Investors Title Company (NASDAQ: ITIC) today announced its results for the third quarter ended September 30, 2017. Net income attributable to the Company was $5.9 million, or $3.13 per diluted share, versus $8.1 million, or $4.29 per diluted share, for the prior year period. The Company set an all-time quarterly record for revenues and net premiums written. In addition, earnings for the current quarter were the second highest in the Company’s history.
Revenues increased 5.2% to $43.1 million, compared with $41.0 million in the prior year quarter. Net premiums written increased 1.0%, primarily due to a higher level of purchase transactions, business from new agencies, and higher average real estate values, partially offset by a decrease in the level of refinance activity. Other income sources, including revenue from ancillary services coincident with providing title insurance, increased 49.7% to $4.6 million.
Operating expenses increased 15.5% versus the prior year quarter, mainly as a result of increases in the provision for claims stemming from recognition of favorable loss development in the prior year quarter that did not repeat in the current year quarter. In addition, the inclusion of expenses for a title insurance agency acquired in the fourth quarter of 2016 contributed to the higher level of expenses. Excluding these two factors, most expense categories were largely in line with the prior year period.
For the nine months ended September 30, 2017, net income attributable to the Company increased 11.1% to $16.1 million, or $8.48 per diluted share, versus $14.5 million, or $7.53 per diluted share, for the prior year period. Revenues increased 21.4% to $121.1 million, from increases in premiums written due to higher transaction volumes, higher real estate values, and from increases in other income sources. Operating expenses increased 22.9% to $97.4 million, mainly due to the same factors that affected the third quarter.
Chairman J. Allen Fine added, “We are pleased to report another quarter of solid operating results. Against the backdrop of historically low interest rates and a strengthening economy, strong transaction volumes in our core markets, coupled with higher home prices and new agency distribution, resulted in the highest quarterly revenue level in the Company’s history.
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 the 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, 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, 2016, 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, 2017 and 2016 (Unaudited) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Net premiums written | $ | 36,612,558 | $ | 36,306,522 | $ | 102,918,454 | $ | 87,357,972 | ||||||||||||
| Investment income – interest and dividends | 1,087,054 | 1,160,983 | 3,297,634 | 3,478,999 | ||||||||||||||||
| Net realized gain on investments | 803,938 | 439,326 | 990,118 | 574,328 | ||||||||||||||||
| Other | 4,633,915 | 3,094,874 | 13,864,170 | 8,280,139 | ||||||||||||||||
| Total Revenues | 43,137,465 | 41,001,705 | 121,070,376 | 99,691,438 | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Commissions to agents | 17,641,272 | 18,739,151 | 50,569,972 | 45,946,379 | ||||||||||||||||
| Provision (benefit) for claims | 1,854,493 | (1,067,853 | ) | 2,714,717 | (403,982 | ) | ||||||||||||||
| Salaries, employee benefits and payroll taxes | 9,820,578 | 8,300,823 | 29,464,824 | 22,945,972 | ||||||||||||||||
| Office occupancy and operations | 2,309,575 | 1,496,948 | 6,445,880 | 4,526,710 | ||||||||||||||||
| Business development | 639,923 | 608,532 | 1,987,028 | 1,695,180 | ||||||||||||||||
| Filing fees, franchise and local taxes | 203,912 | 191,574 | 935,476 | 688,731 | ||||||||||||||||
| Premium and retaliatory taxes | 673,126 | 673,551 | 1,918,951 | 1,559,631 | ||||||||||||||||
| Professional and contract labor fees | 447,651 | 523,504 | 1,375,291 | 1,599,603 | ||||||||||||||||
| Other | 630,320 | 157,308 | 1,944,419 | 629,539 | ||||||||||||||||
| Total Operating Expenses | 34,220,850 | 29,623,538 | 97,356,558 | 79,187,763 | ||||||||||||||||
| Income before Income Taxes | 8,916,615 | 11,378,167 | 23,713,818 | 20,503,675 | ||||||||||||||||
| Provision for Income Taxes | 2,990,000 | 3,249,000 | 7,647,000 | 6,040,000 | ||||||||||||||||
| Net Income | 5,926,615 | 8,129,167 | 16,066,818 | 14,463,675 | ||||||||||||||||
| Net (Gain) Loss Attributable to Noncontrolling Interests | (158 | ) | (2,228 | ) | 10,886 | 6,684 | ||||||||||||||
| Net Income Attributable to the Company | $ | 5,926,457 | $ | 8,126,939 | $ | 16,077,704 | $ | 14,470,359 | ||||||||||||
| Basic Earnings per Common Share | $ | 3.14 | $ | 4.30 | $ | 8.52 | $ | 7.55 | ||||||||||||
| Weighted Average Shares Outstanding – Basic | 1,887,103 | 1,888,870 | 1,886,474 | 1,915,468 | ||||||||||||||||
| Diluted Earnings per Common Share | $ | 3.13 | $ | 4.29 | $ | 8.48 | $ | 7.53 | ||||||||||||
| Weighted Average Shares Outstanding – Diluted | 1,896,229 | 1,895,592 | 1,895,957 | 1,921,999 | ||||||||||||||||
Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 2017 and December 31, 2016 (Unaudited) | ||||||||
September 30, |
December 31, | |||||||
| Assets: | ||||||||
| Investments in securities: | ||||||||
| Fixed maturities, available-for-sale, at fair value | $ | 100,730,446 | $ | 101,934,077 | ||||
| Equity securities, available-for-sale, at fair value | 45,116,461 | 41,179,259 | ||||||
| Short-term investments | 20,692,763 | 6,558,840 | ||||||
| Other investments | 11,514,780 | 11,181,531 | ||||||
| Total investments | 178,054,450 | 160,853,707 | ||||||
| Cash and cash equivalents | 30,890,785 | 27,928,472 | ||||||
| Premium and fees receivable | 10,260,167 | 8,654,161 | ||||||
| Accrued interest and dividends | 1,323,598 | 1,035,152 | ||||||
| Prepaid expenses and other assets | 9,211,784 | 9,456,523 | ||||||
| Property, net | 10,029,847 | 8,753,466 | ||||||
| Goodwill and other intangible assets, net | 11,785,945 | 12,256,641 | ||||||
| Current income taxes receivable | 1,641,144 | — | ||||||
| Total Assets | $ | 253,197,720 | $ | 228,938,122 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Reserves for claims | $ | 35,207,000 | $ | 35,305,000 | ||||
| Accounts payable and accrued liabilities | 31,462,305 | 26,146,480 | ||||||
| Current income taxes payable | — | 1,232,432 | ||||||
| Deferred income taxes, net | 14,397,180 | 11,118,256 | ||||||
| Total liabilities | 81,066,485 | 73,802,168 | ||||||
| Stockholders’ Equity: | ||||||||
Common stock – no par value (10,000,000 authorized shares; 1,887,026 and 1,884,283 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively, excluding in each period 291,676 shares of common stock held by the Company’s subsidiary) | 1 | 1 | ||||||
| Retained earnings | 157,675,541 | 143,283,621 | ||||||
| Accumulated other comprehensive income | 14,375,694 | 11,761,447 | ||||||
| Total stockholders’ equity attributable to the Company | 172,051,236 | 155,045,069 | ||||||
| Noncontrolling interests | 79,999 | 90,885 | ||||||
| Total stockholders’ equity | 172,131,235 | 155,135,954 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 253,197,720 | $ | 228,938,122 | ||||
Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three and Nine Months Ended September 30, 2017 and 2016 (Unaudited) | ||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
| 2017 | % | 2016 | % | 2017 | % | 2016 | % | |||||||||||||||||||||
| Branch | $ | 10,871,775 | 29.7 | $ | 10,672,619 | 29.4 | $ | 30,296,701 | 29.4 | $ | 24,303,104 | 27.8 | ||||||||||||||||
| Agency | 25,740,783 | 70.3 | 25,633,903 | 70.6 | 72,621,753 | 70.6 | 63,054,868 | 72.2 | ||||||||||||||||||||
| Total | $ | 36,612,558 | 100.0 | $ | 36,306,522 | 100.0 | $ | 102,918,454 | 100.0 | $ | 87,357,972 | 100.0 | ||||||||||||||||
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Contacts:
Elizabeth B. Lewter, 919-968-2200
