Investors Title Company Announces Fourth Quarter and Fiscal Year 2018 Results
CHAPEL HILL, N.C.--(BUSINESS WIRE)--Feb 8, 2019--Investors Title Company (NASDAQ: ITIC) today announced its results for the fourth quarter and year ended December 31, 2018.
For the year, net income attributable to the Company decreased 14.8% to $21.9 million, or $11.54 per diluted share, versus $25.7 million, or $13.56 per diluted share, in the prior year. For the quarter, net income attributable to the Company decreased to $135,000, or $0.07 per diluted share, versus $9.6 million, or $5.08 per diluted share, in the prior year period.
Income before income taxes declined to $470,000 and $27.1 million for the quarter and year ended December 31, 2018, versus $6.6 million and $30.3 million in the prior year periods, respectively, primarily due to the January 1, 2018 implementation of a new accounting standard requiring unrealized changes in the market value of equity investments to be included in income. The Company recorded net unrealized losses on equity investments totaling $6.8 million and $4.1 million for the current quarter and year, respectively. Excluding the impact of the new accounting standard, income before income taxes (non-GAAP) would have increased to $7.2 million and $31.2 million for the quarter and year ended December 31, 2018 (see Appendix A). In addition, net income for the prior year quarter included a $5.3 million tax benefit related to revaluation of deferred tax assets and liabilities as a result of lower effective rates included in the federal tax reform package enacted in December 2017.
Revenues for the year decreased 3.3% to $156.3 million, compared with $161.6 million in the prior year. The majority of the revenue decrease is attributable to the net unrealized loss on equity investments totaling $4.1 million in the current year, compared with a net realized gain totaling $1.0 million in the prior year. Net premiums written decreased 1.7% mainly due to a decline in refinance activity, partially offset by an increase in purchase activity and higher real estate values. Revenues from non-title services increased primarily due to higher levels of like-kind property exchange transactions. Higher earnings from partnership investments drove increases in other investment income.
Operating expenses decreased 1.6% to $129.2 million, compared with $131.4 million in the prior year. Agent commissions were down commensurate with the decreases in associated revenues. Personnel costs increased primarily as a result of higher staffing levels related to the support of growth and technology initiatives, and due to normal inflationary increases in salaries and benefits. A claims benefit was recorded in the current year primarily due to reserve reductions reflecting favorable loss experience in prior years. In addition, the Company’s net income benefitted from the tax rate reduction associated with recent tax reform legislation.
The quarter was shaped predominantly by the same factors that affected the year.
Chairman J. Allen Fine commented, “We are pleased to report another year of solid operating performance for the Company. Premiums from home purchase activity remained strong throughout the year, as economic growth continues to support a high level of home sales and increases in average real estate values. Premium growth from purchase activity and expansion of our agency footprint largely offset the impact of reductions in premiums related to mortgage refinance activity. The Company continues to experience a low level of claims, due to market factors such as low foreclosure rates, as well as a proactive approach to risk management.
“As we head into 2019 we are optimistic about the market, and we remain focused on enhancing our competitive strengths and expanding our market presence over the long term.”
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, 2017, as filed with the Securities and Exchange Commission, and in subsequent filings.
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 unrealized investment gains and losses reported 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:
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CONTACT: Elizabeth B. Lewter
KEYWORD: UNITED STATES NORTH AMERICA NORTH CAROLINA
INDUSTRY KEYWORD: PROFESSIONAL SERVICES INSURANCE
SOURCE: Investors Title Company
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PUB: 02/08/2019 08:29 AM/DISC: 02/08/2019 08:29 AM