INVESTORS TITLE CO

Previous wording

The Company is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company (“ITIC”) and National Investors Title Insurance Company (“NITIC”). Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer. Total revenues from the title segment accounted for 90.9% of the Company's revenues for the nine-month period ended September 30, 2024.

Current wording

The Company is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company (“ITIC”) and National Investors Title Insurance Company (“NITIC”). Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer. Total revenues from the title segment accounted for 90.4% of the Company's revenues for the three-month period ended March 31, 2025.

Previous wording

Title insurance protects against loss or damage resulting from title defects that affect real property. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects.

Current wording

Title insurance protects against loss or damage resulting from title defects that affect real property and typically arise prior to the policy date. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects.

Previous wording

The Company’s exchange services division, consisting of the operations of Investors Title Exchange Corporation (“ITEC”) and Investors Title Accommodation Corporation (“ITAC”), provides customer services in connection with tax-deferred real property exchanges. ITEC acts as a qualified intermediary in tax-deferred exchanges of real property held for productive use in a trade or business or for investment, and its income is derived from fees for handling exchange transactions and a portion of the interest earned on client deposits held by the Company. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the time the old property is sold and the new property is purchased, and accepting the formal identification of the replacement property within the required identification period. ITAC provides services as an exchange accommodation titleholder for accomplishing “parking transactions” as set forth in the safe harbor contained in Internal Revenue Procedure 2000-37. These transactions include reverse exchanges when taxpayers decide to acquire replacement property before selling the relinquished property, or “build to suit” exchanges, when improvements must be made to the replacement property before the taxpayer acquires the improved replacement property. The services provided by the Company’s exchange services division, ITEC and ITAC, are pursuant to provisions in the Internal Revenue Code. From time to time, these laws are subject to review and changes, which may negatively affect the demand for tax-deferred exchanges in general, and consequently, the revenues and profitability of the Company’s exchange services division.

Current wording

The Company’s exchange services division, consisting of the operations of Investors Title Exchange Corporation (“ITEC”) and Investors Title Accommodation Corporation (“ITAC”), provides customer services in connection with tax-deferred real property exchanges. ITEC acts as a qualified intermediary in tax-deferred exchanges of real property held for productive use in a trade or business or for investment, and its income is derived from fees for handling exchange transactions and a portion of the interest earned on client deposits held by the Company. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the time the old property is sold and the new property is purchased, and accepting the formal identification of the replacement property within the required identification period. ITAC provides services as an exchange accommodation titleholder for accomplishing “parking transactions” as set forth in the safe harbor contained in Internal Revenue Procedure 2000-37. These transactions include reverse exchanges when taxpayers decide to acquire replacement property before selling the relinquished property, or “build to suit” exchanges, when improvements must be made to the replacement property before the taxpayer acquires the improved replacement property. The services provided by the Company’s exchange services division, ITEC and ITAC, are pursuant to provisions in the Internal Revenue Code of 1986. From time to time, these laws are subject to review and changes, which may negatively affect the demand for tax-deferred exchanges in general, and consequently, the revenues and profitability of the Company’s exchange services division.

Previous wording

A recent period of inflation, as well as ongoing geopolitical and military conflicts, have created additional volatile market conditions and uncertainties in the global economy. These events have impacted and could continue to impact the Company in a number of ways including, but not limited to, future fluctuations in the Company's investment portfolio and potential decreases in net premiums written. The Federal Open Market Committee (“FOMC”) of the Federal Reserve has been highly attentive to the risks that these events have created, and in response adjusted the target federal funds rate at several meetings held during 2022 through 2024. Although the federal funds rate does not directly impact mortgage interest rates, it can have a significant influence as lenders pass on the costs of rate increases to consumers. Higher mortgage interest rates have impacted the demand and pricing of real estate.

Current wording

A period of inflation, ongoing geopolitical and military conflicts, and changes in government regulations and policy, including as a result of policies implemented by the Trump administration such as the implementation of widespread tariff reform, have created additional volatile market conditions and uncertainties in the global economy. These events have impacted and could continue to impact the Company in a number of ways including, but not limited to, future fluctuations in the Company's investment portfolio and potential decreases in net premiums written. The Federal Open Market Committee (“FOMC”) of the Federal Reserve has been highly attentive to the risks that these events have created, and in response adjusted the target federal funds rate at several meetings held from 2022 to 2024. Although the federal funds rate does not directly impact mortgage interest rates, it can have a significant influence as lenders pass on the costs of rate increases to consumers. Higher mortgage interest rates have impacted the demand and pricing of real estate.

Previous wording

The FOMC issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. The FOMC maintained a target range between 0.00% and 0.25% from March 2020 until March 2022. Starting at the March 2022 meeting of the FOMC, the FOMC consistently raised the target federal funds rate range through July 2023, when the FOMC increased the target range to between 5.25% and 5.50%. At the September 2024 meeting of the FOMC, the FOMC lowered the target rate by 0.50% to a range between 4.75% and 5.00%. At the November 2024 meeting of the FOMC, the FOMC lowered the target rate by 0.25% to a range between 4.50% and 4.75%. In normal economic situations, future adjustments to the FOMC’s stance of monetary policy are expected to be based on realized and expected economic developments to achieve maximum employment and inflation near the FOMC 's symmetric long-term 2.0% objective.

Current wording

The FOMC issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. Starting at the March 2022 meeting of the FOMC when the target range was 0.00% and 0.25%, the FOMC consistently raised the target federal funds rate range through July 2023, when the FOMC increased the target range to between 5.25% and 5.50%. During several FOMC meetings throughout 2024, the target federal funds rate was reduced, with the most recent adjustment occurring in December 2024, lowering the rate to a range of 4.25% to 4.50%. So far in 2025, the FOMC has opted to keep the target range for the federal funds rate unchanged, emphasizing the need to carefully assess incoming data, shifts in the economic outlook, and the balance of risks before deciding on the timing and magnitude of any future adjustments. In normal economic situations, future adjustments to the FOMC’s stance of monetary policy are expected to be based on realized and expected economic developments to achieve maximum employment and inflation near the FOMC's symmetric long-term 2.0% objective.

Previous wording

The Mortgage Bankers Association's ("MBA") September 23, 2024 Mortgage Finance Forecast (“MBA Forecast”) projects 2024 purchase activity to increase 5.6% to $1,309 billion and mortgage refinance activity to increase 134.2% to $513 billion, resulting in a net increase in total mortgage originations of 25.0% to $1,822 billion, all from 2023 levels. In 2023, purchase activity accounted for 85.0% of all mortgage originations and is projected in the MBA Forecast to represent 71.8% of all mortgage originations in 2024. According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 6.8% and 6.6% for the nine-month periods ended September 30, 2024 and 2023, respectively. Per the MBA Forecast, mortgage interest rates are projected to decrease in subsequent periods, declining to 5.8% in 2026. Due to the rapidly changing environment brought on by inflationary pressures, inventory constraints, and geopolitical and military conflicts, these projections and the impact of actual future developments on the Company could be subject to material change.

Current wording

The Mortgage Bankers Association's ("MBA") April 11, 2025 Mortgage Finance Forecast (“MBA Forecast”) projects 2025 purchase activity to increase 7.4% to $1,383 billion and mortgage refinance activity to increase 41.1% to $693 billion, resulting in a net increase in total mortgage originations of 16.7% to $2,076 billion, all from 2024 levels. In 2024, purchase activity accounted for 72.4% of all mortgage originations and is projected in the MBA Forecast to represent 66.6% of all mortgage originations in 2025. According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 6.8% and 6.7% for the three-month periods ended March 31, 2025 and 2024, respectively. Per the MBA Forecast, mortgage interest rates are projected to decrease in subsequent periods, declining to 6.4% by 2026. Due to the rapidly changing environment brought on by inflationary pressures, inventory constraints, geopolitical and military conflicts, and changes in government regulations and policy, including as a result of the policies implemented by the Trump administration, these projections and the impact of actual future developments on the Company could be subject to material change.

Previous wording

The preparation of the Company's unaudited Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the nine-month period ended September 30, 2024, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the 2023 Form 10-K.

Current wording

The preparation of the Company's unaudited Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the three-month period ended March 31, 2025, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the 2024 Form 10-K.

Previous wording

The following table presents certain unaudited Consolidated Statements of Operations data for the three- and nine-month periods ended September 30, 2024 and 2023:

Current wording

The following table presents certain unaudited Consolidated Statements of Operations data for the three-month periods ended March 31, 2025 and 2024:

Previous wording

Title insurance companies typically issue title insurance policies directly or through title agencies. Following is a breakdown of premiums generated by direct and agency operations for the three- and nine-month periods ended September 30, 2024 and 2023:

Current wording

Title insurance companies typically issue title insurance policies directly or through title agencies. Following is a breakdown of premiums generated by direct and agency operations for the three-month periods ended March 31, 2025 and 2024:

Previous wording

Direct Net Premiums – The Company's direct business consists of operations at the home office, branch offices, and wholly owned title insurance agencies. In the Company's direct operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are recognized in connection with these policies. Net premiums written from direct operations decreased 7.0% and 1.9% for the three- and nine-month periods ended September 30, 2024, respectively, compared with the same prior year periods. The decreases for the three- and nine-month periods ended September 30, 2024 were primarily the result of the Company making the strategic decision to close less profitable offices of a wholly owned title insurance agency and lower activity levels in certain markets where the Company issues title insurance policies directly.

Current wording

Direct Net Premiums – The Company's direct business consists of operations at the home office, branch offices, and wholly owned title insurance agencies. In the Company's direct operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are recognized in connection with these policies. Net premiums written from direct operations increased 1.6% for the three-month period ended March 31, 2025, compared with the same prior year period.

Previous wording

Agency Net Premiums– When a policy is written through a non-wholly owned title agency, the premium is shared between the agency and the Company. The agent retains a majority of the premium as a commission and remits the net amount to the Company. Title insurance commissions earned by the Company’s agents are recognized as expenses concurrently with premium recognition. Agency net premiums written increased 19.3% and 16.7% for the three- and nine-month periods ended September 30, 2024, compared with the same prior year periods. The increases for the three- and nine-month periods ended September 30, 2024 were primarily due to expansion efforts in the Company's Texas and Florida markets, in addition to appreciation in average home prices and higher activity levels for the three-month period ended September 30, 2024 related to lower average mortgage interest rates.

Current wording

Agency Net Premiums– When a policy is written through a non-wholly owned title agency, the premium is shared between the agency and the Company. The agent retains a majority of the premium as a commission and remits the net amount to the Company. Title insurance commissions earned by the Company’s agents are recognized as expenses concurrently with premium recognition. Agency net premiums written increased 22.2% for the three-month period ended March 31, 2025, compared with the same prior year period. The increase for the three-month period ended March 31, 2025 was primarily due to higher activity levels across key markets.

Previous wording

Following is a schedule of net premiums written for the three- and nine-month periods ended September 30, 2024 and 2023 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

Current wording

Following is a schedule of net premiums written for the three-month periods ended March 31, 2025 and 2024 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

Previous wording

Escrow and other title-related fees consists primarily of commission income, escrow and other various fees associated with the issuance of title insurance policies including settlement, examination and closing fees. Escrow and other title-related fee revenues remained relatively consistent with the prior year periods at $4.6 million and $13.1 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $4.7 million and $12.9 million for the same prior year periods.

Current wording

Escrow and other title-related fees consists primarily of commission income, escrow and other various fees associated with the issuance of title insurance policies including settlement, examination and closing fees. Escrow and other title-related fee revenues remained relatively consistent with the prior year period at $3.9 million for the three-month period ended March 31, 2025, compared with $3.7 million for the same prior year period.

Previous wording

Revenue from non-title services includes trust services, agency management services and exchange services income. Non-title service revenues were $4.3 million and $12.9 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $4.6 million and $14.5 million for the same prior year periods. The decreases for the three- and nine-month periods ended September 30, 2024 were primarily related to decreases in like-kind exchange revenues.

Current wording

Revenue from non-title services includes trust services, agency management services and exchange services income. Non-title service revenues were $4.6 million for the three-month period ended March 31, 2025, compared with $4.3 million for the same prior year period. The increase for the three-month period ended March 31, 2025 was primarily related to an increase in like-kind exchange revenues.

Previous wording

Investment-related revenues include interest and dividends, other investment income, and net investment gains (losses).

Current wording

Investment-related revenues include interest and dividends, other investment income, and net investment (losses) gains.

Previous wording

Interest and dividends were $2.7 million and $7.8 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $2.3 million and $6.5 million for the same prior year periods. Interest and dividend levels are primarily a function of general market performance, interest rates and the amount of cash available for investments that meet the Company's investment policy. The increases for the three- and nine-month periods ended September 30, 2024 were primarily related to elevated levels of interest income, predominantly influenced by interest rates, general market performance, and the amount of investments and cash held.

Current wording

Interest and dividends were $2.3 million for the three-month period ended March 31, 2025, compared with $2.5 million for the same prior year period. Interest and dividend levels are primarily a function of general market performance, interest rates and the amount of cash available for investments that meet the Company's investment policy. The decrease for the three-month period ended March 31, 2025 was primarily related to lower levels of interest income, predominantly influenced by interest rates, general market performance, and the amount of investments and cash held.

Previous wording

Other investment income was $995 thousand and $2.0 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $514 thousand and $2.9 million for the same prior year periods. Changes in other investment income are impacted by fluctuations in the carrying value of the underlying investment and distributions received.

Current wording

Other investment income was $410 thousand for the three-month period ended March 31, 2025, compared with $111 thousand for the same prior year period. Changes in other investment income are impacted by fluctuations in the carrying value of the underlying investment and distributions received.

Previous wording

The net realized investment gains were $235 thousand and $4.7 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $1.6 million and $14.7 million for the same prior year periods. The Company recorded impairment charges of $309 thousand and $383 thousand on certain fixed maturity securities and other investments where the intent to hold has changed in the three- and nine-month periods ended September 30, 2024, respectively, compared with $96 thousand and $208 thousand for the same prior year periods. Management believes unrealized losses on the remaining fixed maturity securities at September 30, 2024 are temporary in nature.

Current wording

The net realized investment gains were $2.0 million for the three-month period ended March 31, 2025, compared with $2.6 million for the same prior year period. The Company recorded impairment charges of $275 thousand on other investments in the three-month period ended March 31, 2025, compared with $53 thousand on fixed maturity securities for the same prior year period. Management believes unrealized losses on the remaining fixed maturity securities at March 31, 2025 are temporary in nature.

Previous wording

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment exists. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that the Company’s assessment of an issuer’s ability to meet all of its contractual obligations will change based on changes in the characteristics of that issuer; the risk that information obtained by the Company or changes in other facts and circumstances leads management to change its intent to sell the fixed maturity security; and the risk that management is making decisions based on inaccurate information in the financial statements provided by the issuers.

Current wording

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment exists. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that the Company’s assessment of an issuer’s ability to meet all of its contractual obligations will change based on changes in the characteristics of that issuer; the risk that information obtained by the Company or changes in other facts and circumstances leads management to change its intent to sell the security; and the risk that management is making decisions based on inaccurate information in the financial statements provided by the issuers.

Previous wording

Changes in the Estimated Fair Value of Equity Security Investments – Changes in the estimated fair value of equity security investments were $741 thousand and $(18) thousand for the three- and nine-month periods ended September 30, 2024, respectively, compared with $(2.4) million and $(14.0) million for the same prior year periods. Such fluctuations are typically the result of changes in general market conditions during the respective periods, however, the sale of appreciated investment securities can result in a reduction in unrealized gains as they are reclassified to net realized investment gains (losses), which is not indicative of a decline in estimated fair value.

Current wording

Changes in the Estimated Fair Value of Equity Security Investments – Changes in the estimated fair value of equity security investments were $(3.2) million for the three-month period ended March 31, 2025, compared with $(169) thousand for the same prior year period. Such fluctuations are typically the result of changes in general market conditions during the respective periods, however, the sale of appreciated investment securities can result in a reduction in unrealized gains as they are reclassified to net realized investment gains (losses), which is not indicative of a decline in estimated fair value.

Previous wording

Other revenues primarily include miscellaneous income and gains and losses on the disposal of fixed assets and real estate. Other revenues remained relatively consistent with the prior year periods at $388 thousand and $748 thousand for the three- and nine-month periods ended September 30, 2024, respectively, compared with $257 thousand and $647 thousand for the same prior year periods.

Current wording

Other revenues primarily include miscellaneous income and gains and losses on the disposal of fixed assets and real estate. Other revenues remained relatively consistent with the prior year period at $149 thousand for the three-month period ended March 31, 2025, compared with $199 thousand for the same prior year period.

Previous wording

The Company's operating expenses consist primarily of commissions to agents, personnel expenses, office and technology expenses and the provision for claims. Operating expenses increased 8.4% and 5.3% for the three- and nine-month periods ended September 30, 2024, compared with the same prior year periods. The increases for the three- and nine-month periods ended September 30, 2024 were primarily due to increases in commissions to agents, partially offset by decreases in personnel expenses.

Current wording

The Company's operating expenses consist primarily of commissions to agents, personnel expenses, office and technology expenses and the provision for claims. Operating expenses increased 10.2% for the three-month period ended March 31, 2025, compared with the same prior year period. The increase for the three-month period ended March 31, 2025 was primarily due to increases in commissions to agents and other expenses, partially offset by decreases in the provision for claims and personnel expenses.

Previous wording

Following is a summary of the Company's operating expenses for the three- and nine-month periods ended September 30, 2024 and 2023. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Current wording

Following is a summary of the Company's operating expenses for the three-month periods ended March 31, 2025 and 2024. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Previous wording

On a combined basis, the after-tax profit margins were 13.5% and 12.1% for the three- and nine-month periods ended September 30, 2024, respectively, compared with 11.5% and 9.3% for the same prior year periods. The increases for the three- and nine-month periods ended September 30, 2024 were primarily due to growth in net premiums written, decreases in personnel expenses and other Company expense reduction initiatives, and higher levels of earnings and gains on investments. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to manage its operating expenses.

Current wording

On a combined basis, the after-tax profit margin was 5.6% for the three-month period ended March 31, 2025, compared with 8.5% for the same prior year period. The decrease for the three-month period ended March 31, 2025 was primarily due to an unfavorable change in net investment (losses) gains and increased commission expense, partially offset by an increase in net premiums written. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to manage its operating expenses.

Previous wording

Personnel Expenses– Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses. Personnel expenses were $18.1 million and $54.8 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $19.1 million and $58.5 million for the same prior year periods. On a consolidated basis, personnel expenses as a percentage of total revenues were 26.2% and 29.2% for the three- and nine-month periods ended September 30, 2024, respectively, compared with 31.1% and 34.2% for the same prior year periods. The decreases in personnel expenses for the three- and nine-month periods ended September 30, 2024 were primarily due to lower staffing levels and other impacts from Company expense reduction initiatives.

Current wording

Personnel Expenses– Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses. Personnel expenses were $18.3 million for the three-month period ended March 31, 2025, compared with $18.6 million for the same prior year period. On a consolidated basis, personnel expenses as a percentage of total revenues were 32.4% for the three-month period ended March 31, 2025, compared with 34.8% for the same prior year period. The decrease in personnel expenses for the three-month period ended March 31, 2025 was primarily due a reduction in health insurance costs and contractor expenditures.

Previous wording

Office and Technology Expenses– Office and technology expenses primarily include facilities expenses, software and hardware expenses, depreciation expense, telecommunications expenses, and business insurance. Office and technology expenses remained relatively consistent with the prior year periods at $4.4 million and $13.2 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $4.2 million and $13.1 million for the same prior year periods.

Current wording

Office and Technology Expenses– Office and technology expenses primarily include facilities expenses, software and hardware expenses, depreciation expense, telecommunications expenses, and business insurance. Office and technology expenses remained consistent with the prior year period at $4.5 million for the three-month periods ended March 31, 2025 and 2024.

Previous wording

Other Expenses– Other expenses primarily include business development expenses, premium-related taxes and licensing, professional services, title and service fees, amortization of intangible assets and other general expenses. Other expenses remained relatively consistent with the prior year periods at $4.0 million and $12.1 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $3.9 million and $11.8 million for the same prior year periods.

Current wording

Other Expenses– Other expenses primarily include business development expenses, premium-related taxes and licensing, professional services, title and service fees, amortization of intangible assets and other general expenses. Other expenses increased to $4.5 million for the three-month period ended March 31, 2025, compared with $3.8 million for the same prior year period. The increase in other expenses for the three-month period ended March 31, 2025 was primarily due to increases in professional services, miscellaneous expenditures, and premium-related taxes and licensing.

Previous wording

Commissions to Agents– Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency contracts. Commissions to agents increased 22.2% and 18.5% for the three- and nine-month periods ended September 30, 2024, respectively, compared with the same prior year periods. Commission expense as a percentage of net premiums written by agents was 75.4% and 74.5% for the three- and nine-month periods ended September 30, 2024, respectively, compared with 73.6% and 73.4% for the same prior year periods. The changes in commission expense, and commission expense as a percentage of net premiums written, were commensurate with the increases in agent premium volume. Commission rates vary by market due to local practice, competition and state regulations.

Current wording

Commissions to Agents– Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency contracts. Commissions to agents increased 25.1% for the three-month period ended March 31, 2025, compared with the same prior year period. Commission expense as a percentage of net premiums written by agents was 75.8% for the three-month period ended March 31, 2025, compared with 74.0% for the same prior year period. The increase in commission expense was commensurate with the increase in agent premium volume. The increase in commission expense as a percentage of net premiums written by agents was due to shifts in the geographical distribution of agent premium volume, as commission rates vary by market due to local practice, competition and state regulations.

Previous wording

Provision for Claims– The provision for claims decreased 9.2% and 10.6% for thethree- and nine-month periods ended September 30, 2024, respectively, compared with the same prior year periods. The provision for claims as a percentage of net premiums written was 3.0% and 2.4% for thethree- and nine-month periods ended September 30, 2024, respectively, compared with 3.7% and 2.9% for the same prior year periods. The decreases in the provision for claims as a percentage of net premiums written for the three- and nine-month periods ended September 30, 2024 were primarily due to higher levels of favorable loss development and fewer incurred claims losses in the current year periods.

Current wording

Provision for Claims–The provision for claims decreased 64.5% for the three-month period ended March 31, 2025, compared with the same prior year period. The provision for claims as a percentage of net premiums written was 0.7% for the three-month period ended March 31, 2025, compared with 2.3% for the same prior year period. The decrease in the provision for claims as a percentage of net premiums written for the three-month period ended March 31, 2025 was primarily due to recognition of favorable development on known claims.

Previous wording

Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $3.6 million for both the nine-month periods ended September 30, 2024 and 2023.

Current wording

Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $386 thousand for the three-month period ended March 31, 2025, compared with $741 thousand for the same prior year period.

Previous wording

At September 30, 2024, the total reserve for claims was $37.0 million. Of that total, approximately $2.7 million was reserved for specific claims, and approximately $34.3 million was reserved for claims for which the Company had no notice. Because of the uncertainty of future claims, changes in economic conditions and the fact that claims may not materialize for several years, reserve estimates are subject to variability.

Current wording

At March 31, 2025, the total reserve for claims was $37.0 million. Of that total, approximately $2.5 million was reserved for specific claims, and approximately $34.5 million was reserved for claims for which the Company had no notice. Because of the uncertainty of future claims, changes in economic conditions and the fact that claims may not materialize for several years, reserve estimates are subject to variability.

Previous wording

The provision for income taxes was $2.3 million and $5.9 million for the three- and nine-month periods ended September 30, 2024, respectively, compared with $1.5 million and $4.2 million for the same prior year periods. Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 19.6% and 20.7% for the three- and nine-month periods ended September 30, 2024, respectively, compared with 17.7% and 20.8% for the same prior year periods. The effective income tax rates for both 2024 and 2023 differ from the U.S. federal statutory income tax rate of 21% primarily due to the effect of tax-exempt income and state taxes. Tax-exempt income lowers the effective tax rate.

Current wording

The provision for income taxes was $882 thousand for the three-month period ended March 31, 2025, compared with $1.3 million for the same prior year period. Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 21.8% for the three-month period ended March 31, 2025, compared with 21.9% for the same prior year period. The effective income tax rates for both 2025 and 2024 differ from the U.S. federal statutory income tax rate of 21% primarily due to the effect of tax-exempt income and state taxes.

Previous wording

Cash Flows– Net cash flows provided by (used in) operating activities were $17.7 million and $(6.7) million for the nine-month periods ended September 30, 2024 and 2023, respectively. Cash flows provided by (used in) operating activities differ from net income due to adjustments for non-cash items, such as gains and losses on investments and property, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets.

Current wording

Cash Flows– Net cash (used in) provided by operating activities was $(75) thousand and $1.4 million for the three-month periods ended March 31, 2025 and 2024, respectively. Net cash (used in) provided by operating activities differ from net income due to adjustments for non-cash items, such as gains and losses on investments and property, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets.

Previous wording

Cash flows from non-operating activities have historically consisted of purchases and proceeds from investing activities, the issuance of dividends and repurchases of common stock. Net cash was used in investing activities for the nine-month period ended September 30, 2024, compared with net cash being provided by investing activities in the prior year period. Net cash was used in financing activities for the nine-month periods ended September 30, 2024 and 2023.

Current wording

Cash flows from non-operating activities have historically consisted of purchases and proceeds from investing activities, the issuance of dividends and repurchases of common stock. Net cash was provided by investing activities for the three-month period ended March 31, 2025, compared with net cash being used in investing activities in the prior year period. Net cash was used in financing activities for the three-month periods ended March 31, 2025 and 2024.

Previous wording

The Company maintains a high degree of liquidity within its investment portfolio in the form of cash, short-term investments and other readily marketable securities. As of September 30, 2024, the Company held cash and cash equivalents of $25.5 million, short-term investments of $87.4 million, available-for-sale fixed maturity securities of $103.4 million and equity securities of $37.8 million. The net effect of all activities on total cash and cash equivalents was an increase of $1.4 million in 2024.

Current wording

The Company maintains a high degree of liquidity within its investment portfolio in the form of cash, short-term investments and other readily marketable securities. As of March 31, 2025, the Company held cash and cash equivalents of $27.6 million, short-term investments of $54.1 million, available-for-sale fixed maturity securities of $118.3 million and equity securities of $34.6 million. The net effect of all activities on total cash and cash equivalents was an increase of $2.9 million in 2025.

Previous wording

Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs for the foreseeable future. However, given inflationary pressures and geopolitical and military conflicts, there can be no assurance that future experience will be similar tohistorical experience, since it is influenced by such factors as the interest rate environment, real estate activity, the Company’s claims-paying ability and its financial strength ratings. In addition to operational and investment considerations, taking advantage of opportunistic external growth opportunities may necessitate obtaining additional capital resources. The Company is carefully monitoring inflation, geopolitical and military conflicts, and other trends that could potentially result in material adverse liquidity changes, and will continually assess its capital allocation strategy, including decisions relating to payment of dividends, repurchasing the Company’s common stock and/or conserving cash.

Current wording

Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs for the foreseeable future. However, given inflationary pressures, geopolitical and military conflicts, and changes in the regulatory environment resulting from the Trump administration, such as tariff reform, there can be no assurance that future experience will be similar to historical experience, since it is influenced by such factors as the interest rate environment, real estate activity, the Company’s claims-paying ability and its financial strength ratings. In addition to operational and investment considerations, taking advantage of opportunistic external growth opportunities may necessitate obtaining additional capital resources. The Company is carefully monitoring inflation and the macroeconomic environment, changes in market conditions and the regulatory environment, and other trends that could potentially result in material adverse liquidity changes, and will continually assess its capital allocation strategy, including decisions relating to payment of dividends, repurchasing the Company’s common stock and/or conserving cash.

Previous wording

Purchase of Company Stock– On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan have been purchased. Pursuant to the Company’s ongoing purchase program, the Company purchased 7,039 shares in the nine-month period ended September 30, 2024 and 7,000 shares in the corresponding period in 2023. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.

Current wording

Purchase of Company Stock– On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan have been purchased. Pursuant to the Company’s ongoing purchase program, the Company purchased no shares in the three-month period ended March 31, 2025 and 6,763 shares in the corresponding period in 2024. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.

Previous wording

Capital Expenditures– Capital expenditures were approximately $6.1 million for the nine-month period ended September 30, 2024. In 2024, the Company has plans for various capital improvement projects, including investment in a number of technology and system development initiatives and hardware purchases which are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are subject to periodic review and revision and may vary depending on a number of factors.

Current wording

Capital Expenditures– Capital expenditures were approximately $1.3 million for the three-month period ended March 31, 2025. In 2025, the Company has plans for various capital improvement projects, including investment in a number of technology and system development initiatives and hardware purchases which are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are subject to periodic review and revision and may vary depending on a number of factors.

Previous wording

ITIC, a wholly owned subsidiary of the Company, has entered into employment agreements with certain executive officers. The amounts accrued for these agreements at September 30, 2024 and December 31, 2023, were $15.3 million and $15.2 million, respectively, which includes postretirement compensation and health benefits, and were calculated based on the terms of the contracts. These executive contracts are accounted for on an individual contract basis. As payments are based upon the occurrence of specific events, including death, disability, retirement, termination without cause or upon a change in control, payment periods are currently uncertain. Information regarding retirement agreements and other postretirement benefit plans can be found in Note 5 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Current wording

ITIC, a wholly owned subsidiary of the Company, has entered into employment agreements with certain executive officers. The amounts accrued for these agreements at March 31, 2025 and December 31, 2024, were $15.5 million and $15.4 million, respectively, which includes postretirement compensation and health benefits, and were calculated based on the terms of the contracts. These executive contracts are accounted for on an individual contract basis. As payments are based upon the occurrence of specific events, including death, disability, retirement, termination without cause or upon a change in control, payment periods are currently uncertain. Information regarding retirement agreements and other postretirement benefit plans can be found in Note 5 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Previous wording

The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the term of the lease. The Company occasionally assumes equipment lease agreements through business acquisitions. These leases are accounted for as finance leases. Included in a portion of the Company's current leases is an option to extend or cancel the lease term, and the exercise of such an option is solely at the Company's discretion. The total of undiscounted future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year after 2024 is $3.8 million, which includes lease payments related to options to extend or cancel the lease term if the Company determined at the date of adoption that the lease was expected to be renewed or extended. Information about leases can be found in Note 12 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Current wording

The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the term of the lease. The Company occasionally assumes equipment lease agreements through business acquisitions. These leases are accounted for as finance leases. Included in a portion of the Company's current leases is an option to extend or cancel the lease term, and the exercise of such an option is solely at the Company's discretion. The total of undiscounted future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year after 2025 is $7.2 million, which includes lease payments related to options to extend or cancel the lease term if the Company determined at the date of adoption that the lease was expected to be renewed or extended. Information about leases can be found in Note 12 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.