Document And Entity Information
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Document And Entity Information
 3 Months Ended
Mar. 31, 2012
Apr. 24, 2012
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2012  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2012  
Entity Registrant Name INVESTORS TITLE CO  
Entity Central Index Key 0000720858  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   2,097,749

Consolidated Balance Sheets
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Consolidated Balance Sheets (USD $)
Mar. 31, 2012
Dec. 31, 2011
Assets:    
Fixed maturities, available-for-sale, at fair value (amortized cost: 2012: $80,803,074; 2011: $78,783,968) $ 87,142,860 $ 85,407,365
Equity securities, available-for-sale, at fair value (cost: 2012: $19,840,045; 2011: $17,652,745) 26,824,431 22,549,975
Short-term investments 8,571,468 14,112,262
Other investments 5,628,864 3,631,714
Total investments 128,167,623 125,701,316
Cash and cash equivalents 16,465,383 18,042,258
Premium and fees receivable (less allowance for doubtful accounts: 2012: $1,427,000; 2011: $1,218,000) 7,143,066 6,810,000
Accrued interest and dividends 962,560 1,108,156
Prepaid expenses and other assets 2,713,752 2,743,517
Property, net 3,469,310 3,553,216
Total Assets 158,921,694 157,958,463
Liabilities and Stockholders' Equity    
Reserves for claims 38,285,000 37,996,000
Accounts payable and accrued liabilities 10,513,737 12,330,383
Current income taxes payable 148,262 640,533
Deferred income taxes, net 1,445,108 479,363
Total liabilities 50,392,107 51,446,279
Commitments and Contingencies      
Stockholders' Equity:    
Common stock - no par value (shares authorized 10,000,000; 2,097,564 and 2,107,681 shares issued and outstanding 2012 and 2011, respectively, excluding 291,676 shares for 2012 and 2011 of common stock held by the Company's subsidiary) 1 1
Retained earnings 99,841,101 99,003,018
Accumulated other comprehensive income 8,688,485 7,509,165
Total stockholders' equity 108,529,587 106,512,184
Total Liabilities and Stockholders' Equity 158,921,694 157,958,463
Class A Junior Participating Preferred Stock [Member]
    
Stockholders' Equity:    
Class A Junior Participating preferred stock (shares authorized 100,000; no shares issued)      

Consolidated Balance Sheets (Parenthetical)
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Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2012
Dec. 31, 2011
Available-for-sale, amortized cost $ 80,803,074 $ 78,783,968
Equity securities, available-for-sale, cost 19,840,045 17,652,745
Premium and fees receivable, allowance for doubtful accounts $ 1,427,000 $ 1,218,000
Common stock, no par value      
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,097,564 2,107,681
Common stock, shares outstanding 2,097,564 2,107,681
Common stock, held by company's subsidiary 291,676 291,676
Class A Junior Participating Preferred Stock [Member]
    
Preferred stock, shares authorized 100,000 100,000
Preferred stock, shares issued 0 0

Consolidated Statements Of Income
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Consolidated Statements Of Income (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Revenues:    
Net premiums written $ 19,667,420 $ 17,865,588
Investment income - interest and dividends 977,261 899,372
Net realized gain (loss) on investments 192,881 (26,160)
Other 1,576,712 1,283,220
Total Revenues 22,414,274 20,022,020
Operating Expenses:    
Commissions to agents 11,192,127 10,879,586
Provision for claims 1,631,359 721,626
Salaries, employee benefits and payroll taxes 4,990,632 4,691,996
Office occupancy and operations 927,038 963,927
Business development 393,447 387,547
Filing fees, franchise and local taxes 351,922 214,113
Premium and retaliatory taxes 414,794 405,473
Professional and contract labor fees 400,537 308,524
Other 167,279 103,021
Total Operating Expenses 20,469,135 18,675,813
Income before Income Taxes 1,945,139 1,346,207
Provision for Income Taxes 513,000 327,000
Net Income $ 1,432,139 $ 1,019,207
Basic Earnings per Common Share $ 0.68 $ 0.46
Weighted Average Shares Outstanding - Basic 2,100,835 2,234,480
Diluted Earnings per Common Share $ 0.67 $ 0.46
Weighted Average Shares Outstanding - Diluted 2,128,788 2,239,500
Cash Dividends Paid per Common Share $ 0.07 $ 0.07

Consolidated Statements Of Comprehensive Income
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Consolidated Statements Of Comprehensive Income (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Consolidated Statements Of Comprehensive Income [Abstract]    
Net income $ 1,432,139 $ 1,019,207
Other comprehensive income, before tax:    
Amortization related to prior year service cost 2,349 5,097
Amortization of unrecognized loss 170 643
Unrealized gains on investments arising during the period 1,996,426 680,204
Reclassification adjustment for sale of securities included in net income (192,881) (43,117)
Reclassification adjustment for write-down of securities included in net income   69,277
Other comprehensive income, before tax 1,806,064 712,104
Income tax expense related to postretirement health benefits 857 1,956
Income tax expense related to unrealized gains on investments arising during the year 691,943 231,367
Income tax benefit related to reclassification adjustment for sale of securities included in net income (66,056) (14,739)
Income tax expense related to reclassification adjustment for write-down of securities included in net income   23,889
Net income tax expense on other comprehensive income 626,744 242,473
Other comprehensive income 1,179,320 469,631
Comprehensive income $ 2,611,459 $ 1,488,838

Consolidated Statements Of Stockholders' Equity
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Consolidated Statements Of Stockholders' Equity (USD $)
Common Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income [Member]
Total
Balance at Dec. 31, 2010 $ 1 $ 98,240,109 $ 5,688,705 $ 103,928,815
Balance, shares at Dec. 31, 2010 2,282,596      
Net income   1,019,207   1,019,207
Dividends ($0.07 per share)   (152,830)   (152,830)
Shares of common stock repurchased and retired   (3,929,009)   (3,929,009)
Shares of common stock repurchased and retired, shares (126,768)      
Stock options exercised   3,750   3,750
Stock options exercised, shares 250      
Share-based compensation expense   52,320   52,320
Amortization related to postretirement health benefits     3,784 3,784
Net unrealized gain on investments     465,847 465,847
Balance at Mar. 31, 2011 1 95,233,547 6,158,336 101,391,884
Balance, shares at Mar. 31, 2011 2,156,078      
Balance at Dec. 31, 2011 1 99,003,018 7,509,165 106,512,184
Balance, shares at Dec. 31, 2011 2,107,681      
Net income   1,432,139   1,432,139
Dividends ($0.07 per share)   (147,097)   (147,097)
Shares of common stock repurchased and retired   (509,711)   (509,711)
Shares of common stock repurchased and retired, shares (12,317)      
Stock options exercised   45,062   45,062
Stock options exercised, shares 2,200      
Share-based compensation expense   17,690   17,690
Amortization related to postretirement health benefits     1,662 1,662
Net unrealized gain on investments     1,177,658 1,177,658
Balance at Mar. 31, 2012 $ 1 $ 99,841,101 $ 8,688,485 $ 108,529,587
Balance, shares at Mar. 31, 2012 2,097,564      

Consolidated Statements Of Stockholders' Equity (Parenthetical)
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Consolidated Statements Of Stockholders' Equity (Parenthetical) (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Consolidated Statements Of Stockholders' Equity [Abstract]    
Dividends, per share $ 0.07 $ 0.07

Consolidated Statements Of Cash Flows
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Consolidated Statements Of Cash Flows (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Operating Activities    
Net income $ 1,432,139 $ 1,019,207
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 113,752 126,178
Amortization, net 101,242 81,973
Amortization related to postretirement benefits obligation 2,519 5,740
Share-based compensation expense related to stock options 17,690 52,320
Increase (decrease) in allowance for doubtful accounts on premiums receivable 209,000 (181,000)
Net gain on disposals of property (6,309)  
Net realized (gain) loss on investments (192,881) 26,160
Net earnings from other investments (335,664) (67,482)
Provision for claims 1,631,359 721,626
Provision for deferred income taxes 339,000 592,000
Changes in assets and liabilities:    
(Increase) decrease in receivables (542,066) 2,108,642
Decrease in other assets 175,361 397,136
Increase in current income taxes recoverable   (378,256)
Decrease in accounts payable and accrued liabilities (1,816,646) (642,003)
Decrease in current income taxes payable (492,271) (1,056,356)
Payments of claims, net of recoveries (1,342,359) (1,198,326)
Net cash (used in) provided by operating activities (706,134) 1,607,559
Investing Activities    
Purchases of available-for-sale securities (7,207,882) (3,065,044)
Purchases of short-term securities (2,226,674) (679,407)
Purchases of other investments (1,917,500) (5,681)
Proceeds from sales and maturities of available-for-sale securities 3,093,116 2,565,443
Proceeds from sales and maturities of short-term securities 7,767,468 6,987,035
Proceeds from sales and distributions of other investments 256,014 210,377
Purchases of property (32,537) (59,689)
Proceeds from disposals of property 9,000  
Net cash (used in) provided by investing activities (258,995) 5,953,034
Financing Activities    
Repurchases of common stock (509,711) (3,929,009)
Exercise of options 45,062 3,750
Dividends paid (147,097) (152,830)
Net cash used in financing activities (611,746) (4,078,089)
Net (Decrease) Increase in Cash and Cash Equivalents (1,576,875) 3,482,504
Cash and Cash Equivalents, Beginning of Period 18,042,258 8,117,031
Cash and Cash Equivalents, End of Period 16,465,383 11,599,535
Supplemental Disclosures:    
Income Taxes, payments, net 667,000 1,170,000
Non cash net unrealized gain on investments, net of deferred tax provision of $(625,887) and $(240,517) for 2012 and 2011, respectively $ (1,177,658) $ (465,847)

Consolidated Statements Of Cash Flows (Parenthetical)
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Consolidated Statements Of Cash Flows (Parenthetical) (USD $)
 3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Consolidated Statements Of Cash Flows [Abstract]    
Non cash net unrealized gain on investments, deferred tax provision $ (625,887) $ (240,517)

Basis Of Presentation And Significant Accounting Policies
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Basis Of Presentation And Significant Accounting Policies
 3 Months Ended
Mar. 31, 2012
Basis Of Presentation And Significant Accounting Policies [Abstract]  
Basis Of Presentation And Significant Accounting Policies

Note 1 - Basis of Presentation and Significant Accounting Policies

     Reference should be made to the "Notes to Consolidated Financial Statements" of Investors Title Company's ("the Company") Annual Report on Form 10-K for the year ended December 31, 2011 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 and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual 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 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 March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

     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.

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

     Recently Issued Accounting Standards – In May 2011, the Financial Accounting Standards Board ("the FASB") updated requirements for measuring and disclosing fair value information, resulting in common principles and requirements in accordance with GAAP and International Financial Reporting Standards ("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.

     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 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 January 2010, the FASB updated the requirements for fair value measurements and disclosures to require companies to present purchases, sales, issuances and settlements of Level 3 securities on a gross rather than a net basis. Refer to Note 6 for a discussion of valuation hierarchy levels. This guidance became effective for fiscal years beginning after December 15, 2010, and interim periods within those fiscal years. The Company complied with this update, and it did not have an impact on the Company's financial condition or results of operations.

     Pending Accounting Standards – In June 2011, the FASB updated requirements relating to the presentation of comprehensive income. In December 2011, the FASB issued a subsequent update to defer those changes in the June 2011 update that relate to the presentation of reclassification adjustments. All other requirements of the June 2011 update are not affected by the December 2011 update. The amendments are being made to allow the FASB time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented.

Reserves For Claims
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Reserves For Claims
 3 Months Ended
Mar. 31, 2012
Reserves For Claims [Abstract]  
Reserves For Claims

Note 2 - Reserves for Claims

     Transactions in the reserves for claims for the three months ended March 31, 2012 and the year ended December 31, 2011 are summarized as follows:

             
    March 31, 2012     December 31, 2011  
Balance, beginning of period $ 37,996,000   $ 38,198,700  
Provision, charged to operations   1,631,359     3,342,427  
Payments of claims, net of recoveries   (1,342,359 )   (3,545,127 )
Ending balance $ 38,285,000   $ 37,996,000  

 

     The total reserve for all reported and unreported losses the Company incurred through March 31, 2012 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 incurred claims of policyholders which may be reported in the future. 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 March 31, 2012. 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.

 

     A summary of the Company's loss reserves, broken down into its components of known title claims and incurred but not reported claims ("IBNR"), follows:

             
    March 31, 2012 %   December 31, 2011 %
Known title claims $ 6,357,547 16.6 $ 6,233,501 16.4
IBNR   31,927,453 83.4   31,762,499 83.6
Total loss reserves $ 38,285,000 100.0 $ 37,996,000 100.0

 

     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 acquiring company carries assets at the lower of cost or estimated realizable value, net of any indebtedness on the property.

Earnings Per Common Share And Share Awards
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Earnings Per Common Share And Share Awards
 3 Months Ended
Mar. 31, 2012
Earnings Per Common Share And Share Awards [Abstract]  
Earnings Per Common Share And Share Awards

Note 3 - Earnings Per Common Share and Share Awards

     Basic earnings per common share are 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 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 27,953 and 5,020 for the three months ended March 31, 2012 and 2011, respectively.

     The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31:

    Three Months Ended
    March 31,
    2012   2011
 
Net income $ 1,432,139 $ 1,019,207 
Weighted average common shares        
outstanding – Basic   2,100,835   2,234,480
Incremental shares outstanding assuming        
the exercise of dilutive stock options and        
SARs (share settled)   27,953   5,020
Weighted average common shares        
outstanding - Diluted   2,128,788   2,239,500
 
Basic earnings per common share $ 0.68 $ 0.46
 
Diluted earnings per common share $ 0.67 $ 0.46

 

 

     There were 4,500 and 14,000 shares excluded from the computation of diluted earnings per share for the three months ended March 31, 2012 and 2011, respectively, because these shares were anti-dilutive.

     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 are exercisable and vest immediately or within one year or at 10% to 20% per year beginning on the date of grant and generally expire in five to ten years. All SARs issued to date have been share settled only. There have not been any SARs exercised in 2012 or 2011.

A summary of share-based award transactions for all share-based award plans follows:

        Weighted Average    
        Average Remaining   Aggregate
  Number     Exercise Contractual   Intrinsic
  Of Shares     Price Term (years)   Value
Outstanding as of January 1, 2011 110,800   $ 28.77 4.51 $ 353,955
SARs granted 3,000     41.50      
Options exercised (7,700 )   20.15      
Options/SARs cancelled/forfeited/expired (4,500 )   28.61      
Outstanding as of December 31, 2011 101,600   $ 29.81 3.91 $ 697,780
SARs granted -     -      
Options exercised (2,200 )   20.48      
Options/SARs cancelled/forfeited/expired -     -      
Outstanding as of March 31, 2012 99,400   $ 30.01 3.73 $ 1,668,053
 
Exercisable as of March 31, 2012 98,780   $ 30.01 3.74 $ 1,658,350
 
Unvested as of March 31, 2012 620   $ 31.07 2.28 $ 9,703

 

     There was approximately $18,000 and $52,000 of compensation expense relating to SARs or options vesting on or before March 31, 2012 and 2011, respectively, included in salaries, employee benefits and payroll taxes in the Consolidated Statements of Income. As of March 31, 2012, there was approximately $25,000 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 8 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.

Segment Information
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Segment Information
 3 Months Ended
Mar. 31, 2012
Segment Information [Abstract]  
Segment Information

Note 4 – 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 March 31, 2012 and 2011:

Three Months Ended   Title     All     Intersegment        
March 31, 2012   Insurance     Other     Eliminations     Total  
Operating revenues $ 20,273,756   $ 1,176,058   $ (205,682 ) $ 21,244,132  
Investment income   853,831     143,847     (20,417 )   977,261  
Net realized gain on investments   182,414     10,467     -     192,881  
Total revenues $ 21,310,001   $ 1,330,372   $ (226,099 ) $ 22,414,274  
Operating expenses   19,254,724     1,420,093     (205,682 )   20,469,135  
Income (loss) before income taxes $ 2,055,277   $ (89,721 ) $ (20,417 ) $ 1,945,139  
Total assets $ 123,921,278   $ 35,000,416   $ -   $ 158,921,694  
 
Three Months Ended                        
March 31, 2011                        
Operating revenues $ 18,187,312   $ 1,171,784   $ (210,288 ) $ 19,148,808  
Investment income   790,973     128,816     (20,417 )   899,372  
Net realized loss on investments   (20,535 )   (5,625 )   -     (26,160 )
Total revenues $ 18,957,750   $ 1,294,975   $ (230,705 ) $ 20,022,020  
Operating expenses   17,527,537     1,358,564     (210,288 )   18,675,813  
Income (loss) before income taxes $ 1,430,213   $ (63,589 ) $ (20,417 ) $ 1,346,207  
Total assets $ 111,333,607   $ 37,797,701   $ -   $ 149,131,308  

 

Retirement Agreements And Other Postretirement Benefits
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Retirement Agreements And Other Postretirement Benefits
 3 Months Ended
Mar. 31, 2012
Retirement Agreements And Other Postretirement Benefits [Abstract]  
Retirement Agreements And Other Postretirement Benefits

Note 5 – Retirement Agreements and Other Postretirement Benefits

     On November 17, 2003, the Company's subsidiary, Investors Title Insurance Company, entered into employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement totaling $5,860,000 and $5,740,000 as of March 31, 2012 and December 31, 2011, 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 March 31, 2012 and 2011:

    For the Three
    Months Ended
    March 31,
    2012   2011
 
Service cost – benefits earned during the year $ 3,154 $ 6,424
Interest cost on the projected benefit obligation   6,967   7,689
Amortization of unrecognized prior service cost   2,349   5,097
Amortization of unrecognized losses   170   643
Net periodic benefits costs $ 12,640 $ 19,853

 

Fair Value Measurement
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Fair Value Measurement
 3 Months Ended
Mar. 31, 2012
Fair Value Measurement [Abstract]  
Fair Value Measurement

Note 6 - Fair Value Measurement

     Valuation Hierarchy. 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.

     Valuation Techniques. 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 that are measured at fair value using quoted active market prices.

     The Level 2 category includes fixed maturity investments such as corporate bonds, U.S. government and agency bonds and municipal bonds. Their fair value is principally based on market values obtained from a third party pricing service. Factors that are used in determining their 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 the 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 March 31, 2012 and December 31, 2011, 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 third party 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. Some of the inputs to this model 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 on a quarterly basis. 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 March 31, 2012 and December 31, 2011:

  2012   2011  
Cumulative probability of earning maximum rate until maturity 0.0-0.2 % 0.0-0.1 %
Cumulative probability of principal returned prior to maturity 95.7-98.6%   95.4-98.7%  
Cumulative probability of default at some future point 1.4-4.3 % 1.3-4.6 %
Liquidity risk premium 4.0-4.5 % 4.5-5.0 %

 

     Significant increases or decreases in any of the inputs in isolation would 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. On a quarterly basis, review of the valuation is performed by the Company with significant changes in quarter over quarter values compared to changes to the current economic environment. The Company believes that the midpoint valuation is the most reasonable estimate of fair value. In 2012 and 2011, 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 Company's ARS portfolio is comprised entirely of investment grade student loan ARS. The par value of the ARS bonds was $4,000,000 and $5,000,000 as of March 31, 2012 and December 31, 2011, respectively, with approximately 75.2% and 79.6% as of March 31, 2012 and December 31, 2011, respectively, guaranteed by the U.S. Department of Education.

     The following table presents, by level, the financial assets carried at fair value measured on a recurring basis as of March 31, 2012 and December 31, 2011. 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.

As of March 31, 2012   Level 1   Level 2   Level 3   Total
Short-term Investments $ 8,571,468 $ - $ - $ 8,571,468
Equity Securities                
Common stock and nonredeemable preferred stock   26,824,431   -   -   26,824,431
Fixed Maturities                
Obligations of states and political subdivisions*   -   65,654,123   934,200   66,588,323
Corporate Debt Securities*   -   17,791,037   2,763,500   20,554,537
Total $ 35,395,899 $ 83,445,160 $ 3,697,700 $ 122,538,759

 

As of December 31, 2011   Level 1   Level 2   Level 3   Total
Short-term Investments $ 14,112,262 $ - $ - $ 14,112,262
Equity Securities                
Common stock and nonredeemable preferred stock   22,549,975   -   -   22,549,975
Fixed Maturities                
Obligations of states and political subdivisions*   -   67,612,793   1,834,700   69,447,493
Corporate Debt Securities*   -   13,242,172   2,717,700   15,959,872
Total $ 36,662,237 $ 80,854,965 $ 4,552,400 $ 122,069,602

 

*Denotes fair market value obtained from pricing services.

 

     There were no transfers into or out of Levels 1 and 2 during the period. The following table presents a reconciliation of the Company's assets measured at fair value using significant unobservable inputs (Level 3) for the period ended March 31, 2012 and the year ended December 31, 2011:

Changes in fair value during the period ended:   2012     2011  
Beginning balance at January 1 $ 4,552,400   $ 5,472,244  
Redemptions and sales   (1,000,000 )   (900,000 )
Realized gain-included in realized (loss) gain on investments   40,057     43,199  
Realized loss-included in realized (loss) gain on investments   -     (101,861 )
Unrealized gain-included in other comprehensive income   105,243     38,818  
Ending balance $ 3,697,700   $ 4,552,400  

 

     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.

The Company uses various financial instruments in the normal course of its business. The following tables present the carrying value and fair value of the Company's financial assets disclosed, but not carried, at fair value at March 31, 2012 and December 31, 2011, and the level within the fair value hierarchy at which such assets are measured.

As of March 31, 2012:

        Estimated Fair              
Financial Assets   Carrying Value   Value   Level 1   Level 2     Level 3
Cash $ 16,465,383 $ 16,465,383 $ 16,465,383 $   - $ -
Cost-basis investment   1,371,329   1,757,994   -     -   1,371,329
Accrued dividends and interest   962,560   962,560   52,272     -   910,288
Total $ 18,799,272 $ 19,185,937 $ 16,517,655 $   - $ 2,281,617
 
As of December 31, 2012                      
Cash $ 18,042,258 $ 18,042,258 $ 18,042,258 $   - $ -
Cost-basis investment   1,303,887   1,688,262   -     -   1,303,887
Accrued dividends and interest   1,108,156   1,108,156   39,857     -   1,068,299
Total $ 20,454,301 $ 20,838,676 $ 18,082,115 $   - $ 2,372,186

 

     Certain cost method investments are measured at estimated fair value on a non-recurring basis, such as investments that are impaired during the period and recorded at estimated fair value in the Consolidated Financial Statements as of March 31, 2012 and December 31, 2011. There were no assets valued at fair market value on a non-recurring basis as of March 31, 2012.

 

The following table summarizes the corresponding estimated fair value hierarchy of such investments at December 31, 2011 and the related impairments recognized.

                    Total at      
  Valuation                 Estimated   Impairment  
December 31, 2011 Method Impaired Level 1 Level 2   Level 3   Fair Value   Losses  
Cost method investments Fair Value Yes $ - $ - $ 58,281 $ 58,281 $ (28,904 )
Other assets Fair Value Yes   -   -   17,000   17,000   (15,500 )
Total cost method                          
investments and other                          
assets     $ - $ - $ 75,281 $ 75,281 $ (44,404 )

 

Investments In Securities
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Investments In Securities
 3 Months Ended
Mar. 31, 2012
Investments In Securities [Abstract]  
Investments In Securities

Note 7 – Investments in Securities

     The aggregate estimated fair value, gross unrealized holding gains, gross unrealized holding losses and cost or amortized cost for securities by major security type are as follows:

        Gross   Gross   Estimated
    Amortized   Unrealized   Unrealized   Fair
March 31, 2012   Cost   Gains   Losses   Value
Fixed maturities, available-for-sale, at fair value-                
Obligations of states and political subdivisions $ 60,381,475 $ 5,290,815 $ 18,167 $ 65,654,123
Corporate debt securities   16,782,152   1,133,832   124,947   17,791,037
Auction rate securities   3,639,447   58,253   -   3,697,700
Total $ 80,803,074 $ 6,482,900 $ 143,114 $ 87,142,860
Equity Securities, available-for-sale at fair value-                
Common stocks and nonredeemable preferred stocks $ 19,840,045 $ 7,044,101 $ 59,715 $ 26,824,431
Total $ 19,840,045 $ 7,044,101 $ 59,715 $ 26,824,431
Short-term investments-                
Certificates of deposit and other $ 8,571,468 $ - $ - $ 8,571,468
Total $ 8,571,468 $ - $ - $ 8,571,468
 
December 31, 2011                
Fixed maturities, available-for-sale, at fair value-                
Obligations of states and political subdivisions $ 62,042,929 $ 5,583,733 $ 13,869 $ 67,612,793
Corporate debt securities   12,188,639   1,202,149   148,616   13,242,172
Auction rate securities   4,552,400   -   -   4,552,400
Total $ 78,783,968 $ 6,785,882 $ 162,485 $ 85,407,365
Equity Securities, available-for-sale at fair value-                
Common stocks and nonredeemable preferred stocks $ 17,652,745 $ 4,939,053 $ 41,823 $ 22,549,975
Total $ 17,652,745 $ 4,939,053 $ 41,823 $ 22,549,975
Short-term investments-                
Certificates of deposit and other $ 14,112,262 $ - $ - $ 14,112,262
Total $ 14,112,262 $ - $ - $ 14,112,262

 

 

The scheduled maturities of fixed maturity securities at March 31, 2012 were as follows:

    Available-for-Sale
    Amortized   Fair
    Cost   Value
Due in one year or less $ 7,892,019 $ 8,018,893
Due after one year through five years   34,168,120   36,402,089
Due five years through ten years   31,746,313   34,936,063
Due after ten years   6,996,622   7,785,815
Total $ 80,803,074 $ 87,142,860

 

     Gross realized gains and losses on securities for the three months ended March 31 are summarized as follows:

    2012   2011  
Gross realized gains:          
Obligations of states and political subdivisions $ 250 $ 387  
Common stocks and nonredeemable preferred stocks   152,574   46,189  
Auction rate securities   40,057   15,428  
Total $ 192,881 $ 62,004  
Gross realized losses:          
Obligations of states and political subdivisions $ - $ -  
Common stocks and nonredeemable preferred stocks   -   (13,888 )
Other than temporary impairment of securities   -   (64,468 )
Total   -   (78,356 )
Net realized (loss) gain $ 192,881 $ (16,352 )

 

     Realized gains and losses are determined on the specific identification method. Also included in net realized gain on sales in the Consolidated Statements of Income are impairments of other investments and loss on sales of property acquired in the settlement of claims totaling $0 and $(9,808) for the three months ended March 31, 2012 and 2011, respectively.

 

     The following table presents the gross unrealized losses on investment securities and the 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, 2012 and December 31, 2011.

    Less than 12 Months     12 Months or Longer     Total  
    Fair Unrealized     Fair   Unrealized     Fair   Unrealized  
    Value   Losses     Value   Losses     Value   Losses  
March 31, 2012                              
Obligations of states                              
and political                              
subdivisions $ - $ -   $ 1,012,920 $ (18,167 ) $ 1,012,920 $ (18,167 )
Corporate debt                              
securities   3,607,498   (60,825 )   955,750   (64,122 )   4,563,248   (124,947 )
Total Fixed Income                              
Securities $ 3,607,498 $ (60,825 ) $ 1,968,670 $ (82,289 ) $ 5,576,168 $ (143,114 )
Equity Securities   1,283,535   (59,715 )   -   -     1,283,535   (59,715 )
Total temporarily                              
impaired securities $ 4,891,033 $ (120,540 ) $ 1,968,670 $ (82,289 ) $ 6,859,703 $ (202,829 )

 

    Less than 12 Months     12 Months or Longer     Total  
    Fair   Unrealized     Fair   Unrealized     Fair Unrealized  
    Value   Losses     Value   Losses     Value   Losses  
December 31, 2011                              
Obligations of states                              
and political                              
subdivisions $ 663,666 $ (64 ) $ 1,023,180 $ (13,805 ) $ 1,686,846 $ (13,869 )
Corporate debt                              
securities   3,015,769   (148,616 )   -   -     3,015,769   (148,616 )
Total Fixed Income                              
Securities $ 3,679,435 $ (148,680 ) $ 1,023,180 $ (13,805 ) $ 4,702,615 $ (162,485 )
Equity Securities   957,072   (40,893 )   104,130   (930 )   1,061,202   (41,823 )
Total temporarily                              
impaired securities $ 4,636,507 $ (189,573 ) $ 1,127,310 $ (14,735 ) $ 5,763,817 $ (204,308 )

 

     As of March 31, 2012, the Company held $5,576,168 in fixed maturity securities with unrealized losses of $143,114. As of December 31, 2011, the Company held $4,702,615 in fixed maturity securities with unrealized losses of $162,485. The decline in 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. Because the Company does not have the intent to sell these securities and will likely not be compelled to sell them before it can recover its cost basis, the Company does not consider these investments to be other-than-temporarily impaired.

     As of March 31, 2012, the Company held $1,283,535 in equity securities with unrealized losses of $59,715. As of December 31, 2011, the Company held $1,061,202 in equity securities with unrealized losses of $41,823. The unrealized losses related to holdings of equity securities were caused by market changes that the Company considers to be temporary. Since the Company has the intent and ability to hold these equity securities until a recovery of fair value, the Company does not consider these investments other-than-temporarily impaired.

     Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been below cost, the financial condition and prospects of the issuer (including credit ratings and analyst reports) and macro-economic changes. A total of 12 and 13 securities had unrealized losses at March 31, 2012 and December 31, 2011, respectively. Reviews of the values of 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. During the first quarter 2012, the Company did not have other-than-temporary impairment charges. During the first quarter of 2011, the Company recorded other-than-temporary impairment charges in the amount of $69,276 related to stocks and other assets. For the 2011 fiscal year, the Company recorded other-than-temporary impairment charges in the amount of $280,987 related to securities and other assets, of which, $101,861 was related to Level 3 auction rate securities. Other-than-temporary impairment charges are included in net realized gain on investments in the Consolidated Statements of Income.

Commitments And Contingencies
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Commitments And Contingencies
 3 Months Ended
Mar. 31, 2012
Commitments And Contingencies [Abstract]  
Commitments And Contingencies

Note 8 – Commitments and Contingencies

     Legal Proceedings. A class action lawsuit is pending in the United States District Court for the Southern District of West Virginia against several title insurance companies, including Investors Title Insurance Company, entitled Backel v. Fidelity National Title Insurance et al. (6:2008- CV-00181). The plaintiff in this case contends a lack of meaningful oversight by agencies with which title insurance rates are filed and approved. There are further allegations that the title insurance companies have conspired to fix title insurance rates. The plaintiffs seek monetary damages, including treble damages, as well as injunctive relief. Similar suits have been filed in other jurisdictions, several of which have already been dismissed. In West Virginia, the case has been placed on the inactive list pending the resolution of the bankruptcy of LandAmerica Financial Group, Inc. The Company believes that this case is without merit, and intends to vigorously defend against the allegations. At this stage in the litigation, the Company does not have the ability to make a reasonable range of estimates in regards to potential loss amounts, if any.

     The Company and its subsidiaries are also involved in other 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, will not, in the aggregate, be material to the Company's consolidated financial condition or operations.

     Agency Acquisition. In January 2012, the Company entered into a membership interest purchase and sale agreement under which it agreed to acquire a majority ownership interest of a previously unaffiliated agency which the Company executed on April 2, 2012. The future purchase price cannot be calculated at this time, but the purchase price for the majority interest is capped at $1,041,250 and is to be paid over the next two years. The agreement provides options under which the Company may acquire the remaining interest in the agency and stipulates a minimum purchase price of $1,000,000 for the entire agency should one of those options be exercised. The actual purchase cost may deviate from both the maximum and minimum amounts and the Company has already paid $350,000 toward the purchase price.

     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 Investors Title Insurance Company ("ITIC"), administers escrow and trust deposits representing earnest money received under real estate contracts, 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 Consolidated Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.

     Like-Kind Exchanges Proceeds. In administering tax-deferred property exchanges, the Company's subsidiary, Investors Title Exchange Corporation ("ITEC"), serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company subsidiary, Investors Title Accommodation Corporation ("ITAC"), serves as exchange accommodation titleholder and, through limited liability companies ("LLCs") that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $41,918,857 and $35,359,000 as of March 31, 2012 and December 31, 2011, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying 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. These like-kind exchange funds are primarily invested in money market and other short-term investments: however, as of March 31, 2012 approximately $1,000,000 of par value is invested in an auction rate security. The Company does not believe the current illiquidity of the auction rate security will impact its operations, as it believes it has sufficient capital to provide continuous and immediate liquidity as necessary.

Related Party Transactions
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Related Party Transactions
 3 Months Ended
Mar. 31, 2012
Related Party Transactions [Abstract]  
Related Party Transactions

Note 9 – Related Party Transactions

     The Company does business with, and has investments in, unconsolidated limited liability companies that are primarily title insurance agencies. The Company utilizes the equity method to account for its investment in these limited liability companies. The following table sets forth the approximate values by year found within each financial statement classification:

    As of   As of
Financial Statement Classification,   March 31,   December 31,
Consolidated Balance Sheets   2012   2011
Other investments $ 4,258,000 $ 2,328,000
Premiums and fees receivable   740,000   681,000

 

Financial Statement Classification,   For the Three Months Ended
    March 31,
Consolidated Statements of Income   2012   2011
Net premiums written $ 3,383,000 $ 2,122,000
Other income   474,000   215,000