Investors title company announces second quarter 2022 financial results
Chapel hill, n.c.--(business wire)--investors title company (nasdaq: itic) today announced results for the second quarter ended june 30, 2022. the company reported net income of $2.3 million, or $1.20 per diluted share, compared to $19.8 million, or $10.42 per diluted share, for the prior year period. revenues for the quarter decreased 16.5% to $70.9 million, compared with $85.0 million for the prior year quarter. total revenues were offset by the recognition of a $12.2 million unrealized loss in the company’s equity portfolio. net premiums written increased 3.1% versus the prior year period, driven by higher average home values and growth of our footprint in the texas market, setting a second quarter record. escrow and title-related fees increased 78.1% due to a larger share of business that generates escrow income, and fee income associated with commercial activity. revenues from non-title services increased 17.8% due primarily to higher levels of property exchange transaction volumes. realized gains from sales of equity securities were $1.9 million higher, while other income decreased $3.8 million due to a non-recurring gain on the sale of property which occurred in the prior year quarter. operating expenses increased 13.9%, compared to the prior year period, primarily due to increases in personnel costs, title fees, and office and technology expenses. personnel costs were 31.3% higher than the prior year period due to staffing of new offices, hiring to support growth initiatives, and increased employee benefit costs. office, technology, and other operating expenses increased 49.4% in support of expanding our geographic footprint and various ongoing technology initiatives. income before income taxes decreased $22.3 million to $3.0 million for the current quarter versus $25.3 million in the prior year period. excluding the impact of changes in the estimated fair value of equity security investments, income before income taxes (non-gaap) decreased 26.1% to $15.1 million for the current quarter versus $20.5 million in the prior year period (see appendix a for a reconciliation of this non-gaap measure to the most directly comparable gaap measure). for the six months ended june 30, 2022, net income decreased $25.1 million to $8.5 million, or $4.45 per diluted share, versus $33.6 million, or $17.70 per diluted share, for the prior year period. net premiums written increased 2.9% to $132.8 million, versus $129.0 million in the prior year period. operating expenses increased 12.9% to $129.2 million, mainly due to increases in personnel and office, technology, and other operating expenses. overall results for the first six months have been shaped predominantly by the same factors that affected the second quarter. chairman j. allen fine added, “we are pleased to report a new record level of premiums written for the second quarter. although net income is down for the quarter, much of the negative comparison is attributable to market losses in our equity portfolio and the gain on the sale of property in the prior year quarter. the impact of higher mortgage rates has been varied as we have seen some slowing of activity in some markets but ongoing strength in others. refinance activity has been more significantly impacted by higher rates than activity generated by home sales. we remain optimistic about the company’s prospects for solid financial results and continue to focus on identifying opportunities to profitably expand our market presence, regardless of cyclical changes in the real estate market.” 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. cautionary statements regarding forward-looking statements certain statements contained herein constitute forward-looking statements within the meaning of the private securities litigation reform act of 1995. these statements may be identified by the use of words such as “plan,” expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “should,” “could,” “would,” and other expressions that indicate future events and trends. such statements include, among others, any statements regarding the company’s expected performance for this year, projections regarding u.s. recovery from the covid-19 pandemic, future home price fluctuations, changes in home purchase or refinance demand, activity and the mix thereof, interest rate changes, expansion of the company’s market presence, enhancing competitive strengths, development in housing affordability, wages, 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 severity and duration of the covid-19 pandemic (including any of its variants) and its effects (and the effects of measures undertaken to combat it) on the economy and the company’s business; 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 regulations; changes in the economy; the potential impact of inflation and responses by government regulators, including the federal reserve; 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, 2021 as filed with the securities and exchange commission, and in subsequent filings. investors title company and subsidiaries consolidated statements of operations for the three and six months ended june 30, 2022 and 2021 (in thousands, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2022 2021 2022 2021 revenues: net premiums written $ 69,626 $ 67,527 $ 132,751 $ 129,004 escrow and other title-related fees 6,209 3,487 11,273 6,285 non-title services 2,836 2,408 5,262 4,486 interest and dividends 911 898 1,826 1,914 other investment income 1,106 1,483 2,443 2,424 net realized investment gains 2,038 182 3,785 503 changes in the estimated fair value of equity security investments (12,172 ) 4,829 (18,087 ) 8,068 other 348 4,147 647 4,355 total revenues 70,902 84,961 139,900 157,039 operating expenses: commissions to agents 33,826 34,346 63,683 64,888 provision for claims 1,310 1,436 1,486 3,027 personnel expenses 20,898 15,914 42,152 32,067 office and technology expenses 4,288 3,211 8,656 5,953 other expenses 7,627 4,766 13,177 8,501 total operating expenses 67,949 59,673 129,154 114,436 income before income taxes 2,953 25,288 10,746 42,603 provision for income taxes 674 5,506 2,282 8,998 net income $ 2,279 $ 19,782 $ 8,464 $ 33,605 basic earnings per common share $ 1.20 $ 10.44 $ 4.46 $ 17.74 weighted average shares outstanding – basic 1,897 1,894 1,897 1,894 diluted earnings per common share $ 1.20 $ 10.42 $ 4.45 $ 17.70 weighted average shares outstanding – diluted 1,899 1,899 1,900 1,898 investors title company and subsidiaries consolidated balance sheets as of june 30, 2022 and december 31, 2021 (in thousands) (unaudited) june 30, 2022 december 31, 2021 assets cash and cash equivalents $ 35,486 $ 37,168 investments: fixed maturity securities, available-for-sale, at fair value 61,385 79,791 equity securities, at fair value 54,901 76,853 short-term investments 71,319 45,930 other investments 19,693 20,298 total investments 207,298 222,872 premiums and fees receivable 25,377 22,953 accrued interest and dividends 733 817 prepaid expenses and other receivables 13,002 11,721 property, net 15,698 13,033 goodwill and other intangible assets, net 18,325 15,951 operating lease right-of-use assets 6,561 5,202 other assets 2,322 1,771 current income taxes receivable 390 — total assets $ 325,192 $ 331,488 liabilities and stockholders’ equity liabilities: reserve for claims $ 36,603 $ 36,754 accounts payable and accrued liabilities 40,044 43,868 operating lease liabilities 6,704 5,329 current income taxes payable — 3,329 deferred income taxes, net 8,662 13,121 total liabilities 92,013 102,401 stockholders’ equity: common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of june 30, 2022 and december 31, 2021, respectively, excluding in each period 292 shares of common stock held by the company's subsidiary) — — retained earnings 232,759 225,861 accumulated other comprehensive income 420 3,226 total stockholders’ equity 233,179 229,087 total liabilities and stockholders’ equity $ 325,192 $ 331,488 investors title company and subsidiaries net premiums written by branch and agency for the three and six months ended june 30, 2022 and 2021 (in thousands) (unaudited) three months ended june 30, six months ended june 30, 2022 % 2021 % 2022 % 2021 % branch $ 16,161 23.2 $ 17,048 25.2 $ 33,579 25.3 $ 34,408 26.7 agency 53,465 76.8 50,479 74.8 99,172 74.7 94,596 73.3 total $ 69,626 100.0 $ 67,527 100.0 $ 132,751 100.0 $ 129,004 100.0 investors title company and subsidiaries appendix a non-gaap measures reconciliation for the three and six months ended june 30, 2022 and 2021 (in thousands) (unaudited) management uses various financial and operational measurements, including financial information not prepared in accordance with generally accepted accounting principles ("gaap"), to analyze company performance. this includes adjusting revenues to remove the impact of changes in the estimated fair value of equity security investments, which are recognized in net income under gaap. management believes that these measures are useful to evaluate the company's internal operational performance from period to period because they eliminate the effects of external market fluctuations. the company also believes users of the financial results would benefit from having access to such information, and that certain of the company’s peers make available similar information. this information should not be used as a substitute for, or considered superior to, measures of financial performance prepared in accordance with gaap, and may be different from similarly titled non-gaap financial measures used by other companies. the following tables reconcile non-gaap financial measurements used by company management to the comparable measurements using gaap: three months ended june 30, six months ended june 30, 2022 2021 2022 2021 revenues total revenues (gaap) $ 70,902 $ 84,961 $ 139,900 $ 157,039 add (subtract): changes in the estimated fair value of equity security investments 12,172 (4,829 ) 18,087 (8,068 ) adjusted revenues (non-gaap) $ 83,074 $ 80,132 $ 157,987 $ 148,971 income before income taxes income before income taxes (gaap) $ 2,953 $ 25,288 $ 10,746 $ 42,603 add (subtract): changes in the estimated fair value of equity security investments 12,172 (4,829 ) 18,087 (8,068 ) adjusted income before income taxes (non-gaap) $ 15,125 $ 20,459 $ 28,833 $ 34,535
