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