Market Overview

Investors Title Company Announces Record Second Quarter 2018 Financial Results

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Investors Title Company (NASDAQ:ITIC) today announced its results for
the second quarter ended June 30, 2018. Net income attributable to the
Company increased 22.4% to a new second quarter record of $6.9 million,
or $3.66 per diluted share, versus $5.7 million, or $2.99 per diluted
share, for the prior year period.

Revenues also set a new second quarter record, increasing 4.5% to $41.9
million, compared with $40.1 million in the prior year period. Net
premiums written increased due to higher real estate values, as well as
a shift to higher-premium purchase activity, which offset the decline in
refinance activity that has occurred over the past year. Other
investment income increased primarily due to higher earnings from
partnership investments. Implementation of a new accounting standard in
2018 resulted in recognition of a $0.3 million net unrealized gain on
equity investments.

Operating expenses increased 4.2% versus the prior year quarter, mainly
driven by higher personnel and claims expenses. Personnel costs
increased as a result of higher staffing levels related to the support
of growth, increases in contract services related to software
initiatives, and normal inflationary increases in salaries and benefits.
The provision for claims was higher in the current quarter mainly due to
comparison to a prior year period which included a significant amount of
favorable loss development from earlier policy years. In addition, the
Company's net income benefitted from recent tax reform legislation.

For the six months ended June 30, 2018, net income attributable to the
Company increased 9.6% to $11.1 million, or $5.87 per diluted share,
versus $10.2 million, or $5.35 per diluted share, for the prior year
period. Revenues decreased 2.8% to $75.7 million, while operating
expenses decreased 2.3% to $61.7 million. Results for the first half of
the year have been shaped predominantly by the same factors that
affected the second quarter, with the exception of more favorable claims
experience for the six months ended June 30, 2018 versus the prior year
period.

Chairman J. Allen Fine added, "We are pleased to report a record level
of revenue and earnings for the second quarter. Revenue growth from
purchase activity was strong enough to offset the impact of lower levels
of refinance activity. In addition, we continued to benefit from stable
levels of claims experience. We remain optimistic that low unemployment
levels and wage growth will continue to offset headwinds resulting from
the effects of rising interest rates and housing supply constraints,
resulting in another strong year for real estate, mortgage lending, 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.

 
 
 

Investors Title Company and Subsidiaries
Consolidated
Statements of Income

For the Three and Six Months
Ended June 30, 2018 and 2017

(in
thousands, except per share amounts)

(unaudited)

 
       

Three Months Ended

June 30,

   

Six Months Ended

June 30,

2018     2017     2018     2017
Revenues:            
Net premiums written $ 35,142 $ 34,672 $ 64,701 $ 67,410
Escrow and other title-related fees 2,149 1,942 3,653 3,957
Non-title services 1,696 1,515 3,288 2,878
Interest and dividends 1,125 1,114 2,243 2,211
Other investment income 1,181 766 1,450 995
Net realized investment gains 288 83 441 186
Net unrealized gain (loss) on equity investments 348 (294 )
Other 7       33       230       281  
Total Revenues 41,936       40,125       75,712       77,918  

 

Operating Expenses:
Commissions to agents 16,427 16,598 30,452 32,929
Provision (benefit) for claims 564 140 (842 ) 860
Personnel expenses 10,798 9,942 22,138 19,900
Office and technology expenses 2,326 1,984 4,395 3,923
Other expenses 3,007       3,115       5,530       5,509  
Total Operating Expenses 33,122       31,779       61,673       63,121  
 
Income before Income Taxes 8,814 8,346 14,039 14,797
 
Provision for Income Taxes 1,894       2,672       2,946       4,657  
 
Net Income 6,920 5,674 11,093 10,140
 
Net Loss Attributable to Noncontrolling Interests 27       1       30       11  
 
Net Income Attributable to the Company $ 6,947       $ 5,675       $ 11,123       $ 10,151  
 
Basic Earnings per Common Share $ 3.68       $ 3.01       $ 5.90       $ 5.38  
 
Weighted Average Shares Outstanding – Basic 1,887       1,887       1,886       1,886  
 
Diluted Earnings per Common Share $ 3.66       $ 2.99       $ 5.87       $ 5.35  
 
Weighted Average Shares Outstanding – Diluted 1,897       1,897       1,896       1,896  

 
 
 

Investors Title Company and Subsidiaries
Consolidated
Balance Sheets

As of June 30, 2018 and December 31,
2017

(in thousands)
(unaudited)

 
       

June 30,

2018

   

December 31,

2017

Assets    
 
Cash and cash equivalents $       29,289 $ 20,214
 
Investments:
Fixed maturities, available-for-sale, at fair value 94,578 103,341
Equity securities, at fair value 48,026 47,367
Short-term investments 24,950 23,780
Other investments 11,622       12,032  
Total investments 179,176       186,520  
 
Premiums and fees receivable 11,008 10,031
Accrued interest and dividends 1,015 1,100
Prepaid expenses and other receivables 7,974 7,730
Property, net 10,820 10,173
Goodwill and other intangible assets, net 11,032 11,357
Other assets 1,457 1,403
Current income taxes receivable 1,427       385  
Total Assets $       253,198       $ 248,913  
 
Liabilities and Stockholders' Equity
 
Liabilities:
Reserve for claims $ 32,484 $ 34,801
Accounts payable and accrued liabilities 25,140 27,565
Deferred income taxes, net 9,461       8,626  
Total liabilities 67,085       70,992  
 
Stockholders' Equity:

Common stock – no par value (10,000 authorized shares; 1,887 and
1,886 shares issued and outstanding as of June 30, 2018 and
December 31, 2017, respectively, excluding in each period 292
shares of common stock held by the Company's subsidiary)

Retained earnings 185,252 161,891
Accumulated other comprehensive income 806       15,945  
Total stockholders' equity attributable to the Company 186,058 177,836
Noncontrolling interests 55       85  
Total stockholders' equity 186,113       177,921  
Total Liabilities and Stockholders' Equity $       253,198       $ 248,913  

 
 
 

Investors Title Company and Subsidiaries
Net
Premiums Written By Branch and Agency

For the Three
and Six Months Ended June 30, 2018 and 2017

(in
thousands)

(unaudited)

 
        Three Months Ended June 30,     Six Months Ended June 30,
2018     %     2017     %     2018     %     2017     %
Branch $ 10,736     30.6     $ 10,394     30.0     $ 19,353     29.9     $ 19,677     29.2
 
Agency 24,406       69.4       24,278       70.0       45,348       70.1       47,733       70.8  
 
Total $ 35,142       100.0       $ 34,672       100.0       $ 64,701       100.0       $ 67,410       100.0  
 
 
 
 

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