Investors Title Company (NASDAQ: ITIC) today announced its
results for the fourth quarter and year ended December 31,
2018.
For the year, net income attributable to the Company decreased
14.8% to $21.9 million, or $11.54 per diluted share, versus $25.7
million, or $13.56 per diluted share, in the prior year. For the
quarter, net income attributable to the Company decreased to
$135,000, or $0.07 per diluted share, versus $9.6 million, or $5.08
per diluted share, in the prior year period.
Income before income taxes declined to $470,000 and $27.1
million for the quarter and year ended December 31, 2018, versus
$6.6 million and $30.3 million in the prior year periods,
respectively, primarily due to the January 1, 2018 implementation
of a new accounting standard requiring unrealized changes in the
market value of equity investments to be included in income. The
Company recorded net unrealized losses on equity investments
totaling $6.8 million and $4.1 million for the current quarter and
year, respectively. Excluding the impact of the new accounting
standard, income before income taxes (non-GAAP) would have
increased to $7.2 million and $31.2 million for the quarter and
year ended December 31, 2018 (see Appendix A). In addition, net
income for the prior year quarter included a $5.3 million tax
benefit related to revaluation of deferred tax assets and
liabilities as a result of lower effective rates included in the
federal tax reform package enacted in December 2017.
Revenues for the year decreased 3.3% to $156.3 million, compared
with $161.6 million in the prior year. The majority of the revenue
decrease is attributable to the net unrealized loss on equity
investments totaling $4.1 million in the current year, compared
with a net realized gain totaling $1.0 million in the prior year.
Net premiums written decreased 1.7% mainly due to a decline in
refinance activity, partially offset by an increase in purchase
activity and higher real estate values. Revenues from non-title
services increased primarily due to higher levels of like-kind
property exchange transactions. Higher earnings from partnership
investments drove increases in other investment income.
Operating expenses decreased 1.6% to $129.2 million, compared
with $131.4 million in the prior year. Agent commissions were down
commensurate with the decreases in associated revenues. Personnel
costs increased primarily as a result of higher staffing levels
related to the support of growth and technology initiatives, and
due to normal inflationary increases in salaries and benefits. A
claims benefit was recorded in the current year primarily due to
reserve reductions reflecting favorable loss experience in prior
years. In addition, the Company’s net income benefitted from the
tax rate reduction associated with recent tax reform
legislation.
The quarter was shaped predominantly by the same factors that
affected the year.
Chairman J. Allen Fine commented, “We are pleased to report
another year of solid operating performance for the Company.
Premiums from home purchase activity remained strong throughout the
year, as economic growth continues to support a high level of home
sales and increases in average real estate values. Premium growth
from purchase activity and expansion of our agency footprint
largely offset the impact of reductions in premiums related to
mortgage refinance activity. The Company continues to experience a
low level of claims, due to market factors such as low foreclosure
rates, as well as a proactive approach to risk management.
“As we head into 2019 we are optimistic about the market, and we
remain focused on enhancing our competitive strengths and expanding
our market presence over the long term.”
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, 2017, 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 Twelve Months Ended
December 31, 2018 and 2017
(in thousands, except per share
amounts)
(unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2018 2017
2018 2017
Revenues: Net premiums written
$
34,002 $ 35,664
$ 138,125 $ 140,502 Escrow and
other title-related fees
1,631 1,465
7,096 6,892
Non-title services
1,999 1,630
7,082 6,128 Interest
and dividends
1,238 1,147
4,619 4,445 Other
investment income
828 554
3,107 2,159 Net realized
investment (losses) gains
(739 ) 51
(110
) 1,041 Net unrealized loss on equity investments
(6,756 ) —
(4,130 ) — Other
83
63
470 460 Total
Revenues
32,286 40,574
156,259 161,627
Operating
Expenses: Commissions to agents
16,833 18,073
65,775 68,643 (Benefit) provision for claims
(487
) 596
(332 ) 3,311 Personnel expenses
10,318 9,955
43,552 39,937 Office and technology
expenses
2,210 2,187
8,813 8,172 Other expenses
2,942 3,206
11,382
11,293 Total Operating Expenses
31,816
34,017
129,190 131,356
Income before Income Taxes 470 6,557
27,069
30,271
Provision (Benefit) for Income Taxes
337 (3,077 )
5,210
4,570
Net Income 133 9,634
21,859
25,701
Net Loss (Income) Attributable to Noncontrolling
Interests 2 (5 )
33
6
Net Income Attributable to the Company
$ 135 $ 9,629
$
21,892 $ 25,707
Basic Earnings per
Common Share $ 0.07 $ 5.11
$ 11.60 $ 13.63
Weighted Average Shares Outstanding – Basic 1,887
1,886
1,887 1,886
Diluted Earnings per Common Share $
0.07 $ 5.08
$
11.54 $ 13.56
Weighted Average
Shares Outstanding – Diluted 1,896 1,893
1,897 1,896
Investors Title Company and Subsidiaries Consolidated
Balance Sheets
As of December 31, 2018 and
2017
(in thousands)
(unaudited)
December 31, 2018 December 31,2017
Assets Cash and cash equivalents
$
18,694 $ 20,214 Investments: Fixed maturities,
available-for-sale, at fair value
88,957 103,341 Equity
securities, at fair value
48,489 47,367 Short-term
investments
32,787 23,780 Other investments
12,436
12,032 Total investments
182,669
186,520 Premiums and fees receivable
12,128 10,031
Accrued interest and dividends
946 1,100 Prepaid expenses
and other receivables
7,288 7,730 Property, net
10,304 10,173 Goodwill and other intangible assets, net
10,780 11,357 Other assets
1,459 1,403 Current income
taxes receivable
— 385 Total Assets
$
244,268 $ 248,913
Liabilities and
Stockholders’ Equity Liabilities: Reserve for claims
$ 31,729 $ 34,801 Accounts payable and accrued
liabilities
27,735 27,565 Current income taxes payable
4,981 — Deferred income taxes, net
4,184
8,626 Total liabilities
68,629 70,992
Stockholders’ Equity: Common stock
– no par value
(10,000 authorized shares; 1,887 and 1,886 shares issued and
outstanding as of December 31, 2018 and 2017, respectively,
excluding in each period 292 shares of common stock held by the
Company's subsidiary)
— — Retained earnings
174,690
161,891 Accumulated other comprehensive income
949
15,945 Total stockholders’ equity attributable to the
Company
175,639 177,836 Noncontrolling interests
—
85 Total stockholders’ equity
175,639
177,921 Total Liabilities and Stockholders’ Equity
$
244,268 $ 248,913
Investors Title Company and Subsidiaries Net
Premiums Written By Branch and Agency
For the Three and Twelve Months Ended
December 31, 2018 and 2017
(in thousands)
(unaudited)
Three Months Ended December 31,
Twelve Months Ended December 31, 2018 %
2017 %
2018 %
2017 % Branch
$ 10,047
29.5 $ 9,501 26.6
$ 41,305
29.9 $ 40,405 28.8 Agency
23,955 70.5 26,163
73.4
96,820 70.1
100,097 71.2 Total
$ 34,002
100.0 $ 35,664 100.0
$ 138,125 100.0
$ 140,502 100.0
Investors Title Company and
Subsidiaries
Appendix A
Non-GAAP Measures
Reconciliation
For the Three and Twelve Months Ended
December 31, 2018 and 2017
(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 unrealized investment gains and losses reported 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 December
31,
Twelve Months Ended December
31,
2018 2017
2018 2017
Revenues Total revenues (GAAP)
$
32,286 $ 40,574
$ 156,259 $ 161,627 Add: Net
unrealized loss on equity investments
6,756 —
4,130 — Adjusted revenues
(non-GAAP)
$ 39,042 $ 40,574
$ 160,389 $ 161,627
Income before Income Taxes Income before income taxes
(GAAP)
$ 470 $ 6,557
$ 27,069 $ 30,271
Add: Net unrealized loss on equity investments
6,756
—
4,130 — Adjusted
income before income taxes (non-GAAP)
$ 7,226
$ 6,557
$ 31,199
$ 30,271
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Elizabeth B. Lewter(919) 968-2200
Investors Title (NASDAQ:ITIC)
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