Investors Title Company Announces Third Quarter 2022 Financial Results

About this update from Investors Title Company

CHAPEL HILL, N.C. --(BUSINESS WIRE)-- Investors Title Company (Nasdaq: ITIC) today announced results for the third quarter ended September 30, 2022 . The Company reported net income of $7.9 million , or $4.17 per diluted share, for the three months ended September 30, 2022 , compared to $14.5 million , or $7.63 per diluted share, for the prior year period. Revenues decreased 4.2% to $78.0 million , compared with $81.4 million for the prior year quarter. The reduction in revenue is attributable to recognition of a $4.6 million unrealized loss in the Company’s equity portfolio, and a 7.9% decrease in net premiums written, partially offset by realized gains on sales of equity investments as well as increases in revenue from escrow fees and other title-related fees, and non-title services. The reduction in premiums stems from an overall decline in the level of real estate transaction volume following the rise in mortgage interest rates over the course of the year. Although overall premium revenue was down, escrow and other title-related fees increased 54.4% due to an increase in business in markets that generate escrow income, and fee income associated with commercial activity. Revenue from non-title services increased 57.5%, mainly due to an increase in like-kind exchange revenues. Realized gains from sales of equity securities were $2.2 million higher than the prior year period. Operating expenses increased 7.8% compared to the prior year quarter, primarily due to increases in personnel costs, title fees, and office and technology expenses. Commissions to agents decreased commensurate with the decrease in agent premium volume. Personnel costs were 39.7% higher than the prior year quarter due to staffing of new offices, hiring to support growth initiatives, and increased employee benefit costs. Office, technology, and other operating expenses increased 36.7% in support of expanding our geographic footprint and ongoing technology initiatives. Claims expense was essentially flat compared to the prior year quarter. Income before income taxes decreased 45.3% to $10.1 million for the current quarter versus $18.4 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) decreased 23.5% to $14.7 million for the third quarter versus $19.2 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, 2022 , net income decreased $31.7 million to $16.4 million , or $8.63 per diluted share, versus $48.1 million , or $25.34 per diluted share, for the prior year period. Revenues decreased 8.6% to $217.9 million compared with $238.5 million for the prior year period. Operating expenses increased 11.1% to $197.1 million , mainly due to increases in personnel and office, technology, and other operating expenses. Aside from a non-recurring gain on the sale of property in the prior year period, 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 commented, “We are pleased to report another quarter of solid operating performance, despite market headwinds. Rising mortgage interest rates resulted in the continued moderation of the real estate market, reducing home affordability which in turn has softened demand. “Although overall transaction volumes were lower than the prior year quarter, our recent successes in expanding our market footprint materially contributed to lessening the impact of the market slowdown on our operating performance. We believe the Company is well-positioned as we transition to a different stage of the real estate cycle, and plan to continue to make targeted investments in our business to expand our geographic presence, improve our operating performance, and deliver value to our customers and business partners.” 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, 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 impact of the COVID-19 pandemic (including any of its variants) 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 and responses by government regulators, including the Federal Reserve ; 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 and Nine Months Ended September 30, 2022 and 2021 (in thousands, except per share amounts) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2022 2021 2022 2021 Revenues: Net premiums written $ 66,658 $ 72,345 $ 199,409 $ 201,349 Escrow and other title-related fees 5,963 3,863 17,236 10,148 Non-title services 3,852 2,446 9,114 6,932 Interest and dividends 1,229 893 3,055 2,807 Other investment income 2,173 2,186 4,616 4,610 Net realized investment gains 2,481 268 6,266 771 Changes in the estimated fair value of equity security investments (4,635 ) (802 ) (22,722 ) 7,266 Other 277 217 924 4,572 Total Revenues 77,998 81,416 217,898 238,455 Operating Expenses: Commissions to agents 33,478 37,570 97,161 102,458 Provision for claims 1,966 1,993 3,452 5,020 Personnel expenses 21,586 15,457 63,738 47,524 Office and technology expenses 4,274 3,175 12,930 9,128 Other expenses 6,606 4,784 19,783 13,285 Total Operating Expenses 67,910 62,979 197,064 177,415 Income before Income Taxes 10,088 18,437 20,834 61,040 Provision for Income Taxes 2,175 3,934 4,457 12,932 Net Income $ 7,913 $ 14,503 $ 16,377 $ 48,108 Basic Earnings per Common Share $ 4.17 $ 7.66 $ 8.63 $ 25.40 Weighted Average Shares Outstanding – Basic 1,897 1,894 1,897 1,894 Diluted Earnings per Common Share $ 4.17 $ 7.63 $ 8.63 $ 25.34 Weighted Average Shares Outstanding – Diluted 1,897 1,900 1,898 1,899 Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 2022 and December 31, 2021 (in thousands) (unaudited) September 30 , 2022 December 31 , 2021 Assets Cash and cash equivalents $ 41,380 $ 37,168 Investments: Fixed maturity securities, available-for-sale, at fair value 55,307 79,791 Equity securities, at fair value 52,657 76,853 Short-term investments 80,785 45,930 Other investments 19,673 20,298 Total investments 208,422 222,872 Premiums and fees receivable 23,194 22,953 Accrued interest and dividends 971 817 Prepaid expenses and other receivables 12,527 11,721 Property, net 16,613 13,033 Goodwill and other intangible assets, net 17,954 15,951 Operating lease right-of-use assets 6,258 5,202 Other assets 2,320 1,771 Current income taxes recoverable 3,164 — Total Assets $ 332,803 $ 331,488 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 37,630 $ 36,754 Accounts payable and accrued liabilities 41,938 43,868 Operating lease liabilities 6,389 5,329 Current income taxes payable — 3,329 Deferred income taxes, net 7,805 13,121 Total liabilities 93,762 102,401 Stockholders’ Equity: Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of September 30, 2022 and December 31, 2021 , respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) — — Retained earnings 239,792 225,861 Accumulated other comprehensive (loss) income (751 ) 3,226 Total stockholders’ equity 239,041 229,087 Total Liabilities and Stockholders’ Equity $ 332,803 $ 331,488 Investors Title Company and Subsidiaries Direct and Agency Net Premiums Written For the Three and Nine Months Ended September 30, 2022 and 2021 (in thousands) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2022 % 2021 % 2022 % 2021 % Direct $ 21,818 32.7 $ 21,803 30.1 $ 68,478 34.3 $ 61,619 30.6 Agency 44,840 67.3 50,542 69.9 130,931 65.7 139,730 69.4 Total $ 66,658 100.0 $ 72,345 100.0 $ 199,409 100.0 $ 201,349 100.0 Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three and Nine Months Ended September 30, 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 September 30 , Nine Months Ended September 30 , 2022 2021 2022 2021 Revenues Total revenues (GAAP) $ 77,998 $ 81,416 $ 217,898 $ 238,455 Add (Subtract): Changes in the estimated fair value of equity security investments 4,635 802 22,722 (7,266 ) Adjusted revenues (non-GAAP) $ 82,633 $ 82,218 $ 240,620 $ 231,189 Income before Income Taxes Income before income taxes (GAAP) $ 10,088 $ 18,437 $ 20,834 $ 61,040 Add (Subtract): Changes in the estimated fair value of equity security investments 4,635 802 22,722 (7,266 ) Adjusted income before income taxes (non-GAAP) $ 14,723 $ 19,239 $ 43,556 $ 53,774 View source version on businesswire.com : https://www.businesswire.com/news/home/20221103005852/en/ Elizabeth B. Lewter Telephone: (919) 968-2200 Source: Investors Title Company

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