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Investors Title Company Announces Record Fourth Quarter and Fiscal Year 2019 Results

·9 min read

Investors Title Company today announced results for the fourth quarter and year ended December 31, 2019.

For the year, net income attributable to the Company increased 43.7% to a record $31.5 million, or $16.59 per diluted share, versus $21.9 million, or $11.54 per diluted share, in the prior year. For the quarter, net income attributable to the Company increased to a record $11.4 million, or $6.00 per diluted share, versus $135,000, or $0.07 per diluted share, in the prior year period.

Revenues for the year increased 17.4% to a record $183.5 million, compared with $156.3 million in the prior year. Revenues benefitted from a $10.3 million increase in the fair value of equity security investments, compared to a $4.1 million decrease in the fair value of equity security investments in the prior year. In addition, net premiums written increased 5.6% to $145.8 million, a new record. The increase in premiums stemmed from a favorable interest rate environment, continued increases in home prices and a high level of home sales activity. Finally, revenues from non-title services increased $2.8 million due mainly to growth in our like-kind property exchange business.

Operating expenses increased 11.2% to $143.7 million, compared with $129.2 million in the prior year. Higher premium levels drove an increase in agent commissions. Personnel expenses increased due to normal inflationary increases in salaries and benefits, growth in staffing levels associated with higher activity levels and targeted investments in key areas of our business, and continued support of multi-year technology initiatives. The claims provision was higher due to less favorable loss development and higher incurred claims in the current period.

Income before income taxes increased to $14.6 million and $39.8 million for the quarter and year ended December 31, 2019, versus $470,000 and $27.1 million in the prior year periods, respectively. Excluding the impact of changes in the fair value of equity security investments, income before income taxes (non-GAAP) increased $3.3 million in the current quarter and decreased $1.7 million in the current year compared with the same periods in the prior year (see Appendix A for a reconciliation of GAAP to non-GAAP measures used in this press release.)

Chairman J. Allen Fine commented, "We are pleased to report another year of strong performance for the Company. For both the quarter and the year, the Company set new records for revenues, premiums, and earnings. A strong economy led to another year of increases in the level of home sales and average real estate values, while historically low interest rates drove a sharp increase in the level of refinance activity.

Even though claims expense increased, we continued to experience a low level of overall claims activity. We believe this is the result of market factors driving foreclosure rates to pre-recession levels, as well as our own efforts to improve the risk profile of our Company and our business partners.

As we head into the new year, we are optimistic that the strength in the economy will result in conditions favorable for continued strength in the real estate market. Regardless of market conditions, however, we remain focused on enhancing our competitive strengths, profitably expanding our market presence, and strengthening our financial position."

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.

-----------------------------------------------------------------------------------------------------------------------------

Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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 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 regulation; changes in the economy; 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, 2018, as filed with the Securities and Exchange Commission, and in subsequent filings.

Investors Title Company and Subsidiaries

Consolidated Statements of Income

For the Three and Twelve Months Ended December 31, 2019 and 2018

(in thousands, except per share amounts)

(unaudited)

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2019

2018

2019

2018

Revenues:

Net premiums written

$

41,900

$

34,002

$

145,842

$

138,125

Escrow and other title-related fees

1,858

1,631

7,474

7,096

Non-title services

2,478

1,999

9,922

7,082

Interest and dividends

1,147

1,238

4,752

4,619

Other investment income

1,147

828

3,191

3,107

Net realized investment gains (losses)

141

(739

)

1,340

(110

)

Changes in the estimated fair value of equity security investments

4,085

(6,756

)

10,303

(4,130

)

Other

128

83

678

470

Total Revenues

52,884

32,286

183,502

156,259

Operating Expenses:

Commissions to agents

21,519

16,833

72,780

65,775

(Benefit) Provision for claims

(78

)

(487

)

3,532

(332

)

Personnel expenses

11,187

10,318

46,058

43,552

Office and technology expenses

2,451

2,210

9,254

8,813

Other expenses

3,234

2,942

12,055

11,382

Total Operating Expenses

38,313

31,816

143,679

129,190

Income before Income Taxes

14,571

470

39,823

27,069

Provision for Income Taxes

3,191

337

8,365

5,210

Net Income

11,380

133

31,458

21,859

Net Loss Attributable to Noncontrolling Interests

2

33

Net Income Attributable to the Company

$

11,380

$

135

$

31,458

$

21,892

Basic Earnings per Common Share

$

6.03

$

0.07

$

16.66

$

11.60

Weighted Average Shares Outstanding – Basic

1,889

1,887

1,888

1,887

Diluted Earnings per Common Share

$

6.00

$

0.07

$

16.59

$

11.54

Weighted Average Shares Outstanding – Diluted

1,896

1,896

1,896

1,897

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2019 and 2018

(in thousands)

(unaudited)

December 31,
2019

December 31,
2018

Assets

Cash and cash equivalents

$

25,949

$

18,694

Investments:

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

104,638

88,957

Equity securities, at fair value

61,108

48,489

Short-term investments

13,134

32,787

Other investments

13,982

12,436

Total investments

192,862

182,669

Premiums and fees receivable

12,523

12,128

Accrued interest and dividends

1,033

946

Prepaid expenses and other receivables

5,519

7,288

Property, net

9,776

10,304

Goodwill and other intangible assets, net

10,275

10,780

Operating lease right-of-use assets

4,469

Other assets

1,487

1,459

Total Assets

$

263,893

$

244,268

Liabilities and Stockholders’ Equity

Liabilities:

Reserve for claims

$

31,333

$

31,729

Accounts payable and accrued liabilities

28,318

27,735

Operating lease liabilities

4,502

Current income taxes payable

1,340

4,981

Deferred income taxes, net

7,038

4,184

Total liabilities

72,531

68,629

Stockholders’ Equity:

Common stock no par value (10,000 authorized shares; 1,889 and 1,887 shares issued and outstanding as of December 31, 2019 and 2018, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)

Retained earnings

188,262

174,690

Accumulated other comprehensive income

3,100

949

Total stockholders’ equity

191,362

175,639

Total Liabilities and Stockholders’ Equity

$

263,893

$

244,268

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Twelve Months Ended December 31, 2019 and 2018

(in thousands)

(unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2019

%

2018

%

2019

%

2018

%

Branch

$

11,527

27.5

$

10,047

29.5

$

40,638

27.9

$

41,305

29.9

Agency

30,373

72.5

23,955

70.5

105,204

72.1

96,820

70.1

Total

$

41,900

100.0

$

34,002

100.0

$

145,842

100.0

$

138,125

100.0

Investors Title Company and Subsidiaries
Appendix A
Non-GAAP Measures Reconciliation
For the Three and Twelve Months Ended December 31, 2019 and 2018
(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,

2019

2018

2019

2018

Revenues

Total revenues (GAAP)

$

52,884

$

32,286

$

183,502

$

156,259

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

(4,085

)

6,756

(10,303

)

4,130

Adjusted revenues (non-GAAP)

$

48,799

$

39,042

$

173,199

$

160,389

Income before Income Taxes

Income before income taxes (GAAP)

$

14,571

$

470

$

39,823

$

27,069

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

(4,085

)

6,756

(10,303

)

4,130

Adjusted income before income taxes (non-GAAP)

$

10,486

$

7,226

$

29,520

$

31,199

View source version on businesswire.com: https://www.businesswire.com/news/home/20200211005324/en/

Contacts

Elizabeth B. Lewter
(919) 968-2200