Investors Title Company Announces Record First Quarter 2021 Results

Rhea-AI Summary

Investors Title Company reported record results for Q1 2021, achieving net income of $13.8 million, or $7.29 per diluted share, reversing a $7.0 million loss from the previous year. Revenues surged 141.1% to $72.1 million, driven by a 59.2% increase in net premiums written. While escrow and title-related fees rose, revenues from non-title services fell 18.4%. Operating expenses increased by 42.5%, with a significant rise in commissions and personnel costs. The CEO expressed optimism for ongoing growth in the housing market despite potential increases in interest rates.

Positive

• Net income surged to $13.8 million from a loss of $7.0 million year-over-year.
• Quarterly revenues increased by 141.1% to $72.1 million.
• Net premiums written rose 59.2% to $61.5 million, reflecting strong refinance activity.
• Record performance in all key markets and channels.

Negative

• Operating expenses increased by 42.5%, primarily due to higher commissions and personnel costs.
• Revenues from non-title services decreased by 18.4%.

Investors Title Company today announced record results for the quarter ended March 31, 2021. The Company reported net income of $13.8 million, or $7.29 per diluted share, compared with a net loss of $7.0 million, or $3.71 per diluted share, for the prior year period. The Company set quarterly records for total revenues, net premiums written and net income.

Revenues for the quarter increased 141.1% to $72.1 million, compared to $29.9 million in the prior year period. Net premiums written increased 59.2% to $61.5 million, as lower average interest rates continued to drive strong levels of refinance activity and home sales. While escrow and title-related fees increased commensurate with the growth in premiums, revenues from non-title services decreased 18.4% mainly due to the impact of low interest rates on our like-kind exchange business. Changes in the estimated fair value of equity security investments resulted in a benefit to revenues of $3.2 million, $17.7 million higher than the prior year period, as equity markets continued to rally following the dip from initial impacts of the COVID-19 pandemic in the prior year period.

Operating expenses increased 42.5%, mainly due to a 51.3% increase in commissions to agents commensurate with the increase in agent premium volume. Claims expense was $685,000 higher than the prior year period due to the increase in premium volume, which was partially offset by a higher level of favorable loss development related to recent policy years. Personnel expenses were 36.8% higher due primarily to additions to staffing in support of strategic growth initiatives, additional staffing required to support volume increases, and increased levels of incentive compensation.

Income before income taxes increased $25.8 million to $17.3 million. Excluding the impact of changes in the estimated fair value of investments in equity securities, income before income taxes (non-GAAP) increased 137.4% to $14.1 million (see Appendix A for a reconciliation of this non-GAAP measure to the most directly comparable GAAP measure).

Chairman J. Allen Fine commented, “We are pleased to report another quarter of exceptional operating results. Overall, the quarter was shaped by a continuation of the trends that began last year following the onset of the pandemic. Low interest rates continued to fuel a high level of refinance activity, as well as strong demand for housing. The Company experienced revenue increases in all of its key markets, and across all channels.

“As we enter the second quarter, the outlook for the real estate market for 2021 is drawing more into focus. The view of most economists appears to be that economic growth, fueled by federal stimulus, the rollout of the COVID-19 vaccine, and job growth will increase throughout the year. Although this growth may lead to a higher interest rate environment, we believe mortgage interest rates will likely remain low by historical standards. Refinance activity will almost certainly slow as rates nudge upward, but we believe population demographics, residual demand attributable to supply shortages, and a growing economy will result in a strong housing market for 2021.”

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.

Cautionary Statements Regarding Forward-Looking Statements

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 (including any of its variants) 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 regulations; changes in the economy; changes resulting from President Biden’s administration and Congress; 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, 2020 as filed with the Securities and Exchange Commission, and in subsequent filings.

Investors Title Company and Subsidiaries <

FAQ

What were the net income results for Investors Title Company in Q1 2021?

In Q1 2021, Investors Title Company reported a net income of $13.8 million, or $7.29 per diluted share.

How much did revenues increase for Investors Title Company in Q1 2021?

Revenues for Investors Title Company increased by 141.1% to $72.1 million in Q1 2021.

What factors contributed to the increase in net premiums written for ITIC?

Net premiums written increased by 59.2% to $61.5 million, driven by low average interest rates and strong refinance activity.

What challenges did Investors Title Company face in Q1 2021?

The company faced a decrease of 18.4% in revenues from non-title services and a 42.5% increase in operating expenses.

What is the outlook for the housing market according to Investors Title Company?

The outlook suggests a strong housing market for 2021, despite potential increases in interest rates.