CHAPEL HILL, N.C.--(BUSINESS WIRE)--Investors Title Company today announced record results for the quarter ended March 31, 2021. The Company reported net income of $13.8 million, or $7.29 per diluted share, compared with a net loss of $7.0 million, or $3.71 per diluted share, for the prior year period. The Company set quarterly records for total revenues, net premiums written and net income.
Revenues for the quarter increased 141.1% to $72.1 million, compared to $29.9 million in the prior year period. Net premiums written increased 59.2% to $61.5 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 18.4% 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 $3.2 million, $17.7 million higher than the prior year period, as equity markets continued to rally following the dip from initial impacts of the COVID-19 pandemic in the prior year period.
Operating expenses increased 42.5%, mainly due to a 51.3% increase in commissions to agents commensurate with the increase in agent premium volume. Claims expense was $685,000 higher than the prior year period due to the increase in premium volume, which was partially offset by a higher level of favorable loss development related to recent policy years. Personnel expenses were 36.8% higher 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 $25.8 million to $17.3 million. Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 137.4% to $14.1 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).
Chairman J. Allen Fine commented, “We are pleased to report another quarter of exceptional operating results. Overall, the quarter was shaped by a continuation of the trends that began last year following the onset of the pandemic. Low interest rates continued to fuel a high level of refinance activity, as well as strong demand for housing. The Company experienced revenue increases in all of its key markets, and across all channels.
“As we enter the second quarter, the outlook for the real estate market for 2021 is drawing more into focus. The view of most economists appears to be that economic growth, fueled by federal stimulus, the rollout of the COVID-19 vaccine, and job growth will increase throughout the year. Although this growth may lead to a higher interest rate environment, we believe mortgage interest rates will likely remain low by historical standards. Refinance activity will almost certainly slow as rates nudge upward, but we believe population demographics, residual demand attributable to supply shortages, and a growing economy will result in a strong housing market for 2021.”
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 Months Ended March 31, 2021 and 2020 (in thousands, except per share amounts) (unaudited) |
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Three Months Ended March 31, |
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2021 |
|
2020 |
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Revenues: |
|
|
|
|
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Net premiums written |
|
$ |
61,477 |
|
|
$ |
38,627 |
|
Escrow and other title-related fees |
|
2,798 |
|
|
1,842 |
|
||
Non-title services |
|
2,078 |
|
|
2,547 |
|
||
Interest and dividends |
|
1,016 |
|
|
1,177 |
|
||
Other investment income |
|
941 |
|
|
440 |
|
||
Net realized investment gains (losses) |
|
321 |
|
|
(412 |
) |
||
Changes in the estimated fair value of equity security investments |
|
3,239 |
|
|
(14,458 |
) |
||
Other |
|
208 |
|
|
138 |
|
||
Total Revenues |
|
72,078 |
|
|
29,901 |
|
||
|
|
|
|
|
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Operating Expenses: |
|
|
|
|
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Commissions to agents |
|
30,542 |
|
|
20,187 |
|
||
Provision for claims |
|
1,591 |
|
|
906 |
|
||
Personnel expenses |
|
16,153 |
|
|
11,809 |
|
||
Office and technology expenses |
|
2,742 |
|
|
2,415 |
|
||
Other expenses |
|
3,735 |
|
|
3,113 |
|
||
Total Operating Expenses |
|
54,763 |
|
|
38,430 |
|
||
|
|
|
|
|
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Income (Loss) before Income Taxes |
|
17,315 |
|
|
(8,529 |
) |
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|
|
|
|
|
||||
Provision (Benefit) for Income Taxes |
|
3,492 |
|
|
(1,518 |
) |
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|
|
|
|
|
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Net Income (Loss) |
|
$ |
13,823 |
|
|
$ |
(7,011 |
) |
|
|
|
|
|
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Basic Earnings (Loss) per Common Share |
|
$ |
7.30 |
|
|
$ |
(3.71 |
) |
|
|
|
|
|
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Weighted Average Shares Outstanding – Basic |
|
1,894 |
|
|
1,890 |
|
||
|
|
|
|
|
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Diluted Earnings (Loss) per Common Share |
|
$ |
7.29 |
|
|
$ |
(3.71 |
) |
|
|
|
|
|
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Weighted Average Shares Outstanding – Diluted |
|
1,897 |
|
|
1,890 |
|
||
Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2021 and 2020 (in thousands) (unaudited) |
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March 31,
|
|
December 31,
|
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Assets |
|
|
|
|||||
|
|
|
|
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Cash and cash equivalents |
$ |
22,964 |
|
|
$ |
13,723 |
|
|
|
|
|
|
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Investments: |
|
|
|
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Fixed maturity securities, available-for-sale, at fair value |
102,970 |
|
|
117,713 |
|
|||
Equity securities, at fair value |
64,646 |
|
|
64,919 |
|
|||
Short-term investments |
30,498 |
|
|
15,170 |
|
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Other investments |
14,840 |
|
|
15,493 |
|
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Total investments |
212,954 |
|
|
213,295 |
|
|||
|
|
|
|
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Premiums and fees receivable |
20,188 |
|
|
19,427 |
|
|||
Accrued interest and dividends |
1,232 |
|
|
1,038 |
|
|||
Prepaid expenses and other receivables |
10,622 |
|
|
9,418 |
|
|||
Property, net |
12,338 |
|
|
11,160 |
|
|||
Goodwill and other intangible assets, net |
10,119 |
|
|
9,771 |
|
|||
Operating lease right-of-use assets |
3,379 |
|
|
3,533 |
|
|||
Other assets |
1,744 |
|
|
1,560 |
|
|||
Total Assets |
$ |
295,540 |
|
|
$ |
282,925 |
|
|
|
|
|
|
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Liabilities and Stockholders’ Equity |
|
|
|
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Liabilities: |
|
|
|
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Reserve for claims |
$ |
34,562 |
|
|
$ |
33,584 |
|
|
Accounts payable and accrued liabilities |
32,038 |
|
|
36,020 |
|
|||
Operating lease liabilities |
3,509 |
|
|
3,669 |
|
|||
Current income taxes payable |
3,377 |
|
|
638 |
|
|||
Deferred income taxes, net |
9,181 |
|
|
8,592 |
|
|||
Total liabilities |
82,667 |
|
|
82,503 |
|
|||
|
|
|
|
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Stockholders’ Equity: |
|
|
|
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Common stock – no par value (10,000 authorized shares; 1,894 and 1,892 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) |
— |
|
|
— |
|
|||
Retained earnings |
209,157 |
|
|
196,096 |
|
|||
Accumulated other comprehensive income |
3,716 |
|
|
4,326 |
|
|||
Total stockholders’ equity |
212,873 |
|
|
200,422 |
|
|||
Total Liabilities and Stockholders’ Equity |
$ |
295,540 |
|
|
$ |
282,925 |
|
|
Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three Months Ended March 31, 2021 and 2020 (in thousands) (unaudited) |
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Three Months Ended March 31, |
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|
2021 |
|
% |
|
2020 |
|
% |
|||||
Branch |
$ |
17,360 |
|
28.2 |
$ |
9,895 |
|
25.6 |
||||
|
|
|
|
|
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Agency |
44,117 |
|
71.8 |
28,732 |
|
74.4 |
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|
|
|
|
|
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Total |
$ |
61,477 |
|
100.0 |
$ |
38,627 |
|
100.0 |
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Investors Title Company and Subsidiaries |
Appendix A |
Non-GAAP Measures Reconciliation |
For the Three Months Ended March 31, 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 (loss) 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
|
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|
|
2021 |
|
2020 |
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|
|
|
|
|
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Revenues |
|
|
|
|
||||
Total revenues (GAAP) |
|
$ |
72,078 |
|
|
$ |
29,901 |
|
(Subtract) Add: Changes in the estimated fair value of equity security investments |
|
(3,239 |
) |
|
14,458 |
|
||
Adjusted revenues (non-GAAP) |
|
$ |
68,839 |
|
|
$ |
44,359 |
|
|
|
|
|
|
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Income (Loss) before Income Taxes |
|
|
|
|
||||
Income (loss) before income taxes (GAAP) |
|
$ |
17,315 |
|
|
$ |
(8,529 |
) |
Subtract (Add): Changes in the estimated fair value of equity security investments |
|
(3,239 |
) |
|
14,458 |
|
||
Adjusted income before income taxes (non-GAAP) |
|
$ |
14,076 |
|
|
$ |
5,929 |
|
