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
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version on businesswire.com: https://www.businesswire.com/news/home/20190805005156/en/
Elizabeth B. Lewter (919) 968-2200
Investors Title (NASDAQ:ITIC)
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