Investors Title Company Announces First Quarter 2022 Results

About this update from Investors Title Company

CHAPEL HILL, N.C. --(BUSINESS WIRE)-- Investors Title Company today announced results for the quarter ended March 31, 2022 . The Company reported net income of $6.2 million , or $3.25 per diluted share, compared with net income of $13.8 million , or $7.29 per diluted share, for the prior year period. Total revenues decreased 4.3% to $69.0 million , compared to $72.1 million in the prior year period. The Company set a first quarter record for net premiums written, however this was partially offset by the recognition of a $5.9 million loss in the estimated fair value of the equity investment portfolio. Net premiums written increased 2.7% to $63.1 million , driven by increases in average home values and a higher level of purchase activity. Escrow and title-related fees increased 81.0% due to growth in independent agent markets and products which support title insurance. Revenues from non-title services increased 16.7%, mainly due to higher like-kind exchange activity and trust management fee income. Operating expenses increased 11.8% to $61.2 million compared to $54.8 million in the prior year period. Claims expense was $1.4 million lower than the prior period mainly due to a higher level of favorable loss development in the current period. Personnel expenses were 31.6% higher primarily due to expansion of our presence in key markets, overall staff growth to support higher transaction volumes, and increased employee benefit and contract labor costs. Other categories of operating expenses were 7.4% higher than the prior period primarily to support expansion of our geographic footprint as well as ongoing strategic technology initiatives. Income before income taxes decreased $9.5 million to $7.8 million . Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) decreased 2.6% to $13.7 million versus $14.1 million for the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure). Chairman J. Allen Fine commented, “As expected, rising mortgage interest rates suppressed refinance activity for the quarter. However, rising home prices and volume growth resulting from our expansion efforts resulted in a new quarterly record for net premiums written again this quarter. “We remain optimistic about the prospects for solid results for the Company in 2022. Regardless of cyclical changes in the real estate market, we will remain focused on profitably expanding our market presence and enhancing our competitive strengths.” 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, projections regarding U.S. recovery from the COVID-19 pandemic, 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, developments 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 severity and duration of the COVID-19 pandemic (including any of its variants) and its effects (and the effects of measures undertaken to combat it) on the economy and the Company’s business; 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; the potential impact of inflation; changes resulting from President Biden’s administration and Congress ; 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, 2021 as filed with the Securities and Exchange Commission , and in subsequent filings. Investors Title Company and Subsidiaries Consolidated Statements of Operations For the Three Months Ended March 31, 2022 and 2021 (in thousands, except per share amounts) (unaudited) Three Months Ended March 31 , 2022 2021 Revenues: Net premiums written $ 63,125 $ 61,477 Escrow and other title-related fees 5,064 2,798 Non-title services 2,426 2,078 Interest and dividends 915 1,016 Other investment income 1,337 941 Net realized investment gains 1,747 321 Changes in the estimated fair value of equity security investments (5,915 ) 3,239 Other 299 208 Total Revenues 68,998 72,078 Operating Expenses: Commissions to agents 29,857 30,542 Provision for claims 176 1,591 Personnel expenses 21,254 16,153 Office and technology expenses 4,368 2,742 Other expenses 5,550 3,735 Total Operating Expenses 61,205 54,763 Income before Income Taxes 7,793 17,315 Provision for Income Taxes 1,608 3,492 Net Income $ 6,185 $ 13,823 Basic Earnings per Common Share $ 3.26 $ 7.30 Weighted Average Shares Outstanding – Basic 1,896 1,894 Diluted Earnings per Common Share $ 3.25 $ 7.29 Weighted Average Shares Outstanding – Diluted 1,903 1,897 Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2022 and December 31, 2021 (in thousands) (unaudited) March 31 , 2022 December 31 , 2021 Assets Cash and cash equivalents $ 37,310 $ 37,168 Investments: Fixed maturity securities, available-for-sale, at fair value 67,725 79,791 Equity securities, at fair value 69,945 76,853 Short-term investments 58,555 45,930 Other investments 20,217 20,298 Total investments 216,442 222,872 Premiums and fees receivable 23,850 22,953 Accrued interest and dividends 1,000 817 Prepaid expenses and other receivables 11,618 11,721 Property, net 13,413 13,033 Goodwill and other intangible assets, net 15,621 15,951 Operating lease right-of-use assets 7,321 5,202 Other assets 1,822 1,771 Total Assets $ 328,397 $ 331,488 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 36,366 $ 36,754 Accounts payable and accrued liabilities 34,486 43,868 Operating lease liabilities 7,453 5,329 Current income taxes payable 6,164 3,329 Deferred income taxes, net 11,436 13,121 Total liabilities 95,905 102,401 Stockholders’ Equity: Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of March 31, 2022 and December 31, 2021 , respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) — — Retained earnings 231,274 225,861 Accumulated other comprehensive income 1,218 3,226 Total stockholders’ equity 232,492 229,087 Total Liabilities and Stockholders’ Equity $ 328,397 $ 331,488 Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three Months Ended March 31, 2022 and 2021 (in thousands) (unaudited) Three Months Ended March 31 , 2022 % 2021 % Branch $ 17,418 27.6 $ 17,360 28.2 Agency 45,707 72.4 44,117 71.8 Total $ 63,125 100.0 $ 61,477 100.0 Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three Months Ended March 31, 2022 and 2021 (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 March 31 , 2022 2021 Revenues Total revenues (GAAP) $ 68,998 $ 72,078 Add (Subtract): Changes in the estimated fair value of equity security investments 5,915 (3,239 ) Adjusted revenues (non-GAAP) $ 74,913 $ 68,839 Income before Income Taxes Income before income taxes (GAAP) $ 7,793 $ 17,315 Add (Subtract): Changes in the estimated fair value of equity security investments 5,915 (3,239 ) Adjusted income before income taxes (non-GAAP) $ 13,708 $ 14,076 View source version on businesswire.com : https://www.businesswire.com/news/home/20220505005803/en/ Elizabeth B. Lewter (919) 968-2200 Source: Investors Title Company

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