Investors Title Company (NASDAQ: ITIC) today announced its results for the third quarter ended September 30, 2017. Net income attributable to the Company was $5.9 million, or $3.13 per diluted share, versus $8.1 million, or $4.29 per diluted share, for the prior year period. The Company set an all-time quarterly record for revenues and net premiums written. In addition, earnings for the current quarter were the second highest in the Company’s history.

Revenues increased 5.2% to $43.1 million, compared with $41.0 million in the prior year quarter. Net premiums written increased 1.0%, primarily due to a higher level of purchase transactions, business from new agencies, and higher average real estate values, partially offset by a decrease in the level of refinance activity. Other income sources, including revenue from ancillary services coincident with providing title insurance, increased 49.7% to $4.6 million.

Operating expenses increased 15.5% versus the prior year quarter, mainly as a result of increases in the provision for claims stemming from recognition of favorable loss development in the prior year quarter that did not repeat in the current year quarter. In addition, the inclusion of expenses for a title insurance agency acquired in the fourth quarter of 2016 contributed to the higher level of expenses. Excluding these two factors, most expense categories were largely in line with the prior year period.

For the nine months ended September 30, 2017, net income attributable to the Company increased 11.1% to $16.1 million, or $8.48 per diluted share, versus $14.5 million, or $7.53 per diluted share, for the prior year period. Revenues increased 21.4% to $121.1 million, from increases in premiums written due to higher transaction volumes, higher real estate values, and from increases in other income sources. Operating expenses increased 22.9% to $97.4 million, mainly due to the same factors that affected the third quarter.

Chairman J. Allen Fine added, “We are pleased to report another quarter of solid operating results. Against the backdrop of historically low interest rates and a strengthening economy, strong transaction volumes in our core markets, coupled with higher home prices and new agency distribution, resulted in the highest quarterly revenue level in the Company’s history.

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 the 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, 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, 2016, 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 Nine Months Ended September 30, 2017 and 2016

(Unaudited)

 
   

Three Months Ended
September 30,

    

Nine Months Ended
September 30,

2017     2016     2017     2016
Revenues:          
Net premiums written $ 36,612,558 $ 36,306,522 $ 102,918,454 $ 87,357,972
Investment income – interest and dividends 1,087,054 1,160,983 3,297,634 3,478,999
Net realized gain on investments 803,938 439,326 990,118 574,328
Other 4,633,915       3,094,874       13,864,170       8,280,139  
Total Revenues 43,137,465       41,001,705       121,070,376       99,691,438  
 
Operating Expenses:
Commissions to agents 17,641,272 18,739,151 50,569,972 45,946,379
Provision (benefit) for claims 1,854,493 (1,067,853 ) 2,714,717 (403,982 )
Salaries, employee benefits and payroll taxes 9,820,578 8,300,823 29,464,824 22,945,972
Office occupancy and operations 2,309,575 1,496,948 6,445,880 4,526,710
Business development 639,923 608,532 1,987,028 1,695,180
Filing fees, franchise and local taxes 203,912 191,574 935,476 688,731
Premium and retaliatory taxes 673,126 673,551 1,918,951 1,559,631
Professional and contract labor fees 447,651 523,504 1,375,291 1,599,603
Other 630,320       157,308       1,944,419       629,539  
Total Operating Expenses 34,220,850       29,623,538       97,356,558       79,187,763  
 
Income before Income Taxes 8,916,615 11,378,167 23,713,818 20,503,675
 
Provision for Income Taxes 2,990,000       3,249,000       7,647,000       6,040,000  
 
Net Income 5,926,615 8,129,167 16,066,818 14,463,675
 
Net (Gain) Loss Attributable to Noncontrolling Interests (158 )     (2,228 )     10,886       6,684  
 
Net Income Attributable to the Company $ 5,926,457       $ 8,126,939       $ 16,077,704       $ 14,470,359  
 
Basic Earnings per Common Share $ 3.14       $ 4.30       $ 8.52       $ 7.55  
 
Weighted Average Shares Outstanding – Basic 1,887,103       1,888,870       1,886,474       1,915,468  
 
Diluted Earnings per Common Share $ 3.13       $ 4.29       $ 8.48       $ 7.53  
 
Weighted Average Shares Outstanding – Diluted 1,896,229       1,895,592       1,895,957       1,921,999  
 

 

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2017 and December 31, 2016

(Unaudited)

 
   

September 30,
2017

    

December 31,
2016

Assets:    
Investments in securities:
Fixed maturities, available-for-sale, at fair value $ 100,730,446 $ 101,934,077
Equity securities, available-for-sale, at fair value 45,116,461 41,179,259
Short-term investments 20,692,763 6,558,840
Other investments 11,514,780     11,181,531
Total investments 178,054,450     160,853,707
 
Cash and cash equivalents 30,890,785 27,928,472
Premium and fees receivable 10,260,167 8,654,161
Accrued interest and dividends 1,323,598 1,035,152
Prepaid expenses and other assets 9,211,784 9,456,523
Property, net 10,029,847 8,753,466
Goodwill and other intangible assets, net 11,785,945 12,256,641
Current income taxes receivable 1,641,144     —
Total Assets $ 253,197,720     $ 228,938,122
 
Liabilities and Stockholders’ Equity
Liabilities:
Reserves for claims $ 35,207,000 $ 35,305,000
Accounts payable and accrued liabilities 31,462,305 26,146,480
Current income taxes payable — 1,232,432
Deferred income taxes, net 14,397,180     11,118,256
Total liabilities 81,066,485     73,802,168
 
Stockholders’ Equity:

Common stock – no par value (10,000,000 authorized shares; 1,887,026 and 1,884,283 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively, excluding in each period 291,676 shares of common stock held by the Company’s subsidiary)

1 1
Retained earnings 157,675,541 143,283,621
Accumulated other comprehensive income 14,375,694     11,761,447
Total stockholders’ equity attributable to the Company 172,051,236 155,045,069
Noncontrolling interests 79,999     90,885
Total stockholders’ equity 172,131,235     155,135,954
Total Liabilities and Stockholders’ Equity $ 253,197,720     $ 228,938,122
 

 

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

 
    Three Months Ended September 30,     Nine Months Ended September 30,
2017     %     2016     %     2017     %     2016     %
Branch $ 10,871,775     29.7     $ 10,672,619     29.4     $ 30,296,701     29.4     $ 24,303,104     27.8
 
Agency   25,740,783     70.3       25,633,903     70.6       72,621,753     70.6       63,054,868     72.2
 
Total $ 36,612,558     100.0     $ 36,306,522     100.0     $ 102,918,454     100.0     $ 87,357,972     100.0