Investors Title Company today announced results for the quarter ended March 31, 2022. The Company reported net income of $6.2 million, or $3.25 per diluted share, compared with net income of $13.8 million, or $7.29 per diluted share, for the prior year period.
Total revenues decreased 4.3% to $69.0 million, compared to $72.1 million in the prior year period. The Company set a first quarter record for net premiums written, however this was partially offset by the recognition of a $5.9 million loss in the estimated fair value of the equity investment portfolio. Net premiums written increased 2.7% to $63.1 million, driven by increases in average home values and a higher level of purchase activity. Escrow and title-related fees increased 81.0% due to growth in independent agent markets and products which support title insurance. Revenues from non-title services increased 16.7%, mainly due to higher like-kind exchange activity and trust management fee income.
Operating expenses increased 11.8% to $61.2 million compared to $54.8 million in the prior year period. Claims expense was $1.4 million lower than the prior period mainly due to a higher level of favorable loss development in the current period. Personnel expenses were 31.6% higher primarily due to expansion of our presence in key markets, overall staff growth to support higher transaction volumes, and increased employee benefit and contract labor costs. Other categories of operating expenses were 7.4% higher than the prior period primarily to support expansion of our geographic footprint as well as ongoing strategic technology initiatives.
Income before income taxes decreased $9.5 million to $7.8 million. Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) decreased 2.6% to $13.7 million versus $14.1 million for the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).
Chairman J. Allen Fine commented, “As expected, rising mortgage interest rates suppressed refinance activity for the quarter. However, rising home prices and volume growth resulting from our expansion efforts resulted in a new quarterly record for net premiums written again this quarter.
“We remain optimistic about the prospects for solid results for the Company in 2022. Regardless of cyclical changes in the real estate market, we will remain focused on profitably expanding our market presence and enhancing our competitive strengths.”
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, developments 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; the potential impact of inflation; 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, 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 Months Ended March 31, 2022 and 2021 (in thousands, except per share amounts) (unaudited) | |||||||
|
| Three Months Ended March 31, | |||||
|
| 2022 |
| 2021 | |||
Revenues: |
|
|
|
| |||
Net premiums written |
| $ | 63,125 |
|
| $ | 61,477 |
Escrow and other title-related fees |
|
| 5,064 |
|
|
| 2,798 |
Non-title services |
|
| 2,426 |
|
|
| 2,078 |
Interest and dividends |
|
| 915 |
|
|
| 1,016 |
Other investment income |
|
| 1,337 |
|
|
| 941 |
Net realized investment gains |
|
| 1,747 |
|
|
| 321 |
Changes in the estimated fair value of equity security investments |
|
| (5,915 | ) |
|
| 3,239 |
Other |
|
| 299 |
|
|
| 208 |
Total Revenues |
|
| 68,998 |
|
|
| 72,078 |
|
|
|
|
| |||
Operating Expenses: |
|
|
|
| |||
Commissions to agents |
|
| 29,857 |
|
|
| 30,542 |
Provision for claims |
|
| 176 |
|
|
| 1,591 |
Personnel expenses |
|
| 21,254 |
|
|
| 16,153 |
Office and technology expenses |
|
| 4,368 |
|
|
| 2,742 |
Other expenses |
|
| 5,550 |
|
|
| 3,735 |
Total Operating Expenses |
|
| 61,205 |
|
|
| 54,763 |
|
|
|
|
| |||
Income before Income Taxes |
|
| 7,793 |
|
|
| 17,315 |
|
|
|
|
| |||
Provision for Income Taxes |
|
| 1,608 |
|
|
| 3,492 |
|
|
|
|
| |||
Net Income |
| $ | 6,185 |
|
| $ | 13,823 |
|
|
|
|
| |||
Basic Earnings per Common Share |
| $ | 3.26 |
|
| $ | 7.30 |
|
|
|
|
| |||
Weighted Average Shares Outstanding – Basic |
|
| 1,896 |
|
|
| 1,894 |
|
|
|
|
| |||
Diluted Earnings per Common Share |
| $ | 3.25 |
|
| $ | 7.29 |
|
|
|
|
| |||
Weighted Average Shares Outstanding – Diluted |
|
| 1,903 |
|
|
| 1,897 |
Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2022 and December 31, 2021 (in thousands) (unaudited) | |||||
| March 31, |
| December 31, | ||
Assets |
|
|
| ||
|
|
|
| ||
Cash and cash equivalents | $ | 37,310 |
| $ | 37,168 |
|
|
|
| ||
Investments: |
|
|
| ||
Fixed maturity securities, available-for-sale, at fair value |
| 67,725 |
|
| 79,791 |
Equity securities, at fair value |
| 69,945 |
|
| 76,853 |
Short-term investments |
| 58,555 |
|
| 45,930 |
Other investments |
| 20,217 |
|
| 20,298 |
Total investments |
| 216,442 |
|
| 222,872 |
|
|
|
| ||
Premiums and fees receivable |
| 23,850 |
|
| 22,953 |
Accrued interest and dividends |
| 1,000 |
|
| 817 |
Prepaid expenses and other receivables |
| 11,618 |
|
| 11,721 |
Property, net |
| 13,413 |
|
| 13,033 |
Goodwill and other intangible assets, net |
| 15,621 |
|
| 15,951 |
Operating lease right-of-use assets |
| 7,321 |
|
| 5,202 |
Other assets |
| 1,822 |
|
| 1,771 |
Total Assets | $ | 328,397 |
| $ | 331,488 |
|
|
|
| ||
Liabilities and Stockholders’ Equity |
|
|
| ||
|
|
|
| ||
Liabilities: |
|
|
| ||
Reserve for claims | $ | 36,366 |
| $ | 36,754 |
Accounts payable and accrued liabilities |
| 34,486 |
|
| 43,868 |
Operating lease liabilities |
| 7,453 |
|
| 5,329 |
Current income taxes payable |
| 6,164 |
|
| 3,329 |
Deferred income taxes, net |
| 11,436 |
|
| 13,121 |
Total liabilities |
| 95,905 |
|
| 102,401 |
|
|
|
| ||
Stockholders’ Equity: |
|
|
| ||
Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary) |
| — |
|
| — |
Retained earnings |
| 231,274 |
|
| 225,861 |
Accumulated other comprehensive income |
| 1,218 |
|
| 3,226 |
Total stockholders’ equity |
| 232,492 |
|
| 229,087 |
Total Liabilities and Stockholders’ Equity | $ | 328,397 |
| $ | 331,488 |
Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three Months Ended March 31, 2022 and 2021 (in thousands) (unaudited) | ||||||
| Three Months Ended March 31, | |||||
| 2022 | % | 2021 | % | ||
Branch | $ | 17,418 | 27.6 | $ | 17,360 | 28.2 |
|
|
|
|
| ||
Agency |
| 45,707 | 72.4 |
| 44,117 | 71.8 |
|
|
|
|
| ||
Total | $ | 63,125 | 100.0 | $ | 61,477 | 100.0 |
Investors Title Company and Subsidiaries Appendix A Non-GAAP Measures Reconciliation For the Three Months Ended March 31, 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 | |||||
| 2022 |
| 2021 | |||
|
|
|
| |||
Revenues |
|
|
| |||
Total revenues (GAAP) | $ | 68,998 |
| $ | 72,078 |
|
Add (Subtract): Changes in the estimated fair value of equity security investments |
| 5,915 |
|
| (3,239 | ) |
Adjusted revenues (non-GAAP) | $ | 74,913 |
| $ | 68,839 |
|
|
|
|
| |||
Income before Income Taxes |
|
|
| |||
Income before income taxes (GAAP) | $ | 7,793 |
| $ | 17,315 |
|
Add (Subtract): Changes in the estimated fair value of equity security investments |
| 5,915 |
|
| (3,239 | ) |
Adjusted income before income taxes (non-GAAP) | $ | 13,708 |
| $ | 14,076 |
|
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