Investors Title
Company today announced results for the fourth quarter and year
ended December 31, 2019.
For the year, net income attributable to the Company increased
43.7% to a record $31.5 million, or $16.59 per diluted share,
versus $21.9 million, or $11.54 per diluted share, in the prior
year. For the quarter, net income attributable to the Company
increased to a record $11.4 million, or $6.00 per diluted share,
versus $135,000, or $0.07 per diluted share, in the prior year
period.
Revenues for the year increased 17.4% to a record $183.5
million, compared with $156.3 million in the prior year. Revenues
benefitted from a $10.3 million increase in the fair value of
equity security investments, compared to a $4.1 million decrease in
the fair value of equity security investments in the prior year. In
addition, net premiums written increased 5.6% to $145.8 million, a
new record. The increase in premiums stemmed from a favorable
interest rate environment, continued increases in home prices and a
high level of home sales activity. Finally, revenues from non-title
services increased $2.8 million due mainly to growth in our
like-kind property exchange business.
Operating expenses increased 11.2% to $143.7 million, compared
with $129.2 million in the prior year. Higher premium levels drove
an increase in agent commissions. Personnel expenses increased due
to normal inflationary increases in salaries and benefits, growth
in staffing levels associated with higher activity levels and
targeted investments in key areas of our business, and continued
support of multi-year technology initiatives. The claims provision
was higher due to less favorable loss development and higher
incurred claims in the current period.
Income before income taxes increased to $14.6 million and $39.8
million for the quarter and year ended December 31, 2019, versus
$470,000 and $27.1 million in the prior year periods, respectively.
Excluding the impact of changes in the fair value of equity
security investments, income before income taxes (non-GAAP)
increased $3.3 million in the current quarter and decreased $1.7
million in the current year compared with the same periods in the
prior year (see Appendix A for a reconciliation of GAAP to non-GAAP
measures used in this press release.)
Chairman J. Allen Fine commented, “We are pleased to report
another year of strong performance for the Company. For both the
quarter and the year, the Company set new records for revenues,
premiums, and earnings. A strong economy led to another year of
increases in the level of home sales and average real estate
values, while historically low interest rates drove a sharp
increase in the level of refinance activity.
Even though claims expense increased, we continued to experience
a low level of overall claims activity. We believe this is the
result of market factors driving foreclosure rates to pre-recession
levels, as well as our own efforts to improve the risk profile of
our Company and our business partners.
As we head into the new year, we are optimistic that the
strength in the economy will result in conditions favorable for
continued strength in the real estate market. Regardless of market
conditions, however, we remain focused on enhancing our competitive
strengths, profitably expanding our market presence, and
strengthening our financial position.”
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 Twelve
Months Ended December 31, 2019 and 2018
(in thousands, except per
share amounts)
(unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Revenues:
Net premiums written
$
41,900
$
34,002
$
145,842
$
138,125
Escrow and other title-related fees
1,858
1,631
7,474
7,096
Non-title services
2,478
1,999
9,922
7,082
Interest and dividends
1,147
1,238
4,752
4,619
Other investment income
1,147
828
3,191
3,107
Net realized investment gains (losses)
141
(739
)
1,340
(110
)
Changes in the estimated fair value of
equity security investments
4,085
(6,756
)
10,303
(4,130
)
Other
128
83
678
470
Total Revenues
52,884
32,286
183,502
156,259
Operating Expenses:
Commissions to agents
21,519
16,833
72,780
65,775
(Benefit) Provision for claims
(78
)
(487
)
3,532
(332
)
Personnel expenses
11,187
10,318
46,058
43,552
Office and technology expenses
2,451
2,210
9,254
8,813
Other expenses
3,234
2,942
12,055
11,382
Total Operating Expenses
38,313
31,816
143,679
129,190
Income before Income Taxes
14,571
470
39,823
27,069
Provision for Income Taxes
3,191
337
8,365
5,210
Net Income
11,380
133
31,458
21,859
Net Loss Attributable to Noncontrolling
Interests
—
2
—
33
Net Income Attributable to the
Company
$
11,380
$
135
$
31,458
$
21,892
Basic Earnings per Common Share
$
6.03
$
0.07
$
16.66
$
11.60
Weighted Average Shares Outstanding –
Basic
1,889
1,887
1,888
1,887
Diluted Earnings per Common
Share
$
6.00
$
0.07
$
16.59
$
11.54
Weighted Average Shares Outstanding –
Diluted
1,896
1,896
1,896
1,897
Investors Title Company and
Subsidiaries
Consolidated Balance
Sheets
As of December 31, 2019 and
2018
(in thousands)
(unaudited)
December 31, 2019
December 31, 2018
Assets
Cash and cash equivalents
$
25,949
$
18,694
Investments:
Fixed maturity securities,
available-for-sale, at fair value
104,638
88,957
Equity securities, at fair value
61,108
48,489
Short-term investments
13,134
32,787
Other investments
13,982
12,436
Total investments
192,862
182,669
Premiums and fees receivable
12,523
12,128
Accrued interest and dividends
1,033
946
Prepaid expenses and other receivables
5,519
7,288
Property, net
9,776
10,304
Goodwill and other intangible assets,
net
10,275
10,780
Operating lease right-of-use assets
4,469
—
Other assets
1,487
1,459
Total Assets
$
263,893
$
244,268
Liabilities and Stockholders’
Equity
Liabilities:
Reserve for claims
$
31,333
$
31,729
Accounts payable and accrued
liabilities
28,318
27,735
Operating lease liabilities
4,502
—
Current income taxes payable
1,340
4,981
Deferred income taxes, net
7,038
4,184
Total liabilities
72,531
68,629
Stockholders’ Equity:
Common stock – no par value (10,000
authorized shares; 1,889 and 1,887 shares issued and outstanding as
of December 31, 2019 and 2018, respectively, excluding in each
period 292 shares of common stock held by the Company's
subsidiary)
—
—
Retained earnings
188,262
174,690
Accumulated other comprehensive income
3,100
949
Total stockholders’ equity
191,362
175,639
Total Liabilities and Stockholders’
Equity
$
263,893
$
244,268
Investors Title Company and
Subsidiaries
Net Premiums Written By Branch
and Agency
For the Three and Twelve
Months Ended December 31, 2019 and 2018
(in thousands)
(unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
%
2018
%
2019
%
2018
%
Branch
$
11,527
27.5
$
10,047
29.5
$
40,638
27.9
$
41,305
29.9
Agency
30,373
72.5
23,955
70.5
105,204
72.1
96,820
70.1
Total
$
41,900
100.0
$
34,002
100.0
$
145,842
100.0
$
138,125
100.0
Investors Title Company and Subsidiaries
Appendix A Non-GAAP Measures Reconciliation For the Three and
Twelve Months Ended December 31, 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 December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Revenues
Total revenues (GAAP)
$
52,884
$
32,286
$
183,502
$
156,259
Subtract: Changes in the estimated fair
value of equity security investments
(4,085
)
6,756
(10,303
)
4,130
Adjusted revenues (non-GAAP)
$
48,799
$
39,042
$
173,199
$
160,389
Income before Income Taxes
Income before income taxes (GAAP)
$
14,571
$
470
$
39,823
$
27,069
Subtract: Changes in the estimated fair
value of equity security investments
(4,085
)
6,756
(10,303
)
4,130
Adjusted income before income taxes
(non-GAAP)
$
10,486
$
7,226
$
29,520
$
31,199
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Elizabeth B. Lewter (919) 968-2200
Investors Title (NASDAQ:ITIC)
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