Investors Title Company Announces Third Quarter 2021 Financial Results

About this update from Investors Title Company

CHAPEL HILL, N.C. --(BUSINESS WIRE)-- Investors Title Company today announced results for the third quarter ended September 30, 2021 . The Company reported net income of $14.5 million , or $7.63 per diluted share, for the three months ended September 30, 2021 , compared to $15.3 million , or $8.07 per diluted share, for the prior year period. The Company set an all-time record for net premiums written in a quarter. Revenues increased 20.4% to $81.4 million , compared with $67.6 million for the prior year quarter. Net premiums written increased 26.5% to $72.3 million , driven mainly by higher average home prices and continued low mortgage interest rates. Escrow and other title-related fees increased 79.3% primarily due to increases in commission income and title ancillary services. Revenue from non-title services increased 25.2%, mainly due to an increase in like-kind exchange activity. Changes in the estimated fair value of equity security investments resulted in the recognition of an $802 thousand loss, which was $4.4 million lower than the prior year quarter, as market values declined from the previous year’s rebound. Operating expenses increased 29.1% compared to the prior year quarter. Commissions to agents increased commensurate with the increase in agent premium volume. Personnel costs were 22.9% higher than the prior year due to staffing additions in support of strategic growth initiatives and volume increases. Higher premium volumes, increases in travel-related expenses and ongoing technology initiatives drove the increase in other operating expenses. Income before income taxes decreased 2.2% to $18.4 million for the current quarter versus $18.9 million in the prior year period. Excluding the impact of changes in the estimated fair value of equity security investments, income before income taxes (non-GAAP) increased 26.3% to $19.2 million for the current quarter versus $15.2 million in the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure). For the nine months ended September 30, 2021 , net income increased $25.3 million to $48.1 million , or $25.34 per diluted share, versus $22.8 million , or $12.02 per diluted share, for the prior year period. Revenues increased 49.7% to $238.5 million compared with $159.3 million for the prior year period. Operating expenses increased 35.4% to $177.4 million , mainly due to increases in agent commissions, personnel costs and other expenses. Aside from changes in the estimated fair value of equity security investments and a decrease in like-kind exchange activity, overall results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter. Chairman J. Allen Fine added, “We are pleased to report a record level of net premiums written for the ninth consecutive quarter. Our results for the quarter and the year have been influenced predominately by continued strength in residential real estate demand as well as high levels of refinance activity. In addition, we have benefitted from recent investments to expand our market presence in key markets.” 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 (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; 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, 2020 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 Nine Months Ended September 30, 2021 and 2020 (in thousands, except per share amounts) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2021 2020 2021 2020 Revenues: Net premiums written $ 72,345 $ 57,205 $ 201,349 $ 143,311 Escrow and other title-related fees 3,863 2,154 10,148 6,014 Non-title services 2,446 1,954 6,932 6,476 Interest and dividends 893 1,060 2,807 3,342 Other investment income 2,186 1,270 4,610 2,236 Net realized investment gains 268 186 771 327 Changes in the estimated fair value of equity security investments (802 ) 3,619 7,266 (2,867 ) Other 217 185 4,572 443 Total Revenues 81,416 67,633 238,455 159,282 Operating Expenses: Commissions to agents 37,570 29,068 102,458 73,344 Provision for claims 1,993 1,552 5,020 4,452 Personnel expenses 15,457 12,575 47,524 36,632 Office and technology expenses 3,175 2,456 9,128 7,328 Other expenses 4,784 3,125 13,285 9,276 Total Operating Expenses 62,979 48,776 177,415 131,032 Income before Income Taxes 18,437 18,857 61,040 28,250 Provision for Income Taxes 3,934 3,556 12,932 5,465 Net Income $ 14,503 $ 15,301 $ 48,108 $ 22,785 Basic Earnings per Common Share $ 7.66 $ 8.09 $ 25.40 $ 12.04 Weighted Average Shares Outstanding – Basic 1,894 1,892 1,894 1,892 Diluted Earnings per Common Share $ 7.63 $ 8.07 $ 25.34 $ 12.02 Weighted Average Shares Outstanding – Diluted 1,900 1,895 1,899 1,896 Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 2021 and December 31, 2020 (in thousands) (unaudited) September 30 , 2021 December 31 , 2020 Assets Cash and cash equivalents $ 48,510 $ 13,723 Investments: Fixed maturity securities, available-for-sale, at fair value 82,306 117,713 Equity securities, at fair value 69,525 64,919 Short-term investments 51,231 15,170 Other investments 15,957 15,493 Total investments 219,019 213,295 Premiums and fees receivable 22,939 19,427 Accrued interest and dividends 990 1,038 Prepaid expenses and other receivables 13,745 9,418 Property, net 15,310 11,160 Goodwill and other intangible assets, net 9,841 9,771 Operating lease right-of-use assets 3,306 3,533 Other assets 1,770 1,560 Total Assets $ 335,430 $ 282,925 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 36,755 $ 33,584 Accounts payable and accrued liabilities 37,927 36,020 Operating lease liabilities 3,424 3,669 Current income taxes payable 704 638 Deferred income taxes, net 11,315 8,592 Total liabilities 90,125 82,503 Stockholders’ Equity: Common stock – no par value (10,000 authorized shares; 1,894 and 1,892 shares issued and outstanding as of September 30, 2021 and December 31, 2020 , respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) — — Retained earnings 241,833 196,096 Accumulated other comprehensive income 3,472 4,326 Total stockholders’ equity 245,305 200,422 Total Liabilities and Stockholders’ Equity $ 335,430 $ 282,925 Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three and Nine Months Ended September 30, 2021 and 2020 (in thousands) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2021 % 2020 % 2021 % 2020 % Branch $ 18,496 25.6 $ 15,496 27.1 $ 52,904 26.3 $ 38,364 26.8 Agency 53,849 74.4 41,709 72.9 148,445 73.7 104,947 73.2 Total $ 72,345 100.0 $ 57,205 100.0 $ 201,349 100.0 $ 143,311 100.0 Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three and Nine Months Ended September 30, 2021 and 2020 (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 September 30 , Nine Months Ended September 30 , 2021 2020 2021 2020 Revenues Total revenues (GAAP) $ 81,416 $ 67,633 $ 238,455 $ 159,282 Add (Subtract): Changes in the estimated fair value of equity security investments 802 (3,619 ) (7,266 ) 2,867 Adjusted revenues (non-GAAP) $ 82,218 $ 64,014 $ 231,189 $ 162,149 Income before Income Taxes Income before income taxes (GAAP) $ 18,437 $ 18,857 $ 61,040 $ 28,250 Add (Subtract): Changes in the estimated fair value of equity security investments 802 (3,619 ) (7,266 ) 2,867 Adjusted income before income taxes (non-GAAP) $ 19,239 $ 15,238 $ 53,774 $ 31,117 View source version on businesswire.com : https://www.businesswire.com/news/home/20211104005237/en/ Elizabeth B. Lewter (919) 968-2200 Source: Investors Title Company

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