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Investors Title Company Announces Fourth Quarter and Fiscal Year 2014 Results

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Investors Title Company (NASDAQ:ITIC) today announced its results for the fourth quarter and year ended December 31, 2014. For the year, net income attributable to the Company decreased 34.4% to $9,648,975, or $4.74 per diluted share, versus $14,708,210, or $7.08 per diluted share, for the prior year. For the quarter, net income attributable to the Company increased 48.9% to $2,694,449, or $1.33 per diluted share, versus $1,810,007, or $0.88 per diluted share, for the prior year period.

Revenues for the year decreased 2.5% to $123,119,286 versus the prior year, primarily due to lower premium volumes. Revenues from purchase activity increased versus last year, due to a slight increase in volume as well as higher real estate values. However, the increase in purchase business was not enough to offset the decline in refinance business, which has fallen significantly across all of our markets due to unfavorable interest rate trends.

Operating expenses increased 4.7% to $109,630,788 versus the prior year, chiefly as a result of a reduction in the reserves for claims in the prior year period. The prior period reduction reflected a change in estimate related to certain actuarial assumptions stemming from improved claims experience in recent policy years. Office and occupancy expenses, as well as professional fees and contract labor, also increased largely as a result of long-term software development initiatives.

For the quarter, total revenues decreased 0.5% versus the prior year period mainly due to minor fluctuations in the mix of business. Operating expenses decreased 4.7%, mainly due to a reduction in the provision for claims, a decline in commissions to agents commensurate with lower premium volumes, and a decrease in retaliatory taxes.

Chairman J. Allen Fine commented, “Despite reductions in the number of mortgage originations in 2014 versus the prior year, we are pleased to report that our revenues contracted only slightly, due to market share increases driven by targeted expansions in our agent network. Although claims payments increased for the year, lower levels of foreclosure activity and our internal risk management efforts led to a continuation of a long-term overall favorable trend in claims provision rates. Our balance sheet and financial condition remain strong, as total assets reached a record level of $198 million. Looking forward, while we realize there are a number of uncertain influences such as the impact of oil price changes and regulatory activities, we remain optimistic about the long-term prospects for the U.S. housing market. We will continue to focus on profitably growing our business by enhancing our competitive strengths and capitalizing on market opportunities.”

Investors Title Company’s subsidiaries issue and underwrite title insurance policies. The Company also provides investment management services to individuals, companies, banks and trusts, as well as services in connection with tax-deferred exchanges of like-kind property.

Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, among others, any statements regarding future home price increases, changes in home purchase or refinance activity, interest rate changes, expansion of the Company’s market presence, enhancing competitive strengths 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 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, 2013, 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, 2014 and 2013

Three Months Ended
December 31,

Twelve Months Ended
December 31,

2014 2013 2014 2013
Revenues:
Net premiums written $ 28,847,616 $ 29,098,948 $ 109,963,556 $ 113,886,266
Investment income – interest and dividends 1,128,655 1,058,738 4,259,501 3,894,608
Net realized (loss) gain on investments (324,614 ) (137,754 ) 268,294 195,800
Other 2,283,772 2,084,653 8,627,935 8,274,823
Total Revenues 31,935,429 32,104,585 123,119,286 126,251,497
Operating Expenses:
Commissions to agents 17,389,430 17,909,893 65,632,353 67,150,810
Provision (benefit) for claims 1,052,238 1,857,693 5,229,716 (571,596 )
Salaries, employee benefits and payroll taxes 5,968,109 5,852,541 25,218,225 25,386,511
Office occupancy and operations 1,365,982 1,164,108 5,049,962 4,430,220
Business development 751,619 658,004 2,333,491 2,145,639
Filing fees, franchise and local taxes 169,887 171,042 817,909 681,935
Premium and retaliatory taxes 519,275 994,463 1,851,767 2,558,227
Professional and contract labor fees 700,211 656,857 2,676,483 2,171,606
Other 164,229 195,237 820,882 755,407
Total Operating Expenses 28,080,980 29,459,838 109,630,788 104,708,759
Income before Income Taxes 3,854,449 2,644,747 13,488,498 21,542,738
Provision for Income Taxes 1,160,000 802,000 3,816,000 6,746,000
Net Income 2,694,449 1,842,747 9,672,498 14,796,738
Net Income Attributable to Redeemable Noncontrolling Interest - (32,740 ) (23,523 ) (88,528 )
Net Income Attributable to the Company $ 2,694,449 $ 1,810,007 $ 9,648,975 $ 14,708,210
Basic Earnings per Common Share $ 1.33 $ 0.88 $ 4.75 $ 7.15
Weighted Average Shares Outstanding – Basic 2,026,125 2,046,998 2,031,760 2,056,169
Diluted Earnings per Common Share $ 1.33 $ 0.88 $ 4.74 $ 7.08
Weighted Average Shares Outstanding – Diluted 2,031,660 2,053,567 2,037,534 2,076,628

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2014 and 2013

(Unaudited)

December 31,
2014
December 31,
2013
Assets:
Investments in securities:
Fixed maturities, available-for-sale, at fair value $ 109,048,290 $ 91,445,413
Equity securities, available-for-sale, at fair value 39,254,981 36,144,065
Short-term investments 2,576,993 7,926,373
Other investments 8,530,929 7,247,831
Total investments 159,411,193 142,763,682
Cash and cash equivalents 15,826,515 23,626,761
Premium and fees receivable 8,544,183 8,750,224
Accrued interest and dividends 1,063,837 1,006,698
Prepaid expenses and other assets 7,732,677 7,466,141
Property, net 5,460,805 4,325,538
Current income taxes recoverable - 366,772
Total Assets $ 198,039,210 $ 188,305,816
Liabilities and Stockholders’ Equity
Liabilities:
Reserves for claims $ 36,677,000 $ 35,360,000
Accounts payable and accrued liabilities 18,290,819 20,324,190
Current income taxes payable 92,192
Deferred income taxes, net 5,415,493 4,013,983
Total liabilities 60,475,504 59,698,173
Redeemable Noncontrolling Interest - 545,489
Stockholders’ Equity:
Common stock – no par value (10,000,000 authorized shares; 2,023,270
and 2,037,135 shares issued and outstanding 2014 and 2013,
respectively, excluding 291,676 shares for 2014 and 2013 of common
stock held by the Company’s subsidiary) 1 1
Retained earnings 124,707,196 116,714,749
Accumulated other comprehensive income 12,856,509 11,347,404
Total stockholders’ equity 137,563,706 128,062,154
Total Liabilities and Stockholders’ Equity $ 198,039,210 $ 188,305,816

Investors Title Company and Subsidiaries

Net Premiums Written By Branch and Agency

For the Three and Twelve Months Ended December 31, 2014 and 2013

Three Months Ended December 31, Twelve Months Ended December 31,
2014 % 2013 % 2014 % 2013 %
Branch $ 6,134,866 21.3 $ 5,064,864 17.4 $ 24,057,032 21.9 $ 24,811,602 21.8
Agency 22,712,750 78.7 24,034,084 82.6 85,906,524 78.1 89,074,664 78.2
Total $ 28,847,616 100.0 $ 29,098,948 100.0 $ 109,963,556 100.0 $ 113,886,266 100.0

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