ITIC Investors Title Company

Investors Title Company (Nasdaq: ITIC) today announced results for the second quarter ended June 30, 2023. The Company reported net income of $7.6 million, or $4.00 per diluted share, for the three months ended June 30, 2023, compared to $2.3 million, or $1.20 per diluted share, for the prior year period.

Revenues decreased 17.8% to $58.3 million, compared with $70.9 million for the prior year quarter, primarily as a result of decreases in the Company’s title insurance business, partially offset by increases in investment income. The reduction in title insurance revenues is attributable to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates and ongoing housing inventory constraints, and was partially offset by increases in like-kind exchanges, net investment gains, and interest income. Net investment gains increased due to changes in the estimated fair value of equity security investments and net realized gains on the sale of investments.

Operating expenses decreased 28.7% compared to the prior year period, primarily due to reductions in expenses which fluctuate with title insurance volume. Commissions to agents declined by $13.2 million, commensurate with the decrease in agent premium volume. Personnel expenses declined by $2.4 million, and other expenses were down $3.8 million, mainly due to a decline in title and service fees, premium-related taxes and licensing, and professional services. The provision for claims and office and technology expenses remained relatively consistent with the prior year period.

Income before income taxes increased to $9.8 million for the current quarter, versus $3.0 million in the prior year period. Excluding the impact of net investment gains (losses), adjusted income before income taxes (non-GAAP) decreased 33.1% to $8.8 million for the second quarter, versus $13.1 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 six months ended June 30, 2023, net income increased $302 thousand to $8.8 million, or $4.62 per diluted share, versus $8.5 million, or $4.45 per diluted share, for the prior year period. Revenues decreased 21.6% to $109.7 million, compared with $139.9 million for the prior year period. Operating expenses decreased 23.9% to $98.3 million, compared to $129.2 million for the prior year period. Overall results for the year-to-date period have been shaped predominantly by the same factors that affected the second quarter.

Chairman J. Allen Fine commented, “I am pleased to report improvement in our revenues from the first quarter. Overall, the real estate environment has continued to face several headwinds, including elevated mortgage interest rates and a very low inventory of homes for sale. Despite these challenges, we managed to deliver a pre-tax profit margin of nearly 17% for the second quarter, as a result of expense management initiatives, higher investment earnings, and growth in revenue from non-title services.

“Regardless of current market conditions, the strength of our balance sheet affords flexibility in the execution of our business strategy. We continue to pursue opportunities to expand our presence, enhance operational capabilities, and position ourselves for profitable growth over the full real estate cycle.”

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, 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 impact of inflation and responses by government regulators, including the Federal Reserve, such as increases in interest rates; 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, 2022 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 Six Months Ended June 30, 2023 and 2022

(in thousands, except per share amounts)

(unaudited)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

44,005

 

 

$

69,626

 

 

$

82,971

 

 

$

132,751

 

Escrow and other title-related fees

 

 

4,604

 

 

 

6,247

 

 

 

8,259

 

 

 

11,325

 

Non-title services

 

 

4,565

 

 

 

2,798

 

 

 

9,877

 

 

 

5,210

 

Interest and dividends

 

 

2,150

 

 

 

911

 

 

 

4,224

 

 

 

1,826

 

Other investment income

 

 

1,648

 

 

 

1,106

 

 

 

2,401

 

 

 

2,443

 

Net investment gains (losses)

 

 

1,092

 

 

 

(10,134

)

 

 

1,535

 

 

 

(14,302

)

Other

 

 

250

 

 

 

348

 

 

 

390

 

 

 

647

 

Total Revenues

 

 

58,314

 

 

 

70,902

 

 

 

109,657

 

 

 

139,900

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

 

20,603

 

 

 

33,826

 

 

 

39,929

 

 

 

63,683

 

Provision for claims

 

 

991

 

 

 

1,310

 

 

 

2,059

 

 

 

1,486

 

Personnel expenses

 

 

18,548

 

 

 

20,898

 

 

 

39,368

 

 

 

42,152

 

Office and technology expenses

 

 

4,513

 

 

 

4,288

 

 

 

8,913

 

 

 

8,656

 

Other expenses

 

 

3,813

 

 

 

7,627

 

 

 

7,981

 

 

 

13,177

 

Total Operating Expenses

 

 

48,468

 

 

 

67,949

 

 

 

98,250

 

 

 

129,154

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

9,846

 

 

 

2,953

 

 

 

11,407

 

 

 

10,746

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

2,261

 

 

 

674

 

 

 

2,641

 

 

 

2,282

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

7,585

 

 

$

2,279

 

 

$

8,766

 

 

$

8,464

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

4.00

 

 

$

1.20

 

 

$

4.62

 

 

$

4.46

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

 

1,895

 

 

 

1,897

 

 

 

1,896

 

 

 

1,897

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

4.00

 

 

$

1.20

 

 

$

4.62

 

 

$

4.45

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

 

1,896

 

 

 

1,899

 

 

 

1,896

 

 

 

1,900

 

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2023 and December 31, 2022

(in thousands)

(unaudited)

 

 

 

 

 

June 30, 2023

 

December 31, 2022

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

26,184

 

 

$

35,311

 

 

 

 

 

Investments:

 

 

 

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

 

58,452

 

 

 

53,989

 

Equity securities, at fair value

 

34,081

 

 

 

51,691

 

Short-term investments

 

114,857

 

 

 

103,649

 

Other investments

 

19,779

 

 

 

18,368

 

Total investments

 

227,169

 

 

 

227,697

 

 

 

 

 

Premiums and fees receivable

 

17,211

 

 

 

19,047

 

Accrued interest and dividends

 

949

 

 

 

872

 

Prepaid expenses and other receivables

 

11,523

 

 

 

11,095

 

Property, net

 

21,197

 

 

 

17,785

 

Goodwill and other intangible assets, net

 

16,927

 

 

 

17,611

 

Lease assets

 

6,830

 

 

 

6,707

 

Other assets

 

2,491

 

 

 

2,458

 

Current income taxes recoverable

 

—

 

 

 

1,174

 

Total Assets

$

330,481

 

 

$

339,757

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

Reserve for claims

$

36,865

 

 

$

37,192

 

Accounts payable and accrued liabilities

 

33,923

 

 

 

47,050

 

Lease liabilities

 

7,049

 

 

 

6,839

 

Current income taxes payable

 

586

 

 

 

—

 

Deferred income taxes, net

 

4,805

 

 

 

7,665

 

Total liabilities

 

83,228

 

 

 

98,746

 

 

 

 

 

Stockholders’ Equity:

 

 

 

Common stock – no par value (10,000 authorized shares; 1,891 and 1,897 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)

 

—

 

 

 

—

 

Retained earnings

 

247,092

 

 

 

240,811

 

Accumulated other comprehensive income

 

161

 

 

 

200

 

Total stockholders’ equity

 

247,253

 

 

 

241,011

 

Total Liabilities and Stockholders’ Equity

$

330,481

 

 

$

339,757

 

Investors Title Company and Subsidiaries

Direct and Agency Net Premiums Written

For the Three and Six Months Ended June 30, 2023 and 2022

(in thousands)

(unaudited)

 

 

 

 

Three Months Ended June 30,

Six Months Ended June 30,

 

2023

%

2022

%

2023

%

2022

%

Direct

$

15,776

 

35.9

$

24,642

35.4

$

28,490

34.3

$

47,334

35.7

 

 

 

 

 

 

 

 

 

Agency

 

28,229

 

64.1

 

44,984

 

64.6

 

54,481

 

65.7

 

85,417

 

64.3

 

 

 

 

 

 

 

 

 

Total

$

44,005

 

100.0

$

69,626

 

100.0

$

82,971

 

100.0

$

132,751

 

100.0

Investors Title Company and Subsidiaries

Appendix A

Non-GAAP Measures Reconciliation

For the Three and Six Months Ended June 30, 2023 and 2022

(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 net investment gains and losses, which are recognized in net income under GAAP. Net investment gains and losses include realized gains and losses on sales of investment securities and changes in the estimated fair value of equity security investments. For the three and six months ended June 30, 2023, management has decided to exclude realized gains and losses on sales of investment securities in addition to changes in the estimated fair value of equity security investments for consistency with a similar change in the presentation in the Consolidated Statement of Operations. The non-GAAP financial measures for prior year periods included in this Appendix have also been updated for consistency with this presentation. Therefore adjusted revenues (non-GAAP) and adjusted income before income taxes (non-GAAP) below are not comparable with previously published non-GAAP financial measures for the Company. 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 June 30,

Six Months Ended June 30,

 

2023

 

2022

2023

 

2022

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Total revenues (GAAP)

$

58,314

 

 

$

70,902

$

109,657

 

 

$

139,900

(Subtract) Add: Net investment (gains) losses

 

(1,092

)

 

 

10,134

 

 

(1,535

)

 

 

14,302

 

Adjusted revenues (non-GAAP)

$

57,222

 

 

$

81,036

 

$

108,122

 

 

$

154,202

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

 

 

 

 

Income before income taxes (GAAP)

$

9,846

 

 

$

2,953

 

$

11,407

 

 

$

10,746

 

(Subtract) Add: Net investment (gains) losses

 

(1,092

)

 

 

10,134

 

 

(1,535

)

 

 

14,302

 

Adjusted income before income taxes (non-GAAP)

$

8,754

 

 

$

13,087

 

$

9,872

 

 

$

25,048

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230804781817/en/

Elizabeth B. Lewter (919) 968-2200