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


FORM 10-Q

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


For the quarterly period ended September 30, 2017March 31, 2022


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


Commission File Number:  0-11774
 
INVESTORS TITLE COMPANY
(Exact name of registrant as specified in its charter)
North Carolina56-111019956-1110199
(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 classTrading symbol(s)Name of each exchange on which registered
Common Stock, no par valueITICThe Nasdaq Stock Market LLC
Rights to Purchase Series A Junior Participating Preferred StockThe 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     X   ☒No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes    X   ☒No ☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer☐Accelerated filer☒
Large accelerated filerAccelerated filerX
Non-accelerated filer☐(Do not check if a smaller reporting company)
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   X   ☒


As of October 17, 2017,April 27, 2022, there were 1,887,0261,897,255 common shares of the registrant outstanding.




INVESTORS TITLE COMPANY
AND SUBSIDIARIES


INDEX
 
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements:
Consolidated Balance Sheets as of September 30, 2017March 31, 2022 and December 31, 20162021
Consolidated Statements of IncomeOperations For the Threeand Nine Months Ended September 30, 2017March 31, 2022 and 20162021
Consolidated Statements of Comprehensive Income For the Three and Nine Months Ended September 30, 2017March 31, 2022 and 20162021

Consolidated Statements of Stockholders’ Equity For the Nine Three Months Ended September 30, 2017March 31, 2022 and 20162021
Consolidated Statements of Cash Flows For the Nine Three Months Ended September 30, 2017March 31, 2022 and 20162021
PART II.OTHER INFORMATION
Legal Proceedings
Risk Factors
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information





PART I.   FINANCIAL INFORMATION


Item 1.  Financial Statements


Investors Title Company and Subsidiaries
Consolidated Balance Sheets
As of September 30, 2017March 31, 2022 and December 31, 20162021
(Unaudited)(in thousands)
(unaudited)
March 31,
2022		December 31,
2021
September 30,
2017		 December 31,
2016
Assets:   
Investments in securities:   
Fixed maturities, available-for-sale, at fair value (amortized cost: September 30, 2017: $97,840,656; December 31, 2016: $100,162,357)$100,730,446
 $101,934,077
Equity securities, available-for-sale, at fair value (amortized cost: September 30, 2017: $25,927,969; December 31, 2016: $24,836,032)45,116,461
 41,179,259
AssetsAssets  
Cash and cash equivalentsCash and cash equivalents$37,310 $37,168 
Investments:Investments:  
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2022: $66,209; December 31, 2021: $75,511)Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2022: $66,209; December 31, 2021: $75,511)67,725 79,791 
Equity securities, at fair value (cost: March 31, 2022: $28,484; December 31, 2021: $29,478)Equity securities, at fair value (cost: March 31, 2022: $28,484; December 31, 2021: $29,478)69,945 76,853 
Short-term investments20,692,763
 6,558,840
Short-term investments58,555 45,930 
Other investments11,514,780
 11,181,531
Other investments20,217 20,298 
Total investments178,054,450
 160,853,707
Total investments216,442 222,872 
   
Cash and cash equivalents30,890,785
 27,928,472
Premium and fees receivable10,260,167
 8,654,161
Premiums and fees receivablePremiums and fees receivable23,850 22,953 
Accrued interest and dividends1,323,598
 1,035,152
Accrued interest and dividends1,000 817 
Prepaid expenses and other assets9,211,784
 9,456,523
Prepaid expenses and other receivablesPrepaid expenses and other receivables11,618 11,721 
Property, net10,029,847
 8,753,466
Property, net13,413 13,033 
Goodwill and other intangible assets11,785,945
 12,256,641
Current income taxes receivable1,641,144
 —
Goodwill and other intangible assets, netGoodwill and other intangible assets, net15,621 15,951 
Operating lease right-of-use assetsOperating lease right-of-use assets7,321 5,202 
Other assetsOther assets1,822 1,771 
Total Assets$253,197,720
 $228,938,122
Total Assets$328,397 $331,488 
   
Liabilities and Stockholders’ Equity 
  
Liabilities and Stockholders’ Equity  
Liabilities: 
  
Liabilities:  
Reserves for claims$35,207,000
 $35,305,000
Reserve for claimsReserve for claims$36,366 $36,754 
Accounts payable and accrued liabilities31,462,305
 26,146,480
Accounts payable and accrued liabilities34,486 43,868 
Operating lease liabilitiesOperating lease liabilities7,453 5,329 
Current income taxes payable—
 1,232,432
Current income taxes payable6,164 3,329 
Deferred income taxes, net14,397,180
 11,118,256
Deferred income taxes, net11,436 13,121 
Total liabilities81,066,485
 73,802,168
Total liabilities95,905 102,401 
   
Commitments and Contingencies—
 —
Commitments and Contingencies— — 
   
Stockholders’ Equity: 
  
Stockholders’ Equity:  
Preferred stock (1,000,000 authorized shares; no shares issued)—
 —
Common stock – no par value (10,000,000 authorized shares; 1,887,026 and 1,884,283 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively, excluding in each period 291,676 shares of common stock held by the Company)1
 1
Preferred stock (1,000 authorized shares; no shares issued)Preferred stock (1,000 authorized shares; no shares issued)— — 
Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company)Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company)— — 
Retained earnings157,675,541
 143,283,621
Retained earnings231,274 225,861 
Accumulated other comprehensive income14,375,694
 11,761,447
Accumulated other comprehensive income1,218 3,226 
Total stockholders’ equity attributable to the Company172,051,236
 155,045,069
Noncontrolling interests79,999
 90,885
Total stockholders' equity172,131,235
 155,135,954
Total stockholders' equity232,492 229,087 
Total Liabilities and Stockholders’ Equity$253,197,720
 $228,938,122
Total Liabilities and Stockholders’ Equity$328,397 $331,488 


SeeRefer to notes to the Consolidated Financial Statements.

1


Investors Title Company and Subsidiaries
Consolidated Statements of IncomeOperations
For the Three and Nine Months Ended September 30, 2017March 31, 2022 and 20162021
(Unaudited)(in thousands, except per share amounts)
(unaudited)
Three Months Ended
September 30,		 
Nine Months Ended
September 30,
 Three Months Ended
March 31,
2017 2016 2017 2016 20222021
Revenues:       Revenues:
Net premiums written$36,612,558
 $36,306,522
 $102,918,454
 $87,357,972
Net premiums written$63,125 $61,477 
Investment income – interest and dividends1,087,054
 1,160,983
 3,297,634
 3,478,999
Net realized gain on investments803,938
 439,326
 990,118
 574,328
Escrow and other title-related feesEscrow and other title-related fees5,064 2,798 
Non-title servicesNon-title services2,426 2,078 
Interest and dividendsInterest and dividends915 1,016 
Other investment incomeOther investment income1,337 941 
Net realized investment gainsNet realized investment gains1,747 321 
Changes in the estimated fair value of equity security investmentsChanges in the estimated fair value of equity security investments(5,915)3,239 
Other4,633,915
 3,094,874
 13,864,170
 8,280,139
Other299 208 
Total Revenues43,137,465
 41,001,705
 121,070,376
 99,691,438
Total Revenues68,998 72,078 
       
Operating Expenses:     
  Operating Expenses:
Commissions to agents17,641,272
 18,739,151
 50,569,972
 45,946,379
Commissions to agents29,857 30,542 
Provision (benefit) for claims1,854,493
 (1,067,853) 2,714,717
 (403,982)
Salaries, employee benefits and payroll taxes9,820,578
 8,300,823
 29,464,824
 22,945,972
Office occupancy and operations2,309,575
 1,496,948
 6,445,880
 4,526,710
Business development639,923
 608,532
 1,987,028
 1,695,180
Filing fees, franchise and local taxes203,912
 191,574
 935,476
 688,731
Premium and retaliatory taxes673,126
 673,551
 1,918,951
 1,559,631
Professional and contract labor fees447,651
 523,504
 1,375,291
 1,599,603
Other630,320
 157,308
 1,944,419
 629,539
Provision for claimsProvision for claims176 1,591 
Personnel expensesPersonnel expenses21,254 16,153 
Office and technology expensesOffice and technology expenses4,368 2,742 
Other expensesOther expenses5,550 3,735 
Total Operating Expenses34,220,850
 29,623,538
 97,356,558
 79,187,763
Total Operating Expenses61,205 54,763 
       
Income before Income Taxes8,916,615
 11,378,167
 23,713,818
 20,503,675
Income before Income Taxes7,793 17,315 
       
Provision for Income Taxes2,990,000
 3,249,000
 7,647,000
 6,040,000
Provision for Income Taxes1,608 3,492 
       
Net Income5,926,615
 8,129,167
 16,066,818
 14,463,675
Net Income$6,185 $13,823 
       
Net (Gain) Loss Attributable to Noncontrolling Interests(158) (2,228) 10,886
 6,684
       
Net Income Attributable to the Company$5,926,457
 $8,126,939
 $16,077,704
 $14,470,359
       
Basic Earnings per Common Share$3.14
 $4.30
 $8.52
 $7.55
Basic Earnings per Common Share$3.26 $7.30 
       
Weighted Average Shares Outstanding – Basic1,887,103
 1,888,870
 1,886,474
 1,915,468
Weighted Average Shares Outstanding – Basic1,896 1,894 
       
Diluted Earnings per Common Share$3.13
 $4.29
 $8.48
 $7.53
Diluted Earnings per Common Share$3.25 $7.29 
       
Weighted Average Shares Outstanding – Diluted1,896,229
 1,895,592
 1,895,957
 1,921,999
Weighted Average Shares Outstanding – Diluted1,903 1,897 
       
Cash Dividends Paid per Common Share$0.40
 $0.20
 $0.95
 $0.52


SeeRefer to notes to the Consolidated Financial Statements.

2


Investors Title Company and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2022 and Nine Months September 30, 2017 and 20162021
(Unaudited)(in thousands)
(unaudited)
 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Net income$5,926,615
 $8,129,167
 $16,066,818
 $14,463,675
Other comprehensive income, before tax:       
Amortization of unrecognized loss2,153
 2,235
 6,459
 6,705
Unrealized gains (losses) on investments arising during the period1,878,509
 (769,328) 4,940,599
 3,518,286
Reclassification adjustment for sales of securities included in net income(803,938) (545,925) (976,888) (785,517)
Reclassification adjustment for write-downs of securities included in net income—
 118,703
 —
 233,941
Other comprehensive income (loss), before tax1,076,724
 (1,194,315) 3,970,170
 2,973,415
Income tax expense related to postretirement health benefits732
 759
 2,194
 2,279
Income tax expense (benefit) related to unrealized gains (losses) on investments arising during the period642,992
 (280,327) 1,687,783
 1,193,241
Income tax benefit related to reclassification adjustment for sales of securities included in net income(274,419) (185,316) (334,054) (268,548)
Income tax expense related to reclassification adjustment for write-downs of securities included in net income—
 40,555
 —
 79,900
Net income tax expense (benefit) on other comprehensive income (loss)369,305
 (424,329) 1,355,923
 1,006,872
Other comprehensive income (loss)707,419
 (769,986) 2,614,247
 1,966,543
Comprehensive Income$6,634,034
 $7,359,181
 $18,681,065
 $16,430,218
Comprehensive (gain) loss attributable to noncontrolling interests(158) (2,228) 10,886
 6,684
Comprehensive Income Attributable to the Company$6,633,876
 $7,356,953
 $18,691,951
 $16,436,902
 Three Months Ended
March 31,
 20222021
Net income$6,185 $13,823 
Other comprehensive loss, before tax:
Accumulated postretirement benefit obligation adjustment219 — 
Net unrealized losses on investments arising during the period(2,764)(750)
Reclassification adjustment for sale of securities included in net income— (23)
Other comprehensive loss, before tax(2,545)(773)
Income tax expense related to postretirement health benefits46 — 
Income tax benefit related to net unrealized losses on investments arising during the period(583)(158)
Income tax benefit related to reclassification adjustment for sale of securities included in net income— (5)
Net income tax benefit on other comprehensive loss(537)(163)
Other comprehensive loss(2,008)(610)
Comprehensive Income$4,177 $13,213 


SeeRefer to notes to the Consolidated Financial Statements.

3


Investors Title Company and Subsidiaries
Consolidated Statements of Stockholders’ Equity
For the NineThree Months Ended September 30,2017March 31, 2022 and 20162021
(Unaudited)
(in thousands, except per share amounts)
 Common Stock Retained Earnings
 
Accumulated
Other
Comprehensive
Income

 
Noncontrolling
Interests

 
Total
Stockholders’
Equity

 Shares Amount    
Balance, January 1, 20161,949,797
 $1
 $131,186,866
 $11,483,015
 $107,198
 $142,777,080
Net income attributable to the Company 
  
 14,470,359
  
   14,470,359
Dividends paid ($0.52 per share) 
  
 (993,534)  
   (993,534)
Repurchases of common stock(66,803)  
 (6,219,670)  
   (6,219,670)
Exercise of stock appreciation rights1,289
  
 (200)  
   (200)
Share-based compensation expense related to stock appreciation rights 
  
 99,755
  
   99,755
Amortization related to postretirement health benefits 
  
  
 4,426
   4,426
Net unrealized gain on investments 
  
  
 1,962,117
   1,962,117
Net loss attributable to noncontrolling interests        (6,684) (6,684)
Purchase of noncontrolling interest of subsidiary        (8,646) (8,646)
Additional paid-in capital from purchase of noncontrolling interest of subsidiary    (496)     (496)
Income tax benefit from share-based compensation    32,292
     32,292
Balance, September 30, 20161,884,283
 $1
 $138,575,372
 $13,449,558
 $91,868
 $152,116,799
            
Balance, January 1, 20171,884,283
 $1
 $143,283,621
 $11,761,447
 $90,885
 $155,135,954
Net income attributable to the Company 
  
 16,077,704
  
   16,077,704
Dividends paid ($0.95 per share) 
  
 (1,792,430)  
   (1,792,430)
Repurchases of common stock(300)  
 (49,604)  
   (49,604)
Exercise of stock appreciation rights3,043
  
 (737)  
   (737)
Share-based compensation expense related to stock appreciation rights 
  
 156,987
  
   156,987
Amortization related to postretirement health benefits 
  
  
 4,265
   4,265
Net unrealized gain on investments 
  
  
 2,609,982
   2,609,982
Net loss attributable to noncontrolling interests        (10,886) (10,886)
Balance, September 30, 20171,887,026
 $1
 $157,675,541
 $14,375,694
 $79,999
 $172,131,235
(unaudited)


See
Common StockRetained EarningsAccumulated
Other
Comprehensive
Income		Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 20201,892 $— $196,096 $4,326 $200,422 
Net income13,823 13,823 
Dividends paid ($0.44 per share)(832)(832)
Exercise of stock appreciation rights2 (1)(1)
Share-based compensation expense related to stock appreciation rights71 71 
Net unrealized loss on investments(610)(610)
Balance, March 31, 20211,894 $— $209,157 $3,716 $212,873 
Balance, December 31, 20211,895 $— $225,861 $3,226 $229,087 
Net income6,185 6,185 
Dividends paid ($0.46 per share)(873)(873)
Exercise of stock appreciation rights2 (1)(1)
Share-based compensation expense related to stock appreciation rights102 102 
Accumulated postretirement benefit obligation adjustment173 173 
Net unrealized loss on investments(2,181)(2,181)
Balance, March 31, 20221,897 $— $231,274 $1,218 $232,492 

Refer to notes to the Consolidated Financial Statements.

4


Investors Title Company and Subsidiaries
Consolidated Statements of Cash Flows
For the NineThree Months Ended September 30,2017March 31, 2022 and 20162021
(Unaudited)(in thousands)
(unaudited)
 Three Months Ended
March 31,
 20222021
Operating Activities  
Net income$6,185 $13,823 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation524 430 
Amortization of investments, net162 285 
Amortization of other intangible assets, net330 134 
Share-based compensation expense related to stock appreciation rights102 71 
Net gain on disposals of property(28)(8)
Net realized investment gains(1,747)(321)
Net change in estimated fair value of equity security investments5,915 (3,239)
Net earnings from other investments(1,207)(594)
Provision for claims176 1,591 
(Benefit) provision for deferred income taxes(1,148)753 
Changes in assets and liabilities:  
Increase in premium and fees receivable(897)(761)
Increase in other assets(131)(2,064)
(Increase) decrease in operating lease right-of-use assets(2,119)154 
Decrease in accounts payable and accrued liabilities(9,163)(3,982)
Increase (decrease) in operating lease liabilities2,124 (160)
Increase in current income taxes payable2,835 2,739 
Payments of claims, net of recoveries(564)(613)
Net cash provided by operating activities1,349 8,238 
Investing Activities  
Purchases of equity securities(102)(976)
Purchases of short-term investments(12,624)(16,578)
Purchases of other investments(275)(286)
Proceeds from sales and maturities of fixed maturity securities9,140 13,660 
Proceeds from sales of equity securities2,842 4,831 
Proceeds from sales and maturities of short-term investments— 1,251 
Proceeds from sales and distributions of other investments1,562 1,534 
Purchases of property(908)(1,613)
Proceeds from the sale of property32 13 
Net (used in) provided by investing activities(333)1,836 
Financing Activities  
Exercise of stock appreciation rights(1)(1)
Dividends paid(873)(832)
Net cash used in financing activities(874)(833)
Net Increase in Cash and Cash Equivalents142 9,241 
Cash and Cash Equivalents, Beginning of Period37,168 13,723 
Cash and Cash Equivalents, End of Period$37,310 $22,964 
5

 Nine Months Ended September 30,
 2017 2016
Operating Activities   
Net income$16,066,818
 $14,463,675
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation1,054,830
 994,619
Amortization of investments, net572,781
 624,882
Amortization related to postretirement benefits obligation6,459
 6,705
Amortization of other intangible assets, net707,696
 —
Share-based compensation expense related to stock appreciation rights156,987
 99,755
Excess tax benefits related to exercise of stock appreciation rights142,280
 32,292
Net gain on disposals of property(15,828) (10,677)
Net realized gain on investments(990,118) (574,328)
Net earnings from other investments(1,251,871) (1,120,640)
Provision (benefit) for claims2,714,717
 (403,982)
Provision for deferred income taxes1,923,000
 4,040,000
Changes in assets and liabilities: 
  
Increase in receivables(1,606,006) (965,873)
(Increase) decrease in other assets(43,707) 1,265,172
Increase in current income taxes recoverable(1,641,144) (1,261,289)
Increase (decrease) in accounts payable and accrued liabilities5,253,825
 (337,935)
Decrease in current income taxes payable(1,374,712) (210,355)
Payments of claims, net of recoveries(2,812,717) (1,848,018)
Net cash provided by operating activities18,863,290
 14,794,003
    
Investing Activities 
  
Purchases of available-for-sale securities(12,953,436) (15,066,182)
Purchases of short-term investments(15,667,715) (1,890,826)
Purchases of other investments(1,223,853) (1,974,275)
Purchase of noncontrolling interest of subsidiary—
 (9,142)
Purchase of subsidiary(175,000) —
Proceeds from sales and maturities of available-for-sale securities14,585,324
 10,711,195
Proceeds from sales and maturities of short-term investments1,535,773
 4,830,935
Proceeds from sales and distributions of other investments2,142,854
 2,594,042
Proceeds from sales of other assets13,230
 10,647
Purchases of property(2,342,583) (1,742,225)
Proceeds from the sale of property27,200
 64,155
Net cash used in investing activities(14,058,206) (2,471,676)
    
Financing Activities 
  
Repurchases of common stock(49,604) (6,219,670)
Exercise of stock appreciation rights(737) (200)
Dividends paid(1,792,430) (993,534)
Net cash used in financing activities(1,842,771) (7,213,404)
    
Net Increase in Cash and Cash Equivalents2,962,313
 5,108,923
Cash and Cash Equivalents, Beginning of Period27,928,472
 21,790,068
Cash and Cash Equivalents, End of Period$30,890,785
 $26,898,991
Consolidated Statements of Cash Flows, continued 
 Three Months Ended
March 31,
 20222021
Supplemental Disclosures:  
Cash Paid During the Year for:  
Income tax refund, net$(79)$— 
Non-Cash Investing and Financing Activities:
Non-cash net unrealized loss on investments, net of deferred tax benefit of $583 and $163 for March 31, 2022 and 2021, respectively$2,181 $610 
Adjustments to postretirement benefits obligation, net of deferred tax expense of $(46) and $0 for March 31, 2022 and 2021, respectively$(173)$— 





Consolidated Statements of Cash Flows, continued 
 Nine Months Ended September 30,
 2017 2016
Supplemental Disclosures:   
Cash Paid During the Year for:   
Income tax payments, net$9,236,200
 $3,736,100
Non Cash Investing and Financing Activities:   
Non cash net unrealized gain on investments, net of deferred tax provision of $(1,353,729) and $(1,004,593) for September 30, 2017 and 2016, respectively
$(2,609,982) $(1,962,117)

SeeRefer to notes to the Consolidated Financial Statements.

6


INVESTORS TITLE COMPANY
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2017March 31, 2022
(Unaudited)(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, 20162021 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. Earnings attributable to noncontrolling interests in majority-owned title insurance agencies are recorded in the Consolidated Statements of Income. Noncontrolling interests representing the portion of equity not related to the Company's ownership interests are recorded in separate sections of the Consolidated Balance Sheets. 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 quarterthree-month period ended September 30, 2017March 31, 2022 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2017.2022 or any other interim period.


Immaterial Classification Corrections – In previous periods, certain commission revenue was improperly classified as net premiums written. The issue was identified in the 2nd quarter of 2017 and, accordingly, the Consolidated Statements of Income have been corrected beginning with the June 30, 2017 Consolidated Financial Statements.  The correction resulted in a decrease to previously reported net premiums written and an increase to other revenues of $1,342,905 and $452,630 for the nine-month periods ended September 30, 2017 and 2016, respectively.  The immaterial classification correction had no impact to the Company’s financial position or results of operations as previously reported.

In the 2nd quarter of 2017, certain net premiums written amounts were improperly classified as other revenues. The issue was identified in the 3rd quarter of 2017 and, accordingly, the Consolidated Statements of Income have been corrected beginning with the September 30, 2017 Consolidated Financial Statements.  The correction resulted in an increase to previously reported net premiums written and a decrease to other revenues of $556,996 for the nine-month period ended September 30, 2017.  The immaterial classification correction had no impact to the Company’s financial position or results of operations as previously reported.

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 financial statementsunaudited 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 subsequent to the date of theits unaudited Consolidated Financial Statements at September 30, 2017.Statements.

Recently Issued Accounting Standards –In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. ASU 2017-08 is intended to enhance the accounting for the amortization of premiums for purchased callable debt securities. Specifically, the ASU shortens the amortization period for certain investments in callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The update is effective for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact.



In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715). This update requires entities to (1) disaggregate the current service cost component from the other components of net benefit cost (the "other components") and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if that subtotal is presented. In addition, the ASU requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This update removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the ASU clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The update is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. None of these amendments will have an impact on the Company's financial position or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The update broadens the information that an entity must consider in developing its expected credit loss estimates, and is meant to better reflect an entity’s current estimate of all expected credit losses. In addition, this update amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The update is effective for annual periods beginning after December 15, 2019, and interim periods within those fiscal years.  Early adoption is permitted as of fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact. Currently, the Company's potential credit losses under this accounting standard relate to available-for-sale securities. The Company does not believe that the risk of credit losses, based on current available-for-sale security holdings, is material to the Company's financial statements as a whole. Please refer to Note 6 for further information about the Company's investments.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). ASU 2016-09 updated guidance to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows.  The update was effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company adopted this update on January 1, 2017 with no material impact to the Company's financial position or results of operations. All excess tax benefits and tax deficiencies are now recognized as income tax expense or benefit in the Consolidated Statements of Income. In addition, a reclassification was made on the Consolidated Statements of Cash Flows, as companies are now required to present excess tax benefits as an operating activity on the Consolidated Statements of Cash Flows rather than as a financing activity. The Company began recording all excess tax benefits and tax deficiencies as an income tax expense or benefit on a prospective basis. The amendments relating to the presentation of excess tax benefits within the Consolidated Statements of Cash Flows were adopted by the Company retrospectively.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 updated guidance to improve financial reporting for leasing transactions. The core principle of the guidance is that lessees will be required to recognize assets and liabilities on the balance sheet for all leases with terms of more than twelve months. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. The accounting applied by a lessor is largely unchanged from current GAAP, with some targeted improvements. Disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. In transition, both lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption was permitted for all entities upon issuance. The Company is currently evaluating the impact that the recently issued accounting standard will have on the Company's financial position and results of operations, but does not expect it to have a material impact. As of December 31, 2016, future minimum lease payments with terms of more than twelve months were approximately $2.5 million.



In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016-01 updated guidance to enhance the reporting model for financial instruments. Among the main principles of the guidance applicable to the Company are provisions to: require equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income; simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, noting that when a qualitative assessment indicates that impairment exists that an entity is required to measure the investment at fair value; eliminate the requirement to disclose methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost; require entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; require separate presentation of financial assets and financial liabilities by measuring category and form of financial asset on the balance sheet or accompanying notes to the financial statements; and clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted for the provision requiring entities to recognize the fair value change from instrument-specific credit risk in other comprehensive income for financial liabilities measured using the fair value option in Accounting Standards Codification ("ASC") 825, and can be early adopted for financial statements of annual or interim periods that have not yet been issued or made available for issuance. The Company will be required to apply the update by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with the amendments related to equity securities without readily determinable fair values being applied prospectively to equity investments that exist as of the date of adoption. The guidance is expected to have a material impact on the Company’s financial condition and results of operations once effective, primarily resulting from fluctuations in security exchanges or markets.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 updated guidance to improve the comparability of revenue recognition practices for entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards such as insurance contracts or lease standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, this update originally became effective for interim and annual reporting periods beginning after December 15, 2016. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU 2015-14 updated guidance to defer the effective date of the standard by one year. Early adoption is not permitted, although public entities are permitted to elect to adopt the amendments on the original effective date. Currently, the Company's only revenue streams potentially impacted by the issued accounting standard are like-kind exchange services revenue produced by the Company's subsidiaries, Investors Title Exchange Corporation ("ITEC") and Investors Title Accommodation Corporation (“ITAC”), and certain management service fees generated by the Company's subsidiary, Investors Title Management Services, Inc. (“ITMS”). Neither like-kind exchange proceeds nor management service fees are material to the Company's financial condition and results of operations.

Note 2 – ReservesReserve for Claims


TransactionsActivity in the reservesreserve for claims for the nine-monththree-month period ended September 30, 2017March 31, 2022 and the year ended December 31, 20162021 are summarized as follows:
 (in thousands)March 31, 2022December 31, 2021
Balance, beginning of period$36,754 $33,584 
Provision charged to operations176 5,686 
Payments of claims, net of recoveries(564)(2,516)
Balance, end of period$36,366 $36,754 
 September 30, 2017 December 31, 2016
Balance, beginning of period$35,305,000
 $37,788,000
Provision, charged to operations2,714,717
 242,953
Payments of claims, net of recoveries(2,812,717) (2,725,953)
Balance, end of period$35,207,000
 $35,305,000


The total reserve for all reported and unreported losses the Company incurred through September 30, 2017March 31, 2022 is represented by the reservesreserve for claims.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 reserves aretotal reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through September 30, 2017.March 31, 2022. 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 maycould be significant.



7


A summary of the Company’s loss reserves,reserve for claims, broken down into its components of known title claims and IBNR, follows:
 (in thousands, except percentages)March 31, 2022%December 31, 2021%
Known title claims$3,910 10.8 $3,317 9.0 
IBNR32,456 89.2 33,437 91.0 
Total reserve for claims$36,366 100.0 $36,754 100.0 
 September 30, 2017 % December 31, 2016 %
Known title claims$4,875,038
 13.8 $4,405,343
 12.5
IBNR30,331,962
 86.2 30,899,657
 87.5
Total loss reserves$35,207,000
 100.0 $35,305,000
 100.0


Claims and losses paid are charged to the reservesreserve 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 realizablefair 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 attributable to the Company by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to the Company 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;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 nine-monththree-month periods ended September 30:March 31:
Three Months Ended
March 31,
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income attributable to the Company$5,926,457
 $8,126,939
 $16,077,704
 $14,470,359
(in thousands, except per share amounts)(in thousands, except per share amounts)20222021
Net incomeNet income$6,185 $13,823 
Weighted average common shares outstanding – Basic1,887,103
 1,888,870
 1,886,474
 1,915,468
Weighted average common shares outstanding – Basic1,896 1,894 
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)9,126
 6,722
 9,483
 6,531
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)7 3 
Weighted average common shares outstanding – Diluted1,896,229
 1,895,592
 1,895,957
 1,921,999
Weighted average common shares outstanding – Diluted1,903 1,897 
Basic earnings per common share$3.14
 $4.30
 $8.52
 $7.55
Basic earnings per common share$3.26 $7.30 
Diluted earnings per common share$3.13
 $4.29
 $8.48
 $7.53
Diluted earnings per common share$3.25 $7.29 
There were 4,5000 and 15 thousand potential shares excluded from the computation of diluted earnings per share for the three- and nine-monththree-month periods ended September 30, 2017. There were no potential shares excluded fromMarch 31, 2022 and 2021, respectively, due to the computationout-of-the-money status of diluted earnings per share for the three- and nine-month periods ended September 30, 2016.related share-based awards.


The Company historically has adopted employee stock award plans under which restricted stock, and options or stock appreciation rights ("SARs") ofexercisable for the Company's stock may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant.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 250,000250 thousand shares.


As of September 30, 2017,March 31, 2022, the only outstanding awards under the plans were SARs, which expire inwithin 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 of which vest and are exercisable within one year of the date of grant. 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.


8

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, 202136 $139.16 4.38$903 
SARs granted5 184.26   
SARs exercised(6)106.71   
Outstanding as of December 31, 202135 $150.36 3.96$1,643 
SARs granted— —   
SARs exercised(4)89.23   
Outstanding as of March 31, 202231 $158.22 4.02$1,400 
Exercisable as of March 31, 202226 $161.73 3.76$1,067 
Unvested as of March 31, 20225 $141.50 5.25$333 

There was approximately $157,000$102 thousand and $100,000$71 thousand of compensation expense relating to SARs vesting on or before September 30, 2017March 31, 2022 and 2016,2021, respectively, included in salaries, employee benefits and payroll taxespersonnel expenses in the unaudited Consolidated Statements of Income.Operations. As of September 30, 2017,March 31, 2022, there was $125,000$206 thousand of unrecognized compensation costexpense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.




A summary of share-based award transactions for all share-based award plans follows:
 
Number
Of Shares
 
Weighted
Average
Exercise Price
 
Average Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding as of January 1, 201622,000
 $57.04
 3.93 $945,055
SARs granted4,500
 93.87
    
SARs exercised(2,000) 32.00
    
Outstanding as of December 31, 201624,500
 $65.85
 3.85 $836,640
SARs granted4,500
 192.71
    
SARs exercised(4,000) 36.38
    
Outstanding as of September 30, 201725,000
 $93.40
 4.23 $2,203,100
        
Exercisable as of September 30, 201722,750
 $83.58
 4.00 $2,203,100
        
Unvested as of September 30, 20172,250
 $192.71
 6.63 $—

During the second quarters of both 2017 and 2016, the Company issued 4,500 share-settled SARs to the directors of the Company.  SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments.  The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted average assumptions noted in the table shown below. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant.  The weighted average fair values for the SARs issued during 2017 and 2016 were $55.40 and $28.75, respectively, and were estimated using the weighted average assumptions shown in the table below.
 2017 2016
Expected Life in Years7.0 7.0
Volatility26.2% 28.9%
Interest Rate2.0% 1.7%
Yield Rate1.0% 1.0%

Note 4 – Segment Information


The Company has one1 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 September 30, 2017March 31, 2022 and 2016:2021:

Three Months Ended
March 31, 2022 (in thousands)		Title
Insurance		All
Other		Intersegment EliminationsTotal
Insurance and other services revenues$73,065 $2,737 $(4,888)$70,914 
Investment loss(1,628)(2,035)— (3,663)
Net realized gain on investments51 1,696 — 1,747 
Total revenues$71,488 $2,398 $(4,888)$68,998 
Operating expenses63,188 2,753 (4,736)61,205 
Income (loss) before income taxes$8,300 $(355)$(152)$7,793 
Total assets$275,729 $52,668 $— $328,397 

Three Months Ended
March 31, 2021 (in thousands)		Title
Insurance		All
Other		Intersegment EliminationsTotal
Insurance and other services revenues$66,521 $2,338 $(2,298)$66,561 
Investment income4,396 800 — 5,196 
Net realized gain on investments232 89 — 321 
Total revenues$71,149 $3,227 $(2,298)$72,078 
Operating expenses54,530 2,385 (2,152)54,763 
Income before income taxes$16,619 $842 $(146)$17,315 
Total assets$237,082 $58,458 $— $295,540 

9
Three Months Ended September 30, 2017
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 Total
Insurance and other services revenues$41,095,694
 $1,985,959
 $(1,835,180) $41,246,473
Investment income1,067,565
 136,159
 (116,670) 1,087,054
Net realized gain on investments749,396
 54,542
 —
 803,938
Total revenues$42,912,655
 $2,176,660
 $(1,951,850) $43,137,465
Operating expenses34,127,244
 1,911,366
 (1,817,760) 34,220,850
Income before income taxes$8,785,411
 $265,294
 $(134,090) $8,916,615
Total assets$201,137,770
 $52,059,950
 $—
 $253,197,720

Three Months Ended September 30, 2016Title
Insurance		 All
Other		 Intersegment
Eliminations		 Total
Insurance and other services revenues$38,285,551
 $1,666,214
 $(550,369) $39,401,396
Investment income1,079,118
 140,201
 (58,336) 1,160,983
Net realized gain (loss) on investments439,501
 (175) —
 439,326
Total revenues$39,804,170
 $1,806,240
 $(608,705) $41,001,705
Operating expenses28,487,268
 1,669,217
 (532,947) 29,623,538
Income before income taxes$11,316,902
 $137,023
 $(75,758) $11,378,167
Total assets$180,436,004
 $42,672,325
 $—
 $223,108,329
Nine Months Ended September 30, 2017
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 Total
Insurance and other services revenues$115,573,247
 $5,495,136
 $(4,285,759) $116,782,624
Investment income3,168,384
 406,342
 (277,092) 3,297,634
Net realized gain on investments893,554
 96,564
 —
 990,118
Total revenues$119,635,185
 $5,998,042
 $(4,562,851) $121,070,376
Operating expenses95,818,759
 5,771,296
 (4,233,497) 97,356,558
Income before income taxes$23,816,426
 $226,746
 $(329,354) $23,713,818
Total assets$201,137,770
 $52,059,950
 $—
 $253,197,720
Nine Months Ended September 30, 2016Title
Insurance		 All
Other		 Intersegment
Eliminations		 Total
Insurance and other services revenues$92,055,531
 $5,137,268
 $(1,554,688) $95,638,111
Investment income3,206,093
 424,578
 (151,672) 3,478,999
Net realized gain on investments513,624
 60,704
 —
 574,328
Total revenues$95,775,248
 $5,622,550
 $(1,706,360) $99,691,438
Operating expenses75,766,983
 4,923,205
 (1,502,425) 79,187,763
Income before income taxes$20,008,265
 $699,345
 $(203,935) $20,503,675
Total assets$180,436,004
 $42,672,325
 $—
 $223,108,329



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 $9,538,000$14.2 million and $8,487,000$13.4 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. The executive employee benefits include health, insurance, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the unaudited Consolidated Balance Sheets. The following sets forth the net periodic benefitsbenefit cost for the executive benefits for the periods ended September 30, 2017March 31, 2022 and 2016:2021:
Three Months Ended
March 31,
 (in thousands)20222021
Service cost – benefits earned during the year$— $— 
Interest cost on the projected benefit obligation6 7 
Amortization of unrecognized losses— — 
Net periodic benefit cost$6 $7 

 Three Months Ended
September 30,		 Nine Months Ended
September 30,
 2017 2016 2017 2016
Service cost – benefits earned during the year$—
 $2,545
 $—
 $7,635
Interest cost on the projected benefit obligation9,217
 8,781
 27,651
 26,343
Amortization of unrecognized losses2,153
 2,235
 6,459
 6,705
Net periodic benefits costs$11,370
 $13,561
 $34,110
 $40,683

Note 6 – Investments and Estimated Fair Value


Investments in Fixed Maturity Securities


The aggregate estimated fair value, gross unrealized holding gains, gross unrealized holding losses and cost or amortized cost for fixed maturity securities by major security typeclassification are as follows:
As of March 31, 2022 (in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated Fair
Value
Fixed maturity securities, available-for-sale, at fair value:    
General obligations of U.S. states, territories and political subdivisions$15,011 $224 $— $15,235 
Special revenue issuer obligations of U.S. states, territories and political subdivisions40,620 806 56 41,370 
Corporate debt securities10,578 707 165 11,120 
Total$66,209 $1,737 $221 $67,725 
As of September 30, 2017
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 Estimated Fair Value
Fixed maturities, available-for-sale, at fair value:       
General obligations of U.S. states, territories and political subdivisions$25,534,763
 $480,036
 $50,347
 $25,964,452
Special revenue issuer obligations of U.S. states, territories and political subdivisions59,050,028
 2,074,655
 179,303
 60,945,380
Corporate debt securities13,255,865
 567,850
 3,101
 13,820,614
Total$97,840,656
 $3,122,541
 $232,751
 $100,730,446
Equity securities, available-for-sale, at fair value: 
  
  
  
Common stocks$25,927,969
 $19,221,955
 $33,463
 $45,116,461
Total$25,927,969
 $19,221,955
 $33,463
 $45,116,461
Short-term investments: 
  
  
  
Commercial paper, money market funds and certificates of deposit$20,692,763
 $—
 $—
 $20,692,763
Total$20,692,763
 $—
 $—
 $20,692,763


As of December 31, 2021 (in thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated Fair
Value
Fixed maturity securities, available-for-sale, at fair value:    
General obligations of U.S. states, territories and political subdivisions$16,669 $922 $— $17,591 
Special revenue issuer obligations of U.S. states, territories and political subdivisions41,753 2,453 2 44,204 
Corporate debt securities17,089 955 48 17,996 
Total$75,511 $4,330 $50 $79,791 

As of December 31, 2016
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
Fixed maturities, available-for-sale, at fair value:       
General obligations of U.S. states, territories and political subdivisions$29,374,774
 $440,628
 $298,533
 $29,516,869
Special revenue issuer obligations of U.S. states, territories and political subdivisions57,459,818
 1,619,444
 502,135
 58,577,127
Corporate debt securities13,327,765
 512,316
 —
 13,840,081
Total$100,162,357
 $2,572,388
 $800,668
 $101,934,077
Equity securities, available-for-sale, at fair value: 
  
  
  
Common stocks$24,836,032
 $16,392,210
 $48,983
 $41,179,259
Total$24,836,032
 $16,392,210
 $48,983
 $41,179,259
Short-term investments: 
  
  
  
Money market funds and certificates of deposit$6,558,840
 $—
 $—
 $6,558,840
Total$6,558,840
 $—
 $—
 $6,558,840


The special revenue category for both periods presented includes approximately 6045 individual bondsfixed maturity securities with revenue sources from a variety of industry sectors.


10

The scheduled maturities of fixed maturity securities at September 30, 2017 wereMarch 31, 2022 are as follows:
 Available-for-Sale
(in thousands)Amortized
Cost		Estimated Fair
Value
Due in one year or less$15,104 $15,165 
Due one year through five years46,535 47,521 
Due five years through ten years3,747 3,811 
Due after ten years823 1,228 
Total$66,209 $67,725 
 Available-for-Sale
 
Amortized
Cost
 
Estimated Fair
Value
Due in one year or less$17,774,970
 $17,870,218
Due one year through five years27,079,300
 27,792,150
Due five years through ten years50,998,490
 52,546,163
Due after ten years1,987,896
 2,521,915
Total$97,840,656
 $100,730,446


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




Gross realized gains and losses on sales of investments for the nine-month periods ended September 30 are summarized as follows:
 2017 2016
Gross realized gains from securities: 
  
Special revenue issuer obligations of U.S. states, territories and political subdivisions$139
 $161
Corporate debt securities—
 20
Common stocks and nonredeemable preferred stocks1,232,330
 880,647
Auction rate securities—
 74,996
Total$1,232,469
 $955,824
Gross realized losses from securities: 
  
General obligations of U.S. states, territories and political subdivisions$—
 $(533)
Special revenue issuer obligations of U.S. states, territories and political subdivisions(100) (1,085)
Common stocks and nonredeemable preferred stocks(255,481) (168,688)
Other-than-temporary impairment of securities—
 (233,941)
Total$(255,581) $(404,247)
Net realized gain from securities$976,888
 $551,577
Net realized gain on other investments:   
Gains on other investments$13,230
 $22,751
Total$13,230
 $22,751
Net realized gain on investments$990,118
 $574,328

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

The following table presents the gross unrealized losses on investmentfixed 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 September 30, 2017March 31, 2022 and December 31, 2016:2021:
 Less than 12 Months12 Months or LongerTotal
As of March 31, 2022 (in thousands)Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions$2,383 $(53)$1,101 $(3)$3,484 $(56)
Corporate debt securities2,633 (69)6,111 (96)8,744 (165)
Total temporarily impaired securities$5,016 $(122)$7,212 $(99)$12,228 $(221)
 Less than 12 Months 12 Months or Longer Total
As of September 30, 2017
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions$8,356,815
 $(50,347) $—
 $—
 $8,356,815
 $(50,347)
Special revenue issuer obligations of U.S. states, territories and political subdivisions12,694,205
 (115,937) 1,666,125
 (63,366) 14,360,330
 (179,303)
Corporate2,018,260
 (3,101) —
 —
 2,018,260
 (3,101)
Total fixed income securities$23,069,280
 $(169,385) $1,666,125
 $(63,366) $24,735,405
 $(232,751)
Equity securities$1,229,320
 $(33,463) $—
 $—
 $1,229,320
 $(33,463)
Total temporarily impaired securities$24,298,600
 $(202,848) $1,666,125
 $(63,366) $25,964,725
 $(266,214)
 Less than 12 Months12 Months or LongerTotal
As of December 31, 2021 (in thousands)Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses		Estimated
Fair
Value		Unrealized
Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions$— $— $1,102 $(2)$1,102 $(2)
Corporate debt securities8,493 (13)6,203 (35)14,696 (48)
Total temporarily impaired securities$8,493 $(13)$7,305 $(37)$15,798 $(50)

 Less than 12 Months 12 Months or Longer Total
As of December 31, 2016
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
Losses
General obligations of U.S. states, territories and political subdivisions$13,884,808
 $(298,533) $—
 $—
 $13,884,808
 $(298,533)
Special revenue issuer obligations of U.S. states, territories and political subdivisions16,161,906
 (502,135) —
 —
 16,161,906
 (502,135)
Total fixed income securities$30,046,714
 $(800,668) $—
 $—
 $30,046,714
 $(800,668)
Equity securities$380,400
 $(48,983) $—
 $—
 $380,400
 $(48,983)
Total temporarily impaired securities$30,427,114
 $(849,651) $—
 $—
 $30,427,114
 $(849,651)
Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.



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


The unrealized losses related to holdings of equity securities were caused by market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity securities until a recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

Factors considered in determining whether a loss is temporary include the length of time and extent to which the estimated fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 2613 and 369 fixed maturity securities had unrealized losses at September 30, 2017March 31, 2022 and December 31, 2016,2021, 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.

11

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 has not recorded noany other-than-temporary impairment charges related to fixed maturity securities for debtthe three-month periods ended March 31, 2022 and 2021. Expenses related to other-than-temporary impairments are recorded in net realized investment gains 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 March 31, 2022 (in thousands)CostEstimated Fair
Value
Equity securities, at fair value:  
Common stocks$28,484 $69,945 
Total$28,484 $69,945 
As of December 31, 2021 (in thousands)CostEstimated Fair
Value
Equity securities, at fair value:  
Common stocks$29,478 $76,853 
Total$29,478 $76,853 

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

Net Realized Investment Gains

Gross realized gains and losses on sales of investments for the nine-month periodthree-month periods ended September 30, 2017March 31, 2022 and $233,941 for2021 are summarized as follows:
(in thousands)20222021
Gross realized gains from securities:  
Common stocks$1,747 $940 
Total$1,747 $940 
Gross realized losses from securities:  
Corporate debt securities$— (23)
Common stocks— (596)
Total$— $(619)
Net realized gains from securities$1,747 $321 
Gross realized gains (losses) on other investments:
Gains on other investments$— $— 
    Losses on other investments— — 
Total$— $— 
Net realized investment gains$1,747 $321 

Realized gains and losses are determined on the nine-month period ended September 30, 2016. Other-than-temporary impairment charges are included in net realized gain on investments in the Consolidated Statements of Income.specific identification method.  


12

Variable Interest Entities


The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of September 30, 2017:March 31, 2022:
Type of Investment Balance Sheet Classification Carrying Value Estimated Fair Value Maximum Potential Loss (a)
  Tax credit LPs Other investments $905,179
 $905,179
 $1,325,000
  Real estate LLCs or LPs Other investments 4,907,741
 5,438,088
 7,200,000
  Small business investment LPs Other investments 3,699,694
 3,612,437
 9,400,000
Total   $9,512,614
 $9,955,704
 $17,925,000
(in thousands)Balance Sheet ClassificationCarrying ValueEstimated Fair ValueMaximum Potential Loss (a)
Tax credit LPsOther investments$276 $276 $1,768 
Real estate LLCs or LPsOther investments3,887 5,098 5,408 
Small business investment LPsOther investments8,764 8,805 14,320 
Total$12,927 $14,179 $21,496 
(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 and Liabilities
 
The FASBFinancial Accounting Standards Board has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.


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



Debt and Equity Securities


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 investmentssecurities such as corporate bonds,debt securities, U.S. government obligations, and agency bondsobligations of U.S. states, territories, and municipal bonds.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 ASCAccounting Standards Codification ("ASC") 820, Fair Value Measurements and DisclosuresMeasurement. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, the Company did not adjust any Level 2 fair values.


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


In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 825, Financial Instruments, excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.
13

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.
Investments in real estate

Real estate investments are reported at amortized cost. Depreciation and other related expenses are recorded as an offset to investment income. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of real estate investments and makes any necessary adjustments, with any reductions in the carrying amount of these investments recorded in net realized investment gains in the unaudited Consolidated Statement of Operations when recognized.

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

The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2022 and December 31, 2021:
As of March 31, 2022 (in thousands)Level 1Level 2 *Level 3Total
Fixed maturity securities:    
Obligations of U.S. states, territories and political subdivisions$— $56,605 $— $56,605 
Corporate debt securities— 11,120 — 11,120 
Total$— $67,725 $— $67,725 
As of December 31, 2021 (in thousands)Level 1Level 2 *Level 3Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions$— $61,795 $— $61,795 
Corporate debt securities— 17,996 — 17,996 
Total$— $79,791 $— $79,791 

*Denotes fair market value obtained from pricing services.
14


The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2022 and December 31, 2021:
As of March 31, 2022 (in thousands)Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$37,310 $— $— $37,310 
Accrued interest and dividends1,000 — — 1,000 
Equity securities, at fair value:
Common stocks69,945 — — 69,945 
Short-term investments: 
Money market funds58,555 — — 58,555 
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative— — 8,908 8,908 
Total$166,810 $— $8,908 $175,718 
As of December 31, 2021 (in thousands)Level 1Level 2Level 3Total
Financial assets:
Cash and cash equivalents$37,168 $— $— $37,168 
Accrued interest and dividends817 — — 817 
Equity securities, at fair value:
Common stocks76,853 — — 76,853 
Short-term investments:
Money market funds45,930 — — 45,930 
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative— — 8,688 8,688 
Total$160,768 $— $8,688 $169,456 

The Company did not hold any Level 3 category debt or marketable equity investment securities as of September 30, 2017March 31, 2022 or December 31, 2016.2021.

The following table presents, by level, the financial assets carried at estimated fair value measured on a recurring basis as of September 30, 2017 and December 31, 2016. The table does not include cash on hand and also does not include assets that are measured at historical cost or any basis other than fair value.
As of September 30, 2017Level 1 Level 2 Level 3 Total
Short-term investments$20,692,763
 $—
 $—
 $20,692,763
Equity securities: 
  
  
  
Common stock45,116,461
 —
 —
 45,116,461
Fixed maturities: 
  
  
  
Obligations of U.S. states, territories and political subdivisions*—
 86,909,832
 —
 86,909,832
Corporate debt securities*—
 13,820,614
 —
 13,820,614
Total$65,809,224
 $100,730,446
 $—
 $166,539,670
As of December 31, 2016Level 1 Level 2 Level 3 Total
Short-term investments$6,558,840
 $—
 $—
 $6,558,840
Equity securities:       
Common stock41,179,259
 —
 —
 41,179,259
Fixed maturities:       
Obligations of U.S. states, territories and political subdivisions*—
 88,093,996
 —
 88,093,996
Corporate debt securities*—
 13,840,081
 —
 13,840,081
Total$47,738,099

$101,934,077
 $—
 $149,672,176

*Denotes fair market value obtained from pricing services.


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




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


Other Financial Instruments

The Company uses various financial instruments in the normal course of its business. InCertain equity investments under the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pensionalternative and other postretirement benefits, and equity method investments.
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.
Cost-basis investments
The estimated fair value of cost-basis investments is calculated from the book value of the underlying entities, which is not materially different from the fair value of the underlying entity. These items are included in other investments in the Consolidated Balance Sheets.
Accrued dividends and interest
The carrying amount for accrued dividends and interest is a reasonable estimate of fair value due to the short-term maturity of these assets.
The carrying amounts and estimated fair values of other financial instruments (see previous table for investments carried at estimated fair value) as of September 30, 2017 and December 31, 2016 are presented in the following table:
As of September 30, 2017Carrying Value 
Estimated Fair
Value
 Level 1 Level 2 Level 3
Financial assets:         
Cash$30,890,785
 $30,890,785
 $30,890,785
 $—
 $—
Cost-basis investments5,342,495
 5,698,667
 —
 —
 5,698,667
Accrued interest and dividends1,323,598
 1,323,598
 1,323,598
 —
 —
Total$37,556,878
 $37,913,050
 $32,214,383
 $—
 $5,698,667
As of December 31, 2016Carrying Value 
Estimated Fair
Value
 Level 1 Level 2 Level 3
Financial assets:         
Cash$27,928,472
 $27,928,472
 $27,928,472
 $—
 $—
Cost-basis investments4,244,402
 4,497,665
 —
 —
 4,497,665
Accrued interest and dividends1,035,152
 1,035,152
 1,035,152
 —
 —
Total$33,208,026
 $33,461,289
 $28,963,624
 $—
 $4,497,665



Certain cost-basisreal estate investments are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such as investments that areinvestment is determined to be other-than-temporarily impaired, during the periodan impairment charge is recorded against such investment and recorded at estimated fair valuereflected in the unaudited Consolidated Financial Statements as of September 30, 2017 and December 31, 2016.Operations. There were no impairments of such investments made during the nine-monththree-month period ended September 30, 2017March 31, 2022 or the twelve-month period ended December 31, 2016.2021. The following table presents a rollforward of equity investments under the measurement alternative and real estate investments as of March 31, 2022 and December 31, 2021:

15


(in thousands)		Balance,
January 1, 2022		Amounts ImpairedObservable ChangesPurchases and
Additional
Commitments
Paid		 Sales, Returns of Capital and Other Reductions
Balance,
March 31, 2022
Other investments:
Real Estate$4,987 $— $— $— $— $4,987 
Equity investments in unconsolidated affiliates, measurement alternative8,688 — — 250 (30)8,908 
Total$13,675 $— $— $250 $(30)$13,895 

(in thousands)		Balance,
January 1, 2021		Amounts ImpairedObservable ChangesPurchases and
Additional
Commitments
Paid		 Sales, Returns of Capital and Other Reductions
Balance,
December 31, 2021
Other investments:
Real Estate$— $— $— $5,000 $(13)$4,987 
Equity investments in unconsolidated affiliates, measurement alternative8,741 — — 1,543 (1,596)8,688 
Total$8,741 $— $— $6,543 $(1,609)$13,675 

Note 7 – Commitments and Contingencies


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


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


Escrow and Trust Deposits – As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, escrowed funds received under escrow agreements, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets. However,Sheets; however, the Company remains contingently liable for the disposition of these deposits.


Like-Kind Exchanges Proceeds – In administering tax-deferred propertylike-kind exchanges pursuant to § 1031 of the Internal Revenue Code, the Company’s wholly owned subsidiary, Investors Title Exchange Corporation (“ITEC”), serves as a qualified intermediary, for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company wholly owned subsidiary, Investors Title Accommodation Corporation (“ITAC”), serves as exchange accommodation titleholder and, through limited liability companiesLLCs that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $213,917,000$571.4 million and $202,184,000$763.9 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenues includerevenue includes earnings on these deposits; therefore, investment income is shown as other revenueincome rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.


16

COVID-19 – Despite the widespread availability of vaccines, COVID-19 (including its variant strains) continues to impact U.S. states where the Company conducts business. The COVID-19 pandemic has negatively impacted worldwide economic activity and created significant volatility and disruptions of financial markets. In response, the U.S. government and its agencies took a number of significant measures to provide fiscal and monetary stimulus. Such actions included an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, mortgage loan forbearance actions, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. Many such actions have lapsed or otherwise been reduced as time has passed since the onset of the pandemic. The Company has remained fully operational throughout the pandemic and did not have any reductions in workforce during 2022 or 2021. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

Note 8 – Related Party Transactions


The Company does business with, and has investments in, unconsolidated limited liability companiesLLCs that are primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these limited liability companies.LLCs. The following table sets forth the approximate values by year found within each financial statement classification:
Financial Statement Classification,
Consolidated Balance Sheets (unaudited)
(in thousands)		As of
March 31, 2022		As of
December 31, 2021
Other investments$6,322 $6,623 
Premium and fees receivable$853 $882 
Financial Statement Classification,As of September 30, 2017As of December 31, 2016
Consolidated Balance Sheets
Other investments$6,172,000
$6,437,000
Premiums and fees receivable$809,000
$56,000
Financial Statement Classification,
Consolidated Statements of Operations (unaudited)
(in thousands)		Three Months Ended
March 31,
20222021
Net premiums written$6,584 $6,769 
Non-title services and other investment income$1,370 $752 
Commissions to agents$4,465 $4,474 

 
Financial Statement Classification,		For the Three Months Ended
September 30,		 For the Nine Months Ended
September 30,
Consolidated Statements of Income2017 2016 2017 2016
Net premiums written$3,705,000
 $4,513,000
 $11,036,000
 $10,993,000
Other income$642,000
 $809,000
 $1,689,000
 $1,541,000
Commissions to agents$2,501,000
 $3,062,000
 $7,457,000
 $7,465,000



Note 9 – Business Combinations, Intangible Assets, Goodwill and GoodwillTitle Plants

Recent Business Combinations

In October 2016, National Investors Holdings, LLC ("NIH"), a subsidiary of the Company, acquired all of the outstanding shares of a title insurance agency doing business in Texas. NIH paid $10 million plus a $918,000 adjustment for the title insurance agency’s net cash position at closing.


Intangible Assets


The estimated fair values of intangible assets recognized as the result of title insurance agency acquisitions, all Level 3 inputs, are principally based on values obtained from aan independent third-party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2022 and 2021 that would indicate the carrying amounts may not be recoverable, and therefore, determined that no identifiable intangible assets were impaired at September 30, 2017.impaired.


Identifiable intangible assets consist of the following as of September 30, 2017 and December 31, 2016:following:
(in thousands)As of
March 31, 2022		As of
December 31, 2021
Referral relationships$8,567 $8,567 
Non-compete agreements2,938 2,938 
Tradename747 747 
Total12,252 12,252 
Accumulated amortization(3,835)(3,505)
Identifiable intangible assets, net$8,417 $8,747 
17

 20172016
Referral relationships$6,498,215
$6,416,215
Non-compete agreements1,405,685
1,405,685
Tradename560,000
560,000
Searcher network126,000
—
Total8,589,900
8,381,900
Accumulated amortization(1,182,806)(475,110)
Identifiable intangible assets, net$7,407,094
$7,906,790


The following table provides the estimated aggregate amortization expense for each of the five succeeding fiscal years:
Year Ended: 
2017$208,989
2018683,857
2019610,524
2020610,524
2021603,191
Thereafter4,690,009
Total$7,407,094
Year Ended (in thousands)
2022$953 
20231,290 
20241,107 
20251,024 
20261,024 
Thereafter2,833 
Total$8,231 


Goodwill and Title PlantPlants


TheAs of March 31, 2022, the Company has recognized $4,378,851$7.2 million in goodwill and $690,000$857 thousand in a title plantplants, net of impairments, as the result of title insurance agency acquisitions.  The title plant isplants are included with prepaid expenses and other assets in the unaudited Consolidated Balance Sheets. The fair values of goodwill and the title plant,plants as of the date of acquisition, both Level 3 inputs, arewere principally based on values obtained from aan independent third-party valuation service. In accordance with ASC 350,Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2022 and 2021 that would indicate the carrying amounts may not be recoverable, and therefore, determined that there were no goodwill and theor title plant were not impaired at September 30, 2017.impairments.




Note 10 – Accumulated Other Comprehensive Income


The following tables providetable provides changes in the balances of each component of accumulated other comprehensive income, net of tax, for the periods ended September 30, 2017March 31, 2022 and 2016:2021:

Three Months Ended
March 31, 2022 (in thousands)		Unrealized Gains and Losses
On Available-for-Sale
Securities		Postretirement
Benefits Plans
 
Total
Beginning balance at January 1$3,370 $(144)$3,226 
Other comprehensive (loss) income before reclassifications(2,181)173 (2,008)
Amounts reclassified from accumulated other comprehensive income— — — 
Net current-period other comprehensive loss (income)(2,181)173 (2,008)
Ending balance$1,189 $29 $1,218 
Three Months Ended
March 31, 2021 (in thousands)		Unrealized Gains and Losses
On Available-for-Sale
Securities		Postretirement
Benefits Plans		Total
Beginning balance at January 1$4,470 $(144)$4,326 
Other comprehensive loss before reclassifications(592)— (592)
Amounts reclassified from accumulated other comprehensive income(18)— (18)
Net current-period other comprehensive loss(610)— (610)
Ending balance$3,860 $(144)$3,716 
18

Three Months Ended September 30, 2017
Unrealized Gains and Losses
On Available-for-Sale
Securities
 
Postretirement
Benefits Plans
 
 
Total
Beginning balance at July 1$13,774,631
 $(106,356) $13,668,275
Other comprehensive income before reclassifications1,235,517
 —
 1,235,517
Amounts reclassified from accumulated other comprehensive income(529,519) 1,421
 (528,098)
Net current-period other comprehensive income705,998
 1,421
 707,419
Ending balance$14,480,629
 $(104,935) $14,375,694

Three Months Ended September 30, 2016
Unrealized Gains and Losses
On Available-for-Sale
Securities
 
Postretirement
Benefits Plans
 
 
Total
Beginning balance at July 1$14,331,320
 $(111,776) $14,219,544
Other comprehensive loss before reclassifications(489,001) —
 (489,001)
Amounts reclassified from accumulated other comprehensive income(282,461) 1,476
 (280,985)
Net current-period other comprehensive (loss) income(771,462) 1,476
 (769,986)
Ending balance$13,559,858
 $(110,300) $13,449,558
Nine Months Ended September 30, 2017
Unrealized Gains and Losses
On Available-for-Sale
Securities
 
Postretirement
Benefits Plans
 
 
Total
Beginning balance at January 1$11,870,647
 $(109,200) $11,761,447
Other comprehensive income before reclassifications3,252,816
 —
 3,252,816
Amounts reclassified from accumulated other comprehensive income(642,834) 4,265
 (638,569)
Net current-period other comprehensive income2,609,982
 4,265
 2,614,247
Ending balance$14,480,629
 $(104,935) $14,375,694
Nine Months Ended September 30, 2016
Unrealized Gains and Losses
On Available-for-Sale
Securities
 
Postretirement
Benefits Plans
 
 
Total
Beginning balance at January 1$11,597,741
 $(114,726) $11,483,015
Other comprehensive income before reclassifications2,325,045
 —
 2,325,045
Amounts reclassified from accumulated other comprehensive income(362,928) 4,426
 (358,502)
Net current-period other comprehensive income1,962,117
 4,426
 1,966,543
Ending balance$13,559,858
 $(110,300) $13,449,558


The following tables providetable provides significant amounts reclassified out of each component of accumulated other comprehensive income for the three-month periods ended September 30, 2017March 31, 2022 and 2016:2021:

Three Months Ended September 30, 2017   
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified from
Accumulated Other
Comprehensive Income
 
 Affected Line Item in the Consolidated
Statements of Income
Unrealized gains and losses on available-for-sale securities:   
Net realized gain on investments$803,938
  
Other-than-temporary impairments—
  
Total$803,938
 Net realized gain on investments
Tax(274,419) Provision for Income Taxes
Net of Tax$529,519
  
Amortization related to postretirement benefit plans: 
  
Prior year service cost$—
  
Unrecognized loss(2,153)  
Total$(2,153) (a)
Tax732
 Provision for Income Taxes
Net of Tax$(1,421)  
Reclassifications for the period$528,098
  
Three Months Ended September 30, 2016   
Details about Accumulated Other
Comprehensive Income Components		Amount Reclassified from
Accumulated Other
Comprehensive Income		  Affected Line Item in the Consolidated
Statements of Income
Unrealized gains and losses on available-for-sale securities:   
Net realized gain on investments$545,925
  
Other-than-temporary impairments(118,703)  
Total$427,222
 Net realized gain on investments
Tax(144,761) Provision for Income Taxes
Net of Tax$282,461
  
Amortization related to postretirement benefit plans: 
  
Prior year service cost$—
  
Unrecognized loss(2,235)  
Total$(2,235) (a)
Tax759
 Provision for Income Taxes
Net of Tax$(1,476)  
Reclassifications for the period$280,985
  


Nine Months Ended September 30, 2017   
Details about Accumulated Other
Comprehensive Income Components
Amount Reclassified from
Accumulated Other
Comprehensive Income
 
 Affected Line Item in the Consolidated
Statements of Income
Unrealized gains and losses on available-for-sale securities:   
Net realized gain on investments$976,888
  
Other-than-temporary impairments—
  
Total$976,888
 Net realized gain on investments
Tax(334,054) Provision for Income Taxes
Net of Tax$642,834
  
Amortization related to postretirement benefit plans: 
  
Prior year service cost$—
  
Unrecognized loss(6,459)  
Total$(6,459) (a)
Tax2,194
 Provision for Income Taxes
Net of Tax$(4,265)  
Reclassifications for the period$638,569
  
Nine Months Ended September 30, 2016   
Details about Accumulated Other
Comprehensive Income Components		Amount Reclassified from
Accumulated Other
Comprehensive Income		  Affected Line Item in the Consolidated
Statements of Income
Unrealized gains and losses on available-for-sale securities:   
Net realized gain on investments$785,517
  
Other-than-temporary impairments(233,941)  
Total$551,576
 Net realized gain on investments
Tax(188,648) Provision for Income Taxes
Net of Tax$362,928
  
Amortization related to postretirement benefit plans: 
  
Prior year service cost$—
  
Unrecognized loss(6,705)  
Total$(6,705) (a)
Tax2,279
 Provision for Income Taxes
Net of Tax$(4,426)  
Reclassifications for the period$358,502
  

(a)Three Months Ended
March 31, 2022 (in thousands)		These accumulated other comprehensive income components are not reclassified to net income
Details about Accumulated Other
Comprehensive Income Components (in thousands)		Amount Reclassified from Accumulated Other Comprehensive IncomeAffected Line Item in their entirety in the same reporting period. The amounts are presented within salaries, employee benefits and payroll taxes on the Consolidated Statements of Operations
Unrealized gains and losses on available-for-sale securities:
Net realized gain (loss) on investments$—
Other-than-temporary impairments—
Total$—Net realized investment gains
Tax—Provision for income taxes
Net of Tax$—
Reclassifications for the period$—

Three Months Ended
March 31, 2021 (in thousands)
Details about Accumulated Other
Comprehensive Income as amortized. Amortization and accretion related to postretirement benefit plans is includedComponents (in thousands)		Amount Reclassified from Accumulated Other Comprehensive IncomeAffected Line Item in the computationConsolidated Statements of net periodic pension costs, as discussed in Note 5.Operations
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investments$23 
Other-than-temporary impairments— 
Total$23 Net realized investment gains
Tax(5)Provision for income taxes
Net of Tax$18 
Reclassifications for the period$18 



Note 11 – Revenue from Contracts with Customers

ASC 606, Revenue from Contracts with Customers, requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories.

Escrow and other title-related fees: The Company’s title segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete.

Non-title services: Through various subsidiaries, the Company offers management services, tax-deferred real property exchange services, investment management and trust services. Nonrefundable exchange fees are recognized as revenue upon receipt of the funds, which is at the time of closing of the initial sale of property. All other non-title service fees are recognized as revenue as performance obligations are completed.

Other: The Company occasionally recognizes revenue from other miscellaneous contracts which can include, but is not limited to, seminar and education registration fees and software licensing contracts. These revenue streams are deemed immaterial to the operations of the Company, and revenue is recognized when, or as, performance obligations are completed.
19


The following table provides a breakdown of the Company’s revenue by major business activity:
Three Months Ended
March 31,
 (in thousands)20222021
Revenue from contracts with customers:
Escrow and other title-related fees$5,064 $2,798 
Non-title services2,426 2,078 
Total revenue from contracts with customers7,490 4,876 
Other sources of revenue:
Net premiums written63,125 61,477 
Investment-related revenue(1,916)5,517 
Other299 208 
Total revenues$68,998 $72,078 

Note 12 – Leases

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.

A portion of the Company's current leases include an option to extend or cancel the lease term. The exercise of such an option is solely at the Company's discretion. The operating lease liability recorded in the unaudited Consolidated Balance Sheets 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. The Company, in determining the present value of lease payments, utilized the average rate over a 10-year term based upon the Moody's seasoned Aaa corporate bond yields, as explicit rates of interest were not readily determinable in the lease contracts. The Company does not carry debt; thus no incremental borrowing rate was available to the Company.

Lease expense is included in office and technology expenses in the unaudited Consolidated Statements of Operations. Information regarding the Company’s operating leases follows:
Three Months Ended
March 31,
(in thousands)20222021
Operating leases$563 $326 
Short-term leases (b)67 64 
Lease expense$630 $390 
Sub-lease income— — 
Lease cost$630 $390 
(b)Leases with an initial term of twelve months or less are not recorded on the unaudited Consolidated Balance Sheets.

Components of the operating lease liability presented on the unaudited Consolidated Balance Sheets are as follows:
(in thousands)As of
March 31, 2022		As of
December 31, 2021
Current:
Operating lease liabilities$2,021 $1,547 
Non-current:
Operating lease liabilities5,432 3,782 
Total operating lease liabilities$7,453 $5,329 

20

The future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of March 31, 2022, are summarized as follows:
Year Ended (in thousands)
2022$2,211 
20231,892 
20241,571 
20251,127 
2026934 
Thereafter284 
Total undiscounted payments$8,019 
Less: present value adjustment(566)
Operating lease liabilities$7,453 

Supplemental lease information is as follows:
As of
March 31, 2022		As of
December 31, 2021
Weighted average remaining lease term (years)4.144.13
Weighted average discount rate4.0 %4.2 %

The Company does not have any material pending operating or financing lease agreements that become effective in future periods.
21

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


TheInvestors Title Company's (the "Company") Annual Report on Form 10-K for the year ended December 31, 20162021 should be read in conjunction with the following discussion since it contains information which is important for evaluating the Company's operating results and financial condition. Forward-looking

In addition, the Company may make forward-looking statements in the following discussion and analysis. Forward looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties. Actual results may vary. See "Safe Harbor for Forward-Looking Statements" at the end of this discussion and analysis, as well as the sections titled "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for factors that could affect forward-looking statements.


Overview


Investors TitleThe Company (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”). Total revenues from the title segment accounted for 95.7%96.9% of the Company's revenues for the nine-monththree-month period ended September 30, 2017.March 31, 2022. Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer.

Title insurance protects against loss or damage resulting from title defects that affect real property.

Title insurance policies for mortgage lenders and real estate owners are the two basic types of policies.  A lender often requires the property owner to purchase a lender’s title insurance policy to protect its position as a holder of a mortgage loan, but the lender’s title insurance policy does not protect the property owner.  The property owner has to purchase a separate owner’s title insurance policy to protect its investment. 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.

There are two basic types of title insurance policies – one for the mortgage lender and one for the real property owner.  A lender often requires the property owner to purchase a lender’s title insurance policy to protect its position as a holder of a mortgage loan, but the lender’s title insurance policy does not protect the property owner.  The property owner has to purchase a separate owner’s title insurance policy to protect its investment.

The Company issues title insurance policies through its home and branch offices and through a network of agents.  Issuing agents are typically real estate attorneys, independent agents or subsidiaries of community and regional mortgage lending institutions, depending on local customs and regulations and the Company’s marketing strategy in a particular territory.  The ability to attract and retain issuing agents is a key determinant of the Company’s growth in title insurance premiums written.

Revenues for thisthe title insurance segment primarily result from purchases of new and existing residential and commercial real estate, refinance activity and certain other types of mortgage lending such as home equity lines of credit.

Title insurance premiums vary from state to state and are subject to extensive regulation. Statutes generally provide that rates must not be excessive, inadequate or unfairly discriminatory. The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.

Volume is a factor in the Company’s profitability due to fixed operating costs whichthat are incurred by the Company regardless of title insurance premium volume.  The resulting operating leverage tends to amplify the impact of changes in volume on the Company’s profitability.  The Company’s profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and to minimize risks such as interest rate changes, defaults and impairments of assets.

The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes property sales, mortgage financing and mortgage refinancing.  Real estate activity, home sales and mortgage lending are cyclical in nature. In turn, realReal estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels, and general United States economic conditions.  Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.


Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. RefinanceMortgage refinance activity is generallytends to be influenced less seasonal, but is subject toby seasonality and more by economic cycles, with activity levels increasing during times of falling interest rate fluctuations.rates.


22

Services other than title insurance provided by operating divisions of the Company are not reported separately, andbut rather are reported collectively in a categorysegment called “All Other.”Other”.  These other services include those offered by the Company and by its wholly owned subsidiaries, Investors Title Exchange Corporation (“ITEC”), Investors Title Accommodation Corporation (“ITAC”), Investors Trust Company (“Investors Trust”) and Investors Title Management Services, Inc. (“ITMS”).



The Company’s exchange services division, consisting of the operations of ITEC and ITAC, provides customer services in connection with tax-deferred real property exchanges. ITEC servesacts as a qualified intermediary in like-kindtax-deferred exchanges of realproperty held for productive use in a trade or personal property under Section 1031 ofbusiness or for investment, and its income is derived from fees for handling exchange transactions and interest earned on client deposits held by the Internal Revenue Code of 1986, as amended.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 sale oftime the old property is sold and the purchase of the new property is purchased, and accepting the formal identification of the replacement property within the required identification period. ITAC servesprovides 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.  An exchange accommodation offers a vehicle for accommodating a reverse exchangeexchanges when the taxpayer musttaxpayers 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.

The Company’s trust services division, Investors Trust, provides investment management and trust services to individuals, companies, banks and trusts.

ITMS offers various consulting and management services to provide clients with the technical expertise to start and successfully operate a title insurance agency.


Business Trends and Recent ConditionsConditions; COVID-19 Pandemic
The housing market is heavily influenced by government policies and overall economic conditionsconditions. Regulatory reform and government policies.  Factors that could impact the Company include, but are not limited to: initiatives by various governmental agencies, including the Federal Reserve's monetary policy;policy and other regulatory changes, and reform of government-sponsored entities that could impact lending standards or the processes and procedures used by the Company; and theCompany. The current real estate environment, including interest rates and general economic activity, that typically influence the demand for real estate. Any one or a combinationChanges in either of these factors would likelyareas, in addition to ongoing supply constraints and volatility in the cost and availability of building materials, could impact the Company's results of operations.operations in future periods.
Initiatives
Despite the widespread availability of vaccines, COVID-19 (including its variant strains) continues to impact U.S. states where the Company conducts business. The COVID-19 pandemic has negatively impacted worldwide economic activity and created significant volatility and disruptions of financial markets. In effortsresponse, the U.S. government and its agencies took a number of significant measures to provide transparency,fiscal and monetary stimulus. Such actions included an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, mortgage loan forbearance actions, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. Many such actions have lapsed or otherwise been reduced as time has passed since the onset of the pandemic. The Company has remained fully operational throughout the pandemic and did not have any reductions in workforce. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

The COVID-19 pandemic has caused the Company to modify its business practices (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences). The COVID-19 pandemic and any of its variants could continue to affect the Company in a number of ways including, but not limited to, the impact of employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, potential decreases in net premiums written in the future, and future fluctuations in the Company's investment portfolio due to the pandemic and the economic disruption it is causing. Because of the inherent uncertainty regarding the duration and severity of the COVID-19 pandemic and its effects on the economy, as well as uncertainty regarding the effects of government measures already taken, and which may be taken or continued in the future, to combat the spread of the virus and any of its variants, the Company is currently unable to predict the ultimate impact of the pandemic.

The ongoing military conflict between Russia and Ukraine has created additional volatile market conditions and uncertainties in the global economy.

23

Regulatory Environment

The Federal Open Market Committee (“FOMC”) of the Federal Reserve issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. At the December 2015 meeting,In March 2020, the FOMC voted to raiselowered the target federal funds rate for the first time since December 2008twice by a total of 150 basis points in response to risk posed to economic activity by COVID-19, resulting in a target federal funds rate range between 0.00% and 0.25%. The FOMC had maintained this target range until March 2022, when the target federal funds rate range was increased to between 0.25% and 0.50%. The FOMC voted to increase thetarget federal funds rate three additional times, atrange was raised again in May 2022, when the December 2016 meeting to aFOMC increased the target range between 0.50% and 0.75%, at the March 2017 meeting to a target range between 0.75% and 1.00%, and again at. Further, the June 2017FOMC noted in the May 2022 meeting to athat it anticipates that ongoing increases in the target range between 1.00%will be appropriate, and 1.25%. Anyannounced steps to begin reducing its balance sheet holdings. In normal economic situations, future adjustments to the rateFOMC’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% inflation. The FOMC anticipates future economic conditions to evolve in ways that will warrant gradual increases and that for some time,objective.

In 2008, the federal funds rate is expected to be below long range levels. At the September 2017 meeting, the FOMC voted to keep rates unchanged and announced that the reductiongovernment took control of securities held on the Federal Reserve's balance sheet, also known as normalization, will begin in October 2017.
On October 20, 2014, the Federal Housing Finance Agency ("FHFA"), which regulates the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), announced that Fannie Mae and Freddie Mac were negotiating guidelines with mortgage lenders that once completed, resulted in less strict lending requirements and lower barriers to mortgage loans for borrowers who are seeking access to home loans. The FHFA noted in its announcement that it intended to clarify the rules that allow Fannie Mae and Freddie Mac to require mortgage lenders to repurchase troubled loans. The FHFA also sought to increase the supply of credit available, particularly to creditworthy lower and middle-income families, by collaborating with mortgage lenders to provide guidelines for mortgage loans with down payments as low as 3.0%. In December 2014, both Fannie Mae and Freddie Mac officially approved 97.0% loan-to-value products (3.0% down payment mortgages). The Fannie Mae program is targeted to first-time home buyers and became available to lenders in December 2014. The Freddie Mac program became available to lenders on March 23, 2015 and is available to both first-time home buyers and other qualified borrowers with limited down payment savings.
In an effort to expand home ownership for lower-income buyers, the Federal Housing Authority (“FHA”) announced in January 2015 that it would cut its rates on mortgage insurance premiums. Mortgage insurance premium rates for 30-year FHA insured mortgages with less than a 5.0% down payment decreased from 1.35% to 0.85%. Mortgage insurance premium rates for 30-year FHA insured mortgages with more than a 5.0% down payment decreased from 1.30% to 0.80%. The new rates took effect on January 26, 2015 and do not apply to borrowers with existing mortgages, unless refinanced, or to 15-year mortgages.


Regulation and Reform
In 2008, the federal government took control of Fannie Mae and Freddie Mac in an effort to keep these government-sponsored entities from failing. The primary functions of Fannie Mae and Freddie Mac are to provide liquidity to the nation's mortgage finance system by purchasing mortgages on the secondary market, pooling them and selling them as mortgage-backed securities. In order to securitize, Fannie Mae and Freddie Mac typically require the purchase of title insurance for loans they acquire. Since the federal takeover, there have been various discussions and proposals regarding their reform. Changes to these entities could impact the entire mortgage loan process and, as a result, could affect the demand for title insurance. The timing and results of reform are currently unknown; however, any changes to these entities could affect the Company and its results of operations.
On July 7, 2017,
In recent years, the Consumer Financial Protection Bureau (“CFPB”) released final amendments to federal mortgage disclosure requirements under the Real Estate Settlement Procedures Act and the Truth in Lending Act that are implemented in Regulation Z.  The final rules were published in the Federal Register on August 11, 2017. The amendments reinforce the CFPB’s informal guidance on various issues and include clarifications and technical amendments.  The CFPB rule creates tolerances for the total of payments; adjusts a partial exemption that mainly affects housing finance agencies and nonprofits; provides a uniform rule regarding application of the integrated mortgage disclosure requirements to cooperative units; and provides guidance on sharing the disclosures with various parties involved in the mortgage origination process. While the Company is still analyzing the final rules, they are not expected to have a material impact on the Company.
In recent years, the CFPB,, Office of the Comptroller of Currency and the Federal Reserve have issued memorandums to banks that communicated those agencies’ heightened focus on vetting third-party providers. Such increased regulatory involvement may affect the Company's agents and approved providers. Further proposals to change regulations governing insurance holding companies and the title insurance industry are often introduced in Congress, in state legislatures and before various insurance regulatory agencies. Although the Company regularly monitors such proposals, the likelihood and timing of passage of any such regulation, and the possible effects of any such regulation on the Company and its subsidiaries, cannot be determined at this time.
In recent months, both the President and certain members of Congress have questioned the CFPB's constitutionality and have indicated a desire for reform.
The timing and resultsnature of reformany reforms are currently unknown; however, anythe CFPB is expected to take a significantly more aggressive approach to using its rulemaking, supervision, and enforcement authorities under President Biden’s administration. Any changes to the CFPB or other governmental entities could affect the Company and its results of operations.
Recently, there have been discussions of reforming current tax law by members of Congress and the President, including revisions to individual and corporate taxes as well as the possibility of eliminating or limiting tax-deferred exchanges currently permitted under Section 1031 of the Internal Revenue Code. The timing and results of implementation of any such changes are currently unknown; however any changes to tax laws could affect the Company and its results of operations.
Real Estate Environment
Overall, the economy is expanding and there has been a steady reduction in unemployment in recent years.
The Mortgage Bankers Association's (“MBA”("MBA") September 2017 Economic andMarch 21, 2022 Mortgage Finance Commentary predicts 2017 overall growth in the housing purchase market driven by higher demand from economic and job market strength. The unemployment rate is projected to decrease to 4.2% and wage rates are projected to increase in the medium-term as job openings continue to outpace hiring. Interest rates are likely to rise as the FOMC is projected to raise rates one more time in 2017.
The MBA September 12, 2017 Mortgage Finance Forecast (“MBA Forecast”) projects 20172022 purchase activity to increase 9.9%7.7% to $1,088$1,773 billion and mortgage refinance activity to decrease 36.6%63.3% to $571$861 billion, resulting in a net decrease in total mortgage originations of 12.3%34.0% to $1,659$2,634 billion, all from 20162021 levels. In 2016,2021, purchase activity accounted for 52.4%41.2% of all mortgage originations and is projected in the MBA Forecast to represent 65.6%67.3% of all mortgage originations in 2017.2022. The MBA Forecast is projecting fewer total mortgage originations in 2023 and 2024, compared with 2022 levels. Due to the rapidly changing environment brought on by COVID-19, supply constraints and geopolitical conflicts, these projections and the impact of actual future developments on the Company could be subject to material change.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 4.0%3.8% and 3.6%2.9% for the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016,2021, respectively. Per the MBA Forecast, refinancing is expected to be lower in 2017 as mortgage interest rates are projected to climbincrease to 4.2%4.5% in the fourth quarter of 2017.2022.
    
Historically, activity in real estate markets has varied over the course of market cycles by geographic region and in response to evolving economic factors. Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future operating results and cash flows.


Acquisition of Title Insurance Agency
In October 2016, National Investors Holdings, LLC ("NIH"), a subsidiary of the Company, acquired all of the outstanding shares of a title insurance agency doing business in Texas. NIH paid $10 million plus a $918,000 adjustment for the title agency’s net cash position at closing.

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Critical Accounting Estimates and Policies


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-monththree-month period ended September 30, 2017,March 31, 2022, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended December 31, 20162021 as filed with the Securities and Exchange Commission.Commission (the "SEC").


Results of Operations


The following table presents certain income statementunaudited Consolidated Statements of Operations data for the three- and nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016:2021:
Three Months Ended
March 31,
(in thousands)20222021
Revenues:
Net premiums written$63,125 $61,477 
Escrow and other title-related fees5,064 2,798 
Non-title services2,426 2,078 
Interest and dividends915 1,016 
Other investment income1,337 941 
Net realized investment gains1,747 321 
Changes in the estimated fair value of equity security investments(5,915)3,239 
Other299 208 
Total Revenues68,998 72,078 
Operating Expenses:
Commissions to agents29,857 30,542 
Provision for claims176 1,591 
Personnel expenses21,254 16,153 
Office and technology expenses4,368 2,742 
Other expenses5,550 3,735 
Total Operating Expenses61,205 54,763 
Income before Income Taxes7,793 17,315 
Provision for Income Taxes1,608 3,492 
Net Income$6,185 $13,823 

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  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2017 2016 2017 2016
Revenues:        
Net premiums written $36,612,558
 $36,306,522
 $102,918,454
 $87,357,972
Investment income – interest and dividends 1,087,054
 1,160,983
 3,297,634
 3,478,999
Net realized gain on investments 803,938
 439,326
 990,118
 574,328
Other 4,633,915
 3,094,874
 13,864,170
 8,280,139
Total Revenues 43,137,465
 41,001,705
 121,070,376
 99,691,438
         
Operating Expenses:        
Commissions to agents 17,641,272
 18,739,151
 50,569,972
 45,946,379
Provision (benefit) for claims 1,854,493
 (1,067,853) 2,714,717
 (403,982)
Salaries, employee benefits and payroll taxes 9,820,578
 8,300,823
 29,464,824
 22,945,972
Office occupancy and operations 2,309,575
 1,496,948
 6,445,880
 4,526,710
Business development 639,923
 608,532
 1,987,028
 1,695,180
Filing fees, franchise and local taxes 203,912
 191,574
 935,476
 688,731
Premium and retaliatory taxes 673,126
 673,551
 1,918,951
 1,559,631
Professional and contract labor fees 447,651
 523,504
 1,375,291
 1,599,603
Other 630,320
 157,308
 1,944,419
 629,539
Total Operating Expenses 34,220,850
 29,623,538
 97,356,558
 79,187,763
         
Income before Income Taxes 8,916,615
 11,378,167
 23,713,818
 20,503,675
         
Provision for Income Taxes 2,990,000
 3,249,000
 7,647,000
 6,040,000
         
Net Income Attributable to the Company $5,926,457
 $8,126,939
 $16,077,704
 $14,470,359



Insurance and Other Services Revenues


Insurance and other services revenues include net premiums written plus other title fee income, commission income, trust income, management services income and exchange services income. Investment income and realized investment gains and losses are not included in insuranceescrow and other title-related income that includes escrow fees, commissions and settlement fees. Non-title services revenue, investment-related revenues and other revenues are discussed separately under “Investment Related Revenues” below.


Title insurance companies typically issue title insurance policies directly through home and branch offices or through title agencies. Following is a breakdown of net premiums generated by home and branch offices and agency operations for the three- and nine-month periods ended September 30, 2017 and 2016:Net Premiums Written

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 % 2016 % 2017 % 2016 %
Home and Branch $10,871,775
 29.7% $10,672,619
 29.4% $30,296,701
 29.4% $24,303,104
 27.8%
Agency 25,740,783
 70.3% 25,633,903
 70.6% 72,621,753
 70.6% 63,054,868
 72.2%
Total $36,612,558
 100.0% $36,306,522
 100.0% $102,918,454
 100.0% $87,357,972
 100.0%

Home and Branch Office Net Premiums: In the Company's home office and branch operations, the Company retains the entire premium for all title insurance policies issued, as no commissions are paid in connection with these policies. Net premiums written from home and branch operations increased 1.9% and 24.7%2.7% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022 to $63.1 million, compared with $61.5 million for the same prior year periods.period. The slight increase for the three-month period ended September 30, 2017March 31, 2022 was primarily attributable to an increase indriven by higher average home prices and a higher level of purchase transactions with variations in the market mix of business that resulted in a slightly lower average premium per policy. The increase for the nine-month period ended September 30, 2017 was primarily attributable to growth in premium volume stemming from higher levels of homes sales and average real estate values and revised premium rates filed in North Carolina, partially offset by lower refinance activity.


During the quarter ended March 31, 2016, the North Carolina Title Insurance Rating Bureau, which establishes premium rates for title insurance in North Carolina, and of which Investors Title Insurance Company is a member, filed updated premium rates that took effect on April 1, 2016.  The revised rates positively impacted the Company's branch and agency premiums by approximately $3,047,000 for the nine-month period ended September 30, 2017, compared with $2,400,000 for the same prior year period.

All of the Company's home office operations and the majority of its branch offices are located in North Carolina; as a result, the home and branch office net premiums written are primarily for North Carolina title insurance policies.

Agency Net Premiums: When a policy is written through a title agency, the premium is shared between the agency and the underwriter. Total premiums include an estimate of premiums for policies that have been issued by branches and agents, but not reported to the Company as of the balance sheet date. To determine the estimated premiums, the Company uses historical experience, as well as other factors, to make certain assumptions about the average elapsed time between the policy effective date and the date the policies are reported. From time to time, the Company adjusts the inputs to the estimation process as branches and agents report transactions and new information becomes available. In addition to estimating revenues, the Company also estimates and accrues agent commissions, claims provision, premium taxes, income taxes, and other expenses associated with the estimated revenues that have been accrued. The Company reflects any adjustments to the accruals in the resultresults of operations in the period in which new information becomes available.

Title insurance companies typically issue title insurance policies directly through home and branch offices or through title agencies. Following is a breakdown of premiums generated by branch and agency operations for the three-month periods ended March 31, 2022 and 2021:
 Three Months Ended
March 31,
(in thousands, except percentages)2022%2021%
Home and Branch$17,418 27.6 $17,360 28.2 
Agency45,707 72.4 44,117 71.8 
Total$63,125 100.0 $61,477 100.0 

Home and Branch Office Net Premiums –In the Company's home and branch operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are paid in connection with these policies. Net premiums written from home and branch operations increased 0.3% for the three-month period ended March 31, 2022, compared with the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily driven by higher average home prices and a higher level of purchase activity.

All of the Company's home office operations and the majority of branch offices are located in North Carolina; as a result, the home and branch office net premiums written are primarily for North Carolina title insurance policies.

Agency Net Premiums –When a policy is written through a title agency, the premium is shared between the agency and the underwriter. 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 0.4% and 15.2%3.6% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with the same prior year periods.period. The increasesincrease for the three- and nine-month periodsthree-month period ended September 30, 2017 wereMarch 31, 2022 was primarily attributable to the addition of new title insurance agents in the Company's Texas and southeast markets,driven by higher levels of real estate activity from existing agents and overall higheraverage home prices partially offset by lower refinanceand a higher level of purchase activity.

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Following is a schedule of net premiums written for the three- and nine-monththree-month periods ended September 30, 2017March 31, 2022 and 20162021 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently writeunderwrite title insurance:
 Three Months Ended
March 31,
State (in thousands)20222021
North Carolina$24,339 $25,247 
Texas15,762 11,352 
Georgia6,972 6,890 
South Carolina5,388 5,348 
All Others10,894 12,773 
Premiums Written63,355 61,610 
Reinsurance Assumed— — 
Reinsurance Ceded(230)(133)
Net Premiums Written$63,125 $61,477 
  Three Months Ended September 30, Nine Months Ended September 30,
State 2017 2016 2017 2016
North Carolina $14,128,480
 $13,782,187
 $39,502,056
 $31,540,890
Texas 7,294,401
 7,069,431
 20,153,555
 17,367,044
South Carolina 3,698,254
 3,541,902
 10,357,916
 8,312,574
Georgia 3,493,075
 3,498,742
 9,160,373
 8,013,787
Virginia 1,614,801
 1,756,468
 4,486,593
 4,745,121
All Others 6,460,531
 6,686,540
 19,448,956
 17,437,969
   Premiums
 36,689,542
 36,335,270
 103,109,449
 87,417,385
Reinsurance Assumed —
 —
 2,756
 10,946
Reinsurance Ceded (76,984) (28,748) (193,751) (70,359)
Net Premiums Written $36,612,558
 $36,306,522
 $102,918,454
 $87,357,972


Escrow and Other Title-Related Fees

Other Revenues

Other revenuesEscrow and other title-related fees consists primarily includeof commission income, escrow and other various fees associated with the issuance of title fee income, trust income, management services income, exchange services income, state tax credit incomeinsurance policies including settlement, examination and income related to the Company’s equity method investments. Otherclosing fees. Escrow and other title-related fee revenues were $4,633,915 and $13,864,170$5.1 million for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with $3,094,874 and $8,280,139$2.8 million for the same prior year periods.period. The increase for the three-three-month period ended March 31, 2022 was mainly due to growth in independent agent markets and nine-month periodsproducts which support title insurance.

Revenue from Non-Title Services

Revenue from non-title services includes trust services, agency management services and exchange services income. Non-title service revenues were $2.4 million for the three-month period ended September 30, 2017March 31, 2022, compared with $2.1 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to increases in revenue from title feeslike-kind exchange activity and commissiontrust management fee income.

Investment-Related Revenues

Investment-related revenues include interest and dividends, other investment income, from title agencies.

Investment Related Revenues

Investment income andnet realized investment gains and losses from investments are includedchanges in investment related revenues.the estimated fair value of equity security investments.


Investment IncomeInterest and Dividends


The Company derives a substantial portion of its income from investments in fixed maturity securities, which are primarily municipal and corporate bondsfixed maturity securities, and equity securities. The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns.  The Company's title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests of policyholders. The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns.  


The Company’s investment strategy emphasizes after-tax income and principal preservation.  The Company’s investments are primarily in bondsfixed maturity securities and to a lesser extent, equity securities.  The average effective maturity of the majority of the bondsfixed maturity securities is less than 10 years.  The Company’s invested assets are managed to fund its obligations and evaluated to ensure long term stability of capital accounts.


27

As the Company generates cash from operations, it is invested in accordance with the Company’s investment policy and corporate goals.  The Company’s investment policy has been designed to balance multiple goals, including the assurance of a stable source of income from interest and dividends, the preservation of principal, and the provision of liquidity sufficient to meet insurance underwriting and other obligations as they become payable in the future.  Securities purchased may include a combination of taxable bonds,or tax-exempt bondsfixed maturity securities and equity securities.  The Company also invests in short-term investments that typically include money market funds, and, at times, the Company has or could invest in U.S. Treasury bills, commercial paper money-market funds and certificates of deposit. In addition, the Company holds other investments that are primarily investments in partnerships structured as limited liability companies. The Company strives to maintain a high quality investment portfolio.  Interest and investment income levels are primarily a function of general market performance, interest rates and the amount of cash available for investment.
Investment income was $1,087,054
Interest and $3,297,634dividends were $915 thousand for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with $1,160,983 and $3,478,999$1.0 million for the same prior year periods.period. The decrease in 2022 was primarily related to lower interest income received due to lower average balances of fixed maturity securities and lower levels of dividends received.

Other Investment Income

Other investment income consists primarily of income related to investments in unconsolidated affiliates, typically structured as limited liability companies ("LLCs"), accounted for under either the equity method of accounting or the measurement alternative for investments that do not have readily determinable fair values. 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.

Other investment income was $1.3 million for the three- and nine-month periodsthree-month period ended September 30, 2017 was primarily due to a lower levelMarch 31, 2022, compared with $0.9 million for the same prior year period. Changes in other investment income are impacted by fluctuations in the carrying value of investments in fixed income securities, partially offset by an increase in equity securities.the underlying investment and/or distributions received.




Net Realized Gain on InvestmentsInvestment Gains


Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing assessments of issuers’ business prospects and tax planning considerations.  Additionally, the amounts ofincluded in net realized investment gains and losses are affected by assessments of securities’ valuation for other-than-temporary impairment.  As a result of the interaction of these factors and considerations, the net realized investment gain or loss can vary significantly from period to period.

The net realized gain on investments was $803,938 and $990,118investment gains were $1.7 million for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with $439,326 and $574,328$321 thousand for the same prior year periods. The net realized gain on investments for the nine-month period ended September 30, 2017 did not include any impairment charges. The net realized gain on investments for the nine-month period ended September 30, 2016 includedperiod. There were no impairment charges of $233,941 on certain investments and other assets that were deemed to be other-than-temporarily impaired, offset by a net realized gain on the sales of investments and other assets of $808,269.recorded in 2022 or 2021. Management believes unrealized losses on the remaining fixed income and equitymaturity securities at September 30, 2017March 31, 2022 are temporary in nature.


The securities in the Company’s investment portfolio are subject to economic conditions and market risks.  The Company considers relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a fixed maturity security is other-than-temporary.  Relevant facts and circumstances include the extent and length of time the fair value of an investment has been below cost.

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment is other-than-temporary. 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 hold the equity security until it recovers in value or its intent to sell the debtfixed maturity security; and the risk that management is making decisions based on misstated informationinaccurate information.

Changes in the financial statements provided by issuers.Estimated Fair Value of Equity Security Investments


Changes in the estimated fair value of equity security investments were $(5.9) million for the three-month period ended March 31, 2022, compared with $3.2 million for the same prior year period. Such fluctuations are the result of changes in general market conditions during the respective periods.

Other Revenues

Other revenues primarily include gains and losses on the disposal of fixed assets and miscellaneous revenues. Other revenues were $299 thousand for the three-month period ended March 31, 2022, compared with $208 thousand for the same prior year period.

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Expenses


The Company's operating expenses consist primarily of commissions to agents, salaries, employee benefitspersonnel expenses, office and payroll taxes, office occupancy and operationstechnology expenses and the provision for claims. Operating expenses increased 15.5% and 22.9%11.8% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with the same prior year periods.period. The increase for the three-month period ended September 30, 2017March 31, 2022 was primarily due to increases in the provision for claims, salaries, employee benefits and payroll taxes and office and occupancypersonnel expenses, partially offset by a decrease in commissions. The increase forclaims expense. Other categories of operating expenses were 7.4% higher than the nine-monthprior period, ended September 30, 2017 was primarily due to increases in salaries, employees benefits and payroll taxes, commissions, the provision for claims and office occupancy and operations. In addition, the inclusionsupport expansion of expenses for a title agency acquired in the fourth quarter of 2016 contributed to the higher expense levels for the three- and nine- month periods ended September 30, 2017.our geographic footprint as well as ongoing strategic technology initiatives.


Following is a summary of the Company's operating expenses for the three- and nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016.2021. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 in the accompanying unaudited Consolidated Financial Statements.
 Three Months Ended
March 31,
(in thousands, except percentages)2022%2021%
Title Insurance$58,487 95.6 $52,412 95.7 
All Other2,718 4.4 2,351 4.3 
Total$61,205 100.0 $54,763 100.0 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 % 2016 % 2017 % 2016 %
Title Insurance $32,332,682
 94.5% $27,967,210
 94.4% $91,654,372
 94.1% $74,302,399
 93.8%
All Other 1,888,168
 5.5% 1,656,328
 5.6% 5,702,186
 5.9% 4,885,364
 6.2%
Total $34,220,850
 100.0% $29,623,538
 100.0% $97,356,558
 100.0% $79,187,763
 100.0%


On a combined basis, the after-tax profit margins were 13.7% and 13.3%margin was 9.0% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively, and 19.8% and 14.5%March 31, 2022, compared with 19.2% for the three- and nine-month periods ended September 30, 2016, respectively.same prior year period. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to reducemanage its operating expenses.




Total Company
Salaries, Employee Benefits and Payroll Taxes: 
Personnel costsExpenses –Personnel expenses include base salaries, benefits and payroll taxes, and bonuses paid to employees. Salaries, employee benefitsemployees and payroll taxescontract labor expenses. Personnel expenses were $9,820,578 and $29,464,824$21.3 million for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with $8,300,823 and $22,945,972$16.2 million for the same prior year periods.period. On a consolidated basis, salaries, employee benefits and payroll taxespersonnel expenses as a percentage of total revenues were 22.8% and 24.3%30.8% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with 20.2% and 23.0%22.4% for the same prior year periods.period. The increasesincrease in payrollpersonnel expenses for the three-month period ended September 30, 2017March 31, 2022 was primarily due to expansion of our presence in key markets, overall staff growth to support higher transaction volumes, and increased employee benefit and contract labor costs.

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 were $4.4 million for the three-month period ended March 31, 2022, compared with $2.7 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to ongoing investments in software and technology related initiatives and increased facilities expenses associated with staffing additions.

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 were $5.6 million for the three-month period ended March 31, 2022, compared with $3.7 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to increases in salaries, benefitstitle and payrollservice fees, travel-related expenses associated with the acquisition of a title agency that was acquired in the fourth quarter of 2016 and other staffing and inflationary increases. The increase for the nine-month period ended September 30, 2017 was primarily attributable to the same factors as the three-month period ended September 30, 2017, in addition to higher levels of incentive compensation.professional service fees.

Office Occupancy and Operations: Office occupancy and operations expenses primarily include office rent and utilities, depreciation, maintenance, telecommunications and insurance expenses. Office occupancy and operations expenses were $2,309,575 and $6,445,880 for the three- and nine-month periods ended September 30, 2017, respectively, compared with $1,496,948 and $4,526,710 for the same prior year periods. The increases in expenses in 2017 primarily related to increases in office equipment, contract services and facilities.

Business Development: Business development expenses primarily include marketing and travel-related expenses. Business development expenses were $639,923 and $1,987,028 for the three- and nine-month periods ended September 30, 2017, respectively, compared with $608,532 and $1,695,180 for the same prior year periods. The increase for the three- and nine-month periods ended September 30, 2017 primarily related to an increase in marketing expenses.

Filing Fees, Franchise and Local Taxes: Filing fees, franchise and local tax expenses include insurance filing and licensing fees, franchise taxes, excise taxes, and local taxes. Filing fees, franchise and local tax expenses were $203,912 and $935,476 for the three- and nine-month periods ended September 30, 2017, respectively, compared with $191,574 and $688,731 for the same prior year periods.

Professional and Contract Labor Fees: Professional and contract labor fees were $447,651 and $1,375,291 for the three- and nine-month periods ended September 30, 2017, respectively, compared with $523,504 and $1,599,603 for the same prior year periods. The decrease for the three-month period ended September 30, 2017 was primarily attributable to a decline in consulting fees. The decrease for the nine-month period ended September 30, 2017 was primarily attributable to a decline in consulting and legal fees.

Other Expenses: Other operating expenses primarily include amortization of intangible assets, miscellaneous expenses of the title segment and miscellaneous operating expenses of the trust division. These amounts typically fluctuate in relation to transaction volume of the title segment and the trust division. Other expenses were $630,320 and $1,944,419 for the three- and nine-month periods ended September 30, 2017, respectively, compared with $157,308 and $629,539 for the same prior year periods. The increases for the three- and nine-month periods ended September 30, 2017 were primarily attributable to increases in amortization of intangible assets attributable to the acquisition of a title insurance agency and miscellaneous title expenses.


Title Insurance
Commissions: 
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 decreased 5.9% and increased 10.1%2.2% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with the same prior year periods.period. Commission expense as a percentage of net premiums written by agents was 68.5% and 69.6%65.3% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with 73.1% and 72.9%69.2% for the same prior year periods.period. The lowerchanges in commission expense, and commission expense as a percentage of net premiums written, in 2017 and the lower commission expense for the three-month period ended September 30, 2017 were primarily duerelated to changes in geographic mix and an increase in the eliminationlevel of intercompany commissions as a percentage of total premiums, with intercompany commissions being eliminated for wholly owned affiliated agents upon consolidation and changes in geographic mix. The increase in commission expense for the nine-month period ended September 30, 2017 was primarily attributable to higher agent premium volume.consolidation. Commission rates vary by market due to local practice, competition and state regulations.

Provision for Claims: Claims – The provision for claims decreased 88.9% for the three-month period ended March 31, 2022, compared with the same prior year period. The provision for claims as a percentage of net premiums written was 5.1% and 2.6%0.3% for the three- and nine-month periodsthree-month period endedSeptember 30, 2017, respectively, March 31, 2022, compared with (2.9)% and (0.5)%2.6% for the same prior year periods. period. The increasedecrease in the provision for claims for the three- and nine-month periodsthree-month period ended September 30, 2017 compared with the same prior year periodsMarch 31, 2022 was primarily relateddue to a higher level of favorable loss development in 2016 for policy years 2009 through 2015. the current period.

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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 isare actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $2,812,717$564 thousand and $1,848,018$613 thousand for the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016,2021, respectively.


Reserves for Claims:  At September 30, 2017,March 31, 2022, the total reserve for claims was $35,207,000.$36.4 million. Of that total, approximately $4,875,000$3.9 million was reserved for specific claims, and approximately $30,332,000$32.5 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.


Changes from prior periods in the expected liability for claims reflect the uncertainty of the claims environment, as well as the limited predictive power of historical data. The Company continually updates and refines its reserve estimates as current experience develops and credible data emerges. Such data includes payments on claims closed during the quarter, new details that emerge on open cases that cause claims adjusters to increase or decrease the case reserves, and the impact that these types of changes have on the Company’s total loss provision. Adjustments may be required as new information develops, which often varies from past experience.
Premium and Retaliatory Taxes: Title insurance companies are generally not subject to state income or franchise taxes.  However, in most states they are subject to premium and retaliatory taxes, as defined by statute. Premium and retaliatory tax rates vary from state to state; accordingly, the total premium and retaliatory tax incurred is dependent upon the geographical mix of insurance revenues.  Premium and retaliatory taxes as a percentage of net premiums written were 1.8% and 1.9% for the three- and nine-month periods ended September 30, 2017, respectively, compared with 1.9% and 1.8% for the same prior year periods.

Income Taxes


The provision for income taxes was $2,990,000 and $7,647,000$1.6 million for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with $3,249,000 and $6,040,000$3.5 million for the same prior year periods.period. Income tax expense, including federal and state taxes, as a percentage of earningsincome before income taxes was 33.5% and 32.2%20.6% for the three- and nine-month periodsthree-month period ended September 30, 2017, respectively,March 31, 2022, compared with 28.6% and 29.5%20.2% for the same prior year periods.period. The effective income tax raterates for both 20172022 and 2016 was below2021 differ from the U.S. federal statutory income tax rate of 34%,21% primarily due to the effect of tax-exempt income.income and state taxes. Tax-exempt income lowers the effective tax rate.


The Company believes it is more likely than not that the tax benefits associated with recognized impairmentimpairments and unrecognized losses recorded through September 30, 2017March 31, 2022 will be realized. However, this judgment could be impacted by further market fluctuations.


Liquidity and Capital Resources


The Company’s currentmaterial cash requirements include general operating expenses, contractual and other obligations for the future payment of title claims, employment agreements, lease agreements, income taxes, capital expenditures, dividends on its common stock and repurchasesother contractual commitments for goods and services needed for operations. All other arrangements entered into by the Company are not reasonably likely to have a material effect on liquidity or the availability of its commons stock.capital resources. Cash flows from operations have historically been the primary source of financing for expanding operations, whether through organic growth or outside investments. The Company believes its balances of cash, short-term investments and other readily marketable securities, along with cash flows generated by ongoing operations, will be sufficient to satisfy its cash requirements over the next 12 months and thereafter, including the funding of operating activities and commitments for investing and financing activities. There are currently no known trends that the Company believes will materially impact the Company’s capital resources, nor is the Company anticipating any material changes in the mix or relative cost of such resources.

The Company evaluates nonorganic growth opportunities, such as mergers and acquisitions, from time to time in the ordinary course of business. Because of the episodic nature of these events, related incremental liquidity and capital resource needs can be difficult to predict.

The Company’s operating results and cash flows are heavily dependent on the real estate market. The Company’s business has certain fixed costs such as personnel; therefore, changes in the real estate market are monitored closely, and operating expenses such as staffing levels are managed and adjusted accordingly. The Company believes that its significant working capital position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.

The extent to which COVID-19 impacts the Company's future operations will depend on future developments which cannot be predicted with certainty at this time, including the duration and severity of the pandemic, actions taken to contain the spread of the virus and its variants, and regulatory actions taken as a result of the outbreak and the availability and rate of vaccinations. Throughout the entirety of the pandemic, the Company has remained fully operational and has not had any reductions in workforce. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

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Cash Flows: Flows –Net cash flows provided by operating activities were $18,863,290$1.3 million and $14,794,003$8.2 million for the nine-monththree-month periods ended September 30, 2017March 31, 2022 and 2016,2021, respectively. Cash flows fromprovided by operating activities increased in 2017differ from 2016, primarilynet income due to an increasesadjustments for non-cash items, such as changes in accounts payable, the provisionestimated fair value of equity security investments, gains and losses on investments, the timing of disbursements for taxes, claims and net income, partially offset by a decreaseother accrued liabilities, and collections or changes in the provision for deferred taxes.receivables and other assets.


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 andstock. Net cash was used in investing activities for the payment of dividends. In 2017, the Company had higher levels of investment purchase activity, payment of dividends and purchases of property, partially offsetthree-month period ended March 31, 2022, compared with net cash being provided by lower repurchases of common stock compared withinvesting activities in the prior year period, due to a decline in proceeds received from investment sales and maturities during the current year period.




The Company maintains a high degree of liquidity within its investment portfolio classified as available-for-sale, in the form of cash, short-term investments and other readily marketable securities. As of September 30, 2017,March 31, 2022, the Company held cash and cash equivalents of $30,890,785,$37.3 million, short-term investments of $20,692,763,$58.6 million, available-for-sale fixed maturity securities of $100,730,446$67.7 million and equity securities of $45,116,461.$69.9 million. The net effect of all activities on total cash and cash equivalents was an increase of $2,962,313$142 thousand in 2017.2022.


Capital Resources: Resources –The amount of capital resources the Company maintains is influenced by state regulation, the need to maintain superior financial ratings from third-party rating agencies and other marketing and operational considerations.

The Company's significant sources of funds are dividends and distributions from its subsidiaries, primarily its two title insurance subsidiaries. Cash is received from its subsidiaries in the form of dividends and as reimbursements for operating and other administrative expenses that it incurs. The reimbursements are executed within the guidelines of management agreements between the Company and its subsidiaries.


The ability of the Company's title insurance subsidiaries to pay dividends to the Company is subject to state regulation from their respective states of domicile. Each state regulates the extent to which title underwriters can pay dividends or make distributions and requires prior regulatory approval of the payment of dividends and other intercompany transfers. The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends. Depending on regulatory conditions, the Company may in the future need to retain cash in its title insurance subsidiaries in order to maintain their statutory capital position. As of September 30, 2017,March 31, 2022, both ITIC and NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.


While state regulations and the need to cover risks may set a minimum level for capital requirements, other factors necessitate maintaining capital resources in excess of the required minimum amounts. For instance, the Company’s capital resources help it maintain high ratings from insurance company rating agencies. Superior ratings strengthen the Company's ability to compete with larger, well known title insurers with national footprints.


A strong financial position provides the necessary flexibility to fund potential acquisition activity, to invest in the Company's core business, and to minimize the financial impact of potential adverse developments. Adverse developments that generally require additional capital include adverse financial results, changes in statutory accounting requirements by regulators, reserve charges, investment losses or costs incurred to adapt to a changing regulatory environment, including costs related to CFPB regulation of the real estate industry.


The Company bases its capitalization levels, in part, on net coverage retained. Since the Company’s geographical focus has been and continues to be concentrated in states with average premium rates typically lower than the national average, capitalization relative to premiums will usually appear higher than industry averages.


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, especially with the continued impact of COVID-19 and the ongoing military conflict between Russia and Ukraine, 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 unaware of any trendcarefully monitoring the COVID-19 situation, the conflict in Ukraine, and other trends that is likely tocould potentially result in material adverse liquidity changes, butand will continually assessesassess its capital allocation strategy, including decisions relating to payment of dividends, repurchasing the Company’s common stock and/or conserving cash.

31

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 has purchased 300did not purchase any shares forin the nine-month periodthree-month periods ended September 30, 2017 and 66,803 shares for the same period in 2016 at an average per share price of $165.35 and $93.10, respectively.March 31, 2022 or 2021.  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.
Capital Expenditures: 
Capital Expenditures were–Capital expenditures were approximately $2,343,000$908 thousand for the nine-monththree-month period ended September 30, 2017.March 31, 2022. In 2017,2022, the Company has plans for various capital improvement projects, including increased 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.




Contractual Obligations - As of March 31, 2022, the Company had a claims reserve totaling $36.4 million. The amounts and timing of these obligations are estimated and not set contractually. Events such as fraud, defalcation, and multiple property title defects can substantially and unexpectedly cause increases in both the amount and timing of estimated title insurance loss payments and loss cost trends whereby increases or decreases in inflationary factors (including the value of real estate) will influence the ultimate amount of title insurance loss payments and could increase total obligations and influence claim payout patterns. Due to the length of time over which claim payments are made and regularly occurring changes in underlying economic and market conditions, claim estimates are subject to variability and future payments could increase or decrease from these estimated amounts in the future.

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, 2022 and December 31, 2021, were $14.2 million and $13.4 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.

The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases. A portion of the Company's current leases include 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 as of March 31, 2022 is $5.8 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.

In the normal course of business, the Company enters into other contractual commitments for goods and services needed for operations. Such commitments are not expected to have a material adverse effect on the Company’s liquidity.

Off-Balance Sheet Arrangements


As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.


In addition, in administering tax-deferred propertylike-kind exchanges pursuant to § 1031 of the Internal Revenue Code, ITEC serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. ITAC serves as exchange accommodation titleholder and, through limited liability companiesLLCs that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property held by the Company for the purpose of completing such transactions totaled approximately $213,917,000$571.4 million and $202,184,000$763.9 million as of September 30, 2017March 31, 2022 and December 31, 2016,2021, respectively. These exchange deposits are held at third-party financial institutions. These amountsExchange deposits are not considered assets of the Company for accounting purposes and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets. Exchange services revenues include earnings on these deposits; therefore, investment income is shown as exchange services revenue, rather than investment income. TheSheets; however, the Company remains contingently liable to customers for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenue includes earnings on these deposits; therefore, investment income is shown as non-title services rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.

32


External assets under management of Investors Trust Company are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets.


It is not the general practice of the Company to enter into off-balance sheet arrangements or issue guarantees to third parties. The Company does not have any material source of liquidity or financing that involves off-balance sheet arrangements. Other than items noted above, off-balance sheet arrangements are generally limited to the future payments under noncancelable operating leases and payments due under various agreements with third-party service providers.


Recent Accounting Standards


For a description ofNo recent accounting pronouncements pleaseare expected to have a material impact on the Company’s financial position and results of operations. Please refer to Note 1 toin the unaudited Notes to Consolidated Financial Statements herein.in this Quarterly Report on Form 10-Q for further information regarding the Company’s basis of presentation and significant accounting policies.




33

Safe Harbor for Forward-Looking Statements


This Quarterly Report on Form 10-Q, as well as information included in future filings by the Company with the Securities and Exchange CommissionSEC and information contained in written material, press releases and oral statements issued by or on behalf of the Company, contains, or may contain, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that reflect management’s current outlook for future periods. These statements may be identified by the use of words such as “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” "may," “should,” “could,” “would” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product and service development, market share position, claims, expenditures, financial results and cash requirements, are forward-looking statements. Without limitation, projected developments in mortgage interest rates and the overall economic environment set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Trends and Recent Conditions”Conditions; COVID-19 Pandemic” constitute forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties.

Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, but not limited to, the following:


•the impact of COVID-19, including its variants, or other pandemics, climate change, severe weather conditions or the occurrence of another catastrophic event;
•changes in interest rates and real estate values;
•changes in general economic, business, and political conditions, including the performance of the financial and real estate markets;
•the potential impact of inflation;
•the impact of the ongoing military conflict between Russia and Ukraine;
•potential reform of government sponsored entities;
•the level of real estate transactions,transaction volumes, the level of mortgage origination volumes (including refinancing) and, the mix of title insurance between markets with varying real estate values, changes to the insurance requirements of the participants in the secondary mortgage market, and the effect of these factors on the demand for title insurance;
changes in general economic, business, and political conditions, including the performance of the financial and real estate markets;
•the possible inadequacy of the provision for claims reserve to cover actual claim losses;
•the incidence of fraud-related losses;
•the impact of cyberattacks (including ransomware attacks) and other cybersecurity events, including damage to the Company's reputation in the event of a serious IT breach or failure;
•unanticipated adverse changes in securities markets including interest rates, could result in material losses to the Company’sCompany's investments;
•significant competition that the Company’s operating subsidiaries face, including the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-effective manner and expansion into new geographic locations;
•the Company’s reliance upon the North Carolina, Texas, Georgia and TexasSouth Carolina markets for a significant portion of its premiums;
•compliance with government regulation, including pricing regulation, and significant changes to applicable regulations or in their application by regulators;
•the impact of governmental oversight of compliance byof the Company's service providers, including title insurance agents, with federal consumerthe application of financial laws;regulation designed to protect consumers;
•possible downgrades from a rating agency, which could result in a loss of underwriting business;
•the inability of the Company to manage, develop and implement technological advancements and prevent system interruptions or unauthorized system intrusions;
•statutory requirements applicable to the Company’s insurance subsidiaries that require them to maintain minimum levels of capital, surplus and reserves and that restrict the amount of dividends they may pay to the Company without prior regulatory approval;
•the desirabilitydesire to maintain capital above statutory minimum requirements for competitive, marketing and other reasons;
•heightened regulatory scrutiny and investigations of the title insurance industry;
•the Company’s dependence on key management and marketing personnel, the loss of whom could have a material adverse effect on the Company’s business;
•difficulty managing growth, whether organic or through acquisitions;
•unfavorable economic or other conditions could cause the Company to record impairment charges for all or a portion of its goodwill and other intangible assets;
reform of government-sponsored entities that could adversely impact the Company;
•policies and procedures for the mitigation of risks that may be insufficient to prevent losses;
•the shareholder rights plan could discourage transactions involving actual or potential changes of control; and
•other risks detailed elsewhere in this document and in the Company’s other filings with the SEC.


34

These and other risks and uncertainties may be described from time to time in the Company's other reports and filings with the Securities and Exchange Commission.SEC. For more details on factors that could affect expectations, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2021, including under the heading "Risk Factors". The Company is not under any obligation (and expressly disclaims any such obligation) and does not undertake to update or alter any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider the possibility that actual results may differ materially from our forward-looking statements.




Item 3.  Quantitative and Qualitative Disclosures About Market Risk


For the quarter ended September 30, 2017, there were no material changes in the Company’s market risks as described in the Company’s Annual Report on Form 10-KItem not required for the year ended December 31, 2016.smaller reporting companies.


Item 4.  Controls and Procedures


Disclosure Controls and Procedures


The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission'sSEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.


No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.


Pursuant to Rule 13a-15(b) under the Exchange Act, an evaluation was performed under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2017March 31, 2022 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.


Changes in Internal Control Over Financial Reporting


During the quarter ended September 30, 2017,March 31, 2022, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.


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PART II.   OTHER INFORMATION
 
Item 1.  Legal Proceedings


See discussion of legal proceedings in Note 7 to the Consolidated Financial Statements included in Part I, Item 1 of Part I of this Quarterly Report, which is incorporated by reference into this Part II, Item 1.


Item 1a.    1A. Risk Factors


The following supplementsThere have been no material changes in the risk factors previously disclosed under Item 1a.1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2021.


Unfavorable economic or other conditions could cause the Company to record impairment charges for all or a portion of its goodwill and other intangible assets.
As a result of acquisition activity, the Company has goodwill and other intangible assets that are approximately 4.7% of total assets as of September 30, 2017. Quarterly, the Company performs an impairment analysis that reviews changes in events or circumstances that could lead to the carrying value not being recoverable. Economic downturns or poor performance of the acquisitions could result in the Company recognizing an impairment of a portion or all of the goodwill and intangible assets on the Company’s books and could have a material adverse effect on the Company’s results of operations.
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

(a)        None
(b)        None
(c)       The following table provides information about purchases by the Company (and all affiliated purchasers) during the quarter ended September 30, 2017 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:
  Issuer Purchases of Equity Securities  
 
 
 
 
Period		 
 
Total Number of
Shares Purchased		  
 
Average Price
Paid per Share		 Total Number of
Shares Purchased as
Part of Publicly
Announced Plan		 Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plan
Beginning of period      429,707
July 2017—
 $—
 —
 429,707
August 2017230
 $176.60
 230
 429,477
September 2017—
 $—
 —
 429,477
Total:230
 $176.60
 230
 429,477

 For the quarter ended September 30, 2017, the Company purchased 230 shares of the Company’s common stock pursuant to the Company’s ongoing purchase program that was initially announced on June 5, 2000.  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. No repurchases of the Company’s common stock under the plan were conducted during the quarter ended March 31, 2022. As of March 31, 2022, there was authority remaining under the plan to purchase up to an aggregate of 428,161 shares of the Company’s common stock. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan (as such number may be amended by the Board)Board from time to time) have been purchased. 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 thenthe existing alternative uses for such cash.


Item 3.     Defaults Upon Senior Securities


None.


Item 4.     Mine Safety Disclosures


Not Applicable.




Item 5.     Other Information


None.On May 4, 2022, the Company’s wholly owned subsidiary ITIC entered into a Second Amended and Restated Employment Agreement (collectively, the “Restated Employment Agreements”) with each of J. Allen Fine, Chief Executive Officer and Chairman of the Board of Directors, James A. Fine, Jr., President, Treasurer, Chief Financial Officer, Chief Accounting Officer, and Director, and W. Morris Fine, Executive Vice President, Secretary and Director (each, an “Executive” and collectively, the “Executives”). The Restated Employment Agreements amend and restate the Amended and Restated Employment Agreements (the “Existing Employment Agreements”) previously entered into with the executive officers. The Restated Employment Agreements include the following changes as compared to the Existing Employment Agreements:



1.Term. The Restated Employment Agreements introduce an indefinite term that extends until terminated by the parties in accordance with the provisions therein, eliminating the prior approach which included five-year terms followed by automatic monthly extensions.



2.Compensation. The Restated Employment Agreements update all compensation terms, including base salary and payments upon termination, where applicable, based on each Executive’s previously disclosed current annual base salary. In addition, in the event of a “change in control” (as defined in the Restated Employment Agreements and consistent with the Existing Employment Agreements), each Executive will be entitled to a bonus in an amount equal to three times the amount of the highest rate of base salary such Executive has received during Executive’s employment with the Company, plus an amount equal to three times the average of the three highest annual bonuses Executive has received from the Company, to be paid in one lump sum on the effective date of the closing of the transaction that constitutes a change in control.

3.Termination and Severance:

a.Good Reason. The Restated Employment Agreements set forth the following events qualifying as “good reason” (previously defined to mean a material breach by the Company that is not cured within 30 days of written notice): (i) a material reduction in the Executive’s base salary; (ii) a relocation of the Executive’s principal place of employment by more than 50 miles; (iii) any material breach by the Company of any material provision of this Agreement; (iv) the Company’s failure to obtain an agreement from any successor to the Company to assume and
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agree to perform the applicable Restated Employment Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law; (v) a material, adverse change in the Executive’s title, authority, duties, or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law); or (vi) a material adverse change in the reporting structure applicable to the Executive. Under the Restated Employment Agreements, an Executive may not terminate his employment for Good Reason unless he has provided written notice to the Company’s Board of Directors of the existence of the circumstances providing grounds for termination for Good Reason within 90 days of the initial existence of such grounds and the Company has had at least 30 days from the date on which such notice is provided to cure such circumstances.

b.Payments of Severance Benefits. The Restated Employment Agreements require that cash payments due to the applicable Executive in connection with a termination of employment due to death, disability, or retirement, without cause or for good reason, or in connection with a change of control, in each case be made within 60 days of such termination.

c.Amount of Severance Pay. The Restated Employment Agreements revised the manner of calculating payments due upon termination in connection with a termination of employment due to death, disability, or retirement, without cause or for good reason, or in connection with a change of control to provide that the base salary component will be based on the highest base salary paid to Executive, and the bonus component will be based on the average of the highest three years of annual bonuses paid by the Company.

d.Release of Claims. The Restated Employment Agreements add a requirement that the applicable Executive execute a release of claims as a condition to the receipt of severance benefits.

4.Restrictive Covenants.The Restated Employment Agreements expand the provisions covering confidentiality and noncompetition and nonsolicitation, and add standard provisions on intellectual property and Company property.

5.Tax Matters. The Restated Employment Agreements provide that, if any of the payments or benefits due to one of the Executives under the Restated Employment Agreements, or in connection with any other payments or benefits, in connection with a change in control constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and would be subject to the excise tax imposed under Section 4999 of the Code, then the Company will either pay the full amount due or reduce the amount that is due to avoid the excise taxes, depending on which alternative would be more advantageous to such Executive.

6.Other Changes. The Restated Employment Agreements consolidate, streamline, and modernize other existing provisions consistent with customary terms for executive employment arrangements.

On May 4, 2022, ITIC entered into an Amended and Restated Death Benefit Plan Agreement (collective, the “Restated Employment Agreements”) with each Executive. The Restated Death Benefit Plan Agreements amend and restate the Amended and Restated Death Benefit Plan Agreements (the “Existing Death Benefit Plan Agreements”) previously entered into with the executive officers. In addition to updating references to the Restated Employment Agreements, the Amended and Restated Death Plan Agreements provide that the base salary component of the benefit due to the Executive’s beneficiary(ies) thereunder will be based on the highest base salary paid to Executive, and the bonus component will be based on the average of the highest three years of annual bonuses paid by the Company.

This foregoing description of the Restated Employment Agreements and the Restated Death Benefit Plan Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Restated Employment Agreements and the Restated Death Benefit Plan Agreements, copies of which are filed herewith as Exhibits 10.1 through 10.6 to this Quarterly Report on Form 10-Q.

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Item 6.  Exhibits
10.1
31(i)10.2
10.3
10.4
10.5
10.6
31(i)
31(ii)
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101.INSInline XBRL Instance DocumentDocument*
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
* - The instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document




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SIGNATURE


Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
INVESTORS TITLE COMPANY
By:/s/ James A. Fine, Jr.
James A. Fine, Jr., President, Treasurer, Chief
Financial Officer, Chief Accounting Officer and
Director (Principal Financial Officer and
Principal Accounting Officer)
 
 
 
Dated:  November 6, 2017May 10, 2022



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