CO TITLE INVESTORS – 10-Q – Management’s discussion and analysis of financial condition and results of operations – InsuranceNewsNet | Business Insurance

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Investors Title Company's (the "Company") Annual Report on Form 10-K for the
year ended December 31, 2021 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.

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

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 97.1% of the Company's revenues for the
six-month period ended June 30, 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. 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 from the title insurance segment are derived primarily from purchases of new
and existing residential and commercial real estate, refinancing activity, and
certain other types of mortgage loans, 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
that 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. Real 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 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. Mortgage refinance
activity tends to be influenced less by seasonality and more by economic cycles,
with activity levels increasing during times of falling interest rates.

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Services other than title insurance provided by operating divisions of the
Company are not reported separately, but are reported collectively in a
group called “Everyone Else”. These other services include those offered by the
Company and by its wholly owned subsidiaries, Investor Securities Exchange
Corporation
(“ITEC”), Investor Securities Hosting Corporation (“ITAC”),
Investor Trust Company (“investor confidence“) Y Investor Securities 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 acts as a qualified intermediary in tax-deferred
exchanges of property held for productive use in a trade or business or for
investment, and its income is derived from fees for handling exchange
transactions and interest earned on client deposits held by the Company. In its
role as qualified intermediary, ITEC coordinates the exchange aspects of the
real estate transaction, and its duties include drafting standard exchange
documents, holding the exchange funds between the time the old property is sold
and the new property is purchased, and accepting the formal identification of
the replacement property within the required identification period. ITAC
provides services as an exchange accommodation titleholder for accomplishing
"parking transactions" as set forth in the safe harbor contained in Internal
Revenue Procedure 2000-37.  These transactions include reverse exchanges when
taxpayers decide to acquire replacement property before selling the relinquished
property, or "build to suit" exchanges, when improvements must be made to the
replacement property before the taxpayer acquires the improved replacement
property. The services provided by the Company's exchange services division,
ITEC and ITAC, are pursuant to provisions in the Internal Revenue Code. From
time to time, these laws are subject to review and changes, which may negatively
affect the demand for tax-deferred exchanges in general, and consequently, the
revenues and profitability of the Company's exchange services division.

The fiduciary services division of the Company, investor confidenceprovides investment
administration and fiduciary services to individuals, companies, banks and trusts.

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

Business Trends and Recent Conditions; COVID-19 pandemic

CO TITLE INVESTORS – 10-Q – Management's discussion and analysis of financial condition and results of operations – InsuranceNewsNet | Business Insurance 2022 08 webinar web banner
The housing market is heavily influenced by government policies and overall
economic conditions. Regulatory reform and initiatives by various governmental
agencies, including the Federal Reserve's monetary policy and other regulatory
changes, could impact lending standards or the processes and procedures used by
the Company. The current real estate environment, including interest rates and
general economic activity, typically influence the demand for real estate.
Changes in either of these areas, in addition to ongoing supply constraints and
volatility in the cost and availability of building materials, could impact the
Company's results of operations in future periods.

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 and with the
widespread availability of vaccines. 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 current period of inflation, as well as the ongoing military conflict between
Russia Y Ukrainehas created additional volatile market conditions and
uncertainties in the world economy.

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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. In March 2020, the FOMC lowered the target federal
funds rate twice 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 target federal funds rate range was further raised at subsequent
meetings, with the FOMC's most recent change increasing the target range in July
2022 to between 2.25% and 2.50%. The FOMC has noted that it anticipates that
ongoing increases in the target range will be appropriate and, in addition,
decided to continue with balance sheet holdings reductions that began in May of
2022. In normal economic situations, future adjustments to the FOMC's stance of
monetary policy are expected to be based on realized and expected economic
developments to achieve maximum employment and inflation near the FOMC's
symmetric long-term 2.0% objective.

In 2008, the federal government took control of the Federal National Mortgage
Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation
("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.

In recent years, the Consumer Financial Protection Bureau ("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.

The timing and nature of any reforms are currently unknown; however, the 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.

Real Estate Environment

The Mortgage Bankers Association's ("MBA") June 10, 2022 Mortgage Finance
Forecast ("MBA Forecast") projects 2022 purchase activity to increase 2.1% to
$1,681 billion and mortgage refinance activity to decrease 68.9% to $730
billion, resulting in a net decrease in total mortgage originations of 39.6% to
$2,411 billion, all from 2021 levels. In 2021, purchase activity accounted for
41.2% of all mortgage originations and is projected in the MBA Forecast to
represent 69.7% of all mortgage originations in 2022. In addition, according to
data published by Freddie Mac, the average 30-year fixed mortgage interest rates
in the United States were 4.5% and 2.9% for the six-month periods ended June 30,
2022 and 2021, respectively. The FOMC has noted that it anticipates that ongoing
increases in the federal funds rate will be appropriate in response to the
current inflationary environment, with mortgage rates typically moving in
conjunction with the federal funds rate. Per the MBA Forecast, mortgage interest
rates are projected to be at or over 5.0% for the remainder of 2022, before
decreasing in both 2023 and 2024. Due to the rapidly changing environment
brought on by COVID-19, supply constraints, inflationary pressures and
geopolitical conflicts, these projections and the impact of actual future
developments on the Company could be subject to material change.

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.

Critical Accounting Policies and Estimates

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 six-month period ended June 30, 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, 2021 as filed with
the Securities and Exchange Commission (the "SEC").

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Results of Operations

The following table presents certain unaudited Consolidated Statements of
Operations data for the three- and six-month periods ended June 30, 2022 and
2021:

                                                             Three Months Ended                     Six Months Ended
                                                                  June 30,                              June 30,
(in thousands)                                             2022               2021               2022               2021
Revenues:
Net premiums written                                   $   69,626          $ 67,527          $ 132,751          $ 129,004
Escrow and other title-related fees                         6,209             3,487             11,273              6,285
Non-title services                                          2,836             2,408              5,262              4,486
Interest and dividends                                        911               898              1,826              1,914
Other investment income                                     1,106             1,483              2,443              2,424
Net realized investment gains                               2,038               182              3,785                503
Changes in the estimated fair value of equity security
investments                                               (12,172)            4,829            (18,087)             8,068
Other                                                         348             4,147                647              4,355
Total Revenues                                             70,902            84,961            139,900            157,039

Operating Expenses:
Commissions to agents                                      33,826            34,346             63,683             64,888
Provision for claims                                        1,310             1,436              1,486              3,027
Personnel expenses                                         20,898            15,914             42,152             32,067
Office and technology expenses                              4,288             3,211              8,656              5,953
Other expenses                                              7,627             4,766             13,177              8,501
Total Operating Expenses                                   67,949            59,673            129,154            114,436

Income before Income Taxes                                  2,953            25,288             10,746             42,603

Provision for Income Taxes                                    674             5,506              2,282              8,998

Net Income                                             $    2,279          $ 19,782          $   8,464          $  33,605



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insurance proceeds

Insurance revenues include net premiums written and escrow 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 below.

Net Premiums Written

Net premiums written increased 3.1% and 2.9% for the three- and six-month
periods ended June 30, 2022 to $69.6 million and $132.8 million, respectively,
compared with $67.5 million and $129.0 million for the same prior year periods.
The increases for the three- and six-month periods ended June 30, 2022 were
primarily driven by higher average home prices and increased premiums in our
Texas market.

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
results of operations in the period in which new information becomes available.

Title insurance companies often write title insurance policies directly
through headquarters and branches or through title agencies. The following is a
breakdown of premiums generated by branch and agency operations for the three
and six-month periods ended June 30, 2022 and 2021:

                                                            Three Months Ended                                                             Six Months Ended
                                                                 June 30,                                                                      June 30,
(in thousands, except
percentages)                          2022                  %                2021                 %                 2022                 %                 2021                 %
Home and Branch                   $   16,161                23.2          $ 17,048                25.2          $  33,579                25.3          $  34,408                26.7
Agency                                53,465                76.8            50,479                74.8             99,172                74.7             94,596                73.3
Total                             $   69,626               100.0          $ 67,527               100.0          $ 132,751               100.0          $ 129,004               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 decreased 5.2% and 2.4% for the
three- and six-month periods ended June 30, 2022, respectively, compared with
the same prior year periods. The decreases for the three- and six-month periods
ended June 30, 2022, were primarily driven by lower levels of purchase and
refinance activity, partially offset by higher average home prices.

All operations of the Company’s head office and most branches
are located in North Carolina; As a result, the network of home and branch offices
written premiums are mainly 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 5.9% and 4.8% for the three- and six-month periods
ended June 30, 2022, compared with the same prior year periods. The increases
for the three- and six-month periods ended June 30, 2022 were primarily driven
by higher average home prices and increased premiums in our Texas market.
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Following is a schedule of net premiums written for the three- and six-month
periods ended June 30, 2022 and 2021 in select states in which the Company's two
insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

                              Three Months Ended          Six Months Ended
                                   June 30,                   June 30,
State (in thousands)          2022           2021       2022           2021
North Carolina            $   23,431      $ 24,162   $  47,770      $  49,409
Texas                         23,614        12,886      39,376         24,238
Georgia                        5,753        10,971      12,725         17,860
South Carolina                 5,554         5,333      10,942         10,682
All Others                    11,542        14,289      22,436         27,061
Premiums Written              69,894        67,641     133,249        129,250
Reinsurance Assumed                -             -           -              -
Reinsurance Ceded               (268)         (114)       (498)          (246)
Net Premiums Written      $   69,626      $ 67,527   $ 132,751      $ 129,004



The increases in net premiums written in the state of Texas for the three- and
six-month periods ended June 30, 2022 were impacted by recent acquisitions of
title insurance agencies doing business in the state of Texas. The Company
evaluates nonorganic growth opportunities, such as acquisitions of title
insurance agencies, from time to time in the ordinary course of business.

Security deposit and other charges related to the title

Escrow and other title-related fees consists primarily of commission income,
escrow and other various fees associated with the issuance of title insurance
policies including settlement, examination and closing fees. Escrow and other
title-related fee revenues were $6.2 million and $11.3 million for the three-
and six-month periods ended June 30, 2022, respectively, compared with $3.5
million and $6.3 million for the same prior year periods. The increases for the
three- and six-month periods ended June 30, 2022 were mainly due to a larger
share of business that generates escrow income, and fee income associated with
commercial activity.

Non-title service revenue

Revenue from non-title services includes trust services, agency management
services and exchange services income. Non-title service revenues were $2.8
million and $5.3 million for the three- and six-month periods ended June 30,
2022, respectively, compared with $2.4 million and $4.5 million for the same
prior year periods. The increases for the three- and six-month periods ended
June 30, 2022 were primarily related to higher levels of property exchange
transaction volumes.

Investment Related Income

Investment-related revenues include interest and dividends, other investment
income, net realized investment gains and changes in the estimated fair value of
equity security investments.

Interest and Dividends

The Company derives a substantial portion of its income from investments in
fixed maturity securities, which are primarily municipal and corporate fixed
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 strategy emphasizes after-tax income and principal
preservation. The Company's investments are primarily in fixed maturity
securities and equity securities. The average effective maturity of the majority
of the fixed 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.

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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 or tax-exempt
fixed 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 and
certificates of deposit. 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.

Interest and dividends were $911 thousand and $1.8 million for the three- and
six-month periods ended June 30, 2022, respectively, compared with $898 thousand
and $1.9 million for the same prior year periods.

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 $1.1 million and $2.4 million for the three- and
six-month periods ended June 30, 2022, respectively, compared with $1.5 million
and $2.4 million for the same prior year periods. Changes in other investment
income are impacted by fluctuations in the carrying value of the underlying
investment and/or distributions received.

Net realized investment 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
included in net realized investment gains 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 investment gains were $2.0 million and $3.8 million for the
three- and six-month periods ended June 30, 2022, respectively, compared with
$182 thousand and $503 thousand for the same prior year periods. The Company
recorded impairment charges of $127 thousand on certain fixed maturity
securities where the intent to hold has changed in the three-month period ended
June 30, 2022. There were no impairment charges recorded in 2021. Management
believes unrealized losses on the remaining fixed maturity securities at
June 30, 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 sell the
fixed maturity security; and the risk that management is making decisions based
on inaccurate information.

Changes in estimated fair value of investments in equity securities

Changes in the estimated fair value of equity security investments were $(12.2)
million and $(18.1) million for the three- and six-month periods ended June 30,
2022, respectively, compared with $4.8 million and $8.1 million for the same
prior year period. Such fluctuations are the result of changes in general market
conditions during the respective periods. All major indices have experienced
significant declines in 2022.

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Other income

Other revenues primarily include miscellaneous income and gains and losses on
the disposal of fixed assets and real estate. Other revenues were $348 thousand
and $647 thousand for the three- and six-month periods ended June 30, 2022,
respectively, compared with $4.1 million and $4.4 million for the same prior
year periods. The decreases for the three- and six-month periods ended June 30,
2022 were primarily related to a gain on the sale of a property recorded in
2021.

Bills

The Company's operating expenses consist primarily of commissions to agents,
personnel expenses, office and technology expenses and the provision for claims.
Operating expenses increased 13.9% and 12.9% for the three- and six-month
periods ended June 30, 2022, compared with the same prior year periods. The
increases for the three- and six-month periods ended June 30, 2022 were
primarily due to increases in personnel expenses, title fees, and office and
technology expenses.

Following is a summary of the Company's operating expenses for the three- and
six-month periods ended June 30, 2022 and 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                                                       Six Months Ended
                                                                 June 30,                                                                June 30,
(in thousands, except
percentages)                          2022                  %                2021                 %           2022                 %                 2021                 %
Title Insurance                   $   64,734                95.3          $ 57,021                95.6    $ 123,221                95.4          $ 109,433                95.6
All Other                              3,215                 4.7             2,652                 4.4        5,933                 4.6              5,003                 4.4
Total                             $   67,949               100.0          $ 59,673               100.0    $ 129,154               100.0          $ 114,436               100.0



On a combined basis, the after-tax profit margins were 3.2% and 6.1% for the
three- and six-month periods ended June 30, 2022, respectively, compared with
23.3% and 21.4% for the same prior year periods. The decreases for the three-
and six-month periods ended June 30, 2022 were primarily due to negative changes
in the estimated fair value of equity security investments during the current
year periods and a gain on the sale of property in the same prior year periods.
The Company continually strives to enhance its competitive strengths and market
position, including ongoing initiatives to manage its operating expenses.

whole company

Personnel Expenses - Personnel expenses include base salaries, benefits and
payroll taxes, bonuses paid to employees and contract labor expenses. Personnel
expenses were $20.9 million and $42.2 million for the three- and six-month
periods ended June 30, 2022, respectively, compared with $15.9 million and $32.1
million for the same prior year periods. On a consolidated basis, personnel
expenses as a percentage of total revenues were 29.5% and 30.1% for the three-
and six-month periods ended June 30, 2022, respectively, compared with 18.7% and
20.4% for the same prior year periods. The increases in personnel expenses for
the three- and six-month periods ended June 30, 2022 were primarily due to
staffing of new offices, hiring to support growth initiatives, and increased
employee benefit 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 $4.3 million and $8.7 million for the three- and
six-month periods ended June 30, 2022, respectively, compared with $3.2 million
and $6.0 million for the same prior year periods. The increases for the three-
and six-month periods ended June 30, 2022 were primarily in support of expanding
the Company's geographic footprint and various ongoing technology initiatives.

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 $7.6 million and $13.2 million for the three- and six-month
periods ended June 30, 2022, respectively, compared with $4.8 million and $8.5
million for the same prior year periods. The increases for the three- and
six-month periods ended June 30, 2022 were primarily related to increases in
title and service fees, business development expenses and professional service
fees.

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title insurance

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 1.5% and 1.9% for the three- and six-month
periods ended June 30, 2022, respectively, compared with the same prior year
periods. Commission expense as a percentage of net premiums written by agents
was 63.3% and 64.2% for the three- and six-month periods ended June 30, 2022,
compared with 68.0% and 68.6% for the same prior year periods. The changes in
commission expense, and commission expense as a percentage of net premiums
written, were primarily related to changes in geographic mix and an increase in
the level of intercompany commissions as a percentage of total premiums, with
intercompany commissions being eliminated for wholly owned affiliated agents
upon consolidation. Commission rates vary by market due to local practice,
competition and state regulations.

Provision for Claims - The provision for claims decreased 8.8% and 50.9% for the
three- and six-month periods ended June 30, 2022, respectively, compared with
the same prior year periods. The provision for claims as a percentage of net
premiums written was 1.9% and 1.1% for the three- and six-month periods ended
June 30, 2022, compared with 2.1% and 2.3% for the same prior year periods. The
decreases in the provision for claims for the three- and six-month periods ended
June 30, 2022 were primarily due to changes in the geographic mix for
underwriting risk and higher levels of favorable loss development in the
six-month period ended June 30, 2022.

Title claims are typically reported and paid within the first several years of
policy issuance. The provision for claims reflects actual payments of claims,
net of recovery amounts, plus adjustments to the specific and incurred but not
reported claims reserves, the latter of which are actuarially determined based
on historical claims experience. Actual payments of claims, net of recoveries,
were $1.6 million and $1.3 million for the six-month periods ended June 30, 2022
and 2021, respectively.

At June 30, 2022, the total reserve for claims was $36.6 million. Of that total,
approximately $3.4 million was reserved for specific claims, and approximately
$33.2 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.

Income taxes

The provision for income taxes was $674 thousand and $2.3 million for the three-
and six-month periods ended June 30, 2022, respectively, compared with $5.5
million and $9.0 million for the same prior year periods. Income tax expense,
including federal and state taxes, as a percentage of income before income taxes
was 22.8% and 21.2% for the three- and six-month periods ended June 30, 2022,
respectively, compared with 21.8% and 21.1% for the same prior year periods. The
effective income tax rates for both 2022 and 2021 differ from the U.S. federal
statutory income tax rate of 21% primarily due to the effect of tax-exempt
income and state taxes. Tax-exempt income lowers the effective tax rate.

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

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Liquidity and Capital Resources

The Company's material 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 other 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 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 except as
otherwise disclosed in the Business Trends and Recent Conditions; COVID-19
Pandemic section of this Management's Discussion and Analysis.

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.

Cash Flows - Net cash flows provided by operating activities were $8.3 million
and $16.5 million for the six-month periods ended June 30, 2022 and 2021,
respectively. Cash flows provided by operating activities differ from net income
due to adjustments for non-cash items, such as changes in the estimated fair
value of equity security investments, gains and losses on investments and
property, the timing of disbursements for taxes, claims and other accrued
liabilities, and collections or changes in receivables and other assets.

Cash flows from non-operating activities have historically consisted of
purchases and proceeds from investing activities, the issuance of dividends and
repurchases of common stock. Net cash was used in investing activities for the
six-month period ended June 30, 2022, compared with net cash being provided by
investing activities in the prior year period, due primarily to the purchase of
a subsidiary, a decrease in proceeds from the sale of property, and an increase
in purchases of investments, net of proceeds from investment sales and
maturities.

The Company maintains a high degree of liquidity within its investment portfolio
in the form of cash, short-term investments and other readily marketable
securities. As of June 30, 2022, the Company held cash and cash equivalents of
$35.5 million, short-term investments of $71.3 million, available-for-sale fixed
maturity securities of $61.4 million and equity securities of $54.9 million. The
net effect of all activities on total cash and cash equivalents was a decrease
of $1.7 million in 2022.

Capital 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.

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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 June 30, 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, ongoing inflationary pressures
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 carefully monitoring the
COVID-19 situation, inflation, the conflict in Ukraine, and other trends that
could potentially result in material adverse liquidity changes, and will
continually assess its capital allocation strategy, including decisions relating
to payment of dividends, repurchasing the Company's common stock and/or
conserving cash.

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 did not purchase any shares
in the six-month periods ended June 30, 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 approximately $2.5 million for
the six-month period ended June 30, 2022. In 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 June 30, 2022, the Company had a claims reserve
totaling $36.6 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.

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ITIC, a wholly owned subsidiary of the Company, has entered into employment
agreements with certain executive officers. The amounts accrued for these
agreements at June 30, 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
June 30, 2022 is $5.9 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 agreements
commitments for goods and services necessary for operations. Such commitments are
it is not expected to have a material adverse effect on the Company’s liquidity.

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Off-Balance 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 like-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 LLCs 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 $484.4 million and $763.9
million as of June 30, 2022 and December 31, 2021, respectively. These exchange
deposits are held at third-party financial institutions. Exchange deposits 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 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.

External assets under management Investor Trust Company Are not considered
assets of the Company and, therefore, are excluded from the
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 due under various agreements with
third-party service providers.

Recent Accounting Standards

No recent accounting pronouncements are expected to have a material impact on
the Company's financial position and results of operations. Please refer to Note
1 in the unaudited Notes to Consolidated Financial Statements in this Quarterly
Report on Form 10-Q for further information regarding the Company's basis of
presentation and significant accounting policies.

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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 SEC 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," "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; 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 transaction volumes, the level of mortgage origination
volumes (including refinancing), 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;
•the possible inadequacy of the provision for claims 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 could result in material
losses to the Company'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 South
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 of the Company's service
providers, including the application of financial 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 desire 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;
•policies and procedures for the mitigation of risks 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.

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These and other risks and uncertainties may be described from time to time in
the Company's other reports and filings with the 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, 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.