Investors Title Company Announces Record Fourth Quarter and Fiscal Year 2020 Results

About this update from Investors Title Company

CHAPEL HILL, N.C. --(BUSINESS WIRE)-- Investors Title Company today announced record results for the fourth quarter and year ended December 31, 2020 . For the quarter, net income increased 46.2% to $16.6 million , or $8.77 per diluted share, versus $11.4 million , or $6.00 per diluted share, in the prior year period. For the year, net income increased 25.3% to $39.4 million , or $20.80 per diluted share, versus $31.5 million , or $16.59 per diluted share, in the prior year. The Company set all-time quarterly and annual records for total revenues, net premiums written and net income. Quarterly results Revenues for the quarter increased 45.8% to $77.1 million , compared to $52.9 million in the prior year period. Net premiums written increased 48.2% to $62.1 million , as lower average interest rates continued to drive strong levels of refinance activity and home sales. While escrow and title-related fees increased commensurate with the growth in premiums, revenues from non-title services decreased 10.5% mainly due to the impact of low interest rates on our like-kind exchange business. Changes in the estimated fair value of equity security investments resulted in a benefit to revenues of $7.8 million , $3.7 million higher than the prior year period, as equity markets continued to recover from the initial impacts of the COVID-19 pandemic earlier in the year. Operating expenses increased 45.4%, mainly due to a 55.5% increase in commissions to agents commensurate with the increase in agent premium volume. Claims expense was $830,000 higher than the prior year period. While claims expense for both periods benefited substantially from recognition of favorable loss development, the prior year quarter also benefited from changes to actuarial estimates for the active policy year. Personnel expenses were 36.7% higher than the prior year due primarily to additions to staffing in support of strategic growth initiatives, additional staffing required to support volume increases, and increased levels of incentive compensation. Income before income taxes increased 46.9% to $21.4 million . Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 30.1% to $13.6 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure). Annual results For the year, revenues increased 28.8% to $236.4 million , mainly due to increases in both refinance and home buying activity levels throughout the year, as well as strong increases in real estate values. Changes in the estimated fair value of equity security investments resulted in a benefit to revenues of $4.9 million , which was $5.4 million lower than the prior year period. Operating expenses increased 30.0%, mostly as a result of volume-related increases. Income before income taxes increased 24.7% to $49.7 million . Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 51.6% to $44.8 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure). Chairman’s commentary 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. Despite headwinds from the pandemic, we experienced strong demand for home purchases and ongoing increases in average real estate values in our operating markets. The decline in interest rates during the year supported housing affordability and drove a sharp increase in the level of refinance activity for the second year in a row. On the expense side, we continued to experience relatively low levels of claims activity. The rate of residential mortgage foreclosures, typically a driver of claims activity, dropped during the year to its lowest level in a decade largely due to moratorium and forbearance programs enacted in response to COVID-19. Looking forward to 2021, we are cautiously optimistic that the real estate sector is poised for another strong year. Many experts predict that the economy and employment will continue to recover during 2021, boosted by rollout of the coronavirus vaccine. We believe economic recovery will lend support to housing demand, while favorable interest rates will sustain high levels of refinance activity, although likely reduced from 2020. Regardless of market conditions, however, we will remain focused on enhancing our competitive strengths and capitalizing on targeted opportunities to expand our market presence.” 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, 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 severity and duration of the COVID-19 pandemic 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; changes resulting from the new 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, 2019 , as filed with the Securities and Exchange Commission , and in subsequent filings. Investors Title Company and Subsidiaries Consolidated Statements of Operations For the Three and Twelve Months Ended December 31, 2020 and 2019 (in thousands, except per share amounts) (unaudited) Three Months Ended December 31 , Twelve Months Ended December 31 , 2020 2019 2020 2019 Revenues: Net premiums written $ 62,107 $ 41,900 $ 205,418 $ 145,842 Escrow and other title-related fees 2,307 1,858 8,321 7,474 Non-title services 2,217 2,478 8,693 9,922 Interest and dividends 1,051 1,147 4,393 4,752 Other investment income 1,487 1,147 3,723 3,191 Net realized investment gains 6 141 333 1,340 Changes in the estimated fair value of equity security investments 7,771 4,085 4,904 10,303 Other 180 128 623 678 Total Revenues 77,126 52,884 236,408 183,502 Operating Expenses: Commissions to agents 33,463 21,519 106,807 72,780 Provision (benefit) for claims 752 (78) 5,204 3,532 Personnel expenses 15,297 11,187 51,929 46,058 Office and technology expenses 2,623 2,451 9,951 9,254 Other expenses 3,580 3,234 12,856 12,055 Total Operating Expenses 55,715 38,313 186,747 143,679 Income before Income Taxes 21,411 14,571 49,661 39,823 Provision for Income Taxes 4,776 3,191 10,241 8,365 Net Income $ 16,635 $ 11,380 $ 39,420 $ 31,458 Basic Earnings per Common Share $ 8.79 $ 6.03 $ 20.84 $ 16.66 Weighted Average Shares Outstanding – Basic 1,892 1,889 1,892 1,888 Diluted Earnings per Common Share $ 8.77 $ 6.00 $ 20.80 $ 16.59 Weighted Average Shares Outstanding – Diluted 1,897 1,896 1,896 1,896 Investors Title Company and Subsidiaries Consolidated Balance Sheets As of December 31, 2020 and 2019 (in thousands) (unaudited) December 31 , 2020 December 31 , 2019 Assets Cash and cash equivalents $ 13,723 $ 25,949 Investments: Fixed maturity securities, available-for-sale, at fair value 117,713 104,638 Equity securities, at fair value 64,919 61,108 Short-term investments 15,170 13,134 Other investments 15,493 13,982 Total investments 213,295 192,862 Premiums and fees receivable 19,427 12,523 Accrued interest and dividends 1,038 1,033 Prepaid expenses and other receivables 9,418 5,519 Property, net 11,160 9,776 Goodwill and other intangible assets, net 9,771 10,275 Operating lease right-of-use assets 3,533 4,469 Other assets 1,560 1,487 Total Assets $ 282,925 $ 263,893 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 33,584 $ 31,333 Accounts payable and accrued liabilities 36,020 28,318 Operating lease liabilities 3,669 4,502 Current income taxes payable 638 1,340 Deferred income taxes, net 8,592 7,038 Total liabilities 82,503 72,531 Stockholders’ Equity: Common stock – no par value (10,000 authorized shares; 1,892 and 1,889 shares issued and outstanding as of December 31, 2020 and 2019, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) — — Retained earnings 196,096 188,262 Accumulated other comprehensive income 4,326 3,100 Total stockholders’ equity 200,422 191,362 Total Liabilities and Stockholders’ Equity $ 282,925 $ 263,893 Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three and Twelve Months Ended December 31, 2020 and 2019 (in thousands) (unaudited) Three Months Ended December 31 , Twelve Months Ended December 31 , 2020 % 2019 % 2020 % 2019 % Branch $ 14,840 23.9 $ 11,527 27.5 $ 53,204 25.9 $ 40,638 27.9 Agency 47,267 76.1 30,373 72.5 152,214 74.1 105,204 72.1 Total $ 62,107 100.0 $ 41,900 100.0 $ 205,418 100.0 $ 145,842 100.0 Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three and Twelve Months Ended December 31, 2020 and 2019 (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 , 2020 2019 2020 2019 Revenues Total revenues (GAAP) $ 77,126 $ 52,884 $ 236,408 $ 183,502 Subtract: Changes in the estimated fair value of equity security investments (7,771) (4,085) (4,904) (10,303) Adjusted revenues (non-GAAP) $ 69,355 $ 48,799 $ 231,504 $ 173,199 Income before Income Taxes Income before income taxes (GAAP) $ 21,411 $ 14,571 $ 49,661 $ 39,823 Subtract: Changes in the estimated fair value of equity security investments (7,771) (4,085) (4,904) (10,303) Adjusted income before income taxes (non-GAAP) $ 13,640 $ 10,486 $ 44,757 $ 29,520 View source version on businesswire.com : https://www.businesswire.com/news/home/20210215005044/en/ Elizabeth B. Lewter Telephone: (919) 968-2200 Source: Investors Title Company

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