Company Quick10K Filing
Investors Title
Price155.27 EPS11
Shares2 P/E15
MCap294 P/FCF30
Net Debt-44 EBIT25
TEV250 TEV/EBIT10
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
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ITIC 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Reserve for Claims
Note 3 - Earnings per Common Share and Share Awards
Note 4 - Segment Information
Note 5 - Retirement Agreements and Other Postretirement Benefits
Note 6 - Investments and Estimated Fair Value
Note 7 - Commitments and Contingencies
Note 8 - Related Party Transactions
Note 9 - Intangible Assets, Goodwill and Title Plant
Note 10 - Accumulated Other Comprehensive Income
Note 11 - Revenue From Contracts with Customers
Note 12 - Leases
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 itic_20200331xex-311.htm
EX-31.2 itic_20200331xex-312.htm
EX-32 itic_20200331xex-32.htm

Investors Title Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2702161621085402012201420172020
Assets, Equity
504030201002012201420172020
Rev, G Profit, Net Income
1593-3-9-152012201420172020
Ops, Inv, Fin

10-Q 1 itic20200331-10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________________  to ___________________

Commission File Number:  0-11774
 
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
 
North Carolina
 
 
 
56-1110199
 
 
(State of incorporation)
 
 
 
(I.R.S. Employer Identification No.)
 
                                        
121 North Columbia Street, Chapel Hill, North Carolina 27514
(Address of principal executive offices)  (Zip Code)

(919) 968-2200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, no par value
 
ITIC
 
The NASDAQ Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred Stock
 
 
 
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 21, 2020, there were 1,891,181 common shares of the registrant outstanding.




INVESTORS TITLE COMPANY
AND SUBSIDIARIES

INDEX
 
PART I.
FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements:
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019
 
 
 
 
Consolidated Statements of Operations For the Three Months Ended March 31, 2020 and 2019
 
 
 
 
 

 
 
Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2020 and 2019
 
 
 
 
Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2020 and 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
Legal Proceedings
 
 
 
Risk Factors
 
 
 
 
 
 
Item 3.
Defaults Upon Senior Securities
 
 
 
Item 4.
Mine Safety Disclosures
 
 
 
Item 5.
Other Information
 
 
 
 
 
 
 




PART I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of March 31, 2020 and December 31, 2019
(in thousands)
(unaudited)
 
March 31,
2020
 
December 31,
2019
Assets
 
 
 
Cash and cash equivalents
$
25,324

 
$
25,949

Investments:
 
 
 
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2020: $97,390; December 31, 2019: $100,667)
101,421

 
104,638

Equity securities, at fair value (cost: March 31, 2020: $34,903; December 31, 2019: $33,570)
47,983

 
61,108

Short-term investments
15,641

 
13,134

Other investments
14,229

 
13,982

Total investments
179,274

 
192,862

 
 
 
 
Premium and fees receivable
12,330

 
12,523

Accrued interest and dividends
1,243

 
1,033

Prepaid expenses and other receivables
10,026

 
5,519

Property, net
9,959

 
9,776

Goodwill and other intangible assets, net
10,149

 
10,275

Operating lease right-of-use assets
4,300

 
4,469

Other assets
1,513

 
1,487

Total Assets
$
254,118

 
$
263,893

 
 
 
 
Liabilities and Stockholders’ Equity
 

 
 

Liabilities:
 

 
 

Reserve for claims
$
31,407

 
$
31,333

Accounts payable and accrued liabilities
27,816

 
28,318

Operating lease liabilities
4,337

 
4,502

Current income taxes payable
2,921

 
1,340

Deferred income taxes, net
3,990

 
7,038

Total liabilities
70,471

 
72,531

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Stockholders’ Equity:
 

 
 

Preferred stock (1,000 authorized shares; no shares issued)

 

Common stock – no par value (10,000 authorized shares; 1,891 and 1,889 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively, excluding in each period 292 shares of common stock held by the Company)

 

Retained earnings
180,535

 
188,262

Accumulated other comprehensive income
3,112

 
3,100

Total stockholders' equity
183,647

 
191,362

Total Liabilities and Stockholders’ Equity
$
254,118

 
$
263,893


Refer to notes to the Consolidated Financial Statements.

1



Investors Title Company and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended March 31, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Revenues:
 
 
 
Net premiums written
$
38,627

 
$
28,795

Escrow and other title-related fees
1,842

 
1,322

Non-title services
2,547

 
2,388

Interest and dividends
1,177

 
1,256

Other investment income
440

 
410

Net realized investment (losses) gains
(412
)
 
790

Changes in the estimated fair value of equity security investments
(14,458
)
 
4,670

Other
138

 
315

Total Revenues
29,901

 
39,946

 
 
 
 
Operating Expenses:
 
 
 
Commissions to agents
20,187

 
15,058

Provision for claims
906

 
226

Personnel expenses
11,809

 
11,612

Office and technology expenses
2,415

 
2,223

Other expenses
3,113

 
2,514

Total Operating Expenses
38,430

 
31,633

 
 
 
 
(Loss) Income before Income Taxes
(8,529
)
 
8,313

 
 
 
 
(Benefit) Provision for Income Taxes
(1,518
)
 
1,687

 
 
 
 
Net (Loss) Income
$
(7,011
)
 
$
6,626

 
 
 
 
Basic (Loss) Earnings per Common Share
$
(3.71
)
 
$
3.51

 
 
 
 
Weighted Average Shares Outstanding – Basic
1,890

 
1,887

 
 
 
 
Diluted (Loss) Earnings per Common Share
$
(3.71
)
 
$
3.49

 
 
 
 
Weighted Average Shares Outstanding – Diluted
1,890

 
1,896


Refer to notes to the Consolidated Financial Statements.

2



Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2020 and 2019
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Net (loss) income
$
(7,011
)
 
$
6,626

Other comprehensive income, before tax:
 
 
 
Accumulated postretirement benefit obligation adjustment
(41
)
 

Net unrealized (loss) gain on investments arising during the period
(391
)
 
1,450

Reclassification adjustment for sale of securities included in net loss
(30
)
 

Reclassification adjustment for write-down of securities included in net loss
482

 

Other comprehensive income, before tax
20

 
1,450

Income tax benefit related to postretirement health benefits
(9
)
 

Income tax (benefit) expense related to net unrealized (loss) gain on investments arising during the period
(87
)
 
307

Income tax benefit related to reclassification adjustment for sale of securities included in net loss
(6
)
 

Income tax expense related to reclassification adjustment for write-down of securities included in net loss
110

 

Net income tax expense on other comprehensive income
8

 
307

Other comprehensive income
12

 
1,143

Comprehensive (Loss) Income
$
(6,999
)
 
$
7,769


Refer to notes to the Consolidated Financial Statements.

3



Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2020 and 2019
(in thousands, except per share amounts)
(unaudited)


 
Common Stock
 
Retained Earnings

 
Accumulated
Other
Comprehensive
Income

 
Total
Stockholders’
Equity

 
Shares
 
Amount
 
 
 
Balance, January 1, 2019
1,887

 
$

 
$
174,690

 
$
949

 
$
175,639

Net income
 

 
 

 
6,626

 
 

 
6,626

Dividends paid ($0.40 per share)
 

 
 

 
(755
)
 
 

 
(755
)
Repurchases of common stock

 
 

 
(11
)
 
 

 
(11
)
Exercise of stock appreciation rights
2

 
 

 
(1
)
 
 

 
(1
)
Share-based compensation expense related to stock appreciation rights
 

 
 

 
88

 
 

 
88

Net unrealized gain on investments
 

 
 

 
 

 
1,143

 
1,143

Balance, March 31, 2019
1,889

 
$

 
$
180,637

 
$
2,092

 
$
182,729

 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2020
1,889

 
$

 
$
188,262

 
$
3,100

 
$
191,362

Net loss
 

 
 

 
(7,011
)
 
 

 
(7,011
)
Dividends paid ($0.44 per share)
 

 
 

 
(832
)
 
 

 
(832
)
Exercise of stock appreciation rights
2

 
 

 
(1
)
 
 

 
(1
)
Share-based compensation expense related to stock appreciation rights
 

 
 

 
117

 
 

 
117

Accumulated postretirement benefit obligation adjustment
 
 
 
 
 
 
(32
)
 
(32
)
Net unrealized gain on investments
 

 
 

 
 
 
44

 
44

Balance, March 31, 2020
1,891

 
$

 
$
180,535

 
$
3,112

 
$
183,647



Refer to notes to the Consolidated Financial Statements.

4



Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2020 and 2019
(in thousands)
(unaudited)
 
 
Three Months Ended
March 31,
 
 
2020
 
2019
Operating Activities
 
 
 
 
Net (loss) income
 
$
(7,011
)
 
$
6,626

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
 
 

 
 

Depreciation
 
457

 
433

Amortization of investments, net
 
248

 
133

Amortization of other intangible assets, net
 
126

 
126

Share-based compensation expense related to stock appreciation rights
 
117

 
88

Net gain on disposals of property
 
(2
)
 
(3
)
Net realized investment losses (gains)
 
412

 
(790
)
Net change in estimated fair value of equity security investments
 
14,458

 
(4,670
)
Net earnings from other investments
 
(315
)
 
(208
)
Provision for claims
 
906

 
226

(Benefit) provision for deferred income taxes
 
(3,057
)
 
828

Changes in assets and liabilities:
 
 

 
 

Decrease in premium and fees receivables
 
193

 
1,384

Increase in other assets
 
(4,743
)
 
(366
)
Decrease (increase) in operating lease right-of-use assets
 
169

 
(4,925
)
Decrease in accounts payable and accrued liabilities
 
(543
)
 
(4,944
)
(Decrease) increase in operating lease liabilities
 
(165
)
 
4,927

Increase in current income taxes payable
 
1,581

 
859

Payments of claims, net of recoveries
 
(832
)
 
(571
)
Net cash provided by (used in) operating activities
 
1,999

 
(847
)
 
 
 
 
 
Investing Activities
 
 

 
 

Purchases of equity securities
 
(5,866
)
 
(1,572
)
Purchases of short-term investments
 
(3,540
)
 
(50,015
)
Purchases of other investments
 
(328
)
 
(776
)
Proceeds from sales and maturities of fixed maturity securities
 
2,579

 
925

Proceeds from sales of equity securities
 
4,557

 
1,561

Proceeds from sales and maturities of short-term investments
 
1,034

 
53,224

Proceeds from sales and distributions of other investments
 
401

 
1,843

Proceeds from sales of other assets
 
10

 

Purchases of property
 
(643
)
 
(225
)
Proceeds from the sale of property
 
5

 
7

Net cash (used in) provided by investing activities
 
(1,791
)
 
4,972

 
 
 
 
 
Financing Activities
 
 

 
 

Repurchases of common stock
 

 
(11
)
Exercise of stock appreciation rights
 
(1
)
 
(1
)
Dividends paid
 
(832
)
 
(755
)
Net cash used in financing activities
 
(833
)
 
(767
)
 
 
 
 
 
Net (Decrease) Increase in Cash and Cash Equivalents
 
(625
)
 
3,358

Cash and Cash Equivalents, Beginning of Period
 
25,949

 
18,694

Cash and Cash Equivalents, End of Period
 
$
25,324

 
$
22,052


5




Consolidated Statements of Cash Flows, continued
 
 
 
 
Three Months Ended
March 31,
 
 
2020
 
2019
Supplemental Disclosures:
 
 
 
 
Cash (Received) Paid During the Year for:
 
 
 
 
Income tax refunds, net
 
$
(42
)
 
$

Non Cash Investing and Financing Activities:
 
 
 
 
Non cash net unrealized gain on investments, net of deferred tax provision of $(17) and $(307) for March 31, 2020 and 2019, respectively
 
$
(44
)
 
$
(1,143
)
Adjustments to postretirement benefits obligation, net of deferred tax benefit of $9 and $0 for March 31, 2020 and 2019, respectively
 
$
32

 
$


Refer to notes to the Consolidated Financial Statements.

6



INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2020
(unaudited)

Note 1 – Basis of Presentation and Significant Accounting Policies

Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, 2019 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies.

Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2020 or any other interim period.

Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.

Subsequent Events – The Company has evaluated and concluded that there were no material subsequent events requiring adjustment or disclosure to its Consolidated Financial Statements.

Recently Adopted Accounting Standards

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 updated guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update broadened the information that an entity must consider in developing its expected credit loss estimates, and was meant to better reflect an entity’s current estimate of all expected credit losses. In addition, this update amended the accounting for credit losses on available-for-sale fixed maturity securities and purchased financial assets with credit deterioration. The update was effective for the Company for annual periods beginning after December 15, 2019, and interim periods within those fiscal years.  The Company adopted this update on January 1, 2020 with no material impact on the Company's financial position and results of operations. Refer to Note 6 for further information about the Company's investments.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity is required to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and must recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized must not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarified that an entity is required to consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update was effective for the Company for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted this update on January 1, 2020 with no impact on the Company's financial position and results of operations.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 is intended to reduce the complexity in accounting for income taxes during interim and annual periods and is expected to provide clarity on income tax situations where a diversity in practice has developed. The update is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted for interim or annual periods for which financial statements have not yet been issued. None of these amendments are expected to have a material impact on the Company's financial position or results of operations.

7




In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative immediately before applying or upon discontinuing the equity method. In addition, this update clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The update is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.  Early adoption is permitted, including early adoption in an interim period, for periods for which financial statements have not yet been issued. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, and does not expect it to have a material impact.

Significant Accounting Policies – The Company has updated the following accounting policies due to the adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Allowance for Credit Losses – Available-for-Sale Securities

For available-for-sale fixed maturity securities in an unrealized loss position, the Company evaluates the securities to determine whether the decline in the estimated fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for credit losses (“ACL”) on the Consolidated Balance Sheets, limited to the amount by which the amortized cost basis exceeds the estimated fair value, with a corresponding adjustment to earnings. Both the ACL and the adjustment to the Consolidated Statements of Operations may be reversed if conditions change. However, if the Company intends to sell an impaired available-for-sale fixed maturity security or more likely than not will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount must be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to estimated fair value, there is no ACL in this situation.

In evaluating available-for-sale fixed maturity securities in unrealized loss positions for impairment and the criteria regarding its intent or requirement to sell such securities, the Company considers the extent to which estimated fair value is less than amortized cost, whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuers’ financial condition, among other factors.

Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the ACL when management believes the uncollectability of an available-for-sale fixed maturity security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable is excluded from the estimate of credit losses.

Note 2 – Reserve for Claims

Activity in the reserve for claims for the three-month period ended March 31, 2020 and the year ended December 31, 2019 are summarized as follows:
 (in thousands)
March 31, 2020
 
December 31, 2019
Balance, beginning of period
$
31,333

 
$
31,729

Provision charged to operations
906

 
3,532

Payments of claims, net of recoveries
(832
)
 
(3,928
)
Balance, end of period
$
31,407

 
$
31,333


The total reserve for all reported and unreported losses the Company incurred through March 31, 2020 is represented by the reserve for claims on the Consolidated Balance Sheets. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through March 31, 2020. Management continually reviews and adjusts its reserve for claims estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews could be significant.


8



A summary of the Company’s reserve for claims, broken down into its components of known title claims and IBNR, follows:
 (in thousands, except percentages)
March 31, 2020
 
%
 
December 31, 2019
 
%
Known title claims
$
3,596

 
11.4
 
$
3,799

 
12.1
IBNR
27,811

 
88.6
 
27,534

 
87.9
Total reserve for claims
$
31,407

 
100.0
 
$
31,333

 
100.0

Claims and losses paid are charged to the reserve for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated fair value, net of any indebtedness on the property.

Note 3 – Earnings Per Common Share and Share Awards

Basic (loss) earnings per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the reporting period. Diluted (loss) earnings per common share is computed by dividing net (loss) income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, as share-based awards are exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted (loss) earnings per share for the three-month periods ended March 31:
 
 
Three Months Ended
March 31,
(in thousands, except per share amounts)
 
2020
 
2019
Net (loss) income
 
$
(7,011
)
 
$
6,626

Weighted average common shares outstanding – Basic
 
1,890

 
1,887

Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)
 

 
9

Weighted average common shares outstanding – Diluted
 
1,890

 
1,896

Basic (loss) earnings per common share
 
$
(3.71
)
 
$
3.51

Diluted (loss) earnings per common share
 
$
(3.71
)
 
$
3.49


There were 15 thousand and 9 thousand potential shares excluded from the computation of diluted (loss) earnings per share for the three-month periods ended March 31, 2020 and 2019, respectively, due to the out-of-the-money status of the related share-based awards. Diluted loss per share is comparable to basic loss per share when an organization is in a net loss situation, like the Company was for the three-month period ended March 31, 2020, as the impact to loss per share from share awards is antidilutive.

The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares.

As of March 31, 2020, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. Most outstanding SARs vest and are exercisable within one year of the date of grant, with the exception of a one-time grant where the SARs vest over a five-year period. All SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

There was approximately $118 thousand and $88 thousand of compensation expense relating to SARs vesting on or before March 31, 2020 and 2019, respectively, included in personnel expenses in the Consolidated Statements of Operations. As of March 31, 2020, there was $171 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.


9



A summary of share-based award transactions for all share-based award plans follows:
(in thousands, except weighted average exercise price and average remaining contractual term)
Number
Of Shares
 
Weighted
Average
Exercise Price
 
Average Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding as of January 1, 2019
28

 
$
110.27

 
3.64
 
$
2,019

SARs granted
4

 
162.81

 
 
 
 

SARs exercised
(2
)
 
50.50

 
 
 
 

Outstanding as of December 31, 2019
30

 
$
124.13

 
3.53
 
$
1,352

SARs granted
7

 
143.53

 
 
 
 

SARs exercised
(5
)
 
74.87

 
 
 
 

Outstanding as of March 31, 2020
32

 
$
135.47

 
4.33
 
$
585

 
 
 
 
 
 
 
 
Exercisable as of March 31, 2020
27

 
$
135.02

 
3.83
 
$
585

 
 
 
 
 
 
 
 
Unvested as of March 31, 2020
5

 
$
137.90

 
6.96
 
$


During the first quarter of 2020 the Company issued 7 thousand share-settled SARs to directors and employees of the Company. There were no such issuances in the first quarter of 2019, as all 2019 issuances of share-settled SARs were made in the second quarter. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments.  The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant.  The weighted average fair value for the SARs issued during first quarter 2020 was $35.49 and was estimated using the weighted average assumptions shown in the table below.
 
2020
Expected Life in Years
6.2 - 7.0
Volatility
27.2%
Interest Rate
0.8%
Yield Rate
1.0%


10



Note 4 – Segment Information

The Company has one reportable segment, title insurance services. The remaining immaterial segments have been combined into a group called “All Other.”

The title insurance segment primarily issues title insurance policies through approved attorneys from underwriting offices and through independent issuing agents. Title insurance policies insure titles to real estate.

Provided below is selected financial information about the Company's operations by segment for the periods ended March 31, 2020 and 2019:
Three Months Ended March 31, 2020 (in thousands)
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
41,853

 
$
2,805

 
$
(1,504
)
 
$
43,154

Investment loss
(11,460
)
 
(1,381
)
 

 
(12,841
)
Net realized gain (loss) on investments
63

 
(475
)
 

 
(412
)
Total revenues
$
30,456

 
$
949

 
$
(1,504
)
 
$
29,901

Operating expenses
37,443

 
2,345

 
(1,358
)
 
38,430

Loss before income taxes
$
(6,987
)
 
$
(1,396
)
 
$
(146
)
 
$
(8,529
)
Total assets
$
187,236

 
$
66,882

 
$

 
$
254,118

Three Months Ended March 31, 2019 (in thousands)
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
31,319

 
$
2,691

 
$
(1,190
)
 
$
32,820

Investment income
5,430

 
906

 

 
6,336

Net realized gain on investments
764

 
26

 

 
790

Total revenues
$
37,513

 
$
3,623

 
$
(1,190
)

$
39,946

Operating expenses
30,452

 
2,237

 
(1,056
)
 
31,633

Income before income taxes
$
7,061

 
$
1,386

 
$
(134
)
 
$
8,313

Total assets
$
200,187

 
$
52,803

 
$

 
$
252,990


Note 5 – Retirement Agreements and Other Postretirement Benefits

The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is a party to employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement, estimated to total $12.3 million and $12.2 million as of March 31, 2020 and December 31, 2019, respectively. The executive employee benefits include health, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the Consolidated Balance Sheets. The following sets forth the net periodic benefit cost for the executive benefits for the periods ended March 31, 2020 and 2019:
 
Three Months Ended
March 31,
 (in thousands)
2020
 
2019
Service cost – benefits earned during the year
$

 
$

Interest cost on the projected benefit obligation
8

 
8

Amortization of unrecognized losses

 

Net periodic benefit cost
$
8

 
$
8



11



Note 6 – Investments and Estimated Fair Value

Investments in Fixed Maturity Securities

The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for fixed maturity securities by major classification are as follows:
As of March 31, 2020 (in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair
Value
Fixed maturity securities, available-for-sale, at fair value:
 
 
 
 
 
 
 
Government obligations
$
24,126

 
$
335

 
$

 
$
24,461

General obligations of U.S. states, territories and political subdivisions
18,565

 
835

 

 
19,400

Special revenue issuer obligations of U.S. states, territories and political subdivisions
50,758

 
2,455

 
12

 
53,201

Corporate debt securities
3,941

 
451

 
33

 
4,359

Total
$
97,390

 
$
4,076

 
$
45

 
$
101,421

As of December 31, 2019 (in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated Fair
Value
Fixed maturity securities, available-for-sale, at fair value:
 
 
 
 
 
 
 
Government obligations
$
25,161

 
$
6

 
$
4

 
$
25,163

General obligations of U.S. states, territories and political subdivisions
18,887

 
843

 

 
19,730

Special revenue issuer obligations of U.S. states, territories and political subdivisions
51,188

 
2,530

 
20

 
53,698

Corporate debt securities
5,431

 
621

 
5

 
6,047

Total
$
100,667

 
$
4,000

 
$
29

 
$
104,638


The special revenue category for both periods presented includes approximately 50 individual fixed maturity securities with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at March 31, 2020 are as follows:
 
Available-for-Sale
(in thousands)
Amortized
Cost
 
Estimated Fair
Value
Due in one year or less
$
20,293

 
$
20,465

Due one year through five years
51,783

 
53,970

Due five years through ten years
24,501

 
25,772

Due after ten years
813

 
1,214

Total
$
97,390

 
$
101,421


Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.


12



The following table presents the gross unrealized losses on fixed maturity securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2020 and December 31, 2019:
 
Less than 12 Months
 
12 Months or Longer
 
Total
As of March 31, 2020 (in thousands)
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions
$
1,573

 
$
(10
)
 
$
1,114

 
$
(2
)
 
$
2,687

 
$
(12
)
Corporate debt securities
640

 
(33
)
 

 

 
640

 
(33
)
Total temporarily impaired securities
$
2,213

 
$
(43
)
 
$
1,114

 
$
(2
)
 
$
3,327

 
$
(45
)
 
Less than 12 Months
 
12 Months or Longer
 
Total
As of December 31, 2019 (in thousands)
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
Government obligations
$
12,045

 
$
(4
)
 
$

 
$

 
$
12,045

 
$
(4
)
Special revenue issuer obligations of U.S. states, territories and political subdivisions
1,101

 
(17
)
 
1,118

 
(3
)
 
2,219

 
(20
)
Corporate debt securities
413

 
(5
)
 

 

 
413

 
(5
)
Total temporarily impaired securities
$
13,559

 
$
(26
)
 
$
1,118

 
$
(3
)
 
$
14,677

 
$
(29
)

The decline in estimated fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 9 and 6 fixed maturity securities had unrealized losses without an allowance for credit losses at March 31, 2020 and December 31, 2019, respectively. The Company does not have the intent to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. The Company believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in interest rates and other market conditions, and therefore the unrealized loss is recorded in accumulated other comprehensive income.

Reviews of the values of fixed maturity securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods resulting in a realized loss. The Company recorded $482 thousand and $0 other-than-temporary impairment charges related to fixed maturity securities for the three-month periods ended March 31, 2020 and 2019, respectively. Expenses related to other-than-temporary impairments are recorded in net realized investment (losses) gains in the Consolidated Statements of Operations when recognized.


13



Investments in Equity Securities

The cost and estimated fair value of equity securities are as follows:
As of March 31, 2020 (in thousands)
Cost
 
Estimated Fair
Value
Equity securities, at fair value:
 

 
 

Common stocks
$
34,903

 
$
47,983

Total
$
34,903

 
$
47,983

As of December 31, 2019 (in thousands)
Cost
 
Estimated Fair
Value
Equity securities, at fair value:
 

 
 

Common stocks
$
33,570

 
$
61,108

Total
$
33,570

 
$
61,108


Unrealized holding gains and losses are reported in the Consolidated Statements of Operations as changes in the estimated fair value of equity security investments.

Net Realized Investment (Losses) Gains

Gross realized gains and losses on sales of investments for the three-month periods ended March 31 are summarized as follows:
(in thousands)
2020
 
2019
Gross realized gains from securities:
 

 
 

Corporate debt securities
$
30

 
$

Common stocks
747

 
831

Total
$
777

 
$
831

Gross realized losses from securities:
 

 
 

Common stocks
$
(722
)
 
$
(41
)
Other-than-temporary impairment of securities
(482
)
 

Total
$
(1,204
)
 
$
(41
)
Net realized (losses) gains from securities
$
(427
)
 
$
790

Net realized gains on other investments:
 
 
 
Gains on other investments
$
20

 
$

Net loss on other assets and investments
(5
)
 

Total
$
15

 
$

Net realized investment (losses) gains
$
(412
)
 
$
790


Realized gains and losses are determined on the specific identification method.  


14



Variable Interest Entities

The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of March 31, 2020:
(in thousands)
 
Balance Sheet Classification
 
Carrying Value
 
Estimated Fair Value
 
Maximum Potential Loss (a)
Tax credit LPs
 
Other investments
 
$
223

 
$
223

 
$
1,768

Real estate LLCs or LPs
 
Other investments
 
5,390

 
6,231

 
6,675

Small business investment LPs
 
Other investments
 
6,516

 
6,311

 
8,955

Total
 
 
 
$
12,129

 
$
12,765

 
$
17,398

(a)
 
Maximum potential loss is calculated as the total investment in the LLC or LP, including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment.

Valuation of Financial Assets
 
The FASB has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement – consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.

The Level 1 category includes equity securities and U.S. Treasury securities that are measured at estimated fair value using quoted active market prices.

The Level 2 category includes fixed maturity securities such as corporate debt securities, U.S. government obligations, and obligations of U.S. states, territories, and political subdivisions. Estimated fair value is principally based on market values obtained from a third-party pricing service. Factors that are used in determining estimated fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from a third-party pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of March 31, 2020 and December 31, 2019, the Company did not adjust any Level 2 fair values.

A number of the Company’s investment grade corporate debt securities are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading prices. Substantially all of the input assumptions used in the service’s model are observable in the marketplace or can be derived or supported by observable market data.

In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.
 

15



In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:
 
Cash and cash equivalents
 
The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.
 
Measurement alternative equity investments
 
The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes.  The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.
 
Accrued interest and dividends
 
The carrying amount for accrued interest and dividends is a reasonable estimate of fair value due to the short-term maturity of these assets.

The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2020 and December 31, 2019:
As of March 31, 2020 (in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Fixed maturity securities:
 

 
 

 
 

 
 

Obligations of U.S. states, territories and political subdivisions*
$
24,461

 
$
72,601

 
$

 
$
97,062

Corporate debt securities*

 
4,359

 

 
4,359

Total
$
24,461

 
$
76,960

 
$

 
$
101,421

As of December 31, 2019 (in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Fixed maturity securities:
 
 
 
 
 
 
 
Obligations of U.S. states, territories and political subdivisions*
$
24,160

 
$
74,431

 
$

 
$
98,591

Corporate debt securities*

 
6,047

 

 
6,047

Total
$
24,160


$
80,478

 
$

 
$
104,638


*Denotes fair market value obtained from pricing services.

The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2020 and December 31, 2019:
As of March 31, 2020 (in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
25,324

 
$

 
$

 
$
25,324

Accrued interest and dividends
1,243

 

 

 
1,243

Equity securities, at fair value:
 
 
 
 
 
 
 
Common stocks
47,983

 

 

 
47,983

Short-term investments:
 

 
 
 
 
 
 
Money market funds and certificates of deposit
15,641

 

 

 
15,641

Other investments:
 
 
 
 
 
 
 
Equity investments in unconsolidated affiliates, equity method

 

 
6,080

 
6,080

Equity investments in unconsolidated affiliates, measurement alternative

 

 
8,149

 
8,149

Total
$
90,191

 
$

 
$
14,229

 
$
104,420



16



As of December 31, 2019 (in thousands)
Level 1
 
Level 2
 
Level 3
 
Total
Financial assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
25,949

 
$

 
$

 
$
25,949

Accrued interest and dividends
1,033

 

 

 
1,033

Equity securities, at fair value:
 
 
 
 
 
 
 
Common stocks
61,108

 

 

 
61,108

Short-term investments:
 
 
 
 
 
 
 
Money market funds and certificates of deposit
13,134

 

 

 
13,134

Other investments:
 
 
 
 
 
 
 
Equity investments in unconsolidated affiliates, equity method

 

 
6,083

 
6,083

Equity investments in unconsolidated affiliates, measurement alternative

 

 
7,899

 
7,899

Total
$
101,224


$


$
13,982

 
$
115,206


The Company did not hold any Level 3 category debt or marketable equity investment securities as of March 31, 2020 or December 31, 2019.

There were no transfers into or out of Levels 1, 2 or 3 during the periods presented.

To help ensure that estimated fair value determinations are consistent with ASC 820, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to, the following: unadjusted quoted market prices for identical securities such as stock market closing prices; non-binding quoted prices for identical securities in markets that are not active; interest rates; yield curves observable at commonly quoted intervals; volatility; prepayment speeds; loss severity; credit risks; and default rates. The Company reviews the procedures and inputs used by its pricing services, and verifies a sample of the services’ quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the respective service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data. The Company believes that these processes and inputs result in appropriate classifications and estimated fair values consistent with ASC 820.

Certain equity investments under the measurement alternative are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such investment is determined to be other-than-temporarily impaired, an impairment charge is recorded against such investment and reflected in the Consolidated Statements of Operations. There were no impairments of such investments made during the three-month period ended March 31, 2020 or the twelve-month period ended December 31, 2019. The following table presents a rollforward of equity investments under the measurement alternative as of March 31, 2020 and December 31, 2019:

(in thousands)
Balance,
January 1, 2020
 
Amounts Impaired
 
Observable Changes
 
Purchases and
Additional
Commitments
Paid
 
Sales, Returns of Capital and Other Reductions
 
Balance,
March 31, 2020
Other investments:
 
 
 
 
 
 
 
 
 
 
 
Equity investments in unconsolidated affiliates, measurement alternative
$
7,899

 
$

 
$

 
$
250

 
$

 
$
8,149

Total
$
7,899

 
$

 
$

 
$
250

 
$

 
$
8,149


17




(in thousands)
Balance,
January 1, 2019
 
Amounts Impaired
 
Observable Changes
 
Purchases and
Additional
Commitments
Paid
 
Sales, Returns of Capital and Other Reductions
 
Balance,
December 31, 2019
Other investments:
 
 
 
 
 
 
 
 
 
 
 
Equity investments in unconsolidated affiliates, measurement alternative
$
6,589

 
$

 
$

 
$
2,241

 
$
(931
)
 
$
7,899

Total
$
6,589

 
$

 
$

 
$
2,241

 
$
(931
)
 
$
7,899


Note 7 – Commitments and Contingencies

Legal Proceedings – The Company and its subsidiaries are involved in legal proceedings that are incidental to their business. In the Company’s opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings, will not, in the aggregate, be material to the Company’s consolidated financial condition or operations.

Regulation – The Company’s title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject to various audits, examinations, and inquiries. It is the opinion of management based on its present expectations that findings from these audits, examinations, and inquiries will not have a material impact on the Company’s consolidated financial condition or results of operations.

Escrow and Trust Deposits – As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, escrowed funds received under escrow agreements, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of these deposits.
     
Like-Kind Exchanges Proceeds – In administering tax-deferred property exchanges, the Company’s subsidiary, Investors Title Exchange Corporation (“ITEC”), serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company subsidiary, Investors Title Accommodation Corporation (“ITAC”), serves as exchange accommodation titleholder and, through limited liability companies that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $223.6 million and $214.6 million as of March 31, 2020 and December 31, 2019, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying Consolidated Balance Sheets; however, the Company remains contingently liable for transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon interest rate. Exchange services revenues include earnings on these deposits; therefore, investment income is included as a component of non-title services on the Consolidated Statements of Operations rather than other investment income. Like-kind exchange funds are primarily invested in money market and other short-term investments.

COVID-19 – An outbreak of a coronavirus ("COVID-19" or "the virus") has emerged and in March 2020 the World Health Organization declared it a pandemic.  This contagious disease outbreak has continued to spread across the globe and is impacting worldwide economic activity and financial markets. The pandemic has had a negative impact on the real estate market and the value of marketable securities, including those held by the Company. In response, the U.S. government and its agencies have taken a number of significant measures to provide monetary stimulus. Such actions include an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. The Company is fully operational and has not had any reductions in workforce. A large portion of the Company's workforce is performing their job functions remotely.  The Company has not taken stimulus relief funding or added any other forms of debt.


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Note 8 – Related Party Transactions

The Company does business with, and has investments in, unconsolidated limited liability companies that are primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these limited liability companies. The following tables set forth the approximate values by year found within each financial statement classification:
Financial Statement Classification,
Consolidated Balance Sheets
(in thousands)
As of
March 31, 2020
As of
December 31, 2019
Other investments
$
6,080

$
6,083

Premium and fees receivable
$
434

$
410

 
Financial Statement Classification,
Consolidated Statements of Operations
(in thousands)
Three Months Ended
March 31,
 
 
2020
2019
 
Net premiums written
$
4,057

$
3,119

 
Non-title services and other investment income
$
502

$
473

 
Commissions to agents
$
2,679

$
2,073


Note 9 – Intangible Assets, Goodwill and Title Plant

Intangible Assets

The estimated fair values of intangible assets recognized as the result of title insurance agency acquisitions, all Level 3 inputs, are principally based on values obtained from an independent third-party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2020 and 2019 that would indicate the carrying amounts may not be recoverable, and therefore determined that no identifiable intangible assets were impaired.

Identifiable intangible assets consist of the following:
(in thousands)
As of
March 31, 2020
As of
December 31, 2019
Referral relationships
$
6,416

$
6,416

Non-compete agreements
1,406

1,406

Tradename
560

560

Total
8,382

8,382

Accumulated amortization
(2,583
)
(2,456
)
Identifiable intangible assets, net
$
5,799

$
5,926


The following table provides the estimated aggregate amortization expense for each of the five succeeding fiscal years:
Year Ended (in thousands)
 
2020
$
378

2021
562

2022
525

2023
525

2024
473

Thereafter
3,336

Total
$
5,799



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Goodwill and Title Plant

As of March 31, 2020, the Company recognized $4.4 million in goodwill and $690 thousand in a title plant, net of impairments, as the result of title insurance agency acquisitions.  The title plant is included with other assets in the Consolidated Balance Sheets. The fair values of goodwill and the title plant, both Level 3 inputs, are principally based on values obtained from an independent third-party valuation service as of the date of acquisition. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2020 and 2019 that would indicate the carrying amounts may not be recoverable, and therefore determined that neither goodwill nor the title plant were impaired.

Note 10 – Accumulated Other Comprehensive Income

The following tables provide changes in the balances of each component of accumulated other comprehensive income, net of tax, for the periods ended March 31, 2020 and 2019: