Investors Title Company today announced record results for the
quarter ended March 31, 2021. The Company reported net income of
$13.8 million, or $7.29 per diluted share, compared with a net loss
of $7.0 million, or $3.71 per diluted share, for the prior year
period. The Company set quarterly records for total revenues, net
premiums written and net income.
Revenues for the quarter increased 141.1% to $72.1 million,
compared to $29.9 million in the prior year period. Net premiums
written increased 59.2% to $61.5 million, as lower average interest
rates continued to drive strong levels of refinance activity and
home sales. While escrow and title-related fees increased
commensurate with the growth in premiums, revenues from non-title
services decreased 18.4% mainly due to the impact of low interest
rates on our like-kind exchange business. Changes in the estimated
fair value of equity security investments resulted in a benefit to
revenues of $3.2 million, $17.7 million higher than the prior year
period, as equity markets continued to rally following the dip from
initial impacts of the COVID-19 pandemic in the prior year
period.
Operating expenses increased 42.5%, mainly due to a 51.3%
increase in commissions to agents commensurate with the increase in
agent premium volume. Claims expense was $685,000 higher than the
prior year period due to the increase in premium volume, which was
partially offset by a higher level of favorable loss development
related to recent policy years. Personnel expenses were 36.8%
higher due primarily to additions to staffing in support of
strategic growth initiatives, additional staffing required to
support volume increases, and increased levels of incentive
compensation.
Income before income taxes increased $25.8 million to $17.3
million. Excluding the impact of changes in the estimated fair
value of investments in equity securities, income before income
taxes (non-GAAP) increased 137.4% to $14.1 million (see Appendix A
for a reconciliation of this non-GAAP measure to the most directly
comparable GAAP measure).
Chairman J. Allen Fine commented, “We are pleased to report
another quarter of exceptional operating results. Overall, the
quarter was shaped by a continuation of the trends that began last
year following the onset of the pandemic. Low interest rates
continued to fuel a high level of refinance activity, as well as
strong demand for housing. The Company experienced revenue
increases in all of its key markets, and across all channels.
“As we enter the second quarter, the outlook for the real estate
market for 2021 is drawing more into focus. The view of most
economists appears to be that economic growth, fueled by federal
stimulus, the rollout of the COVID-19 vaccine, and job growth will
increase throughout the year. Although this growth may lead to a
higher interest rate environment, we believe mortgage interest
rates will likely remain low by historical standards. Refinance
activity will almost certainly slow as rates nudge upward, but we
believe population demographics, residual demand attributable to
supply shortages, and a growing economy will result in a strong
housing market for 2021.”
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, projections regarding
U.S. recovery from the COVID-19 pandemic, 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,
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 severity
and duration of the COVID-19 pandemic (including any of its
variants) and its effects (and the effects of measures undertaken
to combat it) on the economy and the Company’s business; 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; changes resulting
from President Biden’s administration and Congress; 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, 2020 as filed with the Securities and
Exchange Commission, and in subsequent filings.
Investors Title Company and
Subsidiaries
Consolidated Statements of
Operations
For the Three Months Ended
March 31, 2021 and 2020
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended
March 31,
2021
2020
Revenues:
Net premiums written
$
61,477
$
38,627
Escrow and other title-related fees
2,798
1,842
Non-title services
2,078
2,547
Interest and dividends
1,016
1,177
Other investment income
941
440
Net realized investment gains (losses)
321
(412
)
Changes in the estimated fair value of
equity security investments
3,239
(14,458
)
Other
208
138
Total Revenues
72,078
29,901
Operating Expenses:
Commissions to agents
30,542
20,187
Provision for claims
1,591
906
Personnel expenses
16,153
11,809
Office and technology expenses
2,742
2,415
Other expenses
3,735
3,113
Total Operating Expenses
54,763
38,430
Income (Loss) before Income
Taxes
17,315
(8,529
)
Provision (Benefit) for Income
Taxes
3,492
(1,518
)
Net Income (Loss)
$
13,823
$
(7,011
)
Basic Earnings (Loss) per Common
Share
$
7.30
$
(3.71
)
Weighted Average Shares Outstanding –
Basic
1,894
1,890
Diluted Earnings (Loss) per Common
Share
$
7.29
$
(3.71
)
Weighted Average Shares Outstanding –
Diluted
1,897
1,890
Investors Title Company and
Subsidiaries
Consolidated Balance
Sheets
As of March 31, 2021 and
2020
(in thousands)
(unaudited)
March 31, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
22,964
$
13,723
Investments:
Fixed maturity securities,
available-for-sale, at fair value
102,970
117,713
Equity securities, at fair value
64,646
64,919
Short-term investments
30,498
15,170
Other investments
14,840
15,493
Total investments
212,954
213,295
Premiums and fees receivable
20,188
19,427
Accrued interest and dividends
1,232
1,038
Prepaid expenses and other receivables
10,622
9,418
Property, net
12,338
11,160
Goodwill and other intangible assets,
net
10,119
9,771
Operating lease right-of-use assets
3,379
3,533
Other assets
1,744
1,560
Total Assets
$
295,540
$
282,925
Liabilities and Stockholders’
Equity
Liabilities:
Reserve for claims
$
34,562
$
33,584
Accounts payable and accrued
liabilities
32,038
36,020
Operating lease liabilities
3,509
3,669
Current income taxes payable
3,377
638
Deferred income taxes, net
9,181
8,592
Total liabilities
82,667
82,503
Stockholders’ Equity:
Common stock – no par value (10,000
authorized shares; 1,894 and 1,892 shares issued and outstanding as
of March 31, 2021 and December 31, 2020, respectively, excluding in
each period 292 shares of common stock held by the Company's
subsidiary)
—
—
Retained earnings
209,157
196,096
Accumulated other comprehensive income
3,716
4,326
Total stockholders’ equity
212,873
200,422
Total Liabilities and Stockholders’
Equity
$
295,540
$
282,925
Investors Title Company and
Subsidiaries
Net Premiums Written By Branch
and Agency
For the Three Months Ended
March 31, 2021 and 2020
(in thousands)
(unaudited)
Three Months Ended March
31,
2021
%
2020
%
Branch
$
17,360
28.2
$
9,895
25.6
Agency
44,117
71.8
28,732
74.4
Total
$
61,477
100.0
$
38,627
100.0
Investors Title Company and
Subsidiaries
Appendix A
Non-GAAP Measures
Reconciliation
For the Three Months Ended
March 31, 2021 and 2020
(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 (loss) 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
March 31,
2021
2020
Revenues
Total revenues (GAAP)
$
72,078
$
29,901
(Subtract) Add: Changes in the estimated
fair value of equity security investments
(3,239
)
14,458
Adjusted revenues (non-GAAP)
$
68,839
$
44,359
Income (Loss) before Income
Taxes
Income (loss) before income taxes
(GAAP)
$
17,315
$
(8,529
)
Subtract (Add): Changes in the estimated
fair value of equity security investments
(3,239
)
14,458
Adjusted income before income taxes
(non-GAAP)
$
14,076
$
5,929
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version on businesswire.com: https://www.businesswire.com/news/home/20210505005158/en/
Elizabeth B. Lewter Telephone: (919) 968-2200
Investors Title (NASDAQ:ITIC)
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