INVESTORS TITLE CO - Annual Report: 2007 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL
REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
for
the
fiscal year ended December 31, 2007
o TRANSITION
REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
for
the
transition period from __to __
Commission
file number 0-11774
INVESTORS
TITLE COMPANY
(Exact
name of registrant as specified in its charter)
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North
Carolina
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56-1110199
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
|
121
North Columbia Street
Chapel
Hill, North Carolina 27514
(919)
968-2200
(Address
and telephone number of principal executive office)
Securities
registered pursuant to section 12(b) of the Act:
Common
Stock, no par value
Securities
registered pursuant to section 12(g) of the Act:
None
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act.
Yes
o
No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.
Yes
o
No x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes x No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large
accelerated filer o
Accelerated filer x
Non-accelerated filer o Smaller
reporting company
(Do
not
check if a smaller
reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No x
The
aggregate market value of the common shares held by non-affiliates was
$90,590,399 based on the closing sales price on the NASDAQ National Market
System on the last business day of the registrant's most recently completed
second fiscal quarter (June 30, 2007).
As
of
March 7, 2008, there were 2,703,154
common
shares of the registrant outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of Investors Title Company's Annual Report to Shareholders for the fiscal year
ended December 31, 2007 are incorporated by reference in Parts I, II and IV
hereof and portions of Investors Title Company's definitive proxy statement
for
the Annual Meeting of Shareholders to be held on May 21, 2008 are incorporated
by reference in Part III hereof.
1
SAFE
HARBOR FOR FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K, as well as information included in future filings
by
the Company with the Securities and Exchange Commission and information
contained in written material, press releases and oral statements issued by
or
on behalf of the Company, contains, or may contain, “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act of 1995
that
reflect management’s current outlook for future periods. These statements may be
identified by the use of words such as "plan," "expect," "aim," "believe,"
"project," "anticipate," "intend," "estimate," "should," "could" and other
expressions that indicate future events and trends. All statements that address
expectations or projections about the future, including statements about the
Company's strategy for growth, product and service development, market share
position, claims, expenditures, financial results and cash requirements, are
forward-looking statements. Forward-looking statements are based on certain
assumptions and expectations of future events that are subject to a number
of
risks and uncertainties. Actual future results and trends may differ materially
from historical results or those projected in any such forward-looking
statements depending on a variety of factors, including, but not limited to,
the
following:
|
·
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the
demand for title insurance will vary over time due to factors such
as the
level of real estate transactions, the level of mortgage origination
volumes including refinancing and changes to the insurance requirements
of
the participants in the secondary mortgage
market;
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·
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significant
changes to applicable government regulations;
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·
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losses
from claims may be greater than anticipated such that reserves for
possible claims are inadequate;
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·
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heightened
regulatory scrutiny;
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·
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unanticipated
adverse changes in securities markets, including interest rates,
could
result in material losses on the Company's investments;
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·
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the
Company's dependence on key management personnel, the loss of whom
could
have a material adverse affect on the Company's business;
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·
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the
Company’s ability to develop and offer products and services that meet
changing industry standards in a timely and cost-effective manner;
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·
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the
requirement by state statutes of the Company’s insurance subsidiaries to
maintain minimum levels of capital, surplus and reserves and restrict
the
amount of dividends that the insurance subsidiaries may pay to the
Company
without prior regulatory approval; and
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·
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the
concentration of key accounting and information systems in a few
locations.
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For
a
description of factors that may cause actual results to differ materially from
such forward-looking statements, see Item 1A, “Risk Factors” of this annual
report on Form 10-K.
These
and
other risks and uncertainties may be described from time to time in the
Company's other reports and filings with the Securities and Exchange Commission.
The Company does not undertake to update any forward-looking statements to
reflect circumstances or events that occur after the date the forward-looking
statements are made.
2
INVESTORS
TITLE COMPANY AND SUBSIDIARIES
TABLE
OF
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3
GENERAL
Investors
Title Company (the "Company") is a holding company that operates through its
subsidiaries and was incorporated in the state of North Carolina in February
1973. The Company became operational on June 24, 1976, when it acquired
Investors Title Insurance Company ("ITIC") as a wholly owned subsidiary under
a
plan of exchange of shares of common stock. On September 30, 1983, the Company
acquired Northeast Investors Title Insurance Company ("NE-ITIC"), formerly
Investors Title Insurance Company of South Carolina, as a wholly owned
subsidiary under a plan of exchange of shares of common stock. Investors Capital
Management Company ("ICMC"), a wholly owned subsidiary of the Company, was
organized on October 17, 2003. The Company's most recent subsidiary, Investors
Trust Company ("Investors Trust"), was granted a trust charter by the North
Carolina Banking Commissioner on February 17, 2004. The Company's executive
offices are located at 121 North Columbia Street, Chapel Hill, North Carolina
27514 and
its
telephone number is
(919)
968-2200. The
Company maintains a website at www.invtitle.com.
OVERVIEW
OF THE BUSINESS
The
Company engages in several lines of business.
Its
primary
business
activity is the issuance of residential and commercial title insurance through
ITIC and NE-ITIC. The second line of business provides tax-deferred real
property exchange
services through its subsidiaries, Investors Title Exchange Corporation (“ITEC”)
and Investors Title Accommodation Corporation (“ITAC”). The Company entered into
the
business of providing investment management and trust services to individuals,
trusts and other entities in 2003. The Company has two reportable operating
segments. The title insurance segment consists of the operations of ITIC and
NE-ITIC. The exchange services segment consists of the operations of ITEC and
ITAC. See Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 13 of Notes to Consolidated Financial
Statements in the 2007
Annual
Report to Shareholders incorporated by reference in this Form 10-K Annual Report
for additional information related to the revenues, income and assets
attributable to the Company's primary
operating segments.
Title
Insurance
Through
its two wholly owned title underwriting subsidiaries, ITIC and NE-ITIC, the
Company underwrites land title insurance for owners and mortgagees as a primary
insurer. ITIC and NE-ITIC offer primary title insurance coverage to both owners
and mortgagees of real estate and also offers the reinsurance of title insurance
risks to other title insurance companies. Title insurance protects against
loss
or damage resulting from title defects that affect real property. The commitment
and policies issued are predominantly the standard American Land Title
Association (“ALTA”) approved
forms.
Title
Insurance Policies. There
are
two basic types of title insurance policies - one for the mortgage lender and
one for the real estate owner. A lender often requires property owners to
purchase title insurance to protect its position as a holder of a mortgage
loan,
but the lender's title insurance policy does not protect the property owner.
The
property owner has
to
purchase a
separate owner's title insurance policy to protect their investment. The Company
issues title
insurance policies on the basis of a title report. The title report documents
the current status of title to the property.
4
Upon
a
closing, the seller executes a deed to the new owner. When
real
property is conveyed from one party to another, occasionally there is an
undisclosed defect in the title or a mistake in a prior deed, will or mortgage
that may give a third party a legal claim against such property. If a claim
is
made against real property, title insurance provides indemnification against
insured defects. The title insurer has the option to retain counsel and pay
the
legal expenses to eliminate or defend against any title defects, pay any third
party claims arising from errors in title examination and recording or pay
the
insured’s actual losses, up to policy limits, arising from title risks as
defined in the policy.
A
title
risk is one of any number of things that could jeopardize the property owner's
or mortgagee’s interest in the property defined in the title policy. Such risks
include title being vested in someone or some entity other than the insured,
unmarketable title, lack of a right of access to the property, invalidity or
unenforceability of the insured mortgage, or other defects, liens, or
encumbrances against the property. Examples of common types of covered risks
include defects arising from prior unsatisfied mortgages, tax liens or confirmed
assessments, judgments against the property or encumbrances against the property
arising through easements, restrictions or other existing covenants. Title
insurance also generally protects against deeds or mortgages that contain
inaccurate legal descriptions, that were forged or improperly acknowledged
or
delivered, that were executed by spouses without the other spouse’s signature or
release of marital interest or that were conveyed by minors or
incompetents.
Insured
Risk on Policies in Force. Generally,
the amount of the insured risk or “face amount”of insurance on a title insurance
policy is equal to the lesser of the purchase price of the insured property
or
the fair market value of the property. In the event that a claim is made against
the property, the insurer is responsible for paying the legal costs associated
with eliminating covered title defects or defending the insured party against
covered title
defects affecting the property. The insurer may choose to pay the policy limits
to the insured or, if the loss is less than policy limits, the amount of the
insured’s actual loss due to the title defect, at
which
time the insurer's duty to defend the claim and all other obligations of the
insurer with respect to the claim are satisfied.
At
any
given time, the insurer's actual risk of monetary loss under outstanding
policies is only a portion of the aggregate insured risk, or total face amount,
of all policies in force. The lower risk results primarily from the reissuance
of title insurance policies by other underwriters over time when the property
is
conveyed or refinanced. The coverage on a lender's title insurance policy is
reduced and eventually terminated as the mortgage loan it secures is paid.
An
owner's policy is effective as long as the insured has an ownership interest
in
the property or has liability under warranties of title. Due to the variability
of these factors, the aggregate contingent liability of a title
underwriter on
outstanding policies of the Company and its subsidiaries cannot be determined
with any precision.
Losses
and Reserves. While
most other forms of insurance provide for the assumption of risk of loss arising
out of unforeseen events, title insurance is based upon a process of loss
avoidance. Title insurance generally serves to protect the policyholder from
the
risk of loss from events that predate the issuance of the policy. Losses
on
policies typically occur when a title defect is not discovered during the
examination and settlement process or the occurrence of certain hidden risks
which cannot be determined from an accurate search of public land records.
The
maximum amount of liability under a title insurance policy is generally the
face
amount of the policy plus the cost of defending the insured’s title against an
adverse claim. Reserves for claim losses are established based upon known
claims, as well as estimated losses
incurred but not yet reported to the Company,
based
upon historical experience and other factors.
5
Title
claims can often be complex, vary greatly in dollar amounts and are affected
by
economic and market conditions and may involve uncertainties as to ultimate
exposure, and therefore, reserve estimates are subject to variability. For
a
more complete description of the Company’s reserves for claims, see Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations in the 2007 Annual Report of Shareholders incorporated by reference
in this Form 10-K Annual Report.
Geographic
Operations. ITIC
was
incorporated in the State of North Carolina on January 28, 1972, and became
licensed to write title insurance in the State of North Carolina on February
1,
1972. At present, ITIC primarily writes land title insurance in
22
states and the District of Columbia, primarily in the eastern half of
the United
States. ITIC is licensed to write title insurance in 44 states and the District
of Columbia.
NE-ITIC
was incorporated in the State of South Carolina on February 23, 1973, and became
licensed to write title insurance in that state on November 1, 1973. It
currently writes title insurance as a primary insurer and as a reinsurer in
the
State of New York. NE-ITIC is also licensed to write title insurance in
18
additional states and the
District of Columbia.
Premiums
from title insurance written in the state of North Carolina represent the
largest source of revenue for the title insurance segment. In
the
state of North Carolina, ITIC primarily issues
title insurance commitments and policies through branch offices. Title policies
are primarily issued through issuing agents in other states. For a description
of the level of net premiums written geographically by state, refer to Item
7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 2007
Annual
Report of Shareholders incorporated by reference in this Form 10-K Annual
Report.
Each
state license authorizing ITIC or NE-ITIC to write title insurance must be
renewed annually. These licenses are necessary for the companies to operate
as a
title insurer in each state in which they write
premiums.
Ratings.
The
Company’s title insurance subsidiaries are regularly assigned ratings by
independent agencies designed to
indicate their financial condition and/or
its claims paying ability. The rating agencies determine ratings primarily
by
analyzing financial data. ITIC has been rated by two independent Fannie
Mae-approved financial analysis firms, Demotech, Inc. and LACE Financial
Corporation (“LACE”), with financial stability ratings of A" (A Double Prime),
and
B+,
respectively. NE-ITIC's financial stability also has been recognized by
Demotech, Inc. and LACE with ratings of A" (A Double Prime), and
A,
respectively.
According to Demotech, title underwriters earning a Financial Stability Rating
of A'' (A Double Prime) possess Unsurpassed
financial stability related to maintaining positive surplus as regards
policyholders, regardless of the severity of a general economic downturn or
deterioration in the title insurance cycle. A LACE rating of “A” or “B+”
indicates that a title insurance company has a strong overall financial
condition that will allow it to meet its future claims, and that, generally,
the
company has good operating earnings, is well capitalized and has adequate
reserves.
6
Reinsurance.
The
Company assumes and cedes reinsurance with other insurance companies in the
normal course of business. Reinsurance
is a contractual arrangement whereby one insurer assumes some or all of the
risk
exposure written by another insurer. Ceded
reinsurance is comprised of excess of loss treaties, which protects against
losses over certain amounts.
In
the
ordinary course of business, ITIC and NE-ITIC reinsure certain risks with other
title insurers for the purpose of limiting their risk exposure and to comply
with state insurance regulations. They also assume reinsurance for certain
risks
of other title insurers for which they receive additional income. For the last
three years, revenues from reinsurance activities accounted for less than 1%
of
total premium volume.
Exchange
Services
In
1988,
the Company established Investors Title Exchange Corporation, a wholly owned
subsidiary ("ITEC"), to provide services in connection with tax-deferred
exchanges of like-kind property pursuant to Section 1031 of the Internal Revenue
Code. ITEC acts as an intermediary in tax-deferred exchanges of property held
for productive use in a trade or business or for investments, and its income
is
derived from fees for handling exchange transactions and interest earned on
client deposits held by the Company.
Investors
Title Accommodation Corporation ("ITAC") provides
services for accomplishing reverse exchanges when taxpayers decide
to
acquire
replacement property before selling the relinquished property.
In
February 2006, the IRS proposed new regulations which, if adopted, may
negatively affect the ability of qualified intermediaries to retain a portion
of
the interest earned on exchange funds held during exchange transactions. If
passed as proposed, these regulations would adversely impact the exchange
services segment and the Company’s net income, since a significant portion of
the exchange segment’s revenues are based on retaining a portion of the interest
income earned on deposits held. Refer to Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations in the 2007
Annual
Report to Shareholders incorporated by reference in this Form 10-K Annual Report
for additional information regarding IRS regulations.
Investment
Management and Trust Services
Other
services provided include
those offered by Investors Trust Company (“Investors Trust”), Investors Capital
Management Company (“ICMC”), and Investors Title Management Services, Inc.
(“ITMS”), all wholly owned subsidiaries of the Company. Investors Trust and ICMC
work together to provide investment management and trust services to
individuals, companies, banks and trusts. ITMS offers various consulting
services to provide clients with the technical expertise to start and
successfully operate a title insurance agency. These subsidiaries are not
currently a reportable segment for which financial information is presented
in
the Company’s financial statements and are included and reported in the category
All Other.
7
OPERATIONS
OF SUBSIDIARIES
See
Note
13 of Notes to Consolidated Financial Statements in the 2007
Annual
Report to Shareholders incorporated by reference in this Form 10-K Annual Report
for additional information related to the Company's operating
segments.
Title
Insurance
ITIC
and
NE-ITIC issue title insurance coverage through direct operations or through
partially owned
or
independent title insurance agents who
issue
title policies on behalf of ITIC or NE-ITIC. Title insurance premiums written
reflect a one-time premium payment, with no recurring premiums.
Generally,
premiums are recorded and recognized as revenue at the time of closing of the
related transaction as the earnings process is considered complete. Where the
policy is issued directly through a branch office, the premiums collected are
retained by the Company. Where the policy is issued through a title insurance
agent, the agent retains a majority of the premium as a commission.
Title insurance commissions earned by the Company's agents are recognized as
expense concurrently with premium recognition. The percentage of the premium
retained by agents varies by region to region and is sometimes regulated by
the
states.
For
a
description of the level of net premiums written by direct and agency
operations, refer to Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations in the 2007
Annual
Report to Shareholders incorporated by reference in this Form 10-K Annual
Report.
Exchange
Services
ITEC
and
ITAC provide customer services in connection with tax-deferred exchanges
pursuant to Section 1031 of the Internal Revenue Code. Acting as a qualified
intermediary, ITEC holds the proceeds from sales of relinquished properties
until the acquisition of identified replacement properties occurs. ITAC
facilitates reverse tax-deferred exchanges pursuant to IRS Revenue Procedure
2000-37.
CYCLICALITY
AND SEASONALITY
Title
Insurance
Real
estate activity is cyclical in nature. Title insurance premiums are closely
related to the level of real estate activity and the volume of mortgage
origination. A number of general and economic factors influence demand for
title
insurance, including changes in mortgage interest rates, consumer confidence,
economic conditions, supply and demand and family income levels.
The
title
insurance business tends to be seasonal as well as cyclical. Historically,
the winter months have the least real estate activity because fewer real estate
transactions occur, while the remaining quarters are more active. Refinance
activity is generally less seasonal, but it is subject to interest rate
fluctuations.
8
Exchange
Services
Seasonal
and
other
factors affecting the level of real estate activity and the volume of title
premiums written will also generally affect
the demand for exchange services.
MARKETING
Title
Insurance
The
Company markets its title insurance services to a broad range of customers
in
the residential and commercial market sectors of the real estate industry.
Issuing agents are typically real estate attorneys or subsidiaries of community
and regional mortgage lending institutions, depending on local customs and
regulations and the Company’s marketing strategy in a particular territory.
ITIC
and
NE-ITIC strive to provide superior service to their customers and consider
this
an important factor in attracting and retaining customers. Branch and corporate
personnel strive to develop new business and agency relationships to increase
market share and ITIC's Commercial Services Division provides services to
commercial clients.
Exchange
Services
Marketing
of tax-deferred
exchange services offered by ITEC and ITAC has been incorporated into the
marketing of the core title products offered by ITIC and NE-ITIC. The Commercial
Services Division of ITIC also markets the services offered by ITEC and ITAC
to
its commercial clients.
REGULATION
Title
Insurance
The
Company is an insurance holding company and therefore it is subject to
regulation in the states in which its insurance subsidiaries do business. These
regulations, among other things, require insurance holding companies to register
and file certain reports and require prior regulatory approval of the payment
of
dividends and other intercompany distributions or transfers.
Title
insurance companies are extensively regulated under applicable state laws.
All
states have requirements for admission to do business as an insurance company,
including minimum levels of capital and surplus and establishing reserves.
State
regulatory authorities monitor the stability and service of insurance companies
and possess broad powers with respect to the licensing of title insurers and
agents, approving rate schedules and policy forms, financial reporting and
accounting practices, reserve requirements, investments and
dividend restrictions, as well as examinations and audits of title insurers.
Both ITIC and NE-ITIC meet the statutory premium reserve requirements and the
minimum capital and surplus requirements of the states in which they are
licensed.
A
substantial portion of the assets of the Company’s title insurance subsidiaries
consists of their portfolios of investment securities. Both of these
subsidiaries are required by various states’ laws to maintain assets of a
defined quality and amount.
The
Company's two insurance subsidiaries are subject to examination at any time
by
the insurance regulators in the states where they are licensed. These
and
other
governmental authorities have the power to enforce state and federal laws to
which the title insurance subsidiaries are subject, including but
not
limited to, the
Real
Estate Settlement Procedures Act.
9
ITIC
is
domiciled in North Carolina and is subject to North Carolina insurance
regulations and other states where it does business. The North Carolina
Department of Insurance typically schedules financial examinations every
five
years. ITIC was last examined by the North Carolina Department of Insurance
for
the period January 1, 2000 through December 31, 2004. No material deficiencies
were noted in the report. NE-ITIC is domiciled in South Carolina and subject
to
South Carolina insurance regulations. The South Carolina Department of Insurance
periodically schedules financial examinations. NE-ITIC was examined by the
South
Carolina Department of Insurance for the period January 1, 2000 through December
31, 2005. No material deficiencies were noted.
In
addition to financial examinations, ITIC and NE-ITIC are subject to market
conduct examinations by the North Carolina Department of Insurance and the
South
Carolina Department of Insurance, respectively. These audits examine domiciled
state activity. ITIC's last market conduct examination commenced in May 2004
for
the period January 1, 2001 through December 31, 2003, with no material
deficiencies noted. NE-ITIC's last market conduct examination commenced in
November 2001 for the period January 1, 1998 through December 31, 2000, with
no
material deficiencies noted by the market conduct
examiners.
The
United States Department of Housing and Urban Development (“HUD”) continues to
indicate that it would like to make modifications to the Real Estate Settlement
Procedures Act (“RESPA”) and associated regulations. HUD published proposed
rules regarding RESPA for public comment on March 14, 2008 with a 60 day
comment period that expires on May 13, 2008. According
to HUD, the proposed rules are intended to improve disclosure of the loan terms
and closing costs consumers pay when purchasing or refinancing their home.
HUD
has also indicated that it intends to seek legislative changes to RESPA that
will complement the rules and provide HUD with enforcement mechanisms for some
of the most important consumer disclosures and protections. In
April 2007, the Government Accountability Office (“GAO”) released a report on
the title insurance industry in which it recommended that HUD and state
insurance regulators take actions to improve consumers’ ability to comparison
shop for title insurance and strengthen the regulation and oversight of the
title insurance market, among other measures. Based on the information known
to
management at this time, it is not possible to predict the outcome of any of
the
GAO recommendations for the title insurance industry’s market and other matters,
or the market’s response to them. However, any material change in the Company’s
regulatory environment may have an adverse effect on its business.
Proposals
to change the laws and regulations governing insurance holding companies and
the
title insurance industry are often introduced in Congress, in the state
legislatures and before the various insurance regulatory agencies. The Company
regularly monitors such proposals and legislation, although the likelihood
and
timing of them and the impact they may have on the Company and its subsidiaries
cannot be determined at this time.
Exchange
Services
Intermediary
services are not federally regulated by any regulatory commissions, and neither
ITEC or ITAC operate in any states that regulate this industry. ITEC and ITAC
both provide services to taxpayers pursuant to Internal Revenue Service (“IRS”)
regulations that provide taxpayers a safe harbor by using a qualified
intermediary to structure tax-deferred exchanges of property and using an
exchange accommodation titleholder to hold property in reverse exchange
transactions. Periodically, changes to the tax code are proposed containing
provisions that impact like-kind exchanges.
In
2006, the IRS proposed new regulations which, if adopted, may negatively affect
the ability of qualified intermediaries to retain a portion of the interest
earned on exchange funds held during exchange transactions. If passed as
proposed, these regulations would materially adversely impact the exchange
services segment and the Company’s net income. Refer to Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations in
the
2007 Annual Report to Shareholders incorporated by reference in this Form 10-K
Annual Report for information regarding IRS regulations.
10
Investment
Management and Trust Services
Investors
Trust Company is regulated by the North Carolina Commissioner of Banks.
Investors Trust Company was last examined by the North Carolina Commissioner
of
Banks for the period ended December 31, 2006.
No
material deficiencies were noted in the Report of Examination.
COMPETITION
Title
Insurance
The
title
insurance industry is highly competitive. ITIC's and NE-ITIC's major competitors
together comprise a majority of the title insurance market on a national level.
The number and size of competing companies varies in the different geographic
areas in which the Company conducts business. Key factors that affect
competition in the title insurance industry are timeliness
and quality of service, price, expertise and the financial strength and size
of
the insurer. Title insurance underwriters also compete for agents based upon
service and commission levels.
Some
title insurers currently have greater financial resources, larger distribution
networks and more extensive computerized databases of property records and
related information than the Company.
In
addition, there are numerous industry-related regulations and statutes that
set
out conditions and requirements to conduct business. Changes to or the removal
of such regulations and statutes could result in additional competition from
alternative title insurance products or new entrants into the industry that
could materially affect the Company's business operations and financial
condition.
Exchange
Services
Competition
for ITEC and ITAC comes from other title insurance companies and agents, banks,
attorneys, and other independently-owned qualified intermediaries that offer
exchange services. Key elements that affect competition are price, expertise,
timeliness and quality of service and the financial strength and size of the
company. Exchange services are not a regulated industry; there is no market
data
available regarding the Company's market position in this industry.
CUSTOMERS
The
Company is not dependent upon any single customer or a few customers, and the
loss of any single customer would not have a material adverse effect on the
Company.
11
INVESTMENT
POLICIES
The
Company and its subsidiaries derive a substantial portion of their income from
investments in bonds (municipal and corporate) and equity securities. The
investment policy is designed to maintain a high quality portfolio and maximize
income. The Company invests primarily in short-term investments, federal and
municipal governmental securities and investment grade debt securities and
equity securities. Some state laws impose restrictions upon the types and
amounts of investments that can be made by the Company's insurance subsidiaries.
The Company manages its investment portfolio and does not utilize third party
investment managers. The securities in the Company’s portfolio are subject to
economic conditions and normal market risks.
See
Note
3 of Notes to Consolidated Financial Statements in the 2007
Annual Report to Shareholders incorporated by reference in this Form 10-K Annual
Report for the major categories of investments, scheduled maturities, amortized
cost, market values of investment securities and earnings by
category.
ENVIRONMENTAL
MATTERS
The
title
insurance policies ITIC and NE-ITIC currently issue exclude any liability
for environmental risks and contamination. Although policies issued prior to
1992 may not specifically exclude such environmental risks, they generally
do
not provide affirmative coverage for such risks. As a result, the Company
has not experienced and does not anticipate that it or its subsidiaries will
incur any significant expenses related to environmental claims.
In
connection with effecting tax-deferred exchanges of like-kind property, ITEC
and
ITAC may temporarily hold title to property pursuant to an accommodation
titleholder agreement. In such situations, the person or entity for which title
is being held must execute an indemnification agreement pursuant to which it
agrees to indemnify ITEC or ITAC, as appropriate, for any environmental or
other
claims which may arise as a result of the arrangement.
EMPLOYEES
The
Company has no paid employees. Officers of the Company are full-time paid
employees of ITIC. The Company’s subsidiaries had 227 full-time employees and 27
part-time employees as of December 31, 2007. None of the employees are covered
by any collective bargaining agreements. Management considers its relationship
with its employees to be favorable.
ADDITIONAL
INFORMATION
The
Company’s internet address is www.invtitle.com,
the
contents of which are not and shall not be deemed a part of this document or
any
other U.S. Securities and Exchange filing. The Company makes available free
of
charge through
its
Internet website its annual reports on Form 10-K, its quarterly reports on
Form
10-Q, its current reports on Form 8-K, and all amendments to those reports
filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act
of 1934 as soon as reasonably practicable after such materials are
electronically filed with, or furnished to, the Securities and Exchange
Commission (“SEC”). The
information is free of charge and may be reviewed and downloaded from the
website at any time.
The
public may read any material it has filed with the SEC at the SEC’s Public
Reference Room at 100 F. Street, N.E., Washington, D.C. 20549. The Investors
section of the Company’s website also includes its corporate governance
guidelines and code of ethics.
12
The
risk
factors listed in this section and other factors noted herein or incorporated
by
reference could cause actual results to differ materially from those contained
in any forward-looking statements.
The
Company’s results of operations and financial condition are susceptible to the
changing level of demand for title insurance.
The
demand for the Company’s title insurance and other real estate transaction
products and services varies over time and from year to year and is dependent
upon, among other things, the volume of commercial and residential real estate
transactions and mortgage refinancing transactions. The volume of these
transactions has historically been influenced by factors such as the state
of
the overall economy and mortgage interest rates. When
mortgage interest rates are increasing or during an economic downturn or
recession, real estate activity typically declines and the title insurance
industry tends to experience lower revenues and profitability. Both the volume
and the average price of residential real estate transactions have recently
experienced declines in many parts of the country, and these trends appear
likely to continue. Volume is a key factor in the Company’s profitability due to
the existence of fixed costs such as personnel and occupancy expenses associated
with the support of the issuance of the insurance policy and of general
corporate operations. The
overall demand for title insurance also depends in part upon the requirement
by
mortgage lenders and participants in the secondary mortgage market that title
insurance policies be obtained on residential and commercial real property.
The
Company may experience losses resulting from fraud, defalcation or misconduct.
Fraud,
defalcation, regulatory noncompliance and other misconduct by the Company’s
agents, approved attorneys and employees are risks inherent in the Company’s
business. Agents and approved attorneys typically handle large sums of money
in
trust pursuant to the closing of real estate transactions and misappropriation
of funds by any of these parties could result in large
title
claims.
Differences
between actual claims experience and underwriting and reserving assumptions
may
adversely affect the Company’s financial results.
The
Company’s net income is affected by the extent to which its actual claims
experience is consistent with the assumptions used in establishing reserves
for
claims. Reserves for claims are established based on actuarial estimates
of how much the Company will need to pay for reported as well as incurred,
but
not yet reported claims. In addition, management considers factors such as
the
Company’s historical claims experience, case reserve estimates on reported
claims, large claims and other relevant factors in determining loss provision
rates and the aggregate recorded expected liability for claims. Due to the
nature of the underlying risks and the high degree of uncertainty associated
with the determination of reserves for claims, the Company cannot determine
precisely the amounts which it will ultimately pay to settle its claims. Such
amounts may vary from the estimated amounts, particularly when those payments
may not occur until well into the future. To the extent that actual claims
experience is less favorable than the underlying assumptions used in
establishing such liabilities, the Company could be required to increase
reserves. Title claims can often be complex, vary greatly in dollar amounts
and
are affected by economic and market conditions and may involve uncertainties
as
to ultimate exposure, and therefore, reserve estimates are subject to
variability. In
addition, the Company may experience unexpected large losses periodically which
require it to increase its title loss reserves.
13
Regulatory
scrutiny of
the industry and potential changes to RESPA could result in financial losses
or
otherwise impact the manner the Company conducts business.
The
title
insurance industry has recently been under regulatory scrutiny in a number
of
states with respect to pricing practices, possible Real Estate Settlement
Procedures Act (“RESPA”) violations and unlawful rebating practices. The
regulatory investigations have resulted in settlements and fines for some title
insurance underwriters. In 2007, the Government Accountability Office released
a
report in response to a request from the House of Representatives Committee on
Financial Services regarding the title industry. The United States Department
of
Housing and Urban Development (“HUD”) is responsible for enforcing RESPA. HUD
continues to indicate that it would like to make modifications to RESPA and
associated regulations which would result in changes to the existing industry
regulatory framework that could have a material impact on the Company’s
marketing and operations. The Company is periodically involved in litigation
arising in the ordinary course of business.
The
Company’s non-insurance subsidiaries are also subject to state and federal
regulations.
Some
of
the Company’s other businesses operate within state and federal guidelines. Any
changes in the applicable regulatory environment or changes in existing
regulations could restrict its existing or future operations. Revenues from
the
Company’s exchange services segment are closely related to the tax rate on
capital gains and other provisions
in the
Internal Revenue Code. The Company’s revenues in future periods will continue to
be subject to these and other factors which are beyond its control. In February
2006, the IRS proposed new regulations which, if adopted, may negatively affect
the ability of qualified intermediaries to retain interest earned on exchange
funds they are holding. If passed as proposed, these regulations would
materially adversely impact the exchange services segment and the Company’s net
income, since a significant portion of the exchange segment’s revenues are based
on retaining a portion of the interest income earned on deposits held by the
Company. In
March
2007, the IRS issued a revised regulatory flexibility analysis and requested
more specific information to help in determining the impact the rules would
have
on small businesses. The proposed regulations have still not been finalized.
In
addition, the investment management and trust services division is regulated
by
the North Carolina Commissioner of Banks.
The
Company’s insurance subsidiaries are subject to complex government
regulations.
The
Company’s title insurance businesses are subject to extensive state
laws and regulations by state insurance authorities in each state in which
they
operate. These laws and regulations are primarily intended for the protection
of
policyholders and consumers. The nature and extent of these laws and regulations
typically involve, among other matters, licensing and renewal requirements
and
trade and marketing practices, including,
but not limited to:
|
|
|
|
·
|
licensing
of insurers and agents;
|
|
·
|
approval
of premium rates for insurance;
|
|
·
|
limitations
on types and amounts of
investments;
|
|
·
|
restrictions
on the size of risks that may be insured by a single
company;
|
|
·
|
deposits
of securities for the benefit of policy
holders;
|
|
·
|
filing
of annual and other reports with respect to financial
condition;
|
|
·
|
approval
of policy forms; and
|
|
·
|
regulation
regarding the use of personal
information.
|
These
laws and regulations are subject to change and
may
restrict the Company’s ability to implement rate increases or other actions that
it may want to take to enhance its operating results or have a negative impact
on its ability to generate revenue and earnings.
14
Competition
in the Company’s business affects its revenues.
The
title
insurance industry is highly competitive. Key factors that affect competition
in
the title insurance business are quality of service, price within
regulatory parameters, expertise, timeliness and the financial strength and
size
of the insurer. Title companies compete for premiums by choosing various
distribution channels which may include company-owned operations and issuing
agency relationships with attorneys, lenders, realtors, builders and other
settlement service providers. Title insurance underwriters compete for agents
on
the basis of service and commission levels. Some title insurers currently have
greater financial resources, larger distribution networks and more extensive
computerized databases of property records and information than the Company.
The
number and size of competing companies varies in the different geographic areas
in which the Company operates.
Competition among the providers of title insurance, new entrants to the industry
or the acceptance of new alternatives to traditional title products by the
marketplace could adversely affect the Company’s operations and financial
condition.
The
Company’s success relies on its ability to attract and retain key personnel and
agents.
Competition
for skilled and experienced personnel and agents in the Company’s industry is
high. The Company may have difficulty hiring the necessary marketing and
management personnel to support any future growth. The loss of any key employee
or the failure of any key employee to perform in their current position could
prevent the Company from realizing future growth. Also, the Company cannot
provide assurance that it will succeed in attracting or retaining new agents.
Its results of operations and financial condition could be adversely affected
if
it is unsuccessful in attracting and retaining agents.
A
downgrade or a potential downgrade in one of the Company’s financial strength
ratings could result in a loss of business.
The
competitive positions of insurance companies rely in part on the independent
ratings of their financial strength and claims-paying ability. The
Company’s financial strength is subject to continued periodic review by rating
agencies. A
significant downgrade in the ratings of either of the Company’s policy-issuing
subsidiaries could negatively impact its ability to compete for new business
and
retain existing business and
maintain licenses necessary to
operate as title insurance companies in various states.
A
decline in the performance of the Company’s investments could materially
adversely affect net income and cash flows.
Changes
in general economic conditions, interest
rates, activities in securities markets and other external factors could
adversely affect the value of the Company’s investment portfolio and,
in
turn, the Company’s operating results and financial condition.
15
Insurance
regulations limit the ability of the Company’s insurance subsidiaries to pay
dividends to it.
The
Company is an insurance holding company and has no substantial operations of
its
own. The Company’s ability to pay dividends and meet its obligations is
dependent,
among
other things,
on the
ability of its subsidiaries to pay dividends or repay funds to it. The Company’s
insurance subsidiaries are subject to insurance and other regulations that
limit
the amount of dividends, loans or advances to it based on the amount of adjusted
unassigned surplus and net income and require these subsidiaries to maintain
minimum amounts of capital, surplus and reserves. In general, dividends in
excess of prescribed limits are deemed “extraordinary” and require prior
state insurance
regulatory approval.
These
dividend restrictions could limit the Company’s ability to pay dividends to
its
shareholders or grow its business. As of December 31, 2007,
approximately
$63,219,000 of
the
consolidated stockholders' equity represented net assets of the Company’s
subsidiaries that cannot be transferred in the form of dividends, loans or
advances to the parent company under statutory regulations without prior
insurance department approval. For further discussion of the regulation of
dividend payments and other transactions between affiliates, see “Liquidity and
Capital Resources” under Management’s Discussion and Analysis in Item 7 of this
report.
The
Company may encounter difficulties managing growth or rapid technology changes,
which could adversely affect its results.
The
Company has historically achieved revenue growth in part through a combination
of developing related new products or services and increasing its market share
for existing products. A portion of the Company’s growth may be in services or
geographic areas with which management is less familiar than with its core
business and geographic areas. The expansion of the Company’s business,
particularly in new services or geographic areas, or significant changes in
technology may subject it to associated risks, such as the diversion of
management’s attention, lack of substantial experience in operating such
businesses and a change in competitive position resulting
from rapid technology changes.
The
Company relies upon North Carolina for about 50% of its title insurance
premiums.
North
Carolina is the largest source of revenue for the title insurance segment and,
in 2007, North Carolina-based premiums accounted for approximately 50% of
premiums earned by the Company. A decrease in North Carolina business would
negatively impact financial results.
Key
accounting and information systems are concentrated in a few locations.
The
Company’s corporate headquarters, accounting and technology operations are
concentrated in North Carolina. These critical business operations are subject
to interruption by natural disasters, fire, power shortages and other events
beyond the Company’s control. A catastrophic event that results in the
destruction or disruption of any of the Company’s critical business operations
or systems could severely affect its ability to conduct normal business
operations and, as a result, there could be a material and adverse effect on
the
Company’s business, operating results and financial condition.
16
Certain
provisions of the Company’s shareholder rights plan may make a takeover of the
Company difficult.
The
Company has a shareholders rights plan which could discourage transactions
involving actual or potential changes of control, including transactions that
otherwise could involve payment of a premium over prevailing market prices
to
the Company’s shareholders for their common shares.
None
17
The
Company owns two adjacent office buildings and property located on the corner
of
North Columbia and West Rosemary Streets in Chapel Hill, North Carolina, which
serve as the Company's corporate headquarters. The main building contains
approximately 23,000 square feet and has on-site parking facilities. The
Company's principal subsidiary, ITIC, leases office space in 32 locations
throughout North Carolina, South Carolina, Michigan and Nebraska. NE-ITIC leases
office space in one location in New York. Each of the office facilities occupied
by the Company and its subsidiaries are in good condition and adequate for
present operations. In November 2005, the Company purchased approximately 7,000
square feet of additional office space in Chapel Hill, North Carolina that
was
previously leased for ITEC, ITAC, ITIC’s Commercial Services Division and ITIC’s
Settlement Services Division.
The
Company and its subsidiaries are involved in various 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 results of
operations.
No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year ended December 31, 2007.
EXECUTIVE
OFFICERS OF THE COMPANY
Following
is information regarding the executive officers of the Company as of March
14,
2008. Each officer is appointed at the annual meeting of the Board of Directors
to serve until the next annual meeting of the Board or until his or her
respective successor has been elected and qualified.
|
Name
|
Age
|
Position
with Registrant
|
||
|
J.
Allen Fine
|
73
|
Chief
Executive Officer and Chairman of the Board
|
||
|
James
A. Fine, Jr.
|
45
|
President,
Treasurer, Chief Financial Officer, Chief Accounting Officer and
Director
|
||
|
W.
Morris Fine
|
41
|
Executive
Vice President, Secretary and
Director
|
J.
Allen Fine
has been
Chief Executive Officer and Chairman of the Board of the Company since its
incorporation in 1973. Mr. Fine also served as President of the Company until
May 1997. Mr. Fine is the father of James A. Fine, Jr., President, Treasurer,
Chief Financial Officer, Chief Accounting Officer, and Director of the
Company, and W. Morris Fine, Executive Vice President, Secretary and Director
of
the Company.
18
James
A. Fine, Jr.
was
named Vice President of the Company in 1987. In 1997, he was named President
and
Treasurer and appointed as a Director of the Company. In 2002, he was appointed
as Chief Financial Officer and Chief Accounting Officer. He is the son of J.
Allen Fine, Chief Executive Officer and Chairman of the Board of the Company,
and the brother of W. Morris Fine, Executive Vice President, Secretary and
Director of the Company.
W.
Morris Fine
was
named Vice President of the Company in 1992. In 1993, he was named Treasurer
of
the Company and served in that capacity until 1997. In 1997, he was named
Executive Vice President and Secretary of the Company. In 1999, he was appointed
as a Director of the Company. W. Morris Fine is the son of J. Allen Fine, Chief
Executive Officer and Chairman of the Board of the Company, and the brother
of
James A. Fine, Jr., President, Treasurer, Chief Financial Officer, Chief
Accounting Officer, and Director of the Company.
19
The
high
and low sales prices for the Company's common stock, as reported on the NASDAQ
National Market System, the dividends paid per common share for each quarter
in
the last two fiscal years and the approximate number of shareholders of record
are set forth under the caption "Common Stock Data" in the 2007 Annual Report
to
Shareholders and are incorporated by reference in this Form 10-K Annual Report.
For a discussion of factors that may limit the Company's ability to pay
dividends on its common stock, refer to the subsection of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations
entitled "Liquidity and Capital Resources" in the 2007 Annual Report to
Shareholders, incorporated by reference in this Form 10-K Annual Report.
Additional information required by this item is incorporated by reference in
the
2007 Annual Report to Shareholders.
The
following table provides information about purchases by the Company (and all
affiliated purchasers) during the quarter ended December 31, 2007 of equity
securities that are registered by the Company pursuant to Section 12 of the
Exchange Act:
Issuer
Purchases of Equity Securities
|
Period
|
Total
Number of
Shares
Purchased
|
Average Price
Paid per Share
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
|
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plan
|
|||||||||
|
Beginning
of period
|
307,345
|
||||||||||||
|
10/01/07 –
10/31/07
|
9,031
|
$
|
39.12
|
9,031
|
298,314
|
||||||||
|
11/01/07
– 11/30/07
|
1,526
|
39.18
|
1,526
|
296,788
|
|||||||||
|
12/01/07
– 12/31/07
|
61,452
|
38.03
|
61,452
|
235,336
|
|||||||||
|
Total:
|
72,009
|
$
|
38.19
|
72,009
|
235,336
|
||||||||
For
the
quarter ended December 31, 2007, the Company purchased an aggregate of 72,009
shares of the Company’s common stock pursuant to the purchase plan (the “Plan”)
that was publicly announced on June 5, 2000. The Board of Directors of the
Company approved the purchase of up to an aggregate of 500,000 and 125,000
shares, respectively, of the Company’s common stock pursuant to the Plan. Unless
terminated earlier by resolution of the Board of Directors, the Plan will expire
when all shares authorized for purchase under the Plan have been purchased.
The
Company intends to make further purchases under this Plan.
20
The
selected financial data for the last five fiscal years of the Company and its
subsidiaries is set forth under the caption "Financial Highlights" in the 2007
Annual Report to Shareholders and is incorporated by reference in this Form
10-K
Annual Report. The information should be read in conjunction with the
Consolidated Financial Statements, Notes to Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results
of
Operations in the 2007 Annual Report to Shareholders, which are incorporated
by
reference in this Form 10-K Annual Report.
Management's
Discussion and Analysis of Financial Condition and Results of Operations in
the
2007 Annual Report to Shareholders is incorporated by reference in this Form
10-K Annual Report.
The
subsection entitled "Quantitative and Qualitative Disclosures about Market
Risk"
in Management's Discussion and Analysis of Financial Condition and Results
of
Operations in the 2007 Annual Report to Shareholders is incorporated by
reference in this Form 10-K Annual Report.
The
financial statements and supplementary data in the 2007 Annual Report to
Shareholders are incorporated by reference in this Form 10-K Annual
Report.
The
financial statements meeting the requirements of Regulation S-X are attached
hereto as Schedules I, II, III, IV and V.
The
supplementary financial information set forth in the section entitled "Selected
Quarterly Financial Data" in Management's Discussion and Analysis of Financial
Condition and Results of Operations in the 2007 Annual Report to Shareholders
is
incorporated by reference in this Form 10-K Annual Report.
None.
21
DISCLOSURE
CONTROLS AND PROCEDURES
An
evaluation was performed by the Company's management, including its Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures were
effective as of December 31, 2007 for the purpose of providing reasonable
assurance that the information required to be disclosed in the reports the
Company files or submits under the Securities Exchange Act of 1934 (the “Act”)
(i) is recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and forms and (ii) is accumulated and communicated
to the Company's management, including its Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosures.
INTERNAL
CONTROL OVER FINANCIAL REPORTING
(a) Management’s
report on internal control over financial reporting.
The
Company’s management’s report on internal financial reporting is set forth in
the Company’s 2007 Annual Report under the heading “Management’s Report on
Internal Control over Financial Reporting” and is incorporated herein by
reference.
(b) Attestation
report of the registered public accounting firm.
The
report of Dixon Hughes PLLC, the Company’s independent registered public
accounting firm, on the effectiveness of the Company’s internal control over
financial reporting is set forth in the Company’s 2007 Annual Report under the
heading “Report of Independent Registered Public Accounting Firm on Internal
Control” and is incorporated herein by reference.
(c) During
the quarter ended December 31, 2007, there were no changes in the Company's
internal control over financial reporting that has materially affected, or
is
reasonably likely to materially affect, the Company's internal control over
financial reporting. However, in the process of preparing the Annual Report
on
Form 10-K, management identified certain issues with respect to the Company’s
internal control over financial reporting and has remediated those issues.
In
particular, management discovered certain understatements in the provision
for
income taxes in the Company’s financial statements in certain periodic filings.
These errors were due to a misclassification of certain taxable municipal bonds
that the Company’s custodian had reported as tax-exempt in its tax reports to
the Company and were determined to be immaterial to the affected reporting
periods. The Company has corrected these errors for all affected periods in
its
Consolidated Financial Statements for the year ended December 31, 2007.
Management has discussed these matters with the Audit Committee of the Company’s
Board of Directors and the Company’s auditors, and the Company has made
corrective changes to its internal control procedures to improve the
effectiveness of its internal control over financial reporting and to reduce
the
likelihood of similar errors occurring in the future. The Company has
implemented a review process of the Company’s custodian statements to ensure
investments are categorized appropriately for tax purposes.
22
There
was
no information required to be disclosed in a report on Form 8-K during the
fourth quarter of the year that has not been reported.
23
The
information called for by this item is incorporated by reference to the material
under the captions “Proposal Requiring Your Vote,” “General
Information - Section
16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance - Board
of Directors and Committees -
The
Audit
Committee”
and
“Corporate Governance - Code of Business Conduct and Ethics” in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held
on
May 21, 2008. Other information with respect to the executive officers of the
Company is included at the end of Part I of this Form 10-K Annual Report under
the separate caption "Executive Officers of the Company.”
The
information called for by this item is set forth under the captions “Executive
Compensation,” “Compensation of Directors,” “Corporate Governance - Compensation
Committee Interlocks and Insider Participation” and “Compensation Committee
Report” in the Company's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 21, 2008 and is incorporated by
reference in this Form 10-K Annual Report.
The
information pertaining to securities ownership of certain beneficial owners
and
management is set forth under the caption “Stock Ownership of Certain Beneficial
Owners and
Management”
in
the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 21, 2008 and is incorporated by reference in
this
Form 10-K Annual Report.
The
following table provides information about the Company’s compensation plans
under which equity securities are authorized for issuance as of December 31,
2007. The Company does not have any equity compensation plans that have not
been
approved by its shareholders.
Equity
Compensation Plan Information
|
Plan
Category
|
Number of Securities to
be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
|
|||||||
|
Equity
compensation plans approved by shareholders
|
60,480
|
$
|
22.77
|
236,651
|
||||||
|
Equity
compensation plans not approved by shareholders
|
-
|
-
|
-
|
|||||||
|
Total
|
60,480
|
$
|
22.77
|
236,651
|
||||||
24
The
information called for by this item is set forth under the captions “Certain
Relationships and Related Transactions” and “Corporate Governance - Independent
Directors” set forth in the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 21, 2008 and is incorporated
by
reference in this Form 10-K Annual Report.
The
information pertaining to principal accountant fees and services is set forth
under the caption “Independent Registered Public Accounting Firm” in the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 21, 2008 and is incorporated by reference in
this
Form 10-K Annual Report.
25
(a)(1)
Financial
Statements.
The
following financial statements in the 2007 Annual Report to Shareholders are
hereby incorporated by reference in this Form 10-K Annual Report:
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
|
Consolidated
Statements of Income for the Years Ended December 31, 2007, 2006
and
2005
|
|
Consolidated
Statements of Stockholders' Equity for the Years Ended December
31, 2007,
2006 and 2005
|
|
Consolidated
Statements of Comprehensive Income for the Years Ended December
31, 2007,
2006 and 2005
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2007,
2006 and
2005
|
|
Notes
to Consolidated Financial Statements
|
|
Report
of Independent Registered Public Accounting Firm
|
|
Report
of Independent Registered Public Accounting Firm on Internal
Control
|
(a)(2)
Financial
Statement Schedules.
Following
is a list of financial statement schedules filed as part of this Form 10-K
Annual Report:
|
Schedule
Number
|
Description
|
|
|
I
|
Summary
of Investments - Other Than Investments in Related
Parties
|
|
|
II
|
Condensed
Financial Information of Registrant
|
|
|
III
|
Supplementary
Insurance Information
|
|
|
IV
|
Reinsurance
|
|
|
V
|
Valuation
and Qualifying Accounts
|
All
other
schedules are omitted, as the required information either is not applicable,
is
not required, or is presented in the consolidated financial statements or the
notes thereto.
(a)(3)
Exhibits.
The
exhibits filed as a part of this report and incorporated herein by reference
to
other documents are listed in the Index to Exhibits to this Annual Report on
Form 10-K.
26
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by
the undersigned, thereunto duly authorized.
|
INVESTORS
TITLE COMPANY
|
|
|
(Registrant)
|
|
|
By:
|
/s/
J. Allen Fine
|
|
J.
Allen Fine, Chairman and Chief Executive
|
|
|
Officer
(Principal Executive Officer)
|
|
March
17,
2008
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated on the 17th day of March, 2008.
|
/s/ J. Allen Fine
|
/s/
James R. Morton
|
|
|
J.
Allen Fine, Chairman of the Board and
|
James
R. Morton, Director
|
|
|
Chief
Executive Officer
|
||
|
(Principal
Executive Officer)
|
||
|
/s/ James A. Fine, Jr.
|
/s/
A. Scott Parker III
|
|
|
James
A. Fine, Jr., President, Treasurer and
|
A.
Scott Parker III, Director
|
|
|
Director
(Principal Financial Officer and
|
||
|
Principal
Accounting Officer)
|
||
|
/s/ W. Morris Fine
|
/s/
H. Joe King, Jr.
|
|
|
W.
Morris Fine, Executive Vice President,
|
H.
Joe King, Jr., Director
|
|
|
Secretary
and Director
|
||
|
/s/ David L. Francis
|
/s/
R. Horace Johnson
|
|
|
David
L. Francis, Director
|
R.
Horace Johnson, Director
|
|
|
Loren
B. Harrell, Jr., Director
|
27
SCHEDULE
I
INVESTORS
TITLE COMPANY AND SUBSIDIARIES
SUMMARY
OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
As
of December 31, 2007
|
Type of Investment
|
Cost(1)
|
Market Value
|
Amount at
which shown
in the
Balance Sheet (2)
|
|||||||
|
Fixed
Maturities:
|
||||||||||
|
Bonds:
|
||||||||||
|
States,
municipalities and political subdivisions
|
$
|
86,072,449
|
$
|
87,217,601
|
$
|
87,191,907
|
||||
|
All
other corporate bonds
|
4,208,096
|
4,391,574
|
4,391,574
|
|||||||
|
Short-term
investments
|
21,157,598
|
21,157,598
|
21,157,598
|
|||||||
|
Certificates
of deposit
|
64,935
|
64,935
|
64,935
|
|||||||
|
Total
fixed maturities
|
111,503,078
|
112,831,708
|
112,806,014
|
|||||||
|
Equity
Securities:
|
||||||||||
|
Common
Stocks:
|
||||||||||
|
Public
utilities
|
208,106
|
553,482
|
553,482
|
|||||||
|
Banks,
trust and insurance companies
|
34,884
|
246,120
|
246,120
|
|||||||
|
Industrial,
miscellaneous and all other
|
9,776,643
|
13,270,068
|
13,270,068
|
|||||||
|
Nonredeemable
preferred stocks
|
418,025
|
516,396
|
516,396
|
|||||||
|
Total
equity securities
|
10,437,658
|
14,586,066
|
14,586,066
|
|||||||
|
Other
Investments
|
1,634,301
|
1,634,301
|
||||||||
|
Total
investments per the consolidated balance sheet
|
$
|
123,575,037
|
$
|
129,026,381
|
||||||
| (1) |
Fixed
maturities are shown at amortized cost and equity securities are
shown at
original cost.
|
| (2) |
Bonds
of states, municipalities and political subdivisions are shown at
amortized cost for held-to-maturity bonds and
fair value for available-for-sale bonds. Equity securities are shown
at
fair value.
|
SCHEDULE
II
INVESTORS
TITLE COMPANY (PARENT COMPANY)
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
BALANCE
SHEETS
AS
OF DECEMBER 31, 2007 AND 2006
|
2007
|
2006
|
||||||
|
Assets
|
|||||||
|
Cash
and cash equivalents
|
$
|
207,436
|
$
|
194,391
|
|||
|
Investments
in fixed maturities, available-for-sale
|
17,707,623
|
19,951,713
|
|||||
|
Investments
in equity securities, available-for-sale
|
250,950
|
127,750
|
|||||
|
Short-term
investments
|
13,122,076
|
1,464,032
|
|||||
|
Investments
in affiliated companies
|
63,628,499
|
68,973,229
|
|||||
|
Other
investments
|
461,835
|
703,296
|
|||||
|
Other
receivables
|
263,518
|
410,018
|
|||||
|
Income
taxes receivable
|
1,255,157
|
876,666
|
|||||
|
Accrued
interest, dividends, and other assets
|
241,941
|
261,793
|
|||||
|
Property,
net
|
3,038,964
|
3,151,099
|
|||||
|
Deferred
income taxes, net
|
22,288
|
55,551
|
|||||
|
Total
Assets
|
$
|
100,200,287
|
$
|
96,169,538
|
|||
|
Liabilities
and Stockholders' Equity
Liabilities:
|
|||||||
|
Accounts
payable and accrued liabilities
|
$
|
924,447
|
$
|
893,875
|
|||
|
Total
liabilities
|
924,447
|
893,875
|
|||||
|
|
|||||||
|
Stockholders'
Equity:
|
|||||||
|
Class
A Junior Participating preferred stock - no par value (shares authorized
100,000; no shares issued)
|
-
|
-
|
|||||
|
Common
stock-no par (shares authorized 10,000,000; 2,411,318 and 2,507,325
shares
issued and outstanding 2007 and 2006, respectively, excluding 291,676
shares for 2007 and 2006 of common stock held by the Company's
subsidiary)
|
1
|
1
|
|||||
|
Retained
earnings
|
95,739,827
|
92,134,608
|
|||||
|
Accumulated
other comprehensive income
|
3,536,012
|
3,141,054
|
|||||
|
Total
stockholders' equity
|
99,275,840
|
95,275,663
|
|||||
|
Total
Liabilities and Stockholders' Equity
|
$
|
100,200,287
|
$
|
96,169,538
|
|||
SCHEDULE
II
INVESTORS
TITLE COMPANY (PARENT COMPANY)
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS
OF INCOME
FOR
THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
|
2007
|
2006
|
2005
|
||||||||
|
Revenues:
|
||||||||||
|
Investment
income-interest and dividends
|
$
|
1,146,168
|
$
|
561,400
|
$
|
280,145
|
||||
|
Net
realized gain on sales of investments
|
406,623
|
-
|
18,464
|
|||||||
|
Rental
income
|
736,713
|
735,431
|
553,222
|
|||||||
|
Miscellaneous
income (loss)
|
81,938
|
(115,883
|
)
|
70,147
|
||||||
|
Total
|
2,371,442
|
1,180,948
|
921,978
|
|||||||
|
Operating
Expenses:
|
||||||||||
|
Office
occupancy and operations
|
345,389
|
345,859
|
295,481
|
|||||||
|
Business
development
|
64,278
|
69,372
|
51,110
|
|||||||
|
Taxes-other
than payroll and income
|
138,687
|
79,871
|
90,004
|
|||||||
|
Professional
fees
|
141,297
|
141,500
|
68,245
|
|||||||
|
Other
expenses
|
105,873
|
114,240
|
82,211
|
|||||||
|
Total
|
795,524
|
750,842
|
587,051
|
|||||||
|
Equity
in Net Income of Affiliated Cos.
|
7,336,417
|
12,710,328
|
12,984,996
|
|||||||
|
Income
Before Income Taxes
|
8,912,335
|
13,140,434
|
13,319,923
|
|||||||
|
Provision
(benefit) for Income Taxes
|
510,000
|
(45,000
|
)
|
27,000
|
||||||
|
Net
Income
|
$
|
8,402,335
|
$
|
13,185,434
|
$
|
13,292,923
|
||||
|
Basic
Earnings per Common Share
|
$
|
3.39
|
$
|
5.22
|
$
|
5.19
|
||||
|
Weighted
Average Shares Outstanding-Basic
|
2,479,321
|
2,527,927
|
2,560,418
|
|||||||
|
Diluted
Earnings Per Common Share
|
$
|
3.35
|
$
|
5.14
|
$
|
5.10
|
||||
|
Weighted
Average Shares Outstanding-Diluted
|
2,508,609
|
2,564,216
|
2,607,633
|
|||||||
See
notes
to condensed financial statements.
SCHEDULE
II
INVESTORS
TITLE COMPANY (PARENT COMPANY)
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
|
2007
|
2006
|
2005
|
||||||||
|
Operating
Activities:
|
||||||||||
|
Net
income
|
$
|
8,402,335
|
$
|
13,185,434
|
$
|
13,292,923
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||
|
Equity
in net earnings of subsidiaries
|
(7,336,417
|
)
|
(12,710,328
|
)
|
(12,984,996
|
)
|
||||
|
Depreciation
|
124,686
|
124,030
|
80,129
|
|||||||
|
Amortization,
net
|
15,946
|
(820
|
)
|
(1,391
|
)
|
|||||
|
Issuance
of common stock in payment of bonuses and fees
|
1,998
|
5,013
|
-
|
|||||||
|
Net
realized gain on sales of investments
|
(406,623
|
)
|
-
|
(18,464
|
)
|
|||||
|
Provision
(benefit) for deferred income taxes
|
5,000
|
(55,000
|
)
|
33,000
|
||||||
|
(Increase)
decrease in receivables
|
146,500
|
(205,760
|
)
|
33,540
|
||||||
|
(Increase)
decrease in income taxes receivable-current
|
(378,491
|
)
|
356,796
|
890,455
|
||||||
|
(Increase)
decrease in other assets
|
19,852
|
(153,593
|
)
|
(62,488
|
)
|
|||||
|
Increase
(decrease) in accounts payable and accrued liabilities
|
30,572
|
260,468
|
(290,719
|
)
|
||||||
|
Net
cash provided by operating activities
|
625,358
|
806,240
|
971,989
|
|||||||
|
Investing
Activities:
|
||||||||||
|
Capital
contribution to subsidiaries
|
-
|
(115,000
|
)
|
(1,178,000
|
)
|
|||||
|
Return
of capital contributions from subsidiaries
|
-
|
80,000
|
-
|
|||||||
|
Dividends
received from subsidiaries
|
13,122,720
|
9,446,950
|
7,291,120
|
|||||||
|
Purchases
of available-for-sale securities
|
(31,721,740
|
)
|
(21,310,774
|
)
|
(9,435,060
|
)
|
||||
|
Purchases
of short-term securities
|
(11,658,044
|
)
|
(1,459,550
|
)
|
-
|
|||||
|
Purchases
of and net earnings from other investments
|
(94,737
|
)
|
-
|
(150,000
|
)
|
|||||
|
Proceeds
from sales and maturities of available-for-sale securities
|
33,900,000
|
13,600,000
|
6,024,040
|
|||||||
|
Proceeds
from sales of short-term securities
|
-
|
-
|
1,007,700
|
|||||||
|
Proceeds
from sales and distributions from other investments
|
742,822
|
216,190
|
68,915
|
|||||||
|
Purchases
of property
|
(12,551
|
)
|
(18,151
|
)
|
(1,251,285
|
)
|
||||
|
Net
change in pending trades
|
-
|
-
|
(1,027,929
|
)
|
||||||
|
Net
cash provided by investing activities
|
4,278,470
|
439,665
|
1,349,501
|
|||||||
|
Financing
Activities:
|
||||||||||
|
Retirement
of common stock
|
(4,660,259
|
)
|
(2,255,735
|
)
|
(363,765
|
)
|
||||
|
Exercise
of options
|
365,284
|
55,272
|
-
|
|||||||
|
Dividends
paid (net dividends paid to subsidiary of $70,002, $70,401 and
$46,717
in
2007, 2006 and 2005, respectively)
|
(595,808
|
)
|
(606,423
|
)
|
(410,202
|
)
|
||||
|
Net
cash used in financing activities
|
(4,890,783
|
)
|
(2,806,886
|
)
|
(773,967
|
)
|
||||
|
|
|
|||||||||
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
13,045
|
(1,560,981
|
)
|
1,547,523
|
||||||
|
Cash
and Cash Equivalents, Beginning of Year
|
194,391
|
1,755,372
|
207,849
|
|||||||
|
Cash
and Cash Equivalents, End of Year
|
$
|
207,436
|
$
|
194,391
|
$
|
1,755,372
|
||||
|
Supplemental
Disclosures:
|
||||||||||
|
Cash
Paid During the Year For:
|
||||||||||
|
Income
taxes (net of refunds)
|
$
|
889,000
|
$
|
343,000
|
$
|
896,000
|
||||
|
Non
cash net unrealized (gain) loss on investments, net of deferred tax
provision of ($219,001), ($185,475) and $213,400 for 2007, 2006 and
2005,
respectively
|
$
|
(414,956
|
)
|
$
|
(361,631
|
)
|
$
|
414,945
|
||
|
Adjustments
to apply FASB statement No. 158, net of deferred tax provision of
$16,348
and $21,024 for 2007 and 2006, respectively
|
$
|
31,734
|
$
|
40,810
|
$
|
-
|
||||
See
notes
to condensed financial statements.
SCHEDULE
II
INVESTORS
TITLE COMPANY (PARENT COMPANY)
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
| 1. |
The
accompanying condensed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto of Investors
Title Company and Subsidiaries.
|
| 2. |
Cash
dividends paid to Investors Title Company by its wholly owned subsidiaries
were as follows:
|
|
Subsidiaries
|
2007
|
2006
|
2005
|
|||||||
|
Investors
Title Insurance Company, net*
|
$
|
10,662,720
|
$
|
4,976,950
|
$
|
4,546,120
|
||||
|
Investors
Title Exchange Corporation
|
2,250,000
|
4,125,000
|
2,250,000
|
|||||||
|
Investors
Title Accomodation Corporation
|
25,000
|
170,000
|
195,000
|
|||||||
|
Investors
Title Management Services, Inc.
|
-
|
60,000
|
275,000
|
|||||||
|
Investors
Title Capital Management Corporation
|
60,000
|
-
|
-
|
|||||||
|
Investors
Title Commercial Agency
|
125,000
|
115,000
|
25,000
|
|||||||
|
$
|
13,122,720
|
$
|
9,446,950
|
$
|
7,291,120
|
|||||
|
*
|
Total
dividends of $10,732,722, $5,047,351 and $4,592,837 paid to the Parent
Company in 2007, 2006 and 2005, respectively, netted with dividends
of
$70,002, $70,401 and $46,717 received from the Parent in 2007, 2006
and
2005, respectively.
|
SCHEDULE
III
INVESTORS
TITLE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY
INSURANCE INFORMATION
For
the Years Ended December 31, 2007, 2006 and 2005
|
Segment
|
Deferred
Policy Acquisition Cost
|
Future
Policy Benefits, Losses, Claims
and Loss
Expenses
|
Unearned
Premiums
|
Other
Policy Claims and Benefits Payable
|
Premium
Revenue
|
Net
Investment Income
|
Benefits
Claims, Losses and Settlement Expenses
|
Amortization
of Deferred Policy Acquisition Costs
|
Other
Operating Expenses
|
Premiums
Written
|
|||||||||||||||||||||
|
Year
Ended December 31, 2007
|
|||||||||||||||||||||||||||||||
|
Title
Insurance
|
—
|
$
|
36,975,000
|
—
|
$
|
406,922
|
$
|
69,983,989
|
$
|
3,954,898
|
$
|
10,134,719
|
—
|
$
|
58,034,137
|
N/A
|
|||||||||||||||
|
Exchange
Services
|
—
|
—
|
—
|
—
|
—
|
29,501
|
—
|
—
|
1,480,094
|
N/A
|
|||||||||||||||||||||
|
All
Other
|
—
|
—
|
—
|
—
|
—
|
1,212,779
|
—
|
—
|
3,469,002
|
N/A
|
|||||||||||||||||||||
|
|
—
|
$
|
36,975,000
|
—
|
$
|
406,922
|
$
|
69,983,989
|
$
|
5,197,178
|
$
|
10,134,719
|
—
|
$
|
62,983,233
|
||||||||||||||||
|
Year
Ended December 31, 2006
|
|||||||||||||||||||||||||||||||
|
Title
Insurance
|
—
|
$
|
36,906,000
|
—
|
$
|
470,468
|
$
|
70,196,467
|
$
|
3,688,966
|
$
|
7,405,211
|
—
|
$
|
55,557,492
|
N/A
|
|||||||||||||||
|
Exchange
Services
|
—
|
—
|
—
|
—
|
—
|
18,138
|
—
|
—
|
1,346,743
|
N/A
|
|||||||||||||||||||||
|
All
Other
|
—
|
—
|
—
|
—
|
—
|
619,231
|
—
|
—
|
3,022,836
|
N/A
|
|||||||||||||||||||||
|
|
—
|
$
|
36,906,000
|
—
|
$
|
470,468
|
$
|
70,196,467
|
$
|
4,326,335
|
$
|
7,405,211
|
—
|
$
|
59,927,071
|
||||||||||||||||
|
Year
Ended December 31, 2005
|
|||||||||||||||||||||||||||||||
|
Title
Insurance
|
—
|
$
|
34,857,000
|
—
|
$
|
442,098
|
$
|
76,522,266
|
$
|
2,993,149
|
$
|
8,164,783
|
—
|
$
|
57,850,106
|
N/A
|
|||||||||||||||
|
Exchange
Services
|
—
|
—
|
—
|
—
|
—
|
18,463
|
—
|
—
|
907,414
|
N/A
|
|||||||||||||||||||||
|
All
Other
|
—
|
—
|
—
|
—
|
—
|
324,155
|
—
|
—
|
2,358,652
|
N/A
|
|||||||||||||||||||||
|
|
—
|
$
|
34,857,000
|
—
|
$
|
442,098
|
$
|
76,522,266
|
$
|
3,335,767
|
$
|
8,164,783
|
—
|
$
|
61,116,172
|
||||||||||||||||
SCHEDULE
IV
INVESTORS
TITLE COMPANY AND SUBSIDIARIES
REINSURANCE
For
the Years Ended December 31, 2007, 2006 and 2005
|
|
Gross
Amount
|
Ceded to
Other
Companies
|
Assumed from
Other
Companies
|
Net
Amount
|
Percentage of
Amount
Assumed to Net
|
|||||||||||
|
YEAR
ENDED DECEMBER 31, 2007
|
||||||||||||||||
|
Title
Insurance
|
$
|
70,205,350
|
$
|
264,177
|
$
|
42,816
|
$
|
69,983,989
|
0.06
|
%
|
||||||
|
YEAR
ENDED DECEMBER 31, 2006
|
||||||||||||||||
|
Title
Insurance
|
$
|
70,615,891
|
$
|
441,582
|
$
|
22,158
|
$
|
70,196,467
|
0.03
|
%
|
||||||
|
YEAR
ENDED DECEMBER 31, 2005
|
||||||||||||||||
|
Title
Insurance
|
$
|
76,817,423
|
$
|
316,133
|
$
|
20,976
|
$
|
76,522,266
|
0.03
|
%
|
||||||
SCHEDULE
V
INVESTORS
TITLE COMPANY AND SUBSIDIARIES
VALUATION
AND QUALIFYING ACCOUNTS
For
the Years Ended December 31, 2007, 2006 and 2005
|
Description
|
Balance at
Beginning
of Period
|
Additions
Charged to
Costs and Expenses
|
Additions Charged
to Other
Accounts -Describe
|
Deductions- describe*
|
Balance at
End of Period
|
|||||||||||
|
2007
|
||||||||||||||||
|
Premiums
Receivable Valuation Provision
|
$
|
2,128,000
|
$
|
5,298,809
|
$
|
-
|
$
|
(5,256,809
|
(a))
|
$
|
2,170,000
|
|||||
|
Reserves
for Claims
|
$
|
36,906,000
|
$
|
10,134,719
|
$
|
-
|
$
|
(10,065,719
|
(b))
|
$
|
36,975,000
|
|||||
|
2006
|
||||||||||||||||
|
Premiums
Receivable Valuation Provision
|
$
|
2,444,000
|
$
|
4,927,691
|
$
|
-
|
$
|
(5,243,691
|
(a))
|
$
|
2,128,000
|
|||||
|
Reserves
for Claims
|
$
|
34,857,000
|
$
|
7,405,211
|
$
|
-
|
$
|
(5,356,211
|
(b))
|
$
|
36,906,000
|
|||||
|
2005
|
||||||||||||||||
|
Premiums
Receivable Valuation Provision
|
$
|
2,240,000
|
$
|
5,399,734
|
$
|
-
|
$
|
(5,195,734
|
(a))
|
$
|
2,444,000
|
|||||
|
Reserves
for Claims
|
$
|
31,842,000
|
$
|
8,164,783
|
$
|
-
|
$
|
(5,149,783
|
(b))
|
$
|
34,857,000
|
|||||
(a)
Cancelled premiums
(b)
Payments of claims, net of recoveries
INDEX
TO EXHIBITS
|
Exhibit
Number
|
Description
|
|
|
3(i)
|
Articles
of Incorporation dated January 22, 1973, incorporated by reference
to
Exhibit 1 to Form 10 dated June 12, 1984
|
|
|
3(ii)
|
Bylaws
– (amended and restated November 12, 2007), incorporated by reference
to
Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated November
12, 2007, File No. 0-11774
|
|
|
4
|
Rights
Agreement, dated as of November 12, 2002, between Investors Title
Company
and Central Carolina Bank, a division of National Bank of Commerce,
incorporated by reference to Exhibit 1 to Form 8-A filed November
15,
2002
|
|
|
10(i)
|
1997
Stock Option and Restricted Stock Plan, incorporated by reference
to
Exhibit 10(viii) to Form 10-K for the year ended December 31,
1996
|
|
|
10(ii)
|
Form
of Nonqualified Stock Option Agreement to Non-employee Directors
dated May
13, 1997 under the 1997 Stock Option and Restricted Stock Plan,
incorporated by reference to Exhibit 10(ix) to Form 10-Q for the
quarter
ended June 30, 1997
|
|
|
10(iii)
|
Form
of Nonqualified Stock Option Agreement under 1997 Stock Option and
Restricted Stock Plan, incorporated by reference to Exhibit 10(x)
to Form
10-K for the year ended December 31, 1997
|
|
|
10(iv)
|
Form
of Incentive Stock Option Agreement under 1997 Stock Option and Restricted
Stock Plan, incorporated by reference to Exhibit 10(xi) to Form 10-K
for
the year ended December 31, 1997
|
|
|
10(v)
|
Form
of Amendment to Incentive Stock Option Agreement between Investors
Title
Company and George Abbitt Snead incorporated by reference to Exhibit
10(xii) to Form 10-Q for the quarter ended June 30,
2000
|
|
|
10(vi)
|
2001
Stock Option and Restricted Stock Plan, incorporated by reference
to
Exhibit 10(xiii) to Form 10-K for the year ended December 31,
2000
|
|
|
10(vii)
|
Form
of Employment Agreement dated November 17, 2003 with each of J. Allen
Fine, James A. Fine, Jr. and W. Morris Fine, incorporated by reference
to
Exhibit 10(ix) to Form 10-K for the year ended December 31,
2003
|
|
|
10(viii)
|
Amended
and Restated Employment Agreement dated June 1, 2004 with J. Allen
Fine,
incorporated by reference to Exhibit 10(x) to Form 10-Q for the quarter
ended June 30, 2004
|
|
|
10(ix)
|
Form
of Amended and Restated Employment Agreement dated June 1, 2004 with
each
of James A. Fine, Jr. and W. Morris Fine, incorporated by reference
to
Exhibit 10(xi) to Form 10-Q for the quarter ended June 30,
2004
|
|
10(x)
|
Nonqualified
Deferred Compensation Plan dated June 1, 2004, incorporated by reference
to Exhibit 10(xii) to Form 10-Q for the quarter ended June 30,
2004
|
|
|
10(xi)
|
Nonqualified
Supplemental Retirement Benefit Plan dated November 17, 2003, incorporated
by reference to Exhibit 10(xiii) to Form 10-Q for the quarter ended
June
30, 2004
|
|
|
10(xii)
|
Death
Benefit Plan Agreement dated April 1, 2004 with J. Allen Fine,
incorporated by reference to Exhibit 10(xiv) to Form 10-Q for the
quarter
ended June 30, 2004
|
|
|
10(xiii)
|
Death
Benefit Plan Agreement dated May 19, 2004 with James A. Fine, Jr.,
incorporated by reference to Exhibit 10(xv) to Form 10-Q for the
quarter
ended June 30, 2004
|
|
|
13
|
Portions
of 2007 Annual Report to Shareholders incorporated by reference in
this
report as set forth in Parts I, II and IV hereof
|
|
|
21
|
Subsidiaries
of Registrant, incorporated by reference to Exhibit 21 to Form 10-K
for
the year ended December 31, 2003
|
|
|
23
|
Consent
of Dixon Hughes PLLC
|
|
|
31(i)
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
31(ii)
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
Section
906 of the Sarbanes-Oxley Act of
2002
|