INVESTORS TITLE CO 10-Q

Item 1. Financial Statements Investors Title Company and Subsidiaries Consolidated Balance Sheets As of March 31, 2024 and December 31, 2023 (in thousands) (unaudited) March 31, 2024 December 31, 2023 Assets Cash and cash equivalents $ 21,613 $ 24,031 Investments: Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2024: $ 62,277 ; December 31, 2023: $ 63,106 ) 62,647 63,847 Equity securities, at fair value (cost: March 31, 2024: $ 22,647 ; December 31, 2023: $ 22,981 ) 36,708 37,212 Short-term investments 113,379 110,224 Other investments 21,758 17,385 Total investments 234,492 228,668 Premiums and fees receivable 12,911 13,338 Accrued interest and dividends 1,090 978 Prepaid expenses and other receivables 8,843 13,525 Property, net 25,325 23,886 Goodwill and other intangible assets, net 15,910 16,249 Lease assets 6,679 6,303 Other assets 2,631 2,500 Current income taxes recoverable — 1,081 Total Assets $ 329,494 $ 330,559 Liabilities and Stockholders’ Equity Liabilities: Reserve for claims $ 37,316 $ 37,147 Accounts payable and accrued liabilities 27,732 31,864 Lease liabilities 6,828 6,449 Current income taxes payable 282 — Deferred income taxes, net 3,374 3,546 Total liabilities 75,532 79,006 Commitments and Contingencies — — Stockholders’ Equity: Preferred stock ( 1,000 authorized shares; no shares issued) — — Common stock – no par value ( 10,000 authorized shares; 1,884 and 1,891 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, excluding in each period 292 shares of common stock held by the Company) — — Retained earnings 253,616 250,915 Accumulated other comprehensive income 346 638 Total stockholders' equity 253,962 251,553 Total Liabilities and Stockholders’ Equity $ 329,494 $ 330,559 Refer to notes to the Consolidated Financial Statements. 1 Investors Title Company and Subsidiaries Consolidated Statements of Operations For the Three Months Ended March 31, 2024 and 2023 (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2024 2023 Revenues: Net premiums written $ 40,180 $ 38,966 Escrow and other title-related fees 3,723 3,655 Non-title services 4,304 5,312 Interest and dividends 2,520 2,074 Other investment income 111 753 Net investment gains 2,422 443 Other 199 140 Total Revenues 53,459 51,343 Operating Expenses: Commissions to agents 19,870 19,326 Provision for claims 910 1,068 Personnel expenses 18,582 20,820 Office and technology expenses 4,465 4,400 Other expenses 3,835 4,168 Total Operating Expenses 47,662 49,782 Income before Income Taxes 5,797 1,561 Provision for Income Taxes 1,272 380 Net Income $ 4,525 $ 1,181 Basic Earnings per Common Share $ 2.40 $ 0.62 Weighted Average Shares Outstanding – Basic 1,888 1,897 Diluted Earnings per Common Share $ 2.40 $ 0.62 Weighted Average Shares Outstanding – Diluted 1,889 1,897 Refer to notes to the Consolidated Financial Statements. 2 Investors Title Company and Subsidiaries Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2024 and 2023 (in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Net income $ 4,525 $ 1,181 Other comprehensive (loss) income, before income tax: Accumulated postretirement benefit obligation adjustment — 141 Net unrealized (losses) gains on investments arising during the period ( 424 ) 233 Reclassification adjustment for write-down of securities included in net income 53 82 Other comprehensive (loss) income, before income tax ( 371 ) 456 Income tax expense related to postretirement health benefits — 30 Income tax (benefit) expense related to net unrealized (losses) gains on investments arising during the period ( 91 ) 47 Income tax expense related to reclassification adjustment for write-down of securities included in net income 12 19 Net income tax (benefit) expense on other comprehensive (loss) income ( 79 ) 96 Other comprehensive (loss) income ( 292 ) 360 Comprehensive Income $ 4,233 $ 1,541 Refer to notes to the Consolidated Financial Statements. 3 Investors Title Company and Subsidiaries Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2024 and 2023 (in thousands, except per share amounts) (unaudited) Common Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Shares Amount Balance, December 31, 2022 1,897 $ — $ 240,811 $ 200 $ 241,011 Net income 1,181 1,181 Dividends paid ($ 0.46 per share) ( 873 ) ( 873 ) Exercise of stock appreciation rights 1 — — Share-based compensation expense related to stock appreciation rights 159 159 Accumulated postretirement benefit obligation adjustment 111 111 Net unrealized gain on investments 249 249 Balance, March 31, 2023 1,898 $ — $ 241,278 $ 560 $ 241,838 Balance, December 31, 2023 1,891 $ — $ 250,915 $ 638 $ 251,553 Net income 4,525 4,525 Dividends paid ($ 0.46 per share) ( 867 ) ( 867 ) Shares of common stock repurchased and retired ( 7 ) ( 1,053 ) ( 1,053 ) Share-based compensation expense related to stock appreciation rights 96 96 Net unrealized loss on investments ( 292 ) ( 292 ) Balance, March 31, 2024 1,884 $ — $ 253,616 $ 346 $ 253,962 Refer to notes to the Consolidated Financial Statements. 4 Investors Title Company and Subsidiaries Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2024 and 2023 (in thousands) (unaudited) Three Months Ended March 31, 2024 2023 Operating Activities Net income $ 4,525 $ 1,181 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 787 639 Accretion of investments, net ( 1,232 ) ( 865 ) Amortization of other intangible assets, net 339 332 Share-based compensation expense related to stock appreciation rights 96 159 Net (gain) loss on disposals of property ( 13 ) 50 Net investment gains ( 2,422 ) ( 443 ) Net losses (earnings) from other investments 14 ( 568 ) Provision for claims 910 1,068 Benefit for deferred income taxes ( 92 ) ( 1,910 ) Changes in assets and liabilities: Decrease in premium and fees receivable 427 2,220 Decrease (increase) in other assets 3,354 ( 265 ) (Increase) decrease in lease assets ( 376 ) 36 Decrease in current income taxes receivable 1,081 1,174 Decrease in accounts payable and accrued liabilities ( 5,881 ) ( 15,693 ) Increase (decrease) in lease liabilities 379 ( 13 ) Increase in current income taxes payable 282 1,148 Payments of claims, net of recoveries ( 741 ) ( 1,342 ) Net cash provided by (used in) operating activities 1,437 ( 13,092 ) Investing Activities Purchases of fixed maturity securities ( 757 ) ( 2,705 ) Purchases of equity securities ( 2,470 ) ( 3,627 ) Purchases of short-term investments ( 32,751 ) ( 18,800 ) Purchases of other investments ( 5,178 ) ( 970 ) Proceeds from sales and maturities of fixed maturity securities 1,625 4,712 Proceeds from sales of equity securities 5,323 13,090 Proceeds from sales and maturities of short-term investments 31,107 17,654 Proceeds from sales and distributions of other investments 3,379 913 Purchases of property ( 2,230 ) ( 2,301 ) Proceeds from the sale of property 17 243 Net cash (used in) provided by investing activities ( 1,935 ) 8,209 Financing Activities Repurchases of common stock ( 1,053 ) — Dividends paid ( 867 ) ( 873 ) Net cash used in financing activities ( 1,920 ) ( 873 ) Net Decrease in Cash and Cash Equivalents ( 2,418 ) ( 5,756 ) Cash and Cash Equivalents, Beginning of Period 24,031 35,311 Cash and Cash Equivalents, End of Period $ 21,613 $ 29,555 5 Consolidated Statements of Cash Flows, continued Three Months Ended March 31, 2024 2023 Supplemental Disclosures: Cash Paid During the Year for: Income tax payments (refunds), net $ 1 $ ( 32 ) Non-Cash Investing and Financing Activities: Non-cash net unrealized loss (gain) on investments, net of deferred tax benefit (provision) of $ 79 and $( 66 ) for March 31, 2024 and 2023, respectively $ 292 $ ( 249 ) Adjustments to postretirement benefits obligation, net of deferred tax expense of $ 0 and $( 30 ) for March 31, 2024 and 2023, respectively $ — $ ( 111 ) Refer to notes to the Consolidated Financial Statements. 6 INVESTORS TITLE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements March 31, 2024 (unaudited) Note 1 – Basis of Presentation and Significant Accounting Policies Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, 2023 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies. Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the three-month period ended March 31, 2024 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2024 or any other interim period. Reclassifications – Certain amounts have been reclassified for consistency with the current period presentation. The reclassifications were between revenue lines of the unaudited Consolidated Statements of Operations. These reclassifications are not considered an accounting change and had no effect on the reported results of operations. Use of Estimates and Assumptions – The preparation of the Company’s unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used. Subsequent Events – The Company has evaluated through the date of this filing and concluded that there were no material subsequent events requiring adjustment or disclosure to its unaudited Consolidated Financial Statements. Note 2 – Reserve for Claims Activity in the reserve for claims for the three-month period ended March 31, 2024 and the year ended December 31, 2023 is summarized as follows: (in thousands) March 31, 2024 December 31, 2023 Balance, beginning of period $ 37,147 $ 37,192 Provision charged to operations 910 4,762 Payments of claims, net of recoveries ( 741 ) ( 4,807 ) Balance, end of period $ 37,316 $ 37,147 The total reserve for all reported and unreported losses the Company incurred through March 31, 2024 is represented by the reserve for claims on the unaudited Consolidated Balance Sheets. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through March 31, 2024. Management continually reviews and adjusts its reserve for claims estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews could be significant. 7 A summary of the Company’s reserve for claims, broken down into its components of known title claims and IBNR, follows: (in thousands, except percentages) March 31, 2024 % December 31, 2023 % Known title claims $ 3,216 8.6 $ 2,855 7.7 IBNR 34,100 91.4 34,292 92.3 Total reserve for claims $ 37,316 100.0 $ 37,147 100.0 Claims and losses paid are charged to the reserve for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated fair value, net of any indebtedness on the property. Note 3 – Earnings Per Common Share and Share Awards Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, when share-based awards are assumed to be exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period. The following table sets forth the computation of basic and diluted earnings per share for the three-month periods ended March 31: Three Months Ended March 31, (in thousands, except per share amounts) 2024 2023 Net income $ 4,525 $ 1,181 Weighted average common shares outstanding – Basic 1,888 1,897 Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled) 1 — Weighted average common shares outstanding – Diluted 1,889 1,897 Basic earnings per common share $ 2.40 $ 0.62 Diluted earnings per common share $ 2.40 $ 0.62 There were 23 thousand and 24 thousand potential shares excluded from the computation of diluted earnings per share for the three-month periods ended March 31, 2024 and 2023, respectively, due to the out-of-the-money status of the related share-based awards. The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards and one legacy plan under which equity awards remain outstanding. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares. SARs give the holder the right to receive stock equal to the appreciation in the value of shares of stock from the grant date for a specified period of time, and as a result, are accounted for as equity instruments. As of March 31, 2024, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. All outstanding SARs vest and are exercisable within five years or less from the date of grant, and all SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant. 8 A summary of share-based award transactions for all share-based award plans follows: (in thousands, except weighted average exercise price and average remaining contractual term) Number Of Shares Weighted Average Exercise Price Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of January 1, 2023 39 $ 159.39 4.10 $ 243 SARs granted 5 142.88 SARs exercised ( 2 ) 93.87 Outstanding as of December 31, 2023 42 $ 160.83 3.69 $ 428 SARs granted — — SARs exercised — — Outstanding as of March 31, 2024 42 $ 160.83 3.44 $ 451 Exercisable as of March 31, 2024 36 $ 163.77 3.22 $ 331 Unvested as of March 31, 2024 6 $ 143.79 4.70 $ 120 During the first quarter of 2024, the Company did not issue share-settled SARs to key employees or directors of the Company. During the first quarter of 2023, there was an issuance of 1 thousand share-settled SARs to a director of the Company. The fair value of each SAR is estimated on the date of grant using the Black-Scholes option valuation model. Expected volatilities are based on both the implied and historical volatility of the Company’s stock. The Company uses historical data to project SAR exercises and pre-exercise forfeitures within the valuation model. The expected term of awards represents the period of time that SARs granted are expected to be outstanding. The interest rate assumed for the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant. There was approximately $ 96 thousand and $ 159 thousand of compensation expense relating to SARs vesting on or before March 31, 2024 and 2023, respectively, included in personnel expenses in the unaudited Consolidated Statements of Operations. As of March 31, 2024, there was $ 311 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans. Note 4 – Segment Information The Company has two reportable segments, title insurance and exchange services. The remaining immaterial segments have been combined into a group called “All Other.” The title insurance segment primarily issues title insurance policies through approved attorneys from underwriting offices and through independent issuing agents. Title insurance policies insure titles to real estate. The tax-deferred exchange services segment acts as an intermediary in tax-deferred exchanges of property held for productive use in a trade or business or for investments and serves as exchange accommodation titleholder, holding property for exchangers in reverse exchange transactions. 9 Provided below is selected financial information about the Company's operations by segment for the periods ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 (in thousands) Title Insurance Exchange Services All Other Intersegment Eliminations Total Insurance and other services revenues $ 47,728 $ 2,780 $ 1,910 $ ( 4,012 ) $ 48,406 Net investment income 3,652 68 1,333 — 5,053 Total revenues $ 51,380 $ 2,848 $ 3,243 $ ( 4,012 ) $ 53,459 Operating expenses 48,560 670 2,272 ( 3,840 ) 47,662 Income before income taxes $ 2,820 $ 2,178 $ 971 $ ( 172 ) $ 5,797 Total assets $ 215,375 $ 7,523 $ 106,596 $ — $ 329,494 Three Months Ended March 31, 2023 (in thousands) Title Insurance Exchange Services All Other Intersegment Eliminations Total Insurance and other services revenues $ 46,166 $ 3,854 $ 1,889 $ ( 3,836 ) $ 48,073 Net investment income 2,527 34 709 — 3,270 Total revenues $ 48,693 $ 3,888 $ 2,598 $ ( 3,836 ) $ 51,343 Operating expenses 50,724 608 2,115 ( 3,665 ) 49,782 (Loss) income before income taxes $ ( 2,031 ) $ 3,280 $ 483 $ ( 171 ) $ 1,561 Total assets $ 231,894 $ 5,903 $ 86,000 $ — $ 323,797 Note 5 – Retirement Agreements and Other Postretirement Benefits The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is a party to employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement, estimated to total $ 15.2 million as of March 31, 2024 and December 31, 2023. The executive employee benefits include health, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the unaudited Consolidated Balance Sheets. The following sets forth the net periodic benefit cost for the executive benefits for the periods ended March 31, 2024 and 2023: Three Months Ended March 31, (in thousands) 2024 2023 Service cost – benefits earned during the year $ — $ — Interest cost on the projected benefit obligation 11 10 Amortization of unrecognized gain — ( 7 ) Net periodic benefit cost $ 11 $ 3 10 Note 6 – Investments and Estimated Fair Value Investments in Fixed Maturity Securities The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for fixed maturity securities by major classification are as follows: As of March 31, 2024 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturity securities, available-for-sale, at fair value: Government obligations $ 738 $ — $ — $ 738 General obligations of U.S. states, territories and political subdivisions 9,389 17 ( 55 ) 9,351 Special revenue issuer obligations of U.S. states, territories and political subdivisions 24,833 100 ( 67 ) 24,866 Corporate debt securities 27,317 430 ( 55 ) 27,692 Total $ 62,277 $ 547 $ ( 177 ) $ 62,647 As of December 31, 2023 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturity securities, available-for-sale, at fair value: Government obligations $ 2,220 $ 2 $ ( 2 ) $ 2,220 General obligations of U.S. states, territories and political subdivisions 9,419 64 ( 24 ) 9,459 Special revenue issuer obligations of U.S. states, territories and political subdivisions 24,908 145 ( 66 ) 24,987 Corporate debt securities 26,559 655 ( 33 ) 27,181 Total $ 63,106 $ 866 $ ( 125 ) $ 63,847 The special revenue category for both periods presented includes approximately 30 individual fixed maturity securities with revenue sources from a variety of industry sectors. The scheduled maturities of fixed maturity securities at March 31, 2024 are as follows: Available-for-Sale (in thousands) Amortized Cost Estimated Fair Value Due in one year or less $ 8,180 $ 8,202 Due one year through five years 27,601 27,617 Due five years through ten years 18,216 18,306 Due after ten years 8,280 8,522 Total $ 62,277 $ 62,647 Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. 11 The following table presents the gross unrealized losses on fixed maturity securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2024 and December 31, 2023, respectively: Less than 12 Months 12 Months or Longer Total As of March 31, 2024 (in thousands) Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses General obligations of U.S. states, territories and political subdivisions $ 3,276 $ ( 18 ) $ 2,692 $ ( 37 ) $ 5,968 $ ( 55 ) Special revenue issuer obligations of U.S. states, territories and political subdivisions 11,709 ( 26 ) 2,844 ( 41 ) 14,553 ( 67 ) Corporate debt securities 5,832 ( 46 ) 1,230 ( 9 ) 7,062 ( 55 ) Total $ 20,817 $ ( 90 ) $ 6,766 $ ( 87 ) $ 27,583 $ ( 177 ) Less than 12 Months 12 Months or Longer Total As of December 31, 2023 (in thousands) Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Estimated Fair Value Unrealized Losses Government obligations $ 1,488 $ ( 2 ) $ — $ — $ 1,488 $ ( 2 ) General obligations of U.S. states, territories and political subdivisions 5,925 ( 23 ) 101 ( 1 ) 6,026 ( 24 ) Special revenue issuer obligations of U.S. states, territories and political subdivisions 7,124 ( 16 ) 3,085 ( 50 ) 10,209 ( 66 ) Corporate debt securities 6,052 ( 29 ) 296 ( 4 ) 6,348 ( 33 ) Total $ 20,589 $ ( 70 ) $ 3,482 $ ( 55 ) $ 24,071 $ ( 125 ) Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. The decline in estimated fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Factors considered in determining whether a loss is credit-related include the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 59 and 51 fixed maturity securities had unrealized losses at March 31, 2024 and December 31, 2023, respectively. The Company does not intend to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline. The Company believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore the unrealized loss is recorded in accumulated other comprehensive income. Reviews of the values of fixed maturity securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods, resulting in a realized loss. The Company recorded $ 53 thousand and $ 82 thousand in impairment charges related to fixed maturity securities for the three-month periods ended March 31, 2024, and 2023, respectively. Expenses related to impairments are recorded in net investment gains in the unaudited Consolidated Statements of Operations when recognized. Investments in Equity Securities The cost and estimated fair value of equity securities are as follows: As of March 31, 2024 (in thousands) Cost Estimated Fair Value Equity securities, at fair value: Common stocks $ 22,647 $ 36,708 Total $ 22,647 $ 36,708 12 As of December 31, 2023 (in thousands) Cost Estimated Fair Value Equity securities, at fair value: Common stocks $ 22,981 $ 37,212 Total $ 22,981 $ 37,212 Unrealized holding gains and losses are reported in the unaudited Consolidated Statements of Operations as net investment gains. Net Investment Gains Gross investment gains and losses for the three-month periods ended March 31, 2024 and 2023 are summarized as follows: Three Months Ended March 31, (in thousands) 2024 2023 Gross realized gains from securities: Common stocks $ 2,807 $ 7,483 Total $ 2,807 $ 7,483 Gross realized losses from securities: Common stocks $ ( 162 ) $ ( 121 ) Write-down of securities ( 53 ) ( 82 ) Total $ ( 215 ) $ ( 203 ) Net realized gains from securities $ 2,592 $ 7,280 Gross realized losses on other investments: Losses on other investments $ — $ ( 47 ) Total $ — $ ( 47 ) Net realized investment gains $ 2,592 $ 7,233 Changes in the estimated fair value of equity security investments $ ( 170 ) $ ( 6,790 ) Net investment gains $ 2,422 $ 443 Realized gains and losses are determined on the specific identification method. Variable Interest Entities The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause and no participation rights exist. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of March 31, 2024: (in thousands) Balance Sheet Classification Carrying Value Estimated Fair Value Maximum Potential Loss (a) Real estate LLCs or LPs Other investments $ 12,751 $ 14,000 $ 18,060 Small business investment LPs Other investments 197 197 80 Total $ 12,948 $ 14,197 $ 18,140 (a) Maximum potential loss is calculated as the total investment in the LLC or LP, including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment. 13 Valuation of Financial Assets The Financial Accounting Standards Board ("FASB") has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions intended to represent market participant assumptions used to measure assets and liabilities at fair value. A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement – consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls. The Level 1 category includes equity securities and U.S. Treasury securities that are measured at estimated fair value using quoted active market prices. The Level 2 category includes fixed maturity securities such as corporate debt securities, U.S. government obligations, and obligations of U.S. states, territories, and political subdivisions. Estimated fair value is principally based on market values obtained from a third-party pricing service. Factors that are used in determining estimated fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from a third-party pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with GAAP. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of March 31, 2024 and December 31, 2023, the Company did not adjust any Level 2 fair values. A number of the Company’s investment grade corporate debt securities are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading prices. Substantially all of the input assumptions used in the service’s model are observable in the marketplace or can be derived or supported by observable market data. In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments are excluded from the scope of disclosures. In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions: Cash and cash equivalents The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments. Measurement alternative equity investments The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments. Notes receivable Notes receivable are recorded at amortized cost and are included in prepaid expenses and other receivables in the unaudited Consolidated Balance Sheets. The amortized cost is the amount at which a receivable is originated and adjusted for applicable accrued interest, accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash, writeoffs, foreign exchange, and fair value hedge accounting adjustments. 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. 14 Accrued interest and dividends The carrying amount for accrued interest and dividends is a reasonable estimate of fair value due to the short-term maturity of these assets. The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2024 and December 31, 2023: As of March 31, 2024 (in thousands) Level 1 Level 2 * Level 3 Total Fixed maturity securities: Obligations of U.S. states, territories and political subdivisions $ 738 $ 34,217 $ — $ 34,955 Corporate debt securities — 27,692 — 27,692 Total $ 738 $ 61,909 $ — $ 62,647 As of December 31, 2023 (in thousands) Level 1 Level 2 * Level 3 Total Fixed maturity securities: Obligations of U.S. states, territories and political subdivisions $ 2,220 $ 34,446 $ — $ 36,666 Corporate debt securities — 27,181 — 27,181 Total $ 2,220 $ 61,627 $ — $ 63,847 *Denotes fair market value obtained from pricing services. The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2024 and December 31, 2023: As of March 31, 2024 (in thousands) Level 1 Level 2 Level 3 Total Financial assets: Cash and cash equivalents $ 21,613 $ — $ — $ 21,613 Accrued interest and dividends 1,090 — — 1,090 Equity securities, at fair value: Common stocks 36,708 — — 36,708 Short-term investments: Money market funds and U.S. Treasury bills 113,379 — — 113,379 Total $ 172,790 $ — $ — $ 172,790 As of December 31, 2023 (in thousands) Level 1 Level 2 Level 3 Total Financial assets: Cash and cash equivalents $ 24,031 $ — $ — $ 24,031 Accrued interest and dividends 978 — — 978 Equity securities, at fair value: Common stocks 37,212 — — 37,212 Short-term investments: Money market funds and U.S. Treasury bills 110,224 — — 110,224 Total $ 172,445 $ — $ — $ 172,445 The Company did not hold any Level 3 category debt or marketable equity investment securities as of March 31, 2024 or December 31, 2023. There were no transfers into or out of Levels 1, 2 or 3 during the periods presented. 15 To help ensure that estimated fair value determinations are consistent with GAAP, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to, the following: unadjusted quoted market prices for identical securities such as stock market closing prices; non-binding quoted prices for identical securities in markets that are not active; interest rates; yield curves observable at commonly quoted intervals; volatility; prepayment speeds; loss severity; credit risks; and default rates. The Company reviews the procedures and inputs used by its pricing services, and verifies a sample of the services’ quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the respective service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data. Certain measurement alternative equity investments and notes receivable are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such investment is determined to be impaired, an impairment charge is recorded against such investment and reflected in the unaudited Consolidated Statements of Operations. There were no impairments of such investments made during the three-month period ended March 31, 2024 or the twelve-month period ended December 31, 2023. The following table presents assets measured at fair value on a non-recurring basis as of March 31, 2024 and December 31, 2023: As of March 31, 2024 (in thousands) Level 1 Level 2 Level 3 Total Financial assets: Equity investments in unconsolidated affiliates, measurement alternative $ — $ — $ 9,316 $ 9,316 Notes receivable — — 641 641 Total $ — $ — $ 9,957 $ 9,957 As of December 31, 2023 (in thousands) Level 1 Level 2 Level 3 Total Financial assets: Equity investments in unconsolidated affiliates, measurement alternative $ — $ — $ 9,300 $ 9,300 Notes receivable — — 2,201 2,201 Total $ — $ — $ 11,501 $ 11,501 Note 7 – Commitments and Contingencies Legal Proceedings: The Company and its subsidiaries are involved in legal proceedings that are incidental to their business. In the Company’s opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings is not expected to, in the aggregate, be material to the Company’s consolidated financial condition or operations. Regulation: The Company’s title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject to various audits and inquiries. It is the opinion of management based on its present expectations that these audits and inquiries will not have a material impact on the Company’s consolidated financial condition or operations. Escrow and Trust Deposits: As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, escrowed funds received under escrow agreements, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of these deposits. Like-Kind Exchange Proceeds: In administering tax-deferred like-kind exchanges pursuant to § 1031 of the Internal Revenue Code, the Company’s wholly owned subsidiary, Investors Title Exchange Corporation (“ITEC”), serves as a qualified intermediary, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another wholly owned subsidiary of the Company, Investors Title Accommodation Corporation (“ITAC”), serves as exchange accommodation titleholder and, through LLCs that are wholly owned subsidiaries of ITAC, holds property in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $ 220.6 million and $ 263.7 million as of March 31, 2024 and December 31, 2023, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services 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 funds and other short-term investments. 16 Note 8 – Related Party Transactions The Company does business with, and has investments in, unconsolidated LLCs that are primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these LLCs. The following table sets forth the approximate values by year found within each financial statement classification: Financial Statement Classification, Consolidated Balance Sheets (unaudited) (in thousands) As of March 31, 2024 As of December 31, 2023 Other investments $ 4,934 $ 5,561 Premium and fees receivable $ 3,227 $ 627 Financial Statement Classification, Consolidated Statements of Operations (unaudited) (in thousands) Three Months Ended March 31, 2024 2023 Net premiums written $ 5,207 $ 4,133 Non-title services and other investment income $ 196 $ 750 Commissions to agents $ 3,687 $ 2,753 Note 9 – Intangible Assets, Goodwill and Title Plants Intangible Assets The estimated fair values of intangible assets recognized as the result of title insurance agency acquisitions are principally based on values obtained from an independent third-party valuation service and are all Level 3 inputs. Management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2024 and 2023 that would indicate the carrying amounts may not be recoverable, and therefore, determined that no identifiable intangible assets were impaired. Identifiable intangible assets consist of the following: (in thousands) As of March 31, 2024 As of December 31, 2023 Referral relationships $ 8,898 $ 8,898 Non-compete agreements 3,155 3,155 Tradename 747 747 Total 12,800 12,800 Accumulated amortization ( 6,514 ) ( 6,176 ) Identifiable intangible assets, net $ 6,286 $ 6,624 The following table provides the estimated aggregate amortization expense, as of March 31, 2024, for each of the five succeeding fiscal years: Year Ended (in thousands) 2024 $ 840 2025 1,095 2026 1,095 2027 679 2028 650 Thereafter 1,740 Total $ 6,099 17 Goodwill and Title Plants As of March 31, 2024, the Company recognized $ 9.6 million in goodwill and $ 1.6 million in title plants, net of impairments, as the result of title insurance agency acquisitions. The title plants are included with other assets in the unaudited Consolidated Balance Sheets. The fair values of goodwill and the title plants as of the date of acquisition, both Level 3 inputs, were principally based on values obtained from an independent third-party valuation service. In accordance with FASB's Accounting Standards Codification ("ASC") 350, the Company determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2024 and 2023 that would indicate the carrying amounts may not be recoverable, and therefore, determined that there were no goodwill or title plant impairments. Note 10 – Accumulated Other Comprehensive Income The following table provides changes in the balances of each component of accumulated other comprehensive income, net of tax, for the three-month periods ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 (in thousands) Unrealized Gains and Losses On Available-for-Sale Securities Postretirement Benefits Plans Total Beginning balance at January 1 $ 583 $ 55 $ 638 Other comprehensive (loss) income before calculations ( 333 ) — ( 333 ) Amounts reclassified from accumulated other comprehensive income 41 — 41 Net current-period other comprehensive (loss) income ( 292 ) — ( 292 ) Ending balance $ 291 $ 55 $ 346 Three Months Ended March 31, 2023 (in thousands) Unrealized Gains and Losses On Available-for-Sale Securities Postretirement Benefits Plans Total Beginning balance at January 1 $ 164 $ 36 $ 200 Other comprehensive income before calculations 186 111 297 Amounts reclassified from accumulated other comprehensive income 63 — 63 Net current-period other comprehensive income 249 111 360 Ending balance $ 413 $ 147 $ 560 18 The following table provides significant amounts reclassified out of each component of accumulated other comprehensive income for the three-month periods ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 (in thousands) Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the Consolidated Statements of Operations Unrealized gains and losses on available-for-sale securities: Net realized gain on investments $ — Write-down of securities ( 53 ) Total $ ( 53 ) Net investment gains Tax 12 Provision for income taxes Net of Tax $ ( 41 ) Reclassifications for the period $ ( 41 ) Three Months Ended March 31, 2023 (in thousands) Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the Consolidated Statements of Operations Unrealized gains and losses on available-for-sale securities: Net realized gain on investments $ — Write-down of securities ( 82 ) Total $ ( 82 ) Net investment gains Tax 19 Provision for income taxes Net of Tax $ ( 63 ) Reclassifications for the period $ ( 63 ) Note 11 – Revenue from Contracts with Customers ASC 606, Revenue from Contracts with Customers , requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories. Escrow and other title-related fees: The Company’s title segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete. Non-title services: Through various subsidiaries, the Company offers management services, tax-deferred real property exchange services, investment management and trust services. Nonrefundable exchange fees are recognized as revenue upon receipt of the funds, which is at the time of closing of the initial sale of property. All other non-title service fees are recognized as revenue as performance obligations are completed. Other: The Company occasionally recognizes revenue from other miscellaneous contracts which can include, but is not limited to seminar and education registration fees and software licensing contracts. These revenue streams are deemed immaterial to the operations of the Company, and revenue is recognized when, or as, performance obligations are completed. 19 The following table provides a breakdown of the Company’s revenue by major business activity: Three Months Ended March 31, (in thousands) 2024 2023 Revenue from contracts with customers: Escrow and other title-related fees $ 3,723 $ 3,655 Non-title services 4,304 5,312 Total revenue from contracts with customers 8,027 8,967 Other sources of revenue: Net premiums written 40,180 38,966 Investment-related revenue 5,053 3,270 Other 199 140 Total revenues $ 53,459 $ 51,343 Note 12 – Leases The Company enters into lease agreements that are primarily for office space. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the term of the lease. The Company occasionally assumes equipment lease agreements through business acquisitions. These leases are accounted for as finance leases. Included in a portion of the Company's current leases is an option to extend or cancel the lease term. The exercise of such an option is solely at the Company's discretion. The lease liability recorded in the unaudited Consolidated Balance Sheets includes lease payments related to options to extend or cancel the lease term if the Company determines at the inception date that the lease is expected to be renewed or extended. The Company, in determining the present value of lease payments, utilizes the average rate over a 10-year term based upon the Moody's seasoned Aaa corporate bond yields, as explicit rates of interest are not readily determinable in the lease contracts. The Company does not carry debt; thus no incremental borrowing rate was available to the Company. Lease expense is included in office and technology expenses in the unaudited Consolidated Statements of Operations. Information regarding the Company’s leases follows: Three Months Ended March 31, (in thousands) 2024 2023 Operating leases $ 658 $ 731 Finance leases: Amortization of lease assets 71 54 Lease expense $ 729 $ 785 Sub-lease income ( 52 ) — Lease cost $ 677 $ 785 (b) Leases with an initial term of twelve months or less are not recorded on the unaudited Consolidated Balance Sheets. Components of the lease liability presented on the unaudited Consolidated Balance Sheets are as follows: (in thousands) As of March 31, 2024 As of December 31, 2023 Current: Operating lease liabilities $ 1,755 $ 2,201 Finance lease liabilities 177 170 Non-current: Operating lease liabilities 4,299 3,792 Finance lease liabilities 597 286 Total lease liabilities $ 6,828 $ 6,449 20 The future minimum lease payments for leases that have initial or remaining noncancelable lease terms in excess of one year as of March 31, 2024, are summarized as follows: Year Ended (in thousands) Operating Leases Finance Leases Total 2024 $ 1,904 $ 199 $ 2,103 2025 2,179 241 2,420 2026 1,332 203 1,535 2027 424 136 560 2028 183 56 239 Thereafter 433 — 433 Total undiscounted payments $ 6,455 $ 835 $ 7,290 Less: present value adjustment ( 401 ) ( 61 ) ( 462 ) Lease liabilities $ 6,054 $ 774 $ 6,828 Supplemental lease information is as follows: As of March 31, 2024 As of December 31, 2023 Weighted average remaining lease term (years) Operating Leases 3.34 3.07 Finance Leases 3.49 2.93 Weighted average discount rate Operating Leases 3.9 % 3.8 % Finance Leases 4.3 % 3.7 % The Company does not have any material pending operating or financing lease agreements that become effective in future periods. 21