Investors title company announces record third quarter 2020 financial results
Chapel hill, n.c.--(business wire)--investors title company today announced results for the third quarter ended september 30, 2020. the company reported net income of $15.3 million, or $8.07 per diluted share, for the three months ended september 30, 2020, compared to $8.0 million, or $4.20 per diluted share, for the prior year period. all-time quarterly records were set for total revenues, net premiums written, and net income. revenues increased 41.1% to $67.6 million, compared with $47.9 million for the prior year quarter. net premiums written increased 42.4% to $57.2 million, as lower average mortgage interest rates continued to drive increases in refinance activity, while the level of home sales remained strong as well. revenue from non-title services decreased 23.0%, mainly due to the impact of the interest rate environment on like-kind exchange revenues. changes in the estimated fair value of equity security investments resulted in the recognition of $3.6 million of revenue as stock values continued to rebound from declines in the first quarter associated with the covid-19 pandemic. operating expenses increased 28.6%, as higher premium volumes drove increases in commissions to agents and claims expense. personnel costs were 8.6% higher than the prior year due to normal inflationary increases, higher staffing levels to accommodate volume growth, and targeted staff increases to support strategic growth initiatives. income before income taxes increased 88.2% to $18.9 million for the current quarter versus $10.0 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) increased 58.5% to $15.2 million for the current quarter versus $9.6 million in the prior year period (see appendix a for a reconciliation of gaap to non-gaap measures used in this press release). for the nine months ended september 30, 2020, net income increased 13.5% to $22.8 million, or $12.02 per diluted share, versus $20.1 million, or $10.59 per diluted share, for the prior year period. revenues increased 21.9% to $159.3 million, notwithstanding the recognition of $2.9 million of reductions in the estimated fair value of equity investments, compared with $130.6 million for the prior year period, which included a $6.2 million increase in the estimated fair value of equity investments. operating expenses increased 24.4% to $131.0 million, mainly due to increases in agent commissions. aside from the particularly strong revenue growth in the third quarter, overall results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter. chairman j. allen fine added, “we are pleased to report an exceptionally strong third quarter, exceeding all prior company quarterly records for revenues and earnings. as mortgage interest rates hovered just below three percent for most of the quarter, the level of refinance activity continued at a pace similar to the second quarter, and well above the prior year. in addition, title premiums from home sales, sustained by low interest rates and rising real estate values, increased substantially relative to both the previous quarter and the prior year quarter.” 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. 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, positive 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 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 regulation; changes in the economy; the impact of the 2020 u.s. presidential election; 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, 2019, 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 nine months ended september 30, 2020 and 2019 (in thousands, except per share amounts) (unaudited) three months ended september 30, nine months ended september 30, 2020 2019 2020 2019 revenues: net premiums written $ 57,205 $ 40,169 $ 143,311 $ 103,942 escrow and other title-related fees 2,154 2,393 6,014 5,616 non-title services 1,954 2,539 6,476 7,444 interest and dividends 1,060 1,156 3,342 3,605 other investment income 1,270 708 2,236 2,044 net realized investment gains 186 423 327 1,199 changes in the estimated fair value of equity security investments 3,619 406 (2,867) 6,218 other 185 145 443 550 total revenues 67,633 47,939 159,282 130,618 operating expenses: commissions to agents 29,068 19,928 73,344 51,261 provision for claims 1,552 987 4,452 3,610 personnel expenses 12,575 11,576 36,632 34,871 office and technology expenses 2,456 2,350 7,328 6,803 other expenses 3,125 3,079 9,276 8,821 total operating expenses 48,776 37,920 131,032 105,366 income before income taxes 18,857 10,019 28,250 25,252 provision for income taxes 3,556 2,067 5,465 5,174 net income $ 15,301 $ 7,952 $ 22,785 $ 20,078 basic earnings per common share $ 8.09 $ 4.21 $ 12.04 $ 10.63 weighted average shares outstanding – basic 1,892 1,889 1,892 1,888 diluted earnings per common share $ 8.07 $ 4.20 $ 12.02 $ 10.59 weighted average shares outstanding – diluted 1,895 1,895 1,896 1,896 consolidated balance sheets as of september 30, 2020 and december 31, 2019 (in thousands) (unaudited) september 30, 2020 december 31, 2019 assets cash and cash equivalents $ 41,534 $ 25,949 investments: fixed maturity securities, available-for-sale, at fair value 98,428 104,638 equity securities, at fair value 58,851 61,108 short-term investments 22,516 13,134 other investments 14,829 13,982 total investments 194,624 192,862 premiums and fees receivable 17,291 12,523 accrued interest and dividends 1,187 1,033 prepaid expenses and other receivables 9,185 5,519 property, net 10,669 9,776 goodwill and other intangible assets, net 9,897 10,275 operating lease right-of-use assets 3,798 4,469 other assets 1,560 1,487 total assets $ 289,745 $ 263,893 liabilities and stockholders’ equity liabilities: reserve for claims $ 33,532 $ 31,333 accounts payable and accrued liabilities 31,565 28,318 operating lease liabilities 3,937 4,502 current income taxes payable 813 1,340 deferred income taxes, net 6,971 7,038 total liabilities 76,818 72,531 stockholders’ equity: common stock – no par value (10,000 authorized shares; 1,892 and 1,889 shares issued and outstanding as of september 30, 2020 and december 31, 2019, respectively, excluding in each period 292 shares of common stock held by the company's subsidiary) — — retained earnings 208,647 188,262 accumulated other comprehensive income 4,280 3,100 total stockholders’ equity 212,927 191,362 total liabilities and stockholders’ equity $ 289,745 $ 263,893 net premiums written by branch and agency for the three and nine months ended september 30, 2020 and 2019 (in thousands) (unaudited) three months ended september 30, nine months ended september 30, 2020 % 2019 % 2020 % 2019 % branch $ 15,496 27.1 $ 11,557 28.8 $ 38,364 26.8 $ 29,111 28.0 agency 41,709 72.9 28,612 71.2 104,947 73.2 74,831 72.0 total $ 57,205 100.0 $ 40,169 100.0 $ 143,311 100.0 $ 103,942 100.0 investors title company and subsidiaries appendix a non-gaap measures reconciliation for the three and nine months ended september 30, 2020 and 2019 (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 september 30, nine months ended september 30, 2020 2019 2020 2019 revenues total revenues (gaap) $ 67,633 $ 47,939 $ 159,282 $ 130,618 (subtract) add: changes in the estimated fair value of equity security investments (3,619) (406) 2,867 (6,218) adjusted revenues (non-gaap) $ 64,014 $ 47,533 $ 162,149 $ 124,400 income before income taxes income before income taxes (gaap) $ 18,857 $ 10,019 $ 28,250 $ 25,252 (subtract) add: changes in the estimated fair value of equity security investments (3,619) (406) 2,867 (6,218) adjusted income before income taxes (non-gaap) $ 15,238 $ 9,613 $ 31,117 $ 19,034
