Investors Title Co 10-K for FY2020

Investors Title Co (ITIC)

10-K 2021-03-15 For: 2020-12-31

Added on April 07, 2026

About this 10-K

Investors Title Co filed this 10-K on March 15, 2021, covering the fiscal year ended December 31, 2020 (FY2020).

Headline figures

Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $236.41M; up 28.8% from $183.5M a year earlier
Net income: $39.42M; up 25.3% from net income of $31.46M a year earlier
Diluted EPS: $20.80; up 25.4% from $16.59 a year earlier

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PART I
Item 1.	Business	4
	Executive Officers of the Company	9
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16

PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Shares	17
Item 6.	Selected Financial Data	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 8.	Financial Statements and Supplementary Data	33
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

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


•			licensing of insurers and agents;
•			capital and surplus requirements;
•			approval, regulation or establishment of premium rates for insurance;
•			limitations on types and amounts of investments;
•			limitations on the size of risks that may be insured by a single company;
•			filing of annual and other reports with respect to financial condition;
•			the amount of dividends and other payments made by insurance subsidiaries;
•			establishing reserves;
•			accounting and financing practices;
•			deposits of securities for the benefit of policyholders;
•			trade and marketing practices;
•			regulation of reinsurance;
•			approval of policy forms; and
•			use of personal information, including cybersecurity regulations.


•			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.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Additional Shares Approved for Repurchase Under the Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan *
Beginning of period						428,186
October 1 through October 31, 2020	—	$	—	—	—	428,186
November 1 through November 30, 2020	25	173.44		25	—	428,161
December 1 through December 31, 2020	—	—		—	—	428,161
Total	25	$	173.44	25	—	428,161


(in thousands)
Increase in loss ratio of three percentage points	$	4,868
Decrease in loss ratio of three percentage points	$	(4,868)


For the Years Ended December 31, (in thousands)	2020		2019
Revenues:
Net premiums written	$	205,418	$	145,842
Escrow and other title-related fees	8,321		7,474
Non-title services	8,693		9,922
Interest and dividends	4,393		4,752
Other investment income	3,723		3,191
Net realized investment gains	333		1,340
Changes in the estimated fair value of equity security investments	4,904		10,303
Other	623		678
Total Revenues	236,408		183,502

Operating Expenses:
Commissions to agents	106,807		72,780
Provision for claims	5,204		3,532
Personnel expenses	51,929		46,058
Office and technology expenses	9,951		9,254
Other expenses	12,856		12,055
Total Operating Expenses	186,747		143,679

Income before Income Taxes	49,661		39,823

Provision for Income Taxes	10,241		8,365

Net Income	$	39,420	$	31,458


(in thousands, except percentages)	2020		%	2019		%
Title Insurance	$	226,480	95.8	$	170,374	92.8
All Other	9,928		4.2	13,128		7.2
Total	$	236,408	100.0	$	183,502	100.0


State (in thousands)	2020		2019
North Carolina	$	75,697	$	57,132
Texas	38,350		26,652
Georgia	23,502		16,422
South Carolina	18,752		13,796
All Others	49,410		32,249
Premiums Written	205,711		146,251
Reinsurance Assumed	3		2
Reinsurance Ceded	(296)		(411)
Net Premiums Written	$	205,418	$	145,842


1.	Report of Independent Registered Public Accounting Firm	34
2.	Management's Report on Internal Control Over Financial Reporting	37
3.	Report of Independent Registered Public Accounting Firm	38
4.	Consolidated Balance Sheets	40
5.	Consolidated Statements of Operations	41
6.	Consolidated Statements of Comprehensive Income	42
7.	Consolidated Statements of Shareholders' Equity	43
8.	Consolidated Statements of Cash Flows	44
9.	Notes to Consolidated Financial Statements	46


As of December 31,	2020		2019
Assets
Cash and cash equivalents	$	13,723	$	25,949
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: December 31, 2020: $112,037; December 31, 2019: $100,667)	117,713		104,638
Equity securities, at fair value (cost: December 31, 2020: $32,478; December 31, 2019: $33,570)	64,919		61,108
Short-term investments	15,170		13,134
Other investments	15,493		13,982
Total investments	213,295		192,862

Premium and fees receivable	19,427		12,523
Accrued interest and dividends	1,038		1,033
Prepaid expenses and other receivables	9,418		5,519
Property, net	11,160		9,776
Goodwill and other intangible assets, net	9,771		10,275
Operating lease right-of-use assets	3,533		4,469
Other assets	1,560		1,487
Total Assets	$	282,925	$	263,893

Liabilities and Shareholders’ Equity
Liabilities:
Reserve for claims	$	33,584	$	31,333
Accounts payable and accrued liabilities	36,020		28,318
Operating lease liabilities	3,669		4,502
Current income taxes payable	638		1,340
Deferred income taxes, net	8,592		7,038
Total liabilities	82,503		72,531

Commitments and Contingencies	—		—

Shareholders’ Equity:
Preferred stock (1,000 authorized shares; no shares issued)	—		—
Common stock – no par value (10,000 authorized shares; 1,892 and 1,889 shares issued and outstanding as of December 31, 2020 and 2019, respectively, excluding in each period 292 shares of common stock held by the Company)	—		—
Retained earnings	196,096		188,262
Accumulated other comprehensive income	4,326		3,100
Total shareholders’ equity	200,422		191,362
Total Liabilities and Shareholders’ Equity	$	282,925	$	263,893


For the Years Ended December 31,	2020		2019
Revenues:
Net premiums written	$	205,418	$	145,842
Escrow and other title-related fees	8,321		7,474
Non-title services	8,693		9,922
Interest and dividends	4,393		4,752
Other investment income	3,723		3,191
Net realized investment gains	333		1,340
Changes in the estimated fair value of equity security investments	4,904		10,303
Other	623		678
Total Revenues	236,408		183,502

Operating Expenses:
Commissions to agents	106,807		72,780
Provision for claims	5,204		3,532
Personnel expenses	51,929		46,058
Office and technology expenses	9,951		9,254
Other expenses	12,856		12,055
Total Operating Expenses	186,747		143,679

Income before Income Taxes	49,661		39,823

Provision for Income Taxes	10,241		8,365

Net Income	$	39,420	$	31,458

Basic Earnings per Common Share	$	20.84	$	16.66

Weighted Average Shares Outstanding – Basic	1,892		1,888

Diluted Earnings per Common Share	$	20.80	$	16.59

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


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Shareholders’ Equity
	Shares	Amount
Balance, January 1, 2019	1,887	$	—	$	174,690	$	949	$	175,639
Net income				31,458				31,458
Dividends paid ($9.60 per share)				(18,131)				(18,131)
Repurchases of common stock	—			(19)				(19)
Exercise of stock appreciation rights	2			—				—
Share-based compensation expense related to stock appreciation rights				264				264
Net unrealized gain on investments						2,151		2,151
Balance, December 31, 2019	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


Consolidated Statements of Cash Flows, continued
For the Years Ended December 31,	2020	2019
Financing Activities
Repurchases of common stock	(6)	(19)
Exercise of stock appreciation rights	1	—
Dividends paid	(31,716)	(18,131)
Net cash used in financing activities	(31,721)	(18,150)


Net (Decrease) Increase in Cash and Cash Equivalents	(12,226)		7,255
Cash and Cash Equivalents, Beginning of Period	25,949		18,694
Cash and Cash Equivalents, End of Period	$	13,723	$	25,949

Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	10,226	$	9,734
Non Cash Investing and Financing Activities
Non cash net unrealized gain on investments, net of deferred tax provision of $(367) and $(576) for December 31, 2020 and 2019, respectively	$	(1,338)	$	(2,151)
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $31 and $0 for December 31, 2020 and 2019, respectively	$	112	$	—
Adjustments to operating lease right-of-use assets for December 31, 2020 and 2019, respectively	$	94	$	—


☒


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


As of December 31, 2019 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Governmental obligations	$	25,161	$	6	$	4	$	25,163
General obligations of U.S. states, territories and political subdivisions	18,887		843		—		19,730
Special revenue issuer obligations of U.S. states, territories and political subdivisions	51,188		2,530		20		53,698
Corporate debt securities	5,431		621		5		6,047
Total	$	100,667	$	4,000	$	29	$	104,638


	Available-for-Sale
(in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	38,775	$	38,861
Due after one year through five years	56,388		59,930
Due five years through ten years	16,058		17,521
Due after ten years	816		1,401
Total	$	112,037	$	117,713


	Less than 12 Months				12 Months or Longer				Total
As of December 31, 2020 (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	$	(3)	$	1,103	$	(3)
Corporate debt securities	20,630		(24)		—		—		20,630		(24)
Total temporarily impaired securities	$	20,630	$	(24)	$	1,103	$	(3)	$	21,733	$	(27)


As of December 31, 2020 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	32,478	$	64,919
Total	$	32,478	$	64,919


Type of Investment (in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss *
Tax credit LPs	Other investments	$	267	$	267	$	1,768
Real estate LLCs or LPs	Other investments	5,152		6,535		7,000
Small business investment LLCs or LPs	Other investments	7,535		7,204		13,295
Total		$	12,954	$	14,006	$	22,063


*						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 December 31, 2020 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	24,083	$	66,859	$	—	$	90,942
Corporate debt securities	—		26,771		—		26,771
Total	$	24,083	$	93,630	$	—	$	117,713


As of December 31, 2020 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash	$	13,723	$	—	$	—	$	13,723
Accrued interest and dividends	1,038		—		—		1,038
Equity securities, at fair value:
Common stocks	64,919		—		—		64,919
Short-term investments:
Money market funds, Treasury bills, commercial paper and certificates of deposit	15,170		—		—		15,170
Other investments:
Equity investments in unconsolidated affiliates, equity method	—		—		6,752		6,752
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,741		8,741
Total	$	94,850	$	—	$	15,493	$	110,343


(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:
Equity investments in unconsolidated affiliates, measurement alternative	$	7,899	$	—	$	—	$	1,227	$	(385)	$	8,741
Total	$	7,899	$	—	$	—	$	1,227	$	(385)	$	8,741


(in thousands)	Balance, January 1, 2019		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, December 31, 2019
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	$	6,589	$	—	$	—	$	2,241	$	(931)	$	7,899
Total	$	6,589	$	—	$	—	$	2,241	$	(931)	$	7,899


(in thousands, except per share amounts)	2020		2019
Net income	$	39,420	$	31,458
Weighted average common shares outstanding – Basic	1,892		1,888
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	4		8
Weighted average common shares outstanding – Diluted	1,896		1,896
Basic earnings per common share	$	20.84	$	16.66
Diluted earnings per common share	$	20.80	$	16.59


(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, 2019	28	$	110.27	3.64	$	2,019
SARs granted	4	162.81
SARs exercised	(2)	50.50
Outstanding as of December 31, 2019	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

Exercisable as of December 31, 2020	27	$	139.31	3.69	$	772

Unvested as of December 31, 2020	9	$	138.70	6.44	$	131


(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	9	1.38	$	78.52	9	$	78.52
100.00		—	149.99		12	6.43	134.41		3	122.80
150.00		—	199.99		15	4.48	179.50		15	179.50
$	60.00	—	$	199.99	36	4.38	$	139.16	27	$	139.31


	2020			2019
Expected life in years	6.2	-	7.0	7.0	-	7.0
Volatility	29.4%			30.2%
Interest rate	0.7%			2.3%
Yield rate	1.2%			1.0%


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


Year Ended (in thousands)
2021	$	1,208
2022	974
2023	686
2024	515
2025	327
Thereafter	322
Total undiscounted payments	$	4,032
Less: present value adjustment	(363)
Operating lease liabilities	$	3,669


	2020		2019
Weighted average remaining lease term (years)	4.24		4.84
Weighted average discount rate	4.6	%	4.6	%


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


2019 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	161,463	$	11,157	$	(8,704)	$	163,916
Investment income	15,210		3,036		—		18,246
Net realized gain on investments	1,251		89		—		1,340
Total revenues	$	177,924	$	14,282	$	(8,704)	$	183,502
Operating expenses	140,376		9,137		(5,834)		143,679
Income before income taxes	$	37,548	$	5,145	$	(2,870)	$	39,823
Total assets	$	196,825	$	67,068	$	—	$	263,893


State	2020		2019
North Carolina	36.8	%	39.1	%
Texas	18.6	%	18.2	%
Georgia	11.4	%	11.2	%
South Carolina	9.1	%	9.4	%


Financial Statement Classification, Consolidated Balance Sheets (in thousands)	2020		2019
Other investments	$	6,752	$	6,083
Premium and fees receivable	$	753	$	410


2020 (in thousands)	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans		Total
Beginning balance at January 1	$	3,132	$	(32)	$	3,100
Other comprehensive income (loss) before reclassifications	991		(112)		879
Amounts reclassified from accumulated other comprehensive income	347		—		347
Net current-period other comprehensive income (loss)	1,338		(112)		1,226
Ending balance	$	4,470	$	(144)	$	4,326