Investors Title Co 10-K for FY2021

Investors Title Co (ITIC)

10-K 2022-03-14 For: 2021-12-31

Added on April 07, 2026

About this 10-K

Investors Title Co filed this 10-K on March 14, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $329.5M; up 39.4% from $236.41M a year earlier
Net income: $67.02M; up 70.0% from net income of $39.42M a year earlier
Diluted EPS: $35.28; up 69.6% from $20.80 a year earlier

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PART I
Item 1.	Business	5
	Executive Officers of the Company	10
Item 1A.	Risk Factors	11
Item 1B.	Unresolved Staff Comments	18
Item 2.	Properties	18
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	18

PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Shares	19
Item 6.	[Reserved]	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 8.	Financial Statements and Supplementary Data	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	72
Item 9A.	Controls and Procedures	72
Item 9B.	Other Information	72
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	72

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	73
Item 11.	Executive Compensation	73
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	73
Item 13.	Certain Relationships and Related Transactions, and Director Independence	73
Item 14.	Principal Accountant Fees and Services	73

PART IV
Item 15.	Exhibits, Financial Statement Schedules	74
Item 16.	Form 10-K Summary	85

Signatures		86


(in thousands)
Increase in loss ratio of three percentage points	$	(6,491)
Decrease in loss ratio of three percentage points	$	6,491


For the Years Ended December 31, (in thousands)	2021		2020
Revenues:
Net premiums written	$	273,885	$	205,418
Escrow and other title-related fees	13,678		8,321
Non-title services	9,667		8,693
Interest and dividends	3,773		4,393
Other investment income	6,920		3,723
Net realized investment gains	1,869		333
Changes in the estimated fair value of equity security investments	14,934		4,904
Other	4,772		623
Total Revenues	329,498		236,408

Operating Expenses:
Commissions to agents	142,815		106,807
Provision for claims	5,686		5,204
Personnel expenses	64,193		51,929
Office and technology expenses	13,059		9,951
Other expenses	18,813		12,856
Total Operating Expenses	244,566		186,747

Income before Income Taxes	84,932		49,661

Provision for Income Taxes	17,912		10,241

Net Income	$	67,020	$	39,420


(in thousands, except percentages)	2021		%	2020		%
Title Insurance	$	310,592	94.3	$	226,480	95.8
All Other	18,906		5.7	9,928		4.2
Total	$	329,498	100.0	$	236,408	100.0


(in thousands, except percentages)	2021		%	2020		%
Home and Branch	$	68,585	25.0	$	53,204	25.9
Agency	205,300		75.0	152,214		74.1
Total	$	273,885	100.0	$	205,418	100.0


State (in thousands)	2021		2020
North Carolina	$	99,049	$	75,697
Texas	62,557		38,350
Georgia	34,619		23,502
South Carolina	24,981		18,752
All Others	53,197		49,410
Premiums Written	274,403		205,711
Reinsurance Assumed	—		3
Reinsurance Ceded	(518)		(296)
Net Premiums Written	$	273,885	$	205,418


1.	Report of Independent Registered Public Accounting Firm (PCAOB ID: 57)	35
2.	Management's Report on Internal Control Over Financial Reporting	38
3.	Report of Independent Registered Public Accounting Firm	39
4.	Consolidated Balance Sheets	41
5.	Consolidated Statements of Operations	42
6.	Consolidated Statements of Comprehensive Income	43
7.	Consolidated Statements of Shareholders' Equity	44
8.	Consolidated Statements of Cash Flows	45
9.	Notes to Consolidated Financial Statements	47


As of December 31,	2021		2020
Assets
Cash and cash equivalents	$	37,168	$	13,723
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: December 31, 2021: $75,511; December 31, 2020: $112,037)	79,791		117,713
Equity securities, at fair value (cost: December 31, 2021: $29,478; December 31, 2020: $32,478)	76,853		64,919
Short-term investments	45,930		15,170
Other investments	20,298		15,493
Total investments	222,872		213,295

Premium and fees receivable	22,953		19,427
Accrued interest and dividends	817		1,038
Prepaid expenses and other receivables	11,721		9,418
Property, net	13,033		11,160
Goodwill and other intangible assets, net	15,951		9,771
Operating lease right-of-use assets	5,202		3,533
Other assets	1,771		1,560
Total Assets	$	331,488	$	282,925

Liabilities and Shareholders’ Equity
Liabilities:
Reserve for claims	$	36,754	$	33,584
Accounts payable and accrued liabilities	43,868		36,020
Operating lease liabilities	5,329		3,669
Current income taxes payable	3,329		638
Deferred income taxes, net	13,121		8,592
Total liabilities	102,401		82,503

Commitments and Contingencies	—		—

Shareholders’ Equity:
Preferred stock (1,000 authorized shares; no shares issued)	—		—
Common stock – no par value (10,000 authorized shares; 1,895 and 1,892 shares issued and outstanding as of December 31, 2021 and 2020, respectively, excluding in each period 292 shares of common stock held by the Company)	—		—
Retained earnings	225,861		196,096
Accumulated other comprehensive income	3,226		4,326
Total shareholders’ equity	229,087		200,422
Total Liabilities and Shareholders’ Equity	$	331,488	$	282,925


For the Years Ended December 31,	2021		2020
Revenues:
Net premiums written	$	273,885	$	205,418
Escrow and other title-related fees	13,678		8,321
Non-title services	9,667		8,693
Interest and dividends	3,773		4,393
Other investment income	6,920		3,723
Net realized investment gains	1,869		333
Changes in the estimated fair value of equity security investments	14,934		4,904
Other	4,772		623
Total Revenues	329,498		236,408

Operating Expenses:
Commissions to agents	142,815		106,807
Provision for claims	5,686		5,204
Personnel expenses	64,193		51,929
Office and technology expenses	13,059		9,951
Other expenses	18,813		12,856
Total Operating Expenses	244,566		186,747

Income before Income Taxes	84,932		49,661

Provision for Income Taxes	17,912		10,241

Net Income	$	67,020	$	39,420

Basic Earnings per Common Share	$	35.38	$	20.84

Weighted Average Shares Outstanding – Basic	1,894		1,892

Diluted Earnings per Common Share	$	35.28	$	20.80

Weighted Average Shares Outstanding – Diluted	1,900		1,896


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance, January 1, 2020	1,889	$	—	$	188,262	$	3,100	$	191,362
Net income				39,420				39,420
Dividends paid ($16.76 per share)				(31,716)				(31,716)
Repurchases of common stock	—			(6)				(6)
Exercise of stock appreciation rights	3			1				1
Share-based compensation expense related to stock appreciation rights				229				229
Accumulated postretirement benefit obligation adjustment						(112)		(112)
Net unrealized gain on investments						1,338		1,338
Other				(94)				(94)
Balance, December 31, 2020	1,892	$	—	$	196,096	$	4,326	$	200,422
Net income				67,020				67,020
Dividends paid ($19.82 per share)				(37,553)				(37,553)
Exercise of stock appreciation rights	3			(1)				(1)
Share-based compensation expense related to stock appreciation rights				299				299
Net unrealized loss on investments						(1,100)		(1,100)
Balance, December 31, 2021	1,895	$	—	$	225,861	$	3,226	$	229,087


Consolidated Statements of Cash Flows, continued
For the Years Ended December 31,	2021	2020
Financing Activities
Repurchases of common stock	—	(6)
Exercise of stock appreciation rights	(1)	1
Dividends paid	(37,553)	(31,716)
Net cash used in financing activities	(37,554)	(31,721)


Net Increase (Decrease) in Cash and Cash Equivalents	23,445		(12,226)
Cash and Cash Equivalents, Beginning of Period	13,723		25,949
Cash and Cash Equivalents, End of Period	$	37,168	$	13,723

Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	10,410	$	10,226
Non Cash Investing and Financing Activities:
Non cash net unrealized loss (gain) on investments, net of deferred tax benefit (provision) of $295 and $(367) for December 31, 2021 and 2020, respectively	$	1,100	$	(1,338)
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $— and $31 for December 31, 2021 and 2020, respectively	$	—	$	112
Adjustments to operating lease right-of-use assets for December 31, 2021 and 2020, respectively	$	—	$	94


As of December 31, 2021 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Government obligations	$	—	$	—	$	—	$	—
General obligations of U.S. states, territories and political subdivisions	16,669		922		—		17,591
Special revenue issuer obligations of U.S. states, territories and political subdivisions	41,753		2,453		2		44,204
Corporate debt securities	17,089		955		48		17,996
Total	$	75,511	$	4,330	$	50	$	79,791


As of December 31, 2020 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Governmental obligations	$	24,026	$	57	$	—	$	24,083
General obligations of U.S. states, territories and political subdivisions	17,391		1,262		—		18,653
Special revenue issuer obligations of U.S. states, territories and political subdivisions	44,939		3,270		3		48,206
Corporate debt securities	25,681		1,114		24		26,771
Total	$	112,037	$	5,703	$	27	$	117,713


	Available-for-Sale
(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	17,573	$	17,736
Due after one year through five years	52,158		55,253
Due after five years through ten years	4,958		5,436
Due after ten years	822		1,366
Total	$	75,511	$	79,791


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Type of Investment (in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss *
Tax credit LPs	Other investments	$	276	$	276	$	1,768
Real estate LLCs or LPs	Other investments	4,567		5,286		7,750
Small business investment LLCs or LPs	Other investments	8,336		8,254		13,295
Total		$	13,179	$	13,816	$	22,813


*						Maximum potential loss is calculated as the total investment in the LLC or LP including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment.


(in thousands)	2021		2020
Land	$	805	$	1,413
Office buildings and improvements (25 years)	4,808		4,621
Furniture, fixtures and equipment (3 to 10 years)	20,656		17,902
Automobiles (3 years)	1,017		1,058
Total	27,286		24,994
Less accumulated depreciation	(14,253)		(13,834)
Property and equipment, net	$	13,033	$	11,160


	Less than 12 Months				12 Months or Longer				Total
As of December 31, 2021 (in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	—	$	—	$	1,102	$	(2)	$	1,102	$	(2)
Corporate debt securities	8,493		(13)		6,203		(35)		14,696		(48)
Total temporarily impaired securities	$	8,493	$	(13)	$	7,305	$	(37)	$	15,798	$	(50)


As of December 31, 2021 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	29,478	$	76,853
Total	$	29,478	$	76,853


As of December 31, 2021 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	—	$	61,795	$	—	$	61,795
Corporate debt securities	—		17,996		—		17,996
Total	$	—	$	79,791	$	—	$	79,791


As of December 31, 2021 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	37,168	$	—	$	—	$	37,168
Accrued interest and dividends	817		—		—		817
Equity securities, at fair value:
Common stocks	76,853		—		—		76,853
Short-term investments:
Money market funds	45,930		—		—		45,930
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,688		8,688
Total	$	160,768	$	—	$	8,688	$	169,456


(in thousands)	Balance, January 1, 2021		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, December 31, 2021
Other investments:
Real estate	$	—	$	—	$	—	$	5,000	$	(13)	$	4,987
Equity investments in unconsolidated affiliates, measurement alternative	8,741		—		—		1,543		(1,596)		8,688
Total	$	8,741	$	—	$	—	$	6,543	$	(1,609)	$	13,675


(in thousands)	Balance, January 1, 2020		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, December 31, 2020
Other investments:
Real estate	$	—	$	—	$	—	$	—	$	—	$	—
Equity investments in unconsolidated affiliates, measurement alternative	7,899		—		—		1,227		(385)		8,741
Total	$	7,899	$	—	$	—	$	1,227	$	(385)	$	8,741


(in thousands, except per share amounts)	2021		2020
Net income	$	67,020	$	39,420
Weighted average common shares outstanding – Basic	1,894		1,892
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	6		4
Weighted average common shares outstanding – Diluted	1,900		1,896
Basic earnings per common share	$	35.38	$	20.84
Diluted earnings per common share	$	35.28	$	20.80


(in thousands, except weighted average exercise price and average remaining contractual term)	Number Of Shares	Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2020	30	$	124.13	3.53	$	1,352
SARs granted	14	137.40
SARs exercised	(8)	75.75
Outstanding as of December 31, 2020	36	$	139.16	4.38	$	903
SARs granted	5	184.26
SARs exercised	(6)	106.71
Outstanding as of December 31, 2021	35	$	150.36	3.96	$	1,643

Exercisable as of December 31, 2021	28	$	151.17	3.51	$	1,269

Unvested as of December 31, 2021	7	$	147.41	5.59	$	374


(in thousands, except exercise prices and average remaining contractual term)					SARs Outstanding at Year-End				SARs Exercisable at Year-End
Range of Exercise Prices					Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$	60.00	—	$	99.99	6	0.88	$	83.44	6	$	83.44
100.00		—	149.99		11	5.45	134.89		5	126.00
150.00		—	199.99		18	4.09	181.27		17	181.07
$	60.00	—	$	199.99	35	3.96	$	150.36	28	$	151.17


	2021			2020
Expected life in years	7.0	-	7.0	6.2	-	7.0
Volatility	33.9%			29.4%
Interest rate	1.3%			0.7%
Yield rate	1.1%			1.2%


(a)						Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets.


Year Ended (in thousands)
2022	$	1,732
2023	1,390
2024	1,075
2025	736
2026	588
Thereafter	266
Total undiscounted payments	$	5,787
Less: present value adjustment	(458)
Operating lease liabilities	$	5,329


	2021		2020
Weighted average remaining lease term (years)	4.13		4.24
Weighted average discount rate	4.2	%	4.6	%


2021 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	305,615	$	14,821	$	(18,434)	$	302,002
Investment income	21,460		4,167		—		25,627
Net realized gain on investments	779		1,090		—		1,869
Total revenues	$	327,854	$	20,078	$	(18,434)	$	329,498
Operating expenses	247,018		10,131		(12,583)		244,566
Income before income taxes	$	80,836	$	9,947	$	(5,851)	$	84,932
Total assets	$	279,597	$	51,891	$	—	$	331,488


2020 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	225,781	$	9,606	$	(12,332)	$	223,055
Investment income	11,622		1,398		—		13,020
Net realized gain (loss) on investments	334		(1)		—		333
Total revenues	$	237,737	$	11,003	$	(12,332)	$	236,408
Operating expenses	185,026		9,095		(7,374)		186,747
Income before income taxes	$	52,711	$	1,908	$	(4,958)	$	49,661
Total assets	$	225,974	$	56,951	$	—	$	282,925


State	2021		2020
North Carolina	36.1	%	36.8	%
Texas	22.8	%	18.6	%
Georgia	12.6	%	11.4	%
South Carolina	9.1	%	9.1	%


Financial Statement Classification, Consolidated Balance Sheets (in thousands)	2021		2020
Other investments	$	6,623	$	6,752
Premium and fees receivable	$	882	$	753


Year Ended (in thousands)
2022	$	1,282
2023	1,290
2024	1,107
2025	1,024
2026	1,024
Thereafter	2,833
Total	$	8,560


2021 (in thousands)	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans		Total
Beginning balance at January 1	$	4,470	$	(144)	$	4,326
Other comprehensive loss before reclassifications	(1,085)		—		(1,085)
Amounts reclassified from accumulated other comprehensive income	(15)		—		(15)
Net current-period other comprehensive loss	(1,100)		—		(1,100)
Ending balance	$	3,370	$	(144)	$	3,226


2021 (in thousands)
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statements of Operations
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investments	$	19
Other-than-temporary impairments	—
Total	$	19	Net realized investment gains
Tax	(4)		Provision for Income Taxes
Net of Tax	$	15
Reclassifications for the period	$	15