What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-08 · 85 added, 83 removed, 287 unchanged (37% of the section changed)

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Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer.

Total revenues from the title segment accounted for 89.2% of t he Company's revenues for the three-month period ended March 31, 2024.

Title insurance protects against loss or damage resulting from title defects that affect real property and customarily arising prior to the policy date.

Total revenues from the title segment accounted for 90.3% of the Company's revenues for the six-month period ended June 30, 2024.

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

When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property.

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Real Estate Environment

The Mortgage Bankers Association's ("MBA") April 18, 2024 Mortgage Finance Forecast (“MBA Forecast”) projects 2024 purchase activity to increase 5.1% to $1,393 billion and mortgage refinance activity to increase 34.4% to $422 billion, resulting in a net increase in total mortgage originations of 10.7% to $1,815 billion, all from 2023 levels.

The Mortgage Bankers Association's ("MBA") June 24, 2024 Mortgage Finance Forecast (“MBA Forecast”) projects 2024 purchase activity to increase 3.7% to $1,374 billion and mortgage refinance activity to increase 34.4% to $422 billion, resulting in a net increase in total mortgage originations of 9.6% to $1,796 billion, all from 2023 levels.

In 2023, purchase activity accounted for 80.8% of all mortgage originations and is projected in the MBA Forecast to represent 76.5% of all mortgage originations in 2024.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 6.7% and 6.4% for the three-month periods ended March 31, 2024 and 2023, respectively.

Per the MBA Forecast, mortgage interest rates are projected to decrease in subsequent periods, reaching 5.5% in 2026.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 6.9% and 6.4% for the six-month periods ended June 30, 2024 and 2023, respectively.

Per the MBA Forecast, mortgage interest rates are projected to decrease in subsequent periods, declining to 5.8% in 2026.

Due to the rapidly changing environment brought on by inflationary pressures, inventory constraints, and geopolitical and military 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.

Historically, activity in real estat e markets has varied over the course of market cycles by geographic region and in response to evolving economic factors.

Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future operating results and cash flows.

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Actual results could differ from these estimates.

During the three-month period ended March 31, 2024, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the 2023 Form 10-K.

During the six-month period ended June 30, 2024, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the 2023 Form 10-K.

Results of Operations

The following table presents certain unaudited Consolidated Statements of Operations data for the three-month periods ended March 31, 2024 and 2023:

The following table presents certain unaudited Consolidated Statements of Operations data for the three- and six-month periods ended June 30, 2024 and 2023:

Three Months Ended

June 30, Six Months Ended

(in thousands) 2024 2023 2024 2023

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Net Income $ 8,871 $ 7,585 $ 13,396 $ 8,766

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.

Title Insurance Revenues

Title insurance revenues include net premiums written and escrow and other title-related income that includes escrow fees, commissions and settlement fees.

Insurance Revenues

Insurance revenues include net premiums written and escrow and other title-related income that includes escrow fees, commissions and settlement fees.

Non-title services revenue, investment-related revenues and other revenues are discussed separately below.

Net Premiums Written

Net premiums written increased 3.1% for the three-month period ended March 31, 2024 to $40.2 million, compared with $39.0 million for the same prior year period.

The increase for the three-month period ended March 31, 2024 is attributable to higher activity levels in some of our key markets.

Net premiums written increased 16.8% and 10.4% for the three- and six-month periods ended June 30, 2024 to $51.4 million and $91.6 million, respectively, compared with $44.0 million and $83.0 million for the same prior year periods.

The increases for the three- and six-month periods ended June 30, 2024 were attributable to higher real estate activity levels in certain markets and continued increases in average home prices.

Total premiums include an estimate of premiums for policies that have been issued directly and by agents, but not reported to the Company as of the balance sheet date.

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Title insurance companies typically issue title insurance policies directly or through title agencies.

Following is a breakdown of premiums generated by direct and agency operations for the three-month periods ended March 31, 2024 and 2023:

Following is a breakdown of premiums generated by direct and agency operations for the three- and six-month periods ended June 30, 2024 and 2023:

Three Months Ended

June 30, Six Months Ended

(in thousands, except percentages) 2024 % 2023 % 2024 % 2023 %

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In the Company's direct operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are recognized in connection with these policies.

Net premiums written from direct operations increased 4.8% for the three-month period ended March 31, 2024, compared with the same prior year period.

The increase for the three-month period ended March 31, 2024 is attributable to higher activity levels in some of our key markets.

Agency Net Premiums – When a policy is written through a non-wholly owned title agency, the premium is shared between the agency and the underwriter.

Net premiums written from direct operations decreased 1.6% and increased 1.3% for the three- and six-month periods ended June 30, 2024, respectively, compared with the same prior year periods.

The decrease for the three-month period ended June 30, 2024 was primarily the result of the Company making the strategic decision to close less profitable offices of a wholly owned title insurance agency.

The increase for the six-month period ended June 30, 2024 was primarily driv en by higher activity levels in certain markets and continued increases in average home prices.

Agency Net Premiums – When a policy is written through a non-wholly owned title agency, the premium is shared between the agency and the Company.

The agent retains a majority of the premium as a commission and remits the net amount to the Company.

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

Agency net premiums written increased 2.3% for the three-month period ended March 31, 2024, compared with the same prior year period.

The increase for the three-month period ended March 31, 2024 is attributable to higher activity levels in some of our key markets.

Following is a schedule of net premiums written for the three-month periods ended March 31, 2024 and 2023 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:

Agency net premiums written increased 27.1% and 15.2% for the three- and six-month periods ended June 30, 2024, compared with the same prior year periods.

The increases for the three- and six-month periods ended June 30, 2024 were primarily driv en by higher activity levels in certain markets and continued increases in average home prices.

Following is a schedule of net premiums written for the three- and six-month periods ended June 30, 2024 and 2023 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) 2024 2023 2024 2023

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Georgia 4,304 2,631 6,763 6,178

Florida 3,974 1,383 6,111 2,350

All Others 6,330 6,963 12,606 12,623

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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 a title insurance policy including settlement, examination and closing fees.

Escrow and other title-related fee revenues were virtually unchanged at $3.7 million for the three-month periods ended March 31, 2024 and 2023.

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 $4.8 million and $8.5 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $4.6 million and $8.3 million for the same prior year periods.

The increases for the three- and six-month periods ended June 30, 2024 were mainly due to increases in real estate transaction volume.

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 $4.3 million for the three-month period ended March 31, 2024, compared with $5.3 million for the same prior year period.

The decrease for the three-month period ended March 31, 2024 was primarily related to a decrease in like-kind exchange revenues.

Non-title service revenues were $4.3 million and $8.6 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $4.6 million and $9.9 million for the same prior year periods.

The decreases for the three- and six-month periods ended June 30, 2024 were primarily related to decreases in like-kind exchange revenues.

Investment-Related Revenues

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Interest and Dividends

The Company derives a portion of its income from investments in short-term investments, fixed maturity securities, which are primarily municipal and corporate fixed maturity securities, and equity securities.

The Company derives a substantial portion of its income from investments in short-term investments, fixed maturity securities, which are primarily municipal and corporate fixed maturity securities, and equity securities.

The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns.

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The Company’s investments are primarily in short-term investments, fixed maturity securities and equity securities.

The average effective maturity of the majority of the fixed maturity securities is less than 10 years.

The average effective maturity of the majority of the fixed maturity securities at June 30, 2024 is less than 10 years.

The Company’s invested assets are managed to fund its obligations and evaluated to ensure long term stability of capital accounts.

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The Company strives to maintain a high quality investment portfolio.

Since 2022, the Company has been purchasing higher levels of short-term investments to take advantage of elevated short-term interest rates during this period of uncertainty in the investment market.

Interest and dividends were $2.5 million for the three-month period ended March 31, 2024, compared with $2.1 million for the same prior year period.

Interest and dividend income levels are primarily a function of general market performance, interest rates and the amount of cash available for investments that meet the Company's investment policy.

The increase for the three-month period ended March 31, 2024 was primarily related to an increase in interest received due to higher interest rates and levels of short-term investments and fixed maturity securities.

Interest and dividends were $2.6 million and $5.1 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $2.2 million and $4.2 million for the same prior year periods.

Interest and dividend levels are primarily a function of general market performance, interest rates and the amount of cash available for investments that meet the Company's investment policy.

The increases for the three- and six-month periods ended June 30, 2024 were primarily related to elevated levels of interest income, predominantly influenced by interest rates, general market performance, and the amount of investments and cash held.

Other Investment Income

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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 $111 thousand for the three-month period ended March 31, 2024, compared $753 thousand for the same prior year period.

Changes in other investment income are impacted by fluctuations in the carrying value of the underlying investment and/or distributions received.

Other investment income was $890 thousand and $1.0 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $1.6 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 distributions received.

Net Investment Gains

Net investment gains include realized gains and losses on the sale of investment securities and changes in the estimated fair value of equity security investments.

Net investment gains were $2.4 million for the three-month period ended March 31, 2024, compared with $443 thousand for the same prior year period.

Net investment gains and losses include realized gains and losses on the sale of investment securities and changes in the estimated fair value of equity security investments.

Net Realized Investment Gains and Losses – Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing assessments of issuers’ business prospects and tax planning considerations.

Additionally, the amounts included in net investment gains are affected by assessments of securities’ valuation for impairment.

Additionally, the amounts included in net realized investment gains or losses are affected by assessments of securities’ valuation for impairment.

As a result of the interaction of these factors and considerations, the net realized investment gain or loss can vary significantly from period to period.

The net realized investment gains were $2.6 million for the three-month period ended March 31, 2024, compared with $7.2 million for the same prior year period.

The Company recorded impairment charges of $53 thousand and $82 thousand on certain fixed maturity securities where the intent to hold had changed in the three-month periods ended March 31, 2024 and 2023, respectively.

Management believes unrealized losses on the remaining fixed maturity securities at March 31, 2024 are not credit related.

The net realized investment gains were $1.8 million and $4.4 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $5.9 million and $13.1 million for the same prior year periods.

The Company recorded impairment charges of $21 thousand and $74 thousand on certain fixed maturity securities where the intent to hold has changed in the three- and six-month periods ended June 30, 2024, respectively, compared with $30 thousand and $112 thousand for the same prior year periods.

Management believes unrealized losses on the remaining fixed maturity securities at June 30, 2024 are temporary in nature.

The securities in the Company’s investment portfolio are subject to economic conditions and market risks.

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and the risk that management is making decisions based on inaccurate information in the financial statements provided by the issuers.

Changes in the Estimated Fair Value of Equity Security Investments – Changes in the estimated fair value of equity security investments were $(169) thousand for the three-month period ended March 31, 2024, compared with $(6.8) million for the same prior year period.

Such fluctuations are the result of changes in general market conditions during the respective periods, however, the sale of appreciated investment securities can result in a reduction in unrealized gains as they are reclassified to net realized investment gains, which is not indicative of a decline in estimated fair value.

Changes in the Estimated Fair Value of Equity Security Investments – Changes in the estimated fair value of equity security investments were $(589) thousand and $(759) thousand for the three- and six-month periods ended June 30, 2024, respectively, compared with $(4.8) million and $(11.6) million for the same prior year periods.

Such fluctuations are typically the result of changes in general market conditions during the respective periods, however, the sale of appreciated investment securities can result in a reduction in unrealized gains as they are reclassified to net realized investment gains, which is not indicative of a decline in estimated fair value.

Other Revenues

Other revenues primarily include miscellaneous income and gains and losses on the disposal of fixed assets and real estate and rental income.

Other revenues were $199 thousand for the three-month period ended March 31, 2024, compared with $140 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 $161 thousand and $360 thousand for the three- and six-month periods ended June 30, 2024, respectively, compared with $250 thousand and $390 thousand for the same prior year periods.

The Company's operating expenses consist primarily of commissions to agents, personnel expenses, office and technology expenses and the provision for claims.

Operating expenses decreased 4.3% for the three-month period ended March 31, 2024, compared with the same prior year period.

The decrease for the three-month period ended March 31, 2024 was primarily due to a decline in personnel expenses and other expenses, partially offset by an increase in commissions to agents.

Following is a summary of the Company's operating expenses for the three-month periods ended March 31, 2024 and 2023.

Operating expenses increased 11.7% and 3.6% for the three- and six-month periods ended June 30, 2024, compared with the same prior year periods.

The increases for the three- and six-month periods ended June 30, 2024 were primarily due to increases in commissions to agents and other expenses, partially offset by decreases in personnel expenses.

Following is a summary of the Company's operating expenses for the three- and six-month periods ended June 30, 2024 and 2023.

Inter-segment eliminations have been netted;

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Three Months Ended

June 30, Six Months Ended

(in thousands, except percentages) 2024 % 2023 % 2024 % 2023 %

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Total $ 54,115 100.0 $ 48,468 100.0 $ 101,777 100.0 $ 98,250 100.0

On a combined basis, the after-tax profit margin was 8.5% for the three-month period ended March 31, 2024, compared with 2.3% for the same prior year period.

The increase for the three-month period ended March 31, 2024 was primarily due to increases in premiums and net investment gains and decreases in personnel costs and other overhead expense categories.

On a combined basis, the after-tax profit margins were 13.6% and 11.3% for the three- and six-month periods ended June 30, 2024, respectively, compared with 13.0% and 8.0% for the same prior year periods.

The increases for the three- and six-month periods ended June 30, 2024 were primarily due to growth in net premiums written, Company expense reduction initiatives, and higher levels of investment earnings.

The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to manage its operating expenses.

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

Personnel expenses were $18.6 million for the three-month period ended March 31, 2024, compared with $20.8 million for the same prior year period.

On a consolidated basis, personnel expenses as a percentage of total revenues were 34.8% for the three-month period ended March 31, 2024, compared with 40.6% for the same prior year period.

The decrease in personnel expenses for the three-month period ended March 31, 2024 was primarily due to reduced staffing levels .

Personnel expenses were $18.2 million and $36.7 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $18.5 million and $39.4 million for the same prior year periods.

On a consolidated basis, personnel expenses as a percentage of total revenues were 27.8% and 30.9% for the three- and six-month periods ended June 30, 2024, respectively, compared with 31.8% and 35.9% for the same prior year periods.

The decreases in personnel expenses for the three- and six-month periods ended June 30, 2024 were primarily due to lower staffing levels.

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 $4.5 million and $4.4 million for the three-month periods ended March 31, 2024 and 2023, respectively.

Office and technology expenses remained relatively consistent with the prior year period at $4.3 million and $8.8 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $4.5 million and $8.9 million for the same prior year periods.

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 $3.8 million for the three-month period ended March 31, 2024, compared with $4.2 million for the same prior year period.

The decrease for the three-month period ended March 31, 2024 was primarily related to decreases in title and service fees, technology expenses and miscellaneous expenses.

Other expenses were $4.2 million and $8.0 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $3.8 million and $8.0 million for the same prior year periods.

The increase for the three-month period June 30, 2024 was mainly due to expenses associated with higher title insurance revenues.

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 increased 2.8% for the three-month period ended March 31, 2024, compared with the same prior year period.

Commission expense as a percentage of net premiums written by agents was 74.0% for the three-month period ended March 31, 2024, compared with 73.6% for the same prior year period.

The change in commission expense was primarily related to the increase in agent premium volume.

Commissions to agents increased 28.9% and 16.3% for the three- and six-month periods ended June 30, 2024, respectively, compared with the same prior year periods.

Commission expense as a percentage of net premiums written by agents was 74.0% and 74.0% for the three- and six-month periods ended June 30, 2024, respectively, compared with 73.0% and 73.3% for the same prior year periods.

The changes in commission expense, and commission expense as a percentage of net premiums written, were commensurate with the increases in agent premium volume.

Commission rates vary by market due to local practice, competition and state regulations.

Provision for Claims – The provision for claims decreased $158 thousand for the three-month period ended March 31, 2024, compared with the same prior year period.

The provision for claims as a percentage of net premiums written was 2.3% for the three-month period ended March 31, 2024, compared with 2.7% for the same prior year period.

The decrease in the provision for claims for the three-month period ended March 31, 2024 was primarily due to a higher level of favorable loss development and less incurred claims losses in the current year period.

Provision for Claims – The provision for claims decreased 8.7% and 11.9% for the three- and six-month periods ended June 30, 2024, respectively, compared with the same prior year periods.

The provision for claims as a percentage of net premiums written was 1.8% and 2.0% for the three- and six-month periods ended June 30, 2024, respectively, compared with 2.3% and 2.5% for the same prior year periods.

The decreases in the provision for claims as a percentage of net premiums written for the three- and six-month periods ended June 30, 2024 were primarily due to favorable loss development.

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 $741 thousand and $1.3 million for the three-month periods ended March 31, 2024 and 2023, respectively.

At March 31, 2024, the total reserve for claims was $37.3 million.

Actual payments of claims, net of recoveries, were $1.8 million and $2.4 million for the six-month periods ended June 30, 2024 and 2023, respectively.

At June 30, 2024, the total reserve for claims was $37.2 million.

Of that total, approximately $3.3 million was reserved for specific claims, and approximately $33.9 million was reserved for claims for which the Company had no notice.

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

The provision for income taxes was $1.3 million for the three-month period ended March 31, 2024, compared with $380 thousand for the same prior year period.

Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 21.9% for the three-month period ended March 31, 2024, compared with 24.3% for the same prior year period.

The provision for income taxes was $2.4 million and $3.7 million for the three- and six-month periods ended June 30, 2024, respectively, compared with $2.3 million and $2.6 million for the same prior year periods.

Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 21.3% and 21.5% for the three- and six-month periods ended June 30, 2024, respectively, compared with 23.0% and 23.2% for the same prior year periods.

The effective income tax rates for both 2024 and 2023 differ from the U.S.

federal statutory income tax rate of 21% primarily due to the effects of state taxes and tax-exempt income.

federal statutory income tax rate of 21% primarily due to the effect of tax-exempt income and state taxes.

Tax-exempt income lowers the effective tax rate.

The Company believes it is more likely than not that the tax benefits associated with recognized impairments and unrecognized losses recorded through March 31, 2024 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, 2024 will be realized.

However, this judgment could be impacted by further market fluctuations.

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The Company believes that its significant working capital position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.

Cash Flows – Net cash flows provided by (used in) operating activities were $1.4 million and $(13.1) million for the three-month periods ended March 31, 2024 and 2023, respectively.

Cash flows provided by (used in) 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 – Net cash flows provided by (used in) operating activities were $9.9 million and $(7.4) million for the six-month periods ended June 30, 2024 and 2023, respectively.

Cash flows provided by (used in) operating activities differ from net income due to adjustments for non-cash items, such as 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, 2024, compared with net cash being provided by investing activities in the prior year period.

Net cash was used in investing activities for the six-month period ended June 30, 2024, compared with net cash being provided by investing activities in the prior year period.

Net cash was used in financing activities for the six-month periods ended June 30, 2024 and 2023.

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, 2024, the Company held cash and cash equivalents of $21.6 million, short-term investments of $113.4 million, available-for-sale fixed maturity securities of $62.6 million and equity securities of $36.7 million.

The net effect of all activities on total cash and cash equivalents was a decrease of $2.4 million in 2024.

Beginning in late 2022, ongoing evaluation of changing business and financial market conditions led to portions of cash flow from operations, and certain amounts resulting from sales and maturities in the company’s investment portfolio, to be invested in short term investments to take advantage of elevated short-term interest rates.

As of June 30, 2024, the Company held cash and cash equivalents of $26.7 million, short-term investments of $84.5 million, available-for-sale fixed maturity securities of $93.5 million and equity securities of $36.8 million.

The net effect of all activities on total cash and cash equivalents was an increase of $2.7 million in 2024.

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.

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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, 2024, both ITIC and NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.

As of June 30, 2024, 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.

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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.

The Company purchased 6,763 shares in the three-month period ended March 31, 2024 and no shares in the same prior year period.

The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market prices of the Company's common stock, the Company's available cash and the existing alternative uses for such cash.

Capital Expend itures – Capital expenditures were approximately $2.2 million for the three-month period ended March 31, 2024 .

In 2024, 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.

Pursuant to the Company’s ongoing purchase program, the Company purchased 7,039 shares in the six-month period ended June 30, 2024 and 7,000 shares in the corresponding period in 2023.

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 $4.3 million for the six-month period ended June 30, 2024 .

In 2024, the Company has plans for various capital improvement projects, including 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, 2024, the Company had a claims reserve totaling $37.3 million.

Contractual Obligations - As of June 30, 2024, the Company had a claims reserve totaling $37.2 million.

The amounts and timing of these obligations are estimated and not set contractually.

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ITIC, a wholly owned subsidiary of the Company, has entered into employment agreements with certain executive officers.

The amounts accrued for these agreements at March 31, 2024 and December 31, 2023, were $15.2 million, 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, 2024 and December 31, 2023, were $15.3 million and $15.2 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.

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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 $220.6 million and $263.7 million as of March 31, 2024 and December 31, 2023, respectively.

Like-kind exchange deposits and reverse exchange property held by the Company for the purpose of completing such transactions totaled approximately $203.8 million and $263.7 million as of June 30, 2024 and December 31, 2023, respectively.

These exchange deposits are held at third-party financial institutions.

26 unchanged sentences

• the incidence of fraud-related losses;

• the impact of cyberattacks (including ransomware attacks) and other cybersecurity events, including damage to the Company's reputation in the event of a serious IT breach or failure;

• the impact of cyberattacks (including ransomware attacks) and other cybersecurity events involving the Company or its vendors, including damage to the Company's reputation in the event of a serious IT breach or failure;

• the impact of pandemics, climate change, severe weather conditions or the occurrence of another catastrophic event;

1 unchanged sentence

• 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, South Carolina and Georgia markets for a significant portion of its premiums;

• the Company’s reliance upon the North Carolina, Texas, South Carolina, Georgia and Florida markets for a significant portion of its premiums;

• compliance with government regulation, including pricing regulation, and significant changes to applicable regulations or in their application by regulators;

17 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