Investors Title Co 10-Q for FY2021 Q2

Investors Title Co (ITIC)

10-Q 2021-08-09 For: 2021-06-30

Added on April 07, 2026

About this 10-Q

Investors Title Co filed this 10-Q on August 9, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $84.96M; up 37.6% from $61.75M a year earlier
Net income: $19.78M; up 36.5% from net income of $14.5M a year earlier
Diluted EPS: $10.42; up 36.2% from $7.65 a year earlier

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PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	1

	Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2021 and 2020	2

	Consolidated Statements of Comprehensive Income For the Three and Six Months Ended June 30, 2021 and 2021	3

	Consolidated Statements of Stockholders’ Equity For the Three and Six Months Ended June 30, 2021 and 2020	4

	Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2021 and 2020	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	40

Item 4.	Mine Safety Disclosures	40

Item 5.	Other Information	40

Item 6.	Exhibits	41

SIGNATURE		42


	June 30, 2021		December 31, 2020
Assets
Cash and cash equivalents	$	31,583	$	13,723
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2021: $83,968; December 31, 2020: $112,037)	88,982		117,713
Equity securities, at fair value (cost: June 30, 2021: $29,406; December 31, 2020: $32,478)	69,915		64,919
Short-term investments	44,446		15,170
Other investments	15,031		15,493
Total investments	218,374		213,295

Premium and fees receivable	21,388		19,427
Accrued interest and dividends	850		1,038
Prepaid expenses and other receivables	13,800		9,418
Property, net	15,010		11,160
Goodwill and other intangible assets, net	9,980		9,771
Operating lease right-of-use assets	3,383		3,533
Other assets	1,767		1,560
Current income taxes receivable	804		—
Total Assets	$	316,939	$	282,925

Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims	$	35,303	$	33,584
Accounts payable and accrued liabilities	34,724		36,020
Operating lease liabilities	3,510		3,669
Current income taxes payable	—		638
Deferred income taxes, net	11,464		8,592
Total liabilities	85,001		82,503

Commitments and Contingencies	—		—

Stockholders’ Equity:
Preferred stock (1,000 authorized shares; no shares issued)	—		—
Common stock – no par value (10,000 authorized shares; 1,894 and 1,892 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively, excluding in each period 292 shares of common stock held by the Company)	—		—
Retained earnings	228,133		196,096
Accumulated other comprehensive income	3,805		4,326
Total stockholders' equity	231,938		200,422
Total Liabilities and Stockholders’ Equity	$	316,939	$	282,925


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Net premiums written	$	67,527	$	47,479	$	129,004	$	86,106
Escrow and other title-related fees	3,487		2,018		6,285		3,860
Non-title services	2,408		1,975		4,486		4,522
Interest and dividends	898		1,105		1,914		2,282
Other investment income	1,483		526		2,424		966
Net realized investment gains	182		553		503		141
Changes in the estimated fair value of equity security investments	4,829		7,972		8,068		(6,486)
Other	4,147		120		4,355		258
Total Revenues	84,961		61,748		157,039		91,649

Operating Expenses:
Commissions to agents	34,346		24,089		64,888		44,276
Provision for claims	1,436		1,994		3,027		2,900
Personnel expenses	15,914		12,248		32,067		24,057
Office and technology expenses	3,211		2,457		5,953		4,872
Other expenses	4,766		3,038		8,501		6,151
Total Operating Expenses	59,673		43,826		114,436		82,256

Income before Income Taxes	25,288		17,922		42,603		9,393

Provision for Income Taxes	5,506		3,427		8,998		1,909

Net Income	$	19,782	$	14,495	$	33,605	$	7,484

Basic Earnings per Common Share	$	10.44	$	7.66	$	17.74	$	3.96

Weighted Average Shares Outstanding – Basic	1,894		1,892		1,894		1,891

Diluted Earnings per Common Share	$	10.42	$	7.65	$	17.70	$	3.95

Weighted Average Shares Outstanding – Diluted	1,899		1,895		1,898		1,895


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	19,782	$	14,495	$	33,605	$	7,484
Other comprehensive income (loss), before tax:
Accumulated postretirement benefit obligation adjustment	—		—		—		(41)
Net unrealized gain (loss) on investments arising during the period	59		1,423		(691)		1,032
Reclassification adjustment for sale of securities included in net income	53		—		30		(30)
Reclassification adjustment for write-down of securities included in net income	—		—		—		482
Other comprehensive income (loss), before tax	112		1,423		(661)		1,443
Income tax benefit related to postretirement health benefits	—		—		—		(9)
Income tax expense (benefit) related to net unrealized gain (loss) on investments arising during the period	12		305		(146)		218
Income tax expense (benefit) related to reclassification adjustment for sale of securities included in net income	11		—		6		(6)
Income tax expense related to reclassification adjustment for write-down of securities included in net income	—		—		—		110
Net income tax expense (benefit) on other comprehensive income (loss)	23		305		(140)		313
Other comprehensive income (loss)	89		1,118		(521)		1,130
Comprehensive Income	$	19,871	$	15,613	$	33,084	$	8,614


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balance, March 31, 2020	1,891	$	—	$	180,535	$	3,112	$	183,647
Net income				14,495				14,495
Dividends paid ($0.44 per share)				(832)				(832)
Exercise of stock appreciation rights	1			—				—
Share-based compensation expense related to stock appreciation rights				37				37
Net unrealized gain on investments						1,118		1,118
Balance, June 30, 2020	1,892	$	—	$	194,235	$	4,230	$	198,465

Balance, March 31, 2021	1,894	$	—	$	209,157	$	3,716	$	212,873
Net income				19,782				19,782
Dividends paid ($0.46 per share)				(873)				(873)
Share-based compensation expense related to stock appreciation rights				67				67
Net unrealized gain on investments						89		89
Balance, June 30, 2021	1,894	$	—	$	228,133	$	3,805	$	231,938


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Consolidated Statements of Cash Flows, continued
	Six Months Ended June 30,
	2021		2020
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	7,423	$	3,413
Non-Cash Investing and Financing Activities:
Non-cash net unrealized loss (gain) on investments, net of deferred tax benefit (provision) of $140 and $(322) for June 30, 2021 and 2020, respectively	$	521	$	(1,162)
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $— and $9 for June 30, 2021 and 2020, respectively	$	—	$	32


(in thousands)	June 30, 2021		December 31, 2020
Balance, beginning of period	$	33,584	$	31,333
Provision charged to operations	3,027		5,204
Payments of claims, net of recoveries	(1,308)		(2,953)
Balance, end of period	$	35,303	$	33,584


(in thousands, except percentages)	June 30, 2021		%	December 31, 2020		%
Known title claims	$	3,222	9.1	$	3,585	10.7
IBNR	32,081		90.9	29,999		89.3
Total reserve for claims	$	35,303	100.0	$	33,584	100.0


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2021		2020		2021		2020
Net income	$	19,782	$	14,495	$	33,605	$	7,484
Weighted average common shares outstanding – Basic	1,894		1,892		1,894		1,891
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	5		3		4		4
Weighted average common shares outstanding – Diluted	1,899		1,895		1,898		1,895
Basic earnings per common share	$	10.44	$	7.66	$	17.74	$	3.96
Diluted earnings per common share	$	10.42	$	7.65	$	17.70	$	3.95


(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	(3)	68.70
Outstanding as of June 30, 2021	38	$	150.06	4.56	$	1,122

Exercisable as of June 30, 2021	28	$	148.09	3.91	$	889

Unvested as of June 30, 2021	10	$	155.32	6.28	$	233


	2021			2020
Expected Life in Years	7.0	-	7.0	6.2	-	7.0
Volatility	33.9%			28.5%
Interest Rate	1.3%			0.7%
Yield Rate	1.1%			1.2%


Three Months Ended June 30, 2021 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	74,599	$	6,655	$	(3,685)	$	77,569
Investment income	6,504		706		—		7,210
Net realized gain on investments	161		21		—		182
Total revenues	$	81,264	$	7,382	$	(3,685)	$	84,961
Operating expenses	60,521		2,686		(3,534)		59,673
Income before income taxes	$	20,743	$	4,696	$	(151)	$	25,288
Total assets	$	239,572	$	77,367	$	—	$	316,939


Three Months Ended June 30, 2020 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	51,158	$	2,168	$	(1,734)	$	51,592
Investment income	8,358		1,245		—		9,603
Net realized gain on investments	527		26		—		553
Total revenues	$	60,043	$	3,439	$	(1,734)	$	61,748
Operating expenses	43,074		2,340		(1,588)		43,826
Income before income taxes	$	16,969	$	1,099	$	(146)	$	17,922
Total assets	$	204,523	$	75,385	$	—	$	279,908


As of June 30, 2021 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions	$	17,274	$	1,083	$	—	$	18,357
Special revenue issuer obligations of U.S. states, territories and political subdivisions	43,468		2,900		2		46,366
Corporate debt securities	23,226		1,050		17		24,259
Total	$	83,968	$	5,033	$	19	$	88,982


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:
Government 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		Estimated Fair Value
Due in one year or less	$	24,443	$	24,586
Due one year through five years	47,393		50,670
Due five years through ten years	11,313		12,338
Due after ten years	819		1,388
Total	$	83,968	$	88,982


	Less than 12 Months				12 Months or Longer				Total
As of June 30, 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	$	—	$	—	$	1,103	$	(2)	$	1,103	$	(2)
Corporate debt securities	17,887		(17)		—		—		17,887		(17)
Total temporarily impaired securities	$	17,887	$	(17)	$	1,103	$	(2)	$	18,990	$	(19)


Six Months Ended June 30, 2021 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	141,120	$	8,993	$	(5,983)	$	144,130
Investment income	10,900		1,506		—		12,406
Net realized gain on investments	393		110		—		503
Total revenues	$	152,413	$	10,609	$	(5,983)	$	157,039
Operating expenses	115,051		5,071		(5,686)		114,436
Income before income taxes	$	37,362	$	5,538	$	(297)	$	42,603
Total assets	$	239,572	$	77,367	$	—	$	316,939


Six Months Ended June 30, 2020 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	93,011	$	4,973	$	(3,238)	$	94,746
Investment loss	(3,102)		(136)		—		(3,238)
Net realized gain (loss) on investments	590		(449)		—		141
Total revenues	$	90,499	$	4,388	$	(3,238)	$	91,649
Operating expenses	80,517		4,685		(2,946)		82,256
Income (loss) before income taxes	$	9,982	$	(297)	$	(292)	$	9,393
Total assets	$	204,523	$	75,385	$	—	$	279,908


As of June 30, 2021 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	29,406	$	69,915
Total	$	29,406	$	69,915


(in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss (a)
Tax credit LPs	Other investments	$	276	$	276	$	1,768
Real estate LLCs or LPs	Other investments	5,034		5,177		7,750
Small business investment LPs	Other investments	7,427		7,177		13,295
Total		$	12,737	$	12,630	$	22,813


(a)						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.


As of June 30, 2021 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	—	$	64,723	$	—	$	64,723
Corporate debt securities	—		24,259		—		24,259
Total	$	—	$	88,982	$	—	$	88,982


As of June 30, 2021 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	31,583	$	—	$	—	$	31,583
Accrued interest and dividends	850		—		—		850
Equity securities, at fair value:
Common stocks	69,915		—		—		69,915
Short-term investments:
Money market funds and commercial paper	44,446		—		—		44,446
Other investments:
Equity investments in unconsolidated affiliates, equity method	—		—		6,209		6,209
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,822		8,822
Total	$	146,794	$	—	$	15,031	$	161,825


(in thousands)	Balance, December 31, 2020		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, June 30, 2021
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	$	8,741	$	—	$	—	$	345	$	(264)	$	8,822
Total	$	8,741	$	—	$	—	$	345	$	(264)	$	8,822


(in thousands)	Balance, December 31, 2019		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, December 31, 2020
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	$	7,899	$	—	$	—	$	1,227	$	(385)	$	8,741
Total	$	7,899	$	—	$	—	$	1,227	$	(385)	$	8,741


Financial Statement Classification, Consolidated Balance Sheets (unaudited) (in thousands)	As of June 30, 2021		As of December 31, 2020
Other investments	$	6,209	$	6,752
Premium and fees receivable	$	848	$	753


Year Ended (in thousands)
2021	$	270
2022	574
2023	574
2024	522
2025	504
Thereafter	2,999
Total	$	5,443


Three Months Ended June 30, 2021 (in thousands)	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans		Total
Beginning balance at March 31	$	3,860	$	(144)	$	3,716
Other comprehensive income before reclassifications	47		—		47
Amounts reclassified from accumulated other comprehensive income	42		—		42
Net current-period other comprehensive income	89		—		89
Ending balance	$	3,949	$	(144)	$	3,805


Three Months Ended June 30, 2021 (in thousands)
Details about Accumulated Other Comprehensive Income Components (in thousands)	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	$	(53)
Other-than-temporary impairments	—
Total	$	(53)	Net realized investment gains
Tax	11		Provision for income taxes
Net of Tax	$	(42)
Reclassifications for the period	$	(42)


Six Months Ended June 30, 2021 (in thousands)
Details about Accumulated Other Comprehensive Income Components (in thousands)	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	$	(30)
Other-than-temporary impairments	—
Total	$	(30)	Net realized investment gains
Tax	6		Provision for income taxes
Net of Tax	$	(24)
Reclassifications for the period	$	(24)


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


	As of June 30, 2021		As of December 31, 2020
Weighted average remaining lease term (years)	4.22		4.24
Weighted average discount rate	4.5	%	4.6	%


	Three Months Ended June 30,				Six Months Ended June 30,
State (in thousands)	2021		2020		2021		2020
North Carolina	$	24,162	$	18,098	$	49,409	$	32,041
Texas	12,886		8,462		24,238		15,979
Georgia	10,971		4,899		17,860		9,404
South Carolina	5,333		4,158		10,682		7,639
All Others	14,289		11,941		27,061		21,242
Premiums Written	67,641		47,558		129,250		86,305
Reinsurance Assumed	—		—		—		3
Reinsurance Ceded	(114)		(79)		(246)		(202)
Net Premiums Written	$	67,527	$	47,479	$	129,004	$	86,106


•			process title insurance applications and policy issuances;
•			perform due diligence on land titles;
•			manage substantial cash, investment assets, bank deposits, trust assets and escrow account balances on behalf of the Company and its customers;
•			manage billing, collections and payables, including insurance premiums and agent commissions;
•			manage accounting and financial reporting; and
•			manage payroll and human resources information.


•			hacking, computer viruses, malware, ransomware or other cyberattacks;
•			software “bugs”, hardware defects or human error;
•			natural disasters, like fires, or pandemics; or
•			power loss.


	Issuer Purchases of Equity Securities (unrounded)
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan (*)
Beginning of period					428,161
April 1 through April 30, 2021	—	$	—	—	428,161
May 1 through May 31, 2021	—	—		—	428,161
June 1 through June 30, 2021	—	—		—	428,161
Total	—	$	—	—	428,161