The risk factors listed in this section and other factors noted herein could cause actual results to differ materially from those contained in any forward-looking statements or could result in a significant or material adverse effect on the Company’s results of operations.
−Removed: RISKS RELATED TO THE EFFECTS OF COVID-19 AND OTHER POTENTIAL PANDEMICS, HEALTH CRISES, CLIMATE CHANGE, SEVERE WEATHER CONDITIONS OR OTHER CATASTROPHIC EVENTS
−Removed: Our business could be adversely affected by the COVID-19 pandemic, climate change, severe weather conditions or the occurrence of another catastrophic event.
−Removed: and other countries continue to experience an outbreak of COVID-19.
−Removed: The COVID-19 pandemic has negatively impacted worldwide economic activity and created significant volatility and disruptions of financial markets.
−Removed: In response, the U.S.
−Removed: government and its agencies have taken a number of significant measures to provide fiscal and monetary stimulus, and authorities have implemented numerous measures to try to contain the virus.
−Removed: These measures have impacted and may continue to impact the Company’s workforce and operations.
−Removed: 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), and the Company may take further actions as may be required by government authorities or that the Company believes is in the best interests of its employees.
−Removed: The extent to which COVID-19 impacts the Company's future operations will depend on uncertain developments, including the duration and severity of the pandemic (including any of its variants), 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, and/or provide additional economic stimulus.
−Removed: This situation is continually changing, and additional impacts may arise that the Company is not aware of currently.
−Removed: It is not currently possible to predict the extent that COVID-19 will impact the Company's financial position or results of operation, although it is possible that it could have a material adverse effect on the Company's business.
−Removed: Climate change, extreme weather conditions and catastrophic events, such as future pandemic diseases, natural disasters and terrorist attacks, could have a material adverse effect on the Company’s future results of operations and financial condition.
−Removed: The Company’s business operations could be impacted, including availability of key Company personnel or the Company’s information technology systems, by volatility of real estate prices, significant climate migration, and disruptions to the real estate environment or financial markets.
−Removed: Given the unpredictable nature of these events with respect to size, severity, duration and geographic location, it is not currently possible to quantify the ultimate impact that they may have on the Company’s business.
RISKS RELATED TO THE COMPANY’S BUSINESS
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The demand for the Company’s title insurance and other real estate transaction products and services varies from year to year and is dependent upon, among other factors, the volume of residential and commercial real estate transactions and mortgage financing transactions.
−Removed: The volume of these transactions has historically been influenced by factors such as the overall state of the economy, the average price level of real estate sales, housing inventory, and the availability and pricing of mortgage financing.
+Added: The volume of these transactions has historically been influenced by factors such as the overall state of the economy, the average price level of real estate sales, housing inventory, unemployment levels, and the availability and pricing of mortgage financing.
Real estate activity generally decreases when the economy is weak or uncertain, home prices are increasing, housing inventory is limited, the availability of mortgage credit is limited, or mortgage interest rates are increasing.
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Demand for title insurance also depends in part upon the requirement by mortgage lenders and other participants in the secondary mortgage market that title insurance policies be obtained on residential and commercial real property.
+Added: 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.
+Added: Current political tensions may make it difficult for Congress to agree on any further increases to or suspension of the debt ceiling in a timely manner or at all, further increasing market volatility and economic uncertainty.
+Added: These events have impacted and could continue to impact the Company in a number of ways including, but not limited to, future fluctuations in the Company's investment portfolio and potential decreases in net premiums written.
+Added: The Federal Open Market Committee (“FOMC”) of the Federal Reserve has been highly attentive to the risks that these events have created, and in response has been raising the target federal funds rate at recent meetings.
+Added: Although the federal funds rate does not directly impact mortgage interest rates, it can have a significant influence as lenders pass on the costs of rate increases to consumers.
+Added: Higher mortgage interest rates have and could continue to negatively impact the demand and pricing of real estate, which has and could continue to adversely affect the Company’s operations and financial condition.
+Added: For example, net premiums written for the Company decreased during certain periods of 2022 due to an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates.
The Company may experience material losses resulting from fraud, defalcation or misconduct.
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Misappropriation of funds by any of these parties could result in title claims, some of which could be large and have a material negative impact on the Company’s results of operations and financial condition.
−Removed: The Company relies upon the North Carolina, Texas, Georgia and South Carolina markets for a significant portion of its premiums.
+Added: The Company relies upon the North Carolina, Texas, South Carolina and Georgia markets for a significant portion of its premiums.
Changes in the economic or regulatory environments in these states could have an adverse impact on the Company.
−Removed: North Carolina, Texas, Georgia and South Carolina are the largest sources of premium revenue for the Company’s title insurance subsidiaries.
+Added: North Carolina, Texas, South Carolina and Georgia are the largest sources of premium revenue for the Company’s title insurance subsidiaries.
In 2022, these states represented 35.6%, 29.0%, 9.4% and 9.2% of total premiums written by the Company, respectively.
A decrease in the level of real estate activity in these states, whether driven by weak economic conditions, changes in regulatory environments or other factors that influence demand, could have a negative impact on the Company’s financial results.
+Added: Some of these markets, like the overall real estate market, experienced during 2022 and may continue to experience, an overall decline in the level of real estate transaction volumes resulting from higher average mortgage interest rates.
Adverse deviation of actual claims experience from expected claims experience will result in lower net earnings.
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Mortgage lending is highly concentrated and changes in relationships with lenders or reform of government-sponsored entities could adversely affect the Company.
+Added: Large mortgage lenders and government-sponsored entities, because of their significant role in the mortgage process, have significant influence over the Company and other service providers.
Refusal by major market lenders to accept the Company’s product offerings could have a material adverse effect on the Company.
Furthermore, government-sponsored entities, the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), often require the purchase of title insurance for home loans they securitize.
−Removed: The federal government has had discussions about the possible reform of Fannie Mae and Freddie Mac.
−Removed: Changes to these entities could impact the entire mortgage loan process and as a result, could impact the demand for title insurance.
+Added: Changes by these regulatory entities could impact the entire mortgage loan process and as a result, could impact the demand for title insurance.
+Added: This includes the recent promotion of the use of alternative products in lieu of title insurance, such as attorney opinion letters, in certain circumstances to lower closing costs.
+Added: In addition, the federal government has had discussions about the possible reform of Fannie Mae and Freddie Mac.
The timing and results of reform are currently unknown;
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The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.
−Removed: This regulation could impact the Company’s ability to adjust prices in the face of rapidly changing market conditions, which could adversely affect results of operations.
+Added: These regulations could impact the Company’s ability to adjust prices in the face of rapidly changing market conditions, which could adversely affect results of operations.
Regulatory investigations of the title insurance industry by governmental entities could adversely impact the Company’s results of operations.
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Deterioration in financial markets may cause a decline in the performance of the Company’s investments and could have a material adverse impact on net income.
−Removed: The Company derives a substantial portion of its income from its investment portfolio that primarily includes fixed maturity securities and equity securities.
+Added: The Company derives a substantial portion of its income from its investment portfolio that primarily includes fixed maturity securities, equity securities and short-term investments.
The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns.
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Changes in the estimated fair value of fixed maturity securities are recorded as a component of accumulated other comprehensive income.
−Removed: If the carrying value of the Company’s fixed maturity securities exceeds the estimated fair value, and the decline in estimated fair value is deemed to be other-than-temporary, the Company will be required to write down the value of its investments.
−Removed: Unrealized holding gains and losses on equity securities are reported in the Consolidated Statements of Operations as changes in the estimated fair value of equity security investments, without regard as to whether a decline in value is deemed to be temporary or other-than-temporary.
+Added: Fixed maturity securities are regularly reviewed for differences between the cost and estimated fair value of each security for factors indicating impairment that would result in the value of the investment being written down.
+Added: Unrealized holding gains and losses on equity securities are reported in the Consolidated Statements of Operations as changes in the estimated fair value of equity security investments, without regard to impairment.
Changes in the estimated fair value of securities in the Company’s investment portfolio could have a material adverse effect on the Company’s results of operations and financial condition.
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RISKS RELATED TO CYBERSECURITY, TECHNOLOGY AND RISK MANAGEMENT
−Removed: Breaches and failures of, and other disruptions to, the Company’s information technology systems may disrupt the Company’s operations, result in monetary losses and harm the Company’s reputation.
+Added: Breaches and failures of, and other disruptions to, information technology systems of the Company or its service providers may disrupt the Company’s operations, result in monetary losses and harm the Company’s reputation.
The Company relies on information technology (“IT”) systems for a wide range of activities involved in the delivery of its products and services, including, but not limited to, the following:
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• manage payroll and human resources information.
−Removed: The Company’s IT systems may be disrupted or fail, and information stolen or otherwise misappropriated, for a number of reasons, including:
+Added: The Company’s IT systems may be disrupted or fail, and information stolen or otherwise misappropriated, for a number of reasons, including, but not limited to:
• hacking, computer viruses, malware, ransomware or other cyberattacks;
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Like all companies, the Company’s IT systems have been, and likely will continue to be, the target of computer viruses, cyberattacks, phishing attacks and other malicious activity.
−Removed: For example, during the third quarter of 2021 , the Company detected a ransomware attack limited to one entity that required a temporary interruption to the impacted entity’s computer network as the issue was being remediated.
−Removed: Promptly upon detection, the Company launched an investigation and initiated response protocols, including the engagement of external cybersecurity professionals and legal counsel.
−Removed: Based on the information developed in the course of the investigation, the ransomware attack has not had, and is not expected to have, a material impact on the Company's business, financial position and results of operations.
−Removed: While the Company has not experienced a known material breach to date, the occurrence or scope of such events is not always immediately apparent and there can be no assurance that the Company will not suffer additional attacks or incur more serious financial consequences or expense in the future.
+Added: While the Company has not experienced a known material breach to date, the occurrence or scope of such events is not always immediately apparent and there can be no assurance that the Company will not suffer additional attacks or incur serious financial consequences or expense in the future.
The Company invests resources in maintaining the security of its systems and adapting to evolving security threats.
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Non-public personal information may include, but is not limited to, names, addresses, social security numbers, and banking information.
+Added: Additionally, future or past business transactions (such as acquisitions or integrations) could expose the Company to additional cybersecurity risks and vulnerabilities, as the Company’s systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.
+Added: In conducting its business and delivering its products and services, the Company also utilizes service providers.
+Added: These service providers and the IT systems they utilize are typically subject to similar types of risks that the Company faces.
+Added: The Company provides certain of these service providers with data, including non-public personal information.
+Added: There is no guarantee that the Company’s due diligence or ongoing vendor oversight will be sufficient to ensure the integrity and security of the systems utilized by these service providers or the protection of the information that resides thereon.
Furthermore, the Company is required by law and by certain contracts, particularly contracts with financial institutions, to notify various parties, consumers and customers in the event that confidential or personal information may have been or was accessed by unauthorized third parties.
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As cybercriminals continue to become more sophisticated, the costs to insure against cyberattacks have risen and may continue to rise in the future.
+Added: Any inability of the Company or its service providers to prevent or adequately respond to the issues described above could disrupt the Company’s business, delay or impact the delivery of its products and services, inhibit its ability to retain existing customers or attract new customers, divert management’s time and energy, otherwise harm its reputation and/or result in financial losses, litigation, regulatory inquiries, increased costs or other adverse consequences that could be material to the Company.
+Added: Errors and fraud involving the transfer of funds may adversely affect the Company.
+Added: The Company relies on its systems, employees and banks to transfer its own funds and the funds of third parties.
+Added: These transfers are susceptible to user input error, fraud, system interruptions and other similar errors that could result in lost funds or delayed transactions.
+Added: The Company’s email and computer systems, along with systems used by other parties involved in the transactions, have been subject to, and are likely to continue to be the target of, fraudulent attacks, including attempts to cause the improper transfer of funds.
+Added: Funds transferred to a fraudulent recipient are often not recoverable and, in certain instances, the Company may be liable for those unrecovered funds.
+Added: These attacks have increased in frequency and sophistication.
+Added: The controls and procedures used by the Company to prevent transfer errors and fraud may prove inadequate, resulting in financial losses, reputational harm, loss of customers or other adverse consequences which could be material to the Company.
The Company may encounter difficulties managing system or technological changes, which could adversely affect its financial and operating results.
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Misidentified or unanticipated risks could adversely impact the Company and its results of operations.
+Added: RISKS RELATED TO THE EFFECTS OF CLIMATE CHANGE, SEVERE WEATHER CONDITIONS, POTENTIAL PANDEMICS, HEALTH CRISES, OR OTHER CATASTROPHIC EVENTS
+Added: Our business could be adversely affected by climate change, severe weather conditions, potential pandemics, health crises, or the occurrence of another catastrophic event.
+Added: Climate change, extreme weather conditions and catastrophic events, such as future pandemic diseases, natural disasters and terrorist attacks, could have a material adverse effect on the Company’s future results of operations and financial condition.
+Added: The Company’s business operations could be impacted, including availability of key Company personnel or the Company’s information technology systems, by volatility of real estate prices, significant climate migration, and disruptions to the real estate environment or financial markets.
+Added: Given the unpredictable nature of these events with respect to size, severity, duration and geographic location, it is not currently possible to quantify the ultimate impact that they may have on the Company’s business.
+Added: COVID-19 or other potential pandemics 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.
RISKS RELATED TO OWNING THE COMPANY’S COMMON STOCK
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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.