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<SEC-DOCUMENT>0001169232-03-002568.txt : 20030331
<SEC-HEADER>0001169232-03-002568.hdr.sgml : 20030331
<ACCEPTANCE-DATETIME>20030331143106
ACCESSION NUMBER:		0001169232-03-002568
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20021231
FILED AS OF DATE:		20030331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INVESTORS TITLE CO
		CENTRAL INDEX KEY:			0000720858
		STANDARD INDUSTRIAL CLASSIFICATION:	TITLE INSURANCE [6361]
		IRS NUMBER:				561110199
		STATE OF INCORPORATION:			NC
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-11774
		FILM NUMBER:		03629280

	BUSINESS ADDRESS:	
		STREET 1:		121 N COLUMBIA ST
		STREET 2:		P O DRAWER 2687
		CITY:			CHAPEL HILL
		STATE:			NC
		ZIP:			27514
		BUSINESS PHONE:		9199682200

	MAIL ADDRESS:	
		STREET 1:		121 NORTH COLUMBIA STREET
		CITY:			CHAPEL HILL
		STATE:			NC
		ZIP:			27514
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d54625_10k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

              |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   for the fiscal year ended December 31, 2002

              |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission file number 0-11774

                             INVESTORS TITLE COMPANY
             (Exact name of registrant as specified in its charter)

       North Carolina                                            56-1110199
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                            121 North Columbia Street
                        Chapel Hill, North Carolina 27514
                                 (919) 968-2200

          Securities registered pursuant to section 12(b) of the Act:
                                      None

          Securities registered pursuant to section 12(g) of the Act:

                           Common Stock, no par value

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|

      Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|

      The aggregate market value of the common shares held by non-affiliates was
$38,094,868 based on the closing sales price on the NASDAQ National Market
System on the last business day of the registrant's most recently completed
second fiscal quarter (June 30, 2002).

      As of March 20, 2003, there were 2,855,744 common shares of the registrant
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

      Portions of Investors Title Company's Annual Report to Shareholders for
the fiscal year ended December 31, 2002 are incorporated by reference in Parts
I, II and IV hereof and portions of Investors Title Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on May 21, 2003 are
incorporated by reference in Part III hereof.


<PAGE>

SAFE HARBOR STATEMENT

      Except for the historical information presented, the matters disclosed in
the foregoing discussion and analysis and other parts of this report include
forward-looking statements. These statements represent the Company's current
judgment on the future and are subject to risks and uncertainties that could
cause actual results to differ materially. Such factors include, without
limitation: (1) that the demand for title insurance will vary with factors
beyond the control of the Company such as changes in mortgage interest rates,
availability of mortgage funds, level of real estate activity, cost of real
estate, consumer confidence, supply and demand for real estate, inflation and
general economic conditions; (2) that losses from claims may be greater than
anticipated such that reserves for possible claims are inadequate; (3) that
unanticipated adverse changes in securities markets could result in material
losses on investments made by the Company; and (4) the dependence of the Company
on key management personnel, the loss of whom could have a material adverse
affect on the Company's business. Other risks and uncertainties may be described
from time to time in the Company's other reports and filings with the Securities
and Exchange Commission.


<PAGE>

                    INVESTORS TITLE COMPANY AND SUBSIDIARIES

                                      INDEX

<TABLE>

<S>                                                                                                               <C>
PART I
Item 1.    Business..............................................................................................1
Item 2.    Properties............................................................................................9
Item 3.    Legal Proceedings.....................................................................................9
Item 4.    Submission of Matters to a Vote of Security Holders...................................................9
Item 4A.   Executive Officers of the Company....................................................................10

PART II
Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters................................10
Item 6.    Selected Financial Data..............................................................................11
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations................11
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk...........................................11
Item 8.    Financial Statements and Supplementary Data..........................................................11
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................11

PART III
Item 10.   Directors and Executive Officers of the Registrant...................................................12
Item 11.   Executive Compensation...............................................................................12
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.......12
Item 13.   Certain Relationships and Related Transactions.......................................................12
Item 14.   Controls and Procedures..............................................................................12

PART IV
Item 15.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................................13
Signatures......................................................................................................16
Certifications..................................................................................................17
</TABLE>


<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

      Investors Title Company (the "Company") is a holding company that was
incorporated in the State of North Carolina in February 1973. The Company became
operational on June 24, 1976, when it acquired Investors Title Insurance Company
("ITIC") as a wholly owned subsidiary under a plan of exchange of shares of
common stock. On September 30, 1983, the Company acquired Northeast Investors
Title Insurance Company ("NE-ITIC"), formerly Investors Title Insurance Company
of South Carolina, as a wholly owned subsidiary under a plan of exchange of
shares of common stock.

      The Company's executive offices are located at 121 North Columbia Street,
Chapel Hill, North Carolina 27514. The Company's telephone number is (919)
968-2200, its facsimile number is (919) 968-2235, and its website address is
www.invtitle.com.

      The Company engages primarily in two segments of business. The main
business activity is the issuance of title insurance through ITIC and NE-ITIC.
The second segment provides tax-free exchange services through its subsidiaries,
Investors Title Exchange Corporation and Investors Title Accommodation
Corporation. See Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note 13 of Notes to Consolidated Financial Statements
in the 2002 Annual Report to Shareholders incorporated by reference in this Form
10-K Annual Report for additional information related to the Company's operating
segments.

      Title Insurance

      Through its two wholly owned subsidiaries, ITIC and NE-ITIC, the Company
underwrites land title insurance for owners and mortgagees as a primary insurer
and as a reinsurer for other title insurance companies. Title insurance protects
against loss or damage resulting from defects that affect the title to real
property. The commitment and policies issued are the standard American Land
Title Association approved forms.

      There are two basic types of title insurance policies - one for the
mortgage lender and one for the real estate owner. A lender often requires
property owners to purchase title insurance to protect its position as a holder
of a mortgage loan, but the lender's title insurance policy does not protect the
property owner. The property owner needs to purchase an owner's title insurance
policy to protect his investment.

      When real property is conveyed from one party to another, occasionally
there is a hidden defect in the title or a mistake in a prior deed, will or
mortgage that may give a third party a legal claim against such property. If a
claim is made against real property, title insurance provides a corporate
guarantee against insured defects, pays all legal expenses to eliminate any
title defects, pays any claims arising from errors in title examination and
recording, and pays any losses arising from hidden defects in title and defects
that are not of record. Title insurance provides an assurance that the insurance
holder's ownership and use of such property will be defended promptly against
claims, at no cost, whether or not the claim is valid.


                                       1
<PAGE>

      A title defect is one of any number of things that could jeopardize the
property owner's interest. It could be an unsatisfied mortgage, lien, judgment
or other unrecorded claim against the property. It could arise through
easements, use restrictions or other existing covenants, or it could be a hidden
risk. Title insurance generally protects against four kinds of hidden risks --
errors in the public records such as incorrect information in deeds and
mortgages regarding names, signatures and legal descriptions; judgments, liens
and mortgages or any other claims against the property or the seller which
become the new owner's responsibility after closing, such as unpaid taxes,
assessments and other debts to creditors; claims to ownership by the spouse of a
former owner or by the "missing heir" of a deceased owner who did not receive
his share of the estate; and invalid deeds or other transfers by sellers who did
not actually own the property or by previous owners who were minors or not
mentally competent.

      ITIC was incorporated in the State of North Carolina on January 28, 1972,
and became licensed to write title insurance in the State of North Carolina on
February 1, 1972. At present, ITIC mainly writes land title insurance both as a
primary insurer and as a reinsurer throughout the eastern and midwestern United
States. ITIC is the leading title insurer of North Carolina property and has
held this position of most premiums written for nineteen years based on amounts
reported to the North Carolina Department of Insurance. ITIC writes title
insurance through issuing agents or branch offices in the District of Columbia
and the States of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana,
Kentucky, Maryland, Michigan, Minnesota, Mississippi, Nebraska, New Jersey,
North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia, West
Virginia and Wisconsin. In addition to the states in which ITIC currently writes
title insurance, it is also licensed to write title insurance in the States of
Arizona, Colorado, Connecticut, Delaware, Idaho, Kansas, Louisiana, Maine,
Massachusetts, Missouri, Montana, Nevada, North Dakota, Oklahoma, Rhode Island,
Texas, Utah, Vermont and Wyoming. Agents issue policies for ITIC and may provide
other services such as escrow and settlement services.

      The Settlement Services division of ITIC, which became operational in
January 2002, provides a variety of closing-related services to lenders. The
services provided by this division include scheduling closings for lenders,
preparing HUD statements, paying off existing mortgages and liens, making
post-closing disbursements and providing witness closers upon request. By
December 31, 2002, Settlement Services was providing closing assistance to
lenders in Maryland, Michigan and Virginia, and it anticipates expanding into
additional states in 2003. The Settlement Services division derives its income
from the fees it charges on a transactional basis, and such fees vary based upon
the state in which services are provided.

      NE-ITIC was incorporated in the State of South Carolina on February 23,
1973, and became licensed to write title insurance in that state on November 1,
1973. It currently writes title insurance as a primary insurer and as a
reinsurer in the State of New York. NE-ITIC is also licensed to write title
insurance in North Carolina and South Carolina.

      Each state license authorizing ITIC or NE-ITIC to write title insurance
must be renewed annually. These licenses are necessary for the companies to
operate as a title insurer in each state in which they are held and the loss of
a license in any state by either company would prevent the company from issuing
title insurance in that state.


                                       2
<PAGE>

      In the State of North Carolina, ITIC issues title insurance commitments
and policies through its home office and its 27 branch offices that are located
throughout North Carolina.

      In the ordinary course of business, ITIC and NE-ITIC reinsure certain
risks with other title insurers for the purpose of limiting their exposure. They
also assume reinsurance for certain risks of other title insurers for which they
receive additional income. For the last three years, reinsurance activities
accounted for less than 1% of total premium volume.

      As of December 31, 2002, ITIC had a risk retention limit of $2,000,000,
meaning that it assumed primary risks up to $2,000,000. It then reinsured the
next $250,000 of risk with NE-ITIC, and all risks above $2,250,000 were
reinsured with an unrelated reinsurer.

      As of December 31, 2002, NE-ITIC had a risk retention limit of $250,000,
meaning that it assumed primary risks up to $250,000. It then reinsured the next
$2,000,000 of risk with ITIC, and all amounts above $2,250,000 were reinsured
with an unrelated reinsurer.

      Both ITIC's and NE-ITIC's risk retention limits are self-imposed and are
more conservative than state insurance regulations require. ITIC's self-imposed
retention of $2,000,000 is only 14.9% of its statutorily permitted retention of
$13,398,715. NE-ITIC's self-imposed retention of $250,000 is only 14.6% of its
statutorily permitted retention of $1,708,111.

      ITIC's financial stability has been recognized by two Fannie Mae-approved
actuarial firms with rating categories of "A Double Prime - unsurpassed
financial stability" and "A - strong overall financial condition."

      NE-ITIC's financial stability has been recognized by two Fannie Mae-
approved actuarial firms with rating categories of "A Prime - unsurpassed
financial stability" and "A+ - strong overall financial condition."

      Exchange Services

      In 1988, the Company established Investors Title Exchange Corporation, a
wholly owned subsidiary ("ITEC"), to provide services in connection with
tax-free exchanges of like-kind property. ITEC acts as an intermediary in
tax-free exchanges of property held for productive use in a trade or business or
for investments, and its income is derived from fees for handling exchange
transactions.

      The Company established South Carolina Document Preparation Company
("SCDPC") as a wholly owned subsidiary in 1994. In the first quarter of 2001,
SCDPC changed its name to Investors Title Accommodation Corporation ("ITAC") and
began serving as an exchange accommodation titleholder, offering a vehicle for
accomplishing a reverse exchange when a taxpayer must acquire replacement
property before selling the relinquished property.


                                       3
<PAGE>

OPERATIONS OF SUBSIDIARIES

      For a description of net premiums written geographically, refer to
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 2002 Annual Report to Shareholders incorporated by reference
in this Form 10-K Annual Report.

      Title Insurance

      ITIC and NE-ITIC offer primary title insurance coverage to owners and
mortgagees of real estate and reinsurance of title insurance risks to other
title insurance companies. Title insurance premiums written reflect a one-time
premium payment, with no recurring premiums. Premiums are recorded and policies
or commitments are issued upon receipt of final certificates or preliminary
reports with respect to titles. Title insurance commissions earned by the
Company's agents are recognized as expense concurrently with premium
recognition. See Note 13 of Notes to Consolidated Financial Statements in the
2002 Annual Report to Shareholders incorporated by reference in this Form 10-K
Annual Report for additional information related to the Company's operating
segments.

      Exchange Services

      ITEC and ITAC offer services in connection with tax-free exchanges. See
Note 13 of Notes to Consolidated Financial Statements in the 2002 Annual Report
to Shareholders incorporated by reference in this Form 10-K Annual Report for
additional information related to the Company's operating segments.

SEASONALITY

      Title Insurance

      Title insurance premiums are closely related to the level of real estate
activity and the average price of real estate sales. The availability of funds
to finance purchases directly affects real estate sales. Other factors include
consumer confidence, economic conditions, supply and demand, mortgage interest
rates and family income levels. Historically, the first quarter has the least
real estate activity because fewer real estate transactions occur, while the
remaining quarters are more active. Refinance activity is generally less
seasonal, but it is subject to interest rate volatility. Fluctuations in
mortgage interest rates can cause shifts in real estate activity outside of the
normal seasonal pattern.

      Exchange Services

      Seasonal factors affecting the level of real estate activity and the
volume of title premiums written will also affect the demand for exchange
services.

MARKETING

      Title Insurance

      ITIC's marketing plan is based upon providing fast and efficient service
in the delivery of title insurance coverage through a home office, branch
offices, and issuing agents. In North Carolina, ITIC operates through a home



                                       4
<PAGE>

office and 27 branch offices. In South Carolina, ITIC operates through a branch
office and issuing agents located conveniently to customers throughout the
state. ITIC also writes title insurance policies through issuing agents in the
District of Columbia and the States of Alabama, Arkansas, Florida, Georgia,
Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, Mississippi,
Nebraska, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and
Wisconsin.

      NE-ITIC currently operates through agency offices in the State of New
York.

      ITIC and NE-ITIC strive to provide superior service to their customers and
consider this an important factor in attracting and retaining customers. Branch
and corporate personnel strive to develop new business and agency relationships
to increase market share. A Commercial Services Division established in the
first quarter of 2001 provides services to commercial clients. The Company's
marketing efforts are also enhanced through advertising in various periodicals.

      Exchange Services

      Marketing of exchange services offered by ITEC and ITAC has been
increasingly incorporated into the marketing of the core title products offered
by ITIC and NE-ITIC. ITEC and ITAC are also promoted through the marketing
efforts of this division. The Commercial Services Division of ITIC also markets
the services offered by ITEC and ITAC to its clients.

CUSTOMERS

      The Company is not dependent upon any single customer or a few customers,
and the loss of any single customer would not have a material adverse effect on
the Company.

RESERVES

      The total reserve for all reported and unreported losses the Company
incurred through December 31, 2002, is represented by the reserve for claims.
The Company's reserves for unpaid losses and loss adjustment expenses are
established using estimated amounts required to settle claims for which notice
has been received (reported) and the amount estimated to be required to satisfy
incurred claims of policyholders which may be reported in the future. Despite
the variability of such estimates, management believes that the reserves are
adequate to cover claim losses which might result from pending and future
claims. The Company continually reviews and adjusts its reserve estimates to
reflect its loss experience and any new information that becomes available.

      Claims and losses paid are charged to the reserves for claims. Although
claims losses are typically paid in cash, occasionally claims are settled by
purchasing the interest of the insured or the claimant in the real property.
When this occurs, the acquiring company carries assets at the lower of cost or
estimated realizable value, net of any indebtedness on the property. Refer to
Note 6 of Notes to Consolidated Financial Statements in the 2002 Annual Report
to Shareholders incorporated by reference in this Form 10-K Annual Report for a
further discussion of reserves.


                                       5
<PAGE>

INSURED RISK ON POLICIES IN FORCE

      Generally, the amount of the insured risk on a title insurance policy is
equal to the lesser of the amount of the loan secured by the policy, the
purchase price of the insured property or the fair market value of the property.
In the event that a claim is made against the property, the insurer is also
responsible for paying all legal expenses in connection with defending the
insured party and eliminating any title defects affecting the property. The
insurer may, however, choose to pay the policy limits to the insured, at which
time the insurer's duty to defend the claim is satisfied.

      At any given time, the insurer's actual financial risk is only a portion
of the aggregate insured risk of all policies in force. The reduction in risk
results in part from the reissuance of title insurance policies by other
underwriters when the property is refinanced. An owner's policy is effective
only as long as the insured has an ownership interest in the property or has
liability under warranties of title. Furthermore, the coverage on a lender's
title insurance policy is reduced and eventually terminated as the loan it
secures is paid. Due to the variability of these factors, the aggregate
contingent liability of the Company and its subsidiaries cannot be determined
with any precision.

ENVIRONMENTAL MATTERS

      The title insurance policies ITIC and NE-ITIC currently issue exclude
liability for environmental risks and contamination. Although older policies do
not specifically exclude such environmental risks, they generally do not provide
affirmative coverage for such risks. As a result, the Company does not
anticipate that it or its subsidiaries will incur any significant expenses
related to environmental claims.

      In connection with effecting tax-free exchanges of like-kind property,
ITEC and ITAC may temporarily hold title to property pursuant to an
accommodation titleholder agreement. In such situations, the person or entity
for which title is being held must execute an indemnification agreement pursuant
to which it agrees to indemnify ITEC or ITAC, as appropriate, for any
environmental or other claims which may arise as a result of the arrangement.

REGULATIONS

      Title insurance companies are extensively regulated under applicable state
laws. The regulatory authorities possess broad powers with respect to the
licensing of title insurers and agents, rates, investments, policy forms,
financial reporting, reserve requirements, and dividend restrictions, as well as
examinations and audits of title insurers. The Company's two insurance
subsidiaries are subject to examination at any time by the insurance regulators
in the states where they are licensed.

      ITIC is domiciled in North Carolina and is subject to North Carolina
insurance regulations. The North Carolina Department of Insurance typically
schedules financial examinations every five years. ITIC was last examined by the
North Carolina Department of Insurance for the period January 1, 1995 through
December 31, 1999. No material deficiencies were noted in the report.

      NE-ITIC is domiciled in South Carolina and subject to South Carolina
insurance regulations. The South Carolina Department of Insurance periodically
schedules financial examinations. NE-ITIC was examined by the South Carolina


                                       6
<PAGE>

Department of Insurance for the period January 1, 1998 through December 31,
2000. No material deficiencies were noted in the report.

      In addition to financial examinations, both ITIC and NE-ITIC are subject
to market conduct examinations. These audits examine domiciled state activity.
ITIC's last market conduct examination commenced on April 19, 1999 for the
period January 1, 1996 through December 31, 1998, with no material deficiencies
noted. NE-ITIC's last market conduct examination coincided with its financial
examination, which commenced on November 19, 2001 for the period January 1, 1998
through December 31, 2000. No material deficiencies were noted for NE-ITIC by
the market conduct examiners.

      In accordance with the insurance laws and regulations applicable to title
insurance in the State of North Carolina, ITIC has established and maintains a
statutory premium reserve for the protection of policyholders. As of December
31, 2002, ITIC's statutory premium reserve was $25,176,594. For years prior to
1999, ITIC reserved an amount equal to 10% of current year premiums written and
reduced such amounts annually by 5% beginning one year subsequent to the annual
addition. For years after 1998, 10% of direct premiums written plus premiums for
reinsurance assumed less premiums for reinsurance ceded is reserved and reduced
annually, one year subsequent to the annual addition, over a period of 20 years,
as follows: 20% the first year, 10% the second and third year, 5% for years four
through ten, 3% for years eleven through fifteen, and 2% for years sixteen
through twenty.

      NE-ITIC has established and maintains a statutory premium reserve as
required by the insurance laws and regulations of the State of New York. As of
December 31, 2002, NE-ITIC's statutory premium reserve was $290,870. NE-ITIC has
accumulated a statutory premium reserve equal to $1.50 for each risk assumed
under a policy or commitment plus one-eightieth of one percent of the face
amount of each commitment or policy. Beginning in the year following the annual
addition, the reserve is reduced by 5%.

      These statutory premium reserves are not recorded for financial reporting
under accounting principles generally accepted in the United States of America
("GAAP") and changes in the statutory premium reserve have no effect on net
income of the Company or its subsidiaries for GAAP reporting purposes.

      The Company is an insurance holding company and therefore it is subject to
regulation in the states in which its insurance subsidiaries do business. These
regulations, among other things, require insurance holding companies to register
and file certain reports and require prior regulatory approval of intercorporate
transfers. All states set requirements for admission to do business, including
minimum levels of capital and surplus. State insurance departments have broad
administrative powers and monitor the stability and service of insurance
companies.

      In addition to the financial statements which are required to be filed as
part of this report and are prepared on the basis of generally accepted
accounting principles, the Company's insurance subsidiaries also prepare
financial statements in accordance with statutory accounting principles
prescribed or permitted by state regulations. Based upon the latter principles,
as of December 31, 2002, ITIC reported $33,496,787 of capital and surplus, and
net income of $7,696,548; and NE-ITIC reported $3,416,221 of capital and
surplus, and net income of $370,423.


                                       7
<PAGE>

      Both ITIC and NE-ITIC meet the minimum capital and surplus requirements of
the states in which they are licensed.

COMPETITION

      Title Insurance

      ITIC currently operates primarily in Michigan, North Carolina,
Pennsylvania, South Carolina, Tennessee and Virginia. ITIC's major competitors
are Chicago Title Insurance Company, Commonwealth Land Title Insurance Company,
Fidelity National Title Insurance Company, First American Title Insurance
Company, Lawyers Title Insurance Corporation, Old Republic National Title
Insurance Company and Stewart Title Guaranty Company. Key elements that affect
competition are price, expertise, timeliness and quality of service and the
financial strength and size of the insurer.

      In addition, there are numerous industry-related regulations and statutes
that set out conditions and requirements to conduct business. Changes to or the
removal of such regulations and statutes could result in additional competition
from alternative title insurance products or new entrants into the industry that
could materially affect our business operations and financial condition.

      Exchange Services

      Competition for ITEC and ITAC comes from other title insurance companies
as well as some major banks that offer exchange services. Key elements that
affect competition are price, expertise, timeliness and quality of service and
the financial strength and size of the company.

      The exchange segment is dependent upon current Internal Revenue Service
("IRS") regulations that provide taxpayers a safe harbor by using a qualified
intermediary to structure tax-free exchanges of property and using an exchange
accommodation titleholder to hold property in reverse exchange transactions.
Changes to current IRS regulations could materially affect the Company's
operations.

INVESTMENTS

      The Company and its subsidiaries derive a substantial portion of their
income from investments in bonds (municipal and corporate) and equity
securities. The investment policy is designed to maintain a high quality
portfolio and maximize income. Some state laws impose restrictions upon the
types and amounts of investments that can be made by the Company's insurance
subsidiaries.

      See Note 3 of Notes to Consolidated Financial Statements in the 2002
Annual Report to Shareholders incorporated by reference in this Form 10-K Annual
Report for the major categories of investments, earnings by investment
categories, scheduled maturities, amortized cost, and market values of
investment securities.


                                       8
<PAGE>

EMPLOYEES

      The Company has no paid employees. NE-ITIC had one full-time paid employee
as of December 31, 2002. Officers of the Company are full-time paid employees of
ITIC, which had 203 full-time employees and 15 part-time employees as of
December 31, 2002.

INTELLECTUAL PROPERTY

      The Company has registered two service marks with the United States Patent
and Trademark Office (the "USPTO"). The first mark was registered with the USPTO
on September 12, 2000 and the second mark was registered on August 29, 2000. In
addition, ITIC registered a service mark with the USPTO on February 3, 1987. In
the Company's opinion, the loss of these registrations would not materially
affect its business or the business of its subsidiaries.

ITEM 2. PROPERTIES

      The Company owns the office building and property located on the corner of
North Columbia and West Rosemary Streets in Chapel Hill, North Carolina, which
serves as the Company's corporate headquarters. The building contains
approximately 23,000 square feet. The Company's principal subsidiary, ITIC,
leases office space in 29 locations throughout North Carolina, South Carolina
and Michigan. NE-ITIC leases office space in one location in New York.

      The Company also owns several parcels and two buildings adjacent to the
Company's facility.

      See Note 9 of Notes to Consolidated Financial Statements in the 2002
Annual Report to Shareholders incorporated by reference in this Form 10-K Annual
Report for the amounts of future minimum lease payments. Each of the office
facilities occupied by the Company and its subsidiaries are in good condition
and adequate for present operations.

ITEM 3. LEGAL PROCEEDINGS

      The Company and its subsidiaries are involved in various routine legal
proceedings that are incidental to their business. All of these proceedings
arose in the ordinary course of business and, in the Company's opinion, any
potential liability of the Company or its subsidiaries with respect to these
legal proceedings will not, in the aggregate, be material to the Company's
consolidated financial condition or operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2002.


                                       9
<PAGE>

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

         Following is information regarding the executive officers of the
Company as of December 31, 2002. Each officer is appointed at the annual meeting
of the Board of Directors to serve until the next annual meeting of the Board or
until his or her respective successor has been elected and qualified.

Name                        Age     Position with Registrant   Officer  Since
- ----                        ---     ------------------------   --------------
J. Allen Fine               68      Chairman,                       1973
                                    Director and
                                    CEO

James A. Fine, Jr.          40      President, Director             1987
                                    and Treasurer

W. Morris Fine              36      Executive Vice                  1992
                                    President, Director
                                    and Secretary

J. Allen Fine has been Chief Executive Officer and Chairman of the Board of the
Company since its incorporation in 1973. Mr. Fine also served as President of
the Company until May 1997. Mr. Fine is the father of James A. Fine, Jr.,
President, Treasurer and Director of the Company, and W. Morris Fine, Executive
Vice President, Secretary and Director of the Company.

James A. Fine, Jr. was named Vice President of the Company in 1987. In 1997, Mr.
Fine was named President and Treasurer and appointed a Director of the Company.
James A. Fine, Jr. is the son of J. Allen Fine, Chief Executive Officer and
Chairman of the Board of the Company, and the brother of W. Morris Fine,
Executive Vice President, Secretary and Director of the Company.

W. Morris Fine was named Vice President of the Company in 1992. In 1993, Mr.
Fine was named Treasurer of the Company and served in that capacity until 1997.
In 1997, Mr. Fine was named Executive Vice President and Secretary of the
Company. In 1999, he was appointed Director of the Company. Morris Fine is the
son of J. Allen Fine, Chief Executive Officer and Chairman of the Board of the
Company, and the brother of James A. Fine, Jr., President, Treasurer and
Director of the Company.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The high and low sales prices for the Company's common stock, as reported
on the NASDAQ National Market System, and the dividends paid per common share
for each quarter in the last two fiscal years are set forth under the caption
"Corporate Information" in the 2002 Annual Report to Shareholders and are
incorporated by reference in this Form 10-K Annual Report. For a discussion of

                                       10
<PAGE>

restrictions limiting the Company's ability to pay dividends on its common
stock, refer to the subsection of Management's Discussion and Analysis of
Financial Condition and Results of Operations entitled "Liquidity and Capital
Resources" in the 2002 Annual Report to Shareholders, incorporated by reference
in this Form 10-K Annual Report.

ITEM 6. SELECTED FINANCIAL DATA

      The selected financial data for the last five fiscal years of the Company
and its subsidiaries is set forth under the caption "Financial Highlights" in
the 2002 Annual Report to Shareholders and is incorporated by reference in this
Form 10-K Annual Report. The information should be read in conjunction with the
Consolidated Financial Statements, Notes to Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 2002 Annual Report to Shareholders, which are incorporated by
reference in this Form 10-K Annual Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 2002 Annual Report to Shareholders is incorporated by
reference in this Form 10-K Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The subsection entitled "Quantitative and Qualitative Disclosures about
Market Risk" in Management's Discussion and Analysis of Financial Condition and
Results of Operations in the 2002 Annual Report to Shareholders is incorporated
by reference in this Form 10-K Annual Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The financial statements and supplementary data in the 2002 Annual Report
to Shareholders are incorporated by reference in this Form 10-K Annual Report.

      The financial statements meeting the requirements of Regulation S-X are
attached hereto as Schedules I, II, III, IV and V.

      The supplementary financial information set forth in "Selected Quarterly
Financial Data" in the 2002 Annual Report to Shareholders is incorporated by
reference in this Form 10-K Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      There were no changes in, nor disagreements with, accountants on
accounting and financial disclosure.


                                       11
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Information pertaining to Directors of the Company under the heading
"Election of Directors" in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 21, 2003 is incorporated by
reference in this Form 10-K Annual Report. Other information with respect to
executive officers is contained in Part I - Item 4(a) under the caption
"Executive Officers of the Company".

ITEM 11. EXECUTIVE COMPENSATION

      Information set forth under the headings "Executive Compensation",
"Performance Graph" and "Compensation Committee Interlocks and Insider
Participation" in the Company's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 21, 2003 is incorporated by
reference in this Form 10-K Annual Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

      Information pertaining to securities ownership of certain beneficial
owners and management under the heading "Ownership of Stock by Executive
Officers and Certain Beneficial Owners" in the Company's definitive Proxy
Statement relating to the Annual Meeting of Shareholders to be held on May 21,
2003 is incorporated by reference in this Form 10-K Annual Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The Company has nothing to report in response to this Item.

ITEM 14. CONTROLS AND PROCEDURES

      Based on their evaluation of the Company's disclosure controls and
procedures, which was completed within 90 days prior to the filing of this
report, the Chief Executive Officer and the Chief Financial Officer of the
Company concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities and Exchange Act of
1934, as amended, is recorded, processed, summarized and reported, within the
time periods specified by the Securities and Exchange Commission's rules and
forms. In reaching this conclusion, the Company's Chief Executive Officer and
Chief Financial Officer determined that the Company's disclosure controls and
procedures are effective in ensuring that such information is accumulated and
communicated to the Company's management to allow timely decisions regarding
required disclosure.

      There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.


                                       12
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Financial Statements.

      The following financial statements in the 2002 Annual Report to
Shareholders are hereby incorporated by reference in this Form 10-K Annual
Report:

      Consolidated Balance Sheets as of December 31, 2002 and 2001

      Consolidated Statements of Income for the Years Ended December 31, 2002,
        2001 and 2000

      Consolidated Statements of Stockholders' Equity for the Years Ended
        December 31, 2002, 2001 and 2000

      Consolidated Statements of Comprehensive Income for the Years Ended
        December 31, 2002, 2001 and 2000

      Consolidated Statements of Cash Flow for the Years Ended December 31,
        2002, 2001 and 2000

      Notes to Consolidated Financial Statements

      Report of Independent Auditors

(a)(2) Financial Statement Schedules.

      Following is a list of financial statement schedules filed as part of this
Form 10-K Annual Report:

      Schedule Number   Description
      ---------------   -----------

      I                 Summary of Investments - Other Than Investments in
                          Related Parties
      II                Condensed Financial Information of Registrant
      III               Supplementary Insurance Information
      IV                Reinsurance
      V                 Valuation and Qualifying Accounts

All other schedules are omitted, as the required information either is not
applicable, is not required, or is presented in the consolidated financial
statements or the notes thereto.

(a)(3)  Exhibits.

Exhibit                                              Incorporated by
Number   Description                                 Reference to
- ------   -----------                                 ------------

3(i)     Articles of Incorporation                   Exhibit 1 to Form 10,
                                                     dated June 12, 1984


                                       13
<PAGE>

3(ii)    Bylaws - Restated and Amended               Included herewith
         through November 12, 2002

4        Rights Agreement, dated as of November      Exhibit 1 to Form 8-A
         12, 2002, between Investors Title           filed November 15, 2002
         Company and Central Carolina Bank,
         a division of National Bank of Commerce

           Management contracts or compensatory plans or arrangements

10(i)    1993 Incentive Stock Option Plan            Exhibit 10 to Form 10-K
                                                     for the year ended
                                                     December 31, 1993

10(ii)   Employment Agreement dated                  Exhibit 10 to Form 10-K
         February 9, 1984 with                       for the year ended
         J. Allen Fine, Chairman                     December 31, 1985

10(iii)  Form of Incentive Stock Option              Exhibit 10(v) to Form 10-K
         Agreement under 1993 Incentive              for the year ended
         Stock Option Plan                           December 31, 1994

10(iv)   1997 Stock Option and Restricted            Exhibit 10(viii) to Form
         Stock Plan                                  10-K for the year ended
                                                     December 31, 1996

10(v)    Form of Nonqualified Stock Option           Exhibit 10(ix) to Form 10-Q
         Agreement to Non-employee Directors         for the quarter ended
         dated May 13, 1997 under the 1997           June 30, 1997
         Stock Option and Restricted Stock Plan

10(vi)   Form of Nonqualified Stock Option           Exhibit 10(x) to Form 10-K
         Agreement under 1997 Stock Option           for the year ended
         and Restricted Stock Plan                   December 31, 1997

10(vii)  Form of Incentive Stock Option              Exhibit 10(xi) to Form 10-K
         Agreement under 1997 Stock Option           for the year ended
         and Restricted Stock Plan                   December 31, 1997

10(viii) Form of Amendment to Incentive              Exhibit 10(xii) to Form
         Stock Option Agreement between              10-Q for the quarter ended
         Investors Title Company and James           June 30, 2000
         Allen Fine, James Allen Fine, Jr.,
         William Morris Fine, George Abbitt
         Snead, Ralph Nichols Strayhorn, III
         and Raeford Wilder Wall, Jr., respectively


                                       14
<PAGE>

Exhibit                                              Incorporated by
Number   Description                                 Reference to
- ------   -----------                                 ------------

10(ix)   2001 Stock Option and Restricted            Exhibit 10(xiii) to Form
         Stock Plan                                  10-K for the year ended
                                                     December 31, 2000

13       Portions of 2002 Annual                     Included herewith
         Report to Shareholders
         incorporated by reference
         in this report as set forth
         in Parts I, II and IV hereof

21       Subsidiaries of Registrant                  Included herewith

23       Independent Auditors Consent and            Included herewith
         Report on Schedules

(b) Reports on Form 8-K.

      No reports were filed on Form 8-K during the fourth quarter of 2002.


                                       15
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                             INVESTORS TITLE COMPANY


                              By: /s/J. Allen Fine
                                  ----------------
                                  J. Allen Fine
                      Chairman and Chief Executive Officer
                              Date: March 26, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 26th day of March, 2003.


/s/J. Allen Fine                                /s/James R. Morton
- --------------------------------------------    --------------------------------
J. Allen Fine, Chairman and Chief               James R. Morton, Director
Executive Officer


/s/James A. Fine,  Jr.                          /s/Lillard H. Mount
- --------------------------------------------    --------------------------------
James A. Fine, Jr., President, Treasurer and    Lillard H. Mount, Director
Director (Principal Financial Officer and
               Principal Accounting Officer)


/s/W. Morris Fine                               /s/A. Scott Parker III
- --------------------------------------------    --------------------------------
W. Morris Fine, Executive Vice President,       A. Scott Parker III, Director
Secretary and Director


/s/David L.  Francis
- --------------------------------------------
David L. Francis, Director


/s/Loren B. Harrell, Jr.
- --------------------------------------------
Loren B. Harrell, Jr., Director


/s/William J. Kennedy III
- --------------------------------------------
William J. Kennedy III, Director


/s/H. Joe King, Jr.
- --------------------------------------------
H. Joe King, Jr., Director


                                       16
<PAGE>

                                 Certifications

I, J. Allen Fine, certify that:

1. I have reviewed this annual report on Form 10-K of Investors Title Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      annual report (the "Evaluation Date"); and

      c) presented in this annual report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/J. Allen Fine
- -----------------------
J. Allen Fine
Chief Executive Officer


                                       17
<PAGE>

                           Certifications (continued)

I, James A. Fine, Jr., certify that:

1. I have reviewed this annual report on Form 10-K of Investors Title Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

      a) designed such disclosure controls and procedures to ensure that
      material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this annual report is
      being prepared;

      b) evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      annual report (the "Evaluation Date"); and

      c) presented in this annual report our conclusions about the effectiveness
      of the disclosure controls and procedures based on our evaluation as of
      the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

      a) all significant deficiencies in the design or operation of internal
      controls which could adversely affect the registrant's ability to record,
      process, summarize and report financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and

      b) any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal
      controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/ James A. Fine, Jr.
- -----------------------
James A. Fine, Jr.
Chief Financial Officer


                                       18

<PAGE>

                                                                      SCHEDULE I

                    INVESTORS TITLE COMPANY AND SUBSIDIARIES
       SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2002

<TABLE>
<CAPTION>
                                                                                      Amount at
                                                                                     which shown
                                                                                       in the
Type of Investment                                        Cost(1)   Market Value   Balance Sheet(2)
                                                          -------   ------------   ----------------

<S>                                                    <C>           <C>           <C>
Fixed Maturities:
  Bonds:
    States, municipalities and political
      subdivisions                                     $29,255,117   $31,316,899   $31,134,911
     Public utilities                                      199,439       231,156       231,156
     All other corporate bonds                          13,776,077    15,002,497    15,002,497
  Certificates of deposit                               10,518,165    10,518,165    10,518,165
                                                       -----------   -----------   -----------
      Total fixed maturities                            53,748,798    57,068,717    56,886,729
                                                       -----------   -----------   -----------

Equity Securities:
  Common Stocks:
      Public utilities                                     349,966       588,180       588,180
      Banks, trust and insurance companies                 289,195     1,097,152     1,097,152
      Industrial, miscellaneous and all other            1,676,011     2,020,826     2,020,826
  Nonredeemable preferred stocks                         4,078,117     4,178,770     4,178,770
                                                       -----------   -----------   -----------
      Total equity securities                            6,393,289     7,884,928     7,884,928
                                                       -----------   -----------   -----------

Other Investments                                          564,782                     564,782
                                                       -----------                 -----------
Total investments per the consolidated balance sheet    60,706,869                  65,336,439
                                                       -----------                 -----------

Cash equivalents                                         2,486,871                   2,486,871
                                                       -----------                 -----------
      Total investments                                 63,193,740                  67,823,310
                                                       ===========                 ===========
</TABLE>

(1)   Fixed maturities are shown at amortized cost and equity securities are
      shown at original cost.

(2)   Bonds of states, municipalities and political subdivisions are shown at
      amortized cost for held-to-maturity bonds and fair value for
      available-for-sale bonds. Equity securities are shown at fair value.



<PAGE>

                                                                     SCHEDULE II

                    INVESTORS TITLE COMPANY (PARENT COMPANY)
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 2002 AND 2001

<TABLE>
<CAPTION>
                                                                 2002          2001
<S>                                                         <C>           <C>
Assets
  Cash and cash equivalents                                 $   142,038   $   436,014
  Investments in equity securities                               30,000        30,000
  Investments in fixed maturities, available-for-sale         5,036,231     2,025,748
  Other investments                                             385,195            --
  Investments in affiliated companies                        47,741,967    42,928,301
  Other receivables                                             310,778       315,345
  Deferred income taxes, net                                     43,067        44,318
  Prepaid expenses and other assets                              19,641        52,525
  Property, net                                               2,074,844     2,148,622
                                                            -----------   -----------

Total Assets                                                $55,783,761   $47,980,873
                                                            ===========   ===========

Liabilities and Stockholders' Equity
Liabilities:
  Accounts payable and accrued liabilities                  $   475,387   $   337,087
  Income taxes payable                                          232,325       390,097
                                                            -----------   -----------
    Total liabilities                                           707,712       727,184
                                                            -----------   -----------

Stockholders' Equity:
  Class A Junior Participating preferred stock - no par value
    (shares authorized 100,000; no shares issued)                    --            --
  Common stock-no par (shares authorized,
    10,000,000; 2,855,744 and 2,855,744 shares issued and
    2,515,804 and 2,516,298 shares outstanding 2002 and
    2001, respectively)                                       1,650,350     1,650,350
  Retained earnings                                          53,400,579    45,592,295
  Accumulated other comprehensive income
     (net of deferred taxes: 2002: $12,939, 2001: $5,689)        25,120        11,044
                                                            -----------   -----------
    Total stockholders' equity                               55,076,049    47,253,689
                                                            -----------   -----------

Total Liabilities and Stockholders' Equity                  $55,783,761   $47,980,873
                                                            ===========   ===========
</TABLE>

See notes to condensed financial statements.


<PAGE>

                                                                     SCHEDULE II

                    INVESTORS TITLE COMPANY (PARENT COMPANY)
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                              STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                  2002         2001         2000
<S>                                           <C>          <C>          <C>
Revenues:
Investment income - interest and dividends    $   91,619   $   96,624   $   74,105
Rental income                                    516,018      510,132      482,267
Miscellaneous income                               5,017        1,000           45
                                              ----------   ----------   ----------
     Total                                       612,654      607,756      556,417
                                              ----------   ----------   ----------
Operating Expenses:
Office occupancy and operations                  247,244      170,445      148,750
Business development                              24,077       21,928       14,116
Taxes - other than payroll and income             61,107       65,917       66,948
Professional fees                                 63,490       30,191       40,311
Other expenses                                    45,332       43,215       48,939
                                              ----------   ----------   ----------
     Total                                       441,250      331,696      319,064
                                              ----------   ----------   ----------

Equity in Net Income of Affiliated Cos.*       7,991,438    5,850,938    2,988,984
                                              ----------   ----------   ----------
Income Before Income Taxes                     8,162,842    6,126,998    3,226,337
                                              ----------   ----------   ----------
Provision for Income Taxes                        54,000      118,000       85,874
                                              ----------   ----------   ----------
Net Income                                    $8,108,842   $6,008,998   $3,140,463
                                              ==========   ==========   ==========
Basic Earnings per Common Share               $     3.22   $     2.35   $     1.21
                                              ==========   ==========   ==========
Weighted Average Shares Outstanding-Basic      2,517,328    2,554,204    2,594,891
                                              ==========   ==========   ==========
Diluted Earnings Per Common Share             $     3.12   $     2.31   $     1.21
                                              ==========   ==========   ==========
Weighted Average Shares Outstanding-Diluted    2,597,979    2,599,714    2,601,283
                                              ==========   ==========   ==========
</TABLE>

* Eliminated in consolidation

See notes to condensed financial statements.


<PAGE>

                                                                     SCHEDULE II

                    INVESTORS TITLE COMPANY (PARENT COMPANY)
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<TABLE>
<CAPTION>
                                                                                  2002           2001           2000
<S>                                                                           <C>            <C>            <C>
Operating Activities:
  Net income                                                                  $ 8,108,842    $ 6,008,998    $ 3,140,463
   Adjustments to reconcile net income to net cash provided
     by operating activities:
         Equity in net earnings of subsidiaries less net dividends received
           of $3,177,772, $900,000 and $625,000 in 2002, 2001 and
           2000, respectively                                                  (4,813,666)    (4,950,938)    (2,363,984)
         Depreciation                                                              72,467         76,206         72,517
         Amortization, net                                                         11,977             --             --
         Net gain on disposals of property                                           (532)            --             --
         Benefit for deferred income taxes                                         (6,000)       (11,400)        (1,081)
         (Increase) decrease in receivables                                         4,567       (203,869)        (8,465)
         Decrease in income taxes receivable-current                                   --        404,548        442,536
         (Increase) decrease in prepaid expenses                                   32,884        (40,598)         8,270
         Increase (decrease) in accounts payable and accrued liabilities          138,300        193,821         (5,310)
         Increase (decrease) in income taxes payable-current                     (157,772)       390,097             --
                                                                              -----------    -----------    -----------
            Net cash provided by operating activities                           3,391,067      1,866,865      1,284,946
                                                                              -----------    -----------    -----------

Investing Activities:
   Capital contribution to subsidiary                                                  --             --       (600,000)
   Purchases of available-for-sale securities                                  (3,599,096)      (382,526)      (402,073)
   Proceeds from available-for-sale securities                                         --        661,397             --
   Purchases of available-for-sale bonds                                               --     (1,626,489)            --
   Proceeds from available-for-sale bonds                                         597,962             --             --
   Purchases of held-at-cost securities                                          (385,195)            --             --
   Proceeds from the sale of equity securities                                         --         45,000             --
   Purchases of furniture and equipment                                            (8,157)       (11,075)       (34,387)
   Proceeds from the sale of furniture and equiment                                10,000             --             --
                                                                              -----------    -----------    -----------
      Net cash used in investing activities                                    (3,384,486)    (1,313,693)    (1,036,460)
                                                                              -----------    -----------    -----------

Financing Activities:
   Dividends paid (net dividends paid to subsidiary of $42,132 in 2002)          (300,557)      (342,689)      (342,689)
                                                                              -----------    -----------    -----------
      Net cash used in financing activities                                      (300,557)      (342,689)      (342,689)
                                                                              -----------    -----------    -----------

Net Increase (Decrease) in Cash and Cash Equivalents                             (293,976)       210,483        (94,203)
Cash and Cash Equivalents, Beginning of Year                                      436,014        225,531        319,734
                                                                              -----------    -----------    -----------
Cash and Cash Equivalents, End of Year                                        $   142,038    $   436,014    $   225,531
                                                                              ===========    ===========    ===========

Supplemental Disclosures:
Cash Paid (Refunded) During the Year For:
   Income Taxes                                                               $   217,772    $  (109,359)   $   490,592
                                                                              ===========    ===========    ===========
</TABLE>

See notes to condensed financial statements.


<PAGE>

                                                                     SCHEDULE II

                    INVESTORS TITLE COMPANY (PARENT COMPANY)
                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                    NOTES TO CONDENSED FINANCIAL STATEMENTS

1.    The accompanying condensed financial statements should be read in
      conjunction with the consolidated financial statements and notes thereto
      of Investors Title Company and Subsidiaries.

2.    Cash dividends paid to Investors Title Company by its wholly owned
      subsidiaries were as follows:

<TABLE>
<CAPTION>
         Subsidiaries                                  2002        2001       2000
                                                    ----------   --------   --------

<S>                                                 <C>          <C>        <C>
      Investors Title Insurance Company *           $2,857,772   $350,000   $350,000
      Northeast Investors Title Insurance Company           --         --         --
      Investors Title Exchange Corporation             160,000    550,000    275,000
      Investors Title Accommodation Corporation        100,000         --         --
      Investors Title Management Services, Inc.         60,000         --         --
                                                    ----------   --------   --------
                                                    $3,177,772   $900,000   $625,000
                                                    ==========   ========   ========
</TABLE>

* Total dividends of $2,899,904 paid to the Parent Company, netted with
dividends of $42,132 received from the Parent.



<PAGE>
                                                                    SCHEDULE III

                    INVESTORS TITLE COMPANY AND SUBSIDIARIES
                       SUPPLEMENTARY INSURANCE INFORMATION
              For the Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                  Future
                                  Policy                 Other
                                 Benefits,              Policy
                    Deferred      Losses,               Claims
                     Policy       Claims                  and        Net
                   Acquisition   and Loss   Unearned   Benefits    Premium
     Segment          Cost       Expenses   Premiums    Payable    Revenue
                  -----------  -----------  --------  ---------  -----------
<S>                   <C>      <C>            <C>     <C>        <C>
Year Ended
December 31, 2002
Title Insurance        --      $25,630,000     --     $ 401,040  $67,693,617
Exchange Services      --               --     --            --           --
All Other              --               --     --            --           --
                  -----------  -----------  --------  ---------  -----------
                       --      $25,630,000     --     $ 401,040  $67,693,617
                  ===========  ===========  ========  =========  ===========

Year Ended
December 31, 2001
Title Insurance        --      $21,460,000     --     $ 281,961  $59,480,545
Exchange Services      --               --     --            --           --
All Other              --               --     --            --           --
                  -----------  -----------  --------  ---------  -----------
                       --      $21,460,000     --     $ 281,961  $59,480,545
                  ===========  ===========  ========  =========  ===========

Year Ended
December 31, 2000
Title Insurance        --      $17,944,665     --     $ 222,748  $37,690,752
Exchange Services      --               --     --            --           --
All Other              --               --     --            --           --
                  -----------  -----------  --------  ---------  -----------
                       --      $17,944,665     --     $ 222,748  $37,690,752
                  ===========  ===========  ========  =========  ===========
<CAPTION>
                                  Benefits    Amortization
                                   Claims,     of Deferred
                       Net       Losses and      Policy         Other
                    Investment   Settlement    Acquisition    Operating    Premiums
     Segment          Income      Expenses       Costs        Expenses     Written
                   -----------   ----------    --------      ------------  -------

<S>                <C>          <C>            <C>           <C>             <C>
Year Ended
December 31, 2002
Title Insurance    $ 2,706,886  $ 6,871,822       --         $ 53,167,680    N/A
Exchange Services        6,115           --       --              441,386    N/A
All Other               93,807           --       --            1,097,610    N/A
                   -----------   ----------    --------      ------------
                   $ 2,806,808  $ 6,871,822       --         $ 54,706,676
                   ===========  ===========    ========      ============

Year Ended
December 31, 2001
Title Insurance    $ 2,626,053  $ 6,786,263       --         $ 47,449,615    N/A
Exchange Services       16,245           --       --              433,811    N/A
All Other               97,982           --       --            1,063,758    N/A
                   -----------   ----------    --------      ------------
                   $ 2,740,280  $ 6,786,263       --         $ 48,947,184
                   ===========  ===========    ========      ============

Year Ended
December 31, 2000
Title Insurance    $ 2,436,561  $ 5,865,355       --         $ 31,060,289    N/A
Exchange Services       17,478           --       --              225,330    N/A
All Other               74,104           --       --              818,331    N/A
                   -----------   ----------    --------      ------------
                   $ 2,528,143  $ 5,865,355       --         $ 32,103,950
                   ===========  ===========    ========      ============
</TABLE>
<PAGE>

                                                                     SCHEDULE IV

                    INVESTORS TITLE COMPANY AND SUBSIDIARIES
                                   REINSURANCE
              For the Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                                    Ceded to     Assumed from                 Percentage of
                       Gross         Other           Other         Net           Amount
                      Amount       Companies       Companies     Amount       Assumed to Net
                      ------       ---------       ---------     ------       --------------

<S>                 <C>            <C>             <C>           <C>             <C>
YEAR ENDED
DECEMBER 31, 2002
Title Insurance     $68,021,272    $ 348,395       $ 20,740      $67,693,617     0.03%

YEAR ENDED
DECEMBER 31, 2001
Title Insurance     $59,799,379    $ 340,228       $ 21,394      $59,480,545     0.04%

YEAR ENDED
DECEMBER 31, 2000
Title Insurance     $38,020,917    $ 362,528       $ 32,363      $37,690,752     0.09%
</TABLE>


<PAGE>

                                                                      SCHEDULE V

                    INVESTORS TITLE COMPANY AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
              For the Years Ended December 31, 2002, 2001 and 2000

<TABLE>
<CAPTION>
                              Balance at         Additions        Additions Charged
                              Beginning         Charged to             to Other          Deductions-       Balance at
Description                   of Period      Costs and Expenses   Accounts - Describe     describe*      End of Period
                              ---------      ------------------   -------------------     ---------      -------------

<S>                         <C>                 <C>                 <C>                  <C>               <C>
2002
Premiums Receivable
Valuation Provision         $ 1,405,000         $ 4,600,806         $     --             $(4,205,806)      $ 1,800,000

Reserves for
Claims                      $21,460,000         $ 6,871,822         $     --             $(2,701,822)      $25,630,000

2001
Premiums Receivable
Valuation Provision         $   725,000         $ 3,484,380         $     --             $(2,804,380)      $ 1,405,000

Reserves for
Claims                      $17,944,665         $ 6,786,263         $     --             $(3,270,928)      $21,460,000


2000
Premiums Receivable
Valuation Provision         $   775,000         $ 2,219,190         $     --             $(2,269,190)      $   725,000

Reserves for
Claims                      $15,864,665         $ 5,865,355         $     --             $(3,785,355)      $17,944,665
</TABLE>

*Cancelled premiums and change in allowance for bad debts

*Payments of claims, net of recoveries



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)
<SEQUENCE>3
<FILENAME>d54625_exh-3ii.txt
<DESCRIPTION>BYLAWS - RESTATED AND AMENDED
<TEXT>
                                                                   EXHIBIT 3(ii)

                                     BY-LAWS
                                       OF
                             INVESTORS TITLE COMPANY

                 RESTATED AND AMENDED THROUGH NOVEMBER 12, 2002


                                   ARTICLE I.

                                    OFFICES:

            Section 1. Principal Office: The principal office of the Corporation
shall be located at 121 North Columbia Street, Chapel Hill, North Carolina.

            Section 2. Registered Office: The registered office of the
Corporation required by law to be maintained in the State of North Carolina may
be, but need not be, identical with the principal office.

            Section 3. Other Offices: The Corporation may have offices at such
other places, either within or without the State of North Carolina, as the Board
of Directors may from time to time determine, or as the affairs of the
Corporation may require.

                                   ARTICLE II.

                            MEETING OF SHAREHOLDERS:

            Section 1. Place of Meetings: All meetings of shareholders shall be
held at the principal office of the Corporation, or at such other place, either
within or without the State of North Carolina, as shall be designated in the
notice of the meeting or agreed upon by a majority of the shareholders entitled
to vote thereat.

            Section 2. Annual Meetings: The annual meeting of shareholders shall
be held on the third Wednesday in May of each year, if not a legal holiday, but
if a legal holiday, then on the next day following not a legal holiday, for the
purpose of electing directors of the Corporation and for the transaction of such
other business as may be properly brought before the meeting.

            Section 3. Substitute Annual Meeting: If the annual meeting shall
not be held on the day designated by these by-laws, a substitute annual meeting
may be called in accordance with the provisions of Section 4 of this Article. A
meeting so called shall be designated and treated for all purposes as the annual
meeting.

            Section 4. Special Meetings: Special meetings of the shareholders
may be called by any of the following: (a) by the Chairman of the Board of
Directors; (b) by the President of the Corporation; (c) by the Board of
Directors upon the affirmative vote of at least

<PAGE>

seventy-five percent (75%) of the entire Board of Directors; or (d) by the
shareholders upon written request of those persons holding of record not less
than eighty percent (80%) of the total voting power of the shares entitled to
vote thereon.

            Section 5. Notice of Meetings: Written or printed notice stating the
time and place of the meeting shall be delivered no fewer than 10 nor more than
60 days before the date thereof, either personally or by mail, by or at the
direction of the President or the other person calling the meeting, to each
shareholder of record entitled to vote at such meeting and to each nonvoting
shareholder entitled to notice of the meeting. If the corporation is required by
law to give notice of proposed action to nonvoting shareholders and the action
is to be taken without a meeting pursuant to Section 9 of this Article, written
notice of such proposed action shall be delivered to such shareholders not less
than 10 days before such action is taken.

            If notice is mailed, such notice shall be effective when deposited
in the United States mail with postage thereon prepaid and correctly addressed
to the shareholder's address shown in the corporation's current record of
shareholders.

            In the case of an annual or substitute annual meeting, the notice of
meeting need not specifically state the business to be transacted thereat unless
it is a matter with respect to which specific notice to the shareholders is
expressly required by the provisions of the North Carolina Business Corporation
Act. In the case of a special meeting, the notice of meeting shall specifically
state the purpose or purposes for which the meeting is called.

            When a meeting is adjourned for more than 120 days after the date
fixed for the original meeting or if a new record date for the adjourned meeting
is fixed, notice of the adjourned meeting shall be given as in the case of an
original meeting. When a meeting is adjourned for 120 days or less and no new
record date for the adjourned meeting is fixed, it is not necessary to give
notice of the adjourned meeting other than by announcement at the meeting at
which the adjournment is taken.

            Section 6. Voting Lists: At least ten days before each meeting of
shareholders the Secretary of the Corporation shall prepare an alphabetical list
of the shareholders entitled to vote at such meetings, with the address of and
number of shares held by each, which list shall be kept on file at the
registered office of the Corporation for a period of ten days prior to such
meeting, and shall be subject to inspection by any shareholder at any time
during the usual business hours. This list shall also be provided and kept open
at the time and place of the meeting and shall be subject to inspection by any
shareholder during the whole time of the meeting.

            Section 7. Quorum: The holders of a majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at
meetings of shareholders. If there is no quorum at the opening of a meeting of
shareholders, such meeting may be adjourned from time to time by the vote of a
majority of the shares voting on the motion to adjourn; and, at any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the original meeting.

            The shareholders at a meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.


<PAGE>

            Section 8. Voting of Shares: Each outstanding share having voting
rights shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.

            Except in the election of directors, the vote of a majority of the
shares voted on any matter at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders on that matter, unless the vote of
a greater number is required by law or by the charter or by-laws of this
Corporation.

            Voting on all matters shall be by voice or by a show of hands unless
the holders of one-tenth of the shares represented at the meeting shall, prior
to the voting on any matter, demand a ballot vote on that particular matter.

            Section 9. Informal Action by Shareholders: Any action which may be
taken at a meeting of the shareholders may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the persons who would be entitled to vote upon such action at a meeting, and
filed with the Secretary of the Corporation to be kept in the Corporate Minute
Book.

                                  ARTICLE III.

                                    DIRECTORS

            Section 1. General Powers: The business and affairs of the
Corporation shall be managed by the Board of Directors or by such Executive
Committees as the Board may establish pursuant to these by-laws.

            Section 2. Number, Term and Qualifications: The number of Directors
of the Corporation shall not be less than nine nor more than twelve as
determined, from time to time, by the shareholders. The Board shall be divided
into three classes, having staggered terms of three years each. Each director
shall hold office until his death, resignation, retirement, removal,
disqualification, or his successor is elected and qualified. Directors need not
be residents of the State of North Carolina or shareholders of the Corporation.

            Section 3. Election of Directors: Except as provided in Section 6 of
this Article, the directors shall be elected at the annual meeting of
shareholders; and those persons who receive the highest number of votes shall be
deemed to have been elected.

      Section 4. Removal: Neither the entire Board of Directors nor any
individual director of the corporation shall be removed from office, with or
without cause, unless a meeting of the shareholders of the corporation is held
to act thereon and there is obtained the approval of a percentage of all votes
entitled to be cast thereon of at least eighty percent (80%); provided, however,
that if any such removal shall have been recommended to the shareholders of the
corporation by a resolution of the Board of Directors adopted by the affirmative
vote of seventy-five percent (75%) of the entire Board of Directors, then such
removal may be effected if a meeting of the shareholders of the corporation is
held to act thereon and there is obtained the approval of a percentage of all
votes entitled to be cast thereon equal to a majority of all votes entitled to
be cast thereon; provided, further, that any such removal may be effected
without a meeting or vote of the shareholders of the corporation if a resolution

<PAGE>

determining that cause exists for such removal shall be adopted by the
affirmative vote of seventy-five percent (75%) of the entire Board of Directors.

            Section 5. Vacancies: A vacancy occurring in the Board of Directors
may be filled by a majority of the remaining directors, though less than a
quorum, or by the sole remaining Directors; but a vacancy created by an increase
in the authorized number of Directors shall be filled only by election at an
annual meeting or at a special meeting of shareholders called for that purpose.
The shareholders may elect a director at any time to fill any vacancy not filled
by the directors.

            Section 6. Chairman: There may be a Chairman of the Board of
Directors elected by the directors from their number at any meeting of the
Board. The Chairman shall preside at all meetings of the Board of Directors and
perform such other duties as may be directed by the Board.

            Section 7. Compensation: The Board of Directors may compensate
directors for their services.

            Section 8. Executive Committee: The Board of Directors may, by
resolution adopted by a majority of the number of directors fixed by these
by-laws, designate two or more directors to constitute an Executive Committee,
which committee to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation.

            Section 9. Indemnification: Any person who at any time serves or has
served as a director of the corporation, or who, while serving as a director of
the corporation, serves or has served, at the request of the corporation, as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under an employee benefit plan, shall have a right to be
indemnified by the corporation to the fullest extent permitted by law against
(a) all expenses, including but not limited to attorneys' fees, the costs of any
investigation, experts and similar expenses incurred by him in connection with
any threatened, pending, or completed civil, criminal, administrative,
investigative, or arbitrative action, suit or proceeding (and any appeal
therein), whether or not brought by or on behalf of the corporation, seeking to
hold him liable by reason of the fact that he is or was acting in such capacity,
and (b) all payments made by him in satisfaction of any judgment, money decree,
fine (including an excise tax assessed with respect to an employee benefit
plan), penalty, or settlement for which he may have become liable in any such
action, suit or proceeding.

            The Board of Directors of the corporation shall take all such action
as may be necessary and appropriate to authorize the corporation to pay the
indemnification required by this bylaw.

            To the fullest extent from time to time permitted by law, the
Company agrees to pay as incurred all the expenses, including but not limited to
attorneys' fees and expenses of any person indemnified hereunder, incurred in
defending any action, proceeding, suit or investigation and in advance of the
final disposition of such action, proceeding, suit or investigation.


<PAGE>

            Any person who at any time after the adoption of this bylaw serves
or has served in the aforesaid capacity for or on behalf of the corporation
shall be deemed to be doing or to have done so in reliance upon, and as
consideration for, the right of indemnification provided herein. Such right
shall inure to the benefit of the legal representatives of any such person and
shall not be exclusive of any other rights to which such person may be entitled
apart from the provision of this bylaw.

                                   ARTICLE IV.

                              MEETING OF DIRECTORS

            Section 1. Regular Meetings: A regular meeting of the Board of
Directors shall be held immediately after, and at the same place as, the annual
meeting of shareholders. In addition the Board of Directors may provide, by
resolution, the time and place, either within or without the State of North
Carolina, for the holding of additional regular meetings.

            Section 2. Special Meetings: Special Meetings of the Board of
Directors may be called by or at the request of the President or any two
directors. Such meetings may be held either within or without the State of North
Carolina.

            Section 3. Notice of Meetings: Regular meetings of the Board of
Directors may be held without notice.

            The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof by
the usual means of communication. Such notice need not specify the purpose for
which the meeting is called.

            Attendance by a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called.

            Section 4. Quorum: A majority of the directors fixed by these
by-laws shall constitute a quorum for the transaction of business at any meeting
of the Board of Directors.

            Section 5. Manner of Acting: Except as otherwise provided in this
section, the act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.

            The vote of a majority of the number of directors fixed by these
by-laws shall be required to adopt a resolution constituting an executive
committee. The vote of a majority of the directors then holding office shall be
required to adopt, amend or repeal a by-law, or to adopt a resolution dissolving
the corporation without action by the shareholders. Vacancies in the Board of
Directors may be filled as provided in Article III, Section 6 of these by-laws.

            Section 6. Informal Action by Directors: Action taken by a majority
of the directors without a meeting is nevertheless Board action if written
consent to the action in question is signed by all the directors and filed with
the minutes of the proceedings.


<PAGE>

            Section 7. Secretary: The Secretary shall keep accurate records of
the acts and proceedings of all meetings of shareholders and directors. He shall
give all notices required by law and by these by-laws. He shall have general
charge of the corporate books and records and of the corporate seal, and he
shall affix the corporate seal to any lawfully executed instrument requiring it.
He shall have general charge of the stock transfer books of the Corporation and
shall keep, at the registered or principal office of the Corporation, a record
of shareholders showing the name and address of each shareholder and the number
and class of the shares held by each. He shall sign such instruments as may
require his signature, and, in general, shall perform all duties incident to the
office of Secretary and such other duties as may be assigned to him from time to
time by the President or by the Board of Directors.

            Section 8. Treasurer: The Treasurer shall have custody of all funds
and securities belonging to the Corporation and shall receive, deposit or
disburse the same under the direction of the Board of Directors. He shall keep
full and accurate accounts of the finances of the Corporation in books
especially provided for that purpose; and he shall cause a true statement of its
assets and liabilities as of the close of each fiscal year and of the results of
its operations and of changes in surplus for such fiscal year, all in reasonable
detail, including particulars as to convertible securities then outstanding, to
be made and filed at the registered or principal office of the Corporation
within four months after the end of such fiscal year. The statement so filed
shall be kept available for inspection by any shareholder for a period of ten
years; and the Treasurer shall mail or otherwise deliver a copy of the latest
such statement to any shareholder upon his written request thereof. The
Treasurer shall, in general perform all duties incident to his office and such
other duties as may be assigned to him from time to time by the President or by
the Board of Directors.

            Section 9. Assistant Secretaries and Treasurers: The Assistant
Secretaries and Assistant Treasurers shall, in the absence or disability of the
Secretary or the Treasurer, respectively, perform the duties and exercise the
powers of those offices, and they shall, in general, perform such other duties
as shall be assigned to them by the Secretary or the Treasurer, respectively, or
by the President or the Board of Directors.

            Section 10. Bonds: The Board of Directors may by resolution require
any or all officers, agents and employees of the Corporation to give bond to the
Corporation, with sufficient sureties, conditioned on the faithful performance
of the duties of their respective offices or positions, and to comply with such
other conditions as may from time to time be required by the Board of Directors.

                                   ARTICLE V.

                                    OFFICERS

            Section 1. Number: The officers of the Corporation shall consist of
a President, a Secretary, a Treasurer, and such Vice-Presidents, Assistant
Secretaries, Assistant Treasurers and other officers as the Board of Directors
may from time to time elect. Any two or more offices may be held by the same
person, except the offices of President and Secretary.

            Section 2. Election and Term: The officers of the Corporation shall
be elected by the Board of Directors. Such elections may be held at any regular
or special meeting

<PAGE>

of the Board. Each officer shall hold office until his death, resignation,
retirement, removal, disqualification, or his successor is elected and
qualified.

            Section 3. Removal: Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board with or without cause; but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.

            Section 4. Compensation: The compensation of all officers of the
Corporation shall be fixed by the Board of Directors.

            Section 5. President: The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall supervise and control the management of the Corporation in
accordance with these by-laws.

            He shall, when present, preside at all meetings of shareholders. He
shall sign, with any other proper officer, certificates for shares of the
Corporation and any deeds, mortgages, bonds, contracts, or other instruments
which may be lawfully executed on behalf of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be delegated by the Board of
Directors to some other officer or agent; and, in general, he shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.

            Section 6. Vice-Presidents: The Vice-Presidents in the order of
their election, unless otherwise determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and exercise the
powers of that office. In addition, they shall perform such other duties and
have such other powers as the Board of Directors shall prescribe.

                                   ARTICLE VI.

                          CONTRACTS, LOANS AND DEPOSITS

            Section 1. Contracts: The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument on behalf of the Corporation, and such authority may be
general or confined to specific instances.

            Section 2. Loans: No loans to or from the Corporation shall be
contracted on behalf of the Corporation and no evidences of indebtedness shall
be issued in its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to specific instances.

            Section 3. Checks and Drafts: All checks, drafts or other orders for
the payment of money issued in the name of the Corporation shall be signed by
such officer or officers, agent or agents of the Corporation and in such manner
as shall from time to time be determined by resolution of the Board of
Directors.

<PAGE>

            Section 4. Deposits: All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such depositories as the Board of Directors shall direct.

                                  ARTICLE VII.

                   CERTIFICATES FOR SHARES AND THEIR TRANSFER

            Section 1. Certificates for Shares: Certificates representing shares
of the Corporation shall be issued, in such form as the Board of Directors shall
determine, to every shareholder for the fully paid shares owned by him. These
certificates shall be signed by the President or any Vice-President and the
Secretary, Assistant Secretary, Treasurer or Assistant Treasurer. They shall be
consecutively numbered or otherwise identified; and the name and address of the
persons, corporations, firms or organizations to whom they are issued, with the
number of shares and date of issue, shall be entered on the stock transfer books
of the Corporation.

            Section 2. Transfer of Shares: Transfer of shares shall be made on
the stock transfer books of the Corporation only upon surrender of the
certificates for the shares sought to be transferred by the record holder
thereof or by his duly authorized agent, transferee or legal representative. All
certificates surrendered for transfer shall be cancelled before new certificates
for the transferred shares shall be issued.

            Section 3. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of a meeting of shareholders, to demand a
special meeting, to vote, to take any other action, or to receive a dividend
with respect to their shares, the Board of Directors may fix in advance a date
as the record date for any such determination of shareholders. Such record date
fixed by the Board of Directors under this Section shall not be more than 70
days before the meeting or action requiring a determination of shareholders.

            If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to a dividend, the close of the business day before the first notice is
delivered to shareholders or the date on which the Board of Directors authorizes
the dividend, as the case may be, shall be the record date for such
determination of shareholders.

            When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned to a date more than
120 days after the date fixed for the original meeting.

            Section 4. Lost Certificates: The Board of Directors may authorize
the issuance of a new share certificate in place of a certificate claimed to
have been lost or destroyed, upon receipt of an affidavit of such fact from the
person claiming the loss or destruction. When authorizing such issuance of a new
certificate, the Board may require the claimant to give the Corporation a bond
in such sum as it may direct to indemnify the Corporation against loss from

<PAGE>

any claim with respect to the certificate claimed to have been lost or
destroyed; or the Board may, by resolution reciting that the circumstances
justify such action, authorize the issuance of the new certificate without
requiring such a bond.

                                  ARTICLE VIII.

                               GENERAL PROVISIONS

            Section 1. Dividends: The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and by its charter.

            Section 2. Seal: The corporate seal of the Corporation shall consist
of two concentric circles between which is the name of the Corporation and in
the center of which is inscribed SEAL; and such seal, as impressed on the margin
hereof, is hereby adopted as the corporate seal of the Corporation.

            Section 3. Waiver of Notice: Whenever any notice is required to be
given to any shareholder or director under the provisions of the North Carolina
Business Corporation Act or under the provisions of the charter or by-laws of
this Corporation, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be equivalent to the giving of such notice.

            Section 4. Fiscal Year: Unless otherwise ordered by the Board of
Directors, the fiscal year of the Corporation shall be from January 1 to
December 31.

            Section 5. Amendments: Except as otherwise provided herein, these
by-laws may be amended or repealed and new by-laws may be adopted by the
affirmative vote of a majority of the directors then holding office at any
regular or special meeting of the Board of Directors.

            The Board of Directors shall have no power to adopt a by-law: (1)
requiring more than a majority of the voting shares for a quorum at a meeting of
shareholders or more than a majority of the votes cast to constitute action by
the shareholders, except where higher percentages are required by law; (2)
providing for the management of the Corporation otherwise than by the Board of
Directors or its Executive Committees; (3) increasing or decreasing the number
of directors; (4) classifying and staggering the election of directors. No
by-law adopted or amended by the shareholders shall be altered or repealed by
the Board of Directors.

            No provision of the by-laws may be amended, altered or repealed by
the shareholders of the corporation unless a meeting of the shareholders is held
to act thereon and there is obtained the approval of a percentage of all the
votes entitled to be cast on at least eighty percent (80%); provided, however,
that the approval of the majority of all the votes entitled to be cast shall be
sufficient to approve any such amendment, alteration or repeal that has been
favorably recommended to the shareholders by resolution adopted by the
affirmative vote of at least seventy-five percent (75%) of the entire Board of
Directors.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>4
<FILENAME>d54625_exh-13.txt
<DESCRIPTION>A/R TO SECURITY HOLDERS
<TEXT>
Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion should be read in conjunction with the consolidated
financial statements and the related notes in this report.

Overview

      Investors Title Company (the "Company") engages primarily in two segments
of business. The main business activity is the issuance of title insurance
through two title insurance subsidiaries, Investors Title Insurance Company
("ITIC") and Northeast Investors Title Insurance Company ("NE-ITIC"). Factors
that influence the land title business include mortgage interest rates, the
availability of mortgage funds, the level of real estate activity, the cost of
real estate, consumer confidence, the supply and demand of real estate,
inflation and general economic conditions.

      The Company's second segment provides tax-free exchange services through
its two subsidiaries, Investors Title Exchange Corporation ("ITEC") and
Investors Title Accommodation Corporation ("ITAC"). ITEC serves as a qualified
intermediary in ss.1031 like-kind exchanges of real or personal property. ITAC
serves as exchange accommodation titleholder in reverse exchanges.

      The downward trend in interest rates that began in 2000 continued into
2002, thus helping to sustain strong real estate activity. During the latter
part of 2002, mortgage rates dropped to near forty-year lows. A new record for
refinance origination was set in the United States in 2002 as steadily declining
interest rates created a high demand for mortgage refinancing. According to data
published by Freddie Mac, the monthly average thirty-year fixed mortgage
interest rates were reported to be 6.54%, 6.97% and 8.05% in 2002, 2001 and
2000, respectively. According to statistics from the National Association of
Realtors(R), existing home sales reached a record high of 5.6 million. This
represents an increase of 5.1% from 2001 to 2002 and an increase of 2.8% from
2000 to 2001. New and existing home sales were 6.5 million, 6.2 million and 6
million in 2002, 2001 and 2000, respectively.

      During 2002, the monthly average thirty-year fixed mortgage interest rates
began the year at 7.07% and ended the year at 6.05%, which was the lowest
monthly average for the year. Low interest rates also resulted in increased
affordability of new and existing homes, setting new annual transaction records.
Total refinancing volume for 2002 was approximately $1.4 trillion, which was
$270 billion more than the preceding year according to the Mortgage Bankers
Association of America. The level of mortgage refinancing and the number of
existing home sales are primary drivers of our premiums written.

      Management cannot predict the future level of mortgage interest rates nor
the impact such rates will have on home sales, housing starts, mortgage lending
or other real estate activity. The Company strives to offset the cyclical nature
of the real estate market by increasing its market share. This effort includes
expanding into new markets primarily by continuing to develop agency
relationships, as well as improving market penetration with existing offices and
agents.

Credit Rating

      ITIC has been recognized by two independent Fannie Mae-approved actuarial
firms, Demotech, Inc. and Lace Financial Corporation, with rating categories of
"A Double Prime--unsurpassed financial stability" and "A--strong overall
financial condition."

      NE-ITIC's financial stability also has been recognized by Demotech, Inc.
and Lace Financial Corporation with rating categories of "A Prime--unsurpassed
financial stability" and "A+--strong overall financial condition."

Results of Operations

Operating Revenues

      A summary by segment of the Company's operating revenues is as follows:

<TABLE>
<CAPTION>
                                                                       2002                     2001                    2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>        <C>           <C>       <C>           <C>
Title insurance                                              $68,539,235   97.7%      $59,815,041   96.9%     $37,925,106   95.8%
Exchange services                                                947,426    1.3%        1,018,353    1.7%       1,046,178    2.6%
All other                                                        674,570    1.0%          886,998    1.4%         626,130    1.6%
- ---------------------------------------------------------------------------------------------------------------------------------

                                                             $70,161,231    100%      $61,720,392    100%     $39,597,414    100%
</TABLE>

<PAGE>

Title Insurance

      Net premiums written increased 13.8% in 2002 over 2001 and 57.8% in 2001
over 2000. The increase in premiums in 2002 and 2001 resulted primarily from
declining mortgage interest rates, which continued to fuel refinance activity.
The number of policies and commitments issued in 2002 was 325,918, an increase
of 11.5% compared with 292,328 in 2001. In 2001, the number of policies and
commitments issued increased by 48.5% compared with 196,836 in 2000.

      Shown below is a schedule of net premiums written for 2002, 2001 and 2000
in all states where our two title insurance subsidiaries, Investors Title
Insurance Company and Northeast Investors Title Insurance Company, currently
underwrite insurance:

State                               2002             2001               2000
- --------------------------------------------------------------------------------
Alabama                        $    654,742      $     90,369      $         --
Arkansas                             58,455                --                --
District of Columbia                  2,441                --                --
Florida                               1,745            10,530                --
Georgia                             100,887           318,284           209,300
Illinois                             57,977                --                --
Indiana                             292,575            14,096           400,488
Iowa                                     --            31,770                --
Kentucky                          1,282,552           132,606                --
Maryland                          1,434,872         1,023,093           525,177
Michigan                          9,520,086        11,891,314         6,395,071
Minnesota                         1,180,045         1,342,606           851,836
Mississippi                       1,011,547           160,952            35,509
Nebraska                          1,353,233         1,255,563         1,103,168
New Jersey                           46,901                --                --
New York                          3,894,757         3,384,451           770,082
North Carolina                   24,418,013        21,767,115        15,825,323
Ohio                                 47,912            55,349            43,810
Pennsylvania                      4,466,476         3,554,748           962,331
South Carolina                    5,640,755         4,054,696         3,893,692
Tennessee                         3,260,696         2,521,198         1,097,654
Virginia                          7,633,405         6,847,586         4,772,838
West Virginia                     1,650,424         1,314,747         1,127,715
Wisconsin                            10,776            28,306             6,923
- --------------------------------------------------------------------------------
  Direct Premiums                68,021,272        59,799,379        38,020,917
Reinsurance Assumed                  20,740            21,394            32,363
Reinsurance Ceded                  (348,395)         (340,228)         (362,528)
- --------------------------------------------------------------------------------
Net Premiums Written           $ 67,693,617      $ 59,480,545      $ 37,690,752
- --------------------------------------------------------------------------------

      Branch net premiums written as a percentage of total net premiums written
were 36.3%, 36.7% and 42.2% in 2002, 2001 and 2000, respectively. Net premiums
written from branch operations increased 12.4% in 2002 compared with 2001 and
increased 37.3 % in 2001 compared with 2000.

      Agency net premiums written as a percentage of total net premiums written
were 63.7%, 63.3% and 57.8% in 2002, 2001 and 2000, respectively. Net premiums
written from agency operations increased 14.6% compared with 2002 and increased
72.8 % in 2001 compared with 2000.

Exchange Services

      Operating revenues from exchange transactions decreased 7% from 2001 to
2002 and decreased 2.7% from 2000 to 2001 due to lower interest rates. On
September 15, 2000, the Internal Revenue Service issued Revenue Procedure
2000-37, which provides a safe harbor for reverse exchanges. The original safe
harbors, which established procedures to follow for standard exchange
transactions, excluded the more complicated reverse transactions. The Company
has dedicated a separate subsidiary to assist clients in structuring this type
of exchange.

<PAGE>

Seasonality

Title Insurance

      Title insurance premiums are closely related to the level of real estate
activity and the average price of real estate sales. The availability of funds
to finance purchases directly affects real estate sales. Other factors include
consumer confidence, economic conditions, supply and demand, mortgage interest
rates and family income levels. Historically, the first quarter has the least
real estate activity because fewer real estate transactions occur, while the
remaining quarters are more active. Refinance activity is generally less
seasonal, but it is subject to interest rate volatility. Fluctuations in
mortgage interest rates can cause shifts in real estate activity outside of the
normal seasonal pattern.

Exchange Services

      Seasonal factors affecting the level of real estate activity and the
volume of title premiums written will also affect the demand for exchange
services.

Investment Income

      Investments are an integral part of the Company's business. In formulating
its investment strategy, the Company has emphasized after-tax income.
Investments in marketable securities have increased from funds retained in the
Company. The investments are primarily in debt securities and, to a lesser
extent, equity securities. The effective maturity of the majority of the fixed
income investments is within 15 years.

      As new funds become available, they are invested in accordance with the
Company's investment policy and corporate goals. Securities purchased may
include a combination of taxable fixed-income securities, tax-exempt securities
and equities. The Company strives to maintain a high quality investment
portfolio.

      Investment income increased 2.4% from 2001 to 2002 and increased 8.4% from
2000 to 2001. These increases were primarily attributable to increases in the
average investment portfolio balances.

Expenses

      A summary by segment of the Company's operating expenses is as follows:

<TABLE>
<CAPTION>
                                                 2002                      2001                    2000
- ------------------------------------------------------------------------------------------------------------------
<S>                                  <C>             <C>        <C>             <C>       <C>             <C>
Title insurance                      $60,039,502     97.5%      $54,235,878     97.3%     $36,925,644     97.3%
Exchange services                        441,386       .7%          433,811       .8%         225,330       .6%
All other                              1,097,610      1.8%        1,063,758      1.9%         818,331      2.1%
- ------------------------------------------------------------------------------------------------------------------
                                     $61,578,498      100%      $55,733,447      100%     $37,969,305      100%
                                     -----------                -----------               -----------
</TABLE>

      On a combined basis, profit margins were 11.07%, 9.32% and 7.44% in 2002,
2001 and 2000, respectively. The increase of 13.8% in net premiums written
coupled with a smaller increase of only 10.5% in operating expenses contributed
to the increase in profit margin for 2002. Expenses increased due to the
increase in premium volume as well as an increase in costs associated with
entering and supporting new market areas.

      Title Insurance

      Profit margins for the title insurance segment were 10.78%, 8.69% and
6.02% in 2002, 2001 and 2000, respectively. The increase in premiums written,
along with concerted efforts to contain costs, contributed to the improvements
in the profit margin for 2002 and 2001. In order to maintain and improve
margins, the Company strives to identify opportunities to refine operating
procedures and to implement programs designed to reduce expenses.

      Commissions increased 14% from 2001 to 2002 and increased 81.5% from 2000
to 2001. Commission expense as a percentage of net premiums written by agents
was 74.2%, 74.6% and 71% for 2002, 2001 and 2000, respectively. Commission rates
vary geographically and may be influenced by state regulations.

      The provision for claims as a percentage of net premiums written was
10.2%, 11.4% and 15.6% in 2002, 2001 and 2000, respectively. This is due in
large part to the fact that we have intensified our analysis of the nature and
source of claims and used this information to foster the development of
preventive measures. The provision 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. Payments of claims, net of recoveries, were
$2,701,822, $3,270,928 and $3,785,355 in 2002, 2001 and 2000, respectively.

<PAGE>

      The Company has continued to strengthen its reserves for claims. At
December 31, 2002, the total reserves for claims were $25,630,000. Of that
total, $3,563,247 was reserved for specific claims, and $22,066,753 was reserved
for claims for which the Company had no notice. Management relies on actuarial
techniques to estimate future claims by analyzing historical claim payment
patterns. Claims reserves are reviewed and certified as to their adequacy by
independent actuaries annually. There are no known claims which are expected to
have a materially adverse effect on the Company's financial position or
operating results.

      On a consolidated basis, salaries and employee benefits as a percentage of
net premiums written were 18.6%, 18.1% and 25.5% in 2002, 2001 and 2000,
respectively. Although salaries and employee benefits have risen in total in
2002 and 2001 compared with 2000, the percentage to net premiums written
decreased due to improvements in productivity and increased revenue from agency
operations. The title insurance segment's total salaries and employee benefits
accounted for 93.5%, 92.8% and 95.1% of total salaries for 2002, 2001 and 2000,
respectively. Overall office occupancy and operations as a percentage of net
premiums was 7.1%, 8.3% and 9.5% in 2002, 2001 and 2000, respectively. The title
insurance segment's total office occupancy and operations accounted for 92.9%,
95.2% and 93.5% in 2002, 2001 and 2000, respectively. In 2002, the improvement
in the percentage of overall office occupancy and operations to net premiums
reflects the increase in premium volume and the fixed cost nature of some of the
office occupancy and operations expenses.

      Premium and retaliatory taxes increased 10.3% from 2001 to 2002 and
increased 66.5% from 2000 to 2001 in direct proportion to the fluctuations in
premium volume.

Exchange Services

      The exchange services segment's total operating expenses as a percentage
of the Company's total expenses were .7%, .8%, and .6% for 2002, 2001 and 2000,
respectively, which remained at comparable levels for the reporting periods.

Net Income

      A summary by segment of the Company's net income is as follows:

<TABLE>
<CAPTION>
                                                                       2002                     2001                    2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>         <C>          <C>        <C>          <C>
Title insurance                                               $7,706,961   95.0%       $5,429,494   90.3%      $2,434,088   77.5%
Exchange services                                                317,154    3.9%          370,787    6.2%         514,921   16.4%
All other                                                         84,727    1.1%          208,717    3.5%         191,454    6.1%
- ---------------------------------------------------------------------------------------------------------------------------------
                                                              $8,108,842    100%       $6,008,998    100%      $3,140,463    100%
                                                              ----------               ----------              ----------
</TABLE>

      On a consolidated basis, the Company reported an increase in net income of
34.9% and 91.3% in 2002 and 2001, respectively. The increases in 2002 and 2001
were primarily attributable to increased revenue, improved operating
efficiencies resulting from expense control procedures and improved claims
experience.

Title Insurance

      Net income for the title insurance segment increased 41.9% from 2001 to
2002 and increased 123.1% from 2000 to 2001. The increases in 2002 and 2001 were
primarily attributable to increased revenues and improved operating efficiencies
resulting from expense control procedures.

Exchange Services

      The exchange services segment saw a net income decrease of 14.5% from 2001
to 2002 and a decrease of 28% from 2000 to 2001. Decreases in fee revenue,
coupled with increases in salaries and employee benefits, contributed to the
decreases in net income for the exchange services segment for 2002 and 2001.

Liquidity and Capital Resources

      Cash flows provided by operating activities were $12,290,577, $8,723,704
and $7,135,956 in 2002, 2001 and 2000, respectively. The increase in 2002 is
primarily the result of the increase in net income compared with 2001.

      As of December 31, 2002 and 2001, approximately $46,730,000 and
$41,670,000, respectively, of the consolidated stockholders' equity represented
net assets of the Company's subsidiaries that cannot be transferred in the form
of dividends, loans or advances to the parent company under statutory
regulations without prior insurance department approval. The parent company's
ability to pay dividends and operating expenses is dependent on funds received
from the insurance subsidiaries. The Company believes amounts available for
transfer from the insurance subsidiaries are adequate to meet the parent
company's operating needs.

<PAGE>

      On May 11, 1999, the Board of Directors approved the repurchase of an
additional 200,000 shares of the Company's common stock. Pursuant to this
approval, the Company repurchased all 200,000 shares at an average price of
$12.50 per share, including 25,766 shares purchased at an average purchase price
of $14.73 during 2001 and 174,234 shares purchased at an average purchase price
of $12.18 per share during 2000.

      On May 9, 2000, the Board of Directors approved the repurchase of an
additional 500,000 shares of the Company's common stock. Pursuant to this
approval, the Company repurchased 19,134 shares in the twelve months ended
December 31, 2002 and 32,184 shares in the twelve months ended December 31, 2001
at an average per share price of $18.81 and $14.75, respectively.

      During the twelve months ended December 31, 2002, the Company repurchased
common stock for $359,902 and issued common stock totaling $236,086 in
satisfaction of stock option exercises, stock bonuses and other stock issuances.
In 2002, retained earnings had a net increase of $7,684,469, after repurchases
and issuances reduced retained earnings by $123,816.

      Management believes that funds generated from operations (primarily
underwriting and investment income) will enable the Company to adequately meet
its operating needs and is unaware of any trend likely to result in adverse
liquidity changes. In addition to operational liquidity, the Company maintains a
high degree of liquidity within its investment portfolio in the form of
short-term investments and other readily marketable securities.

Quantitative and Qualitative Disclosures About Market Risk

      The Company's primary exposure to market risk relates to the impact of
adverse changes in interest rates and market prices of its investment portfolio.
Increases in interest rates diminish the value of fixed income securities and
preferred stock and decreases in stock market values diminish the value of
common stocks held.

Corporate Oversight

      The Company generates substantial investable funds from its two insurance
subsidiaries. In formulating and implementing policies for investing new and
existing funds, the Company has emphasized maximizing total after-tax return on
capital and earnings while ensuring the safety of funds under management and
adequate liquidity. The Company's Board of Directors oversees investment risk
management processes. The Company seeks to invest premiums and other income to
create future cash flows that will fund future claims, employee benefits and
expenses, and earn stable margins across a wide variety of interest rate and
economic scenarios. The Board has established specific investment policies that
define the overall framework for managing market and other investment risks,
including the accountabilities and controls over these activities. The Company
may rebalance its existing asset portfolios or change the character of future
investments from time to time to manage its exposure to market risk within
defined tolerance ranges.

Interest Rate Risk

      Interest rate risk is the risk that the Company will incur economic losses
due to adverse changes in interest rates. This risk arises from the Company's
investments in interest-sensitive debt securities. These securities are
primarily fixed rate municipal bonds and corporate bonds. The Company does not
purchase such securities for trading purposes. At December 31, 2002, the Company
had approximately $57 million in fixed rate bonds. The Company manages the
interest rate risk inherent in its assets by monitoring its liquidity needs and
by targeting a specific range for the portfolio's duration or weighted average
maturity.

      To determine the potential effect of interest rate risk on
interest-sensitive assets, the Company calculates the effect of a 10% change in
prevailing interest rates ("rate shock") on the fair market value of these
securities considering stated interest rates and time to maturity. Based upon
the information and assumptions the Company uses in its calculation, management
estimates that a 10% immediate, parallel increase in prevailing interest rates
would decrease the net fair market value of its debt securities by approximately
$2.3 million. The selection of 10% immediate parallel increase in prevailing
interest rates should not be construed as a prediction by the Company's
management of future market events, but rather, to illustrate the potential
impact of such an event. To the extent that actual results differ from the
assumptions utilized, the Company's rate shock measures could be significantly
impacted. Additionally, the Company's calculation assumes that the current
relationship between short-term and long-term interest rates (the term structure
of interest rates) will remain constant over time. As a result, these
calculations may not fully capture the impact of nonparallel changes in the term
structure of interest rates and/or large changes in interest rates.

Equity Price Risk

      Equity price risk is the risk that the Company will incur economic losses
due to adverse changes in a particular stock or stock index. At December 31,
2002, the Company had approximately $7.9 million in preferred and common stocks.
Equity price risk is addressed in

<PAGE>

part by varying the specific allocation of equity investments over time pursuant
to management's assessment of market and business conditions and ongoing
liquidity needs analysis. The Company's largest equity exposure is declines in
the S&P 500; its portfolio of equity instruments is similar to those that
comprise this index. Based upon the information and assumptions the Company used
in its calculation, management estimates that an immediate decrease in the S&P
500 of 10% would decrease the net fair value of the Company's assets identified
above by approximately $488,000. The selection of a 10% immediate decrease in
the S&P 500 should not be construed as a prediction by the Company's management
of future market events, but rather, to illustrate the potential impact of such
an event. Since this calculation is based on historical performance, projecting
future price volatility using this method involves an inherent assumption that
historical volatility and correlation relationships will remain stable.
Therefore, the results noted above may not reflect the Company's actual
experience if future volatility and correlation relationships differ from such
historical relationships.

Critical Accounting Policies

      The Company's management makes various estimates when applying policies
affecting the preparation of the consolidated financial statements. Actual
results could differ from those estimates. Significant accounting policies of
the Company are discussed in Note 1 to the accompanying consolidated financial
statements. Following are those accounting policies considered critical to the
Company:

Premiums Written and Commissions to Agents

      Premiums are recorded and policies or commitments are issued upon receipt
of final certificates or preliminary reports with respect to titles. Title
insurance commissions earned by the Company's agents are recognized as expense
concurrently with premium recognition.

Reserves for Claims

      The total reserve for all reported and unreported losses the Company
incurred through December 31, 2002, is represented by the reserve for claims.
The Company's reserves for unpaid losses and loss adjustment expenses are
established using estimated amounts required to settle claims for which notice
has been received (reported) and the amount estimated to be required to satisfy
incurred claims of policyholders which may be reported in the future. Despite
the variability of such estimates, management believes that the reserves are
adequate to cover claim losses which might result from pending and future
claims. The Company continually reviews and adjusts its reserve estimates to
reflect its loss experience and any new information that becomes available.

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

Investments in Securities

      Securities for which the Company has the intent and ability to hold to
maturity are classified as held-to-maturity and are reported at cost, adjusted
for amortization of premiums or accretion of discounts and other-than-temporary
declines in fair value. Securities held principally for resale in the near term
are classified as trading securities and recorded at fair values. Realized and
unrealized gains and losses on trading securities are included in other income.
Securities not classified as either trading or held-to-maturity are classified
as available-for-sale and reported at fair value, adjusted for
other-than-temporary declines in fair value, with unrealized gains and losses
reported as accumulated other comprehensive income. Fair values of all
investments are based on quoted market prices. Realized gains and losses are
determined on the specific identification method. Other investments consist
primarily of investments in affiliates, which are accounted for under the equity
or cost method of accounting.

Recent and Pending Accounting Pronouncements

      SFAS 141/142: In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires the use of the purchase method of accounting for all business
acquisitions initiated after June 30, 2001, and the use of pooling-of-interest
method is no longer allowed. Under SFAS No. 142, goodwill and intangible assets
deemed to have infinite lives will no longer be amortized but will be subject to
annual impairment tests in accordance with the statement. Other intangible
assets will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121, Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS No. 142 on January 1, 2002. Adoption of SFAS No. 142 did not have
any impact on the Company's financial statements.

      SFAS 144: In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supercedes

<PAGE>

SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. The Company adopted SFAS No. 144 on January
1, 2002. Adoption of SFAS No. 144 did not have any impact on the Company's
financial statements.

      SFAS 146: In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses accounting
and reporting for costs associated with exit or disposal activities. SFAS No.
146 requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value when the liability
is incurred. SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. The Company does not expect the adoption of
this Statement to have a material effect on its financial statements.

      SFAS 148: In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation--Transition and Disclosure--an Amendment of FASB
Statement No. 123. This Statement amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
This Statement requires that companies having a fiscal year end after December
15, 2002, follow the prescribed format and provide the additional disclosures in
their annual reports. Adoption of SFAS 148 did not have a material impact on the
Company's financial statements.

      FIN 45: FASB Interpretation No. 45, Guarantor's Accounting and Disclosures
Requirements for Guarantees, including Indirect Guarantees of Indebtedness of
Others became effective on December 31, 2002. This Interpretation addresses the
disclosure requirements for guarantees and indemnification agreements entered
into by the entity. The implementation of this pronouncement did not have any
effect on the Company's financial statements.

Selected Quarterly Financial Data

<TABLE>
<CAPTION>
 2002                                               March 31           June 30      September 30       December 31
- ------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>               <C>               <C>
 Net premiums written                             $14,680,725      $14,871,197       $18,041,421       $20,100,274
 Investment income                                    669,038          692,781           680,991           763,998
 Net income                                         1,547,179        1,700,998         2,146,025         2,714,640
 Basic earnings per common share                          .61              .68               .85              1.08
 Diluted earnings per common share                        .60              .65               .83              1.04

<CAPTION>
2001                                                March 31           June 30      September 30       December 31
- ------------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>               <C>               <C>
Net premiums written                              $11,437,725      $14,867,277       $14,730,034       $18,445,509
Investment income                                     685,877          672,054           661,803           720,546
Net income                                            840,124        1,444,546         1,604,444         2,119,884
Basic earnings per common share                           .33              .56               .63               .84
Diluted earnings per common share                         .32              .56               .61               .82
</TABLE>

<PAGE>

Investors Title Company and Subsidiaries

Consolidated Balance Sheets

<TABLE>
<CAPTION>
as of December 31,                                                                                         2002           2001
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                     <C>           <C>
Assets
  Cash and cash equivalents                                                                             $ 3,781,961   $ 3,069,929
  Investments in securities (Notes 2 and 3):
    Fixed maturities:
      Held-to-maturity, at amortized cost (fair value: 2002: $4,577,069; 2001: $5,010,237)                4,395,081     4,907,066
      Available-for-sale, at fair value (amortized cost: 2002: $49,353,717; 2001: $41,746,795)           52,491,648    43,066,186
    Equity securities, at fair value (cost: 2002: $6,393,289; 2001: $3,202,085)                           7,884,928     5,433,557
    Other investments                                                                                       564,782        64,888
- ---------------------------------------------------------------------------------------------------------------------------------
        Total investments                                                                                65,336,439    53,471,697

  Premiums receivable (less allowance for doubtful accounts: 2002: $1,800,000; 2001: $1,405,000)          7,949,904     7,104,580
  Accrued interest and dividends                                                                            720,902       725,757
  Prepaid expenses and other assets                                                                       1,095,230       765,348
  Property acquired in settlement of claims                                                                 749,562       294,510
  Property, net (Note 4)                                                                                  4,109,885     4,433,855
  Deferred income taxes, net (Note 8)                                                                       893,263       354,024
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets                                                                                            $84,637,146   $70,219,700
=================================================================================================================================
Liabilities and Stockholders' Equity
Liabilities
  Reserves for claims (Note 6)                                                                          $25,630,000   $21,460,000
  Accounts payable and accrued liabilities                                                                4,780,865     3,700,095
  Commissions and reinsurance payables (Note 5)                                                             401,040       281,961
  Premium taxes payable                                                                                     268,972       367,055
  Current income taxes payable                                                                              888,085       138,821
- ---------------------------------------------------------------------------------------------------------------------------------
    Total liabilities                                                                                    31,968,962    25,947,932
=================================================================================================================================
Commitments and Contingencies (Notes 5, 9 and 11)
Stockholders' Equity (Notes 2, 3, 7 and 12)
  Class A Junior Participating preferred stock - no par value
    (shares authorized 100,000; no shares issued)                                                                --            --
  Common stock-no par value (shares authorized 10,000,000; 2,855,744 and
    2,855,744 shares issued; and 2,515,804 and 2,516,298 shares outstanding
    2002 and 2001, respectively)                                                                                  1             1
  Retained earnings                                                                                      49,613,044    41,928,575
  Accumulated other comprehensive income (net unrealized gain on investments)
    (net of deferred taxes: 2002: $1,574,431; 2001: $1,207,670) (Note 8)                                  3,055,139     2,343,192
- ---------------------------------------------------------------------------------------------------------------------------------
    Total stockholders' equity                                                                           52,668,184    44,271,768
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                                                              $84,637,146   $70,219,700
=================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

<PAGE>

Investors Title Company and Subsidiaries

Consolidated Statements of Income

<TABLE>
<CAPTION>
for the Years Ended December 31,                                                       2002               2001              2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>                <C>
Revenues
  Underwriting income:
    Premiums written (Note 5)                                                      $68,042,012        $59,820,773        $38,053,280
    Less--premiums for reinsurance ceded (Note 5)                                      348,395            340,228            362,528
- ------------------------------------------------------------------------------------------------------------------------------------
    Net premiums written                                                            67,693,617         59,480,545         37,690,752
  Investment income-interest and dividends (Note 3)                                  2,806,808          2,740,280          2,528,143
  Net realized gain on sales of investments (Note 3)                                   279,301             11,773            104,211
  Other                                                                              2,467,614          2,239,847          1,906,662
- ------------------------------------------------------------------------------------------------------------------------------------
    Total                                                                           73,247,340         64,472,445         42,229,768
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
  Commissions to agents                                                             32,006,188         28,074,489         15,470,852
  Provision for claims (Note 6)                                                      6,871,822          6,786,263          5,865,355
  Salaries, employee benefits and payroll taxes (Notes 7 and 10)                    12,591,736         10,747,424          9,602,572
  Office occupancy and operations (Note 9)                                           4,810,283          4,911,912          3,568,760
  Business development                                                               2,161,928          1,879,224          1,521,120
  Taxes, other than payroll and income                                                 387,594            287,804            309,098
  Premium and retaliatory taxes                                                      1,378,880          1,250,177            750,697
  Professional fees                                                                    772,096            910,586            749,047
- ------------------------------------------------------------------------------------------------------------------------------------
  Other                                                                                597,971            885,568            131,804
- ------------------------------------------------------------------------------------------------------------------------------------
    Total                                                                           61,578,498         55,733,447         37,969,305
- ------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                                                          11,668,842          8,738,998          4,260,463
Provision for Income Taxes (Note 8)                                                  3,560,000          2,730,000          1,120,000
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income                                                                         $ 8,108,842        $ 6,008,998        $ 3,140,463
====================================================================================================================================
Basic Earnings per Common Share (Note 7)                                           $      3.22        $      2.35        $      1.21
====================================================================================================================================
Weighted Average Shares Outstanding--Basic                                           2,517,328          2,554,204          2,594,891
====================================================================================================================================
Diluted Earnings per Common Share (Note 7)                                         $      3.12        $      2.31        $      1.21
====================================================================================================================================
Weighted Average Shares Outstanding--Diluted                                         2,597,979          2,599,714          2,601,283
====================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

<PAGE>

Investors Title Company and Subsidiaries

Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                                    Accumulated
                                                                                                Other Comprehensive
                                                            Common Stock                            Income (Net             Total
                                                        --------------------      Retained        Unrealized Gain      Stockholders'
for the Years Ended December 31, 2002, 2001 and 2000     Shares       Amount      Earnings        on Investments)          Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>      <C>                 <C>                <C>
Balance,
  January 1, 2000                                       2,736,961       $1       $36,311,613         $1,190,126         $37,501,740
  Net income                                                                       3,140,463                              3,140,463
  Dividends ($.12 per share)                                                        (342,689)                              (342,689)
  Purchases of 170,102 shares of common
    stock (net of distributions)                         (170,102)                (2,088,117)                            (2,088,117)
  Net unrealized gain on investments                                                                    978,252             978,252
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
  December 31, 2000                                     2,566,859        1        37,021,270          2,168,378          39,189,649
  Net income                                                                       6,008,998                              6,008,998
  Dividends ($.12 per share)                                                        (342,689)                              (342,689)
  Purchases of 50,561 shares of common
    stock (net of distributions)                          (50,561)                  (759,004)                              (759,004)
  Net unrealized gain on investments                                                                    174,814             174,814
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
  December 31, 2001                                     2,516,298        1        41,928,575          2,343,192          44,271,768
  Net income                                                                       8,108,842                              8,108,842
  Dividends ($.12 per share)                                                        (300,557)                              (300,557)
  Purchases of 494 shares of common
    stock (net of distributions)                             (494)                  (123,816)                              (123,816)
  Net unrealized gain on investments                                                                    711,947             711,947
- ------------------------------------------------------------------------------------------------------------------------------------
 Balance,
   December 31, 2002                                    2,515,804       $1       $49,613,044         $3,055,139         $52,668,184
====================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

Investors Title Company and Subsidiaries

Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>
for the Years Ended December 31,                                                                2002        2001          2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>            <C>            <C>
Net income                                                                                $ 8,108,842    $ 6,008,998    $ 3,140,463
Other comprehensive income, before tax:
  Unrealized gains on investments arising during the year                                   1,358,009        276,642      1,586,411
  Less: reclassification adjustment for gains realized in net income                         (279,301)       (11,773)      (104,211)
- ------------------------------------------------------------------------------------------------------------------------------------

  Other comprehensive income, before tax                                                    1,078,708        264,869      1,482,200
  Income tax expense related to unrealized gains on investments arising during the year       461,723         94,058        539,380
  Income tax expense related to reclassification adjustment for
    gains realized in net income                                                              (94,962)        (4,003)       (35,432)
- ------------------------------------------------------------------------------------------------------------------------------------
  Net income tax expense on other comprehensive income                                        366,761         90,055        503,948
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                                                    711,947        174,814        978,252
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                                                      $ 8,820,789    $ 6,183,812    $ 4,118,715
====================================================================================================================================
</TABLE>

See notes to consolidated financial statements.

<PAGE>

Investors Title Company and Subsidiaries

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
for the Years Ended December 31,                                                  2002             2001               2000
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                <C>                <C>
Operating Activities
Net income                                                                   $  8,108,842       $  6,008,998       $ 3,140,463
  Adjustments to reconcile net income to net cash provided by operating
  activities:
    Depreciation                                                                  961,872          1,412,023           794,689
    Amortization (accretion), net                                                  25,022              1,818            (1,312)
    Provision (benefit) for losses on premiums receivable                         395,000            680,000           (50,000)
    Net gain on disposals of property                                             (15,485)           (22,263)           (4,523)
    Net realized gain on sales of investments                                    (279,301)           (11,773)         (104,211)
    Provision (benefit) for deferred income taxes                                (906,000)          (483,921)          149,987
    Provision for claims                                                        6,871,822          6,786,263         5,865,355
    Payments of claims, net of recoveries                                      (2,701,822)        (3,270,928)       (3,785,355)
  Changes in assets and liabilities:
    (Increase) decrease in receivables and other assets                        (2,020,403)        (4,699,594)           50,734
    Increase in accounts payable and accrued liabilities                        1,080,770          1,782,061           357,098
    Increase in commissions and reinsurance payables                              119,079             59,213            14,143
    Increase (decrease) in premium taxes payable                                  (98,083)           367,055           (20,618)
    Increase in current income taxes payable                                      749,264            114,752           729,506
- ------------------------------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                                12,290,577          8,723,704         7,135,956
- ------------------------------------------------------------------------------------------------------------------------------
Investing Activities
  Purchases of available-for-sale securities                                  (18,534,327)       (11,194,289)       (7,899,367)
  Purchases of held-to-maturity securities                                       (365,796)          (600,000)               --
  Purchases of other securities                                                  (499,894)                --                --
  Proceeds from sales of available-for-sale securities                          7,987,511          2,555,417         3,347,164
  Proceeds from sales of held-to-maturity securities                              880,751          1,406,463         1,907,214
  Purchases of property                                                          (691,968)          (392,157)         (484,151)
  Proceeds from disposals of property                                              69,551             65,168            33,825
- ------------------------------------------------------------------------------------------------------------------------------
      Net cash used in investing activities                                   (11,154,172)        (8,159,398)       (3,095,315)
- ------------------------------------------------------------------------------------------------------------------------------
Financing Activities
  Repurchases of common stock, net                                               (303,146)          (792,666)       (2,103,947)
  Exercise of options                                                             179,330             33,662            15,830
  Dividends paid                                                                 (300,557)          (342,689)         (342,689)
- ------------------------------------------------------------------------------------------------------------------------------
      Net cash used in financing activities                                      (424,373)        (1,101,693)       (2,430,806)
- ------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents                              712,032           (537,387)        1,609,835
Cash and Cash Equivalents, Beginning of Year                                    3,069,929          3,607,316         1,997,481
- ------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Year                                       $  3,781,961       $  3,069,929       $ 3,607,316
==============================================================================================================================
Supplemental Disclosures
Cash Paid During the Year for
  Income Taxes (net of refunds)                                              $  3,718,000       $  3,101,000       $   240,000
==============================================================================================================================
</TABLE>

Noncash Financing Activities

Bonuses and fees totaling $56,757, $61,472 and $126,850 were paid for the twelve
months ended December 31, 2002, 2001 and 2000, respectively, by issuance of the
Company's common stock.

See notes to consolidated financial statements.

<PAGE>

Investors Title Company and Subsidiaries

Notes to Consolidated Financial Statements

1. Basis of Presentation and Summary of Significant Accounting Policies

      Description of Business--Investors Title Company's (the "Company") two
primary business segments are title insurance and exchange services. The
Company's title insurance segment, through its two subsidiaries, Investors Title
Insurance Company ("ITIC") and Northeast Investors Title Insurance Company
("NE-ITIC"), is licensed to insure titles to residential, institutional,
commercial and industrial properties. The Company issues title insurance
policies through approved attorneys from underwriting offices in North Carolina
and South Carolina, and primarily through independent issuing agents in the
District of Columbia, Alabama, Arkansas, Florida, Georgia, Illinois, Indiana,
Kentucky, Maryland, Michigan, Minnesota, Mississippi, Nebraska, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia,
West Virginia and Wisconsin. The majority of the Company's business is
concentrated in Michigan, New York, North Carolina, Pennsylvania, South
Carolina, Tennessee and Virginia. Investors Title Exchange Corporation ("ITEC")
acts as an intermediary in tax-free exchanges of property held for productive
use in a trade or business or for investments, while Investors Title
Accommodation Corporation ("ITAC") serves as an exchange accommodation
titleholder, offering a vehicle for accomplishing a reverse exchange when a
taxpayer must acquire replacement property before selling the relinquished
property. ITEC's and ITAC's income is derived from fees for handling exchange
transactions.

      Principles of Consolidation and Basis of Presentation--The accompanying
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.

      Significant Accounting Policies--The significant accounting policies of
the Company are summarized below:

Cash and Cash Equivalents

      For the purpose of presentation in the Company's statements of cash flows,
cash equivalents are highly liquid investments with original maturities of three
months or less. The carrying amount of cash and cash equivalents is a reasonable
estimate of fair value due to the short-term maturity of these investments.

Investments in Securities

      Securities for which the Company has the intent and ability to hold to
maturity are classified as held-to-maturity and reported at cost, adjusted for
amortization of premiums or accretion of discounts and other-than-temporary
declines in fair value. Securities held principally for resale in the near term
are classified as trading securities and recorded at fair values. Realized and
unrealized gains and losses on trading securities are included in other income.
Securities not classified as either trading or held-to-maturity are classified
as available-for-sale and reported at fair value, adjusted for
other-than-temporary declines in fair value, with unrealized gains and losses
reported as accumulated other comprehensive income. Fair values of all
investments are based on quoted market prices. Realized gains and losses are
determined on the specific identification method. Other investments consist
primarily of investments in affiliates, which are accounted for under the equity
or cost method of accounting.

Property Acquired in Settlement of Claims

      Property acquired in settlement of claims is carried at estimated
realizable value. Adjustments to reported estimated realizable values and
realized gains or losses on dispositions are recorded as increases or decreases
in claim costs.

Property and Equipment

      Property and equipment are recorded at cost and are depreciated
principally under the straight-line method over the estimated useful lives (3 to
25 years) of the respective assets. During 2001, the Company changed the
estimated useful life of EDP equipment from 5 to 3 years. This accounting
estimate change had an effect of decreasing net income for the year by
approximately $291,600. Maintenance and repairs are charged to operating
expenses and improvements are capitalized.

<PAGE>

Reserves for Claims

      The total reserve for all reported and unreported losses the Company
incurred through December 31, 2002, is represented by the reserve for claims.
The Company's reserves for unpaid losses and loss adjustment expenses are
established using estimated amounts required to settle claims for which notice
has been received (reported) and the amount estimated to be required to satisfy
incurred claims of policyholders which may be reported in the future. Despite
the variability of such estimates, management believes that the reserves are
adequate to cover claim losses which might result from pending and future
claims. The Company continually reviews and adjusts its reserve estimates to
reflect its loss experience and any new information that becomes available.

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

Deferred Income Taxes

      The Company provides for deferred income taxes (benefits) on temporary
differences between the financial statements' carrying values and the tax bases
of assets and liabilities.

Premiums Written and Commissions to Agents

      Premiums are recorded and policies or commitments are issued upon receipt
of final certificates or preliminary reports with respect to titles. Title
insurance commissions earned by the Company's agents are recognized as expense
concurrently with premium recognition.

Stock Option Disclosure

      The Company has adopted Employee Stock Option Purchase Plans (the "Plans")
under which options to purchase shares (not to exceed 650,000 shares) of the
Company's stock may be granted to key employees of the Company at a price not
less than the market value on the date of grant. All options are exercisable at
10% to 20% per year beginning on the date of grant or one year from the date of
grant and generally expire in five to ten years. The Company applies the
intrinsic value method of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related Interpretations in accounting for its
employee stock option plans and, accordingly, no compensation cost has been
recognized.

      Had compensation cost for the Plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the method
of Financial Accounting Standards Board Statement No. 123, Accounting for
Stock-Based Compensation, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                              2002               2001               2000
- -------------------------------------------------------------------------------------------
<S>                                        <C>                <C>                <C>
Net income:
  As reported                              $8,108,842         $6,008,998         $3,140,463
  Pro forma                                 7,983,301          5,881,756          3,041,875

Basic earnings per common share:
  As reported                              $     3.22         $     2.35         $     1.21
  Pro forma                                      3.17               2.30               1.17

Diluted earnings per common share:
  As reported                              $     3.12         $     2.31         $     1.21
  Pro forma                                      3.07               2.26               1.17
</TABLE>

Comprehensive Income

      The Company's other comprehensive income is solely comprised of its
unrealized holding gains on available-for-sale securities.

Escrows 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, undisbursed amounts received for settlement of mortgage loans and
indemnities against specific title risks. In administering tax-free exchanges,
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 holds property
for exchangers in reverse exchange transactions. Cash and other assets held by
the Company for these purposes were approximately $63,642,000 and $67,713,000 as
of December 31, 2002 and 2001, respectively. These amounts are not considered
assets of the Company and, therefore, are excluded from the accompanying
consolidated balance sheets.

<PAGE>

Recently Issued and Pending Accounting Standards

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
(collectively referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company adopted SFAS 133 on January 1, 2001. Adoption of SFAS
133 did not have any impact on the Company's financial statements.

      In July 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires the
use of the purchase method of accounting for all business acquisitions initiated
after June 30, 2001, and the use of the pooling-of-interest method is no longer
allowed. Under SFAS No. 142, goodwill and intangible assets deemed to have
infinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statement. Other intangible assets will
continue to be amortized over their useful lives and reviewed for impairment in
accordance with SFAS No. 121, Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of. SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001. The Company adopted SFAS No. 142 on
January 1, 2002. Adoption of SFAS No. 142 did not have any impact on the
Company's financial statements.

      In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This Statement supercedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001. The Company
adopted SFAS No. 144 on January 1, 2002. Adoption of SFAS No. 144 did not have
any impact on the Company's financial statements.

      In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 addresses accounting and reporting for costs associated with exit or
disposal activities. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized and measured
initially at fair value when the liability is incurred. SFAS No. 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The Company does not expect the adoption of this statement to have a
material effect on its financial statements.

      In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure--an Amendment of FASB Statement No. 123.
This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. This Statement requires that
companies having a year end after December 15, 2002, follow the prescribed
format and provide the additional disclosures in their annual reports. Adoption
of SFAS No. 148 did not have a material impact on the Company's financial
statements.

      FASB Interpretation No. 45, Guarantor's Accounting and Disclosures
Requirements for Guarantees, including Indirect Guarantees of Indebtedness of
Others became effective on December 31, 2002. This Interpretation addresses the
disclosure requirements for guarantees and indemnification agreements entered
into by the entity. The implementation of this pronouncement did not have any
effect on the Company's financial statements.

Use of Estimates and Assumptions

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassification

      Certain 2001 and 2000 amounts have been reclassified to conform with 2002
classifications.

<PAGE>

2. Statutory Restrictions on Consolidated Stockholders' Equity and Investments

      The Company has designated approximately $25,467,000 and $21,948,000 of
retained earnings as of December 31, 2002 and 2001, respectively, as
appropriated to reflect the required statutory premium reserve. See Note 8 for
the tax treatment of the statutory premium reserve.

      As of December 31, 2002 and 2001, approximately $46,730,000 and
$41,670,000, respectively, of consolidated stockholders' equity represents net
assets of the Company's subsidiaries that cannot be transferred in the form of
dividends, loans or advances to the parent company under statutory regulations
without prior insurance department approval.

      Bonds and certificates of deposit totaling approximately $3,420,000 and
$3,170,000 at December 31, 2002 and 2001, respectively, are deposited with the
insurance departments of the states in which business is conducted. These
investments are restricted as to withdrawal as required by law.

      The National Association of Insurance Commissioners has established new
statutory accounting practices, which became effective January 1, 2001, subject
to adoption by the various state insurance departments. Adoption of the new
practices, as amended by state insurance departments, resulted in an adjustment
that increased surplus $1,000,000 as of January 1, 2001. The increase in surplus
related to deferred tax assets.

3. Investments in Securities

      The aggregate fair value, gross unrealized holding gains, gross unrealized
holding losses, and amortized cost for securities by major security type at
December 31 are as follows:

<TABLE>
<CAPTION>
                                                                                          Gross            Gross         Estimated
                                                                     Amortized         Unrealized       Unrealized          Fair
                                                                        Cost              Gains            Losses          Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                <C>               <C>             <C>
 December 31, 2002
 Fixed maturities--
   Held-to-maturity, at amortized cost:
     Certificates of deposit                                        $ 1,035,924        $       --        $     --        $ 1,035,924
     Obligations of states and political subdivisions                 3,359,157           184,417           2,429          3,541,145
- ------------------------------------------------------------------------------------------------------------------------------------
     Total                                                          $ 4,395,081        $  184,417        $  2,429        $ 4,577,069
====================================================================================================================================

 Fixed maturities--
   Available-for-sale, at fair value:
     Obligations of states and political subdivisions               $25,895,959        $1,879,795        $     --        $27,775,754
     Corporate debt securities                                       13,975,517         1,258,136              --         15,233,653
     Other                                                            9,482,241                --              --          9,482,241
- ------------------------------------------------------------------------------------------------------------------------------------
     Total                                                          $49,353,717        $3,137,931        $     --        $52,491,648
====================================================================================================================================
 Equity securities, at fair value--
   Common stocks and nonredeemable preferred stocks                 $ 6,393,289        $1,665,624        $173,985        $ 7,884,928
====================================================================================================================================

December 31, 2001
Fixed maturities--
  Held-to-maturity, at amortized cost:
    Certificates of deposit                                         $   670,126        $       --        $     --        $   670,126
    Obligations of states and political subdivisions                  4,236,940           120,282          17,111          4,340,111
- ------------------------------------------------------------------------------------------------------------------------------------
    Total                                                           $ 4,907,066        $  120,282        $ 17,111        $ 5,010,237
====================================================================================================================================
Fixed maturities--
  Available-for-sale, at fair value:
    Obligations of states and political subdivisions                $24,302,114        $  722,428        $ 46,938        $24,977,604
    Corporate debt securities                                        14,816,885           669,510          25,609         15,460,786
    Other                                                             2,627,796                --              --          2,627,796
- ------------------------------------------------------------------------------------------------------------------------------------
    Total                                                           $41,746,795        $1,391,938        $ 72,547        $43,066,186
====================================================================================================================================
Equity securities, at fair value--
  Common stocks and nonredeemable preferred stocks                  $ 3,202,085        $2,335,603        $104,131        $ 5,433,557
====================================================================================================================================
</TABLE>

<PAGE>

      The scheduled maturities of fixed maturities at December 31, 2002 are as
follows:

<TABLE>
<CAPTION>
                                                                 Available-for-Sale            Held-to-Maturity
- --------------------------------------------------------------------------------------------------------------------
                                                               Amortized        Fair        Amortized        Fair
                                                                  Cost          Value          Cost          Value
- --------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>            <C>            <C>           <C>
Due in one year or less                                       $11,090,185    $11,121,498    $1,095,764    $1,096,778
Due after one year through five years                          12,403,845     13,317,270       348,664       349,274
Due after five years through ten years                         17,597,015     19,232,314     1,080,938     1,146,005
Due after ten years                                             8,262,672      8,820,566     1,869,715     1,985,012
- --------------------------------------------------------------------------------------------------------------------
  Total                                                       $49,353,717    $52,491,648    $4,395,081    $4,577,069
====================================================================================================================
</TABLE>

      Earnings on investments and net realized gains for the years ended
December 31 are as follows:

<TABLE>
<CAPTION>
                                                                              2002            2001          2000
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>             <C>             <C>
Fixed maturities                                                          $ 2,397,307     $ 2,235,401     $ 1,838,463
Equity securities                                                             225,913         160,493         174,757
Invested cash and other short-term investments                                166,298         293,729         497,653
Miscellaneous interest                                                         17,290          50,657          17,270
Net realized gain                                                             279,301          11,773         104,211
- ---------------------------------------------------------------------------------------------------------------------
  Investment income                                                       $ 3,086,109     $ 2,752,053     $ 2,632,354
=====================================================================================================================
</TABLE>

      Gross realized gains and losses on sales of available-for-sale securities
for the years ended December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                                              2002            2001          2000
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>             <C>             <C>
Gross realized gains:
  Obligations of states and political subdivisions                        $     5,909     $       323     $       280
  Debt securities of domestic corporations                                      6,820              --              --
  Common stocks and nonredeemable preferred stocks                            405,449          79,766         501,942
- ---------------------------------------------------------------------------------------------------------------------
    Total                                                                     418,178          80,089         502,222
- ---------------------------------------------------------------------------------------------------------------------

Gross realized losses:
  Obligations of states and political subdivisions                             (7,672)           (155)       (147,659)
  Common stocks and nonredeemable preferred stocks                           (131,205)        (68,161)       (250,352)
- ---------------------------------------------------------------------------------------------------------------------
    Total                                                                    (138,877)        (68,316)       (398,011)
- ---------------------------------------------------------------------------------------------------------------------
  Net realized gain                                                       $   279,301     $    11,773     $   104,211
=====================================================================================================================
</TABLE>

<PAGE>

4. Property and Equipment

      Property and equipment and estimated useful lives at December 31 are
summarized as follows:

<TABLE>
<CAPTION>
                                                                                2002          2001
- -----------------------------------------------------------------------------------------------------
<S>                                                                        <C>            <C>
Land                                                                       $ 1,107,582    $ 1,107,582
Title plant                                                                    200,000             --
Office buildings and improvements (25 years)                                 1,625,544      1,617,387
Furniture, fixtures and equipment (3 to 10 years)                            5,205,145      4,860,555
Automobiles (3 years)                                                          399,169        468,201
- -----------------------------------------------------------------------------------------------------

    Total                                                                    8,537,440      8,053,725

Less accumulated depreciation                                               (4,427,555)    (3,619,870)
- -----------------------------------------------------------------------------------------------------

Property and equipment, net                                                $ 4,109,885    $ 4,433,855
=====================================================================================================
</TABLE>

5. Reinsurance

     The Company assumes and cedes reinsurance with other insurance companies in
the normal course of business. Premiums assumed and ceded were approximately
$21,000 and $348,000, respectively, for 2002, $21,000 and $340,000,
respectively, for 2001, and $32,000 and $363,000, respectively, for 2000. Ceded
reinsurance is comprised of excess of loss treaties, which protects against
losses over certain amounts. The Company remains liable to the insured for
claims under ceded insurance policies in the event that the assuming insurance
companies are unable to meet their obligations under these contracts.

6. Reserves for Claims

     Changes in the reserves for claims for the years ended December 31 are
summarized as follows based on the year in which the policies were written:

<TABLE>
<CAPTION>
                                                                            2002            2001            2000
- -------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>             <C>
Balance, beginning of year                                              $21,460,000     $17,944,665     $15,864,665
Provision related to:
  Current year                                                            9,714,121       7,056,008       5,832,040
  Prior years                                                            (2,842,299)       (269,745)         33,315
- -------------------------------------------------------------------------------------------------------------------
    Total provision charged to operations                                 6,871,822       6,786,263       5,865,355
- -------------------------------------------------------------------------------------------------------------------
Claims paid, net of recoveries, related to:
  Current year                                                             (395,688)       (241,263)       (413,129)
  Prior years                                                            (2,306,134)     (3,029,665)     (3,372,226)
- -------------------------------------------------------------------------------------------------------------------
    Total claims paid, net of recoveries                                 (2,701,822)     (3,270,928)     (3,785,355)
- -------------------------------------------------------------------------------------------------------------------
    Balance, end of year                                                $25,630,000     $21,460,000     $17,944,665
===================================================================================================================
</TABLE>

      In management's opinion, the reserves are adequate to cover claim losses
which might result from pending and possible claims.

<PAGE>

7. Common Stock and Stock Options

      The Company has adopted Employee Stock Option Purchase Plans (the "Plans")
under which options to purchase shares (not to exceed 650,000 shares) of the
Company's stock may be granted to key employees of the Company at a price not
less than the market value on the date of grant. All options are exercisable at
10% to 20% per year beginning on the date of grant or one year from the date of
grant and generally expire in five to ten years. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
its plans and, accordingly, no compensation cost has been recognized. Had
compensation cost for the Plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-Based
Compensation, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>

                                                                                 2002           2001            2000
- ------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>              <C>
Net income:
  As reported                                                                 $8,108,842     $6,008,998       $3,140,463
  Pro forma                                                                    7,983,301      5,881,756        3,041,875
Basic earnings per common share:
  As reported                                                                 $     3.22     $     2.35       $     1.21
  Pro forma                                                                         3.17           2.30             1.17
Diluted earnings per common share:
  As reported                                                                 $     3.12     $     2.31       $     1.21
  Pro forma                                                                         3.07           2.26             1.17
</TABLE>

      The estimated weighted average grant-date fair value of options granted
for the years ended December 31 are as follows:

<TABLE>
<CAPTION>
                                                                                        2002       2001      2000
- ------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>        <C>       <C>
Exercise price equal to market price on date of grant:
  Weighted average exercise price                                                      $19.40     $14.91    $12.07
  Weighted average grant-date fair value                                                 8.83       7.19      5.85
</TABLE>

      There are no stock options granted where the exercise price is greater
than the market price on the date of grant.

<PAGE>

      The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 2002, 2001 and 2000, respectively: dividend yield
of .6%, .8% and .6%; expected volatility of 32%, 33% and 34%; risk-free interest
rates of approximately 3.9%, 5% and 5.5%; and expected lives of 5 to 10 years. A
summary of the status of the Company's plans as of December 31 and changes
during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
                                                               2002                   2001                   2000
                                                        -----------------------------------------------------------------
                                                                   Weighted               Weighted               Weighted
                                                                    Average                Average                Average
                                                                   Exercise               Exercise               Exercise
                                                         Shares      Price       Shares     Price        Shares    Price
- -------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>         <C>         <C>         <C>        <C>
Outstanding at beginning of year                        291,835     $15.08      279,080     $15.05       82,320    $22.74
Granted                                                  28,650      19.40       31,300      14.91      212,500     12.07
Exercised                                               (15,604)     11.49       (3,150)     10.53       (2,060)     7.60
Terminated                                               (6,140)     15.04      (15,395)     15.27      (13,680)    16.29
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year                              298,741     $15.68      291,835     $15.08      279,080    $15.05
                                                        =======                 =======                 =======
Options exercisable at year-end                         145,156     $15.22      126,145     $14.81      108,744    $14.89
                                                        =======                 =======                 =======
</TABLE>

      The following table summarizes information about fixed stock options
outstanding at December 31, 2002:

<TABLE>
<CAPTION>
                                                    Options Outstanding at Year-End             Options Exercisable at Year-End
                                            -----------------------------------------------     -------------------------------
                                                                  Weighted         Weighted                           Weighted
                                                                   Average          Average                            Average
                                               Number             Remaining        Exercise         Number            Exercise
Range of Exercise Prices                    Outstanding       Contractual Life       Price        Exercisable           Price
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                    <C>            <C>            <C>                <C>
$10.00-$12.00                                  87,965                 5             $11.13          35,960             $11.12
 13.06- 15.58                                 126,800                 4              13.40          80,160              13.18
 16.25- 19.35                                  17,740                 9              18.35           2,215              18.07
 20.00- 22.75                                  24,396                 8              20.52           5,926              20.91
 25.50- 29.15                                  41,840                 5              28.21          20,895              28.21
                                              -------                                              -------
$10.00-$29.15                                 298,741                 5             $15.68         145,156             $15.22
                                              =======                                              =======
</TABLE>

      The employee stock options are considered outstanding for the diluted
earnings per common share calculation. The total increase in the weighted
average shares outstanding related to these equivalent shares was 80,651, 45,510
and 6,392 for 2002, 2001 and 2000, respectively.

      Options to purchase 69,386, 57,626 and 174,880 shares of common stock were
outstanding during 2002, 2001 and 2000, respectively, but were not included in
the computation of diluted earnings per share because the options' exercise
prices were greater than the average market price of the common shares.

<PAGE>

8. Income Taxes

      The components of income tax expense for the years ended December 31 are
summarized as follows:

<TABLE>
<CAPTION>
                                                                   2002          2001          2000
- -----------------------------------------------------------------------------------------------------
<S>                                                             <C>          <C>           <C>
Current:
  Federal                                                       $4,425,000   $2,993,500    $  889,038
  State                                                             41,000       61,500        79,037
- -----------------------------------------------------------------------------------------------------
    Total                                                        4,466,000    3,055,000       968,075
Deferred expense (benefit)                                        (906,000)    (325,000)      151,925
- -----------------------------------------------------------------------------------------------------
    Total                                                       $3,560,000   $2,730,000    $1,120,000
=====================================================================================================
</TABLE>

      For state income tax purposes, ITIC and NE-ITIC must pay only a gross
premium tax.

      At December 31, the approximate effect on each component of deferred
income taxes and liabilities is summarized as follows:

<TABLE>
<CAPTION>
                                                                                2002          2001
- ----------------------------------------------------------------------------------------------------
<S>                                                                         <C>           <C>
Deferred income tax assets:
  Recorded reserves for claims net of statutory premium reserves            $1,622,992    $1,027,881
  Accrued vacation                                                             246,911       203,181
  Reinsurance and commissions payable                                           64,497        23,681
  Bad debt reserve                                                             612,000       477,700
  Other                                                                        134,338         8,000
- ----------------------------------------------------------------------------------------------------
    Total                                                                    2,680,738     1,740,443
- ----------------------------------------------------------------------------------------------------
Deferred income tax liabilities:
  Net unrealized gain on investments                                         1,574,431     1,207,670
  Excess of tax over book depreciation                                         152,739       142,089
  Discount accretion on tax-exempt obligations                                  33,849        35,661
  Other                                                                         26,456           999
- ----------------------------------------------------------------------------------------------------
    Total                                                                    1,787,475     1,386,419
- ----------------------------------------------------------------------------------------------------
Net deferred income tax assets                                              $  893,263    $  354,024
====================================================================================================
</TABLE>

      A reconciliation of income tax as computed for the years ended December 31
at the U.S. federal statutory income tax rate (34%) to income tax expense
follows:

<TABLE>
<CAPTION>
                                                                         2002             2001           2000
- -----------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>             <C>
Anticipated income tax expense                                         $3,967,406      $2,971,259      $1,448,557
Increase (reduction) related to:
  State income taxes, net of the federal income tax benefit                25,740          47,413          48,408
  Tax exempt interest income (net of amortization)                       (461,300)       (466,408)       (466,041)
  Other, net                                                               28,154         177,736          89,076
- -----------------------------------------------------------------------------------------------------------------
Provision for income taxes                                             $3,560,000      $2,730,000      $1,120,000
=================================================================================================================
</TABLE>

<PAGE>

9. Leases

      The Company leases certain office facilities and equipment under operating
leases. Rent expense totaled approximately $643,000, $575,000 and $584,000 in
2002, 2001 and 2000, respectively. The future minimum lease payments under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year as of December 31, 2002 are summarized as follows:

<TABLE>
<S>                                                                     <C>
Year End:
2003                                                                    $464,328
2004                                                                     261,285
2005                                                                     123,383
- --------------------------------------------------------------------------------
Total                                                                   $848,996
================================================================================
</TABLE>

10. Employee Benefit Plan

      After three years of service, employees are eligible to participate in a
Simplified Employee Pension Plan. Contributions, which are made at the
discretion of the Company, are based on the employee's salary, but in no case
will such contribution exceed $40,000 annually per employee. All contributions
are deposited in Individual Retirement Accounts for participants. Contributions
under the plan were approximately $475,000, $416,000 and $393,000 for 2002, 2001
and 2000, respectively.

11. Commitments and Contingencies

      The Company and its subsidiaries are involved in various routine legal
proceedings that are incidental to their business. All of these proceedings
arose in the ordinary course of business and, in the Company's opinion, any
potential liability of the Company or its subsidiaries with respect to these
legal proceedings will not, in the aggregate, be material to the Company's
consolidated financial condition or operations.

12. Statutory Accounting

      The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles in the United States of America
which differ in some respects from statutory accounting practices prescribed or
permitted in the preparation of financial statements for submission to insurance
regulatory authorities.

      Stockholders' equity on a statutory basis was $44,597,876 and $36,750,825
as of December 31, 2002 and 2001, respectively. Net income on a statutory basis
was $8,466,841, $5,348,071 and $3,911,764 for the twelve months ended December
31, 2002, 2001 and 2000, respectively. The Company's subsidiaries complied with
all applicable state insurance department requirements at December 31, 2002.

<PAGE>

13. Segment Information

      The Company's operations include two reportable segments: title insurance
services and tax-free exchange services.

      The title insurance segment issues title insurance policies through
approved attorneys from underwriting offices and through independent issuing
agents. Title insurance policies insure titles to residential, institutional,
commercial and industrial properties.

      The tax-free exchange segment acts as an intermediary in tax-free
exchanges of property held for productive use in a trade or business or for
investments and serves as exchange accommodation titleholder, holding property
for exchangers in reverse exchange transactions. Revenues are derived from fees
for handling exchange transactions.

      Provided below is selected financial information about the company's
operations by segment for the three years ended December 31, 2002, 2001 and
2000:

<TABLE>
<CAPTION>
                                                                   Income           Provision
                                                 Operating         Before              for
                                                 Revenues       Income Taxes       Income Taxes     Assets
- -------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>               <C>            <C>
2002
Title insurance                                $68,539,235       $11,035,961       $3,329,000     $77,427,725
Exchange services                                  947,426           512,154          195,000         386,419
All other                                          674,570           120,727           36,000       6,823,002
- -------------------------------------------------------------------------------------------------------------
   Consolidated total                          $70,161,231       $11,668,842       $3,560,000     $84,637,146
=============================================================================================================

2001
Title insurance                                $59,815,041       $ 7,779,494       $2,350,000     $64,928,091
Exchange services                                1,018,353           600,787          230,000         367,848
All other                                          886,998           358,717          150,000       4,923,761
- -------------------------------------------------------------------------------------------------------------
  Consolidated total                           $61,720,392       $ 8,738,998       $2,730,000     $70,219,700
=============================================================================================================

2000
Title insurance                                $37,925,106       $ 3,115,950         $681,862     $55,299,670
Exchange services                                1,046,178           838,326          323,405         724,020
All other                                          626,130           306,187          114,733       3,315,317
- -------------------------------------------------------------------------------------------------------------
  Consolidated total                           $39,597,414       $ 4,260,463       $1,120,000     $59,339,007
=============================================================================================================
</TABLE>

<PAGE>

14. Stockholders' Equity

      On November 12, 2002, the Company's Board of Directors amended the
Company's Articles of Incorporation, creating a series of Class A Junior
Participating Preferred Stock (the "Class A Preferred Stock"). The number of
shares constituting the Class A Preferred Stock is 100,000. The Class A
Preferred Stock is senior to common stock in dividends or distributions of
assets upon liquidations, dissolutions or winding up of the Company. Dividends
on the Class A Preferred Stock are cumulative and accrue from the quarterly
dividend payment date. Each share of Class A Preferred Stock entitles the holder
thereof to 100 votes on all matters submitted to a vote of shareholders of the
Company. These shares were reserved for issuance under the Shareholder Rights
Plan (the "Plan"), which was adopted on November 21, 2002, by the Company's
Board of Directors. Under the terms of the Plan, the Company's common stock
acquired by a person or a group buying 15% or more of the Company's common stock
would be diluted, except in transactions approved by the Board of Directors.

      In connection with the Plan, the Company's Board of Directors declared a
dividend distribution of one right (a "Right") for each outstanding share of the
Company's common stock paid on December 16, 2002, to shareholders of record at
the close of business on December 2, 2002. Each Right entitles the registered
holder to purchase from the Company a unit (a "Unit") consisting of one
one-hundredth of a share of Class A Preferred Stock at a purchase price of $80
per Unit. Under the Plan, the Rights detach and become exercisable upon the
earlier of (1) 10 days following public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of the Company's
common stock, or (2) 10 business days following the commencement of, or first
public announcement of the intent of a person or group to commence, a tender
offer or exchange offer that would result in a person or group beneficially
owing 15% or more of such outstanding shares of the Company's common stock. The
exercise price, the kind and the number of shares covered by each right are
subject to adjustment upon the occurrence of certain events described in the
Plan.

      If the Company is acquired in a merger or consolidation in which the
Company is not the surviving corporation, or the Company engages in a merger or
consolidation in which the Company is the surviving corporation and the
Company's common stock is changed or exchanged, or more than 50% of the
Company's assets or earning power is sold or transferred, the Rights entitle a
holder (other than the acquiring person or group) to buy, at the exercise price,
stock of the acquiring company having a market value equal to twice the exercise
price. Following an acquisition by such person or group of 50% or more of the
outstanding common stock, the Company's Board of Directors may exchange the
Rights (other than the Rights owned by such person or group), in whole or in
part, at an exchange ratio of one share of the Company's common stock, or one
one-hundredth of a share of Preferred Stock, per Right.

      The Rights expire on November 11, 2012 and are redeemable upon action by
the Board of Directors at a price of $0.01 per right at any time before they
become exercisable. Until the Rights become exercisable, they are evidenced only
by the common stock certificates and are transferred with and only with such
certificates.

<PAGE>

Report of Independent Auditors

Investors Title Company and Subsidiaries:

      We have audited the accompanying consolidated balance sheets of Investors
Title Company (the "Company") and its subsidiaries as of December 31, 2002 and
2001, and the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2002. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

      We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

      In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Investors Title Company and its
subsidiaries at December 31, 2002 and 2001, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America.


/s/ DELOITTE & TOUCHE LLP
Raleigh, North Carolina
March 11, 2003

<PAGE>

Common Stock Data

The Common Stock of the Company is traded under the symbol "ITIC" in the
over-the-counter market and is quoted on the National Market System of the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). The Company has approximately 1,500 shareholders of record,
including shareholders whose shares are held in street name. The following table
shows the high and low sales prices reported on the NASDAQ National Market
System.

<TABLE>
<CAPTION>
                                      2002                      2001
- ---------------------------------------------------------------------------
                                High          Low         High          Low
<S>                           <C>          <C>          <C>          <C>
First Quarter                 $19.92       $15.24       $17.00       $13.75
Second Quarter                $20.90       $18.30       $16.00       $14.49
Third Quarter                 $20.20       $17.60       $17.44       $12.01
Fourth Quarter                $22.96       $17.67       $17.00       $14.00
</TABLE>

The Company paid cash dividends of $.03 per share in each of the four quarters
during 2002 and 2001.

Market Makers
Davenport & Co. of Virginia                          Knight Securities L.P.
Goldman, Sachs & Co.

Financial Highlights

<TABLE>
<CAPTION>
For the Year                                        2002              2001              2000              1999              1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>               <C>               <C>               <C>
Net premiums written                            $67,693,617       $59,480,545       $37,690,752       $43,819,565       $45,379,696
Revenues                                         73,247,340        64,472,445        42,229,768        47,366,559        48,476,263
Investment income                                 2,806,808         2,740,280         2,528,143         2,175,671         1,834,949
Net income                                        8,108,842         6,008,998         3,140,463         4,420,394         5,459,509
Per Share Data
- -----------------------------------------------------------------------------------------------------------------------------------
Basic earnings per
  common share                                  $      3.22       $      2.35       $      1.21       $      1.59       $      1.95
Weighted average shares
outstanding--Basic                                2,517,328         2,554,204         2,594,891         2,776,878         2,806,267
Diluted earnings per
  common share                                  $      3.12       $      2.31       $      1.21       $      1.59       $      1.92
Weighted average shares
  outstanding--Diluted                            2,597,979         2,599,714         2,601,283         2,786,282         2,841,035
Cash dividends per share                        $       .12       $       .12       $       .12       $       .12       $       .12
At Year End
- -----------------------------------------------------------------------------------------------------------------------------------
Assets                                          $84,637,146       $70,219,700       $59,339,007       $55,156,564       $51,597,812
Investments in securities                        65,336,439        53,471,697        45,299,576        41,066,864        35,726,837
Stockholders' equity                             52,668,184        44,271,768        39,189,649        37,501,740        36,328,665
Book value/share                                      20.93             17.59             15.27             13.70             12.93
Performance Ratios
- -----------------------------------------------------------------------------------------------------------------------------------
Net income to:
  Average stockholders' equity                        16.73%            14.40%             8.19%            11.97%            16.19%
  Total revenues (profit margin)                      11.07%             9.32%             7.44%             9.33%            11.26%
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>d54625_exh-21.txt
<DESCRIPTION>SUBSIDIARIES OF REGISTRANT
<TEXT>
                                                                      EXHIBIT 21

                           SUBSIDIARIES OF REGISTRANT

Name of                Percent    Names Under Which            State of
Subsidiary             Ownership  Subsidiaries Do Business     Incorporation
- ----------             ---------  ------------------------     -------------

Investors Title        100%       Investors Title Insurance    North Carolina
Insurance Company                 Company

Northeast Investors    100%       Northeast Investors Title    South Carolina
Title Insurance                   Insurance Company
Company

Investors Title        100%       Investors Title Exchange     North Carolina
Exchange Corporation              Corporation

Investors Title        100%       Investors Title              South Carolina
Accommodation                     Accommodation Corporation
Corporation

Investors Title        100%       Investors Title Management   North Carolina
Management                        Services, Inc.
Services, Inc.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>6
<FILENAME>d54625_exh-23.txt
<DESCRIPTION>INDEPENDENT AUDITORS CONSENT
<TEXT>
                                                                      EXHIBIT 23

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

We consent to the use in Registration Statement No. 333-33903 of Investors Title
Company (the "Company") and subsidiaries on Form S-8 of our report dated March
11, 2003, incorporated by reference in this Annual Report on Form 10-K of
Investors Title Company for the year ended December 31, 2002.

Our audits of the consolidated financial statements referred to in our
aforementioned report also included the financial statement schedules of
Investors Title Company, listed in Item 15. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.


/s/  Deloitte & Touche LLP

Raleigh, North Carolina
March 25, 2003



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>7
<FILENAME>d54625_exh-99.txt
<DESCRIPTION>CERTIFICATION
<TEXT>
                                 Certification

                         Pursuant to Section 906 of the
             Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of
            Section 1350, Chapter 63 of Title 18, United States Code)

      Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, a chapter 63 of title 18, United States Code), each of
the undersigned officers of Investors Title Company, a North Carolina
corporation (the "Company"), does hereby certify that:

      The Annual Report on Form 10-K for the year ended December 31, 2002 (the
"Form 10-K") of the Company fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained
in the Form 10-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.

Dated:   March 26, 2003                        /s/ J. Allen Fine
                                               ------------------------
                                               J. Allen Fine
                                               Chief Executive Officer


Dated:   March 26, 2003                        /s/ James A. Fine, Jr.
                                               ------------------------
                                               James A. Fine, Jr.
                                               Chief Financial Officer



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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