continuation of increases in real estate values in our core markets. A new accounting standard which requires unrealized changes in the market value of marketable equity investments to be recognized in income resulted in recognition of a $642,000 loss for the quarter.
Operating expenses decreased 8.9% versus the prior year period, mainly due to decreases in agent commissions commensurate with the decrease in premium volume, and a benefit in claims expense resulting from favorable loss development. Personnel costs increased as a result of the effect of normal inflationary increases on salaries and benefits, as well as modest increases in staffing levels in support of growth. In addition, the effective tax rate declined to 20.1% as a result of legislative reform.
Chairman J. Allen Fine commented, "As expected, higher interest rates dampened refinance activity, particularly in our markets which rely heavily on referrals from lenders. We are encouraged, however, by the fact that purchase activity remains strong. As we enter 2018, we expect low levels of unemployment and solid wage growth to help offset the effects of higher interest rates and limited inventories of residential housing in certain markets, resulting in another year of overall healthy demand for real estate, mortgage loans, and title insurance."
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.
Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, among others, any statements regarding the Company's expected performance for this year, future home price fluctuations, changes in home purchase or refinance 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 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 regulation; changes in the economy; 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, 2017, as filed with the Securities and Exchange Commission, and in subsequent filings.
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Investors Title Company and Subsidiaries Consolidated Statements of Income For the Three Months Ended March 31, 2018 and 2017 (in thousands, except per share amounts) (unaudited) |
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| Three Months Ended March 31, | |||||||||||
| 2018 | 2017 | ||||||||||
| Revenues: | |||||||||||
| Net premiums written | $ | 29,559 | $ | 32,738 | |||||||
| Escrow and other title-related fees | 1,504 | 2,015 | |||||||||
| Non-title services | 1,592 | 1,363 | |||||||||
| Interest and dividends | 1,118 | 1,097 | |||||||||
| Other investment income | 269 | 229 | |||||||||
| Net realized investment gains | 153 | 103 | |||||||||
| Net unrealized loss on equity investments | (642 | ) | — | ||||||||
| Other | 223 | 248 | |||||||||
| Total Revenues | 33,776 | 37,793 | |||||||||
| Operating Expenses: | |||||||||||
| Commissions to agents | 14,025 | 16,331 | |||||||||
| (Benefit) provision for claims | (1,406 | ) | 720 | ||||||||
| Personnel expenses | 11,340 | 9,958 | |||||||||
| Office and technology expenses | 2,069 | 1,939 | |||||||||
| Other expenses | 2,523 | 2,394 | |||||||||
| Total Operating Expenses | 28,551 | 31,342 | |||||||||
| Income before Income Taxes | 5,225 | 6,451 | |||||||||
| Provision for Income Taxes | 1,052 | 1,985 | |||||||||
| Net Income | 4,173 | 4,466 | |||||||||
| Net Loss Attributable to Noncontrolling Interests | 3 | 10 | |||||||||
| Net Income Attributable to the Company | $ | 4,176 | $ | 4,476 | |||||||
| Basic Earnings per Common Share | $ | 2.21 | $ | 2.37 | |||||||
| Weighted Average Shares Outstanding – Basic | 1,886 | 1,886 | |||||||||
| Diluted Earnings per Common Share | $ | 2.20 | $ | 2.36 | |||||||
| Weighted Average Shares Outstanding – Diluted | 1,897 | 1,895 | |||||||||
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Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2018 and December 31, 2017 (in thousands) (unaudited) |
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March 31, |
December 31, |
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| Assets | ||||||||||
| Cash and cash equivalents | $ | 22,174 | $ | 20,214 | ||||||
| Investments: | ||||||||||
| Fixed maturities, available-for-sale, at fair value | 100,389 | 103,341 | ||||||||
| Equity securities, at fair value | 47,252 | 47,367 | ||||||||
| Short-term investments | 21,144 | 23,780 | ||||||||
| Other investments | 11,601 | 12,032 | ||||||||
| Total investments | 180,386 | 186,520 | ||||||||
| Premiums and fees receivable | 9,889 | 10,031 | ||||||||
| Accrued interest and dividends | 1,359 | 1,100 | ||||||||
| Prepaid expenses and other receivables | 7,904 | 7,730 | ||||||||
| Property, net | 10,376 | 10,173 | ||||||||
| Goodwill and other intangible assets, net | 11,176 | 11,357 | ||||||||
| Other assets | 1,417 | 1,403 | ||||||||
| Current income taxes receivable | — | 385 | ||||||||
| Total Assets | $ | 244,681 | $ | 248,913 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Liabilities: | ||||||||||
| Reserve for claims | $ | 32,770 | $ | 34,801 | ||||||
| Accounts payable and accrued liabilities | 22,876 | 27,565 | ||||||||
| Current income taxes payable | 215 | — | ||||||||
| Deferred income taxes, net | 8,758 | 8,626 | ||||||||
| Total liabilities | 64,619 | 70,992 | ||||||||
| Stockholders' Equity: | ||||||||||
| Common stock – no par value (10,000 authorized shares; 1,887 and 1,886 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) | — | — | ||||||||
| Retained earnings | 178,971 | 161,891 | ||||||||
| Accumulated other comprehensive income | 1,009 | 15,945 | ||||||||
| Total stockholders' equity attributable to the Company | 179,980 | 177,836 | ||||||||
| Noncontrolling interests | 82 | 85 | ||||||||
| Total stockholders' equity | 180,062 | 177,921 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 244,681 | $ | 248,913 | ||||||
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Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three Months Ended March 31, 2018 and 2017 (in thousands) (unaudited) |
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| Three Months Ended March 31, | ||||||||||||||||
| 2018 | % | 2017 | % | |||||||||||||
| Branch | $ | 8,617 | 29.2 | $ | 9,283 | 28.4 | ||||||||||
| Agency | 20,942 | 70.8 | 23,455 | 71.6 | ||||||||||||
| Total | $ | 29,559 | 100.0 | $ | 32,738 | 100.0 | ||||||||||
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