ITIC Investors Title Company

Investors Title Company today announced results for the fourth quarter and year ended December 31, 2022. For the quarter, net income decreased 60.2% to $7.5 million, or $3.97 per diluted share, versus $18.9 million, or $9.94 per diluted share, in the prior year period. For the year, net income decreased 64.3% to $23.9 million, or $12.59 per diluted share, versus $67.0 million, or $35.28 per diluted share, in the prior year.

Revenues for the quarter decreased 28.1% to $65.5 million, compared to $91.0 million in the prior year period, primarily as a result of a 32.1% decrease in net premiums written, a $5.9 million decrease in the change in the estimated fair value of equity security investments, and a loss in other investments. These factors were partially offset by net realized gains in our equity portfolio, increases in escrow fees and other title-related fees, and higher levels of revenue derived from non-title services. The reduction in net premiums written is attributable to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates. Although overall premium revenue declined, escrow and other title-related fees increased 27.1% due to an increase in business in markets that generate escrow income, and fee income associated with commercial activity. Revenues from non-title services increased 97.8% due to increases in income from like-kind exchange revenues. Realized gains from sales of equity securities were $2.4 million higher than the prior year quarter.

Operating expenses decreased 16.3% compared to the prior year quarter, mainly due to a 39.5% decline in commissions to agents commensurate with the decrease in agent premium volume. Personnel expenses were 29.5% higher than the prior year due to staffing of new offices and hiring to support growth initiatives. Office expenses increased 11.8% in support of expanding our geographic footprint.

Income before income taxes decreased 61.2% to $9.3 million compared with $23.9 million for the prior year quarter. Excluding the impact of changes in the estimated fair value of equity security investments, adjusted income before income taxes (non-GAAP) decreased 53.7% to $7.5 million versus $16.2 million for the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).

For the year, revenues decreased 14.0% to $283.4 million compared with $329.5 million for the prior year. Operating expenses increased 3.6% to $253.3 million compared with $244.6 million for the prior year period, mainly due to increases in personnel and office, technology and other operating expenses, partially offset by a decrease in commissions. Income before income taxes decreased 64.6% to $30.1 million compared with $84.9 million for the prior year. Excluding the impact of changes in the estimated fair value of equity security investments, adjusted income before income taxes (non-GAAP) decreased 27.0% to $51.1 million versus $70.0 million for the prior year (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure). Aside from a non-recurring gain on the sale of property in the prior year period and an increase in technology and other operating expenses, overall results for the year-to-date period have been shaped predominantly by the same factors that affected the fourth quarter.

Chairman J. Allen Fine commented, “The impact of Federal Reserve efforts to fight inflation by slowing economic activity came into sharper focus in the fourth quarter. The rapid rise in mortgage interest rates over the course of the year and the appreciation in home prices in recent years combined to dampen financial results for the fourth quarter relative to the record performance of the prior year. Home prices have increased nearly 40% following the pandemic, and mortgage rates doubled since the beginning of 2022. Although home prices in most of our key markets seem to be largely holding steady, transaction volumes were more impacted by these recent trends.

“Despite these challenging economic conditions, we reported another year of solid operating results in 2022. The level of claims activity remained low, and we are seeing a partial offset to Fed policy in the opportunity to earn a higher level of return on our investment portfolio from the highest level of interest rates available in over a decade. Operationally we are also benefitting from growth initiatives of the last several years.

“While we expect these market headwinds to persist for a while, there are some positive signs on the horizon. Inflation data has moderated in recent months and this recent trend may enable the Fed to moderate or cease its inflation fighting program in the upcoming months. In anticipation of this, mortgage rates have already fallen slightly from their peak in December. We believe this should help affordability and provide support to the market going forward.

“Real estate markets are cyclical in nature due in part to sensitivity to changes in interest rates and their impact on borrowing costs. Downturns in market activity require companies to make appropriate adjustments. We are focused on maintaining a disciplined management approach balancing both the need for shorter term cost control with an appropriate level of investment in longer term growth opportunities.”

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.

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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, 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 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; the impact of the COVID-19 pandemic (including any of its variants) on the economy and the Company’s business; 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 Twelve Months Ended December 31, 2022 and 2021

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

49,223

 

 

$

72,536

 

$

248,632

 

 

$

273,885

Escrow and other title-related fees

 

 

4,485

 

 

 

3,530

 

 

21,721

 

 

 

13,678

Non-title services

 

 

5,410

 

 

 

2,735

 

 

14,524

 

 

 

9,667

Interest and dividends

 

 

1,649

 

 

 

966

 

 

4,704

 

 

 

3,773

Other investment (loss) income

 

 

(720

)

 

 

2,310

 

 

3,896

 

 

 

6,920

Net realized investment gains

 

 

3,469

 

 

 

1,098

 

 

9,735

 

 

 

1,869

Changes in the estimated fair value of equity security investments

 

 

1,761

 

 

 

7,668

 

 

(20,961

)

 

 

14,934

Other

 

 

217

 

 

 

200

 

 

1,141

 

 

 

4,772

Total Revenues

 

 

65,494

 

 

 

91,043

 

 

283,392

 

 

 

329,498

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

 

24,405

 

 

 

40,357

 

 

121,566

 

 

 

142,815

Provision for claims

 

 

803

 

 

 

666

 

 

4,255

 

 

 

5,686

Personnel expenses

 

 

21,593

 

 

 

16,669

 

 

85,331

 

 

 

64,193

Office and technology expenses

 

 

4,393

 

 

 

3,931

 

 

17,323

 

 

 

13,059

Other expenses

 

 

5,026

 

 

 

5,528

 

 

24,809

 

 

 

18,813

Total Operating Expenses

 

 

56,220

 

 

 

67,151

 

 

253,284

 

 

 

244,566

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

9,274

 

 

 

23,892

 

 

30,108

 

 

 

84,932

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

1,748

 

 

 

4,980

 

 

6,205

 

 

 

17,912

 

 

 

 

 

 

 

 

 

Net Income

 

$

7,526

 

 

$

18,912

 

$

23,903

 

 

$

67,020

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

3.97

 

 

$

9.98

 

$

12.60

 

 

$

35.38

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

 

1,897

 

 

 

1,895

 

 

1,897

 

 

 

1,894

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

3.97

 

 

$

9.94

 

$

12.59

 

 

$

35.28

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

 

1,897

 

 

 

1,903

 

 

1,898

 

 

 

1,900

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2022 and 2021

(in thousands)

(unaudited)

 

 

December 31, 2022

 

December 31, 2021

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

35,311

 

$

37,168

 

 

 

 

Investments:

 

 

 

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

 

53,989

 

 

79,791

Equity securities, at fair value

 

51,691

 

 

76,853

Short-term investments

 

103,649

 

 

45,930

Other investments

 

18,368

 

 

20,298

Total investments

 

227,697

 

 

222,872

 

 

 

 

Premiums and fees receivable

 

19,047

 

 

22,953

Accrued interest and dividends

 

872

 

 

817

Prepaid expenses and other receivables

 

11,095

 

 

11,721

Property, net

 

17,785

 

 

13,033

Goodwill and other intangible assets, net

 

17,611

 

 

15,951

Lease assets

 

6,707

 

 

5,202

Other assets

 

2,458

 

 

1,771

Current income taxes recoverable

 

1,174

 

 

—

Total Assets

$

339,757

 

$

331,488

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

Reserve for claims

$

37,192

 

$

36,754

Accounts payable and accrued liabilities

 

47,050

 

 

43,868

Lease liabilities

 

6,839

 

 

5,329

Current income taxes payable

 

—

 

 

3,329

Deferred income taxes, net

 

7,665

 

 

13,121

Total liabilities

 

98,746

 

 

102,401

 

 

 

 

Stockholders’ Equity:

 

 

 

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

 

—

 

 

—

Retained earnings

 

240,811

 

 

225,861

Accumulated other comprehensive income

 

200

 

 

3,226

Total stockholders’ equity

 

241,011

 

 

229,087

Total Liabilities and Stockholders’ Equity

$

339,757

 

$

331,488

Investors Title Company and Subsidiaries

Direct and Agency Net Premiums Written

For the Three and Twelve Months Ended December 31, 2022 and 2021

(in thousands)

(unaudited)

 

 

Three Months Ended December 31,

Twelve Months Ended December 31,

 

2022

%

2021

%

2022

%

2021

%

Direct

$

16,230

33.0

$

19,363

26.7

$

85,676

34.5

$

82,085

30.0

 

 

 

 

 

 

 

 

 

Agency

 

32,993

67.0

 

53,173

73.3

 

162,956

65.5

 

191,800

70.0

 

 

 

 

 

 

 

 

 

Total

$

49,223

100.0

$

72,536

100.0

$

248,632

100.0

$

273,885

100.0

Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Twelve Months Ended December 31, 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 December 31,

Twelve Months Ended December 31,

 

2022

 

2021

2022

 

2021

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Total revenues (GAAP)

$

65,494

 

 

$

91,043

 

$

283,392

 

$

329,498

 

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

 

(1,761

)

 

 

(7,668

)

 

20,961

 

 

(14,934

)

Adjusted revenues (non-GAAP)

$

63,733

 

 

$

83,375

 

$

304,353

 

$

314,564

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

 

 

 

 

Income before income taxes (GAAP)

$

9,274

 

 

$

23,892

 

$

30,108

 

$

84,932

 

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

 

(1,761

)

 

 

(7,668

)

 

20,961

 

 

(14,934

)

Adjusted income before income taxes (non-GAAP)

$

7,513

 

 

$

16,224

 

$

51,069

 

$

69,998

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230214005112/en/

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