Investors title company announces first quarter 2023 results
Chapel hill, n.c.--(business wire)--investors title company (nasdaq: itic) today announced results for the quarter ended march 31, 2023. the company reported net income of $1.2 million, or $0.62 per diluted share, compared with net income of $6.2 million, or $3.25 per diluted share, for the prior year period. revenues decreased 25.6% to $51.3 million, compared to $69.0 million in the prior year period, primarily as a result of decreases of 38.3% in revenues related to our title insurance business. the reductions in net premiums written and escrow and other title-related fees are attributable to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates and ongoing housing supply constraints. the decline in title insurance revenues was partially offset by increases in non-title services, primarily like-kind exchanges, and net realized investment gains. the sale of appreciated investment securities during the period resulted in a reduction in unrealized gains as they were reclassified to net realized investment gains, which is not indicative of a decline in estimated fair value. operating expenses decreased 18.7% compared to the prior year period, mainly due to a $10.5 million decline in commissions to agents commensurate with the decrease in agent premium volume. the decrease in operating expenses was partially offset by an $892 thousand increase in the provision for claims, which resulted primarily from a lower level of favorable loss development as compared to the prior year period. personnel, office, and technology expenses remained relatively consistent with the prior year period, primarily due to growth initiatives and continued expansion of our geographic footprint. chairman j. allen fine commented, “the title insurance industry continued to experience economic headwinds in the first quarter. while mortgage rates declined slightly from the prior quarter, the overall higher level continued to negatively impact home sales and commercial real estate activity. higher interest rates in the financial markets did help partially offset the decline in real estate activity by providing the ability to increase our investment income. “regardless of the recent softness in the real estate market, we are still finding opportunities to enhance our operational capabilities and expand our presence in new and existing markets. we possess a very strong balance sheet which affords us the strength to continue to make investments in the future, even in market downturns. as always, we strive to maintain a disciplined financial approach, balancing the need for short-term expense management with long-term investments in our business.” 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, 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 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; the impact of the covid-19 pandemic (including any of its variants) on the economy and the company’s business; 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, 2022 as filed with the securities and exchange commission, and in subsequent filings. investors title company and subsidiaries consolidated statements of operations for the three months ended march 31, 2023 and 2022 (in thousands, except per share amounts) (unaudited) three months ended march 31, 2023 2022 revenues: net premiums written $ 38,966 $ 63,125 escrow and other title-related fees 3,125 5,064 non-title services 5,842 2,426 interest and dividends 2,074 915 other investment income 753 1,337 net realized investment gains 7,233 1,747 changes in the estimated fair value of equity security investments (6,790 ) (5,915 ) other 140 299 total revenues 51,343 68,998 operating expenses: commissions to agents 19,326 29,857 provision for claims 1,068 176 personnel expenses 20,820 21,254 office and technology expenses 4,400 4,368 other expenses 4,168 5,550 total operating expenses 49,782 61,205 income before income taxes 1,561 7,793 provision for income taxes 380 1,608 net income $ 1,181 $ 6,185 basic earnings per common share $ 0.62 $ 3.26 weighted average shares outstanding – basic 1,897 1,896 diluted earnings per common share $ 0.62 $ 3.25 weighted average shares outstanding – diluted 1,897 1,903 investors title company and subsidiaries consolidated balance sheets as of march 31, 2023 and december 31, 2022 (in thousands) (unaudited) march 31, 2023 december 31, 2022 assets cash and cash equivalents $ 29,555 $ 35,311 investments: fixed maturity securities, available-for-sale, at fair value 52,210 53,989 equity securities, at fair value 42,800 51,691 short-term investments 105,662 103,649 other investments 18,948 18,368 total investments 219,620 227,697 premiums and fees receivable 16,827 19,047 accrued interest and dividends 915 872 prepaid expenses and other receivables 11,315 11,095 property, net 19,154 17,785 goodwill and other intangible assets, net 17,265 17,611 lease assets 6,671 6,707 other assets 2,475 2,458 current income taxes recoverable — 1,174 total assets $ 323,797 $ 339,757 liabilities and stockholders’ equity liabilities: reserve for claims $ 36,918 $ 37,192 accounts payable and accrued liabilities 31,216 47,050 lease liabilities 6,826 6,839 current income taxes payable 1,148 — deferred income taxes, net 5,851 7,665 total liabilities 81,959 98,746 stockholders’ equity: common stock – no par value (10,000 authorized shares; 1,898 and 1,897 shares issued and outstanding as of march 31, 2023 and december 31, 2022, respectively, excluding in each period 292 shares of common stock held by the company's subsidiary) — — retained earnings 241,278 240,811 accumulated other comprehensive income 560 200 total stockholders’ equity 241,838 241,011 total liabilities and stockholders’ equity $ 323,797 $ 339,757 investors title company and subsidiaries direct and agency net premiums written for the three months ended march 31, 2023 and 2022 (in thousands) (unaudited) three months ended march 31, 2023 % 2022 % direct $ 12,714 32.6 $ 22,692 35.9 agency 26,252 67.4 40,433 64.1 total $ 38,966 100.0 $ 63,125 100.0 investors title company and subsidiaries appendix a non-gaap measures reconciliation for the three months ended march 31, 2023 and 2022 (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 the company's 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. note that, in periods with significant sales of investment securities, unrealized gains/losses as presented may not necessarily reflect portfolio performance due to reclassifications of unrealized gains/losses to realized gains/losses when such sales are made. management believes that these non-gaap 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 march 31, 2023 2022 revenues total revenues (gaap) $ 51,343 $ 68,998 add: changes in the estimated fair value of equity security investments 6,790 5,915 adjusted revenues (non-gaap) $ 58,133 $ 74,913 income before income taxes income before income taxes (gaap) $ 1,561 $ 7,793 add: changes in the estimated fair value of equity security investments 6,790 5,915 adjusted income before income taxes (non-gaap) $ 8,351 $ 13,708
