What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 83 added, 74 removed, 320 unchanged (33% of the section changed)

6 unchanged sentences

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 96.9% of the Company's revenues for the three-month period ended March 31, 2022.

Total revenues from the title segment accounted for 97.1% of t he 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.

23 unchanged sentences

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.

Services other than title insurance provided by operating divisions of the Company are not reported separately, but rather are reported collectively in a segment called “All Other”.

Services other than title insurance provided by operating divisions of the Company are not reported separately, but rather are reported collectively in a group called “All 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.

14 unchanged sentences

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.

Despite the widespread availability of vaccines, COVID-19 (including its variant strains) continues to impact U.S.

COVID-19 (including its variant strains) continues to impact U.S.

states where the Company conducts business.

3 unchanged sentences

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.

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.

4 unchanged sentences

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.

The current period of inflation, as well as ongoing military conflict between Russia and Ukraine, has created additional volatile market conditions and uncertainties in the global economy.

Regulatory Environment

2 unchanged sentences

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 raised again in May 2022, when the FOMC increased the target range to between 0.75% and 1.00%.

Further, the FOMC noted in the May 2022 meeting that it anticipates that ongoing increases in the target range will be appropriate, and announced steps to begin reducing its balance sheet holdings.

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.

14 unchanged sentences

Real Estate Environment

The Mortgage Bankers Association's ("MBA") March 21, 2022 Mortgage Finance Forecast (“MBA Forecast”) projects 2022 purchase activity to increase 7.7% to $1,773 billion and mortgage refinance activity to decrease 63.3% to $861 billion, resulting in a net decrease in total mortgage originations of 34.0% to $2,634 billion, all from 2021 levels.

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.

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 3.8% and 2.9% for the three-month periods ended March 31, 2022 and 2021, respectively.

Per the MBA Forecast, mortgage interest rates are projected to increase to 4.5% in the fourth quarter of 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.

3 unchanged sentences

Actual results could differ from these estimates.

During the three-month period ended 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, 2021 as filed with the Securities and Exchange Commission (the "SEC").

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").

Results of Operations

The following table presents certain unaudited Consolidated Statements of Operations data for the three-month periods ended March 31, 2022 and 2021:

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

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

24 unchanged sentences

Net Premiums Written

Net premiums written increased 2.7% for the three-month period ended March 31, 2022 to $63.1 million, compared with $61.5 million for 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.

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 driv en 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.

4 unchanged sentences

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:

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

June 30, Six Months Ended

(in thousands, except percentages) 2022 % 2021 % 2022 % 2021 %

3 unchanged sentences

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.

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 of the Company's home office operations and the majority of branch offices are located in North Carolina;

3 unchanged sentences

Title insurance commissions earned by the Company’s agents are recognized as expenses concurrently with premium recognition.

Agency net premiums written increased 3.6% 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.

Following is a schedule of net premiums written for the three-month periods ended March 31, 2022 and 2021 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

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.

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

June 30, Six Months Ended

State (in thousands) 2022 2021 2022 2021

8 unchanged sentences

Net Premiums Written $ 69,626 $ 67,527 $ 132,751 $ 129,004

Escrow and Other Title-Related Fees

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.

Escrow and Other Titl e-Related Fees

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 $5.1 million for the three-month period ended March 31, 2022, compared with $2.8 million for the same prior year period.

The increase for the three-month period ended March 31, 2022 was mainly due to growth in independent agent markets and products which support title insurance.

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.

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 March 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 like-kind exchange activity and trust management fee 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 Revenues

15 unchanged sentences

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 $915 thousand for the three-month period ended March 31, 2022, compared with $1.0 million for the same prior year 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.

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

2 unchanged sentences

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-month period ended March 31, 2022, compared with $0.9 million for the same prior year period.

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.

3 unchanged sentences

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 $1.7 million for the three-month period ended March 31, 2022, compared with $321 thousand for the same prior year period.

There were no impairment charges recorded in 2022 or 2021.

Management believes unrealized losses on the remaining fixed maturity securities at March 31, 2022 are temporary in nature.

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.

7 unchanged sentences

Changes in the 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.

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.

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.

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.

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 11.8% 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 due to increases in personnel expenses, partially offset by a decrease in claims expense.

Other categories of operating expenses were 7.4% higher than the prior period, primarily to support expansion of our geographic footprint as well as ongoing strategic technology initiatives.

Following is a summary of the Company's operating expenses for the three-month periods ended March 31, 2022 and 2021.

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;

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

(in thousands, except percentages) 2022 % 2021 % 2022 % 2021 %

2 unchanged sentences

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 margin was 9.0% for the three-month period ended March 31, 2022, compared with 19.2% for the same prior year period.

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.

1 unchanged sentence

Personnel Expenses – Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses.

Personnel expenses were $21.3 million for the three-month period ended March 31, 2022, compared with $16.2 million for the same prior year period.

On a consolidated basis, personnel expenses as a percentage of total revenues were 30.8% for the three-month period ended March 31, 2022, compared with 22.4% for the same prior year period.

The increase in personnel expenses for the three-month period ended March 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.

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 $4.4 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.

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 $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 title and service fees, travel-related expenses and professional service fees.

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.

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 2.2% for the three-month period ended March 31, 2022, compared with the same prior year period.

Commission expense as a percentage of net premiums written by agents was 65.3% for the three-month period ended March 31, 2022, compared with 69.2% for the same prior year period.

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 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 0.3% for the three-month period ended March 31, 2022, compared with 2.6% for the same prior year period.

The decrease in the provision for claims for the three-month period ended March 31, 2022 was primarily due to a higher level of favorable loss development in the current period.

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 $564 thousand and $613 thousand for the three-month periods ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total reserve for claims was $36.4 million.

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.

4 unchanged sentences

Adjustments may be required as new information develops, which often varies from past experience.

The provision for income taxes was $1.6 million for the three-month period ended March 31, 2022, compared with $3.5 million for the same prior year period.

Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 20.6% for the three-month period ended March 31, 2022, compared with 20.2% for the same prior year period.

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.

1 unchanged sentence

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 March 31, 2022 will be realized.

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.

4 unchanged sentences

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.

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.

8 unchanged sentences

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 $1.3 million and $8.2 million for the three-month periods ended March 31, 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, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets.

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 three-month period ended March 31, 2022, compared with net cash being provided by investing activities in the prior year period, due to a decline in proceeds received from investment sales and maturities during the current year period.

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 March 31, 2022, the Company held cash and cash equivalents of $37.3 million, short-term investments of $58.6 million, available-for-sale fixed maturity securities of $67.7 million and equity securities of $69.9 million.

The net effect of all activities on total cash and cash equivalents was an increase of $142 thousand in 2022.

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.

6 unchanged sentences

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 March 31, 2022, both ITIC and NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.

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.

6 unchanged sentences

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.

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, 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.

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 three-month periods ended March 31, 2022 or 2021.

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 $908 thousand for the three-month period ended March 31, 2022.

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 March 31, 2022, the Company had a claims reserve totaling $36.4 million.

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.

2 unchanged sentences

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.

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.

4 unchanged sentences

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.

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.

7 unchanged sentences

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 $571.4 million and $763.9 million as of March 31, 2022 and December 31, 2021, respectively.

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.

31 unchanged sentences

• 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;

• the Company’s r eliance upon the North Carolina, Texas, Georgia and South Carolina marke ts 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;

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis