Investors Title Company today announced its results for the third quarter ended September 30, 2016. Net income attributable to the Company increased 81.0% to an all-time record high of $8.1 million, or $4.29 per diluted share, versus $4.5 million, or $2.28 per diluted share, for the prior year period.
Revenues increased 18.7% versus the prior year quarter to an all-time record high of $41.0 million, mainly due to an 18.0% increase in net premiums written. The increase in premiums is due to higher aggregate coverage insured resulting from increased transaction volume and real estate values, as well as higher average premium rates.
Operating expenses increased 5.4% versus the prior year quarter to $29.6 million, primarily due to increases in commissions and payroll expenses, partially offset by a benefit for claims. Commissions increased commensurate with the increase in agency premium volume. Payroll expenses increased 19.3% to $8.3 million, mainly due to an increase in the accrual for incentive compensation and fluctuations in the level of capitalized salaries related to software development. There was a benefit for claims during the current quarter, stemming from favorable loss development in recent policy years. Claim experience in recent years has improved in part due to a decrease in the level of foreclosure activity. All other categories of operating expenses, in total, were up 3.0% versus the prior year period.
For the nine months ended September 30, 2016, net income attributable to the Company increased 40.0% to $14.5 million, or $7.53 per diluted share, versus $10.3 million, or $5.17 per diluted share, for the prior year period. Revenues increased 1.4% to $99.7 million versus the prior year period, while operating expenses decreased 5.4% to $79.2 million. Commissions decreased 5.1%, mainly due to a decline in agency premiums and concentration of business in markets with lower average commission rates. Variances in claims, payroll, and other categories of expenses were shaped predominantly by the same factors that affected the third quarter.
Chairman J. Allen Fine added, “We are very pleased with this quarter’s results. A number of factors drove the strong revenue growth including improving economic conditions in our core markets, strong seasonal demand for housing, and solid underlying real estate fundamentals. In addition to higher levels of premiums written, our record net income resulted from a combination of items including a higher percentage of direct business, favorable claims development and stable overhead expenses.”
“As always we remain focused on profitably growing our business over the long term, enhancing our competitive strengths and capitalizing on market opportunities.”
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; possible non-satisfaction of closing conditions related to 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, 2015, 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, 2016 and 2015 (Unaudited) | ||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||
Revenues: | ||||||||||||||
Net premiums written | $ | 36,511,373 | $ | 30,945,532 | $ | 87,810,602 | $ | 86,372,154 | ||||||
Investment income – interest and dividends | 1,160,983 | 1,117,529 | 3,478,999 | 3,427,055 | ||||||||||
Net realized gain (loss) on investments | 439,326 | (338,631 | ) | 574,328 | 601,336 | |||||||||
Other | 2,890,023 | 2,816,828 | 7,827,509 | 7,924,329 | ||||||||||
Total Revenues | 41,001,705 | 34,541,258 | 99,691,438 | 98,324,874 | ||||||||||
Operating Expenses: | ||||||||||||||
Commissions to agents | 18,739,151 | 16,898,323 | 45,946,379 | 48,393,553 | ||||||||||
(Benefit) provision for claims | (1,067,853 | ) | 703,979 | (403,982 | ) | 3,621,401 | ||||||||
Salaries, employee benefits and payroll taxes | 8,300,823 | 6,957,874 | 22,945,972 | 21,101,955 | ||||||||||
Office occupancy and operations | 1,496,948 | 1,342,288 | 4,526,710 | 4,089,806 | ||||||||||
Business development | 608,532 | 568,189 | 1,695,180 | 1,633,358 | ||||||||||
Filing fees, franchise and local taxes | 191,574 | 134,880 | 688,731 | 572,621 | ||||||||||
Premium and retaliatory taxes | 673,551 | 573,336 | 1,559,631 | 1,684,674 | ||||||||||
Professional and contract labor fees | 523,504 | 661,879 | 1,599,603 | 1,926,469 | ||||||||||
Other | 157,308 | 264,012 | 629,539 | 708,918 | ||||||||||
Total Operating Expenses | 29,623,538 | 28,104,760 | 79,187,763 | 83,732,755 | ||||||||||
Income before Income Taxes | 11,378,167 | 6,436,498 | 20,503,675 | 14,592,119 | ||||||||||
Provision for Income Taxes | 3,249,000 | 1,941,000 | 6,040,000 | 4,250,000 | ||||||||||
Net Income | 8,129,167 | 4,495,498 | 14,463,675 | 10,342,119 | ||||||||||
Net (Gain) Loss Attributable to Noncontrolling | ||||||||||||||
Interests | (2,228 | ) | (4,536 | ) | 6,684 | (4,536 | ) | |||||||
Net Income Attributable to the Company | $ | 8,126,939 | $ | 4,490,962 | $ | 14,470,359 | $ | 10,337,583 | ||||||
Basic Earnings per Common Share | $ | 4.30 | $ | 2.28 | $ | 7.55 | $ | 5.18 | ||||||
Weighted Average Shares Outstanding – Basic | 1,888,870 | 1,967,923 | 1,915,468 | 1,995,120 | ||||||||||
Diluted Earnings per Common Share | $ | 4.29 | $ | 2.28 | $ | 7.53 | $ | 5.17 | ||||||
Weighted Average Shares Outstanding – Diluted | 1,895,592 | 1,972,233 | 1,921,999 | 2,000,043 | ||||||||||
Investors Title Company and Subsidiaries Consolidated Balance Sheets As of September 30, 2016 and December 31, 2015 (Unaudited) | ||||||
September 30, 2016 |
December 31, 2015 | |||||
Assets: | ||||||
Investments in securities: | ||||||
Fixed maturities, available-for-sale, at fair value | $ | 111,038,924 | $ | 106,066,384 | ||
Equity securities, available-for-sale, at fair value | 39,834,879 | 37,513,464 | ||||
Short-term investments | 3,925,296 | 6,865,406 | ||||
Other investments | 10,626,505 | 10,106,828 | ||||
Total investments | 165,425,604 | 160,552,082 | ||||
Cash and cash equivalents | 26,898,991 | 21,790,068 | ||||
Premium and fees receivable | 9,358,570 | 8,392,697 | ||||
Accrued interest and dividends | 1,389,526 | 1,004,126 | ||||
Prepaid expenses and other assets | 10,931,270 | 12,634,105 | ||||
Property, net | 7,843,079 | 7,148,951 | ||||
Current income taxes recoverable | 1,261,289 | — | ||||
Total Assets | $ | 223,108,329 | $ | 211,522,029 | ||
Liabilities and Stockholders’ Equity | ||||||
Liabilities: | ||||||
Reserves for claims | $ | 35,536,000 | $ | 37,788,000 | ||
Accounts payable and accrued liabilities | 24,705,653 | 25,043,588 | ||||
Current income taxes payable | — | 210,355 | ||||
Deferred income taxes, net | 10,749,877 | 5,703,006 | ||||
Total liabilities | 70,991,530 | 68,744,949 | ||||
Stockholders’ Equity: | ||||||
Common stock – no par value (10,000,000 authorized shares; 1,884,283 | ||||||
and 1,949,797 shares issued and outstanding 2016 and 2015, | ||||||
respectively, excluding 291,676 shares for 2016 and 2015 of common | ||||||
stock held by the Company's subsidiary) | 1 | 1 | ||||
Retained earnings | 138,575,372 | 131,186,866 | ||||
Accumulated other comprehensive income | 13,449,558 | 11,483,015 | ||||
Total stockholders’ equity attributable to the Company | 152,024,931 | 142,669,882 | ||||
Noncontrolling interests | 91,868 | 107,198 | ||||
Total stockholders’ equity | 152,116,799 | 142,777,080 | ||||
Total Liabilities and Stockholders’ Equity | $ | 223,108,329 | $ | 211,522,029 | ||
Investors Title Company and Subsidiaries Net Premiums Written By Branch and Agency For the Three and Nine Months Ended September 30, 2016 and 2015 (Unaudited) | ||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2016 | % | 2015 | % | 2016 | % | 2015 | % | |||||||||||||||
Branch | $ | 10,860,361 | 29.7 | $ | 7,967,826 | 25.7 | $ | 24,751,134 | 28.2 | $ | 21,281,363 | 24.6 | ||||||||||
Agency | 25,651,012 | 70.3 | 22,977,706 | 74.3 | 63,059,468 | 71.8 | 65,090,791 | 75.4 | ||||||||||||||
Total | $ | 36,511,373 | 100.0 | $ | 30,945,532 | 100.0 | $ | 87,810,602 | 100.0 | $ | 86,372,154 | 100.0 |
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Contacts:
Elizabeth B. Lewter, 919-968-2200