INVESTORS TITLE CO [ITIC] Filings

10-Q 1 itic-20230630.htm 10-Q itic-20230630

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 June 30, 2023


☐			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.

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 July 27, 2023, there were 1,890,623 common shares of the registrant outstanding.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

INDEX


PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	1

	Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2023 and 2022	2

	Consolidated Statements of Comprehensive Income For the Three and Six Months Ended June 30, 2023 and 2022	3

	Consolidated Statements of Stockholders’ Equity For the Three and Six Months Ended June 30, 2023 and 2022	4

	Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2023 and 2022	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	38

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	39

Item 1A.	Risk Factors	39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 3.	Defaults Upon Senior Securities	39

Item 4.	Mine Safety Disclosures	39

Item 5.	Other Information	39

Item 6.	Exhibits	40

SIGNATURE		41

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of June 30, 2023 and December 31, 2022

(in thousands)

(unaudited)


	June 30, 2023		December 31, 2022
Assets
Cash and cash equivalents	$	26,184	$	35,311
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: June 30, 2023: $58,423; December 31, 2022: $53,775)	58,452		53,989
Equity securities, at fair value (cost: June 30, 2023: $19,282; December 31, 2022: $25,278)	34,081		51,691
Short-term investments	114,857		103,649
Other investments	19,779		18,368
Total investments	227,169		227,697

Premiums and fees receivable	17,211		19,047
Accrued interest and dividends	949		872
Prepaid expenses and other receivables	11,523		11,095
Property, net	21,197		17,785
Goodwill and other intangible assets, net	16,927		17,611
Lease assets	6,830		6,707
Other assets	2,491		2,458
Current income taxes recoverable	—		1,174
Total Assets	$	330,481	$	339,757

Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims	$	36,865	$	37,192
Accounts payable and accrued liabilities	33,923		47,050
Lease liabilities	7,049		6,839
Current income taxes payable	586		—
Deferred income taxes, net	4,805		7,665
Total liabilities	83,228		98,746

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 1,897 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively, excluding in each period 292 shares of common stock held by the Company)	—		—
Retained earnings	247,092		240,811
Accumulated other comprehensive income	161		200
Total stockholders' equity	247,253		241,011
Total Liabilities and Stockholders’ Equity	$	330,481	$	339,757

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2023 and 2022

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Net premiums written	$	44,005	$	69,626	$	82,971	$	132,751
Escrow and other title-related fees	4,604		6,247		8,259		11,325
Non-title services	4,565		2,798		9,877		5,210
Interest and dividends	2,150		911		4,224		1,826
Other investment income	1,648		1,106		2,401		2,443
Net investment gains (losses)	1,092		(10,134)		1,535		(14,302)
Other	250		348		390		647
Total Revenues	58,314		70,902		109,657		139,900

Operating Expenses:
Commissions to agents	20,603		33,826		39,929		63,683
Provision for claims	991		1,310		2,059		1,486
Personnel expenses	18,548		20,898		39,368		42,152
Office and technology expenses	4,513		4,288		8,913		8,656
Other expenses	3,813		7,627		7,981		13,177
Total Operating Expenses	48,468		67,949		98,250		129,154

Income before Income Taxes	9,846		2,953		11,407		10,746

Provision for Income Taxes	2,261		674		2,641		2,282

Net Income	$	7,585	$	2,279	$	8,766	$	8,464

Basic Earnings per Common Share	$	4.00	$	1.20	$	4.62	$	4.46

Weighted Average Shares Outstanding – Basic	1,895		1,897		1,896		1,897

Diluted Earnings per Common Share	$	4.00	$	1.20	$	4.62	$	4.45

Weighted Average Shares Outstanding – Diluted	1,896		1,899		1,896		1,900

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three and Six Months Ended June 30, 2023 and 2022

(in thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	7,585	$	2,279	$	8,766	$	8,464
Other comprehensive loss, before income tax:
Accumulated postretirement benefit obligation adjustment	(7)		(8)		134		211
Net unrealized losses on investments arising during the period	(530)		(1,178)		(297)		(3,942)
Reclassification adjustment for sale of securities included in net income	—		46		—		46
Reclassification adjustment for write-down of securities included in net income	30		127		112		127
Other comprehensive loss, before income tax	(507)		(1,013)		(51)		(3,558)
Income tax (benefit) expense related to postretirement health benefits	(2)		(2)		28		44
Income tax benefit related to net unrealized losses on investments arising during the period	(113)		(252)		(66)		(835)
Income tax expense related to reclassification adjustment for sale of securities included in net income	—		10		—		10
Income tax expense related to reclassification adjustment for write-down of securities included in net income	7		29		26		29
Net income tax benefit on other comprehensive loss	(108)		(215)		(12)		(752)
Other comprehensive loss	(399)		(798)		(39)		(2,806)
Comprehensive Income	$	7,186	$	1,481	$	8,727	$	5,658

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Three and Six Months Ended June 30, 2023 and 2022

(in thousands, except per share amounts)

(unaudited)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balance, March 31, 2022	1,897	$	—	$	231,274	$	1,218	$	232,492
Net income				2,279				2,279
Dividends paid ($0.46 per share)				(872)				(872)
Share-based compensation expense related to stock appreciation rights				78				78
Accumulated postretirement benefit obligation adjustment						(6)		(6)
Net unrealized loss on investments						(792)		(792)
Balance, June 30, 2022	1,897	$	—	$	232,759	$	420	$	233,179

Balance, March 31, 2023	1,898	$	—	$	241,278	$	560	$	241,838
Net income				7,585				7,585
Dividends paid ($0.46 per share)				(873)				(873)
Repurchases of common stock	(7)			(959)				(959)
Share-based compensation expense related to stock appreciation rights				61				61
Accumulated postretirement benefit obligation adjustment						(5)		(5)
Net unrealized loss on investments						(394)		(394)
Balance, June 30, 2023	1,891	$	—	$	247,092	$	161	$	247,253


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2021	1,895	$	—	$	225,861	$	3,226	$	229,087
Net income				8,464				8,464
Dividends paid ($0.92 per share)				(1,745)				(1,745)
Exercise of stock appreciation rights	2			(1)				(1)
Share-based compensation expense related to stock appreciation rights				180				180
Accumulated postretirement benefit obligation adjustment						167		167
Net unrealized loss on investments						(2,973)		(2,973)
Balance, June 30, 2022	1,897	$	—	$	232,759	$	420	$	233,179

Balance, December 31, 2022	1,897	$	—	$	240,811	$	200	$	241,011
Net income				8,766				8,766
Dividends paid ($0.92 per share)				(1,746)				(1,746)
Repurchases of common stock	(7)			(959)				(959)
Exercise of stock appreciation rights	1			—				—
Share-based compensation expense related to stock appreciation rights				220				220
Accumulated postretirement benefit obligation adjustment						106		106
Net unrealized loss on investments						(145)		(145)
Balance, June 30, 2023	1,891	$	—	$	247,092	$	161	$	247,253

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2023 and 2022

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Operating Activities
Net income	$	8,766	$	8,464
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	1,307		1,109
(Accretion) Amortization of investments, net	(1,704)		310
Amortization of other intangible assets, net	657		653
Share-based compensation expense related to stock appreciation rights	220		180
Net gain on disposals of property	(53)		(36)
Net investment (gains) losses	(1,535)		14,302
Net earnings from other investments	(2,087)		(1,918)
Provision for claims	2,059		1,486
Benefit for deferred income taxes	(2,848)		(3,708)
Changes in assets and liabilities:
Decrease (increase) in premium and fees receivable	1,836		(2,424)
Increase in other assets	(511)		(1,171)
Increase in lease assets	(123)		(1,359)
Decrease (increase) in current income taxes receivable	1,174		(390)
Decrease in accounts payable and accrued liabilities	(12,993)		(3,613)
Increase in lease liabilities	210		1,375
Increase (decrease) in current income taxes payable	586		(3,329)
Payments of claims, net of recoveries	(2,386)		(1,637)
Net cash (used in) provided by operating activities	(7,425)		8,294

Investing Activities
Purchases of fixed maturities	(10,963)		(350)
Purchases of equity securities	(6,006)		(1,146)
Purchases of short-term investments	(81,202)		(47,890)
Purchases of other investments	(1,095)		(939)
Purchases of subsidiary, net of cash	—		(4,927)
Proceeds from sales and maturities of fixed maturity securities	6,212		14,496
Proceeds from sales of equity securities	25,378		9,378
Proceeds from sales and maturities of short-term investments	71,688		22,509
Proceeds from sales and distributions of other investments	1,657		3,054
Purchases of property	(5,017)		(2,452)
Proceeds from the sale of property	351		37
Net cash provided by (used in) investing activities	1,003		(8,230)

Financing Activities
Repurchases of common stock	(959)		—
Exercise of stock appreciation rights	—		(1)
Dividends paid	(1,746)		(1,745)
Net cash used in financing activities	(2,705)		(1,746)

Net Decrease in Cash and Cash Equivalents	(9,127)		(1,682)
Cash and Cash Equivalents, Beginning of Period	35,311		37,168
Cash and Cash Equivalents, End of Period	$	26,184	$	35,486


Consolidated Statements of Cash Flows, continued
	Six Months Ended June 30,
	2023		2022
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax payments, net	$	3,729	$	9,709
Non-Cash Investing and Financing Activities:
Non-cash net unrealized loss on investments, net of deferred tax benefit of $40 and $835 for June 30, 2023 and 2022, respectively	$	145	$	2,973
Adjustments to postretirement benefits obligation, net of deferred tax expense of $(28) and $(44) for June 30, 2023 and 2022, respectively	$	(106)	$	(167)


Changes in Financial Statement Amounts Related to Purchase of Subsidiaries, Net of Cash Received:
Goodwill and other intangibles acquired	$	—	$	(3,028)
Title plant acquired	—		(500)
Prepaid and other assets acquired	—		(77)
Fixed assets acquired	—		(1,322)
Purchase of subsidiary, net of cash received	$	—	$	(4,927)

Refer to notes to the Consolidated Financial Statements.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2023

(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, 2022 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 consolidated 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- and six-month periods ended June 30, 2023 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2023 or any other interim period.

Reclassifications – Certain amounts have been reclassified for consistency with the current period presentation. The reclassifications were between revenue lines of the unaudited Consolidated Statements of Operations. These reclassifications are not considered an accounting change and had no effect on the reported results of operations.

Use of Estimates and Assumptions – The preparation of the Company’s unaudited 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 unaudited 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 unaudited Consolidated Financial Statements.

Note 2 – Reserve for Claims

Activity in the reserve for claims for the six-month period ended June 30, 2023 and the year ended December 31, 2022 are summarized as follows:


(in thousands)	June 30, 2023		December 31, 2022
Balance, beginning of period	$	37,192	$	36,754
Provision charged to operations	2,059		4,255
Payments of claims, net of recoveries	(2,386)		(3,817)
Balance, end of period	$	36,865	$	37,192

The total reserve for all reported and unreported losses the Company incurred through June 30, 2023 is represented by the reserve for claims on the unaudited 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 June 30, 2023. 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.

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)	June 30, 2023		%	December 31, 2022		%
Known title claims	$	3,034	8.2	$	3,250	8.7
IBNR	33,831		91.8	33,942		91.3
Total reserve for claims	$	36,865	100.0	$	37,192	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 earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net 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, when share-based awards are assumed to be 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 earnings per share for the three- and six-month periods ended June 30:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2023		2022		2023		2022
Net income	$	7,585	$	2,279	$	8,766	$	8,464
Weighted average common shares outstanding – Basic	1,895		1,897		1,896		1,897
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	1		2		—		3
Weighted average common shares outstanding – Diluted	1,896		1,899		1,896		1,900
Basic earnings per common share	$	4.00	$	1.20	$	4.62	$	4.46
Diluted earnings per common share	$	4.00	$	1.20	$	4.62	$	4.45

There were 17 thousand and 13 thousand potential shares excluded from the computation of diluted earnings per share for the three-month periods ended June 30, 2023 and 2022, respectively, due to the out-of-the-money status of the related share-based awards. There were 24 thousand and 13 thousand potential shares excluded from the computation of diluted earnings per share for the six-month periods ended June 30, 2023 and 2022, respectively, due to the out-of-the-money status of the related share-based awards.

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. 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.

As of June 30, 2023, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. All outstanding SARs vest and are exercisable within five years or less from the date of grant, and 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.

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, 2022	35	$	150.36	3.96	$	1,643
SARs granted	10	155.16
SARs exercised	(6)	94.44
Outstanding as of December 31, 2022	39	$	159.39	4.10	$	243
SARs granted	5	142.88
SARs exercised	(2)	93.87
Outstanding as of June 30, 2023	42	$	160.83	4.19	$	127

Exercisable as of June 30, 2023	30	$	168.30	3.57	$	84

Unvested as of June 30, 2023	12	$	142.46	5.71	$	43

During the second quarter of 2023, the Company issued 4 thousand share-settled SARs to directors of the Company. During the second quarter of 2022, the Company issued 5 thousand share-settled SARs to directors of the Company. During the first quarter of 2023, the Company issued 1 thousand share-settled SARs to a non-executive employee of the Company. There were no such first quarter issuances in 2022. The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model. 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 2023 and 2022 were $55.52 and $69.64, respectively, and were estimated using the weighted average assumptions shown in the table below:


	2023			2022
Expected Life in Years	6.2	-	7.0	7.0
Volatility	36.6%			35.0%
Interest Rate	3.7%			2.9%
Yield Rate	1.2%			0.1%

There was approximately $220 thousand and $180 thousand of compensation expense relating to SARs vesting on or before June 30, 2023 and 2022, respectively, included in personnel expenses in the unaudited Consolidated Statements of Operations. As of June 30, 2023, there was $611 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.

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 June 30, 2023 and 2022:


Three Months Ended June 30, 2023 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	54,034	$	5,081	$	(5,691)	$	53,424
Net investment income	4,052		838		—		4,890
Total revenues	$	58,086	$	5,919	$	(5,691)	$	58,314
Operating expenses	51,161		2,825		(5,518)		48,468
Income before income taxes	$	6,925	$	3,094	$	(173)	$	9,846
Total assets	$	236,185	$	94,296	$	—	$	330,481


Three Months Ended June 30, 2022 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	83,478	$	3,242	$	(7,701)	$	79,019
Net investment loss	(7,084)		(1,033)		—		(8,117)
Total revenues	$	76,394	$	2,209	$	(7,701)	$	70,902
Operating expenses	72,234		3,265		(7,550)		67,949
Income (loss) before income taxes	$	4,160	$	(1,056)	$	(151)	$	2,953
Total assets	$	249,160	$	76,032	$	—	$	325,192


Six Months Ended June 30, 2023 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	100,200	$	10,824	$	(9,527)	$	101,497
Net investment income	6,579		1,581		—		8,160
Total revenues	$	106,779	$	12,405	$	(9,527)	$	109,657
Operating expenses	101,885		5,548		(9,183)		98,250
Income before income taxes	$	4,894	$	6,857	$	(344)	$	11,407
Total assets	$	236,185	$	94,296	$	—	$	330,481


Six Months Ended June 30, 2022 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	156,543	$	5,979	$	(12,589)	$	149,933
Net investment loss	(8,661)		(1,372)		—		(10,033)
Total revenues	$	147,882	$	4,607	$	(12,589)	$	139,900
Operating expenses	135,422		6,018		(12,286)		129,154
Income (loss) before income taxes	$	12,460	$	(1,411)	$	(303)	$	10,746
Total assets	$	249,160	$	76,032	$	—	$	325,192

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 $15.1 million and $15.0 million as of June 30, 2023 and December 31, 2022, 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 unaudited Consolidated Balance Sheets. The following sets forth the net periodic benefit cost for the executive benefits for the periods ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Service cost – benefits earned during the year	$	—	$	—	$	—	$	—
Interest cost on the projected benefit obligation	10		8		20		14
Amortization of unrecognized gain	(7)		(4)		(14)		(4)
Net periodic benefit cost	$	3	$	4	$	6	$	10

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 June 30, 2023 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Government obligations	$	1,938	$	—	$	(8)	$	1,930
General obligations of U.S. states, territories and political subdivisions	8,298		3		(71)		8,230
Special revenue issuer obligations of U.S. states, territories and political subdivisions	27,011		56		(120)		26,947
Corporate debt securities	21,176		359		(190)		21,345
Total	$	58,423	$	418	$	(389)	$	58,452


As of December 31, 2022 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
Government obligations	$	4,329	$	—	$	(7)	$	4,322
General obligations of U.S. states, territories and political subdivisions	8,561		21		(36)		8,546
Special revenue issuer obligations of U.S. states, territories and political subdivisions	30,123		106		(219)		30,010
Corporate debt securities	10,762		417		(68)		11,111
Total	$	53,775	$	544	$	(330)	$	53,989

The special revenue category for both periods presented includes approximately 30 individual fixed maturity securities with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at June 30, 2023 are as follows:


	Available-for-Sale
(in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	17,422	$	17,422
Due one year through five years	31,178		31,070
Due five years through ten years	8,993		8,902
Due after ten years	830		1,058
Total	$	58,423	$	58,452

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

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 June 30, 2023 and December 31, 2022:


	Less than 12 Months				12 Months or Longer				Total
As of June 30, 2023 (in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Government obligations	$	2	$	(8)	$	—	$	—	$	2	$	(8)
General obligations of U.S. states, territories and political subdivisions	6,939		(69)		101		(2)		7,040		(71)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	7,196		(48)		3,893		(72)		11,089		(120)
Corporate debt securities	15,126		(187)		248		(3)		15,374		(190)
Total	$	29,263	$	(312)	$	4,242	$	(77)	$	33,505	$	(389)


	Less than 12 Months				12 Months or Longer				Total
As of December 31, 2022 (in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Government obligations	$	4,322	$	(7)	$	—	$	—	$	4,322	$	(7)
General obligations of U.S. states, territories and political subdivisions	3,221		(36)		—		—		3,221		(36)
Special revenue issuer obligations of U.S. states, territories and political subdivisions	12,568		(216)		1,100		(3)		13,668		(219)
Corporate debt securities	6,498		(68)		—		—		6,498		(68)
Total	$	26,609	$	(327)	$	1,100	$	(3)	$	27,709	$	(330)

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. 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.

Factors considered in determining whether a loss is credit-related include the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 83 and 51 fixed maturity securities had unrealized losses at June 30, 2023 and December 31, 2022, respectively. The Company does not intend 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 market 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 $112 thousand in impairment charges related to fixed maturity securities for the six-month period ended June 30, 2023 and had $127 thousand recorded in impairment charges for the six-month period ended June 30, 2022. Expenses related to impairments are recorded in net investment gains (losses) in the unaudited Consolidated Statements of Operations when recognized.

Investments in Equity Securities

The cost and estimated fair value of equity securities are as follows:


As of June 30, 2023 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	19,282	$	34,081
Total	$	19,282	$	34,081


As of December 31, 2022 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	25,278	$	51,691
Total	$	25,278	$	51,691

Unrealized holding gains and losses are recorded net in net investment gains (losses) in the unaudited Consolidated Statements of Operations.

Net Investment Gains (Losses)

Gross realized gains and losses on sales of investments and unrealized holding gains and losses for the three and six-months ended June 30, 2023 and 2022 are summarized as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2023		2022		2023		2022
Gross realized gains from securities:
Common stocks	$	6,217	$	2,809	$	13,700	$	4,556
Total	$	6,217	$	2,809	$	13,700	$	4,556
Gross realized losses from securities:
Corporate debt securities	$	—	$	(46)	$	—	$	(46)
Common stocks	(202)		(189)		(323)		(189)
Write-down of securities	(30)		(127)		(112)		(127)
Total	$	(232)	$	(362)	$	(435)	$	(362)
Net realized gains from securities	$	5,985	$	2,447	$	13,265	$	4,194
Gross realized gains (losses) on other investments:
Losses on other investments	$	(69)	$	(409)	$	(116)	$	(409)
Total	$	(69)	$	(409)	$	(116)	$	(409)
Net realized investment gains	$	5,916	$	2,038	$	13,149	$	3,785
Changes in the estimated fair value of equity security investments	$	(4,824)	$	(12,172)	$	(11,614)	$	(18,087)
Net investment gains (losses)	$	1,092	$	(10,134)	$	1,535	$	(14,302)

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

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 and no participation rights exist. 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 June 30, 2023:


(in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss (a)
Real estate LLCs or LPs	Other investments	$	4,425	$	4,720	$	5,658
Small business investment LPs	Other investments	8,838		9,063		13,080
Total		$	13,263	$	13,783	$	18,738


(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 Financial Accounting Standards Board ("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 intended to represent market participant 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 GAAP. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of June 30, 2023 and December 31, 2022, 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, certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments are excluded from the scope of disclosures.

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.

Notes Receivable

Notes receivable are recorded at amortized cost basis and are included in prepaid expenses and other receivables in the unaudited Consolidated Balance Sheets. The amortized cost basis is the amount at which a receivable is originated and adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, writeoffs, foreign exchange, and fair value hedge accounting adjustments. 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 June 30, 2023 and December 31, 2022:


As of June 30, 2023 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	1,930	$	35,177	$	—	$	37,107
Corporate debt securities	—		21,345		—		21,345
Total	$	1,930	$	56,522	$	—	$	58,452


As of December 31, 2022 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	4,322	$	38,556	$	—	$	42,878
Corporate debt securities	—		11,111		—		11,111
Total	$	4,322	$	49,667	$	—	$	53,989

*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 June 30, 2023 and December 31, 2022:


As of June 30, 2023 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	26,184	$	—	$	—	$	26,184
Accrued interest and dividends	949		—		—		949
Equity securities, at fair value:
Common stocks	34,081		—		—		34,081
Short-term investments:
Money market funds and U.S. Treasury bills	114,857		—		—		114,857
Total	$	176,071	$	—	$	—	$	176,071


As of December 31, 2022 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	35,311	$	—	$	—	$	35,311
Accrued interest and dividends	872		—		—		872
Equity securities, at fair value:
Common stocks	51,691		—		—		51,691
Short-term investments:
Money market funds and U.S. Treasury bills	103,649		—		—		103,649
Total	$	191,523	$	—	$	—	$	191,523

The Company did not hold any Level 3 category debt or marketable equity investment securities as of June 30, 2023 or December 31, 2022.

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 GAAP, 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.

Certain equity investments under the measurement alternative and notes receivable 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 impaired, an impairment charge is recorded against such investment and reflected in the unaudited Consolidated Statements of Operations. There were no impairments of such investments made during the six-month period ended June 30, 2023 or the twelve-month period ended December 31, 2022. The following table presents assets measured at fair value on a non-recurring basis at the time of impairment as of June 30, 2023 and December 31, 2022:

As of June 30, 2023 (in thousands)

Level 1

Level 2

Level 3

Total

Financial assets:

Equity investments in unconsolidated affiliates, measurement alternative