Investors Title Company Announces Third Quarter 2023 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, 2023 . The Company reported net income of $7.1 million , or $3.75 per diluted share, for the three months ended September 30, 2023 , compared to $7.9 million , or $4.17 per diluted share, for the prior year period. Revenues decreased 21.3% to $61.4 million , compared with $78.0 million for the prior year quarter, primarily as the result of decreases in the Company’s title insurance business and other investment income. The reduction in title insurance revenues is attributable to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates and ongoing housing inventory constraints. Changes in other investment income are due to fluctuations in the carrying value of the underlying investments and distributions received. The lower levels of title insurance activity and other investment income were partially offset by increases in non-title services revenue and interest income and an improvement in net investment (losses) gains. The increase in revenue from non-title services was mainly due to an increase in like-kind exchange revenues. The impact of positive changes in the estimated fair value of equity security investments resulted in a decrease in net investment losses compared to the prior year period. Operating expenses decreased 22.3% compared to the prior year period, primarily due to reductions in expenses which fluctuate with title insurance volume. Commissions to agents decreased by $9.7 million , commensurate with the decrease in agent premium volume. Personnel expenses decreased by $2.5 million , primarily due to reductions in incentive compensation and reductions in staffing levels. Other expenses were down $2.7 million , mainly due to the impact of lower title insurance volumes and a reduction in the level of contractors engaged in software development activities. The provision for claims, and office and technology expenses, remained consistent with the prior year period. Income before income taxes decreased to $8.6 million for the current quarter, versus $10.1 million in the prior year period. Excluding the impact of net investment (losses) gains, adjusted income before income taxes (non-GAAP) decreased 23.0% to $9.4 million for the quarter, versus $12.2 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, 2023 , net income decreased $527 thousand to $15.9 million , or $8.37 per diluted share, versus $16.4 million , or $8.63 per diluted share, for the prior year period. Revenues decreased 21.5% to $171.1 million , compared with $217.9 million for the prior year period. Operating expenses decreased 23.3% to $151.1 million , compared to $197.1 million for 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 were pleased to see an uptick in revenues this quarter over the second quarter, as we entered what is traditionally a more favorable time of year for real estate activity. Market conditions remained challenging, as interest rates rose to levels not seen in over 20 years. Partially offsetting reductions in title insurance revenues, investment earnings continued to benefit from higher average interest rates. “Regardless of current market conditions, the strength of our balance sheet allows us to remain focused on the execution of our long-term business strategy. We will continue to navigate this market cycle by balancing expense discipline with ongoing targeted investments in growing our business and improving our competitive positioning.” 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, 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 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, including those resulting from a shutdown of the U.S. Government ; the impact of inflation and responses by government regulators, including the Federal Reserve , such as increases in interest rates; the impact of the COVID-19 pandemic (including any of its variants) on the economy and the Company’s business; 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, 2022 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, 2023 and 2022 (in thousands, except per share amounts) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2023 2022 2023 2022 Revenues: Net premiums written $ 49,822 $ 66,658 $ 132,793 $ 199,409 Escrow and other title-related fees 4,683 6,136 12,942 17,461 Non-title services 4,636 3,679 14,513 8,889 Interest and dividends 2,313 1,229 6,537 3,055 Other investment income 514 2,173 2,915 4,616 Net investment (losses) gains (815 ) (2,154 ) 720 (16,456 ) Other 257 277 647 924 Total Revenues 61,410 77,998 171,067 217,898 Operating Expenses: Commissions to agents 23,806 33,478 63,735 97,161 Provision for claims 1,838 1,966 3,897 3,452 Personnel expenses 19,083 21,586 58,451 63,738 Office and technology expenses 4,209 4,274 13,122 12,930 Other expenses 3,864 6,606 11,845 19,783 Total Operating Expenses 52,800 67,910 151,050 197,064 Income before Income Taxes 8,610 10,088 20,017 20,834 Provision for Income Taxes 1,526 2,175 4,167 4,457 Net Income $ 7,084 $ 7,913 $ 15,850 $ 16,377 Basic Earnings per Common Share $ 3.75 $ 4.17 $ 8.37 $ 8.63 Weighted Average Shares Outstanding – Basic 1,891 1,897 1,894 1,897 Diluted Earnings per Common Share $ 3.75 $ 4.17 $ 8.37 $ 8.63 Weighted Average Shares Outstanding – Diluted 1,891 1,897 1,894 1,898 Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 2023 and December 31, 2022 (in thousands) (unaudited) September 30 , 2023 December 31 , 2022 Assets Cash and cash equivalents $ 30,411 $ 35,311 Investments: Fixed maturity securities, available-for-sale, at fair value 64,640 53,989 Equity securities, at fair value 31,831 51,691 Short-term investments 103,959 103,649 Other investments 20,144 18,368 Total investments 220,574 227,697 Premiums and fees receivable 17,322 19,047 Accrued interest and dividends 1,111 872 Prepaid expenses and other receivables 14,888 11,095 Property, net 22,093 17,785 Goodwill and other intangible assets, net 16,588 17,611 Lease assets 6,432 6,707 Other assets 2,496 2,458 Current income taxes recoverable — 1,174 Total Assets $ 331,915 $ 339,757 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 37,494 $ 37,192 Accounts payable and accrued liabilities 30,719 47,050 Lease liabilities 6,639 6,839 Current income taxes payable 1,008 — Deferred income taxes, net 3,387 7,665 Total liabilities 79,247 98,746 Stockholders’ Equity: Common stock – no par value (10,000 authorized shares; 1,891 and 1,897 shares issued and outstanding as of September 30, 2023 and December 31, 2022 , respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) — — Retained earnings 253,423 240,811 Accumulated other comprehensive (loss) income (755 ) 200 Total stockholders’ equity 252,668 241,011 Total Liabilities and Stockholders’ Equity $ 331,915 $ 339,757 Investors Title Company and Subsidiaries Direct and Agency Net Premiums Written For the Three and Nine Months Ended September 30, 2023 and 2022 (in thousands) (unaudited) Three Months Ended September 30 , Nine Months Ended September 30 , 2023 % 2022 % 2023 % 2022 % Direct $ 17,485 35.1 $ 22,112 33.2 $ 45,975 34.6 $ 69,446 34.8 Agency 32,337 64.9 44,546 66.8 86,818 65.4 129,963 65.2 Total $ 49,822 100.0 $ 66,658 100.0 $ 132,793 100.0 $ 199,409 100.0 Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three and Nine Months Ended September 30, 2023 and 2022 (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 net investment gains and losses, which are recognized in net income under GAAP. Net investment gains and losses include realized gains and losses on sales of investment securities and changes in the estimated fair value of equity security investments. For the three and nine months ended September 30, 2023 , management has decided to exclude realized gains and losses on sales of investment securities in addition to changes in the estimated fair value of equity security investments for consistency with a similar change in the presentation in the Consolidated Statement of Operations. The non-GAAP financial measures for prior year periods included in this Appendix have also been updated for consistency with this presentation. Therefore adjusted revenues (non-GAAP) and adjusted income before income taxes (non-GAAP) below are not comparable with previously published non-GAAP financial measures for the Company. 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 , 2023 2022 2023 2022 Revenues Total revenues (GAAP) $ 61,410 $ 77,998 $ 171,067 $ 217,898 Add (Subtract): Net investment losses (gains) 815 2,154 (720 ) 16,456 Adjusted revenues (non-GAAP) $ 62,225 $ 80,152 $ 170,347 $ 234,354 Income before Income Taxes Income before income taxes (GAAP) $ 8,610 $ 10,088 $ 20,017 $ 20,834 Add (Subtract): Net investment losses (gains) 815 2,154 (720 ) 16,456 Adjusted income before income taxes (non-GAAP) $ 9,425 $ 12,242 $ 19,297 $ 37,290 View source version on businesswire.com : https://www.businesswire.com/news/home/20231102031053/en/ Elizabeth B. Lewter Telephone: (919) 968-2200 Source: Investors Title Company

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