INVESTORS TITLE CO (Form: 10-Q, Received: 05/10/2022 16:24:59)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			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)

North Carolina

56-1110199

(State of incorporation)

(I.R.S. Employer Identification No.)

121 North Columbia Street, Chapel Hill, North Carolina 27514

(Address of principal executive offices) (Zip Code)

(919) 968-2200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, no par value

ITIC

The Nasdaq Stock Market LLC

Rights to Purchase Series A Junior Participating Preferred Stock

The Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 27, 2022, there were 1,897,255 common shares of the registrant outstanding.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

INDEX


PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	1

	Consolidated Statements of Operations For the Three Months Ended March 31, 2022 and 2021	2

	Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2022 and 2021	3

	Consolidated Statements of Stockholders’ Equity For the Three Months Ended March 31, 2022 and 2021	4

	Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2022 and 2021	5

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	38

SIGNATURE		39

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

As of March 31, 2022 and December 31, 2021

(in thousands)

(unaudited)


	March 31, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	37,310	$	37,168
Investments:
Fixed maturity securities, available-for-sale, at fair value (amortized cost: March 31, 2022: $66,209; December 31, 2021: $75,511)	67,725		79,791
Equity securities, at fair value (cost: March 31, 2022: $28,484; December 31, 2021: $29,478)	69,945		76,853
Short-term investments	58,555		45,930
Other investments	20,217		20,298
Total investments	216,442		222,872

Premiums and fees receivable	23,850		22,953
Accrued interest and dividends	1,000		817
Prepaid expenses and other receivables	11,618		11,721
Property, net	13,413		13,033
Goodwill and other intangible assets, net	15,621		15,951
Operating lease right-of-use assets	7,321		5,202
Other assets	1,822		1,771
Total Assets	$	328,397	$	331,488

Liabilities and Stockholders’ Equity
Liabilities:
Reserve for claims	$	36,366	$	36,754
Accounts payable and accrued liabilities	34,486		43,868
Operating lease liabilities	7,453		5,329
Current income taxes payable	6,164		3,329
Deferred income taxes, net	11,436		13,121
Total liabilities	95,905		102,401

Commitments and Contingencies	—		—

Stockholders’ Equity:
Preferred stock (1,000 authorized shares; no shares issued)	—		—
Common stock – no par value (10,000 authorized shares; 1,897 and 1,895 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, excluding in each period 292 shares of common stock held by the Company)	—		—
Retained earnings	231,274		225,861
Accumulated other comprehensive income	1,218		3,226
Total stockholders' equity	232,492		229,087
Total Liabilities and Stockholders’ Equity	$	328,397	$	331,488

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Operations

For the Three Months Ended March 31, 2022 and 2021

(in thousands, except per share amounts)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Revenues:
Net premiums written	$	63,125	$	61,477
Escrow and other title-related fees	5,064		2,798
Non-title services	2,426		2,078
Interest and dividends	915		1,016
Other investment income	1,337		941
Net realized investment gains	1,747		321
Changes in the estimated fair value of equity security investments	(5,915)		3,239
Other	299		208
Total Revenues	68,998		72,078

Operating Expenses:
Commissions to agents	29,857		30,542
Provision for claims	176		1,591
Personnel expenses	21,254		16,153
Office and technology expenses	4,368		2,742
Other expenses	5,550		3,735
Total Operating Expenses	61,205		54,763

Income before Income Taxes	7,793		17,315

Provision for Income Taxes	1,608		3,492

Net Income	$	6,185	$	13,823

Basic Earnings per Common Share	$	3.26	$	7.30

Weighted Average Shares Outstanding – Basic	1,896		1,894

Diluted Earnings per Common Share	$	3.25	$	7.29

Weighted Average Shares Outstanding – Diluted	1,903		1,897

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Three Months Ended March 31, 2022 and 2021

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Net income	$	6,185	$	13,823
Other comprehensive loss, before tax:
Accumulated postretirement benefit obligation adjustment	219		—
Net unrealized losses on investments arising during the period	(2,764)		(750)
Reclassification adjustment for sale of securities included in net income	—		(23)
Other comprehensive loss, before tax	(2,545)		(773)
Income tax expense related to postretirement health benefits	46		—
Income tax benefit related to net unrealized losses on investments arising during the period	(583)		(158)
Income tax benefit related to reclassification adjustment for sale of securities included in net income	—		(5)
Net income tax benefit on other comprehensive loss	(537)		(163)
Other comprehensive loss	(2,008)		(610)
Comprehensive Income	$	4,177	$	13,213

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the Three Months Ended March 31, 2022 and 2021

(in thousands, except per share amounts)

(unaudited)


	Common Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2020	1,892	$	—	$	196,096	$	4,326	$	200,422
Net income				13,823				13,823
Dividends paid ($0.44 per share)				(832)				(832)
Exercise of stock appreciation rights	2			(1)				(1)
Share-based compensation expense related to stock appreciation rights				71				71
Net unrealized loss on investments						(610)		(610)
Balance, March 31, 2021	1,894	$	—	$	209,157	$	3,716	$	212,873

Balance, December 31, 2021	1,895	$	—	$	225,861	$	3,226	$	229,087
Net income				6,185				6,185
Dividends paid ($0.46 per share)				(873)				(873)
Exercise of stock appreciation rights	2			(1)				(1)
Share-based compensation expense related to stock appreciation rights				102				102
Accumulated postretirement benefit obligation adjustment						173		173
Net unrealized loss on investments						(2,181)		(2,181)
Balance, March 31, 2022	1,897	$	—	$	231,274	$	1,218	$	232,492

Refer to notes to the Consolidated Financial Statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2022 and 2021

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Operating Activities
Net income	$	6,185	$	13,823
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	524		430
Amortization of investments, net	162		285
Amortization of other intangible assets, net	330		134
Share-based compensation expense related to stock appreciation rights	102		71
Net gain on disposals of property	(28)		(8)
Net realized investment gains	(1,747)		(321)
Net change in estimated fair value of equity security investments	5,915		(3,239)
Net earnings from other investments	(1,207)		(594)
Provision for claims	176		1,591
(Benefit) provision for deferred income taxes	(1,148)		753
Changes in assets and liabilities:
Increase in premium and fees receivable	(897)		(761)
Increase in other assets	(131)		(2,064)
(Increase) decrease in operating lease right-of-use assets	(2,119)		154
Decrease in accounts payable and accrued liabilities	(9,163)		(3,982)
Increase (decrease) in operating lease liabilities	2,124		(160)
Increase in current income taxes payable	2,835		2,739
Payments of claims, net of recoveries	(564)		(613)
Net cash provided by operating activities	1,349		8,238

Investing Activities
Purchases of equity securities	(102)		(976)
Purchases of short-term investments	(12,624)		(16,578)
Purchases of other investments	(275)		(286)
Proceeds from sales and maturities of fixed maturity securities	9,140		13,660
Proceeds from sales of equity securities	2,842		4,831
Proceeds from sales and maturities of short-term investments	—		1,251
Proceeds from sales and distributions of other investments	1,562		1,534
Purchases of property	(908)		(1,613)
Proceeds from the sale of property	32		13
Net (used in) provided by investing activities	(333)		1,836

Financing Activities
Exercise of stock appreciation rights	(1)		(1)
Dividends paid	(873)		(832)
Net cash used in financing activities	(874)		(833)

Net Increase in Cash and Cash Equivalents	142		9,241
Cash and Cash Equivalents, Beginning of Period	37,168		13,723
Cash and Cash Equivalents, End of Period	$	37,310	$	22,964


Consolidated Statements of Cash Flows, continued
	Three Months Ended March 31,
	2022		2021
Supplemental Disclosures:
Cash Paid During the Year for:
Income tax refund, net	$	(79)	$	—
Non-Cash Investing and Financing Activities:
Non-cash net unrealized loss on investments, net of deferred tax benefit of $583 and $163 for March 31, 2022 and 2021, respectively	$	2,181	$	610
Adjustments to postretirement benefits obligation, net of deferred tax expense of $(46) and $0 for March 31, 2022 and 2021, respectively	$	(173)	$	—

Refer to notes to the Consolidated Financial Statements.

INVESTORS TITLE COMPANY

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2022

(unaudited)

Note 1 – Basis of Presentation and Significant Accounting Policies

Reference should be made to the “Notes to Consolidated Financial Statements” appearing in the Annual Report on Form 10-K for the year ended December 31, 2021 of Investors Title Company (the “Company”) for a complete description of the Company’s significant accounting policies.

Principles of Consolidation – The accompanying unaudited Consolidated Financial Statements include the accounts and operations of Investors Title Company and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information, with the instructions to Form 10-Q and with Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in annual consolidated financial statements have been condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation.

In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows of the Company in the accompanying unaudited Consolidated Financial Statements have been included. All such adjustments are of a normal recurring nature. Operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the financial condition and results that may be expected for the year ending December 31, 2022 or any other interim period.

Use of Estimates and Assumptions – The preparation of the Company’s unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the date of the unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions used.

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

Note 2 – Reserve for Claims

Activity in the reserve for claims for the three-month period ended March 31, 2022 and the year ended December 31, 2021 are summarized as follows:


(in thousands)	March 31, 2022		December 31, 2021
Balance, beginning of period	$	36,754	$	33,584
Provision charged to operations	176		5,686
Payments of claims, net of recoveries	(564)		(2,516)
Balance, end of period	$	36,366	$	36,754

The total reserve for all reported and unreported losses the Company incurred through March 31, 2022 is represented by the reserve for claims on the unaudited Consolidated Balance Sheets. The Company's reserves for unpaid losses and loss adjustment expenses are established using estimated amounts required to settle claims for which notice has been received (reported) and the amount estimated to be required to satisfy claims that have been incurred but not yet reported (“IBNR”). Despite the variability of such estimates, management believes that the total reserve for claims is adequate to cover claim losses which might result from pending and future claims under title insurance policies issued through March 31, 2022. Management continually reviews and adjusts its reserve for claims estimates to reflect its loss experience and any new information that becomes available. Adjustments resulting from such reviews could be significant.

A summary of the Company’s reserve for claims, broken down into its components of known title claims and IBNR, follows:


(in thousands, except percentages)	March 31, 2022		%	December 31, 2021		%
Known title claims	$	3,910	10.8	$	3,317	9.0
IBNR	32,456		89.2	33,437		91.0
Total reserve for claims	$	36,366	100.0	$	36,754	100.0

Claims and losses paid are charged to the reserve for claims. Although claims losses are typically paid in cash, occasionally claims are settled by purchasing the interest of the insured or the claimant in the real property. When this event occurs, the Company carries assets at the lower of cost or estimated fair value, net of any indebtedness on the property.

Note 3 – Earnings Per Common Share and Share Awards

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income by the combination of dilutive potential common stock, comprised of shares issuable under the Company’s share-based compensation plans, and the weighted average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share-based awards, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, when share-based awards are assumed to be exercised, (a) the exercise price of a share-based award and (b) the amount of compensation cost, if any, for future services that the Company has not yet recognized, are assumed to be used to repurchase shares in the current period.

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


	Three Months Ended March 31,
(in thousands, except per share amounts)	2022		2021
Net income	$	6,185	$	13,823
Weighted average common shares outstanding – Basic	1,896		1,894
Incremental shares outstanding assuming the exercise of dilutive SARs (share-settled)	7		3
Weighted average common shares outstanding – Diluted	1,903		1,897
Basic earnings per common share	$	3.26	$	7.30
Diluted earnings per common share	$	3.25	$	7.29

There were 0 and 15 thousand potential shares excluded from the computation of diluted earnings per share for the three-month periods ended March 31, 2022 and 2021, respectively, due to the out-of-the-money status of the related share-based awards.

The Company historically has adopted employee stock award plans under which restricted stock, options or stock appreciation rights ("SARs") exercisable for the Company's stock may be granted to key employees or directors of the Company. There is currently one active plan from which the Company may grant share-based awards. The awards eligible to be granted under the active plan are limited to SARs, and the maximum aggregate number of shares of common stock of the Company available pursuant to the plan for the grant of SARs is 250 thousand shares.

As of March 31, 2022, the only outstanding awards under the plans were SARs, which expire within seven years or less from the date of grant. All outstanding SARs vest and are exercisable within five years or less from the date of grant, and all SARs issued to date have been share-settled only. There have been no stock options or SARs granted where the exercise price was less than the market price on the date of grant.

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


(in thousands, except weighted average exercise price and average remaining contractual term)	Number Of Shares	Weighted Average Exercise Price		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2021	36	$	139.16	4.38	$	903
SARs granted	5	184.26
SARs exercised	(6)	106.71
Outstanding as of December 31, 2021	35	$	150.36	3.96	$	1,643
SARs granted	—	—
SARs exercised	(4)	89.23
Outstanding as of March 31, 2022	31	$	158.22	4.02	$	1,400

Exercisable as of March 31, 2022	26	$	161.73	3.76	$	1,067

Unvested as of March 31, 2022	5	$	141.50	5.25	$	333

There was approximately $102 thousand and $71 thousand of compensation expense relating to SARs vesting on or before March 31, 2022 and 2021, respectively, included in personnel expenses in the unaudited Consolidated Statements of Operations. As of March 31, 2022, there was $206 thousand of unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s stock award plans.

Note 4 – Segment Information

The Company has 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, 2022 and 2021:


Three Months Ended March 31, 2022 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	73,065	$	2,737	$	(4,888)	$	70,914
Investment loss	(1,628)		(2,035)		—		(3,663)
Net realized gain on investments	51		1,696		—		1,747
Total revenues	$	71,488	$	2,398	$	(4,888)	$	68,998
Operating expenses	63,188		2,753		(4,736)		61,205
Income (loss) before income taxes	$	8,300	$	(355)	$	(152)	$	7,793
Total assets	$	275,729	$	52,668	$	—	$	328,397


Three Months Ended March 31, 2021 (in thousands)	Title Insurance		All Other		Intersegment Eliminations		Total
Insurance and other services revenues	$	66,521	$	2,338	$	(2,298)	$	66,561
Investment income	4,396		800		—		5,196
Net realized gain on investments	232		89		—		321
Total revenues	$	71,149	$	3,227	$	(2,298)	$	72,078
Operating expenses	54,530		2,385		(2,152)		54,763
Income before income taxes	$	16,619	$	842	$	(146)	$	17,315
Total assets	$	237,082	$	58,458	$	—	$	295,540

Note 5 – Retirement Agreements and Other Postretirement Benefits

The Company’s subsidiary, Investors Title Insurance Company ("ITIC"), is a party to employment agreements with key executives that provide for the continuation of certain employee benefits and other payments due under the agreements upon retirement, estimated to total $14.2 million and $13.4 million as of March 31, 2022 and December 31, 2021, respectively. The executive employee benefits include health, dental, vision and life insurance and are unfunded. These amounts are classified as accounts payable and accrued liabilities in the unaudited Consolidated Balance Sheets. The following sets forth the net periodic benefit cost for the executive benefits for the periods ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(in thousands)	2022		2021
Service cost – benefits earned during the year	$	—	$	—
Interest cost on the projected benefit obligation	6		7
Amortization of unrecognized losses	—		—
Net periodic benefit cost	$	6	$	7

Note 6 – Investments and Estimated Fair Value

Investments in Fixed Maturity Securities

The estimated fair value, gross unrealized holding gains, gross unrealized holding losses and amortized cost for fixed maturity securities by major classification are as follows:


As of March 31, 2022 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions	$	15,011	$	224	$	—	$	15,235
Special revenue issuer obligations of U.S. states, territories and political subdivisions	40,620		806		56		41,370
Corporate debt securities	10,578		707		165		11,120
Total	$	66,209	$	1,737	$	221	$	67,725


As of December 31, 2021 (in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Fixed maturity securities, available-for-sale, at fair value:
General obligations of U.S. states, territories and political subdivisions	$	16,669	$	922	$	—	$	17,591
Special revenue issuer obligations of U.S. states, territories and political subdivisions	41,753		2,453		2		44,204
Corporate debt securities	17,089		955		48		17,996
Total	$	75,511	$	4,330	$	50	$	79,791

The special revenue category for both periods presented includes approximately 45 individual fixed maturity securities with revenue sources from a variety of industry sectors.

The scheduled maturities of fixed maturity securities at March 31, 2022 are as follows:


	Available-for-Sale
(in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	15,104	$	15,165
Due one year through five years	46,535		47,521
Due five years through ten years	3,747		3,811
Due after ten years	823		1,228
Total	$	66,209	$	67,725

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties.

The following table presents the gross unrealized losses on fixed maturity securities and the estimated fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position at March 31, 2022 and December 31, 2021:


	Less than 12 Months				12 Months or Longer				Total
As of March 31, 2022 (in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	2,383	$	(53)	$	1,101	$	(3)	$	3,484	$	(56)
Corporate debt securities	2,633		(69)		6,111		(96)		8,744		(165)
Total temporarily impaired securities	$	5,016	$	(122)	$	7,212	$	(99)	$	12,228	$	(221)


	Less than 12 Months				12 Months or Longer				Total
As of December 31, 2021 (in thousands)	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Special revenue issuer obligations of U.S. states, territories and political subdivisions	$	—	$	—	$	1,102	$	(2)	$	1,102	$	(2)
Corporate debt securities	8,493		(13)		6,203		(35)		14,696		(48)
Total temporarily impaired securities	$	8,493	$	(13)	$	7,305	$	(37)	$	15,798	$	(50)

Management evaluates available-for-sale fixed maturity securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. Consideration is given to (1) the extent to which the fair value is less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for any anticipated recovery in fair value.

The decline in estimated fair value of the fixed maturity securities can be attributed primarily to changes in market interest rates and changes in credit spreads over Treasury securities. Because the Company does not intend 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.

Factors considered in determining whether a loss is temporary include the length of time and extent to which the estimated 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 13 and 9 fixed maturity securities had unrealized losses at March 31, 2022 and December 31, 2021, respectively. The Company does not intend to sell any of these securities and believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. The fair value is expected to recover as the securities approach their maturity date, or repricing date, or if market yields for such investments decline. The Company believes that the unrealized losses detailed in the previous table are due to noncredit-related factors, including changes in market interest rates and other market conditions, and therefore the unrealized loss is recorded in accumulated other comprehensive income.

Reviews of the values of fixed maturity securities are inherently uncertain and the value of the investment may not fully recover, or may decline in future periods, resulting in a realized loss. The Company has not recorded any other-than-temporary impairment charges related to fixed maturity securities for the three-month periods ended March 31, 2022 and 2021. Expenses related to other-than-temporary impairments are recorded in net realized investment gains in the unaudited Consolidated Statements of Operations when recognized.

Investments in Equity Securities

The cost and estimated fair value of equity securities are as follows:


As of March 31, 2022 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	28,484	$	69,945
Total	$	28,484	$	69,945


As of December 31, 2021 (in thousands)	Cost		Estimated Fair Value
Equity securities, at fair value:
Common stocks	$	29,478	$	76,853
Total	$	29,478	$	76,853

Unrealized holding gains and losses are reported in the unaudited Consolidated Statements of Operations as changes in the estimated fair value of equity security investments.

Net Realized Investment Gains

Gross realized gains and losses on sales of investments for the three-month periods ended March 31, 2022 and 2021 are summarized as follows:


(in thousands)	2022		2021
Gross realized gains from securities:
Common stocks	$	1,747	$	940
Total	$	1,747	$	940
Gross realized losses from securities:
Corporate debt securities	$	—	(23)
Common stocks	—		(596)
Total	$	—	$	(619)
Net realized gains from securities	$	1,747	$	321
Gross realized gains (losses) on other investments:
Gains on other investments	$	—	$	—
Losses on other investments	—		—
Total	$	—	$	—
Net realized investment gains	$	1,747	$	321

Realized gains and losses are determined on the specific identification method.

Variable Interest Entities

The Company holds investments in variable interest entities ("VIEs") that are not consolidated in the Company's financial statements as the Company is not the primary beneficiary. These entities are considered VIEs as the equity investors at risk, including the Company, do not have the power over the activities that most significantly impact the economic performance of the entities; this power resides with a third-party general partner or managing member that cannot be removed except for cause. The following table sets forth details about the Company's variable interest investments in VIEs, which are structured either as limited partnerships ("LPs") or limited liability companies ("LLCs"), as of March 31, 2022:


(in thousands)	Balance Sheet Classification	Carrying Value		Estimated Fair Value		Maximum Potential Loss (a)
Tax credit LPs	Other investments	$	276	$	276	$	1,768
Real estate LLCs or LPs	Other investments	3,887		5,098		5,408
Small business investment LPs	Other investments	8,764		8,805		14,320
Total		$	12,927	$	14,179	$	21,496


(a)						Maximum potential loss is calculated as the total investment in the LLC or LP, including any capital commitments that may have not yet been called. The Company is not exposed to any loss beyond the total commitment of its investment.

Valuation of Financial Assets

The Financial Accounting Standards Board has established a valuation hierarchy for disclosure of the inputs used to measure estimated fair value of financial assets and liabilities, such as securities. This hierarchy categorizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

A financial instrument’s classification within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement – consequently, if there are multiple significant valuation inputs that are categorized in different levels of the hierarchy, the instrument’s hierarchy level is the lowest level (with Level 3 being the lowest level) within which any significant input falls.

The Level 1 category includes equity securities and U.S. Treasury securities that are measured at estimated fair value using quoted active market prices.

The Level 2 category includes fixed maturity securities such as corporate debt securities, U.S. government obligations, and obligations of U.S. states, territories, and political subdivisions. Estimated fair value is principally based on market values obtained from a third-party pricing service. Factors that are used in determining estimated fair market value include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. The Company receives one quote per security from a third-party pricing service, although as discussed below, the Company does consult other pricing resources when confirming that the prices it obtains reflect the fair values of the instruments in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurement. Generally, quotes obtained from the pricing service for instruments classified as Level 2 are not adjusted and are not binding. As of March 31, 2022 and December 31, 2021, the Company did not adjust any Level 2 fair values.

A number of the Company’s investment grade corporate debt securities are frequently traded in active markets, and trading prices are consequently available for these securities. However, these securities are classified as Level 2 because the pricing service from which the Company has obtained estimated fair values for these instruments uses valuation models that use observable market inputs in addition to trading prices. Substantially all of the input assumptions used in the service’s model are observable in the marketplace or can be derived or supported by observable market data.

In the measurement of the estimated fair value of certain financial instruments, other valuation techniques were utilized if quoted market prices were not available. These derived fair value estimates are significantly affected by the assumptions used. Additionally, ASC 825, Financial Instruments, excludes from its scope certain financial instruments, including those related to insurance contracts, pension and other postretirement benefits, and equity method investments.

In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:

Cash and cash equivalents

The carrying amount for cash and cash equivalents is a reasonable estimate of fair value due to the short-term maturity of these investments.

Investments in real estate

Real estate investments are reported at amortized cost. Depreciation and other related expenses are recorded as an offset to investment income. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of real estate investments and makes any necessary adjustments, with any reductions in the carrying amount of these investments recorded in net realized investment gains in the unaudited Consolidated Statement of Operations when recognized.

Measurement alternative equity investments

The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.

Accrued interest and dividends

The carrying amount for accrued interest and dividends is a reasonable estimate of fair value due to the short-term maturity of these assets.

The following table presents, by level, fixed maturity securities carried at estimated fair value as of March 31, 2022 and December 31, 2021:


As of March 31, 2022 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	—	$	56,605	$	—	$	56,605
Corporate debt securities	—		11,120		—		11,120
Total	$	—	$	67,725	$	—	$	67,725


As of December 31, 2021 (in thousands)	Level 1		Level 2 *		Level 3		Total
Fixed maturity securities:
Obligations of U.S. states, territories and political subdivisions	$	—	$	61,795	$	—	$	61,795
Corporate debt securities	—		17,996		—		17,996
Total	$	—	$	79,791	$	—	$	79,791

*Denotes fair market value obtained from pricing services.

The following table presents, by level, estimated fair values of equity investments and other financial instruments as of March 31, 2022 and December 31, 2021:


As of March 31, 2022 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	37,310	$	—	$	—	$	37,310
Accrued interest and dividends	1,000		—		—		1,000
Equity securities, at fair value:
Common stocks	69,945		—		—		69,945
Short-term investments:
Money market funds	58,555		—		—		58,555
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,908		8,908
Total	$	166,810	$	—	$	8,908	$	175,718


As of December 31, 2021 (in thousands)	Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	37,168	$	—	$	—	$	37,168
Accrued interest and dividends	817		—		—		817
Equity securities, at fair value:
Common stocks	76,853		—		—		76,853
Short-term investments:
Money market funds	45,930		—		—		45,930
Other investments:
Equity investments in unconsolidated affiliates, measurement alternative	—		—		8,688		8,688
Total	$	160,768	$	—	$	8,688	$	169,456

The Company did not hold any Level 3 category debt or marketable equity investment securities as of March 31, 2022 or December 31, 2021.

There were no transfers into or out of Levels 1, 2 or 3 during the periods presented.

To help ensure that estimated fair value determinations are consistent with ASC 820, prices from our pricing services go through multiple review processes to ensure appropriate pricing. Pricing procedures and inputs used to price each security include, but are not limited to, the following: unadjusted quoted market prices for identical securities such as stock market closing prices; non-binding quoted prices for identical securities in markets that are not active; interest rates; yield curves observable at commonly quoted intervals; volatility; prepayment speeds; loss severity; credit risks; and default rates. The Company reviews the procedures and inputs used by its pricing services, and verifies a sample of the services’ quotes by comparing them to values obtained from other pricing resources. In the event the Company disagrees with a price provided by its pricing services, the respective service reevaluates the price to corroborate the market information and then reviews inputs to the evaluation in light of potentially new market data.

Certain equity investments under the measurement alternative and real estate investments are measured at estimated fair value on a non-recurring basis and are reviewed for impairment quarterly. If any such investment is determined to be other-than-temporarily impaired, an impairment charge is recorded against such investment and reflected in the unaudited Consolidated Statements of Operations. There were no impairments of such investments made during the three-month period ended March 31, 2022 or the twelve-month period ended December 31, 2021. The following table presents a rollforward of equity investments under the measurement alternative and real estate investments as of March 31, 2022 and December 31, 2021:


(in thousands)	Balance, January 1, 2022		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, March 31, 2022
Other investments:
Real Estate	$	4,987	$	—	$	—	$	—	$	—	$	4,987
Equity investments in unconsolidated affiliates, measurement alternative	8,688		—		—		250		(30)		8,908
Total	$	13,675	$	—	$	—	$	250	$	(30)	$	13,895


(in thousands)	Balance, January 1, 2021		Amounts Impaired		Observable Changes		Purchases and Additional Commitments Paid		Sales, Returns of Capital and Other Reductions		Balance, December 31, 2021
Other investments:
Real Estate	$	—	$	—	$	—	$	5,000	$	(13)	$	4,987
Equity investments in unconsolidated affiliates, measurement alternative	8,741		—		—		1,543		(1,596)		8,688
Total	$	8,741	$	—	$	—	$	6,543	$	(1,609)	$	13,675

Note 7 – Commitments and Contingencies

Legal Proceedings – The Company and its subsidiaries are involved in legal proceedings that are incidental to their business. In the Company’s opinion, based on the present status of these proceedings, any potential liability of the Company or its subsidiaries with respect to these legal proceedings, is not expected to, in the aggregate, be material to the Company’s consolidated financial condition or operations.

Regulation – The Company’s title insurance and trust subsidiaries are regulated by various federal, state and local governmental agencies and are subject to various audits and inquiries. It is the opinion of management based on its present expectations that these audits and inquiries will not have a material impact on the Company’s consolidated financial condition or operations.

Escrow and Trust Deposits – As a service to its customers, the Company, through ITIC, administers escrow and trust deposits representing earnest money received under real estate contracts, escrowed funds received under escrow agreements, undisbursed amounts received for settlement of mortgage loans and indemnities against specific title risks. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of these deposits.

Like-Kind Exchanges Proceeds – In administering tax-deferred like-kind exchanges pursuant to § 1031 of the Internal Revenue Code, the Company’s wholly owned subsidiary, Investors Title Exchange Corporation (“ITEC”), serves as a qualified intermediary, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. Another Company wholly owned subsidiary, Investors Title Accommodation Corporation (“ITAC”), serves as exchange accommodation titleholder and, through LLCs that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property totaled approximately $571.4 million and $763.9 million as of March 31, 2022 and December 31, 2021, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenue includes earnings on these deposits; therefore, investment income is shown as other income rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.

COVID-19 – Despite the widespread availability of vaccines, COVID-19 (including its variant strains) continues to impact U.S. states where the Company conducts business. The COVID-19 pandemic has negatively impacted worldwide economic activity and created significant volatility and disruptions of financial markets. In response, the U.S. government and its agencies took a number of significant measures to provide fiscal and monetary stimulus. Such actions included an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, mortgage loan forbearance actions, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. Many such actions have lapsed or otherwise been reduced as time has passed since the onset of the pandemic. The Company has remained fully operational throughout the pandemic and did not have any reductions in workforce during 2022 or 2021. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

Note 8 – Related Party Transactions

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


Financial Statement Classification, Consolidated Balance Sheets (unaudited) (in thousands)	As of March 31, 2022		As of December 31, 2021
Other investments	$	6,322	$	6,623
Premium and fees receivable	$	853	$	882


Financial Statement Classification, Consolidated Statements of Operations (unaudited) (in thousands)	Three Months Ended March 31,
	Three Months Ended March 31,
	2022		2021
Net premiums written	$	6,584	$	6,769
Non-title services and other investment income	$	1,370	$	752
Commissions to agents	$	4,465	$	4,474

Note 9 – Intangible Assets, Goodwill and Title Plants

Intangible Assets

The estimated fair values of intangible assets recognized as the result of title insurance agency acquisitions, all Level 3 inputs, are principally based on values obtained from an independent third-party valuation service. In accordance with ASC 350, Intangibles – Goodwill and Other, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2022 and 2021 that would indicate the carrying amounts may not be recoverable, and therefore, determined that no identifiable intangible assets were impaired.

Identifiable intangible assets consist of the following:


(in thousands)	As of March 31, 2022		As of December 31, 2021
Referral relationships	$	8,567	$	8,567
Non-compete agreements	2,938		2,938
Tradename	747		747
Total	12,252		12,252
Accumulated amortization	(3,835)		(3,505)
Identifiable intangible assets, net	$	8,417	$	8,747

The following table provides the estimated aggregate amortization expense for each of the five succeeding fiscal years:


Year Ended (in thousands)
2022	$	953
2023	1,290
2024	1,107
2025	1,024
2026	1,024
Thereafter	2,833
Total	$	8,231

Goodwill and Title Plants

As of March 31, 2022, the Company recognized $7.2 million in goodwill and $857 thousand in title plants, net of impairments, as the result of title insurance agency acquisitions. The title plants are included with other assets in the unaudited Consolidated Balance Sheets. The fair values of goodwill and the title plants as of the date of acquisition, both Level 3 inputs, were principally based on values obtained from an independent third-party valuation service. In accordance with ASC 350, management determined that no events or changes in circumstances occurred during the three-month periods ended March 31, 2022 and 2021 that would indicate the carrying amounts may not be recoverable, and therefore, determined that there were no goodwill or title plant impairments.

Note 10 – Accumulated Other Comprehensive Income

The following table provides changes in the balances of each component of accumulated other comprehensive income, net of tax, for the periods ended March 31, 2022 and 2021:


Three Months Ended March 31, 2022 (in thousands)	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans		Total
Beginning balance at January 1	$	3,370	$	(144)	$	3,226
Other comprehensive (loss) income before reclassifications	(2,181)		173		(2,008)
Amounts reclassified from accumulated other comprehensive income	—		—		—
Net current-period other comprehensive loss (income)	(2,181)		173		(2,008)
Ending balance	$	1,189	$	29	$	1,218


Three Months Ended March 31, 2021 (in thousands)	Unrealized Gains and Losses On Available-for-Sale Securities		Postretirement Benefits Plans		Total
Beginning balance at January 1	$	4,470	$	(144)	$	4,326
Other comprehensive loss before reclassifications	(592)		—		(592)
Amounts reclassified from accumulated other comprehensive income	(18)		—		(18)
Net current-period other comprehensive loss	(610)		—		(610)
Ending balance	$	3,860	$	(144)	$	3,716

The following table provides significant amounts reclassified out of each component of accumulated other comprehensive income for the three-month periods ended March 31, 2022 and 2021:


Three Months Ended March 31, 2022 (in thousands)
Details about Accumulated Other Comprehensive Income Components (in thousands)	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statements of Operations
Unrealized gains and losses on available-for-sale securities:
Net realized gain (loss) on investments	$	—
Other-than-temporary impairments	—
Total	$	—	Net realized investment gains
Tax	—		Provision for income taxes
Net of Tax	$	—
Reclassifications for the period	$	—


Three Months Ended March 31, 2021 (in thousands)
Details about Accumulated Other Comprehensive Income Components (in thousands)	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Consolidated Statements of Operations
Unrealized gains and losses on available-for-sale securities:
Net realized gain on investments	$	23
Other-than-temporary impairments	—
Total	$	23	Net realized investment gains
Tax	(5)		Provision for income taxes
Net of Tax	$	18
Reclassifications for the period	$	18

Note 11 – Revenue from Contracts with Customers

ASC 606, Revenue from Contracts with Customers, requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance does not apply to revenue associated with insurance contracts (including title insurance policies), financial instruments and lease contracts; and therefore is primarily applicable to the following Company revenue categories.

Escrow and other title-related fees: The Company’s title segment recognizes commission revenue and fees related to items such as searches, settlements, commitments and other ancillary services. Escrow and other title-related fees are recognized as revenue at the time of the related transactions as the earnings process, or performance obligation, is then considered to be complete.

Non-title services: Through various subsidiaries, the Company offers management services, tax-deferred real property exchange services, investment management and trust services. Nonrefundable exchange fees are recognized as revenue upon receipt of the funds, which is at the time of closing of the initial sale of property. All other non-title service fees are recognized as revenue as performance obligations are completed.

Other: The Company occasionally recognizes revenue from other miscellaneous contracts which can include, but is not limited to, seminar and education registration fees and software licensing contracts. These revenue streams are deemed immaterial to the operations of the Company, and revenue is recognized when, or as, performance obligations are completed.

The following table provides a breakdown of the Company’s revenue by major business activity:


	Three Months Ended March 31,
(in thousands)	2022		2021
Revenue from contracts with customers:
Escrow and other title-related fees	$	5,064	$	2,798
Non-title services	2,426		2,078
Total revenue from contracts with customers	7,490		4,876
Other sources of revenue:
Net premiums written	63,125		61,477
Investment-related revenue	(1,916)		5,517
Other	299		208
Total revenues	$	68,998	$	72,078

Note 12 – Leases

The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases, with lease expense recognized on a straight-line basis over the term of the lease.

A portion of the Company's current leases include an option to extend or cancel the lease term. The exercise of such an option is solely at the Company's discretion. The operating lease liability recorded in the unaudited Consolidated Balance Sheets includes lease payments related to options to extend or cancel the lease term if the Company determined at the date of adoption that the lease was expected to be renewed or extended. The Company, in determining the present value of lease payments, utilized the average rate over a 10-year term based upon the Moody's seasoned Aaa corporate bond yields, as explicit rates of interest were not readily determinable in the lease contracts. The Company does not carry debt; thus no incremental borrowing rate was available to the Company.

Lease expense is included in office and technology expenses in the unaudited Consolidated Statements of Operations. Information regarding the Company’s operating leases follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
Operating leases	$	563	$	326
Short-term leases (b)	67		64
Lease expense	$	630	$	390
Sub-lease income	—		—
Lease cost	$	630	$	390


(b)						Leases with an initial term of twelve months or less are not recorded on the unaudited Consolidated Balance Sheets.

Components of the operating lease liability presented on the unaudited Consolidated Balance Sheets are as follows:


(in thousands)	As of March 31, 2022		As of December 31, 2021
Current:
Operating lease liabilities	$	2,021	$	1,547
Non-current:
Operating lease liabilities	5,432		3,782
Total operating lease liabilities	$	7,453	$	5,329

The future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of March 31, 2022, are summarized as follows:


Year Ended (in thousands)
2022	$	2,211
2023	1,892
2024	1,571
2025	1,127
2026	934
Thereafter	284
Total undiscounted payments	$	8,019
Less: present value adjustment	(566)
Operating lease liabilities	$	7,453

Supplemental lease information is as follows:


	As of March 31, 2022		As of December 31, 2021
Weighted average remaining lease term (years)	4.14		4.13
Weighted average discount rate	4.0	%	4.2	%

The Company does not have any material pending operating or financing lease agreements that become effective in future periods.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Investors Title Company's (the "Company") Annual Report on Form 10-K for the year ended December 31, 2021 should be read in conjunction with the following discussion since it contains information which is important for evaluating the Company's operating results and financial condition.

In addition, the Company may make forward-looking statements in the following discussion and analysis. Forward looking statements are based on certain assumptions and expectations of future events that are subject to a number of risks and uncertainties. Actual results may vary. See "Safe Harbor for Forward-Looking Statements" at the end of this discussion and analysis, as well as the sections titled "Risk Factors" in Part I, Item 1A of the Company's Annual Report on Form 10-K for factors that could affect forward-looking statements.

Overview

The Company is a holding company that engages primarily in issuing title insurance through two subsidiaries, Investors Title Insurance Company (“ITIC”) and National Investors Title Insurance Company (“NITIC”). Total revenues from the title segment accounted for 96.9% of the Company's revenues for the three-month period ended March 31, 2022. Through ITIC and NITIC, the Company underwrites land title insurance for owners and mortgagees as a primary insurer.

Title insurance protects against loss or damage resulting from title defects that affect real property. When real property is conveyed from one party to another, occasionally there is an undisclosed defect in the title or a mistake or omission in a prior deed, will or mortgage that may give a third party a legal claim against such property. If a covered claim is made against real property, title insurance provides indemnification against insured defects.

There are two basic types of title insurance policies – one for the mortgage lender and one for the real property owner. A lender often requires the property owner to purchase a lender’s title insurance policy 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 its investment.

The Company issues title insurance policies through its home and branch offices and through a network of agents. Issuing agents are typically real estate attorneys, independent agents 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. The ability to attract and retain issuing agents is a key determinant of the Company’s growth in title insurance premiums written.

Revenues for the title insurance segment primarily result from purchases of new and existing residential and commercial real estate, refinance activity and certain other types of mortgage lending such as home equity lines of credit.

Title insurance premiums vary from state to state and are subject to extensive regulation. Statutes generally provide that rates must not be excessive, inadequate or unfairly discriminatory. The process of implementing a rate change in most states involves pre-approval by the applicable state insurance regulator.

Volume is a factor in the Company’s profitability due to fixed operating costs that are incurred by the Company regardless of title insurance premium volume. The resulting operating leverage tends to amplify the impact of changes in volume on the Company’s profitability. The Company’s profitability also depends, in part, upon its ability to manage its investment portfolio to maximize investment returns and to minimize risks such as interest rate changes, defaults and impairments of assets.

The Company’s volume of title insurance premiums is affected by the overall level of residential and commercial real estate activity, which includes property sales, mortgage financing and mortgage refinancing. Real estate activity, home sales and mortgage lending are cyclical in nature. Real estate activity is affected by a number of factors, including the availability of mortgage credit, the cost of real estate, consumer confidence, employment and family income levels, and general United States economic conditions. Interest rate volatility is also an important factor in the level of residential and commercial real estate activity.

The Company’s title insurance premiums in future periods are likely to fluctuate due to these and other factors which are beyond management’s control.

Historically, the title insurance business tends to be seasonal as well as cyclical. Because home sales are typically strongest in periods of favorable weather, the first calendar quarter tends to have the lowest activity levels, while the spring and summer quarters tend to be more active. Mortgage refinance activity tends to be influenced less by seasonality and more by economic cycles, with activity levels increasing during times of falling interest rates.

Services other than title insurance provided by operating divisions of the Company are not reported separately, but rather are reported collectively in a segment called “All Other”. These other services include those offered by the Company and by its wholly owned subsidiaries, Investors Title Exchange Corporation (“ITEC”), Investors Title Accommodation Corporation (“ITAC”), Investors Trust Company (“Investors Trust”) and Investors Title Management Services, Inc. (“ITMS”).

The Company’s exchange services division, consisting of the operations of ITEC and ITAC, provides customer services in connection with tax-deferred real property exchanges. ITEC acts as a qualified intermediary in tax-deferred exchanges of property held for productive use in a trade or business or for investment, and its income is derived from fees for handling exchange transactions and interest earned on client deposits held by the Company. In its role as qualified intermediary, ITEC coordinates the exchange aspects of the real estate transaction, and its duties include drafting standard exchange documents, holding the exchange funds between the time the old property is sold and the new property is purchased, and accepting the formal identification of the replacement property within the required identification period. ITAC provides services as an exchange accommodation titleholder for accomplishing “parking transactions” as set forth in the safe harbor contained in Internal Revenue Procedure 2000-37. These transactions include reverse exchanges when taxpayers decide to acquire replacement property before selling the relinquished property, or “build to suit” exchanges, when improvements must be made to the replacement property before the taxpayer acquires the improved replacement property. The services provided by the Company’s exchange services division, ITEC and ITAC, are pursuant to provisions in the Internal Revenue Code. From time to time, these laws are subject to review and changes, which may negatively affect the demand for tax-deferred exchanges in general, and consequently, the revenues and profitability of the Company’s exchange services division.

The Company’s trust services division, Investors Trust, provides investment management and trust services to individuals, companies, banks and trusts.

ITMS offers various consulting and management services to provide clients with the technical expertise to start and successfully operate a title insurance agency.

Business Trends and Recent Conditions; COVID-19 Pandemic

The housing market is heavily influenced by government policies and overall economic conditions. Regulatory reform and initiatives by various governmental agencies, including the Federal Reserve's monetary policy and other regulatory changes, could impact lending standards or the processes and procedures used by the Company. The current real estate environment, including interest rates and general economic activity, typically influence the demand for real estate. Changes in either of these areas, in addition to ongoing supply constraints and volatility in the cost and availability of building materials, could impact the Company's results of operations in future periods.

Despite the widespread availability of vaccines, COVID-19 (including its variant strains) continues to impact U.S. states where the Company conducts business. The COVID-19 pandemic has negatively impacted worldwide economic activity and created significant volatility and disruptions of financial markets. In response, the U.S. government and its agencies took a number of significant measures to provide fiscal and monetary stimulus. Such actions included an unscheduled cut to the federal funds rate, the introduction of new programs to preserve market liquidity, extended unemployment and sick leave benefits, mortgage loan forbearance actions, low-interest loans for working capital access and payroll assistance, and other relief measures for both workers and businesses. Many such actions have lapsed or otherwise been reduced as time has passed since the onset of the pandemic. The Company has remained fully operational throughout the pandemic and did not have any reductions in workforce. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

The COVID-19 pandemic has caused the Company to modify its business practices (including employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences). The COVID-19 pandemic and any of its variants could continue to affect the Company in a number of ways including, but not limited to, the impact of employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, potential decreases in net premiums written in the future, and future fluctuations in the Company's investment portfolio due to the pandemic and the economic disruption it is causing. Because of the inherent uncertainty regarding the duration and severity of the COVID-19 pandemic and its effects on the economy, as well as uncertainty regarding the effects of government measures already taken, and which may be taken or continued in the future, to combat the spread of the virus and any of its variants, the Company is currently unable to predict the ultimate impact of the pandemic.

The ongoing military conflict between Russia and Ukraine has created additional volatile market conditions and uncertainties in the global economy.

Regulatory Environment

The Federal Open Market Committee (“FOMC”) of the Federal Reserve issues disclosures on a periodic basis that include projections of the federal funds rate and expected actions. In March 2020, the FOMC lowered the target federal funds rate twice by a total of 150 basis points in response to risk posed to economic activity by COVID-19, resulting in a target federal funds rate range between 0.00% and 0.25%. The FOMC had maintained this target range until March 2022, when the target federal funds rate range was increased to between 0.25% and 0.50%. The target federal funds rate range was raised again in May 2022, when the FOMC increased the target range to between 0.75% and 1.00%. Further, the FOMC noted in the May 2022 meeting that it anticipates that ongoing increases in the target range will be appropriate, and announced steps to begin reducing its balance sheet holdings. In normal economic situations, future adjustments to the FOMC’s stance of monetary policy are expected to be based on realized and expected economic developments to achieve maximum employment and inflation near the FOMC's symmetric long-term 2.0% objective.

In 2008, the federal government took control of the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) in an effort to keep these government-sponsored entities from failing. The primary functions of Fannie Mae and Freddie Mac are to provide liquidity to the nation's mortgage finance system by purchasing mortgages on the secondary market, pooling them and selling them as mortgage-backed securities. In order to securitize, Fannie Mae and Freddie Mac typically require the purchase of title insurance for loans they acquire. Since the federal takeover, there have been various discussions and proposals regarding their reform. Changes to these entities could impact the entire mortgage loan process and, as a result, could affect the demand for title insurance. The timing and results of reform are currently unknown; however, any changes to these entities could affect the Company and its results of operations.

In recent years, the Consumer Financial Protection Bureau (“CFPB”), Office of the Comptroller of Currency and the Federal Reserve have issued memorandums to banks that communicated those agencies’ heightened focus on vetting third-party providers. Such increased regulatory involvement may affect the Company's agents and approved providers. Further proposals to change regulations governing insurance holding companies and the title insurance industry are often introduced in Congress, in state legislatures and before various insurance regulatory agencies. Although the Company regularly monitors such proposals, the likelihood and timing of passage of any such regulation, and the possible effects of any such regulation on the Company and its subsidiaries, cannot be determined at this time.

The timing and nature of any reforms are currently unknown; however, the CFPB is expected to take a significantly more aggressive approach to using its rulemaking, supervision, and enforcement authorities under President Biden’s administration. Any changes to the CFPB or other governmental entities could affect the Company and its results of operations.

Real Estate Environment

The Mortgage Bankers Association's ("MBA") March 21, 2022 Mortgage Finance Forecast (“MBA Forecast”) projects 2022 purchase activity to increase 7.7% to $1,773 billion and mortgage refinance activity to decrease 63.3% to $861 billion, resulting in a net decrease in total mortgage originations of 34.0% to $2,634 billion, all from 2021 levels. In 2021, purchase activity accounted for 41.2% of all mortgage originations and is projected in the MBA Forecast to represent 67.3% of all mortgage originations in 2022. The MBA Forecast is projecting fewer total mortgage originations in 2023 and 2024, compared with 2022 levels. Due to the rapidly changing environment brought on by COVID-19, supply constraints and geopolitical conflicts, these projections and the impact of actual future developments on the Company could be subject to material change.

According to data published by Freddie Mac, the average 30-year fixed mortgage interest rates in the United States were 3.8% and 2.9% for the three-month periods ended March 31, 2022 and 2021, respectively. Per the MBA Forecast, mortgage interest rates are projected to increase to 4.5% in the fourth quarter of 2022.

Historically, activity in real estate markets has varied over the course of market cycles by geographic region and in response to evolving economic factors. Operating results can vary from year to year based on cyclical market conditions and do not necessarily indicate the Company's future operating results and cash flows.

Critical Accounting Estimates and Policies

The preparation of the Company's unaudited Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of certain assets, liabilities, revenues, expenses and related disclosures regarding contingencies and commitments. Actual results could differ from these estimates. During the three-month period ended March 31, 2022, the Company did not make any material changes to its critical accounting policies as previously disclosed in Management's Discussion and Analysis in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission (the "SEC").

Results of Operations

The following table presents certain unaudited Consolidated Statements of Operations data for the three-month periods ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(in thousands)	2022		2021
Revenues:
Net premiums written	$	63,125	$	61,477
Escrow and other title-related fees	5,064		2,798
Non-title services	2,426		2,078
Interest and dividends	915		1,016
Other investment income	1,337		941
Net realized investment gains	1,747		321
Changes in the estimated fair value of equity security investments	(5,915)		3,239
Other	299		208
Total Revenues	68,998		72,078

Operating Expenses:
Commissions to agents	29,857		30,542
Provision for claims	176		1,591
Personnel expenses	21,254		16,153
Office and technology expenses	4,368		2,742
Other expenses	5,550		3,735
Total Operating Expenses	61,205		54,763

Income before Income Taxes	7,793		17,315

Provision for Income Taxes	1,608		3,492

Net Income	$	6,185	$	13,823

Insurance Revenues

Insurance revenues include net premiums written and escrow and other title-related income that includes escrow fees, commissions and settlement fees. Non-title services revenue, investment-related revenues and other revenues are discussed separately below.

Net Premiums Written

Net premiums written increased 2.7% for the three-month period ended March 31, 2022 to $63.1 million, compared with $61.5 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily driven by higher average home prices and a higher level of purchase activity.

Total premiums include an estimate of premiums for policies that have been issued by branches and agents, but not reported to the Company as of the balance sheet date. To determine the estimated premiums, the Company uses historical experience, as well as other factors, to make certain assumptions about the average elapsed time between the policy effective date and the date the policies are reported. From time to time, the Company adjusts the inputs to the estimation process as branches and agents report transactions and new information becomes available. In addition to estimating revenues, the Company also estimates and accrues agent commissions, claims provision, premium taxes, income taxes, and other expenses associated with the estimated revenues that have been accrued. The Company reflects any adjustments to the accruals in the results of operations in the period in which new information becomes available.

Title insurance companies typically issue title insurance policies directly through home and branch offices or through title agencies. Following is a breakdown of premiums generated by branch and agency operations for the three-month periods ended March 31, 2022 and 2021:


	Three Months Ended March 31,
(in thousands, except percentages)	2022		%	2021		%
Home and Branch	$	17,418	27.6	$	17,360	28.2
Agency	45,707		72.4	44,117		71.8
Total	$	63,125	100.0	$	61,477	100.0

Home and Branch Office Net Premiums – In the Company's home and branch operations, the Company issues a title insurance policy and retains the entire premium, as no commissions are paid in connection with these policies. Net premiums written from home and branch operations increased 0.3% for the three-month period ended March 31, 2022, compared with the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily driven by higher average home prices and a higher level of purchase activity.

All of the Company's home office operations and the majority of branch offices are located in North Carolina; as a result, the home and branch office net premiums written are primarily for North Carolina title insurance policies.

Agency Net Premiums – When a policy is written through a title agency, the premium is shared between the agency and the underwriter. The agent retains a majority of the premium as a commission and remits the net amount to the Company. Title insurance commissions earned by the Company’s agents are recognized as expenses concurrently with premium recognition. Agency net premiums written increased 3.6% for the three-month period ended March 31, 2022, compared with the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily driven by higher average home prices and a higher level of purchase activity.

Following is a schedule of net premiums written for the three-month periods ended March 31, 2022 and 2021 in select states in which the Company's two insurance subsidiaries, ITIC and NITIC, currently underwrite title insurance:


	Three Months Ended March 31,
State (in thousands)	2022		2021
North Carolina	$	24,339	$	25,247
Texas	15,762		11,352
Georgia	6,972		6,890
South Carolina	5,388		5,348
All Others	10,894		12,773
Premiums Written	63,355		61,610
Reinsurance Assumed	—		—
Reinsurance Ceded	(230)		(133)
Net Premiums Written	$	63,125	$	61,477

Escrow and Other Title-Related Fees

Escrow and other title-related fees consists primarily of commission income, escrow and other various fees associated with the issuance of title insurance policies including settlement, examination and closing fees. Escrow and other title-related fee revenues were $5.1 million for the three-month period ended March 31, 2022, compared with $2.8 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was mainly due to growth in independent agent markets and products which support title insurance.

Revenue from Non-Title Services

Revenue from non-title services includes trust services, agency management services and exchange services income. Non-title service revenues were $2.4 million for the three-month period ended March 31, 2022, compared with $2.1 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to increases in like-kind exchange activity and trust management fee income.

Investment-Related Revenues

Investment-related revenues include interest and dividends, other investment income, net realized investment gains and changes in the estimated fair value of equity security investments.

Interest and Dividends

The Company derives a substantial portion of its income from investments in fixed maturity securities, which are primarily municipal and corporate fixed maturity securities, and equity securities. The Company’s investment policy is designed to comply with regulatory requirements and to balance the competing objectives of asset quality and investment returns. The Company's title insurance subsidiaries are required by statute to maintain minimum levels of investments in order to protect the interests of policyholders.

The Company’s investment strategy emphasizes after-tax income and principal preservation. The Company’s investments are primarily in fixed maturity securities and equity securities. The average effective maturity of the majority of the fixed maturity securities is less than 10 years. The Company’s invested assets are managed to fund its obligations and evaluated to ensure long term stability of capital accounts.

As the Company generates cash from operations, it is invested in accordance with the Company’s investment policy and corporate goals. The Company’s investment policy has been designed to balance multiple goals, including the assurance of a stable source of income from interest and dividends, the preservation of principal, and the provision of liquidity sufficient to meet insurance underwriting and other obligations as they become payable in the future. Securities purchased may include a combination of taxable or tax-exempt fixed maturity securities and equity securities. The Company also invests in short-term investments that typically include money market funds, and, at times, the Company has or could invest in U.S. Treasury bills, commercial paper and certificates of deposit. The Company strives to maintain a high quality investment portfolio. Interest and investment income levels are primarily a function of general market performance, interest rates and the amount of cash available for investment.

Interest and dividends were $915 thousand for the three-month period ended March 31, 2022, compared with $1.0 million for the same prior year period. The decrease in 2022 was primarily related to lower interest income received due to lower average balances of fixed maturity securities and lower levels of dividends received.

Other Investment Income

Other investment income consists primarily of income related to investments in unconsolidated affiliates, typically structured as limited liability companies ("LLCs"), accounted for under either the equity method of accounting or the measurement alternative for investments that do not have readily determinable fair values. The measurement alternative method requires investments without readily determinable fair values to be recorded at cost, less impairments, and plus or minus any changes resulting from observable price changes. The Company monitors any events or changes in circumstances that may have had a significant adverse effect on the fair value of these investments and makes any necessary adjustments.

Other investment income was $1.3 million for the three-month period ended March 31, 2022, compared with $0.9 million for the same prior year period. Changes in other investment income are impacted by fluctuations in the carrying value of the underlying investment and/or distributions received.

Net Realized Investment Gains

Dispositions of equity securities at a realized gain or loss reflect such factors as industry sector allocation decisions, ongoing assessments of issuers’ business prospects and tax planning considerations. Additionally, the amounts included in net realized investment gains are affected by assessments of securities’ valuation for other-than-temporary impairment. As a result of the interaction of these factors and considerations, the net realized investment gain or loss can vary significantly from period to period.

The net realized investment gains were $1.7 million for the three-month period ended March 31, 2022, compared with $321 thousand for the same prior year period. There were no impairment charges recorded in 2022 or 2021. Management believes unrealized losses on the remaining fixed maturity securities at March 31, 2022 are temporary in nature.

The securities in the Company’s investment portfolio are subject to economic conditions and market risks. The Company considers relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a fixed maturity security is other-than-temporary. Relevant facts and circumstances include the extent and length of time the fair value of an investment has been below cost.

There are a number of risks and uncertainties inherent in the process of monitoring impairments and determining if an impairment is other-than-temporary. These risks and uncertainties include the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that the Company’s assessment of an issuer’s ability to meet all of its contractual obligations will change based on changes in the characteristics of that issuer; the risk that information obtained by the Company or changes in other facts and circumstances leads management to change its intent to sell the fixed maturity security; and the risk that management is making decisions based on inaccurate information.

Changes in the Estimated Fair Value of Equity Security Investments

Changes in the estimated fair value of equity security investments were $(5.9) million for the three-month period ended March 31, 2022, compared with $3.2 million for the same prior year period. Such fluctuations are the result of changes in general market conditions during the respective periods.

Other Revenues

Other revenues primarily include gains and losses on the disposal of fixed assets and miscellaneous revenues. Other revenues were $299 thousand for the three-month period ended March 31, 2022, compared with $208 thousand for the same prior year period.

Expenses

The Company's operating expenses consist primarily of commissions to agents, personnel expenses, office and technology expenses and the provision for claims. Operating expenses increased 11.8% for the three-month period ended March 31, 2022, compared with the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily due to increases in personnel expenses, partially offset by a decrease in claims expense. Other categories of operating expenses were 7.4% higher than the prior period, primarily to support expansion of our geographic footprint as well as ongoing strategic technology initiatives.

Following is a summary of the Company's operating expenses for the three-month periods ended March 31, 2022 and 2021. Inter-segment eliminations have been netted; therefore, the individual segment amounts will not agree to Note 4 in the accompanying unaudited Consolidated Financial Statements.


	Three Months Ended March 31,
(in thousands, except percentages)	2022		%	2021		%
Title Insurance	$	58,487	95.6	$	52,412	95.7
All Other	2,718		4.4	2,351		4.3
Total	$	61,205	100.0	$	54,763	100.0

On a combined basis, the after-tax profit margin was 9.0% for the three-month period ended March 31, 2022, compared with 19.2% for the same prior year period. The Company continually strives to enhance its competitive strengths and market position, including ongoing initiatives to manage its operating expenses.

Total Company

Personnel Expenses – Personnel expenses include base salaries, benefits and payroll taxes, bonuses paid to employees and contract labor expenses. Personnel expenses were $21.3 million for the three-month period ended March 31, 2022, compared with $16.2 million for the same prior year period. On a consolidated basis, personnel expenses as a percentage of total revenues were 30.8% for the three-month period ended March 31, 2022, compared with 22.4% for the same prior year period. The increase in personnel expenses for the three-month period ended March 31, 2022 was primarily due to expansion of our presence in key markets, overall staff growth to support higher transaction volumes, and increased employee benefit and contract labor costs.

Office and Technology Expenses – Office and technology expenses primarily include facilities expenses, software and hardware expenses, depreciation expense, telecommunications expenses, and business insurance. Office and technology expenses were $4.4 million for the three-month period ended March 31, 2022, compared with $2.7 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to ongoing investments in software and technology related initiatives and increased facilities expenses associated with staffing additions.

Other Expenses – Other expenses primarily include business development expenses, premium-related taxes and licensing, professional services, title and service fees, amortization of intangible assets and other general expenses. Other expenses were $5.6 million for the three-month period ended March 31, 2022, compared with $3.7 million for the same prior year period. The increase for the three-month period ended March 31, 2022 was primarily related to increases in title and service fees, travel-related expenses and professional service fees.

Title Insurance

Commissions to Agents – Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency contracts. Commissions to agents decreased 2.2% for the three-month period ended March 31, 2022, compared with the same prior year period. Commission expense as a percentage of net premiums written by agents was 65.3% for the three-month period ended March 31, 2022, compared with 69.2% for the same prior year period. The changes in commission expense, and commission expense as a percentage of net premiums written, were primarily related to changes in geographic mix and an increase in the level of intercompany commissions as a percentage of total premiums, with intercompany commissions being eliminated for wholly owned affiliated agents upon consolidation. Commission rates vary by market due to local practice, competition and state regulations.

Provision for Claims – The provision for claims decreased 88.9% for the three-month period ended March 31, 2022, compared with the same prior year period. The provision for claims as a percentage of net premiums written was 0.3% for the three-month period ended March 31, 2022, compared with 2.6% for the same prior year period. The decrease in the provision for claims for the three-month period ended March 31, 2022 was primarily due to a higher level of favorable loss development in the current period.

Title claims are typically reported and paid within the first several years of policy issuance. The provision for claims reflects actual payments of claims, net of recovery amounts, plus adjustments to the specific and incurred but not reported claims reserves, the latter of which are actuarially determined based on historical claims experience. Actual payments of claims, net of recoveries, were $564 thousand and $613 thousand for the three-month periods ended March 31, 2022 and 2021, respectively.

At March 31, 2022, the total reserve for claims was $36.4 million. Of that total, approximately $3.9 million was reserved for specific claims, and approximately $32.5 million was reserved for claims for which the Company had no notice. Because of the uncertainty of future claims, changes in economic conditions and the fact that claims may not materialize for several years, reserve estimates are subject to variability.

Changes from prior periods in the expected liability for claims reflect the uncertainty of the claims environment, as well as the limited predictive power of historical data. The Company continually updates and refines its reserve estimates as current experience develops and credible data emerges. Such data includes payments on claims closed during the quarter, new details that emerge on open cases that cause claims adjusters to increase or decrease the case reserves, and the impact that these types of changes have on the Company’s total loss provision. Adjustments may be required as new information develops, which often varies from past experience.

Income Taxes

The provision for income taxes was $1.6 million for the three-month period ended March 31, 2022, compared with $3.5 million for the same prior year period. Income tax expense, including federal and state taxes, as a percentage of income before income taxes was 20.6% for the three-month period ended March 31, 2022, compared with 20.2% for the same prior year period. The effective income tax rates for both 2022 and 2021 differ from the U.S. federal statutory income tax rate of 21% primarily due to the effect of tax-exempt income and state taxes. Tax-exempt income lowers the effective tax rate.

The Company believes it is more likely than not that the tax benefits associated with recognized impairments and unrecognized losses recorded through March 31, 2022 will be realized. However, this judgment could be impacted by further market fluctuations.

Liquidity and Capital Resources

The Company’s material cash requirements include general operating expenses, contractual and other obligations for the future payment of title claims, employment agreements, lease agreements, income taxes, capital expenditures, dividends on its common stock and other contractual commitments for goods and services needed for operations. All other arrangements entered into by the Company are not reasonably likely to have a material effect on liquidity or the availability of capital resources. Cash flows from operations have historically been the primary source of financing for expanding operations, whether through organic growth or outside investments. The Company believes its balances of cash, short-term investments and other readily marketable securities, along with cash flows generated by ongoing operations, will be sufficient to satisfy its cash requirements over the next 12 months and thereafter, including the funding of operating activities and commitments for investing and financing activities. There are currently no known trends that the Company believes will materially impact the Company’s capital resources, nor is the Company anticipating any material changes in the mix or relative cost of such resources.

The Company evaluates nonorganic growth opportunities, such as mergers and acquisitions, from time to time in the ordinary course of business. Because of the episodic nature of these events, related incremental liquidity and capital resource needs can be difficult to predict.

The Company’s operating results and cash flows are heavily dependent on the real estate market. The Company’s business has certain fixed costs such as personnel; therefore, changes in the real estate market are monitored closely, and operating expenses such as staffing levels are managed and adjusted accordingly. The Company believes that its significant working capital position and management of operating expenses will aid its ability to manage cash resources through fluctuations in the real estate market.

The extent to which COVID-19 impacts the Company's future operations will depend on future developments which cannot be predicted with certainty at this time, including the duration and severity of the pandemic, actions taken to contain the spread of the virus and its variants, and regulatory actions taken as a result of the outbreak and the availability and rate of vaccinations. Throughout the entirety of the pandemic, the Company has remained fully operational and has not had any reductions in workforce. A large number of the Company's employees are performing their job functions remotely. The Company has not taken stimulus relief funding or incurred any other forms of debt.

Cash Flows – Net cash flows provided by operating activities were $1.3 million and $8.2 million for the three-month periods ended March 31, 2022 and 2021, respectively. Cash flows provided by operating activities differ from net income due to adjustments for non-cash items, such as changes in the estimated fair value of equity security investments, gains and losses on investments, the timing of disbursements for taxes, claims and other accrued liabilities, and collections or changes in receivables and other assets.

Cash flows from non-operating activities have historically consisted of purchases and proceeds from investing activities, the issuance of dividends and repurchases of common stock. Net cash was used in investing activities for the three-month period ended March 31, 2022, compared with net cash being provided by investing activities in the prior year period, due to a decline in proceeds received from investment sales and maturities during the current year period.

The Company maintains a high degree of liquidity within its investment portfolio in the form of cash, short-term investments and other readily marketable securities. As of March 31, 2022, the Company held cash and cash equivalents of $37.3 million, short-term investments of $58.6 million, available-for-sale fixed maturity securities of $67.7 million and equity securities of $69.9 million. The net effect of all activities on total cash and cash equivalents was an increase of $142 thousand in 2022.

Capital Resources – The amount of capital resources the Company maintains is influenced by state regulation, the need to maintain superior financial ratings from third-party rating agencies and other marketing and operational considerations.

The Company's significant sources of funds are dividends and distributions from its subsidiaries, primarily its two title insurance subsidiaries. Cash is received from its subsidiaries in the form of dividends and as reimbursements for operating and other administrative expenses that it incurs. The reimbursements are executed within the guidelines of management agreements between the Company and its subsidiaries.

The ability of the Company's title insurance subsidiaries to pay dividends to the Company is subject to state regulation from their respective states of domicile. Each state regulates the extent to which title underwriters can pay dividends or make distributions and requires prior regulatory approval of the payment of dividends and other intercompany transfers. The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends. Depending on regulatory conditions, the Company may in the future need to retain cash in its title insurance subsidiaries in order to maintain their statutory capital position. As of March 31, 2022, both ITIC and NITIC met the minimum capital, surplus and reserve requirements for each state in which they are licensed.

While state regulations and the need to cover risks may set a minimum level for capital requirements, other factors necessitate maintaining capital resources in excess of the required minimum amounts. For instance, the Company’s capital resources help it maintain high ratings from insurance company rating agencies. Superior ratings strengthen the Company's ability to compete with larger, well known title insurers with national footprints.

A strong financial position provides the necessary flexibility to fund potential acquisition activity, to invest in the Company's core business, and to minimize the financial impact of potential adverse developments. Adverse developments that generally require additional capital include adverse financial results, changes in statutory accounting requirements by regulators, reserve charges, investment losses or costs incurred to adapt to a changing regulatory environment, including costs related to CFPB regulation of the real estate industry.

The Company bases its capitalization levels, in part, on net coverage retained. Since the Company’s geographical focus has been and continues to be concentrated in states with average premium rates typically lower than the national average, capitalization relative to premiums will usually appear higher than industry averages.

Due to the Company’s historical ability to consistently generate positive cash flows from its consolidated operations and investment income, management believes that funds generated from operations will enable the Company to adequately meet its current operating needs for the foreseeable future. However, especially with the continued impact of COVID-19 and the ongoing military conflict between Russia and Ukraine, there can be no assurance that future experience will be similar to historical experience, since it is influenced by such factors as the interest rate environment, real estate activity, the Company’s claims-paying ability and its financial strength ratings. In addition to operational and investment considerations, taking advantage of opportunistic external growth opportunities may necessitate obtaining additional capital resources. The Company is carefully monitoring the COVID-19 situation, the conflict in Ukraine, and other trends that could potentially result in material adverse liquidity changes, and will continually assess its capital allocation strategy, including decisions relating to payment of dividends, repurchasing the Company’s common stock and/or conserving cash.

Purchase of Company Stock – On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. 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. Pursuant to the Company’s ongoing purchase program, the Company did not purchase any shares in the three-month periods ended March 31, 2022 or 2021. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and then existing alternative uses for such cash.

Capital Expenditures – Capital expenditures were approximately $908 thousand for the three-month period ended March 31, 2022. In 2022, the Company has plans for various capital improvement projects, including increased investment in a number of technology and system development initiatives and hardware purchases which are anticipated to be funded via cash flows from operations. All material anticipated capital expenditures are subject to periodic review and revision and may vary depending on a number of factors.

Contractual Obligations - As of March 31, 2022, the Company had a claims reserve totaling $36.4 million. The amounts and timing of these obligations are estimated and not set contractually. Events such as fraud, defalcation, and multiple property title defects can substantially and unexpectedly cause increases in both the amount and timing of estimated title insurance loss payments and loss cost trends whereby increases or decreases in inflationary factors (including the value of real estate) will influence the ultimate amount of title insurance loss payments and could increase total obligations and influence claim payout patterns. Due to the length of time over which claim payments are made and regularly occurring changes in underlying economic and market conditions, claim estimates are subject to variability and future payments could increase or decrease from these estimated amounts in the future.

ITIC, a wholly owned subsidiary of the Company, has entered into employment agreements with certain executive officers. The amounts accrued for these agreements at March 31, 2022 and December 31, 2021, were $14.2 million and $13.4 million, respectively, which includes postretirement compensation and health benefits, and were calculated based on the terms of the contracts. These executive contracts are accounted for on an individual contract basis. As payments are based upon the occurrence of specific events, including death, disability, retirement, termination without cause or upon a change in control, payment periods are currently uncertain. Information regarding retirement agreements and other postretirement benefit plans can be found in Note 5 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company enters into lease agreements that are primarily used for office space. These leases are accounted for as operating leases. A portion of the Company's current leases include an option to extend or cancel the lease term, and the exercise of such an option is solely at the Company's discretion. The total of undiscounted future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of March 31, 2022 is $5.8 million, which includes lease payments related to options to extend or cancel the lease term if the Company determined at the date of adoption that the lease was expected to be renewed or extended. Information about leases can be found in Note 12 to the unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

In the normal course of business, the Company enters into other contractual commitments for goods and services needed for operations. Such commitments are not expected to have a material adverse effect on the Company’s liquidity.

Off-Balance Sheet Arrangements

As a service to its customers, the Company, through 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 unaudited Consolidated Balance Sheets. However, the Company remains contingently liable for the disposition of these deposits.

In addition, in administering tax-deferred like-kind exchanges pursuant to § 1031 of the Internal Revenue Code, ITEC serves as a qualified intermediary for exchanges, holding the net sales proceeds from relinquished property to be used for purchase of replacement property. ITAC serves as exchange accommodation titleholder and, through LLCs that are wholly owned subsidiaries of ITAC, holds property for exchangers in reverse exchange transactions. Like-kind exchange deposits and reverse exchange property held by the Company for the purpose of completing such transactions totaled approximately $571.4 million and $763.9 million as of March 31, 2022 and December 31, 2021, respectively. These exchange deposits are held at third-party financial institutions. Exchange deposits are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets; however, the Company remains contingently liable for the disposition of the transfers of property, disbursements of proceeds and the return on the proceeds at the agreed upon rate. Exchange services revenue includes earnings on these deposits; therefore, investment income is shown as non-title services rather than investment income. These like-kind exchange funds are primarily invested in money market and other short-term investments.

External assets under management of Investors Trust Company are not considered assets of the Company and, therefore, are excluded from the accompanying unaudited Consolidated Balance Sheets.

It is not the general practice of the Company to enter into off-balance sheet arrangements or issue guarantees to third parties. The Company does not have any material source of liquidity or financing that involves off-balance sheet arrangements. Other than items noted above, off-balance sheet arrangements are generally limited to the future payments due under various agreements with third-party service providers.

Recent Accounting Standards

No recent accounting pronouncements are expected to have a material impact on the Company’s financial position and results of operations. Please refer to Note 1 in the unaudited Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information regarding the Company’s basis of presentation and significant accounting policies.

Safe Harbor for Forward-Looking Statements

This Quarterly Report on Form 10-Q, as well as information included in future filings by the Company with the SEC 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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,” “would” 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. Without limitation, projected developments in mortgage interest rates and the overall economic environment set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Trends and Recent Conditions; COVID-19 Pandemic” constitute 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:

•the impact of COVID-19, including its variants, or other pandemics, climate change, severe weather conditions or the occurrence of another catastrophic event;

•changes in interest rates and real estate values;

•changes in general economic, business, and political conditions, including the performance of the financial and real estate markets;

•the potential impact of inflation;

•the impact of the ongoing military conflict between Russia and Ukraine;

•potential reform of government sponsored entities;

•the level of real estate transaction volumes, the level of mortgage origination volumes (including refinancing), the mix of title insurance between markets with varying real estate values, changes to the insurance requirements of the participants in the secondary mortgage market, and the effect of these factors on the demand for title insurance;

•the possible inadequacy of the provision for claims to cover actual claim losses;

•the incidence of fraud-related losses;

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

•unanticipated adverse changes in securities markets could result in material losses to the Company's investments;

•significant competition that the Company’s operating subsidiaries face, including the Company’s ability to develop and offer products and services that meet changing industry standards in a timely and cost-effective manner and expansion into new geographic locations;

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

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

•the impact of governmental oversight of compliance of the Company's service providers, including the application of financial regulation designed to protect consumers;

•possible downgrades from a rating agency, which could result in a loss of underwriting business;

•the inability of the Company to manage, develop and implement technological advancements and prevent system interruptions or unauthorized system intrusions;

•statutory requirements applicable to the Company’s insurance subsidiaries that require them to maintain minimum levels of capital, surplus and reserves and that restrict the amount of dividends they may pay to the Company without prior regulatory approval;

•the desire to maintain capital above statutory minimum requirements for competitive, marketing and other reasons;

•heightened regulatory scrutiny and investigations of the title insurance industry;

•the Company’s dependence on key management and marketing personnel, the loss of whom could have a material adverse effect on the Company’s business;

•difficulty managing growth, whether organic or through acquisitions;

•unfavorable economic or other conditions could cause the Company to record impairment charges for all or a portion of its goodwill and other intangible assets;

•policies and procedures for the mitigation of risks may be insufficient to prevent losses;

•the shareholder rights plan could discourage transactions involving actual or potential changes of control; and

•other risks detailed elsewhere in this document and in the Company’s other filings with the SEC.

These and other risks and uncertainties may be described from time to time in the Company's other reports and filings with the SEC. For more details on factors that could affect expectations, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, including under the heading "Risk Factors". The Company is not under any obligation (and expressly disclaims any such obligation) and does not undertake to update or alter any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. You should consider the possibility that actual results may differ materially from our forward-looking statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item not required for smaller reporting companies.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company's disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in such reports is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

No system of controls, no matter how well designed and operated, can provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that the system of controls has operated effectively in all cases. The Company’s disclosure controls and procedures, however, are designed to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Pursuant to Rule 13a-15(b) under the Exchange Act, an evaluation was performed under the supervision and with the participation of 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 March 31, 2022 to provide reasonable assurance that the objectives of disclosure controls and procedures are met.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2022, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See discussion of legal proceedings in Note 7 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report, which is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

There have been no material changes in the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 9, 2015, the Board of Directors of the Company approved the purchase of an additional 163,335 shares pursuant to the Company’s repurchase plan, such that there was authority remaining under the plan to purchase up to an aggregate of 500,000 shares of the Company’s common stock pursuant to the plan immediately after this approval. No repurchases of the Company’s common stock under the plan were conducted during the quarter ended March 31, 2022. As of March 31, 2022, there was authority remaining under the plan to purchase up to an aggregate of 428,161 shares of the Company’s common stock. Unless terminated earlier by resolution of the Board of Directors, the plan will expire when all shares authorized for purchase under the plan (as such number may be amended by the Board from time to time) have been purchased. The Company anticipates making further purchases under this plan from time to time in the future, depending on such factors as the prevailing market price of the Company’s common stock, the Company’s available cash and the existing alternative uses for such cash.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

On May 4, 2022, the Company’s wholly owned subsidiary ITIC entered into a Second Amended and Restated Employment Agreement (collectively, the “Restated Employment Agreements”) with each of J. Allen Fine, Chief Executive Officer and Chairman of the Board of Directors, James A. Fine, Jr., President, Treasurer, Chief Financial Officer, Chief Accounting Officer, and Director, and W. Morris Fine, Executive Vice President, Secretary and Director (each, an “Executive” and collectively, the “Executives”). The Restated Employment Agreements amend and restate the Amended and Restated Employment Agreements (the “Existing Employment Agreements”) previously entered into with the executive officers. The Restated Employment Agreements include the following changes as compared to the Existing Employment Agreements:

1.Term. The Restated Employment Agreements introduce an indefinite term that extends until terminated by the parties in accordance with the provisions therein, eliminating the prior approach which included five-year terms followed by automatic monthly extensions.

2.Compensation. The Restated Employment Agreements update all compensation terms, including base salary and payments upon termination, where applicable, based on each Executive’s previously disclosed current annual base salary. In addition, in the event of a “change in control” (as defined in the Restated Employment Agreements and consistent with the Existing Employment Agreements), each Executive will be entitled to a bonus in an amount equal to three times the amount of the highest rate of base salary such Executive has received during Executive’s employment with the Company, plus an amount equal to three times the average of the three highest annual bonuses Executive has received from the Company, to be paid in one lump sum on the effective date of the closing of the transaction that constitutes a change in control.

3.Termination and Severance:

a.Good Reason. The Restated Employment Agreements set forth the following events qualifying as “good reason” (previously defined to mean a material breach by the Company that is not cured within 30 days of written notice): (i) a material reduction in the Executive’s base salary; (ii) a relocation of the Executive’s principal place of employment by more than 50 miles; (iii) any material breach by the Company of any material provision of this Agreement; (iv) the Company’s failure to obtain an agreement from any successor to the Company to assume and

agree to perform the applicable Restated Employment Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law; (v) a material, adverse change in the Executive’s title, authority, duties, or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law); or (vi) a material adverse change in the reporting structure applicable to the Executive. Under the Restated Employment Agreements, an Executive may not terminate his employment for Good Reason unless he has provided written notice to the Company’s Board of Directors of the existence of the circumstances providing grounds for termination for Good Reason within 90 days of the initial existence of such grounds and the Company has had at least 30 days from the date on which such notice is provided to cure such circumstances.

b.Payments of Severance Benefits. The Restated Employment Agreements require that cash payments due to the applicable Executive in connection with a termination of employment due to death, disability, or retirement, without cause or for good reason, or in connection with a change of control, in each case be made within 60 days of such termination.

c.Amount of Severance Pay. The Restated Employment Agreements revised the manner of calculating payments due upon termination in connection with a termination of employment due to death, disability, or retirement, without cause or for good reason, or in connection with a change of control to provide that the base salary component will be based on the highest base salary paid to Executive, and the bonus component will be based on the average of the highest three years of annual bonuses paid by the Company.

d.Release of Claims. The Restated Employment Agreements add a requirement that the applicable Executive execute a release of claims as a condition to the receipt of severance benefits.

4.Restrictive Covenants. The Restated Employment Agreements expand the provisions covering confidentiality and noncompetition and nonsolicitation, and add standard provisions on intellectual property and Company property.

5.Tax Matters. The Restated Employment Agreements provide that, if any of the payments or benefits due to one of the Executives under the Restated Employment Agreements, or in connection with any other payments or benefits, in connection with a change in control constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and would be subject to the excise tax imposed under Section 4999 of the Code, then the Company will either pay the full amount due or reduce the amount that is due to avoid the excise taxes, depending on which alternative would be more advantageous to such Executive.

6.Other Changes. The Restated Employment Agreements consolidate, streamline, and modernize other existing provisions consistent with customary terms for executive employment arrangements.

On May 4, 2022, ITIC entered into an Amended and Restated Death Benefit Plan Agreement (collective, the “Restated Employment Agreements”) with each Executive. The Restated Death Benefit Plan Agreements amend and restate the Amended and Restated Death Benefit Plan Agreements (the “Existing Death Benefit Plan Agreements”) previously entered into with the executive officers. In addition to updating references to the Restated Employment Agreements, the Amended and Restated Death Plan Agreements provide that the base salary component of the benefit due to the Executive’s beneficiary(ies) thereunder will be based on the highest base salary paid to Executive, and the bonus component will be based on the average of the highest three years of annual bonuses paid by the Company.

This foregoing description of the Restated Employment Agreements and the Restated Death Benefit Plan Agreement does not purport to be complete and is qualified in its entirety by reference to the text of the Restated Employment Agreements and the Restated Death Benefit Plan Agreements, copies of which are filed herewith as Exhibits 10.1 through 10.6 to this Quarterly Report on Form 10-Q.

Item 6. Exhibits


10.1			Second Amended and Restated Employment Agreement, by and between Investors Title Insurance Company and J. Allen Fine, dated May 4 , 2022

10.2			Second Amended and Restated Employment Agreement, by and between Investors Title Insurance Company and James A. Fine, Jr., dated May 4 , 2022

10.3			Second Amended and Restated Employment Agreement, by and between Investors Title Insurance Company and W. Morris Fine, Jr., dated May 4 , 2022

10.4			Amended and Restated Death Benefit Plan Agreement, by and between Investors Title Insurance Company and J. Allen Fine, dated May 4 , 2022

10.5			Amended and Restated Death Benefit Plan Agreement, by and between Investors Title Insurance Company and James A. Fine, Jr., dated May 4 , 2022

10.6			Amended and Restated Death Benefit Plan Agreement, by and between Investors Title Insurance Company and W. Morris Fine, Jr., dated May 4 , 2022

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			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS			Inline XBRL Instance Document*

101.SCH			Inline XBRL Taxonomy Extension Schema Document

101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document

104			Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* - The instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

SIGNATURE

Pursuant to the requirements of the Securities and 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

			By:			/s/ James A. Fine, Jr.
						James A. Fine, Jr., President, Treasurer, Chief
						Financial Officer, Chief Accounting Officer and
						Director (Principal Financial Officer and
						Principal Accounting Officer)

Dated: May 10, 2022

Exhibit 10.1

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) effective as of May 4, 2022 (the “Effective Date”), is between Investors Title Insurance Company, a North Carolina corporation (the “Company”), and J. Allen Fine (“Executive”). The Executive and the Company may be referred to individuals as a “party” or collectively as the “parties.”

RECITALS:

WHEREAS, Executive is presently the Chief Executive Officer of the Company and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company;

WHEREAS, the Company desired to secure the services of the Executive for the future;

WHEREAS, the parties hereto previously entered into that certain Amended and Restated Employment Agreement, effective as of January 1, 2009 (the “Existing Employment Agreement”);

WHEREAS, pursuant to Section 17 of the Existing Employment Agreement, the Existing Employment Agreement may be amended by the parties hereto; and

WHEREAS, the parties hereto deem it appropriate to amend and restate the Existing Employment Agreement;

NOW, THEREFORE, in consideration of the mutual covenants contained herein the parties hereto agree as follows:

1.Employment. The Company shall continue to employ Executive, and Executive accepts continued employment with the Company, upon the terms and conditions set forth in this Agreement. The term of this Agreement shall be for an indefinite period and shall continue until terminated by either party as provided in Section 4 hereof (the “Employment Period”).

2.Position and Duties.

(a)During the Employment Period, Executive shall serve as the Chief Executive Officer of the Company or in such other similar position as the Executive and the Board of Directors of the Company (referred to herein as either the “Board” or the “Board of Directors”) shall agree upon and, subject to the management of the business and affairs of the Company at the direction of the Board of Directors of the Company, shall have the normal duties, responsibilities and authority of an executive serving in such position.

(b)Executive shall report to the Board of Directors.

(c)During the Employment Period, Executive shall devote his best efforts and his full business time and attention (except for participation in charitable and civic endeavors and management of Executive’s personal investments and business interests, provided such activities do not have more than a de minimis effect on Executive’s performance of his duties under this Agreement) to the business and affairs of the Company, its parent, subsidiaries and affiliates. Executive shall perform his duties and responsibilities to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner.

(d)Executive shall perform his duties and responsibilities principally in the Chapel Hill, North Carolina area and shall not be required to travel outside that area any more extensively than Executive has done in the recent past in the ordinary course of the business of the Company.

3.Compensation and Benefits.

(a)Salary. The Company agrees to pay Executive a salary during the Employment Period in installments based on the Company’s practices as may be in effect from time to time. Executive’s initial salary shall be at the rate of Five Hundred Forty One Thousand and No/100 Dollars ($541,000) per year, as may be increased from time to time (the “Base Salary”), provided, however, that if there is a Change in Control (as hereafter defined) during the Employment Period, the Executive’s Base Salary as then in effect shall double effective on the effective date of the closing of the transaction that constitutes a Change in Control. Executive’s Base Salary shall be reviewed by the Compensation Committee of the Board (the “Compensation Committee”) and shall be increased, but not decreased, from time to time at least in an amount as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

(b)Bonuses. Executive will be entitled to such cash bonuses as the Board may determine, in its sole discretion, from time to time (“Annual Bonus Compensation”). Any Annual Bonus Compensation payable hereunder shall be paid no later than March 15 of the calendar year following the calendar year in which such cash bonus shall cease to be subject to a substantial risk of forfeiture under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, in the event of a Change in Control during the Employment Period, the Company shall pay to Executive a Change in Control Bonus (“CIC Bonus”) in an amount that is the sum of an amount that is equal to three (3) times the amount of the highest rate of Base Salary Executive has received during Executive’s employment with the Company (excluding for this purpose the doubling of Base Salary upon a Change in Control as described in Section 3(a)), plus an amount equal to three (3) times the average of the three highest years of Annual Bonus Compensation Executive has received under this Section 3(b), with such CIC Bonus to be paid in one lump sum on the effective date of the closing of the transaction that constitutes a Change in Control.

(c)Expense Reimbursement. The Company shall reimburse Executive for all reasonable expenses incurred by Executive during the Employment Period in the course of performing his duties under this Agreement that are consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company’s requirements applicable generally with respect to reporting and documentation of such expenses.

(d)Supplemental Retirement Cash Payment. During the portion of the Employment Period following December 31, 2021, on an annual basis (and in no event later than March 15 of each calendar year), the Company shall make a cash payment equal to the amount that the Company would have contributed to such Executive’s account under the Section 401(k) Plan as Non-Elective Company Contributions during such calendar year if Non-Elective Company Contributions to the Section 401(k) Plan for such calendar year had not been limited by Code Sections 401(a)(17), 401(k)(3), 401(m), 402(g), and 415(c) less the Non-Elective Company Contributions actually contributed to such Executive’s account under the Section 401(k) Plan during such calendar year. Such amounts shall constitute Compensation within the meaning of the Investors Title Insurance Company Nonqualified Deferred Compensation Plan.

(e)Compensation for Serving on Board. Executive shall be entitled to no extra compensation for serving on the Company’s or its affiliated companies’ Boards of Directors.

(f)Vacation and Sick Leave. Executive shall be entitled annually to thirty (30) days of paid vacation and to unlimited sick leave, provided the Employment Period is subject to termination for Disability as provided under Section 4(b). Executive may carry over any unused but accrued vacation leave from year-to-year, provided, however, that Executive shall not be compensated for any unused vacation leave.

(g)Other Benefits. Executive shall be entitled during the Employment Period to participate, on the same basis as other executives of the Company, in such other benefits for which substantially all of the executives of the Company are from time to time generally eligible, as determined from time to time by the Board.

4.Employment Period.

(a)The Employment Period shall continue until terminated as provided in subsection (b) below. Notwithstanding anything herein to the contrary, whether a termination of employment has occurred for purposes of any deferred compensation payable hereunder and subject to Code Section 409A shall be determined in a manner consistent with Section 409A of the Internal Revenue Code of 1986, as amended (referred to herein as either the “Code” or the “Internal Revenue Code”) and the Company’s 409A Policy, if any.

(b)The Employment Period shall end upon the first to occur of any of the following events:

(i)Executive’s death;

(ii)the Company’s termination of Executive’s employment on account of Executive’s Disability, as defined below (“Termination for Disability”);

(iii)the Company’s termination of Executive’s employment for Cause (“Termination for Cause”);

(iv)the Company’s termination of Executive’s employment other than pursuant to subsections (b)(ii) or (iii) above (“Termination without Cause”) by means of advance written notice of at least sixty (60) days;

(v)Executive’s termination of Executive’s employment for Good Reason by means of advance written notice as described in Section 4(d) (“Termination by Executive for Good Reason”);

(vi)Executive’s retirement at any time following his 70th birthday, upon written notice to the Company of at least six (6) months (“Retirement”);

(vii)Executive’s voluntary termination of his employment within thirty (30) days following a Change in Control by written notice to the Company.

(c)For purposes of this Agreement, “Cause” shall mean:

(i)the Executive’s conviction of, or plea of guilty or nolo contendere to, any crime involving dishonesty or moral turpitude;

(ii)the commission by Executive of a fraud against the Company or any of its parent, subsidiaries or affiliates for which he is convicted;

(iii)gross negligence or willful misconduct by Executive with respect to the Company or any of its parent, subsidiaries or affiliates which causes material detriment to the Company or any of its parent, subsidiaries or affiliates;

(iv)the falsification or manipulation of any records of the Company or any of its parent, subsidiaries or affiliates;

(v)repudiation of this Agreement by Executive or Executive’s abandonment of employment with the Company or any of its parent, subsidiaries or affiliates;

(vi)breach by Executive of any of the provisions set forth in Sections 6, 7 or 8 hereof prior to the end of the Employment Period;

(vii)failure or refusal of Executive to perform his duties with the Company or any of its parent, subsidiaries or affiliates or to implement or follow the policies or directions of the Board within thirty (30) days after a written demand for performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has not performed his duties or failed to implement or follow the policies or directions of the Board.

(d) For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following, in each case during the Employment Period without the Executive's written consent:

(i)a material reduction in the Executive's Base Salary;

(ii)a relocation of the Executive's principal place of employment by more than fifty (50) miles;

(iii)any material breach by the Company of any material provision of this Agreement;

(iv)the Company's failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law;

(v)a material, adverse change in the Executive's title, authority, duties, or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law); or

(vi)a material adverse change in the reporting structure applicable to the Executive.

The Executive cannot terminate employment for Good Reason unless the Executive has provided written notice to the Board of the existence of the circumstances providing grounds for termination for Good Reason within ninety (90) days of the initial existence of such grounds and the Company has had at least thirty (30) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate employment for Good Reason within thirty (30) days of written notice to the Board, then the Executive will be deemed to have waived the right to terminate for Good Reason with respect to such grounds.

(e)For purposes of this Agreement, “Change in Control” shall be deemed to have occurred upon the occurrence of any of the following events:

(A)Any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than Executive or his affiliates or immediate family members, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company, or its parent, Investors Title Company, representing 50% or more of the combined voting power of the Company’s or Investors Title Company’s outstanding securities then entitled ordinarily (and apart from rights accruing under special circumstances) to vote for the election of directors; or

(B)Individuals who are “Continuing Directors” (as hereinafter defined) of Investors Title Company cease for any reason to constitute at least a majority of its Board of Directors; or

(C)A sale of more than 50% of the assets (measured in terms of monetary value) of the Company or Investors Title Company is consummated; or

(D)Any merger, consolidation, or like business combination or reorganization of the Company or Investors Title Company is consummated that results in the occurrence of any event described in subparagraph (A), (B) or (C) above.

(f)For purposes of this Agreement, “Continuing Directors” shall mean:

(A)the directors of Investors Title Company in office on the date of this Agreement; or

(B)any successor to any such director (and any additional director) who after the date of this Agreement (i) was nominated or selected by a majority of the Continuing Directors in the office at the time of his or her nomination or selection and (ii) who is not an “affiliate” or “associate” (as defined in Regulation 12B under the Exchange Act) of any person who is the beneficial owner, directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s outstanding securities then entitled ordinarily to vote for the election of directors.

(g)For purposes of this Agreement, “Disability” shall mean: the Executive's inability, due to physical or mental incapacity, to perform the essential functions of the Executive's job, with or without reasonable accommodation, for one hundred eighty (180) days out of any three hundred sixty-five (365) day period; provided, however, in the event that the Company temporarily replaces the Executive, or transfers the Executive's duties or responsibilities to another individual on account of the Executive's inability to perform such duties due to a mental or physical incapacity which is, or is reasonably expected to become, a Disability, then the Executive's employment shall not be deemed terminated by the Company and the Executive shall not be able to resign with Good Reason as a result thereof. Any question as to the existence of the Executive's Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.

5.Post-Employment Period Payments.

(a)General Termination of Employment. If the Employment Period ends pursuant to Section 4 hereof for any reason, Executive shall cease to have any rights to Base Salary, equity grants, expense reimbursements or other compensation or benefits other than: (i) any Base Salary which has accrued but is unpaid, a prorated Annual Bonus Compensation for the year of termination that is calculated based on Executive’s pro rata share of the average of the of the three (3) highest years of Annual Bonus Compensation Executive has received at any time, and any reimbursable expenses which have been incurred but are unpaid as of the end of the Employment Period (all of which shall be paid within thirty (30) days of termination) (ii) any rights under equity awards or plan benefits which by their terms extend beyond termination of Executive’s employment (but only to the extent provided in any equity award theretofore granted to Executive or any other benefit plan in which Executive has participated as an employee of the Company), (iii) any benefits to which Executive is entitled under Part 6 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (“COBRA”), (iv) any accumulations and benefits to which employee is entitled under the Nonqualified Supplemental Retirement Benefit Plan and the Nonqualified Deferred Compensation Plan (amounts due or benefits available under Sections 5(a)(i) – (iv) are referred to collectively as the “Accrued Benefits”), and (v) any other amount(s) payable pursuant to the succeeding provisions of this Section 5.

(b)Termination of Employment Due to Death, Disability or Retirement. If the Employment Period ends pursuant to Section 4 hereof on account of Executive’s death, Termination for Disability or Retirement, the Executive or, in the event of death, his beneficiary (as identified to the Company in writing) shall be entitled to receive the following, in addition to the Accrued Benefits described above, subject to the existence of an Effective Release of Claims: (i) except in the case of the Executive’s death, a lump sum payment of three (3) times the amount of the highest rate of Base Salary paid to Executive at any time, to be paid within sixty (60) days of the effective date of the termination of Executive’s employment, except as provided below, (ii) except in the case of the Executive’s death, a lump sum payment equal to three (3) times the average of the three (3) highest years of Annual Bonus Compensation Executive has received at any time, to be paid within sixty (60) days of the effective date of the termination of Executive’s employment, except as provided below, (iii) continued participation by Executive and his spouse in the Company’s medical, dental and vision health plan, at the Company’s expense, until Executive dies or, if later, until his surviving spouse dies, to be effective immediately upon the effective date of the termination of Executive’s employment, and subject to any elections necessary by the Executive or Executive’s spouse to effect such continuation, (iv) any accumulations and benefits to which Executive is entitled under the Nonqualified Supplemental Retirement Benefit Plan and the Nonqualified Deferred Compensation Plan, to be paid in accordance with the terms of such plans, and (v) immediate vesting of Executive’s existing unvested equity awards as of the effective date of the termination of Executive’s employment. For purposes of the payments due Executive under Sections 5(b) (i) and (ii), if the sixty (60) day period following the effective date of the termination of Executive’s employment begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year. If the Company’s obligations under Section 5(b)(iii) would violate the nondiscrimination rules applicable to non-grandfathered plans under the Affordable Care Act (the “ACA”), or result in the imposition of

penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform Section 5(b)(iii) in a manner as is necessary to comply with the ACA.

(c)Termination of Employment for Cause. If the Employment Period ends pursuant to Section 4 hereof on account of Termination for Cause, the Company shall pay Executive, in addition to the Accrued Benefits described above: (i) an amount equal to that amount Executive would have received as Base Salary (based on Executive’s Base Salary then in effect) had the Employment Period remained in effect until the later of the effective date of the Company’s termination of Executive’s employment or the date thirty (30) days after the Company’s notice to Executive of such termination, to be paid within thirty (30) days of the effective date of the termination of Executive’s employment, and (ii) any accumulations and benefits to which Executive is entitled under the Nonqualified Supplemental Retirement Benefit Plan and the Nonqualified Deferred Compensation Plan, to be paid in accordance with the terms of such plans. The Company shall make no further payments to Executive, except as provided in Section 5(a) hereof.

(d)Termination of Employment Without Cause or for Good Reason. If the Employment Period ends pursuant to Section 4 hereof on account of a Termination without Cause or a Termination by Executive for Good Reason, the Executive shall be entitled to receive the following, in addition to the Accrued Benefits described above, subject to the existence of an Effective Release of Claims: (i) a lump sum payment equal to five times the amount of the highest rate of Base Salary paid to Executive at any time, to be paid within sixty (60) days of the effective date of the termination of Executive’s employment, except as provided below, (ii) a lump sum payment equal to five times the average of the three (3) highest years of Annual Bonus Compensation Executive has received at any time, to be paid within sixty (60) days of the effective date of the termination of Executive’s employment, except as provided below, (iii) any accumulations and benefits to which Executive is entitled under the Nonqualified Supplemental Retirement Benefit Plan and the Nonqualified Deferred Compensation Plan, to be paid in accordance with the terms of such plans, (iv) continued participation by Executive and his spouse in the Company’s medical, dental and vision health plan, at the Company’s expense, until Executive dies or, if later, until his surviving spouse dies, to be effective immediately upon the effective date of the termination of Executive’s employment, and subject to any elections necessary by the Executive or Executive’s spouse to effect such continuation, and (v) immediate vesting of Executive’s existing unvested equity awards as of the effective date of the termination of Executive’s employment. For purposes of the payments due Executive under Section 5(d) (i) and (ii), if the sixty (60) day period following the effective date of the termination of Executive’s employment begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year. If the Company's obligations under Section 5(d) (iv) would violate the nondiscrimination rules applicable to non-grandfathered plans under the ACA, or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform Section 5(d) (iv) in a manner as is necessary to comply with the ACA. Notwithstanding any other provision of this Section 5(d), if Executive’s employment terminates due to a Termination by the Company without Cause or a Termination by Executive for Good Reason upon or within six (6) months following a Change in Control, then the amount due Executive under Sections 5(d)(i) and (ii) above shall be reduced by the amount of the CIC Bonus actually paid to Executive under Section 3(b) of this Agreement.

(f)No Mitigation Required. Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise.

(g)Effective Release of Claims. The Company shall not be obligated to pay to the Executive or his beneficiaries any of the pay or benefits described in Sections 5(b), 5(d) or 5(e), as applicable, unless and until Executive, or his beneficiary, has, within the time period allowed (either 21 or 45 days), executed, returned and does not revoke, a full release of claims in favor of the Company, and its executives, employees, directors, affiliates and successors, in a form that is acceptable to Company (as executed by the Executive, or his beneficiary, and after all applicable revocation periods have expired, referred to as the “Effective Release of Claims”). The form release of claims must be provided by the Company to the Executive within fifteen (15) days following separation from service. If Executive, or Executive’s beneficiary, fails or refuses to return such release of claims within the time allowed, or revokes such release of claims, then neither Executive, nor his beneficiaries or dependents, shall be entitled to any of the benefits described in Sections 5(b), 5(d) or 5(e), as applicable.

(h)Resignation of All Other Positions. On termination of the Executive's employment hereunder for any reason, the Executive shall agree to resign from all positions that the Executive holds as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates, unless the Company and Executive agree otherwise.

6.Confidential Information. Executive acknowledges that: (i) the Company and/or its Affiliates has disclosed and will continue to disclose to Executive certain Confidential Information; (ii) Confidential Information is the sole and exclusive property of the Company and/or its Affiliates (or a third party providing such information to the Company and/or its Affiliates) and the Company and/or its Affiliates or such third party owns all worldwide rights therein under patent, copyright, trademarks, trade secret, confidential information or other property right; and (iii) the disclosure of Confidential Information to Executive does not confer upon Executive any license, interest or rights of any kind in or to the Confidential Information. Accordingly, Executive acknowledges and agrees that the Executive may use Confidential Information only while Executive is employed or otherwise retained by the Company and only then in accordance with applicable Company policies and procedures and solely for the Company’s benefit. Except as authorized in the performance of services for the Company, Executive will hold in confidence and will not, either directly or indirectly, in any form, by any means, or for any purpose, disclose, reproduce, distribute, transmit, reverse engineer, decompile, disassemble, or transfer Confidential Information or any portion thereof. Upon the Company’s request, and upon termination of Executive’s employment, Executive shall return Confidential Information and all related materials. Executive’s obligations with regard to Confidential Information shall remain in effect while Executive is employed or otherwise retained by the Company and/or its Affiliates and for fifteen (15) years thereafter.

(a)Definition of Confidential Information. As used in this Agreement, “Confidential Information” means all non-public confidential and/or proprietary knowledge, data or information of the Company. By way of illustration but not limitation, “Confidential Information” includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques; (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) non-public information regarding the skills and compensation of other employees of the Company.

(b)Disclosure Pursuant to Court Order, Subpoena or Other Process. If Executive is required to disclose Confidential Information pursuant to a court order, subpoena or other government process or such disclosure is necessary to comply with applicable law or defend against claims, Executive shall: (i) notify the Company promptly before any such disclosure is made; (ii) at the Company’s request and expense take all reasonably necessary steps to defend against such disclosure, including defending against the enforcement of the court order, other government process or claims; and (iii) permit the Company to participate with counsel of its choice in any proceeding relating to any such court order, subpoena, other government process or claims.

(c)Permitted Communications. Nothing herein prohibits or restricts the Executive (or the Executive's attorney) from initiating communications directly with, responding to an inquiry from, or providing testimony before the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization, or any other federal or state regulatory authority.

(d)Defend Trade Secrets Act. Notwithstanding the foregoing or any other provision in this Agreement, pursuant to the Defend Trade Secrets Act of 2016, if Executive files a lawsuit for retaliation by the Company for the reporting of a suspected violation of law, Executive may disclose any trade secret to Executive’s attorney and use the trade secret information in that court proceeding, if Executive: (i) files any document containing such trade secret under seal and (ii) does not disclose any such trade secret, except pursuant to court order. The Company also hereby notifies Executive that Executive may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence, directly or indirectly, to a federal, state, or local government official, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal

7.Competitive Business Activities. Executive acknowledges that by virtue of Executive’s employment in senior leadership of the Company, Executive will have access to Confidential Information of the Company and its Affiliates, including valuable information about their strategic business operations and plans, and entities with whom they do business, and has developed or will develop relationships with their customers and vendors and others with whom they do business in various locations; and (iii) the Competitive Business Activities provisions set forth in this Agreement are reasonably necessary to protect the Company’s and its Affiliates’ legitimate business interests, are reasonable as to the time and scope of activities which are restricted, do not interfere with public policy or public interest and are described with sufficient accuracy and definiteness to enable Executive to understand the scope of the restrictions imposed on Executive.

(a)Noncompetition and Nonsolicitation Covenants. During Executive’s employment and during the for two (2) year period following the termination of Executive’s employment (regardless of the reasons for the termination) (the “Restricted Period”), and as a condition to the receipt of payments as provided under Section 5, Executive will not engage in the following within the Geographic Territory:

(i)on Executive’s own or another's behalf, whether as an officer, director, stockholder, partner, associate, owner, employee, consultant, advisor or otherwise:

(A)perform or provide services, or assist others to perform or provide services, for any business unit of a Competing Business that competes with the Company’s Business;

(B)engage in the Company Business in competition with the Company or any Restricted Affiliate;

(C)engage in the Company’s Business in any role that is the same as or materially similar to the role that Executive performed for the Company, in competition with the Company or any Restricted Affiliate;

(D)engage in the Company’s Business in competition with the Company or any Restricted Affiliate, in any role the performance of which would be reasonably presumed to require or involve the use or disclosure of Confidential Information;

(E)solicit or do business which is the same as, similar to or otherwise in competition with the Company’s Business from or with persons or entities: (a) who are customers of the Company or a Restricted Affiliate; (b) who Executive, or someone for whom Executive has or had management responsibility or supervision, solicited, negotiated, contracted, serviced or had contact with on the Company's or a Restricted Affiliate’s behalf; (c) who are or were customers of the Company or a Restricted Affiliate during the last year of Executive’s employment with the Company; or (d) to whom the Company had made proposals to do business at any time during Executive’s employment with the Company;

(F)offer employment to or otherwise solicit for employment or engagement (as a consultant, advisor, independent contractor or otherwise) any employee or other person who is or had been employed or engaged by the Company or an Affiliate during the last year of my employment with the Company;

(G)provide services to or become employed by any customer of the Company, or a Restricted Affiliate, with whom Executive had contact, or any individual whom Executive supervised had such contact, or for whom Executive had responsibility, or for whom any individual whom Executive supervised had responsibility, in a business that relates to the services the Company has provided to such customer; or

(ii)take any action which is materially detrimental or otherwise intended to be adverse to the Company's or its Affiliates’ goodwill, name, business relations, prospects and operations.

(b)Definitions:

(i)“Affiliates” shall mean: (i) any Company’s parent, subsidiary or related entity; and/or (ii) any entity directly or indirectly controlled or beneficially owned in whole or part by the Company or Company’s parent, subsidiary or related entity.

(ii)“Company Business” shall mean the business engaged in by the Company during Executive’s employment and shall include, without limitation, the business of providing residential and commercial title insurance, and related services, including the coordination, underwriting, and management of complex commercial transactions, throughout the United States.

(iii)“Restrictive Affiliate” shall mean any Affiliate of the Company engaged in the Company Business with which Executive worked, over which Executive had responsibility or supervisory authority, or which uses Confidential Information of the Company.

(c)“Geographic Territory.” Executive acknowledges that the nature of the business engaged in by the Company and its Affiliates and their broad reach into markets are such that specific geographic limitations are not meaningful, and that the activities prohibited by Section 7 are appropriately prohibited on a nation-wide basis. Accordingly, Executive agrees that the restrictions set forth in Section 7 will apply to the broadest geographic territory possible, including the following geographical regions: (a) the United States; (b) any state in which Executive worked, had responsibility or provided services on behalf of the Company or a Restricted Affiliate; (c) any state in which any employee of the Company or any Restricted Affiliate who was supervised by Executive, either directly or through other supervisors, had responsibility, provided services or worked; (d) any city or any county in which Executive had responsibility, worked or provided services on behalf of the Company or any Restricted Affiliate; (e) any city or any county in which any employee of the Company or any Restricted Affiliate who was supervised by Executive had responsibility, worked or provided services on behalf of the Company or any Restricted Affiliate; and (f) any State, city, metropolitan area or county in which the Company or any Restricted Affiliate is located or does business.

(d)Tolling. In the event that Executive breaches any of the provisions of this Section 7, then the Restricted Period shall be extended for a period of time equal to the period of time during which such breach occurs, and, in the event that the Company is required to seek relief from such breach in any court, board of arbitration or other tribunal, then the Restricted Period shall be extended for the period of time required for the pendency of such proceedings, including all appeals.

(e)Exceptions. Nothing in this Section 7 shall prohibit Executive from being: (1) a shareholder in a mutual fund or a diversified investment company or (ii) a passive owner of not more than 5% of the outstanding equity securities of any class of a corporation or other entity which is publicly traded, so long as Executive has no active participation in the business of such corporation or other entity.

8.Intellectual Property Ownership.

(a)All Work Products shall be considered work made for hire by Executive and owned by the Company. If any of the Work Product may not, by operation of law, be considered work made for hire by Executive for the Company, or if ownership of all rights, title, and interest of the intellectual property rights therein shall not otherwise vest exclusively in the Company, Executive hereby assigns to the Company, and upon the future creation thereof automatically assigns to the Company, without further consideration, the ownership of all Work Product. The Company shall have the right to obtain and hold in its own name copyrights, registrations and any other protection available in the Work Product. Executive agrees to perform, during or after Executive’s employment, such further acts which the Company requests as may be necessary or desirable to transfer, perfect and defend its ownership of the Work Product. As used in this Agreement, “Work Product” shall mean the data, materials, documentation, computer programs, inventions (whether or not patentable), improvements, modifications, discoveries, methods, developments, picture, audio, video, artistic works and all works of authorship, including all worldwide rights therein under patent, copyright, trademark, trade secret, confidential information or other property right, created or developed in whole or in part by Executive, while employed by the Company (whether developed during work hours or not), whether prior or subsequent to the date of this Agreement.

(b)Notwithstanding the foregoing, this Agreement shall not require assignment of any invention that: (i) Executive developed entirely on Executive’s own time without using the Company’s equipment, supplies, facilities, or Confidential Information; and (ii) does not relate to the Company’s business or actual or anticipated research or development or result from any work performed by Executive for the Company.

(c)License. To the extent that any preexisting materials are contained in Work Product which Executive delivers to the Company or its customers, Executive grants to the Company an irrevocable, nonexclusive, worldwide, royalty-free license to: (i) use and distribute (internally or externally) copies of, and prepare derivative works based upon, such preexisting materials and derivative works thereof; and (ii) authorize others to do any of the foregoing.

9.Enforcement. Executive acknowledges that the restrictions contained in Section 6 (Confidential Information), Section 7 (Competitive Business Activities) or Section 8 (Intellectual Property Ownership) are reasonable and necessary to protect the legitimate interests of the Company and that the Company would not agree to the terms of this Agreement without such protections. Executive acknowledges that any breach by Executive of the provisions in Section 6 (Confidential Information), Section 7 (Competitive Business Activities) or Section 8 (Intellectual Property Ownership) of this Agreement will cause continuing and irreparable injury to the Company for which monetary damages would not be an adequate remedy. Executive shall, in any action or proceeding to enforce Section 6 (Confidential Information), Section 7 (Competitive Business Activities) or Section 8 (Intellectual Property Ownership) of this Agreement, assert the claim or defense that an adequate remedy at law exists. In the event of such breach by Executive, the Company shall have the right to enforce Section 6 (Confidential Information), Section 7 (Competitive Business Activities) or Section 8 (Intellectual Property Ownership) of this Agreement by seeking injunctive or other relief in any court, without a requirement that a bond be posted, and this Agreement shall not in any way limit remedies of law or in equity otherwise available to the Company. If any provision of Section 6 (Confidential Information), Section 7 (Competitive Business Activities) or Section 8 (Intellectual Property Ownership) of this Agreement is held to be in any respect an unreasonable restriction upon the Company, then such provision shall be deemed to extend only over the maximum period of time, geographic area, or range of activities as to which it may be enforceable or shall be “blue penciled” to be enforceable.

10.Consulting and Advice. During the time period that the Executive receives post-employment payments under Section 5, other than by reason of death or Disability, the Executive agrees that when and as requested, he will consult with the Company concerning policies, procedures and operations; provided, however, that such services shall not exceed 20% of Executive’s average amount of weekly work time during the thirty six (36) month period prior to the effective date of Executive’s termination from employment, in order to ensure that Executive’s separation from employment with the Company is considered a “Separation from Service” within the meaning of Section 409A of the Internal Revenue Code. Executive shall make himself available at reasonable times, with appropriate notice, not more frequent than three (3) times a month, and may, at the Executive’s election, be through telephone communication.

11.Company Property. Upon termination of Executive’s employment, Executive shall: (i) deliver to the Company all records, memoranda, data, documents and other property of any description which refer or relate in any way to Confidential Information, including all copies thereof, which are in Executive’s possession, custody or control; (ii) deliver to the Company all Company and/or Affiliates property (including, but not limited to, keys, credit cards, client files, contracts, proposals, work in process, manuals, forms, computer stored work in process and other computer data, research materials, other items of business information concerning any Company and/or Affiliates client, or Company and/or Affiliates business or business methods, including all copies thereof) which is in Executive’s possession, custody or control; (iii) bring all such records, files and other materials up to date before returning them; and (iv) fully cooperate with the Company in winding up Executive’s work and transferring that work to other individuals designated by the Company.

12.Publicity. Executive acknowledges that: (i) as a part of Executive’s services, Executive may provide Executive’s image, likeness, voice or other characteristics; and (ii) the Company may use Executive’s image, likeness, voice or other characteristics and expressly releases the Company, its Affiliates and its and/or their agents, employees, licensees and assigns from and against any and all claims which Executive has or may have for invasion of privacy, right of privacy, defamation, copyright infringement or any other causes of action arising out of the use, adaptation, reproduction, distribution, broadcast or exhibition of such characteristics.

13.Survival. Subject to any limits on applicability contained therein, Sections 5, 6, 7, 8, 9, 10 and 11, along with any other term affecting the respective rights and obligations of the parties hereto, shall survive such expiration or other termination of this Agreement or of the employment relationship to the extent necessary to carry out the intentions of the parties under this Agreement.

14.Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by reputable overnight carrier or mailed by first class mail, return receipt requested. Any notice to Executive will be delivered to the last home address on file with the Company and any notice to the Company should be delivered to:

Investors Title Insurance Company

Attention: Secretary

P. O. Drawer 2687

Chapel Hill, NC 27515-2687

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered, sent or mailed.

15.Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

16.Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as of its date supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way, including but not limited to the Existing Employment Agreement.

17.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original and both of which taken together shall constitute one and the same agreement.

18.Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs, executors, personal representatives, successors and assigns, except that neither party may assign any rights or delegate any obligations hereunder without the prior written consent of the other party. Executive hereby consents to the assignment by the Company of all of its rights and obligations hereunder to any successor to the Company by merger or consolidation or purchase of all or substantially all of the Company’s assets, provided such transferee or successor assumes the liabilities of the Company hereunder.

19.Choice of Law. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law (“Applicable Federal Law”). Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Subject to Section 22, both Executive and the Company acknowledge and agree that the state or federal courts located in North Carolina have personal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts.

20.Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

21.Mediation. If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, the parties agree to submit such controversy to mediation for resolution. The parties may use the procedures based on the North Carolina General Statutes’ Rules Implementing Court Ordered Mediated Settlement Conferences; provided, however, that any disputes or enforcement proceedings arising out of Sections 6, 7 or 8 of this Agreement are not subject to mediation, unless both parties agree to such process. If any controversy between the parties is not resolved by mediation within sixty (60) days after the date the controversy has arisen (hereinafter “controversy date”), the dispute shall be resolved under Section 22, as applicable.

22.Dispute Resolution/Binding Arbitration.

(a)Generally. The Executive and the Company hereby agree that any dispute, controversy, or claim arising out of or related to this Agreement or any breach of this Agreement or the Executive's employment, whether the claim arises in contract, tort, or statute, shall be submitted to and decided by binding arbitration; provided, however, that any disputes or enforcement proceedings arising out of Sections 6, 7 or 8 of this Agreement are not subject to arbitration. Arbitration shall be administered exclusively by the American Arbitration Association, before a single arbitrator appointed in accordance with the applicable rules of the American Arbitration Association, as such procedures and rules may be amended from time to time and modified only as herein expressly provided, and shall be conducted within the State of North Carolina. Any arbitral award determination shall be final and binding upon the parties. The arbitrator may enter a default decision against any party who fails to participate in the arbitration proceedings.

(b)Fees and Expenses. Except as otherwise provided in this Agreement or by law, the arbitrator will be authorized to apportion its fees and expenses and the reasonable attorneys’ fees and expenses of either party as the arbitrator deems appropriate. In the absence of any such apportionment, the fees and expenses of the arbitrator will be borne equally by each party, and each party will bear the fees and expenses of its own attorney.

(c)Confidentiality. The parties will keep confidential, and will not disclose to any person or entity, except their respective attorneys or as may be required by law, the existence of any controversy under this Section 22, the referral of any such controversy to arbitration or the status or resolution thereof.

23.Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.

24.Section 280G of the Internal Revenue Code.

(a)If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive's termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute "parachute payments" within the meaning of Section 280G of the Code and would, but for this Section 24, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then prior to making the 280G Payments, a calculation shall be made comparing (i) the Net Benefit (as defined below) to the Executive of the 280G Payments after payment of the Excise Tax to (ii) the Net Benefit to the Executive if the 280G Payments are limited to the extent necessary to avoid being subject to the Excise Tax. Only if the amount calculated under (i) above is less than the amount under (ii) above will the 280G Payments be reduced to the minimum extent necessary to ensure that no portion of the 280G Payments is subject to the Excise Tax. “Net Benefit” shall mean the present value of the 280G Payments net of all federal, state, local, foreign income, employment, and excise taxes. Any reduction made pursuant to this Section 24(a) shall be made in a manner determined by the Company that is consistent with the requirements of Section 409A.

(b)All calculations and determinations under Section 24(a) shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 24, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 24. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services.

25.Section 409A of the Internal Revenue Code.

(a)General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. If any payment or benefit provided to the Executive in connection with the Executive's termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A, and such term may be ambiguous or may be deemed to fail to comply with Section 409A, then the Parties agree to work together in good faith to amend this Agreement, as appropriate, while preserving the economic benefits as much as reasonably possible. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.

(b)Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with the Executive's termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date following the six-month anniversary of the Termination Date or, if earlier, on the Executive's death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

(c)Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:

(i)the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;

(ii)any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and

(iii)any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.

(Signatures on the following page)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written below.


INVESTORS TITLE INSURANCE COMPANY


By:			/s/ James A. Fine, Jr.

Its:			Executive Vice President

Date:			5/4/2022


J. ALLEN FINE
/s/ J. Allen Fine


Date:			5/4/2022

(Signature page for Second Amended and Restated Employment Agreement)

Exhibit 10.2

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) effective as of May 4, 2022 (the “Effective Date”), is between Investors Title Insurance Company, a North Carolina corporation (the “Company”), and James A. Fine, Jr. (“Executive”). The Executive and the Company may be referred to individuals as a “party” or collectively as the “parties.”

RECITALS:

WHEREAS, Executive is presently the Executive Vice President and Chief Financial Officer of the Company and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company;

WHEREAS, the Company desired to secure the services of the Executive for the future;

WHEREAS, the parties hereto previously entered into that certain Amended and Restated Employment Agreement, effective as of January 1, 2009 (the “Existing Employment Agreement”);

WHEREAS, pursuant to Section 17 of the Existing Employment Agreement, the Existing Employment Agreement may be amended by the parties hereto; and

WHEREAS, the parties hereto deem it appropriate to amend and restate the Existing Employment Agreement;

NOW, THEREFORE, in consideration of the mutual covenants contained herein the parties hereto agree as follows:

2.Position and Duties.

(a)During the Employment Period, Executive shall serve as the Executive Vice President and Chief Financial Officer of the Company or in such other similar position as the Executive and the Chief Executive Officer of the Company shall agree upon and, subject to the management of the business and affairs of the Company at the direction of the Chief Executive Officer of the Company, shall have the normal duties, responsibilities and authority of an executive serving in such position.

(b)Executive shall report to the Chief Executive Officer.

3.Compensation and Benefits.

(a)Salary. The Company agrees to pay Executive a salary during the Employment Period in installments based on the Company’s practices as may be in effect from time to time. Executive’s initial salary shall be at the rate of Four Hundred Sixty Four Thousand and No/100 Dollars ($464,000) per year, as may be increased from time to time (the “Base Salary”), provided, however, that if there is a Change in Control (as hereafter defined) during the Employment Period, the Executive’s Base Salary as then in effect shall double effective on the effective date of the closing of the transaction that constitutes a Change in Control. Executive’s Base Salary shall be reviewed by the Compensation Committee of the Board (the “Compensation Committee”) and shall be increased, but not decreased, from time to time at least in an amount as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.

(e)Compensation for Serving on Board. Executive shall be entitled to no extra compensation for serving on the Company’s or its affiliated companies’ Boards of Directors.

4.Employment Period.

(b)The Employment Period shall end upon the first to occur of any of the following events:

(i)Executive’s death;

(ii)the Company’s termination of Executive’s employment on account of Executive’s Disability, as defined below (“Termination for Disability”);

(iii)the Company’s termination of Executive’s employment for Cause (“Termination for Cause”);

(v)Executive’s termination of Executive’s employment for Good Reason by means of advance written notice as described in Section 4(d) (“Termination by Executive for Good Reason”);

(vi)Executive’s retirement at any time following his 50th birthday, upon written notice to the Company of at least six (6) months (“Retirement”);