v2.4.0.8
Document And Entity Information
9 Months Ended
Sep. 30, 2013
Oct. 16, 2013
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2013  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2013  
Entity Registrant Name INVESTORS TITLE CO  
Entity Central Index Key 0000720858  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   2,066,922
v2.4.0.8
Consolidated Balance Sheets (USD $)
Sep. 30, 2013
Dec. 31, 2012
Investments in securities:    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2013: $82,077,868; 2012: $75,573,673) $ 86,100,498 $ 81,936,978
Equity securities, available-for-sale, at fair value (cost: 2013: $22,307,440; 2012: $21,229,114) 33,460,972 28,510,933
Short-term investments 15,388,647 13,567,648
Other investments 7,311,949 6,763,100
Total investments 142,262,066 130,778,659
Cash and cash equivalents 22,868,393 20,810,018
Premium and fees receivable (less allowance for doubtful accounts: 2013: $2,021,793; 2012: $1,902,581) 9,758,749 11,037,714
Accrued interest and dividends 1,041,472 1,037,447
Prepaid expenses and other assets 7,314,187 4,651,115
Property, net 4,204,506 3,603,323
Current income taxes recoverable 1,708,257 0
Total Assets 189,157,630 171,918,276
Liabilities:    
Reserves for claims 34,816,000 39,078,000
Accounts payable and accrued liabilities 21,331,255 15,477,545
Current income taxes payable 0 1,336,824
Deferred income taxes, net 5,259,773 893,156
Total liabilities 61,407,028 56,785,525
Commitments and Contingencies 0 0
Redeemable Noncontrolling Interest 512,749 493,861
Stockholders' Equity:    
Preferred stock (1,000,000 authorized shares; no shares issued) 0 0
Common stock - no par value (10,000,000 authorized shares; 2,066,922 and 2,043,359 shares issued and outstanding 2013 and 2012, respectively, excluding 291,676 shares for 2013 and 2012 of common stock held by the Company’s subsidiary) 1 1
Retained earnings 117,418,431 105,820,459
Accumulated other comprehensive income 9,819,421 8,818,430
Total stockholders' equity 127,237,853 114,638,890
Total Liabilities and Stockholders' Equity $ 189,157,630 $ 171,918,276
v2.4.0.8
Consolidated Balance Sheets (Parenthetical) (USD $)
Sep. 30, 2013
Dec. 31, 2012
Statement of Financial Position [Abstract]    
Fixed maturities, available-for-sale, amortized cost $ 82,077,868 $ 75,573,673
Equity securities, available-for-sale, cost 22,307,440 21,229,114
Premiums and fees receivable, allowance for doubtful accounts $ 2,021,793 $ 1,902,581
Preferred stock, shares authorized 1,000,000 1,000,000
Preferred stock, shares issued 0 0
Common stock, no par value      
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,066,922 2,043,359
Common stock, shares outstanding 2,066,922 2,043,359
Common stock, held by Company's subsidiary 291,676 291,676
v2.4.0.8
Consolidated Statements Of Income (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Revenues:        
Net premiums written $ 30,431,560 $ 29,018,123 $ 84,787,318 $ 71,927,113
Investment income - interest and dividends 990,338 962,573 2,835,870 2,949,752
Net realized gain on investments 261,938 99,790 333,554 357,819
Other 1,921,403 2,196,922 6,190,170 5,537,323
Total Revenues 33,605,239 32,277,408 94,146,912 80,772,007
Operating Expenses:        
Commissions to agents 18,142,697 16,840,421 49,240,917 40,683,365
(Benefit) provision for claims (3,037,101) 2,432,057 (2,429,289) 4,424,523
Salaries, employee benefits and payroll taxes 7,133,497 5,598,722 19,533,970 16,080,639
Office occupancy and operations 1,165,772 984,303 3,266,112 2,956,470
Business development 606,549 472,436 1,487,635 1,254,691
Filing fees, franchise and local taxes 141,373 140,740 510,893 673,992
Premium and retaliatory taxes 592,717 423,626 1,563,764 1,312,906
Professional and contract labor fees 404,206 523,956 1,514,749 1,620,911
Other 179,006 143,232 560,170 481,755
Total Operating Expenses 25,328,716 27,559,493 75,248,921 69,489,252
Income before Income Taxes 8,276,523 4,717,915 18,897,991 11,282,755
Provision for Income Taxes 2,733,000 1,479,000 5,944,000 3,239,000
Net Income 5,543,523 3,238,915 12,953,991 8,043,755
Less: Net Income Attributable to Redeemable Noncontrolling Interest (27,725) (80,730) (55,788) (103,943)
Net Income Attributable to the Company $ 5,515,798 $ 3,158,185 $ 12,898,203 $ 7,939,812
Basic Earnings per Common Share $ 2.67 $ 1.52 $ 6.26 $ 3.80
Weighted Average Shares Outstanding – Basic 2,069,081 2,071,605 2,059,226 2,090,369
Diluted Earnings per Common Share $ 2.66 $ 1.50 $ 6.19 $ 3.74
Weighted Average Shares Outstanding – Diluted 2,074,940 2,108,526 2,083,560 2,124,122
Cash Dividends Paid per Common Share $ 0.08 $ 0.07 $ 0.24 $ 0.21
v2.4.0.8
Consolidated Statements Of Comprehensive Income (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Other Comprehensive Income [Abstract]        
Net income $ 5,543,523 $ 3,238,915 $ 12,953,991 $ 8,043,755
Other comprehensive income, before tax:        
(Accretion) amortization related to prior year service cost (380) 2,349 (1,139) 7,047
Amortization of unrecognized loss 1,573 171 4,720 511
Unrealized gains on investments arising during the period 1,115,120 2,142,925 1,864,591 3,677,740
Reclassification adjustment for sale of securities included in net income (261,938) (99,790) (367,624) (434,358)
Reclassification adjustment for write-down of securities included in net income 0 0 34,070 76,539
Other comprehensive income, before tax 854,375 2,045,655 1,534,618 3,327,479
Income tax expense related to postretirement health benefits 415 858 1,228 2,571
Income tax expense related to unrealized gains on investments arising during the year 385,115 737,122 645,438 1,273,653
Income tax benefit related to reclassification adjustment for sale of securities included in net income (89,575) (34,576) (126,173) (155,912)
Income tax expense related to reclassification adjustment for write-down of securities included in net income 0 0 13,134 26,265
Net income tax expense on other comprehensive income 295,955 703,404 533,627 1,146,577
Other comprehensive income 558,420 1,342,251 1,000,991 2,180,902
Comprehensive Income 6,101,943 4,581,166 13,954,982 10,224,657
Less: Comprehensive income attributable to redeemable noncontrolling interest (27,725) (80,730) (55,788) (103,943)
Comprehensive Income Attributable to the Company $ 6,074,218 $ 4,500,436 $ 13,899,194 $ 10,120,714
v2.4.0.8
Consolidated Statements Of Stockholders' Equity (USD $)
Total
Common Stock
Retained Earnings
Accumulated Other Comprehensive Income
Balance, beginning of year at Dec. 31, 2011 $ 106,512,184 $ 1 $ 99,003,018 $ 7,509,165
Balance, beginning of year, shares at Dec. 31, 2011   2,107,681    
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income attributable to the Company 7,939,812   7,939,812  
Dividends (438,431)   (438,431)  
Shares of common stock repurchased and retired (in shares)   (51,207)    
Shares of common stock repurchased and retired (2,804,412)   (2,804,412)  
Stock options and stock appreciation rights exercised (in shares)   6,130    
Stock options and stock appreciation rights exercised 152,792   152,792  
Share-based compensation expense 55,857   55,857  
Amortization related to postretirement health benefits 4,987     4,987
Net unrealized gain on investments 2,175,915     2,175,915
Balance, end of year at Sep. 30, 2012 113,598,704 1 103,908,636 9,690,067
Balance, end of year, shares at Sep. 30, 2012   2,062,604    
Balance, beginning of year at Dec. 31, 2012 114,638,890 1 105,820,459 8,818,430
Balance, beginning of year, shares at Dec. 31, 2012   2,043,359    
Increase (Decrease) in Stockholders' Equity [Roll Forward]        
Net income attributable to the Company 12,898,203   12,898,203  
Dividends (494,903)   (494,903)  
Shares of common stock repurchased and retired (in shares)   (26,436)    
Shares of common stock repurchased and retired (1,881,323)   (1,881,323)  
Stock options and stock appreciation rights exercised (in shares)   49,999    
Stock options and stock appreciation rights exercised 75,797   75,797  
Share-based compensation expense 62,108   62,108  
Amortization related to postretirement health benefits 2,353     2,353
Net unrealized gain on investments 998,638     998,638
Income tax benefit from share-based compensation 938,090   938,090  
Balance, end of year at Sep. 30, 2013 $ 127,237,853 $ 1 $ 117,418,431 $ 9,819,421
Balance, end of year, shares at Sep. 30, 2013   2,066,922    
v2.4.0.8
Consolidated Statements Of Stockholders' Equity (Parenthetical) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Sep. 30, 2012
Statement of Stockholders' Equity [Abstract]        
Common Stock, Dividends, Per Share, Cash Paid $ 0.08 $ 0.07 $ 0.24 $ 0.21
v2.4.0.8
Consolidated Statements Of Cash Flows (USD $)
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Operating Activities    
Net income $ 12,953,991 $ 8,043,755
Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
Depreciation 444,689 348,334
Amortization, net 378,947 320,666
Amortization related to postretirement benefits obligation 3,581 7,558
Share-based compensation expense related to stock options 62,108 55,857
Increase in allowance for doubtful accounts on premiums receivable 119,212 494,000
Net loss (gain) on disposals of property 778 (23,076)
Net realized gain on investments (333,554) (357,819)
Net earnings from other investments (1,050,854) (1,211,188)
(Benefit) provision for claims (2,429,289) 4,424,523
Provision for deferred income taxes 3,833,000 1,076,000
Excess tax benefits related to exercise of stock options and SARs 938,090 0
Changes in assets and liabilities:    
Decrease (increase) in receivables 1,159,753 (3,892,948)
Increase in other assets (2,771,634) (524,563)
Increase in current income taxes recoverable (1,708,257) 0
Increase in accounts payable and accrued liabilities 5,853,711 847,971
Decrease in current income taxes payable (1,336,824) (356,938)
Payments of claims, net of recoveries (1,832,711) (3,414,523)
Net cash provided by operating activities 14,284,737 5,837,609
Investing Activities    
Purchases of available-for-sale securities (14,833,885) (14,000,215)
Purchases of short-term securities (4,886,789) (5,434,469)
Purchases of other investments (1,330,327) (2,460,907)
Investment in/purchase of subsidiary 0 (350,000)
Proceeds from sales and maturities of available-for-sale securities 7,321,758 11,860,920
Proceeds from sales and maturities of short-term securities 3,065,790 8,315,618
Proceeds from sales and distributions of other investments 1,761,362 1,379,198
Proceeds from sales of other assets 22,808 204,750
Purchases of property (1,063,985) (373,045)
Proceeds from disposals of property 17,335 51,093
Net cash used in investing activities (9,925,933) (807,057)
Financing Activities    
Repurchases of common stock (1,881,323) (2,804,412)
Exercise of options 75,797 152,792
Dividends paid (494,903) (438,431)
Net cash used in financing activities (2,300,429) (3,090,051)
Net Increase in Cash and Cash Equivalents 2,058,375 1,940,501
Cash and Cash Equivalents, Beginning of Period 20,810,018 18,042,258
Cash and Cash Equivalents, End of Period 22,868,393 19,982,759
Cash Paid During the Year for:    
Income taxes, payments, net 4,243,300 2,523,000
Non cash net unrealized gain on investments, net of deferred tax provision of $(532,399) and $(1,144,006) for 2013 and 2012, respectively (998,638) (2,175,915)
Non cash intangible assets acquired from purchase of subsidiary 0 (1,481,900)
Non cash contingent liability from purchase of subsidiary $ 0 $ 691,250
v2.4.0.8
Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
9 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Statement of Cash Flows [Abstract]    
Non cash net unrealized gain on investments, deferred tax provision $ (532,399) $ (1,144,006)
v2.4.0.8
Basis Of Presentation And Significant Accounting Policies
9 Months Ended
Sep. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis Of Presentation And Significant Accounting Policies
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, 2012 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 generally accepted accounting principles 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 financial statements have been condensed or omitted. Earnings attributable to the Company's redeemable noncontrolling interest in a majority-owned insurance agency are recorded in the Consolidated Statements of Income. The redeemable noncontrolling interest representing the portion of equity not related to the Company's ownership interest is recorded as redeemable equity in a separate section of the Consolidated Balance Sheets. 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 quarter ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.

Reclassification Certain 2012 amounts in the accompanying unaudited Consolidated Financial Statements have been reclassified to conform to the 2013 classifications. These reclassifications had no effect on stockholders’ equity or net income as previously reported.

Use of Estimates and Assumptions – The preparation of the Company’s Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“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 financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates and assumptions used.

The Company’s reserves for claims 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 incurred claims of policyholders which have been incurred but not reported (“IBNR”).  During the third quarter of 2013 certain actuarial inputs were changed  to provide a more refined IBNR reserve estimate. See Note 2 in the accompanying Consolidated Financial Statements for further information regarding this change in accounting estimate.

Subsequent Events - The Company has concluded that there were no material subsequent events requiring adjustment to or disclosure in its Consolidated Financial Statements.

Recently Issued Accounting Standards – In July 2013, the Financial Accounting Standards Board (“FASB”) updated guidance to eliminate diversity in practice relating to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss or a tax credit carryforward exists. The main provision of the update requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to deferred tax assets for a net operating loss carryforward, a similar tax loss or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, in which case the unrecognized tax benefit should be presented as a liability. For public entities, this update becomes effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted, and the Company elected to adopt this new guidance in the third quarter of 2013. This update did not have an impact on the Company's financial condition or results of operations.

In February 2013, the FASB updated guidance to improve the reporting of reclassifications out of accumulated other comprehensive income.  The main provisions of this guidance require an entity to provide information about the amount reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the footnotes, the amount reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount is reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures providing additional detail about those amounts.  The amendments do not change the requirements for reporting net income or other comprehensive income in financial statements.  The Company complied with this update, and it did not have an impact on the Company’s financial condition or results of operations.

In June 2011, the FASB updated requirements relating to the presentation of comprehensive income.  The objectives of this accounting update are to facilitate convergence of GAAP and International Financial Reporting Standards (“IFRS”), to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  The main provisions of the guidance require that all nonowner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  For public entities, this update became effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company’s financial condition or results of operations.

In May 2011, the FASB updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in accordance with GAAP and IFRS.  For public entities, this guidance became effective during interim and annual periods beginning after December 15, 2011.  The Company complied with this update, and it did not have an impact on the Company’s financial condition or results of operations.
v2.4.0.8
Reserves For Claims
9 Months Ended
Sep. 30, 2013
Liability for Future Policy Benefits and Unpaid Claims and Claims Adjustment Expense [Abstract]  
Reserves For Claims
Reserves for Claims

Transactions in the reserves for claims for the nine months ended September 30, 2013 and the year ended December 31, 2012 are summarized as follows:
 
September 30, 2013
 
December 31, 2012
Balance, beginning of period
$
39,078,000

 
$
37,996,000

(Benefit) Provision, charged to operations
(2,429,289
)
 
6,072,115

Payments of claims, net of recoveries
(1,832,711
)
 
(4,990,115
)
Ending balance
$
34,816,000

 
$
39,078,000



The total reserve for all reported and unreported losses the Company incurred through September 30, 2013 is represented by the reserves for claims. 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 IBNR. Despite the variability of such estimates, management believes that the reserves are adequate to cover claim losses which might result from pending and future claims under policies issued through September 30, 2013.  The Company continually reviews and adjusts its reserve estimates to reflect its loss experience and any new information that becomes available.  Adjustments resulting from such reviews may be significant.

During the third quarter of 2013 certain actuarial inputs were changed  to provide a more refined IBNR reserve estimate. The Company considers these modifications in actuarial inputs to be a change in estimate. The Company believes that these changes in actuarial inputs were necessary in response to favorable reserve development and claims experience incurred in several recent reporting periods.  The approximate impact of this change in estimate for the quarter ended September 30, 2013 was a reduction of $2,400,000 to the reserves for claims in the Consolidated Balance Sheets, and in the Consolidated Statements of Income a decrease of $2,400,000 to the provision for claims, an increase of $821,000 in the provision for income taxes and an increase of $1,579,000 in net income, or approximately $0.76 per share, compared with the amounts that would have been recorded under the Company’s prior estimate. This change in estimate, coupled with several recent policy years which continued to emerge favorably in comparison with prior expectations, contributed to a benefit in the claims provision this quarter. The change in estimate was primarily driven by the following:

Changing the specific weightings used in performing certain actuarial methods, including weighting between policy years and weighting of title industry loss data; 
Making an adjustment to recognize revenue rate change information and the Company’s improved underwriting efforts related to construction business; and
Increasing the ratios used to estimate projected payments of unallocated loss adjustment expenses to more accurately reflect expected payments.
A summary of the Company’s loss reserves, broken down into its components of known title claims and IBNR, follows:
 
September 30, 2013
 
%
 
December 31, 2012
 
%
Known title claims
$
4,474,405

 
12.9
 
$
5,166,370

 
13.2
IBNR
30,341,595

 
87.1
 
33,911,630

 
86.8
Total loss reserves
$
34,816,000

 
100.0
 
$
39,078,000

 
100.0


Claims and losses paid are charged to the reserves 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 realizable value, net of any indebtedness on the property.
v2.4.0.8
Earnings Per Common Share And Share Awards
9 Months Ended
Sep. 30, 2013
Earnings Per Share [Abstract]  
Earnings Per Common Share And Share Awards
Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income attributable to the Company by the weighted-average number of common shares outstanding during the reporting period.  Diluted earnings per common share is computed by dividing net income attributable to the Company 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 exercised, (a) the exercise price of a share-based award; (b) the amount of compensation cost, if any, for future service that the Company has not yet recognized; and (c) the amount of estimated tax benefits that would be recorded in additional paid-in capital, if any, are assumed to be used to repurchase shares in the current period.  The incremental dilutive potential common shares, calculated using the treasury stock method, were 5,859 and 36,921 for the three months ended September 30, 2013 and 2012, respectively, and 24,334 and 33,753 for the nine months ended September 30, 2013 and 2012, respectively.

The following table sets forth the computation of basic and diluted earnings per share for the three and nine months ended September 30:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2013
 
2012
 
2013
 
2012
Net income attributable to the Company
$
5,515,798

 
$
3,158,185

 
$
12,898,203

 
$
7,939,812

Weighted average common shares outstanding – Basic
2,069,081

 
2,071,605

 
2,059,226

 
2,090,369

Incremental shares outstanding assuming the exercise of dilutive stock options and SARs (share-settled)
5,859

 
36,921

 
24,334

 
33,753

Weighted average common shares outstanding – Diluted
2,074,940

 
2,108,526

 
2,083,560

 
2,124,122

Basic earnings per common share
$
2.67

 
$
1.52

 
$
6.26

 
$
3.80

Diluted earnings per common share
$
2.66

 
$
1.50

 
$
6.19

 
$
3.74



There were no potential shares excluded from the computation of diluted earnings per share for the three months ended September 30, 2013 and 2012. There were no potential shares excluded from the computation of diluted earnings per share for the nine months ended September 30, 2012. There were 3,000 potential shares excluded from the computation of diluted earnings per share for the nine months ended September 30, 2013. These potential shares were anti-dilutive because the underlying share awards were out-of-the-money.
 
The Company has adopted employee stock award plans under which restricted stock, and options or stock appreciation rights (“SARs”) to acquire shares (not to exceed 500,000 shares) of the Company's stock, may be granted to key employees or directors of the Company at a price not less than the market value on the date of grant.  SARs and options (which have predominantly been incentive stock options) awarded under the plans thus far generally expire in five to ten years and are exercisable and vest: immediately; within one year; or at 10% to 20% per year beginning on the date of grant.  All SARs issued to date have been share-settled only.

A summary of share-based award transactions for all share-based award plans follows:
 
Number
Of Shares
 
Weighted
Average
Exercise
Price
 
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding as of January 1, 2012
101,600

 
$
29.81

 
3.91
 
$
697,780

SARs granted
3,000

 
50.50

 
 
 
 

SARs exercised

 

 
 
 
 

Options exercised
(6,380
)
 
25.17

 
 
 
 

Options/SARs canceled/forfeited/expired
(70
)
 
31.00

 
 
 
 

Outstanding as of December 31, 2012
98,150

 
$
30.74

 
3.17
 
$
2,871,710

SARs granted
3,000

 
71.59

 
 
 
 

SARs exercised
(79,500
)
 
28.77

 
 
 
 

Options exercised
(2,650
)
 
28.63

 
 
 
 

Options/SARs canceled/forfeited/expired

 

 
 
 
 

Outstanding as of September 30, 2013
19,000

 
$
45.74

 
3.68
 
$
557,890

 
 
 
 
 
 
 
 
Exercisable as of September 30, 2013
17,500

 
$
43.52

 
3.43
 
$
552,625

 
 
 
 
 
 
 
 
Unvested as of September 30, 2013
1,500

 
$
71.59

 
6.63
 
$
5,265



During the second quarters of both 2013 and 2012, the Company issued a total of 3,000 share-settled SARs to the directors of the Company.   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.  The fair value of each award is estimated on the date of grant using the Black-Scholes option valuation model with the weighted-average assumptions noted in the table shown below. 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.  The weighted-average fair values for the SARs issued during 2013 and 2012 were $27.55 and $18.84, respectively, and were estimated using the weighted-average assumptions shown in the table below.
 
2013
 
2012
Expected Life in Years
5.0
 
5.0
Volatility
44.6%
 
44.6%
Interest Rate
1.3%
 
0.8%
Yield Rate
0.5%
 
0.6%


There was approximately $62,000 and $56,000 of compensation expense relating to SARs or options vesting on or before September 30, 2013 and 2012, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income.  As of September 30, 2013, there was approximately $45,000 of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock award plans. That cost is expected to be recognized over a weighted-average period of approximately 5 months.

There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.
v2.4.0.8
Segment Information
9 Months Ended
Sep. 30, 2013
Segment Reporting [Abstract]  
Segment Information
Segment Information

The Company has one reportable segment, title insurance 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.

Provided below is selected financial information about the Company's operations by segment for the periods ended September 30, 2013 and 2012:
Three Months Ended September 30, 2013
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
31,343,108

 
$
1,396,309

 
$
(386,454
)
 
$
32,352,963

Investment income
919,819

 
93,854

 
(23,335
)
 
990,338

Net realized gain on investments
250,600

 
11,338

 

 
261,938

Total revenues
$
32,513,527

 
$
1,501,501

 
$
(409,789
)
 
$
33,605,239

Operating expenses
24,212,255

 
1,485,494

 
(369,033
)
 
25,328,716

Income before income taxes
$
8,301,272

 
$
16,007

 
$
(40,756
)
 
$
8,276,523

Total assets
$
151,795,001

 
$
37,362,629

 
$

 
$
189,157,630

Three Months Ended September 30, 2012
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
30,429,446

 
$
1,356,733

 
$
(571,134
)
 
$
31,215,045

Investment income
832,241

 
150,749

 
(20,417
)
 
962,573

Net realized gain on investments
85,560

 
14,230

 

 
99,790

Total revenues
$
31,347,247

 
$
1,521,712

 
$
(591,551
)
 
$
32,277,408

Operating expenses
27,086,970

 
1,026,236

 
(553,713
)
 
27,559,493

Income before income taxes
$
4,260,277

 
$
495,476

 
$
(37,838
)
 
$
4,717,915

Total assets
$
132,713,703

 
$
37,296,333

 
$

 
$
170,010,036

Nine Months Ended September 30, 2013
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
88,063,272

 
$
4,004,766

 
$
(1,090,550
)
 
$
90,977,488

Investment income
2,626,642

 
279,231

 
(70,003
)
 
2,835,870

Net realized gain (loss) on investments
341,674

 
(8,120
)
 

 
333,554

Total revenues
$
91,031,588

 
$
4,275,877

 
$
(1,160,553
)
 
$
94,146,912

Operating expenses
71,657,966

 
4,629,241

 
(1,038,286
)
 
75,248,921

Income (loss) before income taxes
$
19,373,622

 
$
(353,364
)
 
$
(122,267
)
 
$
18,897,991

Total assets
$
151,795,001

 
$
37,362,629

 
$

 
$
189,157,630

Nine Months Ended September 30, 2012
Title
Insurance
 
All
Other
 
Intersegment
Eliminations
 
Total
Insurance and other services revenues
$
74,967,470

 
$
3,635,577

 
$
(1,138,611
)
 
$
77,464,436

Investment income
2,566,875

 
444,129

 
(61,252
)
 
2,949,752

Net realized gain on investments
182,249

 
175,570

 

 
357,819

Total revenues
$
77,716,594

 
$
4,255,276

 
$
(1,199,863
)
 
$
80,772,007

Operating expenses
66,772,534

 
3,820,487

 
(1,103,769
)
 
69,489,252

Income before income taxes
$
10,944,060

 
$
434,789

 
$
(96,094
)
 
$
11,282,755

Total assets
$
132,713,703

 
$
37,296,333

 
$

 
$
170,010,036

v2.4.0.8
Retirement Agreements And Other Postretirement Benefits
9 Months Ended
Sep. 30, 2013
Compensation and Retirement Disclosure [Abstract]  
Retirement Agreements And Other Postretirement Benefits
Retirement Agreements and Other Postretirement Benefits

The Company’s subsidiary, Investors Title Insurance Company, is 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 totaling $6,597,000 and $6,303,000 as of September 30, 2013 and December 31, 2012, respectively.  The executive employee benefits include health insurance, dental, vision and life insurance and are unfunded.  These amounts are classified as accounts payable and accrued liabilities in the Consolidated Balance Sheets.  The following sets forth the net periodic benefits cost for the executive benefits for the periods ended September 30, 2013 and 2012:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Service cost – benefits earned during the year
$
3,946

 
$
3,155

 
$
11,837

 
$
9,463

Interest cost on the projected benefit obligation
7,103

 
6,966

 
21,309

 
20,900

(Accretion) amortization of unrecognized prior service cost
(380
)
 
2,349

 
(1,139
)
 
7,047

Amortization of unrecognized losses
1,573

 
171

 
4,720

 
511

Net periodic benefits costs
$
12,242

 
$
12,641

 
$
36,727

 
$
37,921

v2.4.0.8
Fair Value Measurement
9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Fair Value Measurement
 
Valuation of Financial Assets and Liabilities
 
The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value of financial assets and liabilities, such as securities.  This hierarchy categorizes the inputs into three broad levels as follows.  Level 1 inputs to the valuation methodology are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs to the valuation methodology 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 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.

Debt and Equity Securities

The Level 1 category includes equity securities that are measured at fair value using quoted active market prices and money market mutual funds valued at transacted amounts.

The Level 2 category includes fixed maturity investments such as corporate bonds, U.S. government and agency bonds and municipal bonds.  Fair value is principally based on market values obtained from a third party pricing service.  Factors that are used in determining 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 Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures.  Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding.  As of September 30, 2013 and December 31, 2012, the Company did not adjust any Level 2 fair values.

A number of the Company’s investment grade corporate bonds are frequently traded in active markets, and trading prices are consequently available for these securities.  However, these securities were classified as Level 2 because the pricing service from which the Company has obtained fair values for these instruments uses valuation models which use observable market inputs in addition to traded 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.

The Level 3 category only includes the Company’s investments in student loan auction rate securities (“ARS”) because quoted prices were unavailable due to the failure of auctions.  The Company’s ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of these securities was $1,000,000 as of September 30, 2013 and December 31, 2012,  with approximately 97.0% as of September 30, 2013 and December 31, 2012, guaranteed by the U.S. Department of Education.

Some of the inputs to ARS valuation are unobservable in the market and are significant—therefore, the Company utilizes another third party pricing service to assist in the determination of the fair market value of these securities.  That service uses a proprietary valuation model that considers factors such as the following: the financial standing of the issuer; reported prices and the extent of public trading in similar financial instruments of the issuer or comparable companies; the ability of the issuer to obtain required financing; changes in the economic conditions affecting the issuer; pricing by other dealers in similar securities; time to maturity; and interest rates.  The following table summarizes some key assumptions the service used to determine fair value as of September 30, 2013 and December 31, 2012:
 
2013
 
2012
Cumulative probability of earning maximum rate until maturity
—%
 
—%
Cumulative probability of principal returned prior to maturity
95.8%
 
96.1%
Cumulative probability of default at some future point
4.3%
 
3.9%


Significant increases or decreases in any of the inputs in isolation could result in significant changes to the fair value measurement.  Generally, increases in default probabilities and liquidity risk premiums lower the fair market value while increases in principal being returned and earning maximum rates increase fair market values.

Based upon these inputs and assumptions, the pricing service provides a range of values to the Company for its ARS.  The Company records the fair value based on the midpoint of the range and believes that this valuation is the most reasonable estimate of fair value.  In 2013 and 2012, the difference in the low and high values of the ranges was between approximately three and four percent of the carrying value of the Company’s ARS.

The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of September 30, 2013 and December 31, 2012.  The table does not include cash on hand and also does not include assets which are measured at historical cost or any basis other than fair value.  Level 3 assets are comprised solely of ARS.
As of September 30, 2013
Level 1
 
Level 2
 
Level 3
 
Total
Short-term Investments
$
15,388,647

 
$

 
$

 
$
15,388,647

Equity Securities
 

 
 

 
 

 
 

Common stock and nonredeemable preferred stock
33,460,972

 

 

 
33,460,972

Fixed Maturities
 

 
 

 
 

 
 

Obligations of states and political subdivisions*

 
67,185,978

 

 
67,185,978

Corporate debt securities*

 
17,986,320

 
928,200

 
18,914,520

Total
$
48,849,619

 
$
85,172,298

 
$
928,200

 
$
134,950,117

As of December 31, 2012
Level 1
 
Level 2
 
Level 3
 
Total
Short-term Investments
$
13,567,648

 
$

 
$

 
$
13,567,648

Equity Securities
 

 
 

 
 

 
 

Common stock and nonredeemable preferred stock
28,510,933

 

 

 
28,510,933

Fixed Maturities
 

 
 

 
 

 
 

Obligations of states and political subdivisions*

 
62,701,858

 

 
62,701,858

Corporate debt securities*

 
18,302,920

 
932,200

 
19,235,120

Total
$
42,078,581

 
$
81,004,778

 
$
932,200

 
$
124,015,559


*Denotes fair market value obtained from pricing services.

There were no transfers into or out of Levels 1 and 2 during the period.

To help ensure that fair value determinations are consistent with ASC 820 fair value measurements, 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 service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data.  The Company believes that these processes and inputs result in appropriate classifications and fair values consistent with ASC 820.

Other Financial Instruments

The Company uses various financial instruments in the normal course of its business. In the measurement of the 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, ASC 820 excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.
 
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.
 
Cost-basis investments
 
The estimated fair value of cost-basis investments is calculated from the book value of the underlying entities, which is not materially different from the fair market value of the underlying entity.
 
Accrued dividends and interest
 
The carrying amount for accrued dividends and interest is a reasonable estimate of fair value due to the short-term maturity of these assets.
 
Contingent consideration
 
The fair value of contingent consideration was estimated based on the discounted value of future cash flows.  Contingent consideration consists of additional monies the Company may become obligated to pay based on the future performance of a business the Company acquired, as discussed in Note 10.
 
The carrying amounts and fair values of these financial instruments (please note investments are disclosed in a previous table) as of September 30, 2013 and December 31, 2012 are presented in the following table:
As of September 30, 2013
Carrying Value
 
Estimated Fair
Value
 
Level 1
 
Level 2
 
Level 3
Financial Assets
 
 
 
 
 
 
 
 
 
Cash
$
22,868,393

 
$
22,868,393

 
$
22,868,393

 
$

 
$

Cost-basis investments
1,895,895

 
2,030,099

 

 

 
2,030,099

Accrued dividends and interest
1,041,472

 
1,041,472

 
1,041,472

 

 

Total Financial Assets
$
25,805,760