ITIC Investors Title Company

Investors Title Company (Nasdaq: ITIC) today announced results for the third quarter ended September 30, 2023. The Company reported net income of $7.1 million, or $3.75 per diluted share, for the three months ended September 30, 2023, compared to $7.9 million, or $4.17 per diluted share, for the prior year period.

Revenues decreased 21.3% to $61.4 million, compared with $78.0 million for the prior year quarter, primarily as the result of decreases in the Company’s title insurance business and other 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. Changes in other investment income are due to fluctuations in the carrying value of the underlying investments and distributions received. The lower levels of title insurance activity and other investment income were partially offset by increases in non-title services revenue and interest income and an improvement in net investment (losses) gains. The increase in revenue from non-title services was mainly due to an increase in like-kind exchange revenues. The impact of positive changes in the estimated fair value of equity security investments resulted in a decrease in net investment losses compared to the prior year period.

Operating expenses decreased 22.3% compared to the prior year period, primarily due to reductions in expenses which fluctuate with title insurance volume. Commissions to agents decreased by $9.7 million, commensurate with the decrease in agent premium volume. Personnel expenses decreased by $2.5 million, primarily due to reductions in incentive compensation and reductions in staffing levels. Other expenses were down $2.7 million, mainly due to the impact of lower title insurance volumes and a reduction in the level of contractors engaged in software development activities. The provision for claims, and office and technology expenses, remained consistent with the prior year period.

Income before income taxes decreased to $8.6 million for the current quarter, versus $10.1 million in the prior year period. Excluding the impact of net investment (losses) gains, adjusted income before income taxes (non-GAAP) decreased 23.0% to $9.4 million for the quarter, versus $12.2 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 nine months ended September 30, 2023, net income decreased $527 thousand to $15.9 million, or $8.37 per diluted share, versus $16.4 million, or $8.63 per diluted share, for the prior year period. Revenues decreased 21.5% to $171.1 million, compared with $217.9 million for the prior year period. Operating expenses decreased 23.3% to $151.1 million, compared to $197.1 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 third quarter.

Chairman J. Allen Fine commented, “We were pleased to see an uptick in revenues this quarter over the second quarter, as we entered what is traditionally a more favorable time of year for real estate activity. Market conditions remained challenging, as interest rates rose to levels not seen in over 20 years. Partially offsetting reductions in title insurance revenues, investment earnings continued to benefit from higher average interest rates.

“Regardless of current market conditions, the strength of our balance sheet allows us to remain focused on the execution of our long-term business strategy. We will continue to navigate this market cycle by balancing expense discipline with ongoing targeted investments in growing our business and improving our competitive positioning.”

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, including those resulting from a shutdown of the U.S. Government; 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 Nine Months Ended September 30, 2023 and 2022

(in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

49,822

 

 

$

66,658

 

 

$

132,793

 

$

199,409

 

Escrow and other title-related fees

 

 

4,683

 

 

 

6,136

 

 

 

12,942

 

 

17,461

 

Non-title services

 

 

4,636

 

 

 

3,679

 

 

 

14,513

 

 

8,889

 

Interest and dividends

 

 

2,313

 

 

 

1,229

 

 

 

6,537

 

 

3,055

 

Other investment income

 

 

514

 

 

 

2,173

 

 

 

2,915

 

 

4,616

 

Net investment (losses) gains

 

 

(815

)

 

 

(2,154

)

 

 

720

 

 

(16,456

)

Other

 

 

257

 

 

 

277

 

 

 

647

 

 

924

 

Total Revenues

 

 

61,410

 

 

 

77,998

 

 

 

171,067

 

 

217,898

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

 

23,806

 

 

 

33,478

 

 

 

63,735

 

 

97,161

 

Provision for claims

 

 

1,838

 

 

 

1,966

 

 

 

3,897

 

 

3,452

 

Personnel expenses

 

 

19,083

 

 

 

21,586

 

 

 

58,451

 

 

63,738

 

Office and technology expenses

 

 

4,209

 

 

 

4,274

 

 

 

13,122

 

 

12,930

 

Other expenses

 

 

3,864

 

 

 

6,606

 

 

 

11,845

 

 

19,783

 

Total Operating Expenses

 

 

52,800

 

 

 

67,910

 

 

 

151,050

 

 

197,064

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

 

8,610

 

 

 

10,088

 

 

 

20,017

 

 

20,834

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

1,526

 

 

 

2,175

 

 

 

4,167

 

 

4,457

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

7,084

 

 

$

7,913

 

 

$

15,850

 

$

16,377

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

3.75

 

 

$

4.17

 

 

$

8.37

 

$

8.63

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

 

1,891

 

 

 

1,897

 

 

 

1,894

 

 

1,897

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

3.75

 

 

$

4.17

 

 

$

8.37

 

$

8.63

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

 

1,891

 

 

 

1,897

 

 

 

1,894

 

 

1,898

 

   

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022

(in thousands)

(unaudited)

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

30,411

 

 

$

35,311

 

 

 

 

Investments:

 

 

 

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

 

64,640

 

 

 

53,989

Equity securities, at fair value

 

31,831

 

 

 

51,691

Short-term investments

 

103,959

 

 

 

103,649

Other investments

 

20,144

 

 

 

18,368

Total investments

 

220,574

 

 

 

227,697

 

 

 

 

Premiums and fees receivable

 

17,322

 

 

 

19,047

Accrued interest and dividends

 

1,111

 

 

 

872

Prepaid expenses and other receivables

 

14,888

 

 

 

11,095

Property, net

 

22,093

 

 

 

17,785

Goodwill and other intangible assets, net

 

16,588

 

 

 

17,611

Lease assets

 

6,432

 

 

 

6,707

Other assets

 

2,496

 

 

 

2,458

Current income taxes recoverable

 

—

 

 

 

1,174

Total Assets

$

331,915

 

 

$

339,757

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

Reserve for claims

$

37,494

 

 

$

37,192

Accounts payable and accrued liabilities

 

30,719

 

 

 

47,050

Lease liabilities

 

6,639

 

 

 

6,839

Current income taxes payable

 

1,008

 

 

 

—

Deferred income taxes, net

 

3,387

 

 

 

7,665

Total liabilities

 

79,247

 

 

 

98,746

 

 

 

 

Stockholders’ Equity:

 

 

 

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

 

—

 

 

 

—

Retained earnings

 

253,423

 

 

 

240,811

Accumulated other comprehensive (loss) income

 

(755

)

 

 

200

Total stockholders’ equity

 

252,668

 

 

 

241,011

Total Liabilities and Stockholders’ Equity

$

331,915

 

 

$

339,757

 

Investors Title Company and Subsidiaries

Direct and Agency Net Premiums Written

For the Three and Nine Months Ended September 30, 2023 and 2022

(in thousands)

(unaudited)

 

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

2023

%

2022

%

2023

%

2022

%

Direct

$

17,485

35.1

$

22,112

33.2

$

45,975

34.6

$

69,446

34.8

 

 

 

 

 

 

 

 

 

Agency

 

32,337

64.9

 

44,546

66.8

 

86,818

65.4

 

129,963

65.2

 

 

 

 

 

 

 

 

 

Total

$

49,822

100.0

$

66,658

100.0

$

132,793

100.0

$

199,409

100.0

 

Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three and Nine Months Ended September 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 nine months ended September 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 September 30,

Nine Months Ended September 30,

 

2023

2022

2023

2022

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Total revenues (GAAP)

$

61,410

 

$

77,998

$

171,067

 

 

$

217,898

Add (Subtract): Net investment losses (gains)

 

815

 

 

2,154

 

(720

)

 

 

16,456

Adjusted revenues (non-GAAP)

$

62,225

 

$

80,152

$

170,347

 

 

$

234,354

 

 

 

 

 

 

 

Income before Income Taxes

 

 

 

 

 

 

Income before income taxes (GAAP)

$

8,610

 

$

10,088

$

20,017

 

 

$

20,834

Add (Subtract): Net investment losses (gains)

 

815

 

 

2,154

 

(720

)

 

 

16,456

Adjusted income before income taxes (non-GAAP)

$

9,425

 

$

12,242

$

19,297

 

 

$

37,290

 

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