Investors Title pany(ITIC) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results Announcement Investors Title Company reported a decrease in GAAP net income and EPS for Q1 2025 due to investment losses, despite increased revenues from higher premiums and improved adjusted income Financial Highlights for Q1 2025 Investors Title Company reported a decrease in net income and diluted EPS for Q1 2025 compared to the prior year, primarily due to net investment losses, however, revenues increased, driven by higher net premiums written, and adjusted income before income taxes (non-GAAP) showed an increase Net Income and Diluted EPS | Metric | Q1 2025 | Q1 2024 | Change (%) | | :----------------------------- | :------ | :------ | :--------- | | Net Income | $3.2 million | $4.5 million | -28.9% | | Diluted EPS | $1.67 | $2.40 | -30.4% | Total Revenues and Net Premiums Written | Metric | Q1 2025 | Q1 2024 | Change (%) | | :----------------------------- | :------ | :------ | :--------- | | Total Revenues | $56.6 million | $53.5 million | +5.8% | | Net Premiums Written (YoY) | | | +15.3% | - The increase in revenues was primarily due to a 15.3% increase in net premiums written, resulting from higher activity levels across key markets, while revenues were negatively impacted by net investment losses, reflecting overall stock market trends[2] Operating Expenses | Metric | Q1 2025 | Q1 2024 | Change (%) | | :----------------------------- | :------ | :------ | :--------- | | Operating Expenses | $52.5 million | $47.7 million | +10.2% | - Operating expenses increased largely due to higher agent commissions, reflecting growth in agent business, partially offset by a decrease in the provision for claims due to favorable development on known claims, with cost reduction initiatives helping keep other operating expenses only slightly up[3] Income before Income Taxes | Metric | Q1 2025 | Q1 2024 | Change (%) | | :------------------------------------ | :------ | :------ | :--------- | | Income before Income Taxes (GAAP) | $4.1 million | $5.8 million | -29.3% | | Adjusted Income before Income Taxes (non-GAAP) | $5.2 million | $3.4 million | +52.9% | Management Commentary Chairman J. Allen Fine expressed satisfaction with the increase in premiums written, attributing it to modest market improvement and strategic market expansion efforts, noting that while total expenses rose due to higher commissions from increased volume, fixed overhead costs decreased due to ongoing cost-saving measures - Chairman J. Allen Fine was pleased with the increase in premiums written, reflecting modest improvement in market conditions and ongoing efforts to expand market presence[5] - Expenses were up due to higher commissions from increased volume, but fixed overhead costs decreased from the prior year due to ongoing cost-saving measures[5] Company Overview and Forward-Looking Statements This section details Investors Title Company's core business of title insurance and investment services, alongside cautionary statements regarding various operational and market risks Business Description Investors Title Company's core business involves issuing and underwriting title insurance policies through its subsidiaries, additionally, the Company offers investment management services and services related to tax-deferred exchanges of like-kind property - Investors Title Company's subsidiaries issue and underwrite title insurance policies[6] - The Company also provides investment management services and services in connection with tax-deferred exchanges of like-kind property[6] Cautionary Statements Regarding Forward-Looking Statements The report includes cautionary statements about forward-looking information, highlighting that actual results could differ materially due to various risks and uncertainties, including cyclical demand for title insurance, fraud, variances in claims experience, investment performance declines, regulatory changes, economic conditions, inflation, interest rate changes, loss of agency relationships, and challenges in managing growth - Statements regarding future events and trends are forward-looking and involve risks and uncertainties that could cause actual results to differ materially[7] - Key risks include cyclical demand for title insurance, fraud, variances in claims experience, declines in investment performance, changes in government regulations and policy, economic conditions, inflation, interest rate changes, and loss of agency relationships[7] Consolidated Financial Statements This section provides detailed consolidated financial statements, including statements of operations, balance sheets, and a breakdown of direct and agency net premiums written Consolidated Statements of Operations For the three months ended March 31, 2025, total revenues increased to $56.6 million, primarily driven by a significant rise in net premiums written, however, net investment losses negatively impacted overall revenue, and operating expenses also increased, mainly due to higher agent commissions, leading to a decrease in GAAP net income compared to the prior year Revenue Categories | Revenue Category | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :----------------------- | :--------------------- | :--------------------- | | Net premiums written | $46,345 | $40,180 | | Escrow and other title-related fees | $3,892 | $3,723 | | Non-title services | $4,609 | $4,304 | | Interest and dividends | $2,339 | $2,520 | | Other investment income | $410 | $111 | | Net investment (losses) gains | $(1,179) | $2,422 | | Other | $149 | $199 | | Total Revenues | $56,565 | $53,459 | Operating Expense Categories | Operating Expense Category | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :------------------------- | :--------------------- | :--------------------- | | Commissions to agents | $24,857 | $19,870 | | Provision for claims | $323 | $910 | | Personnel expenses | $18,334 | $18,582 | | Office and technology expenses | $4,540 | $4,465 | | Other expenses | $4,458 | $3,835 | | Total Operating Expenses | $52,512 | $47,662 | Income and Earnings per Share | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :----------------------------- | :--------------------- | :--------------------- | | Income before Income Taxes | $4,053 | $5,797 | | Provision for Income Taxes | $882 | $1,272 | | Net Income | $3,171 | $4,525 | | Basic Earnings per Common Share | $1.68 | $2.40 | | Diluted Earnings per Common Share | $1.67 | $2.40 | Consolidated Balance Sheets As of March 31, 2025, total assets remained stable at $333.8 million compared to December 31, 2024, with key changes including an increase in cash and cash equivalents, an increase in fixed maturity securities, and a decrease in equity securities and short-term investments, while total liabilities slightly decreased and total stockholders' equity increased, primarily driven by retained earnings Total Assets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :---------------------------- | :------------------------------- | | Total Assets | $333,781 | $333,571 | Total Liabilities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :---------------------------- | :------------------------------- | | Total Liabilities | $79,369 | $81,798 | Total Stockholders' Equity | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :---------------------------- | :------------------------------- | | Total Stockholders' Equity | $254,412 | $251,773 | Key Asset and Liability Changes | Asset/Liability Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :----------------------- | :---------------------------- | :------------------------------- | :-------------------- | | Cash and cash equivalents | $27,603 | $24,654 | +$2,949 | | Fixed maturity securities | $118,329 | $112,972 | +$5,357 | | Equity securities | $34,589 | $39,893 | -$5,304 | | Short-term investments | $54,141 | $59,101 | -$4,960 | | Reserve for claims | $36,997 | $37,060 | -$63 | | Accounts payable and accrued liabilities | $28,683 | $34,011 | -$5,328 | | Retained earnings | $253,827 | $251,418 | +$2,409 | Direct and Agency Net Premiums Written For the three months ended March 31, 2025, total net premiums written increased to $46.3 million from $40.2 million in the prior year, with the agency channel continuing to be the dominant source, increasing its share to 70.8% of total premiums written, while direct premiums remained relatively stable Net Premiums Written by Channel | Channel | Q1 2025 (in thousands) | % of Total (2025) | Q1 2024 (in thousands) | % of Total (2024) | | :------ | :--------------------- | :---------------- | :--------------------- | :---------------- | | Direct | $13,534 | 29.2% | $13,321 | 33.2% | | Agency | $32,811 | 70.8% | $26,859 | 66.8% | | Total | $46,345 | 100.0% | $40,180 | 100.0% | Non-GAAP Measures Reconciliation This section explains the purpose and provides a reconciliation of non-GAAP financial measures, such as adjusted revenues and adjusted income before income taxes Purpose and Reconciliation of Non-GAAP Measures Management uses non-GAAP financial measures, specifically adjusted revenues and adjusted income before income taxes, to evaluate the Company's internal operational performance by excluding the impact of net investment gains and losses, which helps to remove the effects of external market fluctuations, providing a clearer view of core business performance - Management uses non-GAAP measures to analyze Company performance by removing the impact of net investment gains and losses, which are recognized in net income under GAAP[16] - These non-GAAP measures are useful for evaluating internal operational performance from period to period as they eliminate the effects of external market fluctuations[16] Adjusted Revenues Reconciliation | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Total revenues (GAAP) | $56,565 | $53,459 | | Add (Subtract): Net investment losses (gains) | $1,179 | $(2,422) | | Adjusted revenues (non-GAAP) | $57,744 | $51,037 | Adjusted Income before Income Taxes Reconciliation | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | | Income before income taxes (GAAP) | $4,053 | $5,797 | | Add (Subtract): Net investment losses (gains) | $1,179 | $(2,422) | | Adjusted income before income taxes (non-GAAP) | $5,232 | $3,375 |