Investors Title Company Announces Third Quarter 2014 Results

CHAPEL HILL, N.C.--()--Investors Title Company today announced its results for the third quarter ended September 30, 2014. Net income attributable to the Company decreased 53.0% to $2,594,490, or $1.28 per diluted share, compared with $5,515,798, or $2.66 per diluted share, for the prior year quarter.

Revenues decreased 12.2% to $29,508,230 versus the prior year quarter, primarily due to a 13.4% decrease in net premiums written. Higher mortgage interest rates led to lower levels of refinance activity, while purchase activity remained relatively constant with last year.

Operating expenses increased 2.3% to $25,909,740 versus the prior year quarter, primarily as a result of a higher level of claims expense, following a reduction in the reserves for claims in the prior year period. The prior period reduction reflected a change in estimate related to certain actuarial assumptions stemming from improved claims experience in recent post-recession policy years. The increase in the claims provision was partially offset by a decrease in agent commissions resulting from decreased activity in markets which are predominantly agent-based, and a decrease in incentive compensation and certain employee benefits.

For the nine months ended September 30, 2014, net income attributable to the Company decreased 46.1% to $6,954,526, or $3.41 per diluted share, compared with $12,898,203, or $6.19 per diluted share, for the prior year period, primarily due to changes in the provision for claims. Revenues decreased 3.1% to $91,183,857 versus the prior year period, primarily due to a 4.3% decrease in net premiums written. Premiums related to refinance activity were down substantially for the first three quarters of the year, while purchase-related premiums were up slightly. Operating expenses increased 8.4% to $81,549,808 versus the prior year period, driven mostly by an increase in the claims provision primarily related to the prior year change in estimate.

Chairman J. Allen Fine added, “As expected, the drop in refinance activity that began last year has continued in 2014, and led to a reduction in premium volumes for both the quarter and year-to-date periods. We are, however, pleased with the overall strength in home purchase activity, as well as sustained increases in the level of home prices. Although unusual adjustments to the claims reserve in the prior year led to an unfavorable comparison, we remain encouraged by the general long-term trend of claims activity. We will continue to monitor and respond to changes in the market, while remaining focused on enhancing our long-term competitive strengths.”

Investors Title Company is engaged through its subsidiaries in the business of issuing and underwriting title insurance policies. The Company also provides investment management services to individuals, companies, banks and trusts, as well as services in connection with tax-deferred exchanges of like-kind property.

Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, among others, any statements regarding future home price increases, increases in home purchase activity, expansion of the Company’s market presence, enhancing competitive strengths 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; 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, 2013, 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 Nine Months Ended September 30, 2014 and 2013

   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

2014     2013     2014     2013  
Revenues:      
Net premiums written $ 26,356,835 $ 30,431,560 $ 81,115,940 $ 84,787,318
Investment income - interest and dividends 1,064,995 990,338 3,130,846 2,835,870
Net realized gain on investments 8,689 261,938 592,908 333,554
Other 2,077,711     1,921,403     6,344,163     6,190,170  
Total Revenues 29,508,230     33,605,239     91,183,857     94,146,912  
 
Operating Expenses:
Commissions to agents 14,440,264 18,142,697 48,242,923 49,240,917
Provision (benefit) for claims 1,507,814 (3,037,101 ) 4,177,478 (2,429,289 )
Salaries, employee benefits and payroll taxes 6,609,425 7,133,497 19,250,116 19,533,970
Office occupancy and operations 1,257,009 1,165,772 3,683,980 3,266,112
Business development 552,215 606,549 1,581,872 1,487,635
Filing fees, franchise and local taxes 233,079 141,373 648,022 510,893
Premium and retaliatory taxes 491,927 592,717 1,332,492 1,563,764
Professional and contract labor fees 621,305 404,206 1,976,272 1,514,749
Other 196,702     179,006     656,653     560,170  
Total Operating Expenses 25,909,740     25,328,716     81,549,808     75,248,921  
 
Income before Income Taxes 3,598,490 8,276,523 9,634,049 18,897,991
 
Provision for Income Taxes 1,004,000     2,733,000     2,656,000     5,944,000  
 
Net Income 2,594,490 5,543,523 6,978,049 12,953,991
 
Net Income Attributable to Redeemable Noncontrolling Interest     (27,725 )   (23,523 )   (55,788 )
 
Net Income Attributable to the Company $ 2,594,490     $ 5,515,798     $ 6,954,526     $ 12,898,203  
 
Basic Earnings per Common Share $ 1.28     $ 2.67     $ 3.42     $ 6.26  
 
Weighted Average Shares Outstanding – Basic 2,028,818     2,069,081     2,033,637     2,059,226  
 
Diluted Earnings per Common Share $ 1.28     $ 2.66     $ 3.41     $ 6.19  
 
Weighted Average Shares Outstanding – Diluted 2,032,644     2,074,940     2,038,875     2,083,560  

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of September 30, 2014 and December 31, 2013

(Unaudited)

 
September 30,
2014
  December 31,
2013
Assets:
Investments in securities:
Fixed maturities, available-for-sale, at fair value $ 94,995,138 $ 91,445,413
Equity securities, available-for-sale, at fair value 37,461,674 36,144,065
Short-term investments 6,154,749 7,926,373
Other investments 7,950,676     7,247,831
Total investments 146,562,237     142,763,682
 
Cash and cash equivalents 23,622,522 23,626,761
Premium and fees receivable 8,489,096 8,750,224
Accrued interest and dividends 1,151,250 1,006,698
Prepaid expenses and other assets 8,677,087 7,466,141
Property, net 5,369,084 4,325,538
Current income taxes recoverable 1,624,024     366,772
Total Assets $ 195,495,300     $ 188,305,816
 
Liabilities and Stockholders’ Equity
Liabilities:
Reserves for claims $ 36,252,000 $ 35,360,000
Accounts payable and accrued liabilities 18,683,691 20,324,190
Deferred income taxes, net 5,893,471     4,013,983

Total liabilities

60,829,162     59,698,173
 
Redeemable Noncontrolling Interest 545,489
 
Stockholders’ Equity:
Common stock - no par value (10,000,000 authorized shares; 2,028,818 and
2,037,135 shares issued and outstanding 2014 and 2013, respectively, excluding
291,676 shares for 2014 and 2013 of common stock held by the Company's
subsidiary) 1 1

Retained earnings

122,545,561 116,714,749
Accumulated other comprehensive income 12,120,576     11,347,404
Total stockholders’ equity 134,666,138     128,062,154
Total Liabilities and Stockholders’ Equity $ 195,495,300     $ 188,305,816

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Nine Months Ended September 30, 2014 and 2013

 

       
Three Months Ended September 30, Nine Months Ended September 30,
2014   %   2013   % 2014   %   2013   %
Branch $ 6,815,125   25.9 $ 6,630,345   21.8 $ 17,922,166   22.1 $ 19,746,738   23.3
 
Agency 19,541,710   74.1 23,801,215   78.2 63,193,774   77.9 65,040,580   76.7
 
Total $ 26,356,835   100.0 $ 30,431,560   100.0 $ 81,115,940   100.0 $ 84,787,318   100.0

Contacts

Investors Title Company
Elizabeth B. Lewter, 919-968-2200

Contacts

Investors Title Company
Elizabeth B. Lewter, 919-968-2200