Investors Title Company Announces Second Quarter 2019 Financial Results

CHAPEL HILL, N.C.--()--Investors Title Company today announced its results for the second quarter ended June 30, 2019. The Company reported net income attributable to the Company of $5.5 million, or $2.90 per diluted share, compared to $6.9 million, or $3.66 per diluted share, for the prior year period.

Revenues increased 1.9% to $42.7 million, compared with $41.9 million in the prior year quarter. While net premiums written remained virtually flat compared with the prior year, revenue from non-title services increased 48.4%, mainly due to increased revenues associated with like-kind exchange services. Changes in the estimated fair value of equity security investments resulted in an additional $794 thousand of income versus the prior year.

Operating expenses increased 8.1% versus the prior year quarter, mainly because of higher claims and personnel expenses. Claims expense was higher primarily due to an increase in reserves for a potential large claim, and a higher level of favorable loss development in the prior year period. Personnel costs increased as a result of higher staffing levels necessary to support growth and strategic software initiatives.

Income before income taxes decreased 21.5% to $6.9 million for the current quarter versus $8.8 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 31.8% to $5.8 million for the current quarter versus $8.5 million in the prior year period (see Appendix A).

For the six months ended June 30, 2019, net income attributable to the Company increased 9.0% to $12.1 million, or $6.40 per diluted share, versus $11.1 million, or $5.87 per diluted share, for the prior year period. Revenues increased 9.2% to $82.7 million, while operating expenses increased 9.4% to $67.4 million. Results for the first half of the year have been shaped predominantly by the same factors that affected the second quarter.

Chairman J. Allen Fine added, “Overall premium revenues remained stable for the quarter compared with last year. Although the pace of home sales has cooled slightly from last year, recent decreases in mortgage interest rates have spurred an uptick in refinance activity. We are encouraged that continued strength in the overall economy will continue to drive high levels of activity in our industry, resulting in another year of solid operating results for the Company.”

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.

Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 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 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 regulation; changes in the economy; 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, 2018, as filed with the Securities and Exchange Commission, and in subsequent filings.

Investors Title Company and Subsidiaries

Consolidated Statements of Income

For the Three and Six Months Ended June 30, 2019 and 2018

(in thousands, except per share amounts)

(unaudited)

   

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

34,978

 

 

$

35,142

 

 

$

63,773

 

 

$

64,701

 

Escrow and other title-related fees

 

1,901

 

 

2,149

 

 

3,223

 

 

3,653

 

Non-title services

 

2,517

 

 

1,696

 

 

4,905

 

 

3,288

 

Interest and dividends

 

1,193

 

 

1,125

 

 

2,449

 

 

2,243

 

Other investment income

 

926

 

 

1,181

 

 

1,336

 

 

1,450

 

Net realized investment (losses) gains

 

(14

)

 

288

 

 

776

 

 

441

 

Changes in the estimated fair value of equity security investments

 

1,142

 

 

348

 

 

5,812

 

 

(294

)

Other

 

90

 

 

7

 

 

405

 

 

230

 

Total Revenues

 

42,733

 

 

41,936

 

 

82,679

 

 

75,712

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

Commissions to agents

 

16,275

 

 

16,427

 

 

31,333

 

 

30,452

 

Provision (benefit) for claims

 

2,397

 

 

564

 

 

2,623

 

 

(842

)

Personnel expenses

 

11,683

 

 

10,798

 

 

23,295

 

 

22,138

 

Office and technology expenses

 

2,230

 

 

2,326

 

 

4,453

 

 

4,395

 

Other expenses

 

3,228

 

 

3,007

 

 

5,742

 

 

5,530

 

Total Operating Expenses

 

35,813

 

 

33,122

 

 

67,446

 

 

61,673

 

 

 

 

 

 

 

 

 

 

Income before Income Taxes

 

6,920

 

 

8,814

 

 

15,233

 

 

14,039

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

1,420

 

 

1,894

 

 

3,107

 

 

2,946

 

 

 

 

 

 

 

 

 

 

Net Income

 

5,500

 

 

6,920

 

 

12,126

 

 

11,093

 

 

 

 

 

 

 

 

 

 

Net Loss Attributable to Noncontrolling Interests

 

 

 

27

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

Net Income Attributable to the Company

 

$

5,500

 

 

$

6,947

 

 

$

12,126

 

 

$

11,123

 

 

 

 

 

 

 

 

 

 

Basic Earnings per Common Share

 

$

2.91

 

 

$

3.68

 

 

$

6.42

 

 

$

5.90

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Basic

 

1,889

 

 

1,887

 

 

1,888

 

 

1,886

 

 

 

 

 

 

 

 

 

 

Diluted Earnings per Common Share

 

$

2.90

 

 

$

3.66

 

 

$

6.40

 

 

$

5.87

 

 

 

 

 

 

 

 

 

 

Weighted Average Shares Outstanding – Diluted

 

1,896

 

 

1,897

 

 

1,896

 

 

1,896

 

   

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2019 and December 31, 2018

(in thousands)

(unaudited)

   

 

 

June 30,
2019

 

December 31,
2018

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

36,677

 

 

$

18,694

 

 

 

 

 

 

Investments:

 

 

 

 

Fixed maturity securities, available-for-sale, at fair value

 

86,306

 

 

88,957

 

Equity securities, at fair value

 

55,065

 

 

48,489

 

Short-term investments

 

18,979

 

 

32,787

 

Other investments

 

12,419

 

 

12,436

 

Total investments

 

172,769

 

 

182,669

 

 

 

 

 

 

Premiums and fees receivable

 

11,831

 

 

12,128

 

Accrued interest and dividends

 

922

 

 

946

 

Prepaid expenses and other receivables

 

7,002

 

 

7,288

 

Property, net

 

9,997

 

 

10,304

 

Goodwill and other intangible assets, net

 

10,528

 

 

10,780

 

Operating lease right-of-use assets

 

4,660

 

 

 

Other assets

 

1,495

 

 

1,459

 

Current income taxes receivable

 

613

 

 

 

Total Assets

 

$

256,494

 

 

$

244,268

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

Reserve for claims

 

$

33,038

 

 

$

31,729

 

Accounts payable and accrued liabilities

 

25,079

 

 

27,735

 

Operating lease liabilities

 

4,663

 

 

 

Current income taxes payable

 

 

 

4,981

 

Deferred income taxes, net

 

5,419

 

 

4,184

 

Total liabilities

 

68,199

 

 

68,629

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

Common stock – no par value (10,000 authorized shares; 1,889 and 1,887 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)

 

 

 

 

Retained earnings

 

185,441

 

 

174,690

 

Accumulated other comprehensive income

 

2,854

 

 

949

 

Total stockholders’ equity

 

188,295

 

 

175,639

 

Total Liabilities and Stockholders’ Equity

 

$

256,494

 

 

$

244,268

 

   

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Six Months Ended June 30, 2019 and 2018

(in thousands)

(unaudited)

     

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

%

 

2018

 

%

 

2019

 

%

 

2018

 

%

Branch

 

$

10,388

 

 

29.7

 

$

10,736

 

 

30.6

 

$

17,554

 

 

27.5

 

$

19,353

 

 

29.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

 

24,590

 

 

70.3

 

24,406

 

 

69.4

 

46,219

 

 

72.5

 

45,348

 

 

70.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

34,978

 

 

100.0

 

$

35,142

 

 

100.0

 

$

63,773

 

 

100.0

 

$

64,701

 

 

100.0

                 

Investors Title Company and Subsidiaries
Appendix A
Non-GAAP Measures Reconciliation
For the Three and Six Months Ended June 30, 2019 and 2018
(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 June 30,

   

 

Six Months Ended June 30,

 

 

2019

 

2018

   

 

2019

 

2018

 

 

 

 

 

   

 

 

 

 

Revenues

 

 

 

 

   

 

 

 

 

Total revenues (GAAP)

 

$

42,733

 

 

$

41,936

 

   

 

$

82,679

 

 

$

75,712

 

(Subtract) Add: Changes in the estimated fair value of equity security investments

 

(1,142

)

 

(348

)

   

 

(5,812

)

 

294

 

Adjusted revenues (non-GAAP)

 

$

41,591

 

 

$

41,588

 

   

 

$

76,867

 

 

$

76,006

 

 

 

 

 

 

   

 

 

 

 

Income before Income Taxes

 

 

 

 

   

 

 

 

 

Income before income taxes (GAAP)

 

$

6,920

 

 

$

8,814

 

   

 

$

15,233

 

 

$

14,039

 

(Subtract) Add: Changes in the estimated fair value of equity security investments

 

(1,142

)

 

(348

)

   

 

(5,812

)

 

294

 

Adjusted income before income taxes (non-GAAP)

 

$

5,778

 

 

$

8,466

 

   

 

$

9,421

 

 

$

14,333

 

 

Contacts

Elizabeth B. Lewter
(919) 968-2200

Contacts

Elizabeth B. Lewter
(919) 968-2200