Long time no see. I have to agree with your concerns about ITIC. It is very thinly traded and difficult to accumulate. During past periods of rising rates, ITIC's earnings did drop considerably. And it has been happening again this time. Also ITIC's investment holdings would of course be affected as you describe. Finally the portion of portfolio held in equities has risen a little and that concerns me.
In the long run, the underwriting profit is a plus. But in the next year or two I think refis are likely to dry up and earnings will probably be hit hard.
Re buyout prospects, I'm less enthusiastic. A negotiated deal is always possible but unfortunately defenses against a hostile takeover are pretty discouraging.
I value ITIC in two pieces: (1) present value of estimated future operating earnings, plus (2) value of cash and securities. Because the company has a long record of over-reserving while successfully increasing its premium revenue, I don't deduct loss reserves from (2) but treat that part as "float". A big difference between ITIC and most companies is that ITIC still holds basically all its earnings since its founding, all in liquid form.
Still, I haven't bought any shares for about a year. I can't help thinking that it's due to get even cheaper as rates rise.