Investors Title Company Announces Second Quarter 2019 Financial Results

Investors Title Company today announced its results for the second quarter ended June 30, 2019. The Company reported net income attributable to the Company of $5.5 million, or $2.90 per diluted share, compared to $6.9 million, or $3.66 per diluted share, for the prior year period.

Revenues increased 1.9% to $42.7 million, compared with $41.9 million in the prior year quarter. While net premiums written remained virtually flat compared with the prior year, revenue from non-title services increased 48.4%, mainly due to increased revenues associated with like-kind exchange services. Changes in the estimated fair value of equity security investments resulted in an additional $794 thousand of income versus the prior year.

Operating expenses increased 8.1% versus the prior year quarter, mainly because of higher claims and personnel expenses. Claims expense was higher primarily due to an increase in reserves for a potential large claim, and a higher level of favorable loss development in the prior year period. Personnel costs increased as a result of higher staffing levels necessary to support growth and strategic software initiatives.

Income before income taxes decreased 21.5% to $6.9 million for the current quarter versus $8.8 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 31.8% to $5.8 million for the current quarter versus $8.5 million in the prior year period (see Appendix A).

For the six months ended June 30, 2019, net income attributable to the Company increased 9.0% to $12.1 million, or $6.40 per diluted share, versus $11.1 million, or $5.87 per diluted share, for the prior year period. Revenues increased 9.2% to $82.7 million, while operating expenses increased 9.4% to $67.4 million. Results for the first half of the year have been shaped predominantly by the same factors that affected the second quarter.

Chairman J. Allen Fine added, "Overall premium revenues remained stable for the quarter compared with last year. Although the pace of home sales has cooled slightly from last year, recent decreases in mortgage interest rates have spurred an uptick in refinance activity. We are encouraged that continued strength in the overall economy will continue to drive high levels of activity in our industry, resulting in another year of solid operating results for the Company."

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, 2018, as filed with the Securities and Exchange Commission, and in subsequent filings.

Investors Title Company and Subsidiaries
Appendix A
Non-GAAP Measures Reconciliation
For the Three and Six Months Ended June 30, 2019 and 2018
(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:

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