Investors title company announces third quarter 2019 financial results
Chapel hill, n.c.--(business wire)--investors title company today announced its results for the third quarter ended september 30, 2019. net income attributable to the company was $8.0 million, or $4.20 per diluted share, versus $10.6 million, or $5.61 per diluted share, for the prior year period. the company set an all-time quarterly record for net premiums written. net premiums written increased 1.9% to $40.2 million, as lower average mortgage interest rates drove an increase in refinance activity, while the level of home sales remained strong as well. revenue from non-title services increased 41.4%, mainly due to increased revenues associated with like-kind exchanges. overall, revenues decreased 0.7% to $47.9 million, compared with $48.3 million in the prior year quarter, mainly due to a $2.5 million decrease in revenue associated with changes in the estimated fair value of equity security investments. operating expenses increased 6.2% versus the prior year quarter, primarily resulting from higher agent commissions commensurate with the increase in premium volume, and reflecting a higher proportion of agent business relative to direct business. claims expense was flat with the prior year period, with relatively low levels of claims activity, and continued favorable loss development from prior year activity. personnel expenses were 4.3% higher than the prior year period due to normal inflationary increases in salaries and benefits. income before income taxes decreased 20.2% to $10.0 million for the current quarter versus $12.6 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) was virtually flat versus the prior year quarter (see appendix a for a reconciliation of gaap to non-gaap measures used in this press release). for the nine months ended september 30, 2019, net income attributable to the company decreased 7.7% to $20.1 million, or $10.59 per diluted share, versus $21.8 million, or $11.47 per diluted share, for the prior year period. revenues increased 5.4% to $130.6 million, mainly due to changes in the estimated fair value of equity security investments and an increase in revenues associated with like-kind exchange services. results for the year-to-date period have been shaped predominantly by the same factors that affected the third quarter, with the exception of a higher provision for claims due to more favorable claims experience in the prior year period. chairman j. allen fine added, “we are pleased to report that in the third quarter, we set a new record level of net premiums written. lower interest rates spurred an increased level of refinance activity, while premiums from home sales remained strong in light of continued strength in the u.s. economy. excluding the impact of unrealized gains in equity securities, revenues (a non-gaap measure) were up 4.8% over 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. 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 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 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; 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, 2018, as filed with the securities and exchange commission, and in subsequent filings. investors title company and subsidiaries consolidated statements of income for the three and nine months ended september 30, 2019 and 2018 (in thousands, except per share amounts) (unaudited) three months ended september 30, nine months ended september 30, 2019 2018 2019 2018 revenues: net premiums written $ 40,169 $ 39,422 $ 103,942 $ 104,123 escrow and other title-related fees 2,393 1,812 5,616 5,465 non-title services 2,539 1,795 7,444 5,083 interest and dividends 1,156 1,138 3,605 3,381 other investment income 708 829 2,044 2,279 net realized investment gains 423 188 1,199 629 changes in the estimated fair value of equity security investments 406 2,920 6,218 2,626 other 145 157 550 387 total revenues 47,939 48,261 130,618 123,973 operating expenses: commissions to agents 19,928 18,490 51,261 48,942 provision for claims 987 997 3,610 155 personnel expenses 11,576 11,096 34,871 33,234 office and technology expenses 2,350 2,208 6,803 6,603 other expenses 3,079 2,910 8,821 8,440 total operating expenses 37,920 35,701 105,366 97,374 income before income taxes 10,019 12,560 25,252 26,599 provision for income taxes 2,067 1,927 5,174 4,873 net income 7,952 10,633 20,078 21,726 net loss attributable to noncontrolling interests — 1 — 31 net income attributable to the company $ 7,952 $ 10,634 $ 20,078 $ 21,757 basic earnings per common share $ 4.21 $ 5.64 $ 10.63 $ 11.53 weighted average shares outstanding – basic 1,889 1,887 1,888 1,886 diluted earnings per common share $ 4.20 $ 5.61 $ 10.59 $ 11.47 weighted average shares outstanding – diluted 1,895 1,897 1,896 1,896 investors title company and subsidiaries consolidated balance sheets as of september 30, 2019 and december 31, 2018 (in thousands) (unaudited) september 30, 2019 december 31, 2018 assets cash and cash equivalents $ 43,992 $ 18,694 investments: fixed maturity securities, available-for-sale, at fair value 85,037 88,957 equity securities, at fair value 55,785 48,489 short-term investments 21,714 32,787 other investments 12,689 12,436 total investments 175,225 182,669 premiums and fees receivable 12,630 12,128 accrued interest and dividends 1,161 946 prepaid expenses and other receivables 6,676 7,288 property, net 9,914 10,304 goodwill and other intangible assets, net 10,401 10,780 operating lease right-of-use assets 4,619 — other assets 1,496 1,459 total assets $ 266,114 $ 244,268 liabilities and stockholders’ equity liabilities: reserve for claims $ 31,805 $ 31,729 accounts payable and accrued liabilities 27,530 27,735 operating lease liabilities 4,622 — current income taxes payable 142 4,981 deferred income taxes, net 6,125 4,184 total liabilities 70,224 68,629 stockholders’ equity: common stock – no par value (10,000 authorized shares; 1,889 and 1,887 shares issued and outstanding as of september 30, 2019 and december 31, 2018, respectively, excluding in each period 292 shares of common stock held by the company's subsidiary) — — retained earnings 192,695 174,690 accumulated other comprehensive income 3,195 949 total stockholders’ equity 195,890 175,639 total liabilities and stockholders’ equity $ 266,114 $ 244,268 investors title company and subsidiaries net premiums written by branch and agency for the three and nine months ended september 30, 2019 and 2018 (in thousands) (unaudited) three months ended september 30, nine months ended september 30, 2019 % 2018 % 2019 % 2018 % branch $ 11,557 28.8 $ 11,905 30.2 $ 29,111 28.0 $ 31,258 30.0 agency 28,612 71.2 27,517 69.8 74,831 72.0 72,865 70.0 total $ 40,169 100.0 $ 39,422 100.0 $ 103,942 100.0 $ 104,123 100.0 investors title company and subsidiaries appendix a non-gaap measures reconciliation for the three and nine months ended september 30, 2019 and 2018 (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, 2019 2018 2019 2018 revenues total revenues (gaap) $ 47,939 $ 48,261 $ 130,618 $ 123,973 subtract: changes in the estimated fair value of equity security investments (406 ) (2,920 ) (6,218 ) (2,626 ) adjusted revenues (non-gaap) $ 47,533 $ 45,341 $ 124,400 $ 121,347 income before income taxes income before income taxes (gaap) $ 10,019 $ 12,560 $ 25,252 $ 26,599 subtract: changes in the estimated fair value of equity security investments (406 ) (2,920 ) (6,218 ) (2,626 ) adjusted income before income taxes (non-gaap) $ 9,613 $ 9,640 $ 19,034 $ 23,973
