Investors title company announces second quarter 2019 financial results
Chapel hill, n.c.--(business wire)--investors title company today announced its results for the second quarter ended june 30, 2019. the company reported net income attributable to the company of $5.5 million, or $2.90 per diluted share, compared to $6.9 million, or $3.66 per diluted share, for the prior year period. revenues increased 1.9% to $42.7 million, compared with $41.9 million in the prior year quarter. while net premiums written remained virtually flat compared with the prior year, revenue from non-title services increased 48.4%, mainly due to increased revenues associated with like-kind exchange services. changes in the estimated fair value of equity security investments resulted in an additional $794 thousand of income versus the prior year. operating expenses increased 8.1% versus the prior year quarter, mainly because of higher claims and personnel expenses. claims expense was higher primarily due to an increase in reserves for a potential large claim, and a higher level of favorable loss development in the prior year period. personnel costs increased as a result of higher staffing levels necessary to support growth and strategic software initiatives. income before income taxes decreased 21.5% to $6.9 million for the current quarter versus $8.8 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 31.8% to $5.8 million for the current quarter versus $8.5 million in the prior year period (see appendix a). for the six months ended june 30, 2019, net income attributable to the company increased 9.0% to $12.1 million, or $6.40 per diluted share, versus $11.1 million, or $5.87 per diluted share, for the prior year period. revenues increased 9.2% to $82.7 million, while operating expenses increased 9.4% to $67.4 million. results for the first half of the year have been shaped predominantly by the same factors that affected the second quarter. chairman j. allen fine added, “overall premium revenues remained stable for the quarter compared with last year. although the pace of home sales has cooled slightly from last year, recent decreases in mortgage interest rates have spurred an uptick in refinance activity. we are encouraged that continued strength in the overall economy will continue to drive high levels of activity in our industry, resulting in another year of solid operating results for the company.” 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 six months ended june 30, 2019 and 2018 (in thousands, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2019 2018 2019 2018 revenues: net premiums written $ 34,978 $ 35,142 $ 63,773 $ 64,701 escrow and other title-related fees 1,901 2,149 3,223 3,653 non-title services 2,517 1,696 4,905 3,288 interest and dividends 1,193 1,125 2,449 2,243 other investment income 926 1,181 1,336 1,450 net realized investment (losses) gains (14 ) 288 776 441 changes in the estimated fair value of equity security investments 1,142 348 5,812 (294 ) other 90 7 405 230 total revenues 42,733 41,936 82,679 75,712 operating expenses: commissions to agents 16,275 16,427 31,333 30,452 provision (benefit) for claims 2,397 564 2,623 (842 ) personnel expenses 11,683 10,798 23,295 22,138 office and technology expenses 2,230 2,326 4,453 4,395 other expenses 3,228 3,007 5,742 5,530 total operating expenses 35,813 33,122 67,446 61,673 income before income taxes 6,920 8,814 15,233 14,039 provision for income taxes 1,420 1,894 3,107 2,946 net income 5,500 6,920 12,126 11,093 net loss attributable to noncontrolling interests — 27 — 30 net income attributable to the company $ 5,500 $ 6,947 $ 12,126 $ 11,123 basic earnings per common share $ 2.91 $ 3.68 $ 6.42 $ 5.90 weighted average shares outstanding – basic 1,889 1,887 1,888 1,886 diluted earnings per common share $ 2.90 $ 3.66 $ 6.40 $ 5.87 weighted average shares outstanding – diluted 1,896 1,897 1,896 1,896 investors title company and subsidiaries consolidated balance sheets as of june 30, 2019 and december 31, 2018 (in thousands) (unaudited) june 30, 2019 december 31, 2018 assets cash and cash equivalents $ 36,677 $ 18,694 investments: fixed maturity securities, available-for-sale, at fair value 86,306 88,957 equity securities, at fair value 55,065 48,489 short-term investments 18,979 32,787 other investments 12,419 12,436 total investments 172,769 182,669 premiums and fees receivable 11,831 12,128 accrued interest and dividends 922 946 prepaid expenses and other receivables 7,002 7,288 property, net 9,997 10,304 goodwill and other intangible assets, net 10,528 10,780 operating lease right-of-use assets 4,660 — other assets 1,495 1,459 current income taxes receivable 613 — total assets $ 256,494 $ 244,268 liabilities and stockholders’ equity liabilities: reserve for claims $ 33,038 $ 31,729 accounts payable and accrued liabilities 25,079 27,735 operating lease liabilities 4,663 — current income taxes payable — 4,981 deferred income taxes, net 5,419 4,184 total liabilities 68,199 68,629 stockholders’ equity: common stock – no par value (10,000 authorized shares; 1,889 and 1,887 shares issued and outstanding as of june 30, 2019 and december 31, 2018, respectively, excluding in each period 292 shares of common stock held by the company's subsidiary) — — retained earnings 185,441 174,690 accumulated other comprehensive income 2,854 949 total stockholders’ equity 188,295 175,639 total liabilities and stockholders’ equity $ 256,494 $ 244,268 investors title company and subsidiaries net premiums written by branch and agency for the three and six months ended june 30, 2019 and 2018 (in thousands) (unaudited) three months ended june 30, six months ended june 30, 2019 % 2018 % 2019 % 2018 % branch $ 10,388 29.7 $ 10,736 30.6 $ 17,554 27.5 $ 19,353 29.9 agency 24,590 70.3 24,406 69.4 46,219 72.5 45,348 70.1 total $ 34,978 100.0 $ 35,142 100.0 $ 63,773 100.0 $ 64,701 100.0 investors title company and subsidiaries appendix a non-gaap measures reconciliation for the three and six months ended june 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 june 30, six months ended june 30, 2019 2018 2019 2018 revenues total revenues (gaap) $ 42,733 $ 41,936 $ 82,679 $ 75,712 (subtract) add: changes in the estimated fair value of equity security investments (1,142 ) (348 ) (5,812 ) 294 adjusted revenues (non-gaap) $ 41,591 $ 41,588 $ 76,867 $ 76,006 income before income taxes income before income taxes (gaap) $ 6,920 $ 8,814 $ 15,233 $ 14,039 (subtract) add: changes in the estimated fair value of equity security investments (1,142 ) (348 ) (5,812 ) 294 adjusted income before income taxes (non-gaap) $ 5,778 $ 8,466 $ 9,421 $ 14,333
