UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

__________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 4, 2022

INVESTORS TITLE COMPANY

(Exact Name of Registrant as Specified in Charter)

 Registrant's telephone number, including area code:  (919) 968-2200

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 ☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 ☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 ☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 ☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		ITIC		The Nasdaq Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred Stock				The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

		INVESTORS TITLE COMPANY
Date:	November 4, 2022	By:	/s/ James A. Fine, Jr.
			James A. Fine, Jr.
			President, Principal Financial Officer and
			Principal Accounting Officer

Exhibit No.	Description
99.1	Press release issued by Investors Title Company on November 4, 2022
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

INVESTORS TITLE COMPANY ANNOUNCES THIRD QUARTER 2022 FINANCIAL RESULTS

November 4, 2022

Telephone:  (919) 968-2200

        Nasdaq Symbol:  ITIC

FOR IMMEDIATE RELEASE:

Chapel Hill, NC – Investors Title Company today announced results for the third quarter ended September 30, 2022. The Company reported net income of $7.9 million, or $4.17 per diluted share, for the three months ended September 30, 2022, compared to $14.5 million, or $7.63 per diluted share, for the prior year period.

Revenues decreased 4.2% to $78.0 million, compared with $81.4 million for the prior year quarter. The reduction in revenue is attributable to recognition of a $4.6 million unrealized loss in the Company’s equity portfolio, and a 7.9% decrease in net premiums written, partially offset by realized gains on sales of equity investments as well as increases in revenue from escrow fees and other title-related fees, and non-title services. The reduction in premiums stems from an overall decline in the level of real estate transaction volume following the rise in mortgage interest rates over the course of the year. Although overall premium revenue was down, escrow and other title-related fees increased 54.4% due to an increase in business in markets that generate escrow income, and fee income associated with commercial activity. Revenue from non-title services increased 57.5%, mainly due to an increase in like-kind exchange revenues. Realized gains from sales of equity securities were $2.2 million higher than the prior year period.

Operating expenses increased 7.8% compared to the prior year quarter, primarily due to increases in personnel costs, title fees, and office and technology expenses. Commissions to agents decreased commensurate with the decrease in agent premium volume. Personnel costs were 39.7% higher than the prior year quarter due to staffing of new offices, hiring to support growth initiatives, and increased employee benefit costs. Office, technology, and other operating expenses increased 36.7% in support of expanding our geographic footprint and ongoing technology initiatives. Claims expense was essentially flat compared to the prior year quarter.

Income before income taxes decreased 45.3% to $10.1 million for the current quarter versus $18.4 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 23.5% to $14.7 million for the third quarter versus $19.2 million in the prior year period (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).

 For the nine months ended September 30, 2022, net income decreased $31.7 million to $16.4 million, or $8.63 per diluted share, versus $48.1 million, or $25.34 per diluted share, for the prior year period. Revenues decreased 8.6% to $217.9 million compared with $238.5 million for the prior year period. Operating expenses increased 11.1% to $197.1 million, mainly due to increases in personnel and office, technology, and other operating expenses. Aside from a non-recurring gain on the sale of property in the prior year period, overall results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter.

Chairman J. Allen Fine commented, “We are pleased to report another quarter of solid operating performance, despite market headwinds. Rising mortgage interest rates resulted in the continued moderation of the real estate market, reducing home affordability which in turn has softened demand.

“Although overall transaction volumes were lower than the prior year quarter, our recent successes in expanding our market footprint materially contributed to lessening the impact of the market slowdown on our operating performance. We believe the Company is well-positioned as we transition to a different stage of the real estate cycle, and plan to continue to make targeted investments in our business to expand our geographic presence, improve our operating performance, and deliver value to our customers and business partners.”

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.

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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, 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 impact of the COVID-19 pandemic (including any of its variants) 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 and responses by government regulators, including the Federal Reserve;  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.

# # # #

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenues:
Net premiums written	$	66,658			$	72,345			$	199,409			$	201,349
Escrow and other title-related fees		5,963				3,863				17,236				10,148
Non-title services		3,852				2,446				9,114				6,932
Interest and dividends		1,229				893				3,055				2,807
Other investment income		2,173				2,186				4,616				4,610
Net realized investment gains		2,481				268				6,266				771
Changes in the estimated fair value of equity security investments		(4,635	)			(802	)			(22,722	)			7,266
Other		277				217				924				4,572
Total Revenues		77,998				81,416				217,898				238,455
Operating Expenses:
Commissions to agents		33,478				37,570				97,161				102,458
Provision for claims		1,966				1,993				3,452				5,020
Personnel expenses		21,586				15,457				63,738				47,524
Office and technology expenses		4,274				3,175				12,930				9,128
Other expenses		6,606				4,784				19,783				13,285
Total Operating Expenses		67,910				62,979				197,064				177,415
Income before Income Taxes		10,088				18,437				20,834				61,040
Provision for Income Taxes		2,175				3,934				4,457				12,932
Net Income	$	7,913			$	14,503			$	16,377			$	48,108
Basic Earnings per Common Share	$	4.17			$	7.66			$	8.63			$	25.40
Weighted Average Shares Outstanding – Basic		1,897				1,894				1,897				1,894
Diluted Earnings per Common Share	$	4.17			$	7.63			$	8.63			$	25.34
Weighted Average Shares Outstanding – Diluted		1,897				1,900				1,898				1,899

	September 30, 2022				December 31, 2021
Assets
Cash and cash equivalents	$	41,380			$	37,168
Investments:
Fixed maturity securities, available-for-sale, at fair value		55,307				79,791
Equity securities, at fair value		52,657				76,853
Short-term investments		80,785				45,930
Other investments		19,673				20,298
Total investments		208,422				222,872
Premiums and fees receivable		23,194				22,953
Accrued interest and dividends		971				817
Prepaid expenses and other receivables		12,527				11,721
Property, net		16,613				13,033
Goodwill and other intangible assets, net		17,954				15,951
Operating lease right-of-use assets		6,258				5,202
Other assets		2,320				1,771
Current income taxes recoverable		3,164				—
Total Assets	$	332,803			$	331,488
Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims	$	37,630			$	36,754
Accounts payable and accrued liabilities		41,938				43,868
Operating lease liabilities		6,389				5,329
Current income taxes payable		—				3,329
Deferred income taxes, net		7,805				13,121
Total liabilities		93,762				102,401
Stockholders’ Equity:
Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company's subsidiary)		—				—
Retained earnings		239,792				225,861
Accumulated other comprehensive (loss) income		(751	)			3,226
Total stockholders’ equity		239,041				229,087
Total Liabilities and Stockholders’ Equity	$	332,803			$	331,488

	Three Months Ended September 30,																Nine Months Ended September 30,
	2022				%				2021				%				2022				%				2021				%
Direct	$	21,818				32.7			$	21,803				30.1			$	68,478				34.3			$	61,619				30.6
Agency		44,840				67.3				50,542				69.9				130,931				65.7				139,730				69.4
Total	$	66,658				100.0			$	72,345				100.0			$	199,409				100.0			$	201,349				100.0

	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenues
Total revenues (GAAP)	$	77,998			$	81,416			$	217,898			$	238,455
Add (Subtract):  Changes in the estimated fair value of equity security investments		4,635				802				22,722				(7,266	)
Adjusted revenues (non-GAAP)	$	82,633			$	82,218			$	240,620			$	231,189
Income before Income Taxes
Income before income taxes (GAAP)	$	10,088			$	18,437			$	20,834			$	61,040
Add (Subtract):  Changes in the estimated fair value of equity security investments		4,635				802				22,722				(7,266	)
Adjusted income before income taxes (non-GAAP)	$	14,723			$	19,239			$	43,556			$	53,774